As filed with the Securities and Exchange
Commission on September 27, 2019
Registration No. 333- _______
UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES
ACT OF 1933
NANOVIRICIDES,
INC.
(Exact name of
registrant as specified in its charter)
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Nevada
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8731
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76-0674577
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(State
or other jurisdiction of
incorporation
or organization)
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(Primary
Standard Industrial
Classification
Code Number)
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(I.R.S.
Employer
Identification
Number)
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1 Controls Drive
Shelton, CT 06484
(203) 937-6137
(Address, including
zip code, and telephone number, including area code, of registrant’s principal executive offices)
Anil R. Diwan,
PhD
Chairman and President
NanoViricides,
Inc.
1 Controls Drive
Shelton, CT 06484
(203) 937-6137
(Name, address,
including zip code, and telephone number, including area code, of agent for service)
Copies to:
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Peter
Campitiello, Esq.
McCarter
English, LLP
Two Tower
Center Boulevard, 24th Floor
East Brunswick,
NJ 08816
(732)
867-9741
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Leslie
Marlow, Esq.
Hank Gracin,
Esq.
Patrick
Egan, Esq.
Gracin
& Marlow, LLP
The Chrysler
Building
405 Lexington
Avenue, 26th Floor
New York,
NY 10074
(212)
907-6457
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Approximate date
of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities
being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. x
If this Form is filed
to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a
post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a
post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the same offering. ¨
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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x
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Smaller reporting company
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x
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Emerging growth company
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¨
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If an emerging growth
company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨
CALCULATION OF
REGISTRATION FEE
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Title
of Securities
being
Registered
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Proposed
Maximum
Aggregate
Offering
Price (1) (2)
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Amount
of
Registration Fee
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Shares of Common Stock, $0.001
par value per share(3) (5)
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$
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8,050,000
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$
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Warrants to purchase shares of Common Stock(4)
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Shares of Common Stock issuable upon exercise
of the Warrants(3)
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$
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9,660,000
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$
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Pre-Funded Warrants to purchase shares of Common
Stock(5)
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(5)
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Shares of Common Stock
issuable upon exercise of the Pre-Funded Warrants(3)(4)
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Underwriter’s
Warrants(6)
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Shares of Common Stock
issuable upon exercise of Underwriter’s Warrants (7)
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588,000
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Total
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$
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18,298,000
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$
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2,217.72
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(1)
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Estimated solely for the purpose of calculating
the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended, or the Securities
Act.
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(2)
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Pursuant to Rule 416, the securities being registered
hereunder include such indeterminate number of additional securities as may be issuable to prevent dilution resulting from
stock splits, stock dividends or similar transactions.
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(3)
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Includes the offering price of any additional shares
of Common Stock and warrants to purchase shares of Common Stock that the underwriters have the right to purchase from the
Registrant.
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(4)
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No fee is required pursuant to Rule 457(i) under
the Securities Act.
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(5)
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The proposed maximum aggregate offering price of
the Common Stock proposed to be sold in the offering will be reduced on a dollar-for-dollar basis based on the offering price
of any Pre-Funded Warrants offered and sold in the offering, and, as such, the proposed maximum aggregate offering price of
the Common Stock and Pre-Funded Warrants (including the Common Stock issuable upon exercise of the Pre-Funded Warrants), if
any, is $8,050,000.
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(6)
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No fee pursuant to Rule 457(g) of the Act.
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(7)
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Estimated solely for the purpose of calculating
the registration fee pursuant to Rule 457(g) under the Securities Act. The Representative’s Warrants are
exercisable at a per share exercise price equal to 120% of the public offering price of the Common Stock. As
estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act, the
proposed aggregate offering price of the Representative’s Warrants is $588,000, which is equal to 120% of $490,000 (7%
of $7,000,000).
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The Registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment
that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus
is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer
to buy these securities in any state where the offer or sale is not permitted.
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PRELIMINARY PROSPECTUS
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SUBJECT TO COMPLETION
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DATED SEPTEMBER 27, 2019
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_________ Shares of Common Stock
Pre-Funded Warrants to Purchase
up to ________ Shares of Common Stock
Warrants to Purchase up to _________
Shares of Common Stock
Shares of Common Stock Issuable upon
Exercise of Pre-Funded Warrants
Shares of Common Stock Issuable upon
Exercise of Warrants
NanoViricides, Inc., a Nevada corporation
(the “Company”) is offering
shares (the “Shares”) of Common Stock, par value $0.001 per share (the “Common Stock”),
and warrants (the “Warrants”) to purchase up to
shares of our Common Stock, at an assumed combined offering price of $ per
share of Common Stock and accompanying Warrant (the last reported sale price of our Common Stock on the NYSE American on ,
2019). Each share of our Common Stock is being sold together with a Warrant to purchase one share of our Common Stock. Each Warrant
will have an exercise price per share of $________ per share and be immediately exercisable and will expire on the fifth
anniversary of the original issuance date. The Shares and the Warrants are immediately separable and will be issued separately,
but will be purchased together in this offering.
We are also offering to those purchasers,
if any, whose purchase of our Common Stock in this offering would otherwise result in such purchaser, together with its affiliates
and certain related parties, beneficially owning more than 4.99% (or at the election of the holder 9.99%) of our outstanding Common
Stock immediately following the consummation of this offering, the opportunity, in lieu of purchasing Shares, to purchase pre-funded warrants
to purchase shares of our Common Stock (“Pre-Funded Warrants”). The purchase price of each Pre-Funded Warrant
will equal the price per share at which shares of the Common Stock is being sold to the public in this offering, minus $ ,
and the exercise price of each Pre-Funded Warrant will equal $ per share of Common Stock. For each Pre-Funded Warrant
purchased in this offering in lieu of Shares, we will reduce the number of Shares being sold in the offering by one. Pursuant
to this prospectus, we are also offering the shares of Common Stock issuable upon the exercise of the Warrants and Pre-Funded Warrants
offered hereby.
Each Pre-Funded Warrant is exercisable
for one share of our Common Stock (subject to adjustment as provided for therein) at any time at the option of the holder until
such Pre-Funded Warrant is exercised in full, provided that the holder will be prohibited from exercising Pre-Funded Warrants
for shares of our Common Stock if, as a result of such exercise, the holder, together with its affiliates, would own more than
4.99% of the total number of shares of our Common Stock then issued and outstanding. However, any holder may increase such percentage
to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61
days after such notice to us.
Our Common Stock is listed on the NYSE
American under the symbol “NNVC.” On September 25, 2019, the last reported sale price of our Common Stock on the NYSE
American was $3.12 per share. There is no established trading market for the Warrants or Pre-Funded Warrants and we
do not expect a market to develop. In addition, we do not intend to apply for the listing of the Warrants or Pre-Funded Warrants
on any national securities exchange or other trading market. Without an active trading market, the liquidity of the Warrants and
the Pre-Funded Warrants will be limited.
On
July 18, 2019, Our Board of Directors approved a reverse stock split of all of our authorized and outstanding capital stock, which
includes the Common Stock in this offering as well as our shares of preferred stock, par value $0.001 per share (the “Preferred
Stock”). On September 24, 2019, we effected a
reverse stock split of our Capital Stock at a ratio of one-for-twenty (1:20)
(the “Split”). Also on July 18, 2019, the
Board authorized an amendment to the Company’s Articles of Incorporation to
increase the number of authorized shares of Common Stock to 150,000,000 shares and the number of Preferred Stock to 10,000,000
Shares (the “Authorized Increase”). We will be required to seek shareholder
approval for the Authorized Increase and will be filing a proxy statement for such approval. Additionally, the Warrants require
that we seek shareholder approval for the Authorized Increase. Following the effectiveness of the Split, and prior to the Authorized
Increase, the Company has 7,500,000 shares of Common Stock authorized for issuance
and approximately 3,844,921 shares outstanding and 500,000 shares of Preferred Stock authorized for issuance and approximately
255,714 shares outstanding.
Investing in our securities involves
a high degree of risk. See “Risk Factors” beginning on page 5 of this prospectus for a discussion of information that
should be considered in connection with an investment in our securities.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.
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Per
Share and
Accompanying
Warrant
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Per
Pre-
Funded
Warrant and
Accompanying
Warrant
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Total(1)
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Public offering price(2)
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$
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$
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$
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Underwriting discounts and commissions(3)
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$
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$
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$
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Proceeds, before expenses, to us
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$
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$
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$
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(1)
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Assumes no sale of Pre-Funded Warrants.
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(2)
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The public offering price is $
per share of Common Stock and $ per accompanying Warrant and $
per Pre-Funded Warrant and $ per accompanying Warrant.
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(3)
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See the section entitled “Underwriting” beginning on page 98 of this prospectus for a description of the compensation payable to the underwriters which includes Warrants to purchase shares of our Common Stock and the reimbursement of certain underwriting expenses.
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Each Pre-Funded Warrant is being sold
with a Warrant. Since we will issue one Warrant for each Share and each Pre-Funded Warrant sold in this Offering, the number of
Warrants sold in the Offering will not change as a result of whether Shares or Pre-Funded Warrants are sold.
We have granted the underwriters an option
for a period of 45 days from the date of this prospectus to purchase up to an additional _____ shares of Common Stock and/or warrants
to purchase shares of Common
Stock at the public offering price, less the underwriting discount.
We anticipate that delivery of the Shares, Pre-Funded Warrants
and Warrants against payment will be made on or about ,
2019.
Book-Running Manager
Maxim
Group LLC
The date of this prospectus is ,
2019.
TABLE OF CONTENTS
We have not, and the underwriters have
not, authorized anyone to provide you with information that is different from that contained in this prospectus or in any free
writing prospectus we may authorize to be delivered or made available to you. When you make a decision about whether to invest
in our securities, you should not rely upon any information other than the information in this prospectus or in any free writing
prospectus that we may authorize to be delivered or made available to you. Neither the delivery of this prospectus nor the sale
of our securities means that the information contained in this prospectus or any free writing prospectus is correct after the
date of this prospectus or such free writing prospectus. This prospectus is not an offer to sell or the solicitation of an offer
to buy our securities in any circumstances under which the offer or solicitation is unlawful.
For investors outside the United States:
We have not, and the underwriters have not, taken any action that would permit this offering or possession or distribution of
this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside
the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating
to, the offering of the securities covered hereby and the distribution of this prospectus outside the United States.
Unless otherwise indicated, information
contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and
market position, market opportunity and market share, is based on information from our own management estimates and research,
as well as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates
are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge,
which we believe to be reasonable. Our management estimates have not been verified by any independent source, and we have not
independently verified any third-party information. In addition, assumptions and estimates of our and our industry’s future
performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described
in “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions
and estimates. See “Special Note Regarding Forward-Looking Statements.”
We further note that the representations,
warranties and covenants made by us in any agreement that is filed as an exhibit to the registration statement of which this prospectus
is a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating
risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover,
such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations,
warranties and covenants should not be relied on as accurately representing the current state of our affairs.
We use in this prospectus certain of our
trademarks and tradenames. Solely for convenience these trademarks and tradenames will appear in this prospectus without the ™
or ® symbols, but those references are not intended to indicate, in any way, that we will not assert,
to the fullest extent under applicable law, our rights to these trademarks or tradenames.
This prospectus may include other trademarks,
tradenames and service marks that are the property of other organizations. We do not intend our use or display of other companies’
tradenames, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.
ABOUT THIS PROSPECTUS
The registration statement of which this
prospectus forms a part that we have filed with the Securities and Exchange Commission (the “Commission” or “SEC”),
includes exhibits that provide more detail of the matters discussed in this prospectus. You should read this prospectus and the
related exhibits filed with the SEC, together with the additional information described under the heading “Where You Can
Find More Information.”
You should rely only on the information
contained in this prospectus and in any free writing prospectus prepared by or on behalf of us. We have not, and the underwriters
have not, authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus
or any related free writing prospectus. This prospectus is an offer to sell only the securities offered hereby but only under
circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as
of its date. Our business, financial condition, results of operations and prospects may have changed since that date.
We are not offering to sell or seeking
offers to purchase these securities in any jurisdiction where the offer or sale is not permitted. We have not done anything that
would permit this Offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose
is required, other than in the United States Persons outside the United States who come into possession of this prospectus and
any free writing prospectus related to this Offering in jurisdictions outside the United States are required to inform themselves
about and to observe any restrictions relating to this Offering and the distribution of this prospectus and any such free writing
prospectus applicable to that jurisdiction.
Unless the context otherwise requires,
the terms “NanoViricides,” the “Company,” “we,” “us” and “our” refer
to NanoViricides, Inc. We have registered the trademark “nanoviricides” for use in connection with a pharmaceutical
preparation for the treatment of viral diseases. Except as set forth above and solely for convenience, the trademarks and trade
names in this prospectus are referred to without the ® or ™ symbols, but such reference should not be construed as any
indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
PROSPECTUS SUMMARY
This summary highlights
information contained in greater detail elsewhere in this prospectus. This summary does not contain all the information that you
should consider before investing. You should read the entire prospectus carefully, including the sections titled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Except where the
context otherwise requires, the terms “we,” “us,” “our” or “Nanoviricides” refer
to NanoViricides, Inc.
Unless
otherwise indicated all share amounts and per share amounts in this prospectus have been presented on a pro forma basis as if
reverse stock split of our authorized and outstanding shares of Common Stock at a ratio of one-for-twenty that was effected on
September 24, 2019.
Overview
We are a developmental
stage nano-biopharmaceutical company engaged in various stages of pre-clinical development, including IND-enabling non-clinical
studies of anti-viral therapeutics. We have no customers, products or revenues to date, and may never achieve revenues or profitable
operations. Our drug candidates are based on several patents, patent applications, provisional patent applications, and other
proprietary intellectual property held by TheraCour Pharma, Inc. (“TheraCour”), one of our principal shareholders,
which is controlled by Anil Diwan, our founder, Executive Chairman and President. We have entered into licenses with TheraCour
for the treatment of the following human viral diseases:
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•
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Influenza,
Asian Bird Flu, and H1N1 “Swine Flu” Viruses;
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•
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Herpes
Simplex Virus (HSV);
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•
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Human
Immunodeficiency Virus (HIV/AIDS);
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Adenoviral
Conjunctivitis and Keratitis, and Ocular Indications of Herpes Simplex Types 1 &
2.
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Dengue
Fever types I, II, III, & IV;
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•
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Hepatitis
B Virus (HBV);
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Hepatitis
C Virus (HCV);
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Ebola
and Marburg Viruses;
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Japanese
Encephalitis; and
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Since our founding in 2005, we
have developed drug candidates against a number of different viruses. Our primary focus is on our HerpeCide™ programs.
We are currently actively working on three of our HerpeCide™ drug development programs, namely dermal topical
treatments for Herpes Simplex Virus Type 1 (HSV-1), Herpes Simplex Virus Type 2 (HSV-2) and Varicella Zoster Virus (VZV)
which causes chickenpox and shingles, and two additional drug development programs, namely eye drops for treatment of Herpes
Keratitis (an infection of the external eye), and intra-vitreal injection for the treatment of viral Acute Retinal Necrosis
(vARN), in the HerpeCide program alone. Our most advanced drug candidate is our topical treatment for shingles, which we
intend to bring into human clinical trials. We do not currently have a license for rights to use the TheraCour technology for
the treatment of shingles and are currently in negotiations with TheraCour for the exclusive rights to use its technology to
develop treatments for shingles. Several additional indications in the HerpeCide™ program, for which we have exclusive
license rights from TheraCour, are expected to follow. In addition, we have drug candidates against severe influenzas
(including bird flu), HIV, Dengue, Ebola/Marburg and other viruses at different preclinical stages which are not currently
being actively developed. This broad pipeline is enabled by our unique post-immunotherapeutic
“bind-encapsulate-destroy” technology platform. Based on data in a Jain PharmaBiotech report published in March
2014, we believe the overall market size for the anti-viral market was $40 billion in 2018 and may be $65.5 billion in 2023.
We are seeking to add to our pipeline of drug candidates through our internal discovery pre-clinical development programs and
through an in-licensing strategy.
We believe we are one of only a few companies
that owns a nanomedicines research and cGMP production facility. This facility was designed and built by Dr. Diwan and it provides
us with capability to perform end-to-end discovery-to-drug-product drug development.
Company Information
Our principal executive offices are located
at 1 Controls Drive, Shelton, Connecticut 06484. Our telephone number is 203-937-6137. You may also contact us or obtain additional
information through our internet website address at www.nanoviricides.com or by emailing us at info@nanvoricides.com.
Information contained on our website is not incorporated into this prospectus and is not a part of this prospectus.
Risk Factors
An investment in our securities stock
involves a high degree of risk. You should carefully consider the risks summarized below. The risks are discussed more fully in
the “Risk Factors” section of this prospectus immediately following this prospectus summary. These risks include,
but are not limited to, the following:
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we
are an early stage company with a history of substantial net losses;
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·
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we have never been profitable and we have an accumulated deficit
at June 30, 2019 of approximately $92.1 million and a net loss of approximately $8.4 million and net cash used in operating
activities of approximately $6.8 million for the fiscal year then ended;
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·
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we expect to incur net losses in the future, and we may never
achieve sustained profitability;
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·
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we need to raise additional capital to continue as a going concern;
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·
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our failure to meet the continued listing requirements of the
NYSE American could result in a de-listing of our Common Stock;
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·
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our sale of our Common Stock may cause substantial dilution
to our existing stockholders and could cause the price of our Common Stock to decline;
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·
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our business depends upon our ability to develop and commercialize
products that are currently still in development;
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·
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our business depends on our senior management;
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·
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our business depends on satisfying any applicable United States
(including Food and Drug Administration) and international regulatory requirements with respect to our products, and many
of these requirements are new and still evolving; and
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·
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we need to obtain or maintain patents or other appropriate protection
for the intellectual property utilized in our current and planned products, assays and services, and we must avoid infringement
of third-party intellectual property.
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THE OFFERING
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Common
Stock offered by us
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shares of Common Stock (assuming a combined public offering price of $
per share and related Warrant, the last reported sale price of our Common Stock on the NYSE American on ,
2019 and assuming no sale of any Pre-Funded Warrants).
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Pre-Funded Warrants offered
by us
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We are also
offering to those purchasers, if any, whose purchase of Common Stock in this offering would otherwise result in such purchaser,
together with its affiliates and certain related parties, beneficially owning more than 4.99% (or 9.99% at the election of
the holder) of our outstanding Common Stock immediately following the consummation of this offering, the opportunity, in lieu
of purchasing Common Stock, to purchase Pre-Funded Warrants to purchase up to
shares of our Common Stock. The purchase price of each Pre-Funded Warrant will equal the price
per share at which the shares of Common Stock are being sold to the public in this offering, minus $ ,
and the exercise price of each Pre-Funded Warrant will be $ per share of Common Stock. Each
Pre-Funded Warrant will be exercisable immediately upon issuance and will not expire. This prospectus also relates
to the offering of the shares of Common Stock issuable upon exercise of the Pre-Funded Warrants. See “Description
of the Securities We are Offering–Pre-Funded Warrants” for a discussion on the terms of the Pre-Funded Warrants.
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Each Pre-Funded Warrant
is exercisable for one share of Common Stock (subject to adjustment as provided therein) at any time at the option of the
holder, provided that the holder will be prohibited from exercising its Pre-Funded Warrant for shares of Common
Stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number
of shares of Common Stock then issued and outstanding. However, any holder may increase such percentage to
any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days
after such notice to us.
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Warrants offered by us
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Warrants
to purchase up to shares of Common Stock (assuming a combined
public offering price of $ per share and related warrant, the last reported
sale price of our Common Stock on the NYSE American on ,
2019). Each Share is being sold together with a Warrant to purchase one share of Common Stock. Each
warrant will have an exercise price per share of $________ and will be immediately exercisable and will expire on the fifth
anniversary of the original issuance date. This prospectus also relates to the offering of the shares of
Common Stock issuable upon exercise of the Warrants.
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Underwriter’s Warrants
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The registration
statement of which this prospectus is a part also registers for sale warrants to purchase shares
of Common Stock to the representative of the underwriters as a portion of the underwriting compensation payable to the underwriters
in connection with this offering. The warrants will be exercisable for a four and one-half year period commencing 180 days
following the effective date of the registration statement of which this prospectus is a part at an exercise price equal to
120% of the public offering price of the Common Stock. Please see “Underwriting — Underwriter’s Warrants”
for a description of these warrants.
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Option to purchase additional shares and/or
warrants
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We have granted
the underwriters an option for a period of 45 days from the date of this prospectus to purchase up to an additional
shares of Common Stock and/or Warrants to purchase
shares of Common Stock at the public offering price, less the underwriting discount.
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Common Stock outstanding after this offering
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shares (assuming a combined public offering price of $ per share and
related warrant, the last reported sale price of the Common Stock on the NYSE American on ,
2019) (or shares if the warrants
sold in this offering and the underwriter’s option are each exercised in full). The foregoing assumes
only shares of Common Stock are sold in this offering. For each Pre-Funded Warrant purchased in
this offering in lieu of Common Stock, we will reduce the number of shares of Common Stock being sold in the offering by one.
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Use
of proceeds
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Based on an assumed combined public
offering price of $ per Share and related
Warrant (the last reported sale price of the Common Stock on the NYSE American on ,
2019), we estimate that the net proceeds from our sale of shares of the Common Stock and Warrants in this offering will
be approximately $ , after deducting
estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise
their option to purchase additional shares and Warrants in full, we estimate that our net proceeds from this offering
will be approximately $ , excluding the
proceeds, if any, from the exercise of the Warrants. We currently expect to use the net proceeds from this offering for
general corporate purposes to fund ongoing operations and expansion of our business and to pay TheraCour Pharma, Inc.
$325,000 in deferred development payments.
For additional information please
refer to the section entitled “Use of Proceeds” on page 28 of this prospectus.
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Risk Factors
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Investing
in our securities involves a high degree of risk. You should carefully review and consider the “Risk Factors”
section of this prospectus for a discussion of factors to consider before deciding to invest in shares of our Common
Stock.
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Market
Symbol and trading
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The
Common Stock is listed on the NYSE American under the symbol “NNVC.” There is no established trading market for
the Warrants or Pre-Funded Warrants and we do not expect a market to develop. In addition, we do not intend
to apply for the listing of the Warrants or Pre-Funded Warrants on any national securities exchange or other trading market. Without
an active trading market, the liquidity of the Warrants and Pre-Funded Warrants will be limited.
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Unless otherwise stated, all information
contained in this prospectus assumes no investor purchased Pre-Funded Warrants in lieu of Common Stock sold in this
offering.
We
effected a one-for-twenty (1:20) reverse stock split of our authorized and outstanding capital stock (the “Split”),
including the Common Stock on September 24, 2019. Unless otherwise indicated, all
references to share amounts in this prospectus reflect the Split.
The number of shares of our Common Stock
to be outstanding after this offering is based on 3,844,921 shares of our Common Stock outstanding as of the date hereof and excludes
the following as of September 27, 2019:
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5,000
shares of our Common Stock subject to outstanding options having a weighted average exercise
price of $10.00 per share and restricted stock awards;
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894,999 shares of our Common Stock reserved
for issuance pursuant to the conversion of 255,714 shares of preferred stock;
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398,156 shares of our Common Stock reserved
for issuance upon exercise of outstanding warrants having a weighted average exercise price of $18.20 per share; and
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250,000 shares of our Common Stock reserved for issuance under
the NanoViricides, Inc. Executive Equity Incentive Plan.
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RISK FACTORS
Investing in our securities involves
a high degree of risk. You should carefully consider the following risk factors, as well as the other information contained elsewhere
in this prospectus before deciding whether to purchase, hold or sell our securities. The occurrence of any of the following risks
could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ
materially from those contained in forward-looking statements we have made in this prospectus and those we may make from time
to time. You should consider all of the risk factors described when evaluating our business.
Risks Specific to Our Business
Our company is a development stage
company that has no products approved for commercial sale, never generated any revenues and may never achieve revenues or profitability.
Our company is a development
stage company that has no products approved for commercial sale, never generated any revenues and may never achieve revenues or
profitability. Currently, we have no products approved for commercial sale and, to date, we have not generated any revenues. Our
ability to generate revenue depends heavily on:
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demonstration and proof of principle in pre-clinical trials
that a nanoviricide is safe and effective;
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successful development of our first product candidate in our
pipeline;
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our ability to seek and obtain regulatory approvals, including
with respect to the indications we are seeking;
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the successful commercialization of our product candidates;
and
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market acceptance of our products.
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All of our existing
product candidates are in early stages of development. It will be several years, if ever, until we have a commercial drug product
available for resale. If we do not successfully develop and commercialize these products, we will not achieve revenues or profitability
in the foreseeable future, if at all. If we are unable to generate revenues or achieve profitability, we may be unable to continue
our operations.
We are a development
stage company with a limited operating history, making it difficult for you to evaluate our business and your investment. We are
in the development stage and our operations and the development of our proposed products are subject to all of the risks inherent
in the establishment of a new business enterprise, including but not limited to:
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the absence of an operating history;
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the lack of commercialized products;
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expected substantial and continual losses for the foreseeable
future;
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limited experience in dealing with regulatory issues; the lack
of manufacturing experience and limited marketing experience;
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an expected reliance on third parties for the development and
commercialization of our proposed products;
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a competitive environment characterized by numerous, well-established
and well capitalized competitors; and
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reliance on key personnel.
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There is substantial doubt about our ability to continue
as a going concern.
Our independent registered
public accounting firm has issued an opinion on our consolidated financial statements included in our Annual Report on Form 10-K,
and included in this prospectus, that states that the consolidated financial statements were prepared assuming we will continue
as a going concern. However, we have incurred significant losses from operations to date and we expect
our expenses to increase in connection with our ongoing activities. To date, we have experienced negative cash flow from research
and development, as well as from the costs associated with purchasing and building a laboratory. We expect to incur substantial
net losses for the foreseeable future to further develop and commercialize this technology.
There can be no assurance
that funding will be available on acceptable terms on a timely basis, or at all. The various ways that we could raise capital
carry potential risks. Any additional sources of financing will likely involve the issuance of our equity securities, which will
have a dilutive effect on our stockholders. If we raise funds through collaborations and licensing arrangements, we might be required
to relinquish significant rights to its technologies or tests or grant licenses on terms that are not favorable to us. If we do
not succeed in raising additional funds on acceptable terms or at all, we may be unable to complete planned preclinical and clinical
trials or obtain approval of our product candidates from the Food and Drug Administration (“FDA”) and other regulatory
authorities.
Because we are subject to these
risks, you may have a difficult time evaluating our business and your investment in our company.
Our ability to become
profitable depends primarily on the following factors:
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our ability to develop drugs, obtain approval for such drugs,
and if approved, to successfully commercialize our nanoviricide drug(s);
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our R&D efforts, including the timing and cost of clinical
trials; and
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our ability to enter into favorable alliances with third parties
who can provide substantial capabilities in clinical development, regulatory affairs, sales, marketing and distribution.
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Even if we successfully develop
and market our drug candidates, we may not generate sufficient or sustainable revenue to achieve or sustain profitability.
We have incurred significant
operating losses and may not ever be profitable. As of June 30, 2019, we had a cash and cash equivalent balance of $2,555,207.
Also, we have incurred significant operating losses since its inception, resulting in an accumulated deficit of $92,116,586 at
June 30, 2019. Such losses are expected to continue for the foreseeable future.
We will need to raise substantial
additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable
terms.
While we believe we
will be able to raise sufficient cash in this offering, to be able to take at least one of our drug candidates into initial human
clinical trials, we currently do not have sufficient resources to complete the development, clinical trials, and commercialization
of any of our proposed products. Management is actively exploring additional required funding. However, there is no assurance
that we will be successful in obtaining sufficient financing from this offering on terms acceptable to the Company to fund continuing
operations.
In the event that
we cannot obtain acceptable financing, or that we are unable to secure additional financing on acceptable terms, we would be unable
to complete development of our various drug candidates. This would necessitate implementing staff reductions and operational adjustments
that would include reductions in the following business areas:
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research and development programs;
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preclinical studies and clinical trials; material characterization
studies, regulatory processes;
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a search for third party marketing partners to market our products
for us.
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The amount of capital we may need will
depend on many factors, including the:
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progress, timing and scope of our research and development programs;
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progress, timing and scope of our preclinical studies and clinical
trials;
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time and cost necessary to obtain regulatory approvals;
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time and cost necessary to establish our own marketing capabilities
or to seek marketing partners;
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time and cost necessary to respond to technological and market
developments;
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changes made or new developments in our existing collaborative,
licensing and other commercial relationships; and
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new collaborative, licensing and other commercial relationships
that we may establish.
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Our fixed expenses,
such as real estate taxes and facility and equipment maintenance, rent, and other contractual commitments, may increase in the
future, as we may:
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enter into leases for new facilities and capital equipment;
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enter into additional licenses and collaborative agreements;
and
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incur additional expenses associated with being a public company.
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We have limited experience in drug
development, have not yet conducted any clinical trials and may not be able to successfully develop any drugs.
Until the formation
of NanoViricide, Inc. (the Company’s predecessor prior to the reverse merger in 2005) our management and key personnel had
no experience in pharmaceutical drug development and, consequently, may not be able to successfully develop any drugs. To date,
we have engaged only in pre-clinical activities and have not yet conducted any clinical trials. Our ability to achieve revenues
and profitability in our business will depend, among other things, on our ability to:
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develop products internally or obtain rights to them from others
on favorable terms;
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complete laboratory testing and human studies;
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obtain and maintain necessary intellectual property rights to
our products;
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successfully complete regulatory review to obtain requisite
governmental agency approvals;
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enter into arrangements with third parties to manufacture our
products on our behalf; and
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enter into arrangements with third parties to provide sales
and marketing functions.
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Development of pharmaceutical products
is a time-consuming process, subject to a number of factors, many of which are outside of our control. Consequently, we can provide
no assurance of the successful and timely development of new drugs.
Our drug candidates
are in their developmental stage. Further development and extensive testing will be required to determine their technical feasibility
and commercial viability. Our success will depend on our ability to achieve scientific and technological advances and to translate
such advances into reliable, commercially competitive drugs on a timely basis. Drugs that we may develop are not likely to be
commercially available for a few years. The proposed development schedules for our drug candidates may be affected by a variety
of factors, including technological difficulties, proprietary technology of others, and changes in government regulation, many
of which will not be within our control. Any delay in the development, introduction or marketing of our drug candidates could
result either in such drugs being marketed at a time when their cost and performance characteristics would not be competitive
in the marketplace or in the shortening of their commercial lives. In light of the long-term nature of our projects, the unproven
technology involved and the other factors described elsewhere in “Risk Factors”, we may not be able to complete successfully
the development or marketing of any drugs.
We may fail to successfully
develop and commercialize our drug candidates if they:
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are found to be unsafe or ineffective or fail to meet the appropriate
endpoints in clinical trials;
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do
not receive necessary approval from the FDA or foreign regulatory agencies;
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fail to conform to a changing standard of care for the diseases
they seek to treat; or
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are less effective or more expensive than current or alternative
treatment methods.
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Drug development failure
can occur at any stage of clinical trials and as a result of many factors and there can be no assurance that we or our collaborators
will reach our anticipated clinical targets. Even if we or our collaborators complete our clinical trials, we do not know what
the long-term effects of exposure to our drug candidates will be. Furthermore, our drug candidates may be used in combination
with other treatments and there can be no assurance that such use will not lead to unique safety issues. Failure to complete clinical
trials or to prove that our drug candidates are safe and effective would have a material adverse effect on our ability to generate
revenue and could require us to reduce the scope of or discontinue our operations.
We must comply with significant
and complex government regulations, compliance with which may delay or prevent the commercialization of our drug candidates.
The R&D, manufacture
and marketing of drug candidates are subject to regulation, primarily by the FDA in the United States and by comparable authorities
in other countries. These national agencies and other federal, state, local and foreign entities regulate, among other things,
R&D activities (including testing in primates and in humans) and the testing, manufacturing, handling, labeling, storage,
record keeping, approval, advertising and promotion of the products that we are developing. Noncompliance with applicable requirements
can result in various adverse consequences, including approval delays or refusals to approve drug licenses or other applications,
suspension or termination of clinical investigations, revocation of approvals previously granted, fines, criminal prosecution,
recalls or seizures of products, injunctions against shipping drugs and total or partial suspension of production and/or refusal
to allow a company to enter into governmental supply contracts.
The process of obtaining
FDA approval has historically been costly and time consuming. Current FDA requirements for a new human drug or biological product
to be marketed in the United States include: (1) the successful conclusion of pre-clinical laboratory and animal tests, if appropriate,
to gain preliminary information on the product’s safety; (2) filing with the FDA of an IND application to conduct human
clinical trials for drugs or biologics; (3) the successful completion of adequate and well-controlled human clinical investigations
to establish the safety and efficacy of the product for its recommended use; and (4) filing by a company and acceptance and approval
by the FDA of a New Drug Application, or NDA, for a drug product or a biological license application, or BLA, for a biological
product to allow commercial distribution of the drug or biologic. A delay in one or more of the procedural steps outlined above
could be harmful to us in terms of getting our drug candidates through clinical testing and to market.
The FDA reviews the
results of the clinical trials and may order the temporary or permanent discontinuation of clinical trials at any time if it believes
the drug candidate exposes clinical subjects to an unacceptable health risk. Investigational drugs used in clinical studies must
be produced in compliance with current good manufacturing practice, or GMP, rules pursuant to FDA regulations.
Sales outside the
United States of products that we develop will also be subject to regulatory requirements governing human clinical trials and
marketing for drugs and biological products and devices. The requirements vary widely from country to country, but typically the
registration and approval process takes several years and requires significant resources. In most cases, even if the FDA has not
approved a product for sale in the United States, the product may be exported to any country if it complies with the laws of that
country and has valid marketing authorization by the appropriate authority. There are specific FDA regulations that govern this
process.
We also are subject
to the following risks and obligations, related to the approval of our products:
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The FDA or foreign regulators may interpret data from pre-clinical
testing and clinical trials in different ways than we interpret them.
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If regulatory approval of a product is granted, the approval
may be limited to specific indications or limited with respect to its distribution.
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In addition, many foreign countries control pricing and coverage
under their respective national social security systems.
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The FDA or foreign regulators may not approve our manufacturing
processes or manufacturing facilities.
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The FDA or foreign regulators may change their approval policies
or adopt new regulations.
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Even if regulatory approval for any product is obtained, the
marketing license will be subject to continual review, and newly discovered or developed safety or effectiveness data may
result in suspension or revocation of the marketing license.
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If regulatory approval of the product candidate is granted,
the marketing of that product would be subject to adverse event reporting requirements and a general prohibition against promoting
products for unapproved or “off-label” uses.
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In some foreign countries, we may be subject to official release
requirements that require each batch of the product we produce to be officially released by regulatory authorities prior to
its distribution by us.
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We will be subject to continual regulatory review and periodic
inspection and approval of manufacturing modifications, including compliance with current GMP regulations.
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We can provide no assurance that
our drug candidates will obtain regulatory approval or that the results of clinical studies will be favorable.
The Company reports
summary of its studies as the data become available to the Company, after analyzing and verifying same, in its press releases.
All of our products
in development are still in the pre-clinical stage, and not submitted to any regulatory agencies in any formal drug licensing
or approval processes. We have previously held a pre-IND meeting with the US FDA regarding our anti-influenza drug candidates,
in March 2012. However, since then, we have re-evaluated our priorities. We have now prioritized our HerpeCide™ program
drug candidates as our highest priority candidates.
Such strategic changes
are necessitated due to the limited resources available to us for drug development. We perform such strategic changes in order
to maximize our chances of entering into human clinical trials in the regulatory process in the earliest time frame possible,
and within the funding available to the Company, guided by input from a number of sources. Such changes are designed to accelerate
some programs and would lead to delays in some other programs that receive lower priority, due to our limited resources. We may
not be able to accurately assess the effect of such changes on our business plan.
The testing, marketing
and manufacturing of any product for use in the United States will require approval from the FDA. We cannot predict with any certainty
the amount of time necessary to obtain such FDA approval and whether any such approval will ultimately be granted. Preclinical
and clinical trials may reveal that one or more products are ineffective or unsafe, in which event further development of such
products could be seriously delayed or terminated. Moreover, obtaining approval for certain products may require testing on human
subjects of substances whose effects on humans are not fully understood or documented. Delays in obtaining FDA or any other necessary
regulatory approvals of any proposed drug and failure to receive such approvals would have an adverse effect on the drug’s
potential commercial success and on our business, prospects, financial condition and results of operations. In addition, it is
possible that a proposed drug may be found to be ineffective or unsafe due to conditions or facts that arise after development
has been completed and regulatory approvals have been obtained. In this event, we may be required to withdraw such proposed drug
from the market. To the extent that our success will depend on any regulatory approvals from government authorities outside of
the United States that perform roles similar to that of the FDA, uncertainties similar to those stated above will also exist.
Preclinical
and clinical studies of our product candidates may not be successful. If we are unable to generate successful results from preclinical
and clinical studies of our product candidates, or experience significant delays in doing so, our business may be materially harmed.
We have no products
on the market and all of our product candidates are in preclinical development. In particular, none of our product candidates
have ever been tested in a human subject. Our ability to achieve and sustain profitability depends on obtaining regulatory approvals
for and, if approved, successfully commercializing our product candidates, either alone or with third parties. Before obtaining
regulatory approval for the commercial distribution of our product candidates, we or an existing or future collaborator must conduct
extensive preclinical tests and clinical trials to demonstrate the safety, purity and potency of our product candidates.
The success of our
product candidates will depend on several factors, including the following:
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successfully
designing preclinical studies which may be predictive of clinical outcomes;
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successful results from preclinical and clinical studies;
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receipt of marketing approvals from applicable regulatory authorities;
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obtaining and maintaining patent and trade secret protection
for future product candidates;
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establishing and maintaining manufacturing relationships with
third parties or establishing our own manufacturing capability; and
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successfully commercializing our products, if and when approved,
whether alone or in collaboration with others.
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If we do not achieve
one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully
complete the development or commercialization of our product candidates, which would materially harm our business.
Because
the results of preclinical testing
are not necessarily predictive of future results, our products may not have favorable results in our planned clinical trials.
Even
if we have positive results from our preclinical testing
of our products, this may not necessarily be predictive of the results from our planned clinical trials in humans. Many companies
in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical trials after achieving positive
results in preclinical development, and we cannot
be certain that we will not face similar setbacks. Moreover, preclinical and
clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates
performed satisfactorily in preclinical studies
and clinical trials nonetheless failed to obtain FDA approval. If we fail to produce positive results in our clinical trials,
the development timeline and regulatory approval and commercialization prospects for our products, and, correspondingly, our business
and financial prospects, would be materially adversely affected.
We do not have a license from TheraCour Pharma, Inc.
for the manufacture, marketing and sale of a shingles drug, our lead drug candidate.
We do not currently
have a license from TheraCour Pharma, Inc. (“TheraCour”) for the Varicella Zoster Virus (“VZV”) area.
We are in discussions with TheraCour after having obtained independent asset valuations to serve as the basis for such additional
licenses and have executed a Memorandum of Understanding outlining the terms of the license. However, there can be no assurance
that we will be able to enter into an agreement with TheraCour for such license or that the agreement will be on terms that are
favorable to us. Nevertheless, to date, TheraCour has granted all license requests made by us.
Even if we obtain regulatory approvals,
our marketed drug candidates will be subject to ongoing regulatory review. If we fail to comply with continuing U.S. and foreign
regulations, we could lose our approvals to market these drugs and our business would be seriously harmed.
Following any initial
regulatory approval of any drugs we may develop, we will also be subject to continuing regulatory review, including the review
of adverse experiences and clinical results that are reported after our drug candidates are made commercially available. This
would include results from any post-marketing tests or vigilance required as a condition of approval. The manufacturer and manufacturing
facilities we use to make any of our drug candidates will also be subject to periodic review and inspection by the FDA. The discovery
of any previously unknown problems with the drug, manufacturer or facility may result in restrictions on the drug or manufacturer
or facility, including withdrawal of the drug from the market. If we are required to withdraw all or more of our drugs from the
market, we may be unable to continue revenue-generating operations. Reliance on third-party manufacturers entails risks to which
we would not be subject if we manufactured drugs ourselves, including reliance on the third-party manufacturer for regulatory
compliance. Our drug promotion and advertising is also subject to regulatory requirements and continuing FDA review.
Development of our drug candidates
requires a significant investment in R&D. Our R&D expenses in turn, are subject to variation based on a number of factors,
many of which are outside of our control. A sudden or significant increase in our R&D expenses could materially and adversely
impact our results of operations.
We do not believe
we have sufficient funds on hand to take a drug candidate into the IND application stage. However, we believe we will require
approximately an additional $3,000,000 to pursue the FDA approval process including an initial IND filing. There can be no assurance
that we will be able to raise sufficient funds or that such funds will be raised on terms that will be favorable to us.
We have estimated
a total cash expenditure budget of approximately $7 million for the next 12 months, of which approximately $5.0 million is expected
to go towards research and development for our drug candidates, including IND-enabling studies of one of our lead drug candidates,
namely Skin Cream for Topical Treatment of Shingles, and approximately $2.0 million is budgeted for general and administrative
expenses. However, 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 and 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.
The Company will be unable to proceed
with its business plan without obtaining additional financing to support its budgeted Research and Development and other costs.
We currently do not
have sufficient funds to fully pursue our R&D efforts and to pay for personnel to conduct this research. Because we expect
to expend substantial resources on R&D, our success depends in large part on the results as well as the costs of our R&D.
A failure in our R&D efforts or substantial increase in our R&D expenses would adversely affect our results of operations.
R&D expenditures are uncertain and subject to much fluctuation. Factors affecting our R&D expenses include, but are not
limited to:
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the
number and outcome of clinical studies we are planning to conduct; for example, our R&D
expenses may increase based on the number of late-stage clinical studies that we may
be required to conduct;
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the number, extent, and outcome of pre-clinical studies we are
planning to conduct; for example, our R&D expenses may increase based on the number and extent of IND-enabling pre-clinical
studies including CMC Studies, Tox Package Studies, and Quality Programs that we may be required to conduct;
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the number of drugs entering into pre-clinical development from
research; for example, there is no guarantee that internal research efforts will succeed in generating sufficient data for
us to make a positive development decision; and
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licensing activities, including the timing and amount of related
development funding or milestone payments; for example, we may enter into agreements requiring us to pay a significant up-front
fee for the purchase of in-process R&D that we may record as R&D expense.
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We have limited experience in conducting
or supervising clinical trials and must outsource all clinical trials.
We have limited experience
in conducting or supervising clinical trials that must be performed to obtain data to submit in concert with applications for
approval by the Food and Drug Administration (“FDA”). The regulatory process to obtain approval for drugs for commercial
sale involves numerous steps. Drugs are subjected to clinical trials that allow development of case studies to examine safety,
efficacy, and other issues to ensure that sale of drugs meets the requirements set forth by various governmental agencies, including
the FDA. In the event that our protocols do not meet standards set forth by the FDA, or that our data is not sufficient to allow
such trials to validate our drugs in the face of such examination, we might not be able to meet the requirements that allow our
drugs to be approved for sale.
Because we have limited
experience in conducting or supervising clinical trials, we plan to outsource our clinical trials to third parties. We have no
control over their compliance with procedures and protocols used to complete clinical trials in accordance with standards required
by the agencies that approve drugs for sale. If these subcontractors fail to meet these standards, the validation of our drugs
would be adversely affected, causing a delay in our ability to meet revenue-generating operations.
We are subject to risks inherent
in conducting clinical trials. The risk of non-compliance with FDA-approved good clinical practices by clinical investigators,
clinical sites, or data management services could delay or prevent us from developing or ever commercializing our drug candidates.
Agreements with clinical
investigators and medical institutions for clinical testing and with other third parties for data management services place substantial
responsibilities on these parties, which could result in delays in, or termination of, our clinical trials if these parties fail
to perform as expected. For example, if any of our clinical trial sites fail to comply with FDA-approved good clinical practices,
we may be unable to use the data gathered at those sites. If these clinical investigators, medical institutions or other third
parties do not carry out their contractual duties or obligations or fail to meet expected deadlines, or if the quality or accuracy
of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols or for other reasons,
our clinical trials may be extended, delayed or terminated, and we may be unable to obtain regulatory approval for or successfully
commercialize our drug candidates.
We or regulators may
suspend or terminate our clinical trials for a number of reasons. We may voluntarily suspend or terminate our clinical trials
if at any time we believe that they present an unacceptable risk to the patients enrolled in our clinical trials. In addition,
regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that
the clinical trials are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable
safety risk to the patients enrolled in our clinical trials.
Our clinical trial
operations will be subject to regulatory inspections at any time. If regulatory inspectors conclude that we or our clinical trial
sites are not in compliance with applicable regulatory requirements for conducting clinical trials, we may receive reports of
observations or warning letters detailing deficiencies, and we will be required to implement corrective actions. If regulatory
agencies deem our responses to be inadequate, or are dissatisfied with the corrective actions that we or our clinical trial sites
have implemented, our clinical trials may be temporarily or permanently discontinued, we may be fined, we or our investigators
may be precluded from conducting any ongoing or any future clinical trials, the government may refuse to approve our marketing
applications or allow us to manufacture or market our drug candidates or we may be criminally prosecuted. If we are unable to
complete clinical trials and have our products approved due to our failure to comply with regulatory requirements, we will be
unable to commence revenue-generating operations.
Efforts of government and third-party
payers to contain or reduce the costs of health care may adversely affect our revenues even if we were to develop an FDA approved
drug.
Our ability to earn
sufficient returns on our drug candidates may depend in part on the extent to which government health administration authorities,
private health coverage insurers and other organizations will provide reimbursement for the costs of such drugs and related treatments.
Significant uncertainty exists as to the reimbursement status of newly approved health care drugs, and we do not know whether
adequate third-party coverage will be available for our drug candidates. If our current and proposed drugs are not considered
cost-effective, reimbursement to the consumers may not be available or sufficient to allow us to sell drugs on a competitive basis.
The failure of the government and third-party payers to provide adequate coverage and reimbursement rates for our drug candidates
could adversely affect the market acceptance of our drug candidates, our competitive position and our financial performance.
If we were to successfully
develop approvable drugs, before we can begin selling these drugs, we must obtain regulatory approval of our manufacturing facility
and process or the manufacturing facility and process of the third party or parties with whom we may outsource our manufacturing
activities. In addition, the manufacture of our products must comply with the FDA’s current Good Manufacturing Practices
regulations, commonly known as GMP regulations. The GMP regulations govern quality control and documentation policies and procedures.
Our manufacturing facilities, if any in the future and the manufacturing facilities of our third party manufacturers will be continually
subject to inspection by the FDA and other state, local and foreign regulatory authorities, before and after product approval.
We cannot guarantee that we, or any potential third party manufacturer of our products, will be able to comply with the GMP regulations
or other applicable manufacturing regulations.
As of the date of
this filing, we and TheraCour have approximately seventeen employees including employees from TheraCour, and several consultants
and independent contractors. The only consultant/contractor that we consider critical to the Company is TheraCour Pharma, discussed
in the next risk factor. All other consultant/contractors would be more readily replaceable.
Confidentiality agreements
with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information. Disclosure
of our trade secrets or proprietary information could compromise any competitive advantage that we have.
We depend upon confidentiality
agreements with our officers, employees, consultants, and subcontractors to maintain the proprietary nature of the technology.
These measures may not afford us sufficient or complete protection, and may not afford an adequate remedy in the event of an unauthorized
disclosure of confidential information. In addition, others may independently develop technology similar to ours, otherwise avoiding
the confidentiality agreements, or produce patents that would materially and adversely affect our business, prospects, financial
condition, and results of operations.
We will rely upon licensed patents
to protect our technology. We may be unable to obtain or protect such intellectual property rights, and we may be liable for infringing
upon the intellectual property rights of others.
Our ability to compete
effectively will depend on our ability to maintain the proprietary nature of our technologies and the proprietary technology of
others with which we have entered into licensing agreements. We have exclusive licenses from TheraCour Pharma to novel technologies,
proprietary technologies, and knowhow, some of which has been filed in patent applications, and we expect to file patents of our
own in the coming years. There can be no assurance that any of these patent applications will ultimately result in the issuance
of a patent with respect to the technology owned by us or licensed to us. The patent position of pharmaceutical or biotechnology
companies, including ours, is generally uncertain and involves complex legal and factual considerations. The standards that the
United States Patent and Trademark Office use to grant patents are not always applied predictably or uniformly and can change.
There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical
or biotechnology patents. Accordingly, we do not know the degree of future protection for our proprietary rights or the breadth
of claims that will be allowed in any patents issued to us or to others. Further, we rely on a combination of trade secrets, know-how,
technology and nondisclosure, and other contractual agreements and technical measures to protect our rights in the technology.
If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed
by a competitor, our business and financial condition could be materially adversely affected.
We do not believe
that any of the drug candidates we are currently developing infringe upon the rights of any third parties nor are they infringed
upon by third parties; however, there can be no assurance that our technology will not be found in the future to infringe upon
the rights of others or be infringed upon by others. In such a case, others may assert infringement claims against us, and should
we be found to infringe upon their patents, or otherwise impermissibly utilize their intellectual property, we might be forced
to pay damages, potentially including treble damages, if we are found to have willfully infringed on such parties’ patent
rights. In addition to any damages we might have to pay, we may be required to obtain licenses from the holders of this intellectual
property, enter into royalty agreements, or redesign our drug candidates so as not to utilize this intellectual property, each
of which may prove to be uneconomical or otherwise impossible. Conversely, we may not always be able to successfully pursue our
claims against others that infringe upon our technology and the technology exclusively licensed from the TheraCour Pharma. Thus,
the proprietary nature of our technology or technology licensed by us may not provide adequate protection against competitors.
Moreover, the cost
to us of any litigation or other proceeding relating to our patents and other intellectual property rights, even if resolved in
our favor, could be substantial, and the litigation would divert our management’s efforts. Uncertainties resulting from
the initiation and continuation of any litigation could limit our ability to continue our operations.
Other companies or organizations
may assert patent rights that prevent us from developing and commercializing our drug candidates.
We are in a relatively
new scientific field that has generated many different patent applications from organizations and individuals seeking to obtain
important patents in the field. Because the field is so new, very few of these patent applications have been fully processed by
government patent offices around the world, and there is a great deal of uncertainty about which patents will issue, when, to
whom, and with what claims. It is possible that there will be significant litigation and other proceedings, such as interference
proceedings in various patent offices, relating to patent rights in the field. Others may attempt to invalidate our patents or
other intellectual property rights. Even if our rights are not directly challenged, disputes among third parties could lead to
the weakening or invalidation of those intellectual property rights.
Thus, it is possible
that one or more organizations will hold patent rights to which we will need a license. Any license required under any patent
may not be made available on commercially acceptable terms, if at all. In addition, such licenses are likely to be non-exclusive
and, therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license
and are unable to design around a patent, we may be unable to effectively market some of our technology and drug candidates, which
could limit our ability to generate revenues or achieve profitability and possibly prevent us from generating revenue sufficient
to sustain our operations.
We are dependent upon TheraCour
Pharma Inc. for the rights to develop the products we intend to sell and our license agreements with TheraCour Pharma, Inc.
require that TheraCour is the sole developer and supplier of our licensed products.
Our ability to develop,
manufacture and sell the products the Company plans to develop is derived from our Licensing Agreements with TheraCour Pharma
Inc. (“TheraCour”). While we hold the licenses in perpetuity, the Agreements may be terminated by TheraCour as a result
of: the insolvency or bankruptcy proceedings by or against the Company, a general assignment by the Company to its creditors,
the dissolution of the Company, cessation by the Company of business operations for ninety (90) days or more or the commencement
by the Company or an affiliate to challenge or invalidate the issued patents.
The Company does not
hold the rights to any other patents nor does the Company conduct its own research and development to develop other products to
manufacture and sell. In addition, TheraCour is the sole developer of our licensed products and we are required to pay TheraCour
fess for indirect and direct costs incurred by TheraCour for its licensed products. Therefore, we are dependent upon TheraCour
for all of our product development needs. If the Company’s Agreement with TheraCour is terminated, it is unlikely we will
be able to commence revenue-generating operations or that the Company could continue operating at all.
The expiration or loss of patent protection
may adversely affect our future revenues and operating earnings.
We rely on patent,
trademark, trade secret and other intellectual property protection in the discovery, research and of our product candidates. In
particular, patent protection is important in the development and eventual commercialization of our products and product candidates.
Patents covering our products and product candidates normally provide market exclusivity, which is important in order for our
products and product candidates to become profitable.
Certain of the patents
that we license expire between 2020 and 2028. While we believe the patent holders may seek additional patent coverage which may
protect the technology underlying these patents, there can be no assurances that such additional patent protection will be granted,
or if granted, that these patents will not be infringed upon or otherwise held enforceable. Even if we are successful in obtaining
a patent, patents have a limited lifespan and we currently do not have any products for sale. In the United States, the natural expiration of
a utility patent typically is generally 20 years after it is filed. Various extensions may be available; however, the life of
a patent, and the protection it affords, is limited. Without patent protection for our products and product candidates, we may
be open to competition from generic versions of such methods and devices.
We lack suitable facilities for
clinical testing; reliance on third parties.
The Company does not
have facilities that could be used to conduct clinical testing. We expect to contract with third parties to conduct all clinical
testing required to obtain approvals for any drugs that we might develop. We currently outsource all testing to a number of third
parties in various collaborations and service contracts. Any of our collaborators or service providers may discontinue the service
contract or collaboration. If this were to occur, then we would be required to modify our priorities and goals, obtain other collaborators
or service providers to replace the ones we lose, or we may even be forced to abandon certain drug development programs. In addition,
any failures by third parties to adequately perform their responsibilities may delay the submission of our proposed products for
regulatory approval, impair our ability to deliver our products on a timely basis, increase our costs, or otherwise impair our
competitive position.
We have limited manufacturing experience.
The Company has never
manufactured products in the highly regulated environment of pharmaceutical manufacturing. There are numerous regulations and
requirements that must be maintained to obtain licensure and the permits required to commence manufacturing, as well as additional
requirements to continue manufacturing pharmaceutical products. We now own facilities that could be used to manufacture clinical
quantities of any products that might be developed by the Company. We believe that this cGMP-capable facility may allow us to
produce limited quantities of a drug after approval for initial market entry, and that such an effort may make commercial sense
if the treatment course requirements and afflicted patient populations are limited, and if the remuneration for the treatment
course is appropriate. However, we do not own, nor lease facilities suitable for cGMP manufacture of any of our drug candidates
in large commercial quantities, nor do we have the resources at this time to acquire or lease suitable facilities. At present,
we have not retained any contract manufacturing organizations (CMO) for commercial manufacture or for clinical product manufacture.
We
may be unable to attract, retain, and motivate skilled personnel which will delay our product development programs and our research
and development efforts.
Our success depends
on our continued ability to attract, retain, and motivate highly qualified scientific personnel who must undergo extensive training
to assist in our research programs. Competition for skilled and qualified personnel and academic and other research collaborations
is intense. These employees are highly specialized and require significant training to work on our technology. As a result, if
we lose the services of personnel with the necessary skills, or if there are extensive delays in training such personnel, it could
significantly impede the achievement of our research and development objectives.
Due to our financial
uncertainty, we have lost almost half of the employees that were recently employed by us and TheraCour. Accordingly, we are currently
experiencing extreme staffing constraints as well as financing constraints that have already caused substantial delays and may
continue to cause further delays in our estimated timelines, unless we are successful at raising additional funds and at attracting
and retaining highly skilled employees with specific skill-sets. There can be no assurance that we will be able to raise sufficient
funding or that even if we are able to raise funding on terms favorable to the Company, that we will be able to hire and retain
such qualified employees, The inability to hire and retain these employees will significantly delay our objectives including filing
an IND with the FDA.
We have no sales and marketing personnel.
We are an early stage
development company with limited resources. We do not currently have any products available for sale, so have not secured sales
and marketing staff at this early stage of operations. We cannot generate sales without a sales or marketing staff and we cannot
guarantee we will be successful in developing one. Even if we were to successfully develop approvable drugs, we will not be able
to sell these drugs if we or our third-party manufacturers fail to comply with manufacturing regulations.
Since
we cannot predict whether or when we will obtain regulatory approval to commercialize our product candidates, we cannot predict
the timing of any future revenue from these product candidates.
We
cannot commercialize any of our product candidates to generate revenue until the appropriate regulatory authorities have reviewed
and approved the marketing applications for the product candidates. We cannot ensure that the regulatory agencies will complete
their review processes in a timely manner or that we will obtain regulatory approval for any product candidate that we or our
collaborators develop. Satisfaction of regulatory requirements typically takes many years, is dependent upon the type, complexity
and novelty of the product and requires the expenditure of substantial resources. Regulatory approval processes outside the United
States include all of the risks associated with the FDA approval process. In addition, we may experience delays or rejections
based upon additional government regulation from future legislation or administrative action or changes in FDA policy during the
period of product development, clinical trials and FDA regulatory review.
We license our core technology from
TheraCour. and we are dependent upon them as they have exclusive development rights. If we lose the right to utilize any of the
proprietary information that is the subject of this license agreement, we may incur substantial delays and costs in development
of our drug candidates
The Company has entered
into Material License Agreements with TheraCour Pharma, Inc. (“TheraCour”) (an approximately 12% shareholder of the
Company’s Common Stock) as of September 27, 2019, which is controlled by Anil Diwan, our founder, Executive Chairman and
President. TheraCour has exclusive rights to develop exclusively for us, the materials that comprise the core drugs of our planned
business. TheraCour is a development stage company with limited financial resources and needs the Company’s progress payments
to further the development of the nanoviricides. The Company controls the research and work TheraCour performs on its behalf and
no costs may be incurred without the prior authorization or approval of the Company.
We depend on TheraCour
and other third parties to perform manufacturing activities effectively and on a timely basis. If these third parties fail to
perform as required, this could impair our ability to deliver our products on a timely basis or cause delays in our clinical trials
and applications for regulatory approval, and these events could harm our competitive position and adversely affect our ability
to commence revenue-generating operations. The manufacturing process for pharmaceutical products is highly regulated, and regulators
may shut down manufacturing facilities that they believe do not comply with regulations. We, and our manufacturers are subject
to the FDA’s current Good Manufacturing Practices, which are extensive regulations governing manufacturing processes, stability
testing, record keeping and quality standards and similar regulations are in effect in other countries. In addition, our manufacturing
operations are subject to routine inspections by regulatory agencies.
Our collaborative relationships with third parties could
cause us to expend significant resources and incur substantial business risk with no assurance of financial return.
We anticipate substantial
reliance upon strategic collaborations for marketing and the commercialization of our drug candidates and we may rely even more
on strategic collaborations for R&D of our other drug candidates. Our business depends on our ability to sell drugs to both
government agencies and to the general pharmaceutical market. Offering our drug candidates for non-medical applications to government
agencies does not require us to develop new sales, marketing or distribution capabilities beyond those already existing in the
company. Selling antiviral drugs, however, does require such development. We plan to sell antiviral drugs through strategic partnerships
with pharmaceutical companies. If we are unable to establish or manage such strategic collaborations on terms favorable to us
in the future, our revenue and drug development may be limited. To date, we have not entered into any strategic collaboration
with third parties capable of providing these services. In addition, we have not yet marketed or sold any of our drug candidates
or entered into successful collaborations for these services in order to ultimately commercialize our drug candidates.
If we determine to
enter into R&D collaborations during the early phases of drug development, our success will in part depend on the performance
of our research collaborators. We will not directly control the amount or timing of resources devoted by our research collaborators
to activities related to our drug candidates. Our research collaborators may not commit sufficient resources to our programs.
If any research collaborator fails to commit sufficient resources, our preclinical or clinical development programs related to
such collaboration could be delayed or terminated. Also, our collaborators may pursue existing or other development-stage products
or alternative technologies in preference to those being developed in collaboration with us. Finally, if we fail to make required
milestone or royalty payments to our collaborators or to observe other obligations in our agreements with them, our collaborators
may have the right to terminate those agreements.
Manufacturers producing
our drug candidates must follow current GMP regulations enforced by the FDA and foreign equivalents. If a manufacturer of our
drug candidates does not conform to the current GMP regulations and cannot be brought up to such a standard, we will be required
to find alternative manufacturers that do conform. This may be a long and difficult process and may delay our ability to receive
FDA or foreign regulatory approval of our drug candidates and cause us to fall behind on our business objectives.
Establishing strategic
collaborations is difficult and time-consuming. Our discussion with potential collaborators may not lead to the establishment
of collaborations on favorable terms, if at all. Potential collaborators may reject collaborations based upon their assessment
of our financial, regulatory or intellectual property position. Even if we successfully establish new collaborations, these relationships
may never result in the successful development or commercialization of our drug candidates or the generation of sales revenue.
To the extent that we enter into collaborative arrangements, our drug revenues are likely to be lower than if we directly marketed
and sold any drugs that we may develop.
Management of our
relationships with our collaborators will require:
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significant time and effort from our management
team;
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coordination of our marketing and R&D programs
with the marketing and R&D priorities of our collaborators; and
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effective allocation of our resources to multiple
projects.
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We employ the use of certain chemical
and biological agents and compounds that may be deemed hazardous and we are therefore subject to various environmental laws and
regulations. Compliance with these laws and regulations may result in significant costs, which could materially reduce our ability
to become profitable.
We use hazardous materials,
including chemicals and biological agents and compounds that could be dangerous to human health and safety or the environment.
As appropriate, we safely store these materials and wastes resulting from their use at our laboratory facility pending their ultimate
use or disposal. We contract with a third party to properly dispose of these materials and wastes. We are subject to a variety
of federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of
these materials and wastes. We may incur significant costs complying with environmental laws and regulations adopted in the future.
We cannot eliminate
the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous
materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur
significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
We may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.
These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply
with these laws and regulations also may result in substantial fines, penalties or other sanctions.
If we use biological and hazardous
materials in a manner that causes injury, we may be liable for damages.
Our R&D and manufacturing
activities will involve the use of biological and hazardous materials. Although we believe our safety procedures for handling
and disposing of these materials comply with federal, state and local laws and regulations, we cannot entirely eliminate the risk
of accidental injury or contamination from the use, storage, handling or disposal of these materials. We carry $5,000,000 casualty
and general liability insurance policies. Accordingly, in the event of contamination or injury, we could be held liable for damages
or penalized with fines in an amount exceeding our resources and insurance coverage, and our clinical trials or regulatory approvals
could be suspended.
We depend upon our senior management
and their loss or unavailability could put us at a competitive disadvantage.
We currently depend
upon the efforts and abilities of our management team. The loss or unavailability of the services of any of these individuals
for any significant period of time could have a material adverse effect on our business, prospects, financial condition and results
of operations. We have not obtained, do not own, nor are we the beneficiary of key-person life insurance for all of our key personnel.
The Company believes
that its President, Anil Diwan, is critical to the success of the Company. The Company is a limited beneficiary of a certain amount
of key man insurance for Anil Diwan that the Company maintains. However, there can be no assurances that the amount of the key
man insurance coverage would be sufficient to provide replacement of this key officer for continuing the Company’s operations
in a timely manner, should such an event arise.
The Company also maintains
a limited amount of Directors and Officers Liability insurance coverage to protect all of its directors and executive officers
taken together. There can be no assurance that this D&O coverage will be sufficient to cover the costs of the events that
may lead to its invocation, in which case, there could be a substantial impact on the Company’s ability to continue operations,
should such an unforeseen event occur.
There are conflicts of interest
among our officers, directors and stockholders.
Certain of our executive
officers and directors and their affiliates are engaged in other activities and have interests in other entities on their own behalf
or on behalf of other persons. Neither we, nor our stockholders will have any rights in these ventures or their income or profits.
Specifically, Anil Diwan owns approximately 90% of the capital stock of TheraCour, which as of September 27, 2019 owned approximately
22.5% of the Company’s voting securities including 12% of our Common Stock, and 39% of the Company’s Series A
Preferred stock, and provides the nanomaterials to the Company with which it intends to develop its products and is the holder
of the intellectual property rights the Company uses to conduct its operations. While the Company is not aware of any conflict
that has arisen or any transaction that has not been conducted on an arm’s length basis to date, Dr. Diwan may have conflicting
fiduciary duties between the Company and TheraCour, for which he must recuse himself from certain decision-making processes of
the Company.
In addition, a former
independent director, Dr. Milton Boniuk beneficially owns approximately 523,144 shares of Common Stock, and 16,850 shares of Series
A Preferred stock as of September 27, 2019.
The Company does not
allow a conflicted shareholder, director, or executive officer to vote on matters wherein a conflict may be perceived. The conflicted
person or entity is not allowed to nominate an alternate person to vote for them either. Other than this safeguard, the Company
currently does not have any policy in place, should such a conflict arise.
In particular:
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Our executive officers or directors or their affiliates
may have an economic interest in, or other business relationship with, partner companies that invest in us.
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Our executive officers or directors or their affiliates
have interests in entities that provide products or services to us.
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In any of these cases:
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Our executive officers or directors may have a conflict
between our current interests and their personal financial and other interests in another business venture.
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Our executive officers or directors may have conflicting
fiduciary duties to us and the other entity.
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The terms of transactions with the other entity
may not be subject to arm’s length negotiations and therefore may be on terms less favorable to us than those that could
be procured through arm’s length negotiations.
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We anticipate entering into contracts
with various U.S. government agencies. In contracting with government agencies, we will be subject to various federal contract
requirements. Future sales to U.S. government agencies will depend, in part, on our ability to meet these requirements, certain
of which we may not be able to satisfy.
We may enter into
contracts with various U.S. government agencies which have special contracting requirements that give the government agency various
rights or impose on the other party various obligations that can make the contracts less favorable to the non- government party.
Consequently, if a large portion of our revenue is attributable to these contracts, our business may be adversely affected should
the governmental parties exercise any of these additional rights or impose any of these additional obligations.
U.S. government contracts
typically contain unfavorable termination provisions and are subject to audit and modification by the government at its sole discretion,
which subjects us to additional risks. These risks include the ability of the U.S. government to unilaterally:
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suspend or prevent us for a set period of time from
receiving new contracts or extending existing contracts based on violations or suspected violations of laws or regulations;
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terminate our existing contracts;
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reduce the scope and value of our existing contracts;
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audit and object to our contract-related costs and
fees, including allocated indirect costs;
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control and potentially prohibit the export of our
drug candidates; and
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change certain terms and conditions in our contracts.
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The U.S. government
may terminate any of its contracts with us either for its convenience or if we default by failing to perform in accordance with
the contract schedule and terms. Termination for convenience provisions generally enable us to recover only our costs incurred
or committed, and settlement expenses and profit on the work completed prior to termination. Termination for default provisions
do not permit these recoveries and make us liable for excess costs incurred by the U.S. government in procuring undelivered items
from another source.
As a U.S. government
contractor, we may become subject to periodic audits and reviews. Based on the results of these audits, the U.S. government may
adjust our contract-related costs and fees, including allocated indirect costs. As part of any such audit or review, the U.S.
government may review the adequacy of, and our compliance with, our internal control systems and policies, including those relating
to our purchasing, property, compensation and/or management information systems. In addition, if an audit or review uncovers any
improper or illegal activity, we may be subject to civil and criminal penalties and administrative sanctions, including termination
of our contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with
the U.S. government. We could also suffer serious harm to our reputation if allegations of impropriety were made against us. In
addition, under U.S. government purchasing regulations, some of our costs, including most financing costs, amortization of intangible
assets, portions of our R&D costs and some marketing expenses, may not be reimbursable or allowed under our contracts. Further,
as a U.S. government contractor, we may become subject to an increased risk of investigations, criminal prosecution, civil fraud,
whistleblower lawsuits and other legal actions and liabilities to which purely private sector companies are not.
We may fail to obtain contracts
to supply the U.S. government, and we may be unable to commercialize our drug candidates.
The U.S. government
has undertaken commitments to help secure improved countermeasures against bio-terrorism. The process of obtaining government
contracts is lengthy and uncertain, and we would compete for each contract. Moreover, the award of one government contract would
not necessarily secure the award of future contracts covering the same drug. If the U.S. government makes significant future contract
awards for the supply of its emergency stockpile to our competitors, our business will be harmed and it is unlikely that we will
be able to ultimately commercialize our competitive drug candidate.
In addition, the determination
of when and whether a drug is ready for large scale purchase and potential use will be made by the government through consultation
with a number of government agencies, including the FDA, the NIH, the CDC and the Department of Homeland Security. Congress has
approved measures to accelerate the development of bio-defense drugs through NIH funding, the review process by the FDA and the
final government procurement contracting authority. While this may help speed the approval of our drug candidates, it may also
encourage competitors to develop their own drug candidates.
The market for government
stockpiling of H5N1 medicines and other antiviral drugs in the Strategic National Stockpile is fairly new and uncertain.
At the present many
governments have already stockpiled influenza medicines for H5N1. We cannot predict with certainty the size of the market, if
any for all of the antiviral drugs that the governments may want to stockpile. Consequently, we cannot predict whether sales,
if any, to governments will be sufficient to fund our business plan and commence revenue-generating operations.
If the U.S. government fails to
continue funding bio-defense drug candidate development efforts or fails to purchase sufficient quantities of any future bio-defense
drug candidate, we may be unable to generate sufficient revenues to continue operations.
While we have not
yet received U.S. government funding, we hope to receive funding from the U.S. government for the development of our bio-defense
drug candidates. Changes in government budgets and agendas, however, may result in future funding being decreased and de-prioritized,
and government contracts typically contain provisions that permit cancellation in the event that funds are unavailable to the
government agency. Furthermore, we cannot be certain of the timing of any future funding, and substantial delays or cancellations
of funding could result from protests or challenges from third parties. If the U.S. government fails to continue to adequately
fund R&D programs, we may be unable to generate sufficient revenues to continue operations. Similarly, if we develop a drug
candidate that is approved by the FDA, but the U.S. government does not place sufficient orders for this drug, our future business
may be harmed.
Risks Related to the Biotechnology/Biopharmaceutical
Industry
The biotechnology and biopharmaceutical
industries are characterized by rapid technological developments and a high degree of competition. We may be unable to compete
with enterprises equipped with more substantial resources than us.
The biotechnology
and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition based
primarily on scientific and technological factors. These factors include the availability of patent and other protection for technology
and products, the ability to commercialize technological developments and the ability to obtain government approval for testing,
manufacturing and marketing.
Our shingles drug
candidate would compete with Valtrex®, an approved drug (valacyclovir), and other acyclovir-related nucleoside analogs, and
new drugs in the pipeline. FV-100, a VZV-specific nucleoside analog was in Phase 3 clinical trials that were terminated. Development
of ASP2151, a helicase/primase inhibitor, was terminated due to adverse events in healthy persons in clinical trials. We are not
aware of any further drugs in clinical trials for the treatment of shingles. Painkillers such as lidocaine formulations and oxycodone
formulations were in clinical trials for symptomatic relief of PHN.
Our HSV-1 and HSV-2
skin cream drug candidates would compete with branded and unbranded available skin creams, such as Abreva™, as well as with
branded and unbranded oral drug candidates against herpes, such as those based on acyclovir, valacyclovir, gancyclovir, among
others. It is not known until after human clinical trials whether our drug candidates provide patient benefits beyond those of
these drugs. Other drugs against herpes that are in the pipeline, if approved prior to our drug approval, would also be competition.
Several drugs are in clinical trials for HSV-1 and/or HSV-2 treatment. These include brincidofovir, cyclopropavir, valamocyclovir,
pritelivir, letermovir, as well as antibodies. Their patient benefit profiles are not known at present.
Our anti-influenza
drug in development, FluCide, would compete with neuraminidase inhibitors Tamiflu and Relenza, anti-influenza drugs that are sold
by Roche and Glaxo SmithKline (GSK), respectively. Generic competitors include amantadine and rimantadine, both oral. BioCryst
Pharmaceuticals, Inc. has achieved US FDA approval for IV Infusions formulations of peramivir, an influenza neuraminidase inhibitor,
for the treatment of uncomplicated influenza. Peramivir is approved in Japan and had obtained emergency use authorization in the
US. Its effectiveness during multiple clinical trials was found to be severely limited. Recently, a new drug, Xofluza (Baloxavir
marboxil), developed by Shionogi, Inc., has been approved in Japan, and licensed in the US and the rest of the world by Genetech/Roche.
On October 24, 2018 the U.S. FDA approved it for the treatment of acute uncomplicated influenza in people 12 years of age and older
who have been symptomatic for no more than 48 hours.. It is an influenza viral endonuclease PA inhibitor. Other drugs in this class
are in clinical trials. So are drugs targeting the m7G cap-snatching activity (PB2) of influenza virus such as VX787, and antibodies.
Several H5N1 bird flu, and influenza novelH1N1/2009 vaccines are also in development worldwide. Several companies are developing
anti-influenza drugs and vaccines.
We compete with specialized
biopharmaceutical firms in the United States, Europe and elsewhere, as well as a growing number of large pharmaceutical companies
that are applying biotechnology to their operations, many of which have greater market presence and resources than we do. Many
biopharmaceutical companies have focused their development efforts in the human therapeutics area, including cancer. Many major
pharmaceutical companies have developed or acquired internal biotechnology capabilities or made commercial arrangements with other
biopharmaceutical companies. These companies, as well as academic institutions, government agencies and private research organizations,
also compete with us in recruiting and retaining highly qualified scientific personnel and consultants. Our ability to compete
successfully with other companies in the pharmaceutical field will also depend to a considerable degree on the continuing availability
of capital to us.
We are aware of numerous
products under development or manufactured by competitors that are used for the prevention or treatment of certain diseases we
have targeted for drug development. Various companies are developing biopharmaceutical products that potentially directly compete
with our drug candidates even though their approach to such treatment is different.
We hope that our drug
candidates under development and in clinical trials will address major markets within the anti-viral sector. Our competition will
be determined in part by the potential indications for which drugs are developed and ultimately approved by regulatory authorities.
Additionally, the timing of the market introduction of some of our potential drugs or of competitors’ products may be an
important competitive factor. Accordingly, the relative speed with which we can develop drugs, complete pre-clinical testing,
clinical trials, approval processes and supply commercial quantities to market are important competitive factors. We expect that
competition among drugs approved for sale will be based on various factors, including product efficacy, safety, reliability, availability,
price and patent protection.
The successful development of biopharmaceuticals
is highly uncertain. A variety of factors including, pre-clinical study results or regulatory approvals, could cause us to abandon
development of our drug candidates.
Successful development
of biopharmaceuticals is highly uncertain and is dependent on numerous factors, many of which are beyond our control. Products
that appear promising in the early phases of development may fail to reach the market for several reasons including:
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pre-clinical study results that may show the product
to be less effective than desired (e.g., the study failed to meet its primary objectives) or to have harmful or problematic
side effects;
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failure to receive the necessary regulatory approvals
or a delay in receiving such approvals. Among other things, such delays may be caused by slow enrollment in clinical studies,
length of time to achieve study endpoints, additional time requirements for data analysis or an IND and later NDA, preparation,
discussions with the FDA, an FDA request for additional pre-clinical or clinical data or unexpected safety or manufacturing
issues;
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manufacturing costs, pricing or reimbursement issues,
or other factors that make the product not economical; and
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the proprietary rights of others and their competing
products and technologies that may prevent the product from being commercialized.
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Success in pre-clinical and early clinical
studies does not ensure that large-scale clinical studies will be successful. Clinical results are frequently susceptible to varying
interpretations that may delay, limit or prevent regulatory approvals. The length of time necessary to complete clinical studies
and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one
product to the next, and may be difficult to predict.
Risks Related to
the Securities Markets and Investments in Our Common Stock
We effected a one-for-twenty reverse
stock split of our authorized and outstanding Common Stock and Preferred Stock on September 24, 2019. However, the reverse stock
split may not increase our stock price sufficiently and we may not be able to maintain the listing of our Common Stock on the NYSE
American, LLC, in which case this offering may not be completed.
We
expect that the Split of our outstanding Common Stock will increase the market price
of our Common Stock so that we will continue to meet the minimum market price requirement of the listing rules of the NYSE American,
LLC. However, the effect of a reverse stock split upon the market price of our Common Stock cannot be predicted with certainty,
and the results of reverse stock splits by companies in similar circumstances have been varied. It is possible that the market
price of our Common Stock following the reverse stock split will not increase sufficiently for us to be in compliance with the
minimum market price requirement of the NYSE American, LLC, or if it does, that such price will be sustained. Lf we are unable
to meet the minimum market price requirement, we may be unable to list our shares on the NYSE American, LLC, in which case this
offering may not be completed.
The warrants require that we hold
a special meeting of shareholders for the purpose of obtaining approval of an increase in our authorized number of shares of Common
Stock, which if approved is expected to result in additional share issuances.
An increase in our
authorized shares will allow us to issue additional shares of Common Stock which could be dilutive to shareholders and could potentially
deter takeovers, including takeovers that our Board of Directors has determined are not in the best interest of our stockholders,
in that additional shares could be issued (within the limits imposed by applicable law) in one or more transactions that could
make a change in control or takeover more difficult. Similarly, the issuance of additional shares to certain persons allied with
our management could have the effect of making it more difficult to remove our current management by diluting the stock ownership
or voting rights of persons seeking to cause such removal. The authorized share increase therefore may have the effect of discouraging
unsolicited takeover attempts.
The Split may decrease the liquidity
of the shares of our Common Stock.
The liquidity of the
shares of our Common Stock may be affected adversely by the Split given the reduced number of shares that will be outstanding
following the Split, especially if the market price of our Common Stock does not increase as a result of the Split. In addition,
the Split may decrease the number of shareholders who own odd lots (less than 100 shares) of our Common Stock, creating the potential
for such shareholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.
Following the Split, the resulting
market price of our Common Stock may not attract new investors, including institutional investors, and may not satisfy the investing
requirements of those investors. Consequently, the trading liquidity of our Common Stock may not improve.
Although we believe
that a higher market price of our Common Stock may help generate greater or broader investor interest, there can be no assurance
that the Split will result in a share price that will attract new investors, including institutional investors.
If we do not meet the continued
listing standards of the NYSE American our Common Stock could be delisted from trading, which could limit investors’ ability
to make transactions in our Common Stock and subject us to additional trading restrictions.
As of September 25,
2013, our Common Stock became listed on the NYSE MKT (now known as “NYSE American”), a national securities exchange,
which imposes continued listing requirements with respect to listed shares. If, however, we fail to satisfy the continued listing
standards, such as, for example, the requirement that our shares not trade “for a substantial period of time at a low price
per share,” fail to meet stockholders equity requirements, or that we not dispose of our principal operating assets or discontinue
a substantial portion of our operations, among other requirements, the NYSE American may issue anon-compliance letter or initiate
delisting proceedings. If our securities are delisted from trading on the NYSE American and we are not able to list our securities
on another exchange or to have them quoted on NASDAQ, our securities could be quoted on the OTC Bulletin Board or on the “pink
sheets.” As a result, we could face significant adverse consequences including:
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a limited availability of market quotations for
our securities;
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a determination that our Common Stock is a “penny
stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result
in a reduced level of trading activity in the secondary trading market for our securities;
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a limited amount of news and analyst coverage for
us; and
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a decreased ability to issue additional securities
(including pursuant to short-form registration statements on Form S-3 or obtain additional financing in the future).
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Our Company is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which will require
us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs will reduce or
might eliminate our profitability.
Our Company is required
to file periodic reports with the Commission pursuant to the Exchange Act and the rules and regulations promulgated thereunder.
To comply with these requirements, our independent registered auditors will have to review our quarterly financial statements
and audit our annual financial statements. Moreover, our legal counsel will have to review and assist in the preparation of such
reports. The costs charged by these professionals for such services cannot be accurately predicted at this time, because factors
such as the number and type of transactions that we engage in and the complexity of our reports cannot be determined at this time
and will have a major effect on the amount of time to be spent by our auditors and attorneys. However, the incurrence of such
costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements
and earn a profit. We may be exposed to potential risks resulting from new requirements under Section 404 of the Sarbanes-Oxley
Act of 2002. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed,
investors could lose confidence in our reported financial information, the trading price of our Common Stock, if a market ever
develops, could drop significantly, or we could become subject to Commission enforcement proceedings.
Our Common Stock may be considered
a “penny stock” and may be difficult to sell.
The Commission has
adopted regulations which generally define “penny stock” to be an equity security that has a market price of less
than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. Historically, the price
of our Common Stock has fluctuated greatly. If, the market price of the Common Stock is less than $5.00 per share and the Common
Stock does not fall within any exemption, it therefore may be designated as a “penny stock” according to Commission
rules. The “penny stock” rules impose additional sales practice requirements on broker-dealers who sell securities
to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of securities and have received the purchaser’s written consent
to the transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the broker-dealer
must deliver, before the transaction, a disclosure schedule prescribed by the Commission relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market
in penny stocks. These additional burdens imposed on broker-dealers may restrict the ability or decrease the willingness of broker-dealers
to sell our common shares, and may result in decreased liquidity for our common shares and increased transaction costs for sales
and purchases of our common shares as compared to other securities.
Our stock price may be volatile
and your investment in our Common Stock could suffer a decline in value.
The price of our Common
Stock, as quoted on the NYSE American, may fluctuate significantly in response to a number of factors, many of which are beyond
our control. These factors include but are not limited to:
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progress of our products through the regulatory
process
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results of preclinical studies and clinical trials;
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announcements of technological innovations or new
products by us or our competitors;
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government regulatory action affecting our products
or our competitors’ products in both the United States and foreign countries;
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developments or disputes concerning patent or proprietary
rights;
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general market conditions for emerging growth and
pharmaceutical companies;
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economic conditions in the United States or abroad;
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actual or anticipated fluctuations in our operating
results;
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broad market fluctuations; and
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changes in financial estimates by securities analysts.
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There is a risk of market fraud.
Shareholders should
be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of
fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and
misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5)
the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level,
along with the resulting inevitable collapse of those prices and with consequent investor losses. We are aware of the abuses that
have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of
the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
As of September 25,
2013, our Common Stock has been listed on the NYSE American national exchange. However, shareholders should be aware that the occurrence
of the above-mentioned patterns and practices cannot be entirely precluded and that the occurrence of these patterns or practices
could increase the volatility of our share price.
A registration of a significant amount
of our outstanding restricted stock may have a negative effect on the trading price of our stock.
At September 27, 2019,
shareholders of the Company held 1,305,775 shares (as adjusted) of restricted stock, or approximately 34% of the outstanding Common
Stock. If we were to file a registration statement including all of these shares, and the registration is allowed by the SEC, these
shares would be freely tradable upon the effectiveness of the planned registration statement. If investors holding a significant
number of freely tradable shares decide to sell them in a short period of time following the effectiveness of a registration statement,
such sales could contribute to significant downward pressure on the price of our stock.
We do not intend to pay any cash
dividends in the foreseeable future and, therefore, any return on your investment in our capital stock must come from increases
in the fair market value and trading price of the capital stock.
We have not paid any
cash dividends on our Common Stock and do not intend to pay cash dividends on our Common Stock in the foreseeable future. We intend
to retain future earnings, if any, for reinvestment in the development and expansion of our business. Any credit agreements, which
we may enter into with institutional lenders, may restrict our ability to pay dividends. Whether we pay cash dividends in the
future will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations,
capital requirements and any other factors that the board of directors decides is relevant. Therefore, any return on your investment
in our capital stock must come from increases in the fair market value and trading price of the capital stock.
We may issue additional equity shares
to fund the Company’s operational requirements, which would dilute share ownership.
The Company’s
continued viability depends on its ability to raise capital. Changes in economic, regulatory or competitive conditions may lead
to cost increases. Management may also determine that it is in the best interest of the Company to develop new services or products.
In any such case additional financing is required for the Company to meet its operational requirements. There can be no assurances
that the Company will be able to obtain such financing on terms acceptable to the Company and at times required by the Company,
if at all. In such event, the Company may be required to materially alter its business plan or curtail all or a part of its operational
plans as detailed further in Management’s Discussion and Analysis in this prospectus. The sale or the proposed sale of substantial
amounts of our Common Stock in the public markets may adversely affect the market price of our Common Stock and our stock price
may decline substantially. In the event that the Company is unable to raise or borrow additional funds, the Company may be required
to curtail significantly its operational plans as further detailed in Requirements for Additional Capital in the Management’s
Discussion and Analysis of this prospectus.
Following the Split,
and prior to the Authorized Increase, the Company will be authorized to issue up to 7,500,000 shares of Common Stock without additional
approval by shareholders. As of September 27, 2019, on a pro forma basis and taking into account of the Split, we had 3,844,921
shares of Common Stock outstanding, warrants exercisable into 398,156 shares of Common Stock and 255,714 shares of Series A Preferred
Stock convertible into 894,999 shares of Common Stock only in the event of a change in control.
Large amounts of our Common Stock
will be eligible for resale under Rule 144.
As of September 27,
2019, 1,305,775 of 3,844,921 issued and outstanding split-adjusted shares of the Company’s Common Stock were restricted securities
as defined under Rule 144 of the Securities Act of 1933, as amended (the “Act”) and under certain circumstances may
be resold without registration pursuant to Rule 144. In addition, the 255,714 shares of Series A Preferred Stock are restricted
and convertible into 894,999 shares of Common Stock only in the event of a Change of Control of the Company.
Approximately 292,821
shares of our restricted shares of Common Stock (as adjusted) are held by non-affiliates who may avail themselves of the public
information requirements and sell their shares in accordance with Rule 144. As a result, some or all of these shares may be sold
in accordance with Rule 144 potentially causing the price of the Company’s shares to decline.
In general, under
Rule 144, a person (or persons whose shares are aggregated) who has satisfied a six month holding period may, under certain circumstances,
sell within any three-month period a number of securities which does not exceed the greater of 1% of the then outstanding shares
of Common Stock or the average weekly trading volume of the class during the four calendar weeks prior to such sale. Rule 144
also permits, under certain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate,
as such term is defined in Rule 144(a)(1), of the Company and who has satisfied a one-year holding period. Any substantial sale
of the Company’s Common Stock pursuant to Rule 144 may have an adverse effect on the market price of the Company’s
shares. This filing will satisfy certain public information requirements necessary for such shares to be sold under Rule 144.
The requirements of complying with
the Sarbanes-Oxley act may strain our resources and distract management.
We are subject to
the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act of 2002. The costs associated with these requirements
may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports
with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls
and procedures and internal controls over financial reporting. Historically, we have maintained a small accounting staff, but
in order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial
reporting, significant additional resources and management oversight will be required. This includes, among other things, activities
necessary for supporting our independent public auditors. This effort may divert management’s attention from other business
concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition, we may need to hire additional accounting and financial persons with appropriate public company experience and technical
accounting knowledge, and we cannot assure you that we will be able to do so in a timely fashion.
Sales of additional equity securities
may adversely affect the market price of our Common Stock and your rights in the Company may be reduced.
We expect to continue
to incur drug development and selling, general and administrative costs, and in order to satisfy our funding requirements, we
may need to sell additional equity securities. Our stockholders may experience substantial dilution and a reduction in the price
that they are able to obtain upon sale of their shares. Also, any new securities issued may have greater rights, preferences or
privileges than our existing Common Stock that may adversely affect the market price of our Common Stock and our stock price may
decline substantially.
Risks Relating to This Offering
If you purchase our securities in
this offering, you may incur immediate and substantial dilution in the book value of your shares.
The combined public
offering price per share of our Common Stock, the Pre-Funded Warrants and the related Warrants may be substantially higher than
the net tangible book value per share of our Common Stock immediately prior to the offering. After giving effect to the assumed
sale of shares of our Common Stock,
the Pre-Funded Warrants and the related Warrants in this offering, at an assumed combined public offering price of $
per share, the Pre-Funded Warrants and the related Warrant (the last reported sale price of our Common Stock on the NYSE American
on ,
2019), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us
and attributing no value to the warrants sold in this offering, purchasers of our Common Stock in this offering will incur immediate
dilution of $( ) per share in the net tangible book value of the Common Stock
they acquire. In the event that you exercise your warrants, you may experience additional dilution to the extent that the exercise
price of the warrants is higher than the tangible book value per share of our Common Stock. For a further description of the dilution
that investors in this offering may experience, see “Dilution.”
In addition, to the
extent that outstanding stock options or warrants have been or may be exercised or other shares issued, you may experience further
dilution.
We have broad discretion in the
use of the net proceeds we receive from this offering and may not use them effectively.
Our management will
have broad discretion in the application of the net proceeds we receive in this offering, including for any of the purposes described
in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision
to assess whether our management is using the net proceeds appropriately. Because of the number and variability of factors that
will determine our use of our net proceeds from this offering, their ultimate use may vary substantially from their currently
intended use. The failure by our management to apply these funds effectively could result in financial losses that could have
a material adverse effect on our business and cause the price of our Common Stock to decline. Pending their use, we may invest
our net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield
a favorable return to our stockholders.
Future sales of substantial amounts
of our Common Stock could adversely affect the market price of our Common Stock.
We may choose to raise
additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current
or future operating plans. If additional capital is raised through the sale of equity or convertible debt securities, or perceptions
that those sales could occur, the issuance of these securities could result in further dilution to investors purchasing our Common
Stock in this offering or result in downward pressure on the price of our Common Stock, and our ability to raise capital in the
future.
Holders of the Warrants and Pre-Funded Warrants
will have no rights as a Common Stockholder until they acquire our Common Stock.
Until you acquire
shares of our Common Stock upon exercise of the Warrants or Pre-Funded Warrants, you will have no rights with respect
to shares of our Common Stock issuable upon exercise of the Warrants or Pre-Funded Warrants. Upon exercise of the Warrants
or Pre-Funded Warrants, you will be entitled to exercise the rights of a Common Stockholder only as to matters for which
the record date occurs after the exercise date.
The Warrants may not have any value.
Each Warrant will
have an exercise price of $_______ and will expire on the fifth anniversary of the date they first become exercisable. In the
event our Common Stock price does not exceed the exercise price of the Warrants during the period when the Warrants are exercisable,
the Warrants may not have any value.
There is no public market for the
Warrants to purchase shares of our Common Stock or Pre-Funded Warrants being offered in this offering.
There is no established
public trading market for the Warrants or Pre-Funded Warrants being offered in this offering, and we do not expect a
market to develop. In addition, we do not intend to apply to list the Warrants or Pre-Funded Warrants on any national
securities exchange or other nationally recognized trading system, including the NYSE American. Without an active trading market,
the liquidity of the Warrants and Pre-Funded Warrants will be limited.
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking
statements, which reflect our current expectations and projections about future events and financial trends that we believe may
affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date
of this prospectus and are subject to a number of risks, uncertainties and assumptions described under the sections in this prospectus
entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and elsewhere in this prospectus. Forward-looking statements are identified by terms such as “may,”
“will,” “should,” “expect,” “plan,” “anticipate,” “could,”
“intend,” “target,” “project,” “contemplates,” “believes,” “estimates,”
“predicts,” “potential” or “continue” or the negative of these terms or other similar expressions.
Readers are cautioned not to place undue reliance on these forward-looking statements, which are based on the information available
to management at this time and which speak only as of this date. Examples of our forward-looking statements include:
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our future growth and profitability;
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our competitive strengths; and
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our business strategy and the trends we anticipate in the industries
and economies in which we operate.
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These forward-looking statements are based
on our current expectations and are subject to a number of risks, uncertainties and assumptions. These statements are not guarantees
of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control, are difficult
to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.
Important factors that could cause actual results to differ materially from those in forward-looking statements include:
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economic downturns, reduced capital expenditures,
consolidation and technological and regulatory changes in our industry;
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the highly competitive nature of our industry;
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our ability to attract and retain qualified managers and skilled employees;
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the outcome of our plans for future operations and growth; and
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the other factors referenced in this prospectus supplement, including,
without limitation, under “Risk Factors.”
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Because forward-looking statements are
inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our
control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances
reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those
projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties
may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required
by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result
of any new information, future events, changed circumstances or otherwise. The forward-looking statements contained in this prospectus
are excluded from the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995 and Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”).
This prospectus also refers to estimates
and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry.
This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.
In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which
we operate are necessarily subject to a high degree of uncertainty and risk.
USE OF PROCEEDS
We
estimate that the net proceeds of this offering will be approximately $
assuming the sale of
shares of Common Stock and Warrants to purchase up to
shares of Common Stock at an assumed combined public offering price of $
per share and related Warrant (the last reported sale price of Common Stock on the NYSE
American on ,
2019), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and
excluding the proceeds, if any, from the exercise of the warrants and assuming no sale of any Pre-Funded Warrants and no exercise
of the over-allotment option. If the underwriters exercise their option to purchase additional shares or Common Stock and Warrants
in full, we estimate that our net proceeds from this offering will be approximately $ ,
after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and excluding
the proceeds, if any, from the exercise of the Warrants and assuming no sale of any Pre-Funded Warrants. Each $
increase (decrease) in the assumed combined public offering price of $
per share and accompanying Warrant would increase (decrease) the net proceeds to us from
this offering by approximately $ ,
assuming the number of shares of Common Stock and Warrants offered by us, as set forth on the cover page of this prospectus, remains
the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We
may also increase or decrease the number of shares of Common Stock and Warrants we are offering. An increase (decrease) of 1 million
in the number of shares of Common Stock and Warrants sold in this offering would increase (decrease) the expected net proceeds
of the offering to us by approximately $ ,
assuming that the assumed combined public offering price per share and the related warrant coverage remains the same. We currently
intend to use the net proceeds of the offering for general corporate purposes and to fund ongoing operations and to repay
sums owed to TheraCour for deferred development fees, currently in the amount of $359,000 as of September 27, 2019.
We will only receive additional proceeds from the exercise of the common warrants issuable in connection with this offering if
such warrants are exercised at their exercise price and the holders of such warrants pay the exercise price in cash upon such exercise
and do not utilize the cashless exercise provision of the common warrants
DIVIDEND POLICY
The Company has not
paid any cash dividends on the Common Stock since its inception. The Company currently intends to retain any earnings for use
in its business, and therefore does not anticipate paying dividends in the foreseeable future.
MARKET FOR COMMON
STOCK AND RELATED STOCKHOLDER MATTERS
Our Common Stock commenced
trading on the NYSE MKT (now known as the NYSE American) on September 25, 2013 under the symbol “NNVC”. On September
25, 2019, the last reported sale price of our Common Stock on the NYSE American was $3.12 per share The Company’s Common
Stock, after the Company became a publicly traded company in May 2005, was initially traded on the Pink Sheets under the symbol
NNVC and from June 29, 2007, through September 24, 2013, the Company’s Common Stock has been quoted on the Over The Counter
Bulletin Board. Quotations reflect inter-dealer prices, without retail markup, markdown commission, and may not represent actual
transactions. No assurance can be given that an active market will exist for the Company’s Common Stock and the Company
does not expect to declare dividends in the foreseeable future since the Company intends to utilize its earnings, if any, to finance
its future growth, including possible acquisitions.
Number of Shareholders
As of September.27,
2019, on a pro forma basis adjusted to take into account the Split, a total of 3,844,921 shares of the Company’s Common Stock
are outstanding and held by approximately 154 shareholders of record. This number of shareholders does not reflect the persons
or entities that hold their stock in nominee or street name through various brokerage firms.
Dividends
The Company has not
paid any cash dividends since its inception. The Company currently intends to retain any earnings for use in its business, and
therefore does not anticipate paying dividends in the foreseeable future.
Transfer Agent
The transfer agent
and registrar for our Common Stock is Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado
80209, (303) 282-4800.
CAPITALIZATION
|
Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
Series A Convertible preferred stock,
$0.001 par value; 425,000 shares authorized and 255,714 shares issued and outstanding
|
|
$
|
256
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 750,000 shares authorized and 3,844,921
shares issued and outstanding
|
|
$
|
3,845
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
$
|
102,712,845
|
|
|
|
|
|
|
|
|
Deficit accumulated during the development stage
|
|
$
|
(92,116,586
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
10,600,360
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
SAB Warrants exercisable at various exercise prices.
|
|
|
38,433
|
|
|
|
|
|
|
|
|
Investor Warrants exercisable at 12.20 per share
|
|
|
347,223
|
|
|
|
|
|
|
|
|
Warrants exercisable at $40.00 per share
|
|
|
12,500
|
|
|
|
|
|
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at $10.00 per share
|
|
|
5,000
|
|
DILUTION
If you purchase shares
of our Common Stock in this offering, you may experience dilution to the extent of the difference between the combined public
offering price per share and related warrant in this offering and our as adjusted net tangible book value per share immediately
after this offering assuming no value is attributed to the warrants, and such warrants are accounted for and classified as equity.
Net tangible book value per share is equal to the amount of our total tangible assets, less total liabilities, divided by the
number of outstanding shares of our Common Stock. As of June 30, 2019, our net tangible book value was approximately $______ million,
or approximately $____ per share.
After giving effect
to the assumed sale by us of ___________ shares of our Common Stock (assuming no Pre-Funded Warrants in lieu of Common
Stock issued) and warrants to purchase up to _________ shares of our Common Stock in this offering at an assumed combined public
offering price of $____ per share and related warrant (the last reported sale price of our Common Stock on the NYSE American on
September__, 2019), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable
by us, and assuming no issuance of any Pre-Funded Warrants, our as adjusted net tangible book value as of June 30, 2019 would
have been approximately $____ million, or approximately $____ per share. This represents an immediate decrease in net
tangible book value of $____ per share to existing stockholders and an immediate decrease in net tangible book value of $_____
per share to new investors purchasing shares of our Common Stock and related warrants in this offering, attributing none of the
assumed combined public offering price to the warrants offered hereby. The following table illustrates this per share dilution:
|
Assumed combined public offering price per share and related warrant
|
|
|
|
|
|
$
|
|
|
|
Net tangible book value per share as of June 30, 2019
|
|
$
|
|
|
|
|
|
|
|
Decrease in net tangible book value per share after this offering
|
|
|
(0.__
|
)
|
|
$
|
(0._
|
)
|
|
As adjusted net tangible book value per share
after this offering
|
|
|
|
|
|
|
|
|
|
Dilution per share to new investors
|
|
|
|
|
|
$
|
|
|
A $0.25 increase in
the assumed combined public offering price of $___ per share and related warrant would result in an increase (decrease) in our
as adjusted net tangible book value of approximately $___ million, or approximately $(___) per share, and would result in
a decrease in net tangible book value to new investors of approximately $___ per share, assuming that the number of shares of
our Common Stock and related warrants sold by us remains the same, after deducting the estimated underwriting discounts and commissions
and estimated offering expenses payable by us. A decrease of $___ in the assumed combined public offering price of $____ per share
and related warrant would result in an increase (decrease) in our as adjusted net tangible book value of approximately $____ million,
or approximately $(____) per share, and would result in an increase in net tangible book value to new investors of approximately
$____ per share, assuming that the number of shares of our Common Stock and related warrants sold by us remains the same, after
deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We may also increase
or decrease the number of shares of Common Stock and related warrants we are offering from the assumed number of shares of Common
Stock and related warrants set forth above. An increase of 1.0 million in the assumed number of shares of Common Stock and
related warrants sold by us in this offering would result in an increase (decrease) in our as adjusted net tangible book value
of approximately $____ million, or approximately $(0.__) per share, and would result in a decrease in net tangible book value
to new investors of approximately $____ per share, assuming that the assumed combined public offering price remains the same,
after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A decrease
of 1.0 million in the assumed number of shares of Common Stock and related warrants sold by us in this offering would result
in an increase (decrease) in our as adjusted net tangible book value of approximately $____ million, or approximately $(0.___)
per share, and would result in an increase in the net tangible book value to new investors of approximately $____ per share, assuming
that the assumed combined public offering price remains the same, after deducting the estimated underwriting discounts and commissions
and estimated offering expenses payable by us. The information discussed above is illustrative only and will adjust based on the
actual public offering price, the actual number of shares and related warrants sold in this offering and other terms of this offering
determined at pricing.
The discussion and
table above assume (i) no exercise of the underwriters’ option to purchase up to an additional ___________ shares of Common
Stock and/or warrants to purchase __________ shares of Common Stock, (ii) no exercise of warrants offered in this offering, (iii)
no receipt of cash upon the exercise of such warrants and (iv) one-for-twenty reverse stock split of our issued and outstanding
shares of Common Stock, expected to be effective on September 24, 2019 has been effected. Upon the exercise of such warrants, if
any, holders of such warrants will experience additional dilution.
The foregoing discussion
and table do not take into account further dilution to new investors that could occur upon the exercise of outstanding options
or warrants having a per share exercise price less than the per share offering price to the public in this offering. In addition,
we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient
funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or
convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.
The table and discussion
above are based on 3,844,921 split-adjusted shares of our Common Stock outstanding as of June 30, 2019 and excludes as of such
date:
|
|
●
|
5,000 shares of our Common Stock subject to outstanding
options having a weighted average exercise price of $10 per share and restricted stock awards;
|
|
|
●
|
894,999 shares of our Common Stock
reserved for issuance pursuant to the conversion of 255,714 shares of preferred stock;
|
|
|
●
|
398,156 shares of our Common Stock reserved for
issuance upon exercise of outstanding warrants having a weighted average exercise price of $18.20 per share; and
|
|
|
●
|
250,000 shares of our Common Stock reserved for
issuance under the NanoViricides, Inc. Executive Equity Incentive Plan.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial
condition and results of operations should be read together with our financial statements and related notes included elsewhere
in this prospectus. This discussion contains forward-looking statements based upon our current plans, estimates, beliefs and expectations
that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under the sections entitled “Risk Factors,” “Special
Note Regarding Forward-Looking Statements” and elsewhere in this prospectus.
Management’s Plan of Operation
The Company’s drug development business
model was formed in May 2005 with a license to the patents and intellectual property held by TheraCour that enabled creation of
drugs engineered specifically to combat viral diseases in humans. This exclusive license from TheraCour serves as a foundation
for our intellectual property. The Company was granted a worldwide exclusive license to this technology for several drug candidates
with specific targeting mechanisms 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-1 and HSV-2), Influenza and Asian Bird Flu
Virus. The Company entered into an Additional License Agreement with TheraCour granting the Company the exclusive licenses 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. At present, the Company
has a license for herpes simplex virus areas, but not for the non-simplex human herpes viruses that include VZV. The Company and
TheraCour have signed a Memorandum of Understanding governing the general terms of a license for VZV drug development in February
2019. The definitive agreement is currently being negotiated between the parties.
The Company discloses the risk that while
we are working with the assumption that we will be able to come to mutually agreeable terms for an additional license for the
VZV area with TheraCour. There can be no assurance that the Company will be able to enter into an agreement with TheraCour for
such license or that the agreement will be on terms that are favorable to the Company. The Company may want to add further virus
types to its drug pipeline as the Company progresses further. The Company would then need to negotiate with TheraCour appropriate
license agreements 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 licenses granted by TheraCour are
for entire set of pathologies that the licensed virus is a causative agent for. The licenses are not for single drug/indication
pairs, which is the customary mode of licensing in the pharmaceutical industry. Thus, these are very broad licenses and enable
NanoViricides to pursue a number of indications as well as develop drug candidates with different characteristics as is best suited
for the indications, without having to license the resulting drugs for each indication separately, as with normal pharmaceutical
industry licensing.
The Company plans to develop several drugs
through the preclinical studies and clinical trial phases with the goal of eventually obtaining approval from the United States
Food and Drug Administration (“FDA”) and International regulatory agencies for these drugs. The Company plans, when
appropriate, to seek regulatory approvals in several international markets, including developed markets such as Europe, Japan,
Canada, Australia, and Emerging Regions such as Southeast Asia, India, China, Central and South America, as well as the African
subcontinent. The seeking of these regulatory approvals would only come when and if one or more of our drugs have significantly
advanced through the US FDA and international regulatory process. If and as these advances occur, the Company may attempt to partner
with more established pharmaceutical companies to advance the various drugs through the approval process.
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, 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 develop effective nanoviricides, or if developed, that we will have sufficient resources to be able to successfully
manufacture and market these products to commence revenue-generating operations.
There can be no assurance that other developments
in the field would not impact our business plan adversely. For example, successful creation and availability of an effective vaccine
may reduce the potential market size for a particular viral disease, or an effective drug may be developed by competitors that
becomes difficult to compete against with our limited resources
Our goal, which we can give no assurance
that we will achieve, is for NanoViricides, Inc. to become the premier company developing highly safe and effective drugs that
employ an integrated multiplicity of actions as enabled by our nanomedicine approach for anti-viral therapy.
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 animal models of efficacy and safety. We have generated funding through the issuances of debt and the
sales of securities under our shelf registration and the private placement of Common Stock. The Company does not currently have
any long-term debt. We have not generated any revenues and we do not expect 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.
Current Financial Status
As of June 30, 2019, the end of the reporting
period, we have $2,555,207 in cash and cash equivalents, prepaid expenses of $270,214 and $10,227,247 of property and equipment,
net of accumulated depreciation. Our liabilities are $2,848,153 with $1,645,606 attributable to derivative liabilities of warrants
issued simultaneously with the registered direct offering on February 27, 2019, and accounts payable of $309,893 payable to third
parties and accounts payable to TheraCour of $823,783 of which $300,000 of such accounts payable is deferred until the filing
of an IND. Stockholders’ equity was $10,600,360 at June 30, 2019. In comparison, as of June 30, 2018, we had $7,081,771
in cash and cash equivalents, and additional assets of $240,257 in the form of prepaid expenses. Property and equipment was $10,841,093,
net of accumulated depreciation. Our liabilities were $881,948 with $298,092 attributable to derivative liabilities of warrants.
Stockholders’ equity was $17,664,264.
During the reporting period we spent approximately
$6.8 million in cash toward operating activities and approximately $74,000 in capital investment. In contrast, we spent approximately
$7.8 million in cash toward operating activities and approximately $242,000 in capital investment in the year ended June 30, 2018.
We do not anticipate any major capital costs going forward in the near future.
As of June 30, 2019, we have a cash and
cash equivalent balance of $2,555,207 that is expected to be insufficient to fund our currently budgeted operations for approximately
one year from the filing of the Company’s Form 10K without additional funding through the capital or credit markets.
The Company believes that it will need to raise additional funds in the capital markets to continue its operations through August,
2020. If the Company is unable to obtain debt or equity financing to meet its cash needs in the future it may have to severely
limit its business plan by reducing the funds it plans to expend on pre-clinical studies and clinical trials, and/or research
and development projects.
The Company has incurred significant operating
losses since its inception resulting in an accumulated deficit of $92,116,586 at June 30, 2019. For the year ended June 30, 2019,
the Company had a net loss of $8,424,440. 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. Management is actively exploring
additional required funding through debt or equity financing pursuant to its plan. There is no assurance that the Company will
be successful in obtaining sufficient financing on terms acceptable to the Company to fund continuing operations. Management believes
that as a result of the management plan, the Company’s existing resources and access to the capital markets will permit
the Company to fund planned operations and expenditures. However, the Company cannot provide assurance that its plans will not
change or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently
anticipates.
Results of Operations
The Company is a biopharmaceutical company
and does not have any revenue for the years ended June 30, 2019, 2018 and 2017.
Comparison of the Year End June
30, 2019 to the Year Ended June 30, 2018
Revenues - The Company is
a non-revenue producing entity.
Operating Expenses - Research
and development expenses for the year ended June 30, 2019 increased $8,000 to $5,921,720 from $5,913,720 for the year ended June
30, 2018. This year-to-year increase is generally attributable to an increase in lab supplies and chemicals and a decrease in
employee compensation expenses offset by increases in lab fees for pre IND studies. General and administrative expenses decreased
$673,487 to $2,737,962 for the year ended June 30, 2019 from $3,411,449 for the year ended June 30, 2018. The decrease in general
and administrative expenses is generally attributable to a decrease in salary and stock compensation paid to retired executive
officers and to employees other than research scientists, a decrease in consultants costs unrelated to research and development
offset by an increase in legal, and professional expenses.
Other Income (Expenses)
- Interest income was $55,497 and $100,429 for the years ended June 30, 2019, and 2018, respectively. Interest income included
interest on cash or cash equivalent deposits in interest-bearing account. Interest income decreased due to a decrease in deposits.
The Company has incurred interest expense of $0 and $185,274 for the years ended June 30, 2019 and June 30, 2018, respectively.
The decrease was due to the redemption of the Series B Debentures at maturity, and the Series C Debentures pursuant to a redemption
agreement. The Company amortized the discount on its Series B and Series C Debenture, which were calculated at issuance. The Company
recognized an amortization of bond discount expense of $0 and $359,214 for the years ended June 30, 2019 and 2018, respectively.
Change in fair value of derivative -
Change in fair value of derivative for the year ended June 30, 2019 decreased $2,374,275 to $179,745 from $2,554,020 for the year
ended June 30, 2018. The decrease was due to the reduction of the fair value of derivative liability in the fiscal year ending
June 30, 2018 of the obligation to issue shares related to the redemption of the Company’s Series C Convertible Debenture
of $819,994, a change of the fair value of the derivative liability of the Series C Convertible Debenture, and a change of the
fair value in the derivative liabilities of the Company’s warrants expiring September 12, 2018 and January 14, 2019. For
the year ended June 30, 2019, the change in the fair value of derivative liabilities was calculated primarily on the change in
fair value of 5.5 year warrants issued on February 27, 2019.
Income Taxes - There is
no provision for income taxes due to ongoing operating losses. As of June 30, 2019, we had estimated cumulative tax benefits and
development tax credits and other deferred tax credits resulting in a deferred tax asset of approximately $34,157,707. This amount
has been offset by a full valuation allowance.
Net Loss - For the year
ended June 30, 2019, the Company had a net loss of $8,424,440, or a basic and fully diluted loss per share of $0.12 compared to
a net loss of $8,563,455, or a basic and fully diluted loss per share of $0.13 for the year ended June 30, 2018. The decrease
in the Company’s net loss for the year ended June 30, 2019 from the year ended June 30, 2018 of $139,015 is generally attributable
to the decrease in general and administrative expenses, decreases in interest expenses, and discount on convertible debentures,
offset by the net of a Loss on extinguishment of debt and change in fair value of derivatives for the year ended June 30, 2018.
Comparison of the Year End June
30, 2018 to the Year Ended June 30, 2017
Revenues - The Company is
a non-revenue producing entity.
Operating Expenses - Research
and development expenses for the year ended June 30, 2018 decreased $652,246 to $5,913,720 from $6,565,966 for the year ended
June 30, 2017. This year-to-year decrease is generally attributable to a decrease in stock compensation to research scientists
including Dr. Anil Diwan and to reduced staffing that also led to reduced expense in chemicals and supplies.
General and Administrative Expenses
- General and administrative expenses increased $376,691 to $3,411,449 for the year ended June 30, 2018 from $3,034,758
for the year ended June 30, 2017. The increase in general and administrative expenses is generally attributable to recognition
of stock and cash compensation paid to Dr. Seymour upon his resignation and an increase in legal, professional and consultant
costs.
Other Income (Expenses) - Interest
income was $100,429 and $60,955 for the years ended June 30, 2018, and 2017, respectively. Interest income included interest on
cash or cash equivalent deposits in interest-bearing accounts. Interest income increased due to an increase in interest rates
paid on deposits. The Company has incurred interest expense of $185,274 and $780,767 for the years ended June 30, 2018 and June
30, 2017, respectively. The decrease was due to the redemption of the Series B Debentures on February 1, 2017 and the Series C
Debenture at November 13, 2017. The Company amortized the discount on its Series B and Series C Debentures, which were calculated
at issuance. The Company recognized an amortization of debt discount expense of $359,214 and $1,347,748 for the years ended June
30, 2018 and 2017, respectively. The decrease in amortization of debt discount is a result of the maturity of the Series B Debentures
and the redemption of the Series C Debenture.
Income Taxes - There is
no provision for income taxes due to ongoing operating losses. As of June 30, 2018 we had estimated cumulative tax benefits and
development tax credits and other deferred tax credits resulting in a deferred tax asset of approximately $37,085,072. This amount
has been offset by a full valuation allowance.
Net Loss - For the year
ended June 30, 2018, the Company had a net loss of $8,563,455, or a basic and fully diluted loss per share of $0.13 compared to
a net loss of $10,304,490, or a basic and fully diluted loss per share of $0.17 for the year ended June 30, 2017. The decrease
in the Company’s net loss from the year ended June 30, 2017 to the year ended June 30, 2018 of $1,741,035 is generally attributable
to the larger gain resulting from the change in fair value of derivatives, lower discount on convertible debenture expense, and
interest expense partially offset by a loss on extinguishment of debt of $1,347,748.
Liquidity and Capital Reserves
The Company had cash and cash equivalents
of $2,555,207 and $7,081,771 as of June 30, 2019 and 2018, respectively. On the same dates, current liabilities outstanding totaled
$2,848,153 and $881,948, respectively. As of June 30, 2019 and 2018, the derivative liability associated with its outstanding
warrants was reported as a current liability of $1,645,606 and $298,092, respectively.
Since inception, the Company has expended
substantial resources on research and development. Consequently, we have sustained substantial losses. The Company has an accumulated
deficit of $92,116,586 and $83,692,146 at June 30, 2019 and 2018, respectively. These factors, among others, raise substantial
doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments to
the recoverability and classifications of assets carrying amounts or the amounts and classifications of liabilities that might
result from the outcome of these uncertainties. The financial statements have been prepared under the assumption that we will
continue as a going concern. The continuation of the Company as a going concern is dependent upon the ability of the Company to
obtain necessary financing to sustain operations. There can be no assurance that funding will be available on acceptable terms
on a timely basis, or at all. Accordingly, we need to raise additional capital and are exploring potential transactions to improve
our capital position. Unless we are able to generate additional capital or secure financing from other transactions, our current
cash resources will only satisfy our working capital needs for a limited period of time.
The
Company is exploring potential transactions to raise additional cash in the capital markets and support current budgeted operations
through August 2020. The Company has made several adjustments to the ensuing annual budget, eliminating several expenses including
a reduction in workforce and consultants to the extent feasible without affecting its program of drug development. In addition,
the Company has focused its efforts primarily on a single lead program to minimize cost outlays, namely taking the shingles drug
candidate against VZV into human clinical trials. However, the Company does not believe that it currently has sufficient funds
to allow for the ensuing costs of the external advanced IND-enabling studies of this drug candidate. Management has considered
several options for financing the net working capital deficit as well as to obtain additional funds that will be needed for future
human clinical trials. The Company believes that the proceeds from this offering will be more than sufficient to cover the working
capital deficit and to enable the Company to continue as a going concern. Currently, we do not have any definitive agreements
with any third-party for such transactions and there can be no assurance; however, that we will be successful in raising additional
capital or securing financing when needed on terms satisfactory to the Company. Additionally, TheraCour had agreed to defer $25,000
per month of development fees for twelve months, through June 30, 2019. We currently owe TheraCour development fees in the amount
of $325,000. Repayment has been deferred until the earlier of the filing of an IND
with the FDA or December 31, 2019.
In addition, the Company believes that
it has several important milestones that it will be achieving in the ensuing year. In brief, these include the declaration of
a final clinical candidate for its lead drug indication, achieving successful cGMP-like production of the drug as required for
the ensuing “Tox Package” studies, initiation and completion of the Tox Package studies, a “Pre-IND” meeting
with the FDA, filing of an IND, and the beginning of initial human clinical trials. In general, as a pharmaceutical company achieves
these milestones, its risk-profile with investors improves, allowing appreciation in the stock price, in the market capitalization,
as well as in the trading volumes. Management believes that as it achieves these milestones, the Company would experience substantial
improvement in the liquidity of the Company’s stock and would significantly improve the Company’s ability to raise
funds in the public markets.
As of June 30, 2019, we had a cash and
cash equivalent balance of $2,555,207 that is expected to be insufficient to fund our currently budgeted operations for approximately
one year from the filing of the Company’s Form 10K without additional funding through the capital or credit markets.
The Company believes that it will need to raise additional funds in the capital markets to continue its operations through August,
2020. If the Company is unable to obtain debt or equity financing to meet its cash needs, it may have to severely limit its business
plan by reducing the funds it hopes to expend on pre-clinical studies and trials, and/or research and development projects, any
of which would have a material adverse effect on our business, financial condition and results of operations.
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.
The following table summarizes the primary
components of our research and development expenses as allocated, during the periods presented in this Annual Report on Form 10-K.
R&D Cost Allocations
|
|
|
Year Ended
June 30, 2019
|
|
|
Year Ended
June 30, 2018
|
|
|
Year Ended
June 30, 2017
|
|
|
HerpeCide™ Program. Herpes Simplex virus infections (HSV-1,
HSV-2). Also: VZV. Indications: Cold Sores, Genital Ulcers, Shingles, and ARN
|
|
$
|
5,601,720
|
|
|
$
|
5,563,720
|
|
|
$
|
4,976,266
|
|
|
All Influenzas: FluCide™
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
150,000
|
|
|
HIV-Cide™
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
100,000
|
|
|
EKC-Cide™, other Eye Viral Infections
|
|
|
0
|
|
|
|
0
|
|
|
|
540,000
|
|
|
Dengue
|
|
|
0
|
|
|
|
0
|
|
|
|
50,000
|
|
|
Other (Ebola, and other projects)
|
|
|
0
|
|
|
|
0
|
|
|
|
50,000
|
|
|
Unallocated stock compensation
|
|
|
150,000
|
|
|
|
200,000
|
|
|
|
699,700
|
|
|
Total
|
|
$
|
5,921,720
|
|
|
$
|
5,913,720
|
|
|
$
|
6,565,966
|
|
Anticipated Budgets and Expenditures
in the Near Future
The Company has ended the year on a reasonable
financial footing by controlling costs and expenditures. We project, based on various estimates that we have obtained, that our
current available financing is sufficient for accomplishing the goal of filing one IND or equivalent regulatory applications.
We will need additional financing to execute on our business plan and to engage into human clinical trials of our drug candidates.
Two of our drug programs, namely our Shingles Skin Cream, and our HerpeCide skin cream for herpes labialis, are in IND-enabling
studies. At present, we are working on the scale up of manufacturing of these drug candidates in a manner that will be compliant
with US FDA cGMP and corresponding ICH guidelines. We intend to request a pre-IND meeting with the USFDA at an appropriate time,
as we develop the dataset for this discussion. A pre-IND meeting will help us determine the level of detail needed in the cGLP
Safety/Toxicology study required for the IND application, and also to refine our human clinical trials design. We anticipate that
these drug candidates will move forward into IND or equivalent regulatory filings, and ensuing human clinical trials. As these
drug candidates are advancing into the clinic, we believe that our additional drug candidates, including two more drug candidates
in the HerpeCide program, and the two drug candidates in the FluCide program, will also move forward into IND-enabling studies.
We are thus poised for strong growth with a number of drug candidates in a number of disease indications.
2019 Financings
On February 27, 2019, the Company entered
into a Securities Purchase Agreement with certain institutional investors, for a registered direct offering of 347,223 shares
of Common Stock at the purchase price of $7.20 per share for an aggregate of $2,500,000.
Requirement for Additional Capital
As of June 30, 2019, we have a cash and
cash equivalent balance of $2,555,207 that is expected to be insufficient to fund our currently budgeted operations for approximately
one year from the filing of the Company’s Annual Report on Form 10-K without additional funding through the capital
or credit markets. The Company believes that it will need to raise additional funds in the capital markets to continue its operations
through August, 2020.
The Company believes that our cash and
cash equivalent balance and the estimated proceeds from potential capital market transactions we are considering (of which there
can be no assurance) will provide sufficient funds for us to continue our operations through August, 2020 and to be able to advance
at least one of its drug candidates into IND stage with the available cash. The Company estimates that it will need additional
funding to continue further development of its drug candidates through human clinical trials if it does not form a collaborative
licensing or partnership agreement with a party that would provide such funding, such as Big pharma.
Based on our current rate of expenditures
and anticipated changes, we have estimated a total cash expenditure budget of approximately $7 million for the next 12 months,
of which approximately $5.0 million is expected to go towards research and development for our drug candidates, including IND-enabling
studies of one of our lead drug candidates, namely Skin Cream for Topical Treatment of Shingles, and approximately $2.0 million
is budgeted for general and administrative expenses.
Thereafter, we estimate that beyond the
current budgetary one year period ending August, 2020, over the following two years for human clinical development of the Skin
Cream for Topical Treatment of Shingles, we may need approximately an additional $21 million. The additional funds will be needed
to pay additional personnel, increased subcontract costs related to the expansion and further development of our drug pipeline,
for human clinical trials, and for additional capital and operational expenditures. Further, we anticipate incurring additional
capital costs over this period for further improvements at our 1 Controls Drive, Shelton, CT facility.
These anticipated additional expenses
for the two-year period commencing September 1, 2020 can be summarized as follows:
1. Planned Research and Development Costs
of $9,000,000: Planned costs for in vivo and in vitro studies for the eight indications in HerpeCide program, two indications
in FluCide program, Eye Nanoviricide, DengueCide, and HIVCide, and other programs. This includes staffing costs of approximately
$3,500,000, for the 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.
2. Corporate overhead of $4,000,000: This
amount includes budgeted office salaries, legal, accounting, investor relations, public relations, business development, and other
costs expected to be incurred by being a public reporting company.
3. Capital costs of $1,000,000: This
is the estimated cost for additional equipment and laboratory improvements.
4. Clinical Trial Manufactured Batch of
Drug Product approximately $2,000,000 for Phase 2a for the first HerpeCide program drug candidate. The clinical trial manufacturing
batch cost for the drug product supply for Phase 1, and prior to that, the drug product supply for Tox Package studies, are already
accounted for in the budgeted expenditures for this period.
5. Clinical Trials Costs budgeted at $5,000,000
for the Skin Cream for Shingles and an additional $5,000,000 costs for clinical trials that are expected to extend beyond the
above 24-month timeframe, as follows:
5a. When and if we
initiate human clinical trials for a Topical HerpeCide, we anticipate approximately $1 million total costs for the Phase 1 clinical
trials (which is now included in the budgeted R&D expenditures leading up to September 30, 2019), and approximately $2 million
for the Phase 2 clinical trials. In a subsequent year, if Phase 1 and Phase 2 are successful, we anticipate approximately $10
million for Phase 3 human clinical trials. These estimates are based on rough quotes from potential investigators, and assumptions
relative to additional costs. These estimates assume that Topical HerpeCide is highly effective and therefore would require relatively
few patients in each arm of each trial in order to establish statistically significant results.
5b. If and when we
initiate human clinical trials for Injectable FluCide, we anticipate approximately $2 million total costs for the Phase 1 clinical
trials, and approximately $5 million for the Phase 2a (virus challenge human efficacy study) clinical trials. In a subsequent
year, if Phase 1 and Phase 2a are successful, we anticipate approximately $10 million for Phase 2b 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 have to raise additional funds to take
one of the eight Topical HerpeCide drug candidate indications into an IND application stage. Management is actively exploring
additional required funding through debt or equity financing pursuant to its plan. There is no assurance that the Company will
be successful in obtaining sufficient financing on terms acceptable to the Company to fund continuing operations. Management believes
that as a result of the management plan, the Company’s existing resources and the proceeds of this offering will permit
the Company to fund planned operations and expenditures. However, the Company cannot provide assurance that its plans will not
change or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently
anticipates.
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 the coming year’s
workplan 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.
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.
Our animal efficacy studies as well as
safety/toxicology studies are performed by third parties. We opt into drug developments against specific disease indications for
which we have appropriate partners that can perform the necessary cell culture and animal efficacy studies.
The Company will report summaries of its
studies as the data becomes available to the Company, after analyzing and verifying same, in its press releases. 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.
Our timelines depend upon several assumptions,
many of which are outside the control of the Company, and thus are subject to delays.
Management intends to use capital and
debt financing, as required, to fund the Company’s operations. There can be no assurance that the Company will be able to
obtain the additional capital resources necessary to fund its anticipated obligations for the next twelve months.
The Company is considered to be a development
stage company and will continue in the development stage until it generates revenues from the sales of its products or services.
Off Balance Sheet Arrangements
We have not entered into any off-balance
sheet arrangements during the year ended June 30, 2019.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Accounting for Stock Based Compensation
– The Company follows the provisions of ASC 718 – Stock Compensation, which requires the measurement
of compensation expense for all shared-based payment awards made to employees and non-employee directors, including employee stock
options. Shared-based compensation expense is based on the grant date fair value estimated in accordance with the provisions of
ASC 718 and is generally recognized as an expense over the requisite service period, net of forfeitures.
Accounting for Non-Employee Stock
Based Compensation – The Company accounts for equity instruments issued to parties other than employees for acquiring
goods or services under guidance of section 505-50-30 of the FASB Accounting Standards Codification (“FASB ASC Section 505-50-30”).
Pursuant to FASB ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance
of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity
instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance
will occur.
RECENT ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Pronouncements
In June 2018, the FASB issued ASU 2018-07,
which simplifies the accounting for non-employee share-based payment transactions. The amendments specify that Topic 718 applies
to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s
own operations by issuing share-based payment awards. The standard will be effective for the Company in the first quarter of fiscal
year 2020. The Company does not expect that the adoption of this ASU will have a significant impact on its financial statements.
In July 2017, the FASB issued Accounting
Standards Update (“ASU”) No. 2017-11. “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity
(Topic 480); Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features, II.
Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain
Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. ASU 2017-11 revises the guidance for instruments with
down round features in Subtopic 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity, which is considered
in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity
still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining
whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer
classified as liabilities. ASU 2017-11 is effective for annual and interim periods beginning December 15, 2018, and early adoption
is permitted, including adoption in an interim. ASU 2017-11 provides that upon adoption, an entity may apply this standard retrospectively
to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the opening balance
of retaining earnings in the fiscal year and interim period adoption. The Company has adopted ASU 2017-11 retrospectively as of
January 1, 2019. The adoption of this ASU did not have any impact on the financial statements.
BUSINESS
Overview
We are a developmental
stage nano-biopharmaceutical company engaged in various stages of pre-clinical development, including IND-enabling non-clinical
studies of anti-viral therapeutics. We have no customers, products or revenues to date, and may never achieve revenues or profitable
operations. Our drug candidates are based on several patents, patent applications, provisional patent applications, and other
proprietary intellectual property held by TheraCour Pharma, Inc.(“TheraCour”), one of our principal shareholders,
which is controlled by Anil Diwan, our founder, Executive Chairman and President. We have entered into licenses with TheraCour
for the treatment of the following human viral diseases:
|
|
•
|
Influenza, Asian Bird Flu, and H1N1 “Swine Flu”
Viruses;
|
|
|
•
|
Herpes Simplex Virus (HSV);
|
|
|
•
|
Human Immunodeficiency Virus (HIV/AIDS);
|
|
|
•
|
Adenoviral Conjunctivitis and Keratitis, and Ocular Indications
of Herpes Simplex Types 1 & 2.
|
|
|
•
|
Dengue Fever types I, II, III, & IV;
|
|
|
•
|
Hepatitis B Virus (HBV);
|
|
|
•
|
Hepatitis C Virus (HCV);
|
|
|
•
|
Ebola and Marburg Viruses;
|
|
|
•
|
Japanese Encephalitis; and
|
Since our founding in 2005, we have developed
drug candidates against a number of different viruses. Our primary focus is on our HerpeCide™ programs. We are currently
actively working on three of our HerpeCide™ drug development programs, namely dermal topical treatments for Herpes Simplex
Virus Type 1 (HSV-1), Herpes Simplex Virus Type 2 (HSV-2) and Varicella Zoster Virus (VZV) which causes chickenpox and shingles,
and two additional drug development programs, namely eye drops for treatment of Herpes Keratitis (an infection of the external
eye), and intra-vitreal injection for the treatment of viral Acute Retinal Necrosis (vARN), in the HerpeCide program alone. Our
most advanced drug candidate is our topical treatment for shingles, which we intend to bring into human clinical trials. We do
not currently have a license for rights to use the TheraCour technology for the treatment of shingles and are currently in negotiations
with TheraCour for the exclusive rights to use its technology to develop treatments for shingles. Several additional indications
in the HerpeCide™ program, for which we have exclusive license rights from TheraCour, are expected to follow. In addition,
we have drug candidates against severe influenzas (including bird flu), HIV, Dengue, Ebola/Marburg and other viruses at different
preclinical stages which are not currently being actively developed. This broad pipeline is enabled by our unique post-immunotherapeutic
“bind-encapsulate-destroy” technology platform. Based on data in a Jain PharmaBiotech Report published in March 2014,
we believe the overall size of the anti-viral market was $40 billion in 2018 and may be $65.5 billion in 2023. We are seeking to
add to our pipeline of drug candidates through our internal discovery pre-clinical development programs and through an in-licensing
strategy.
We believe we are one of only a few companies
that owns a nanomedicines research and cGMP production facility. This facility was designed and built by Dr. Diwan and it provides
us with capability to perform end-to-end discovery-to-drug-product drug development.
Organization and Nature of Business
NanoViricides, Inc. (the “Company,”
“we,” or “us”) was incorporated in Nevada on April 1, 2005. Our corporate offices are located at 1 Controls
Drive, Shelton, Connecticut 06484 and our telephone number is (203) 937-6137. Our Website is located at http://www.Nanoviricides.com.
We do not incorporate by reference into this Annual Report the information on or accessible through our website, and you should
not consider it part of this Annual Report.
On September 25, 2013, the Company’s
Common Stock began trading on the New York Stock Exchange American under the symbol, “NNVC”.
The Company’s primary focus is
bringing its topical treatment for shingles into human clinical trials first, which we believe is our most advanced drug
indication. Shingles is caused by reactivation of VZV (Varicella-Zoster Virus), which causes chickenpox in children. Several
additional indications in the HerpeCide™ program, including skin creams for the treatment of “genital
ulcers” (HSV-2), and for the treatment of “cold sores” (HSV-1”) are expected to follow the shingles
candidate into clinical development. In addition, the Company has drug candidates in development against severe influenzas
(including bird flu), HIV, Dengue, Ebola/Marburg and other viruses at different preclinical stages. According to a 2014
market report prepared by Jain PharmaBiotech, entitled “Antiviral Thereapeutics, Technologies, Markets &
Companies,” the overall size of the anti-viral market is estimated to be $40 billion in 2018 and $65.5 billion by 2023.
This broad pipeline is enabled by our unique post-immunotherapeutic “bind-encapsulate-destroy” technology
platform.
We are a development-stage company with
the goal of commercializing special purpose nanomedicine for anti-viral drugs based on a novel, first-in-class mechanism. The
Company's novel nanoviricide® class of drug candidates are designed to specifically attack enveloped virus particles, on the
same sites that they use to bind to cells and dismantle them. Our unique biomimetic approach promises that a virus cannot escape
our nanoviricide drugs due to mutations, if the virus-binding ligands perform as designed.
The Company’s drug candidates are
licensed from TheraCour Pharma, Inc., (“TheraCour®”), and are developed by TheraCour for the Company on the basis
of several patents, patent applications, provisional patent applications, and other proprietary intellectual property held by
TheraCour. Unlike usual pharma industry licenses that are specified for single chemical entities or for groups of similar chemical
entities, our licenses are specified for the vertical application field of use, thereby providing us with a large universe of
diverse development candidates under the same umbrella. The Company has exclusive licenses from TheraCour for drug candidates
derived from and based on TheraCour’s technologies for several viruses. In 2005, the Company obtained a license from TheraCour
for the treatment of the following human viral diseases: Human Immunodeficiency Virus (HIV/AIDS), Influenza including Asian Bird
Flu Virus (INF), Herpes Simplex Virus (HSV-1 and HSV-2), Hepatitis C Virus (HCV), Hepatitis B Virus (HBV), and Rabies. Thereafter,
on February 15, 2010, the Company entered into an Additional License Agreement with TheraCour granting the Company the exclusive
licenses for technologies developed by TheraCour for the additional virus types for Dengue viruses (DENV), Japanese Encephalitis
(JEV), West Nile Virus (WNV), viruses causing viral Conjunctivitis (a disease of the eye) and Ocular Herpes Keratitis, and Ebola/Marburg
viruses. While herpes simplex viruses were already specified as licensed previously, the term “ocular herpes keratitis”
was added to this additional license agreement at the specific request of the Company for clarity only. In addition, the Company
is currently negotiating a license from TheraCour for non-simplex herpes viruses, in particular, for VZV (shingles, chicken pox
virus). TheraCour has developed a lead indication for the treatment of VZV shingles exclusively for the Company at the Company’s
request and with funds paid by the Company. The Company and TheraCour have executed a Memorandum of Understanding on the general
terms of the Licensing Agreement for VZV based upon the valuation for the shingles and PHN indications conducted by the Company.
A definitive agreement is currently being negotiated by the parties. To date, TheraCour has not withheld any licenses for antiviral
nanomedicines that NanoViricides has asked for, and we anticipate that the VZV license will be executed shortly.
The Company retains worldwide exclusive
rights to commercially develop, commercialize, and market the licensed products. The Company pays TheraCour for the R&D work
asked to be performed by the Company to develop these drug candidates, their chemistries, formulations, and manufacturing processes,
substantially at cost, with a certain fee as specified in the license agreements. The Company may perform initial developmental
testing by itself and through third parties, such as academic labs, government institutions, contract research organizations,
for safety and effectiveness, among other tests. The Company may perform further IND-enabling advanced pre-clinical studies using
third parties, such as contract research organizations, usually on clinical drug candidates. The Company expects to perform human
clinical trials using contract research organizations with expertise in such clinical trials. The Company intends to sponsor the
drugs for commercialization activities and obtain the rights of commerce under various regulatory authorities for its own use.
The Company focuses its research and clinical
programs on specific anti-viral therapeutics and is seeking to add to its existing portfolio of products through its internal
discovery and clinical development programs and through an in-licensing strategy. To date, the Company has not commercialized
any product.
The Company’s objectives are to
create the best possible anti-viral nanoviricides and then subject these compounds to rigorous laboratory and animal testing towards
US FDA and international regulatory approvals. Our long-term research efforts are aimed at augmenting the nanoviricides that we
currently have in development with additional therapeutic agents to produce further improved anti-viral agents in the future.
We believe that many viral infections that are at present untreatable or incurable would be curable using such an advanced approach.
The Nanoviricide® Platform Technology
NanoViricides, Inc. is engaged in the
application of 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 cells. Antibodies in contrast attack a virus particle at only a maximum of two attachment points per antibody. In
addition, the nanoviricide technology also simultaneously enables attacking the rapid intracellular reproduction of the virus
by incorporating one or more active pharmaceutical ingredients (APIs) within the core of the nanoviricide. The nanoviricide technology
is the only technology in the world, to the best of our knowledge, that is capable of both (a) attacking extracellular virus thereby
breaking the reinfection cycle, and simultaneously (b) disrupting intracellular production of the virus, thereby enabling complete
control of a virus infection.
Our anti-viral therapeutics, that we call
“nanoviricides®” are designed to look to the virus like the native host cell surface to which it binds. Since
these binding sites for a given virus do not change despite mutations and other changes in the virus, we believe that our drug
candidates will be broad-spectrum, i.e. effective against most if not all strains, types, or subtypes, of a given virus, provided
the virus-binding portion of the nanoviricide is engineered appropriately.
This powerful platform technology has
enabled us to develop several drug candidates against a large number of different viruses that could be further improved into
clinical drug candidates, thus building a very broad drug pipeline that may lead to exponential growth of the Company upon the
approval of our first drug candidate.
It is important to realize that the flexible
nanoviricides nanomedicines show substantial advantages over hard sphere nanoparticles in this antiviral drug application. Hard
sphere nanomaterials such as dendritic materials (dendrimers), nanogold shells, silica, gold or titanium nanospheres, polymeric
particles (such as PLA-PLGA, others), etc., were never designed to be capable of completely enveloping and neutralizing the virus
particle.
Nanoviricides are designed to work by
binding to and eliminating virus particles from the blood stream, just as antibodies do, only potentially much better. Treating
a patient that has a viral infection with a nanoviricide against that virus is expected to result in reduction in viremia. Reduction
in viremia is an important goal in diseases caused by all viral infections. Nanoviricides are designed to accomplish this using
a “Bind-Encapsulate-Destroy” strategy to eliminate the free virus.
A Nanoviricide is constructed by chemically
attaching a ligand designed to bind to a virus particle, to a polymeric material that forms a flexible nanomicelle by self-assembly.
If antibodies are known to affect a viral disease, it is possible to construct a nanoviricide against it, and there can be a general
expectation of some success, depending upon the ligand chosen. We can choose a ligand from any of a number of chemical classes,
including small chemicals, peptides, or antibody fragments or even whole antibodies.
A nanoviricide is made by chemically covalently
linking a “nanomicelle” - a globular polymeric micelle with pendant lipid chains inside, to one or more different
small chemical ligands designed to mimic the cellular receptor to which the virus binds. In addition, the nanoviricide can carry
additional active pharmaceutical ingredients (APIs), which may be chosen to affect the intracellular virus life cycle. Thus, the
nanoviricide platforms enables construction of complete virus-killing nanomachines that block the virus from entering the cell
as well as that block further production of the virus inside the cell.
Attacking the “Achilles Heel”
of the Virus- Unchanging Ability of the Virus to Bind to Its Cognate Receptor on Cell
We strive hard to develop virus-binding
small chemical ligands mimic the cognate cellular receptor of the virus, using rational design and molecular modeling strategies
and our internal, accumulated expertise. This is the receptor to which a virus binds to gain entry into the human cell. Some viruses
use more than one, different, receptors. The nanoviricide® platform technology allows use of different ligands on the same
nanoviricide drug to be able to attack such difficult viruses.
It would be very difficult for a virus
to become resistant to a nanoviricide that mimics the virus’ cellular receptor. This is because, no matter how much a virus
mutates or changes, its binding to the cellular receptor does not change. If the virus does not bind to the nanoviricide efficiently,
it would likely have lost its ability to bind to the cellular receptor efficiently as well, resulting in an attenuated version
with limited pathogenicity.
Beyond Antibodies or “Post-Immunotherapeutic”
Approach: A Nanoviricide in Its Design is a Nanomachine Built to Destroy Viruses
A nanoviricide exposes a very high density
of virus binding sites on its surface, in contrast to a human cell. Thus, a virus would be more likely to be captured by the nanoviricide
than to bind to a cell. Once bound to the virus, it is thought that the nanoviricide would wrap itself around the virus, and the
interior lipidic chains of the nanoviricide would merge into the lipid envelope of an enveloped virus, thus destabilizing the
virus. This attack is expected to result in loss of the viral glycoproteins that it uses to bind to cell and to fuse with the
cell membrane, thus rendering the virus particle non-infectious. In contrast, for an antibody to be successful as a drug, as many
as ten to fifteen antibodies must bind to saturate the virus surface. The resulting antibody-virus complex then may be subject
to the complement protein system in the bloodstream, or it may bind to antibody-receptors on human immune cells. Thus, the human
immune system needs to be functional for an antibody to be effective as a “drug”. In a sense, antibodies only “flag”
the virus particle as foreign.
Almost any virus that causes pathology
in humans is able to do so because it has developed intelligent and complicated pathways for disabling the human immune system
at one or more points. This may be one of the reasons why many antiviral antibodies fail in the field use. Additionally, viruses
readily escape antibodies by mutations. Such viral escape from antibodies has been witnessed in almost every viral epidemic, be
it HIV/AIDS, Influenza pandemic of 2009, or the Ebola epidemic of 2014-15. In contrast, a nanoviricide would complete the job
of making the virus particle non-infectious, without any help from the human immune system.
Broad-Spectrum Nanoviricide Drug Candidates
A nanoviricide is generally “broad-spectrum”
in the sense that it would be effective against all viruses that use the same cellular receptor, binding to the same site on that
cellular receptor.
Formulation is Inherent in the Design
Aspect of a Nanoviricide
Since declaring our clinical candidate,
namely NV-HHV-101 formulated as a skin cream for topical treatment of shingles rash, further development of this drug towards
scale-up, formulation, and cGMP-like manufacture has already been accomplished in a relatively rapid manner. Formulation development
for novel drugs in normal pharmaceutical paradigm often takes years. However, in the nanoviricide approach, the nanomicelle polymeric
backbone itself takes care of the formulation aspects. The nanomicelle is designed to optimize the drug for its intended route
of administration, be it injectable, skin cream, eye drops, or even oral. Thus, no specific or extensive formulation development
is expected to be required after clinical candidate declaration.
We have previously manufactured multi-kilogram
quantities of the final drug product for shingles cGLP Safety/Toxicology studies that are required for filing an IND.
Uniform Polymer Nature Enables Nanomedicine
Manufacturing Quality Assurance
A major problem in the field of nanomedicines
has been that most nanomedicines have been found to be notoriously difficult to manufacture in a consistent manner from batch
to batch. This is because of the complexity inherent in making large molecules, and the very nature of polymer and particle making
processes.
The nanoviricide technology has been designed
from the ground up to enable consistent manufacture and control. Thus, the nanoviricide backbone is a homopolymer of a single
repeating unit or monomer, and not a block copolymer. In addition, the nanoviricide polymer is designed to dynamically and naturally
self-assemble into micelles in a solution. Also, the virus-binding ligands are chemically attached to the polymer. The extent
of attachment can be assessed by analytical techniques that we have developed and continue to develop as needed. Further we use
specialized techniques in the polymer processing to minimize any contamination with endotoxins or other foreign particles. The
final nanoviricide solutions can be sterile filtered using standard membrane filtration processes. The resulting solutions can
be concentrated in a non-contaminating environment in our Process Scale-Up Lab or our cGMP-capable Manufacturing Facility.
Thus the nanoviricides platform has been
designed from the ground up to enable simplifications in processes and analyses that need to be implemented in order to develop
robust, reproducible, and scalable processes.
The Company’s Drug Pipeline
Over the first several years of our operations,
we continued to work on different viruses every year, creating a broad pipeline of drug candidates. This provided a validation
for our novel technologies. In addition, we were pursuing non-dilutive drug development and partnering opportunities such as government
grants and contracts as well as partnering with other non-governmental agencies, or medium and large pharmaceutical companies.
We had realized that the current pharmaceutical
industry contract manufacturing operations (CMOs) do not have the expertise in our kinds of nanomedicines. We therefore acquired
the cGMP-capable nanomedicines drug development and manufacturing facility from Inno-Haven LLC in 2014 at cost. Dr. Anil Diwan,
our co-founder, had established Inno-Haven LLC to acquire and develop lab facilities appropriate for his work. On December 31,
2014, the Company entered into and consummated an Agreement for the Purchase and Sale of this cGMP-compliant pilot manufacturing
and lab facility and property located in Shelton, Connecticut. The purchase price of the facility was comprised solely of the
repayment of the direct costs of the seller, Inno-Haven, LLC incurred in acquiring and renovating the property and the facility
plus Inno- Haven’s closing costs in connection with the sale.
We were able to drive our drug development
programs towards regulatory approval processes only after this modern facility for nanomedicines synthesis, characterization,
scale-up, and cGMP-like production became available. The facility became substantially operational at the end of December 2015.
Since then, we have engaged in activities necessary for filing an IND (Investigational New Drug application) with the US FDA or
another international regulatory agency to begin Phase 1 human clinical trials of our first drug candidate.
We chose our HerpeCide drug program, and
in particular, skin cream for topical treatment of pathologies caused by herpes simplex viruses as our lead program based on regulatory
requirements, resource requirements, commercial opportunity, return on incestment maximization opportunities, and other considerations.
We had developed certain broad-spectrum ligands based on molecular modeling for binding to herpes simplex virus and potentially
interfere with this virus’ binding to its human cell entry receptor, namely HVEM (“herpes virus entry mediator”).
The nanoviricides designed using these ligands have shown broad-spectrum activity in cell cultures against multiple HSV strains
and both HSV-1 and HSV-2. Our early drug candidates have also shown substantial effectiveness in an animal model of HSV-1 skin
disease (for HSV-1 “cold sores” treatment). Additionally, we found that the same drug candidates also demonstrated
effectiveness against VZV, the cause of shingles in adults and chickenpox in children.
This has led to our new strategy for drug
development with the goal of entering our first drug candidate into human clinical trials at the earliest possible timeframe.
The table below summarizes our drug development programs, specific disease indications we plan on developing against, and the
priority for each drug in the development pipeline.
Drug Products in Development by NanoViricides
|
Program
|
|
Drug
|
|
Virus
|
|
Indication
|
|
Development
Stage
|
|
Priority
|
|
I
|
HerpeCide™ Dermal Topical and Eye
Drops
|
|
1a
|
|
Varicella-Zoster Virus (VZV)
|
|
Shingles
|
|
IND-Enabling
|
|
A
|
|
|
1b
|
|
|
PHN
|
|
Advanced Preclinical
|
|
C
|
|
|
1c
|
|
|
Chickenpox
|
|
Advanced Preclinical
|
|
C
|
|
|
2a
|
|
HSV-1
|
|
Herpes “Cold Sores”
|
|
Advanced Preclinical
|
|
B
|
|
|
2b
|
|
|
Recurrent Herpes Labialis (RHL)
|
|
Advanced Preclinical
|
|
C
|
|
|
3
|
|
HSV-2
|
|
Genital Herpes
|
|
Preclinical
|
|
B
|
|
|
4
|
|
HSV-1, HSV-2
|
|
Ocular Herpes Keratitis (HK)
|
|
Preclinical
|
|
C
|
|
HerpeCide™ IntraOcular Injection
|
|
5
|
|
VZV, HSV-2, HSV-1
|
|
viral Acute Retinal Necrosis (vARN)
|
|
Preclinical
|
|
C
|
|
II
|
FluCide™ Broad-Spectrum Anti-Influenza nanoviricide
|
|
6
|
|
All Influenza A
|
|
Injectable FluCide™ for hospitalized patients
|
|
Advanced Preclinical
Pre-IND Meeting held with US FDA
|
|
D
|
|
|
7
|
|
All Influenza A
|
|
Oral Flucide™ for outpatients
|
|
Advanced Preclinical
Pre-IND Meeting held with US FDA
|
|
D
|
|
III
|
Nanoviricide Eye Drops
|
|
8
|
|
Adenoviruses, HSV-1
|
|
Eye Drops for Viral Diseases of the External Eye
|
|
Preclinical
|
|
E
|
|
IV
|
DengueCide™
|
|
9
|
|
Dengue viruses, all types
|
|
Broad-Spectrum nanoviricide against all types of Dengue viruses
|
|
Preclinical
|
|
F
|
|
V
|
HIVCide ™
|
|
10
|
|
HIV/AIDS
|
|
Escape-resistant Anti-HIV nanoviricide
|
|
Preclinical
|
|
D
|
|
VI
|
Other Nanoviricides Drug Projects
|
|
-
|
|
Ebola/Marburg, Rabies, MERS, Others
|
|
Broad-Spectrum nanoviricide drugs against different viruses and
indications
|
|
R&D
|
|
F
|
|
VII
|
HerpeCide™ Program Expansion Drug Projects
|
|
-
|
|
Possible
EBV, HCMV, HHV-6A, HHV-6B, HHV7, KSHV
|
|
Broad-Spectrum nanoviricide drugs against different herpes viruses
for different indications
|
|
R&D
|
|
F
|
|
VIII
|
Long Term Projects
|
|
-
|
|
Various
|
|
Technologies for Cures for Persistent Viral Diseases
|
|
R&D
|
|
F
|
The Company currently has drug candidates
for more than eight different indications in various stages of development in the HerpeCide program alone. Of these, the skin
cream for the topical dermal treatment of shinglesrash (VZV) has advanced into IND-enabling GLP Safety/Toxicology studies, having
completed candidate optimization through rapidly performed human skin organ culture assays in Professor Jennifer Moffat's lab
at the SUNY Syracuse Upstate Medical Center. We believe that the Skin Cream for the dermal topical treatment of HSV-1 cold sores
and the skin cream for the dermal topical treatment of HSV-2 genital ulcers are expected to rapidly mature towards human clinical
trials in short succession after the clinical VZV drug candidate, namely NV-HHV-101. We have expanded the HerpeCide program to
include additional indications for which we are developing drugs that are the same as or simple modifications of the existing
drug candidates in the HerpeCide program, generally with a different formulation due to a different delivery pathway. This enables
us to maximally leverage current R&D while expanding our drug pipeline and potential market and making a greater impact on
patient lives. We are currently negotiating a license agreement for VZV with TheraCour. We have executed a memorandum of understanding
(MoU) with TheraCour on the general terms of this license. A definitive license agreement is currently being negotiated between
the parties, although there can be no assurance that the final agreement will be on terms that are at least as favorable to us
as the terms in the executed MoU.
Given the limited financing available
to the Company, and given the large development costs associated with FluCide, HIVCide and other drug programs, we believe that
these drug candidates will follow later because of the significant development work that needs to be performed in pre-clinical
studies against a number of different influenza virus strains and subtypes.
Management’s beliefs are based on
results of pre-clinical cell culture studies, ex vivo tissue-based studies (e.g. human skin patch oran culture model),
and in vivo animal studies using small animals
The Company is scaling up the production
of its nanoviricide drug candidates for skin cream against VZV as shingles treatment. Subsequent to the reporting period, we have
commissioned our first large-scale batch synthesis program for making sufficient quantities of a drug candidate for the ensuing
IND-enabling Safety/Toxicology studies. In preliminary safety/toxicology studies, our shingles drug candidates were found to be
extremely safe. As a result, the “Tox Package” program is being designed for maximum feasible dose, increasing the
required quantities.
HerpeCide - We have declared the
clinical candidate, NV-HHV-101, for the shingles indication, and have advanced it into IND-enabling non-GLP and GLP Safety/Toxicology
studies. In addition, we continue to conduct studies for optimizing the anti-HSV ligands in animal studies for the other disease
indications listed in Table above. We believe we will be able to successfully advance the optimized drug candidates into an IND
and human clinical trials. We are developing anti-herpes virus drugs against several different indications at present, namely,
(1) skin cream for topical treatment of shingles, chickenpox, and PHN (VZV), (2) skin cream for treating herpes labialis (“cold
sores”) and recurrent herpes labialis (RHL) (HSV-1), (3) Eye drops for Herpes Keratitis treatment, (4) skin cream for genital
herpes (HSV-2) treatment, and (5) intravitreal injection for Viral Acute Retinal Necrosis (viral ARN, wherein causative agents
are mostly VZV, HSV-2, HSV-1 or other viruses). We have continued to expand the HerpeCide program to include additional indications
to take full advantage of the development synergies. We have expanded this program to include topical treatment of shingles and
were able to very quickly bring this indication to the status of our most advanced program. This has been possible because of
the extremely high synergy between the different HerpeCide drug programs, and because of the extremely high effectiveness of our
nanoviricides drug candidates we observed against VZV both in cell cultures and in an ex vivo human skin patch organ culture
(“SOC”) model. We continue to harness additional synergies in the HerpeCide program. For example, viral Acute Retinal
Necrosis (vARN) is a pathology that leads to severely reduced vision, and can lead to blindness. Research and clinical
lab testing have identified that a large proportion of cases are linked to herpes viruses. Of these, a majority of cases are caused
by HSV-2 or VZV. Thus, reformulating our topical drug candidates against HSV-2 and VZV for intravitreal treatment of ARN caused
by these viruses presents an exciting opportunity. Successful treatment would result in significant patient benefits as well as
a significant commercial opportunity. Since vARN is a relatively rare disease, with only a few hundred new cases per year diagnosed
in the USA, we believe it should be eligible for the “orphan drug” incentive programs. In addition, we could potentially
supply the patient pool with commercial drug product from our existing facility alone, without having to invest in or develop
additional commercial large scale manufacturing facilities.
An intravitreal injection requires significantly
increased burden in manufacturing, because it requires sterile manufacturing. In addition, it may require a longer Safety/Toxicology
program than the skin topical treatments, if it is found to release the drug into systemic circulation. Our FluCide and HIVCide
drug candidates are also injectables and require sterile manufacturing and extensive Safety/Toxicology studies because of systemic
delivery (compared to dermal topical drugs that may not have systemic availability). While we do have sterile API and Drug Product
Manufacturing Capabilities, the CMC program, QA/QC program, and production timelines for injectable drugs are significantly more
burdensome and therefore more time-consuming than topical formulations such as dermal topical formulations or external eye drops/gels.
All of the above HerpeCide programs share
substantial common drug manufacturing processes and chemicals. Some of these may be the same drugs with different formulations
to account for different routes of administration. Thus, these programs are strategically developing in parallel to maximize return
on investment, (ROI) and therefore shareholder value. These programs are our current development focus and have been given priority
ratings of A, B, and C. The priority ratings may change as a program develops. We have seen this happen with the newly introduced
shingles program which quickly moved to priority A due to rapid development, even ahead of our HSV-1 and HSV-2 drug candidates.
The HerpeCide indications listed in the
table above alone represent a market size opportunity of over $3B to $5B. After introduction of the new Shingrix™ vaccine
for shingles, and existing vaccines, the market size for shingles treatment is still estimated to be in the range of a billion
dollars, and that for shingles+PHN treatment is estimated to be in the tens of billions dollar range.
FluCide. We are developing injectable
flucide for severely ill hospitalized patients and oral flucide for out-patients. We achieved industry leading 1,000X reduction
in viral load in lethally infected animal model studies previously. This program is on hold due to resource limitations.
HIVCide is our first announced
drug project against HIV-I. Our first HIV drug to be developed is a targeted nanoviricide against HIV and is engineered with specific
recognition ligands that allow multiple-point binding to inactivate HIV virus in the bloodstream. We have previously demonstrated
in the standard SCID-hu Thy-Liv humanized mouse model a strong effectiveness of our drug candidates, leading us to believe that
a “Functional Cure” with our drug candidate as a single agent is possible. We are also working towards a complete
cure of HIV, which requires elimination of the latent virus HIV DNA copies. The nanoviricide nanomedicines platform is the only
platform to the best of our knowledge that has the capabilities required for enabling such a true cure. This program is on hold
due to funding limitations.
Nanoviricide Eye Drops - We previously
undertook a new project and have already designed a ligand, made a nanoviricide drug, and completed successful animal studies
that indicate significant preliminary efficacy and safety of a drug candidate against the severe pink eye disease caused by adenoviruses
called epidemic keratoconjunctivitis (EKC). We have expanded the indication to include HSV, another cause of viral eye diseases.
We designed new broad-spectrum ligands expected to be active against all HSV types and strains, as well as retaining the previously
observed activity features against adenoviruses and created new nanoviricide drug candidates. We have already tested these against
HSV in cell cultures.
DengueCide - We obtained an orphan
drug designation from the US FDA for our lead drug candidate in this program. This program is assigned Priority Level F and will
be activated if sufficient resources become available.
Further, there are several additional
indications under the HerpeCide program that we can continue to expand into, which would maximize return on investment and shareholder
value, as we make further progress into the clinic with our first drug.
The Company believes it has a strong and
growing drug pipeline to take us several years into the future. The Company already has technologies in development that we hope
may yield even better drugs against various diseases as the drugs we are developing now approach their product end of lifecycle.
In particular, we are working on longer term research projects for the purpose of eliminating persistent viruses, thus providing
true cures for many intractable diseases such as HIV/AIDS, Herpes, Shingles, Epstein-Barr Virus, among others.
Additionally, we had demonstrated the
potential for developing highly effective drugs against Dengue viruses, Ebola/Marburg viruses, and others, in cell culture and/or
animal studies.
It should be noted that all of our studies
to date were preliminary. Thus, the evidence we have developed is indicative, but not considered confirmative, of the capabilities
of the nanoviricides technology’s potential. With the success of these preliminary studies, the Company has decided to perform
further pre-clinical studies that validate safety and efficacy of its materials and its various anti-viral drugs. We are advancing
our drug candidates into IND-enabling “Tox Package” studies, as they mature through animal model efficacy and preliminary
safety studies. Management intends to use capital and debt financing to enable the completion of these goals.
With the limited financial resources we
currently have, we have now focused all our efforts on the HerpeCide program, and more specifically, on taking our first clinical
drug candidate, NV-HHV-101 into human clinical trials. We continue to work on the other programs whenever feasible given our resource
constraints. We intend to engage into those programs more fully at a later date if funding is available.
The overall anti-viral market addressed
by our programs was estimated to be $40 billion in 2018 and $65.5 billion in 2023, according to a research report published by Jain
PharmaBiotech in March 2014. Of this, the market size for a highly effective shingles treatment has been estimated by Nanotech
Plus in excess of one billion dollars, after taking into account the recent introduction of the new Shingrix® vaccine (GSK).
The overall market size for the HerpeCide program is estimated at over $5 billion based on published market reports from Jain PharmaBiotech
in 2014.
Our BSL-2 Certified Virology Lab
We have a BSL-2 (Biological Safety Level
2) certification from the State of Connecticut for our Virology suite at the Shelton campus. This suite comprises three individual
virology workrooms, enabling us to work on several different viruses and strains at the same time. This facility is designed only
for cell culture studies on viruses, and no animal studies can be conducted at any of our own facilities.
We are able to perform drug efficacy and
safety studies in cell cultures for multiple different viruses at the same time in this facility, in isolated lab rooms.
We have established R&D labs, Analytical
labs, Bio labs, a Process Scale-Up production facility, and a cGMP-capable manufacturing facility at our Shelton campus. We believe
we are in a much stronger position than ever to move our drug development programs into the clinic. These capabilities have enabled
the rapid progress of our first drug candidate from development cycles through clinical drug candidate declaration to IND-enabling
non-GLP and GLP Safety/Toxicology studies over the past two years.
The Process Scale-up area is available
and operational at scales of 200g to 2kg per step for different chemical synthesis and processing steps as required. It comprises
reactors and process vessels on chassis or skids, ranging from 1L to 30L capacities, as needed. Many of the reactors or vessels
have been designed by us for specific tasks.
Our versatile, customizable cGMP-capable
manufacturing facility is designed to support the production of multiple kilograms-scale quantities of any of our nanoviricides
drugs. In addition, it is designed to support the production of the drug in any formulation such as injectable, oral, skin cream,
eye drops, lotions, etc. The production scale is designed so that clinical batches for Phase 1, Phase 2, and Phase 3 can be made
in this facility. The clean room suite contains areas suitable for the production of sterile injectable drug formulations, which
require special considerations. This cGMP-capable facility can handle multiple reactors on chassis of up to 75L capacities.
At present, we move operations to our
cGMP-capable manufacturing facility from the Process Scale-up facility as the operational steps are developed to the level needed
for moving them into the cGMP facility. This requires the development of draft-level Standard Operating Procedures, training,
and drill-through of operations. We now have a functional Quality Assurance and Quality Control Department.
The Company’s Virologist. Dr. Friedrich,
has previously performed drug screening of hundreds of candidates against several viruses including alphaviruses, bunyaviruses,
and filoviruses (namely, Ebola and Marburg, which are BSL-4), to discover potential therapeutics, while he was at the United States
Army Medical Research Institute of Infectious Diseases (USAMRIID). Brian has also worked extensively on Flaviviruses, specifically
West Nile Virus, while at University of Texas Medical Branch (UTMB). He has also worked on HIV as part of his PhD thesis. Dengue
viruses, and the Zika virus belong to the Flavivirus family.
We have now developed in-house cell culture
screening capability for developing drug candidates against VZV, HSV-1 and HSV-2, as well as influenzas and HIV, among others.
This capability has substantially strengthened our drug development programs. We believe that this internal screening enables
speedy evaluation of a much larger number of candidates than external collaborations allow. We believe this has significantly
improved our ability to find highly effective ligands and performing structure-activity-relationship studies of the same in a
short time period.
cGMP Manufacturing Facility
Manufacturing of drug products for sale,
as well as for late stage clinical trials is required to be performed in FDA-registered cGMP manufacturing facilities. Manufacture
of drugs for earlier stage clinical trials as well as for IND-enabling GLP Safety/Toxicology studies needs to be performed in
a c-GMP-compliant manner.
We believe we are one of the very few
small pharmaceutical drug innovators that possess their own cGMP or cGMP-capable manufacturing facility. With our Shelton, Connecticut
campus and pilot-scale cGMP-capable manufacturing facility, we believe we are in a position to advance our drug candidates into
clinical trials, produce the pre-clinical “tox package” batches, and the clinical drug substance batches.
We believe that this facility will be
capable of scaling to the quantity of product needed for initial market introduction and revenue generation from our first drug
when approved. We have already performed production of kilogram-scale batches of drug substance and multi-kg scale batches of
drug product at this facility successfully. We believe this scale is sufficient for clinical trials, and, depending upon final
dosage level, this scale may be sufficient for initial market entry.
State of the Company – Drug
Development Programs – Focus on HerpeCide™ Program
To date, we do not have any commercialized
products. We continue to add to our existing portfolio of products through our internal discovery and clinical development programs
and also seeks to do so through an in-licensing strategy.
During the fiscal year ending June 30,
2019, we have focused our efforts primarily on the HerpeCide program. We are developing drugs against three indications in this
program in parallel at present, namely, HSV-1 “cold sores” (orolabial herpes and recurrent herpes labialis or RHL),
HSV-2 “genital ulcers”, and VZV shingles. We are developing topical treatments (skin creams or lotions) for these
three indications. All of the drug candidates in these three leading indications comprise common chemistry features and are based
on the same family of ligands and polymers, enabling efficient parallel development. Our parallel development of these indications
maximizes return on investment and shareholder value. Of these, the shingles indication program has advanced to the level of IND-enabling
Safety/Toxicology studies (i.e. “Tox Package” studies). We are currently advancing it towards an IND filing. We believe
that the other two indications will advance to an IND stage in the very near future.
Our HerpeCide™ program has matured
towards multiple drug indications. Besides the three indications listed above, modifications of the same drug candidates are anticipated
to be developed into (iv) Eye Drops to treat ocular (i.e. external eye) Herpes Keratitis (HK) caused by HSV-1 or HSV-2, and possibly
(v) Intra-Ocular injections to treat viral Acute Retinal Necrosis (vARN) caused by herpes viruses, primarily VZV, shingles (varicella
zoster virus) and HSV-2, a cause of blindness.
In addition, we believe that the shingles
drug candidate may be eligible for the PHN indication as well. PHN clinical studies are long and expensive, and we plan to advance
the candidate for this indication only after its shingles indication clinical trials are completed. Further, the same drug candidate
is expected to work against chickenpox in children. Chickenpox remains a sporadic epidemic disease despite vaccines.
Expansion to additional indications is
likely, as we perform further studies. It is likely that some of these drug candidates with variations may be able to address
diseases caused by the remaining human herpes viruses, namely EBV, HCMV, HHV-6A, HHV-6B, and HHV-7. Such expansions would enable
maximization of return on investment (ROI) and maximization of shareholder value.
Including the HerpeCide program explained
above, we currently have eight different drug development programs, attesting to the strength of our platform technology. We have
chosen to focus strategically on our HerpeCide™ program indications and drug candidates that are expected to result in a
robust franchise with drug approvals against a number of different herpes virus indications.
Pharmaceutical drug development is an
expensive and long duration proposition. Management’s plan is to develop each of our nanoviricides to the necessary stage(s)
and then engage into licensing or co-development relationships with other pharmaceutical companies. Such licensing or co-development
relationships may entail upfront payments, milestones payments, cost sharing, and eventual revenue sharing, including royalties
on sales. There is no guarantee that we will be able to negotiate agreements that are financially beneficial to the Company. As
and when needed, management plans to continue to raise additional funds for our continuing drug development efforts from public
markets.
The Company’s cGMP-capable pilot-scale
manufacturing facility in Connecticut may enable initial market entry for some of our products upon approval, allowing the Company
to grow into a stand-alone Pharma company, in addition to a potential licensing strategy for success. The Company thus continues
to minimize risk to investors by improving the potential for success.
While we have continued to make significant
progress in advancing our HerpeCide program drug pipeline, we have also had to curtail our programs and slow down drug development
towards the clinic due to fiscal constraints. In particular, R&D staffing at our affiliates has been reduced significantly,
by about 40% in the last few years. This is expected to have the effect of lengthening our timeline to begin human clinical trials.
The HerpeCide™ Program is Now
Our Top Priority – Shingles is Lead Indication moving into IND-enabling “Tox Package” Studies
During the fiscal year ended June 30,
2019, we have met several milestones towards developing our first drug for regulatory approval:
|
|
•
|
We declared a clinical candidate, namely NV-HHV-101,
for the treatment of shingles rash in third quarter of calendar year 2018.
|
|
|
•
|
We developed manufacturing processes for the drug
substance at kilogram scale.
|
|
|
•
|
We designed and developed the final formulation
of the drug substance for use as a skin cream. Of note, we achieved formulation development in a short time frame of about
six weeks. This attests to the capabilities of nanoviricides platform technology wherein formulation considerations are taking
into account as an inherent design aspect, thereby saving time in the formulation phase.
|
|
|
•
|
We manufactured the NV-HHV-101 drug substance as
well as the formulated drug products at different concentrations, as required for the first portion of the IND-enabling Safety/Toxicology
studies, namely, non-GLP Safety/Toxicology studies.
|
|
|
•
|
We engaged BASi, Evansville, IN, to perform the
IND-enabling Safety/Toxicology ("Tox Package") studies. BASi is a well-known CRO specializing in these pre-clinical
IND-enabling studies.
|
|
|
•
|
The non-GLP Safety/Toxicology studies began towards
the end of December 2018. These studies were successfully completed around March 2019.
|
|
|
•
|
We filed a pre-IND application for shingles rash
treatment using topical skin cream, NV-HHV-101, soon after the non-GLP studies report was available to us.
|
|
|
•
|
We received favorable comments from the US FDA regarding
our drug development plan for NV-HHV-101 into initial human clinical trials, around end of May 2019.
|
|
|
•
|
We developed and implemented cGMP-compliant manufacturing
processes.
|
|
|
•
|
We manufactured a cGMP-compliant large-scale batch
of approximately 1kg of NV-HHV-101 drug substance, and several kg batches of formulated drug products as needed for the ensuing
GLP Safety/Toxicology study.
|
|
|
•
|
The GLP Safety/Tox study began at BASi around June
2019. Subsequent to the reporting period, the in-life portion of this 28-day study in different animal species has been completed
successfully.
|
|
|
•
|
We have executed a Memorandum of Understanding regarding
general terms of the license agreement from TheraCour for drugs in the VZV vertical field. A definitive agreement is being
negotiated by the parties.
|
On August 5, 2019, we reported that the
in-life portion of the GLP Safety/Toxicology studies was completed successfully. We reported that NV-HHV-101 has been found to
well tolerated in the clinical observation portion of the GLP Safety/Toxicology study of NV-HHV-101 as a dermal treatment. Additional
studies required for the Safety and Toxicology datasets for filing an IND are in progress.
Thus, we have executed diligently, rapidly,
and successfully, in developing our first drug candidate in pre-clinical trials towards human clinical trials in this fiscal year,
despite significant resource limitations in terms of both skilled personnel and available budgets. In addition, we have continued
to work on the HSV-1 and HSV-2 drug candidate developments in the background.
In the ensuing fiscal year, we believe
we will be able to meet several important milestones towards establishing human proof-of-concept for the nanoviricides platform:
|
|
•
|
Finalize human clinical trials designs for Phase
1 and Phase 2 trials for NV-HHV-101 for topical treatment of shingles rash.
|
|
|
•
|
Engage a contract Clinical Research Organization
for conducting the human clinical trials.
|
|
|
•
|
Complete the IND-enabling studies, and prepare appropriate
reports.
|
|
|
•
|
Complete manufacture of cGMP-compliant drug substance
and drug products in quantities sufficient for anticipated human clinical trials as designed.
|
|
|
•
|
Submit an IND-application to the US FDA, or an appropriate
international regulatory agency.
|
|
|
•
|
Initiate and conduct Phase 1 human clinical trials,
to determine safety and tolerability of NV-HHV-101 in human subjects.
|
|
|
•
|
If possible, initiate Phase 2 human clinical trials
to determine effectiveness of NV-HHV-101 in controlling shingles rash and to study the effectiveness of NV-HHV-101 regarding
shingles pain.
|
All of these studies are dependent on
external collaborators providing available time slots for us. Thus, there can be delays in achieving the milestones that are beyond
the Company's control.
We also intend to continue HSV-1 and HSV-2
drug candidate developments towards the goal of declaring a clinical candidate for topical treatment of cold sores and genital
ulcers, assuming we receive sufficient funding.
The Shingles Topical Treatment Drug
Program
Our most advanced drug candidate is a
nanoviricide against VZV (varicella-zoster virus), the virus that causes debilitating shingles rash in adults and chickenpox in
children. Its first indication is expected to be as topical treatment of shingles rash. About 500,000 to 1 million episodes of
herpes zoster (shingles) occur annually in the United States alone. In spite of the new Shingrix™ vaccine, the market size
for a therapeutic for shingles is estimated to be in excess of $1 billion dollars according to two consulting firms, namely BioEnsemble,
LLC and NanoTech Plus LLC, in reports prepared for the Company. There is currently no approved drug against shingles, PHN or chickenpox,
indicating an unmet medical need.
Broad-Spectrum HerpeCide™ Drug
Candidates Enable Additional Indications
The potential broad-spectrum nature of
our anti-HSV drug candidates is expected to enable several anti-herpesviral indications. Thus, HSV-1 primarily affects skin and
mucous membranes causing “cold sores”. HSV-2 primarily affects skin and mucous membranes leading to genital herpes.
HSV-1 infection of the eye causes herpes keratitis that can lead to blindness in some cases. In addition, human herpesvirus-3
(HHV-3), aka varicella-zoster virus (VZV) causes chickenpox in children and, when reactivated in adults, causes shingles. Shingles
breakouts are amenable to topical treatment, as are the HSV cold sores, genital lesions, and herpes keratitis of the eye.
Topical treatment is expected to result
in extremely high antiviral efficacy. This is because such treatment would provide higher concentrations of the antiviral at the
site where the virus is manifesting at its highest levels. Highly effective topical treatments in most of these scenarios remain
unmet medical needs. Most of these indications do not have satisfactory treatments at present, if any. Further, the treatment
of herpes virus infections caused by acyclovir- and famciclovir- resistant mutants is currently an unmet medical need.
With additional indications in the diseases
caused by viruses in the herpes virus family, it is likely that our HerpeCide program could expand into a much broader product
pipeline than currently anticipated. We anticipate that many of these new drugs would be variations on our current drug candidates.
It is therefore expected that the incremental cost of drug development for such additional indications could be substantially
smaller than the cost of developing drugs against other viruses in our portfolio.
Progress in Identifying Clinical Lead
Drug Candidates against the Four HerpeCide Program Indications
Previously, in August 2015, we obtained
confirmatory animal studies data on our then current lead anti-herpes virus drug candidate from TransPharm, LLC. The data confirmed
the results earlier obtained in Professor Ken Rosenthal’s Lab at the NorthEast Ohio Medical Center (NEOMED). In both studies,
dermal topical treatment with our anti-HSV drug candidate led to 85~100% survival in mice lethally infected with the zosteriform,
neurotropic, clinically derived and relevant strain, namely HSV-1 H129. In contrast, all of the untreated mice had severe clinical
morbidity and none of the untreated mice survived. These studies established this drug candidate as a viable, effective potential
drug. Professor Rosenthal has since retired from NEOMED and is now Professor of Biomedical Sciences at the College of Medicine,
Roseman University of Health Sciences, Summerlin, NV.
We have developed additional variations
of the ligand used in this older herpecide drug candidate using molecular modeling and rational design strategies. The new ligands
appear to have substantially improved effectiveness and with a similar level of safety as did the prior tested ligand. We are
now performing studies on chemical covalent conjugates of these ligands with different “nanomicelle” polymer backbones.
We are performing a set of studies to identify the lead clinical candidates for the different herpes virus indications based on
these new nanoviricides.
We have found in preclinical studies that
the nanoviricides drug candidates developed against herpes HSV-1 and HSV-2 are also effective against the shingles virus, namely
the Varicella Zoster Virus (VZV), also called HHV-3 (human herpesvirus-3) in cell culture studies in house. These data were presented
at the American Society of Virology 2017 annual meeting held in June 2017 at Madison, WI. Additional studies have continued to
demonstrate strong effectiveness as the development progresses.
We have also found in preclinical studies
that the shingles treatment nanoviricides drug candidates were highly effective in VZV infection studies using human skin-patch
organ culture (SOC) model. We have repeatedly found strong effectiveness in the SOC studies using different variations of the
drug candidates aimed at establishing the final clinical drug candidate. These studies were performed in the Professor Jennifer
Moffat Lab at the Upstate Medical Center in SUNY, Syracuse, NY. The Moffat group presented some of these data at the 31st International
Conference on Antiviral Research held in Porto, Portugal, on June 10-15, 2018.
At present, there is no well-established
animal model of shingles infection, while animal models have been developed to test for shingles vaccines. We are employing the
human skin explant-based SOC model for evaluation of drugs against VZV infection, in lieu of animal studies. This model is expected
to be more relevant than an animal model. It is particularly suited for a topical drug such as ours. We believe that these human
skin-patch SOC model experimental data will be sufficient to establish the effectiveness of a nanoviricide drug candidate to pursue
further in human clinical studies.
Our developmental drug candidates for
shingles treatment were also found to have a good safety profile in a preliminary rat safety/toxicology study, as we reported
in April 2018. No clinically observable adverse safety and toxicology effects were seen in this study of the Company’s optimized
topical dermal drug candidates based on multiple parameters evaluated. There were no adverse effects on the skin at the treatment
sites. Equally importantly, the results of the non-GLP safety and toxicology study showed that there were no overall observable
systemic effects either. There were no observable direct effects on the primary organ function whether the drug was administered
to the skin or administered systemically. This includes liver and kidney function. This is important as the liver and kidneys
are major organs involved in drug toxicity. Dermal topical treatment of rats with formulated drug candidates was evaluated in
this study as a primary objective, since skin is the primary breakout site of HSV-1, HSV-2, and VZV infections. Additionally,
the same drug candidates as formulated for systemic delivery were employed to evaluate potential systemic safety/toxicological
effects. We now also report herein that there were no observable changes in the histo-pathological study (tissue structure) of
a panel of organs including the brain, heart, liver, lungs, spleen, kidney, intestines, uterus, testis, as well as skin upon treatment
with the tested drug candidates. The study was conducted by AR Biosystems of Beverly, MA.
Of note, the drug candidates tested in
this safety/toxicology study have previously shown broad-spectrum effectiveness against alphaherpesviruses, i.e. HSV-1, HSV-2,
and VZV.
These results are consistent with the
positive findings in a model of VZV (the shingles virus) infection of human skin in which no safety or toxicology concerns have
been observed, further demonstrating the safety of these drug candidates. The drug candidates have shown strong effectiveness
in these shingles virus studies as well, as previously reported. Further, these candidates have demonstrated strong anti-viral
activities against HSV-1, HSV-2, and VZV in cell culture studies using multiple cell lines.
These results have enabled the identification
and declaration of a clinical drug candidate in the HerpeCide program. We have taken this candidate, namely NV-HHV-101, into IND-enabling
studies, towards human clinical trials. The first indication we intend for treatment with this drug is the topical treatment of
shingles rash.
The Company’s drug candidates in
HerpeCide™ program are being developed for direct topical application on the affected areas to control the infections. Direct
topical application enables delivery of the highest possible concentrations of the active substance directly at the site of infection.
This allows for maximal clinical effectiveness, while at the same time minimizing side effects that are seen with systemic therapy
(such as oral drugs or injectables).
This dermal drug development workload
is expected to be significantly shorter than the studies for ocular, injectable, or oral drugs. We anticipate filing an IND once
the report of these IND-enabling studies is available.
Topical treatment of herpes virus infections
is important because herpes viruses become latent in neuronal cells or in ganglia and cause periodic localized breakouts that
appear as skin rashes and lesions. Systemic drug treatment results in side effects because of the high systemic drug concentrations
that need to be achieved and the large drug quantities that must be administered. Since the virus remains mostly localized in
the area of the rash and connected nerve apparatus, using high concentrations of drugs delivered in small quantities topically
would allow maximizing the effectiveness while minimizing side effects.
Since these nanoviricides are designed
to attack the virus directly, we believe that human clinical studies should reflect the success of the preclinical studies.
We are also continuing to work on developing
relevant chemical identification and characterization assays, physicochemical and biochemical characterization assays, and chemical
process optimization studies, as part of the CMC (Chemistry, Manufacture and Controls) section of the Investigational New Drug
(IND) Application for the shingles drug. We believe this drug will be our first candidate into human clinical trials.
HerpeCide Program Collaborations and
Program Update
We have engaged in several collaborations
to help us finalize clinical candidates and develop IND-enabling pre-clinical data in our various programs this year. Notably,
we have continued collaborations with the CORL at the University of Wisconsin for HSV-1 and HSV-2, with focus on small animal
models for ocular and dermal diseases.
In addition, we have a continuing relationship
with Bio-Analytical Systems, Inc. (“BASi”), Indiana, a CRO for GLP and non-GLP safety/toxicology (“Tox Package”)
studies. Further, we continue to engage Biologics Consulting Group (BCG), Virginia, for advice and help with regulatory affairs.
We also have a collaboration with the
Campbell Lab at the University of Pittsburgh for in vitro cell culture models of various ocular viruses including many adenovirus
and herpes virus strains, as well as animal models for ocular herpes keratitis (HK) and adenoviral epidemic keratoconjunctivitis
(EKC).
In addition, we have continued our agreement
with SUNY Upstate Medical University for the testing of the Company’s nanoviricides® drug candidates against varicella
zoster virus (VZV), i.e. the shingles virus. This research is being performed in the laboratory of Dr. Jennifer Moffat.
Initially, Dr. Moffat conducted cell culture
studies i.e. in vitro studies. Upon finding that the nanoviricides drug candidates were effective against VZV in cell cultures,
Dr. Moffat advanced the studies to the ex vivo human skin-patch organ culture (SOC) model studies stage, wherein our drug
candidates are being evaluated against VZV infection of human skin patches.
Dr. Moffat has extensive experience in
varicella zoster virus (VZV) infection and antiviral agent discovery. The goal of these studies is to help select a clinical drug
development candidate for toxicology and safety evaluation intended for clinical trials for the treatment of shingles in humans.
VZV is restricted to human tissue and
only infects and replicates in human tissue. The ex vivo studies are continuing to evaluate the efficacy of the Company’s
nanoviricides to inhibit VZV in human skin organ cultures. Dr. Moffat has developed the human skin organ culture VZV infection
model for the evaluation of therapeutics. This model is a good representative model of natural VZV infection in humans as well
as an important model for evaluating antiviral activity, because it demonstrates behavior similar to the skin lesions caused by
VZV in human patients.
Dr. Moffat is an internationally recognized
expert on varicella zoster virus, and her research has focused on the pathogenesis and treatment of infection by this virus. The
National Institute of Health has recognized this VZV model via a contract with Dr. Moffat’s lab for evaluating antiviral
compounds against VZV. Dr. Moffat is the director of two research core facilities at SUNY Upstate: the Center for Humanized Mouse
Models and In vivo Imaging.
In addition, Dr. Brian Friedrich, Senior
Virologist of the Company continues to perform extensive antiviral cell culture studies against VZV, HSV-1 and HSV-2 using multiple
cell lines and multiple strains of the viruses, in our BSL-2+ anti-viral cell culture laboratory in Shelton, CT.
Dr. Friedrich presented a poster entitled
“Novel Nanoviricides® Highly Effective Against Varicella Zoster Virus in Cell Culture” at the 36th Annual Meeting
of the American Society of Virology (ASV) on June 26th, 2017. The ASV Meeting was hosted and held at the University of Wisconsin-Madison,
from June 24th to 28th, 2017 (https://extensionconferencecenters.uwex.edu/asv2017/).
The two active nanoviricide® candidates
presented therein inhibited VZV up to 5 times better than acyclovir-sodium (the current standard of care), and completely inhibited
VZV protein production/infection in cell culture studies. These results indicate a very high level of anti-VZV effectiveness.
The nanoviricide candidates were non-cytotoxic even at the highest doses in all cell lines tested. Thus it should be possible
to administer very high concentrations of the drug locally on the skin without any deleterious effects.
Importantly, the data presented demonstrated
that the anti-viral activity of a nanoviricide is driven by the virus-specific ligand attached to it. Thus, two of the nanoviricide
drug candidates were highly effective against VZV, whereas a third one was not as effective. All three ligands were derived by
in silico computer-aided drug design based on known structures of HSV glycoprotein binding to the cellular receptor, namely the
herpes virus entry mediator (HVEM), and thus were expected to be active against herpes simplex viruses, and only some of them
were anticipated to be active against all alphaherpesviruses. VZV is an alphaherpesvirus. This has once again demonstrated the
validity of our scientific drug development approach.
On July 10, 2017, the Company announced
the results of initial testing of our anti-herpes drug candidates in the ex vivo human skin patch “SOC” model
performed by Dr. Moffat. The anti-shingles nanoviricides® drug candidates achieved dramatic reduction in infection of human
skin by the varicella-zoster virus (VZV), the shingles virus in this study. These findings corroborate the previously reported
findings of inhibition of VZV infection of human cells in culture. The antiviral effect of certain nanoviricide drug candidates
was substantially greater than the effect of the standard positive control of cidofovir added into media. Even more remarkably,
the effect of these nanoviricides drug candidates was equivalent to a topical formulation of 1% cidofovir applied directly onto
the skin patch. A topical skin cream containing 2% cidofovir is clinically used in very severe cases of shingles. However, the
cytotoxicity of cidofovir is known to cause ulceration of the skin to which it is applied, followed by natural wound healing.
Additional studies have continued at Dr.
Moffat lab with small variations on the drug candidates and have led to the identification of a clinical drug candidate. These
studies have continued to demonstrate excellent efficacy of our nanoviricide drug candidates against the VZV virus infection.
Dr. Moffat presented some of the data at the 31st International Conference on Antiviral Research held June 11 - June 15, 2018
in Porto, Portugal.
Shingles and Associated Pain, Postherpetic
Neuralgia (PHN)
Shingles
is caused by re-activation of the chickenpox virus that most humans acquire in childhood. The chickenpox vaccine for children
is a live, attenuated virus (LAV). The LAV is not as pathogenic as the wild-type virus. However, this means the virus is present
in the vaccinated individual, but remains suppressed by the immune system. In both vaccinated and unvaccinated persons, re-activation
occurs when the immune system is suppressed which may be simply because of stress, advanced age, or some other immune modifying
circumstances including immune-compromise due to organ transplants or other diseases. There is a shingles vaccine approved for
adults age 60 and above which is also available for adults younger than that.
Acyclovir-based oral drugs, such as valacyclovir
(Valtrex®), are available as systemic therapy for shingles. Intravenous acyclovir is also employed for treatment of various
VZV indications. However, VZV is substantially less sensitive to (val)acyclovir than is HSV-1. Thus the oral drug generally does
not result in optimal level of the active drug at the site of VZV viral production, and does not result in significant control
of the pathology. The antiviral drugs may be given for a period of 14 days or longer, with as much as 5g of dose per day, due
to poor efficacy. In some indications, the treatment has been continued for a year or so. Thus, there is an unmet need for developing
anti-VZV antivirals with high efficacy and safety.
A Phase 3 clinical study comparing FV-100
to valacyclovir for PHN and shingles was terminated by ContraVir Pharma. FV-100 is a nucleoside analog with an extremely restricted
activity range. A helicase/primase inhibitor, ASP2151, was found to be non-inferior to valacyclovir in a shingles clinical study.
Astellas has suspended its development due to serious side effects in some healthy volunteers. A drug with a novel mechanism of
action such as our nanoviricides should be promising.
Most
adults with shingles recover in about 15~30 days from the shingles rash. While the rash is unsightly, its stinging pain is often
the debilitating pathology that leads to lost workdays and other effects. Depending
on age and the definition used, 10 to 50% of persons with herpes zoster develop postherpetic
neuralgia, or PHN, a stinging, debilitating pain that lasts more than 30 days, and, in some patients, may last for years.
It is generally believed that PHN results
from damage to the local nerve endings and nerve cells caused by the uncontrolled production of the shingles virus. However, VZV
has been found to be present in at least 75% of PHN cases in a study, indicating a role for antivirals in controlling PHN. We
believe that an effective therapy, such as our nanoviricide against VZV, which blocks progression of the virus to infect new cells
and thereby limits further production of virus, would minimize the damage to nerve endings and nerve cells caused by the virus.
We believe that this would minimize the occurrence, severity, and time period of PHN, in addition to having significant effects
on the severity of shingles rash, lesions, and healing time.
In light of this we have conducted an
animal study regarding the effect of our nanoviricide drug candidates against shingles on neuropathic pain in a classical animal
model of pain (without VZV infection). On August 7, 2018, we reported that our anti-Shingles drug candidates were effective in
ameliorating pain sensations in an animal model of abnormal pain. In this animal study, topical treatment with the nanoviricides®
anti-VZV compounds significantly reduced the measures of abnormal pain sensations in a rat model of neuropathic pain. The study
was conducted at AR Biosystems in Tampa FL. A characteristic excruciating pain is a debilitating pathology of shingles presentation.
Thus a direct pain-reducing effect of the Company’s anti-shingles drug candidates would be very important in ameliorating
the pathology of shingles, in addition to the already demonstrated significant antiviral effect.
We believe that a skin cream would be
the best form of treatment to provide rapid control of the virus and shingles lesions patch expansion, since the shingles outbreak
remains highly localized. A skin cream would afford much greater local exposure of drug to virus compared to a systemic oral or
injectable treatment.
An effective therapy for patients with
severe shingles continues to be an unmet need.
HSV-1, HSV-2, Ocular Herpes Keratitis
We believe that a skin cream for the control
of HSV-1 “cold sores” (herpes labialis, and recurrent herpes labialis or RHL) is another drug candidate that may be
close to entering human clinical trials. We have already achieved strong success in animal studies against HSV-1, as discussed
above.
We believe that we will be able to successfully
develop a drug candidates for Ocular Herpes Keratitis (HK) as well. It is caused by HSV-1 or HSV-2 infection of the external eye.
We are developing this drug as topical eye drops or eye lotion, in order to achieve maximum local drug effect while minimizing
systemic exposure. We plan on testing these drug candidates against adenoviruses as well, to determine if the same drug would
also be effective against epidemic keratoconjunctivitis (EKC, the severe “pink eye” disease). If the same drug works
against herpes virus and adenovirus infections of the eye, we expect this drug may cover almost 99% of all external eye viral
pathologies.
We also believe that we will be able to
develop a drug against HSV-2 genital herpes. We plan on developing a skin cream for this indication, to maximize local effectiveness.
Viral Acute Retinal Necrosis (v-ARN)
The Company is also exploring additional
indications of its anti-herpes drug candidates which is expected to broaden the pipeline and require limited development work.
In particular, certain eye diseases of the retina have been causatively linked to herpes viruses. For example, most cases of viral
Acute Retinal Necrosis (ARN), a disease that leads to severe loss of vision and can lead to blindness, have been linked to VZV
and HSV-2, with some also associated with HSV-1 or CMV infection of the eye. It is believed that, HSV-2 ARN in children and adolescents
may result from undiagnosed and asymptomatic neonatal HSV-2 infection, which has reactivated several years later from latency
in a cranial nerve and entered the retina. Currently, intravenous followed by oral acyclovir derivatives daily for several months
to years and sometimes intravitreal (into the eye) foscarnet injections are therapeutically employed with limited effectiveness,
establishing the potential of effective antiviral therapy to avoid blindness as well as multiple surgeries related to retinal
detachment. A highly effective antiviral that can be injected into the eye infrequently and provides sustained antiviral therapeutic
effect over a long period of time for ARN is an unmet medical need.
Neonatally acquired herpes virus infections,
even when asymptomatic, are thought to have led to ARN as late as age 22. There are approximately 2,500 cases per year of diagnosed
neonatal herpes virus infections in the USA.
cGMP Manufacture
We have already manufactured our lead
drug candidate, NV-HHV-101, in a cGMP-compliant manner at this facility for the IND-enabling GLP Safety/Toxicology study. The
drug substance, or active pharmaceutical ingredient (API) was produced at approximately 1kg-scale. Drug products, i.e. different
dose levels of the skin cream, were made at scales of 3-5kg batches.
The FluCide™ Program
We intend to re-engage the FluCide program
once the HerpeCide drug candidates enter human clinical trials, resource permitting. Previously, we had achieved industry-leading
effectiveness levels demonstrating as high as 1,000-fold viral load reduction in a lethal animal model of influenza infection
with multiple strains of influenza. We were developing an injectable drug candidate for treatment of severely ill patients, and
an oral drug candidate for the treatment of out-patients.
DengueCide™
We intend to reengage the DengueCide program
if and when non-dilutive funding such as research grants become available to us. At present we have not applied for any grants
for this program.
HIVCide™
We intend to re-engage the HIVCide program
once the HerpeCide drug candidates enter human clinical trials, resource permitting. Previously, the drug candidates in the HIVCide™
program were found to have effectiveness equal to that of a triple drug HAART cocktail therapy in the standard humanized SCID-hu
Thy/Liv mouse model. Moreover, the nanoviricides were long acting. Viral load suppression continued to hold for more than four
weeks after stopping HIVCide treatment. The Company believes that this strong effect and sustained effect together indicate that
HIVCide can be developed as a single agent that would provide “Functional Cure” from HIV/AIDS. The Company believes
that substantially all HIV virus can be cleared upon HIVCide treatment, except the integrated viral genome in latent cells. This
would enable discontinuation of treatment until HIV reemerges from the latent reservoir, which may be several months without any
drugs. Moreover, the Company believes that this therapy would also minimize the chances of HIV transmission. The Company is currently
optimizing the anti-HIV drug candidates. These drug candidates are effective against both the R5 and X4 subtypes of HIV-1 in cell
cultures. The Company believes that these drug candidates are “broad-spectrum”, i.e. they are expected to be effective
against most strains and mutants of HIV, and therefore escape of mutants from our drugs is expected to be minimal. Certain anti-HIV
nanoviricides have already been demonstrated that appear to provide extended viral load suppression for as long as 30 days or
more even after stopping the drug, in animal studies. Given the chronic nature of HIV/AIDS, such a drug that has long sustained
effect is expected to provide significant benefits to the patient. We believe once a week dosing is possible. Anti-HIV drug development
is both expensive and slow because of the nature of the animal studies that require SCID mice whose immune system is destroyed
and then replaced by surgically implanting and growing human immune system tissues in the mouse body. Due to our limited resources,
HIVCide development is further hampered.
EKC
The Company is developing broad-spectrum
eye drops that are expected to be effective against a majority of the viral infections of the external eye. Most of these viral
infections are from adenoviruses or from herpes viruses. The Company has shown excellent efficacy of its drug candidates against
EKC (adenoviral epidemic keratoconjunctivitis) in an animal model. If feasible, we are planning to merge the anti-EKC drug development
program and the ocular Herpes Keratitis drug development program, to develop a single drug that is effective against both diseases,
i.e. effective against both adenoviruses and herpes viruses. This work is in research stage.
Other Drug Programs: Ebola, Rabies
and others
In addition, the Company also has research
programs against Rabies virus, Ebola and Marburg viruses, and others. We will not be undertaking socially important programs such
as the development of an anti-Zika virus drug candidate, or continuation of our efforts in developing anti-Ebola drug candidate,
unless non-dilutive funding for such efforts becomes available. At present we have not applied for any grants for these programs.
Thus, this year, we have further focused
our programs and prioritized them in order to advance our first drug candidate into the clinic in the fastest possible path.
Safety and Toxicology Studies
As part of the IND-enabling development
of our topical skin cream for treatment of shingles rash, we have performed a substantial amount of safety and toxicology studies.
We performed non-GLP safety toxicology studies in a rat model with two of the development stage candidates first. Both candidates
were extremely well tolerated and no adverse events occurred. This, along with efficacy studies in the Human Skin Organ Culture
model of Dr. Moffat, led us to identify a clinical candidate, namely, NV-HHV-101. We have performed IND-enabling non-GLP Safety
Toxicology studies of this clinical candidate in multiple animal species. NV-HHV-101 was well tolerated at all dosages tested
and none of the parameters tested were affected. Based upon these results, a GLP Safety/Toxicology study of dermal treatment in
mini-pigs has been commissioned. These safety results are in agreement with histopathological observations in the human skin organ
culture model studies.
We previously performed initial safety-toxicology
screening of an optimized FluCide® drug candidate in a GLP-like toxicology study in rats, as an injectable drug. We reported
that a good safety profile was observed for this drug candidate in rats at the end of January 2015. These results are in agreement
with the previously reported results of a non-GLP toxicology study in mice. These 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. 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.
We believe that these safety/toxicology
results are also applicable to other drug candidates as well in the sense that they have established the safety of the polymer
backbones that we have employed. The polymer is made up of PEG (polyethylene glycol) chains put together into a single polymer
chain with ligands and pendant lipids substantially uniformly attached at the connector points. This enables the nanoviricide
to be substantially non-immunogenic. PEG chain attachment or PEGylation is a widely used technique for rendering antibodies and
other drugs substantially non-immunogenic.
Successful preliminary safety study in
an animal model has cleared the way for us to begin IND-enabling safety/toxicology study for our shingles treatment drug candidate,
as described earlier.
Clinical and Regulatory Strategy
We have engaged Biologics Consulting Group,
a well-known group of regulatory consultants, to advise us on the regulatory pathways, and the studies required for the IND applications
for the various disease indications.
At present, our anti-VZV drug candidate
is in IND-enabling development stage, and is expected to enter human clinical trials once the current GLP Safety/Toxicology and
related IND-enabling studies are completed.
The other HerpeCide™ program drug
candidates are expected to follow into clinical development, as the necessary additional safety and efficacy studies in cell culture
and animal models are performed. We depend upon external collaborators for animal safety and efficacy studies, limiting the speed
of our drug development work. While we seek collaborators and providers that have animal models that may be predictive of efficacy
in human clinical trials, pharmaceutical drug development relies on what is available and what is doable rather than this gold
standard. Newly implemented animal models require validation studies to establish how reproducibly they can discriminate between
placebo and drugs that are known to work in the clinic, when such drugs are available. In many cases, we have to rely upon research
level animal models that have not yet established such robustness. Nevertheless, we can continue to use such models to obtain
preliminary indications for drug candidate refinements.
We believe that the efficacy we have observed
of our anti-VZV drug candidates in the ex vivo Human Skin patch Organ Culture “SOC” model in the Moffat Lab
is a strong indicator that these drug candidates are worthy of clinical development. There is no well-established animal model
for shingles at present. As such we assume that these datasets will be sufficient for filing an IND.
With the non-GLP Safety/Toxicology data,
and our Chemistry, Manufacture and Controls (CMC) manufacturing dataset, we filed a pre-IND application with the US FDA for NV-HHV-101
as a topical treatment for shingles rash.
On June 3, 2019, the Company reported
that the US FDA (the Agency) has generally agreed in its pre-IND response that the plan of drug development presented by the Company
to the FDA is generally adequate at this time. The Company received the response on May 23, 2019.
In particular, the Agency agreed that
the Company’s strategy for drug substance and drug product acceptance criteria is adequate. The Agency further agreed that
the IND-enabling non-clinical studies proposed by the Company are generally adequate. The US FDA also said that the proposed design
of the IND-opening human clinical studies appears reasonable at this time.
The FDA made valuable suggestions in the
pre-IND response. The additional non-clinical studies recommended by the Agency are generally consistent with the Company’s
planned IND-enabling non-clinical studies. The Company has discussed the Agency’s comments and suggestions in detail with
its regulatory consultants from Biologics Consulting Group, VA, and has continued the pre-clinical development program accordingly.
We believe that our existing cGMP-capable
manufacturing facilities are sufficient for the production of drug products for human clinical studies.
Large Market Sizes – The Company
Targets an Overall Anti-Viral Drug Market Size that Exceeds $40B
The current market size for drugs for
the treatment of different herpes simplex infections is estimated to be approximately $2 billion in 2018 and $3 billion in 2023.
The current market size for the treatment of shingles is estimated to be approximately $500 million to $1 billion. We believe
that when an effective topical treatment is introduced, the market size is likely to expand substantially, as it has for several
drugs in the antivirals, oncology, and other areas.
The approximate market size for shingles
may be approximately one billion dollars. Severe cases of shingles may lead to hospitalization in several thousand cases in the
USA every year. In addition, shingles appearing on the face may reach the eye and may cause significant vision issues. The outpatient
treatment market size for shingles at present is limited, because of the limited effectiveness of existing drugs. An effective
drug could expand this market into billions of dollars globally. A new two-dose shingles vaccine called Shingrix® has recently
been introduced. However, due to the side effects in a significant percentage of persons taking this vaccine at its first dose,
compliance as well as market penetration may be limited. The supplies of this vaccine are limited at present. Shingles is not
seen as a life-threatening or life-modifying disease, the use of vaccines is limited, and may continue to be limited, especially
if an effective drug is developed.
In addition, the estimated market size
for an effective anti-Influenza drug is expected to be in tens of billions of dollars. The current estimate of anti-influenza
drug market size is approximately $4 billion. The current market size for anti-HIV treatments is in excess of $20 billion. Other
drugs in our pipeline, taken together, are estimated to be several billion dollars in market sizes.
Our focus at present is on the topical
treatments for different herpes virus infections in the HerpeCide program, as listed elsewhere in this report. We plan on re-engaging
our Influenza and HIV programs when sufficient funding and skilled human resources are available.
Our Campus in Shelton, CT
We believe we are one of a few bio-pharma
companies with its own cGMP-capable manufacturing facility. The multi-kilogram production scale of our facility would enable the
potential for NanoViricides to become a fully integrated pharmaceutical company (“FIPCO”), organically growing by
generating revenues from initial market entry, if our first drug is approved for marketing by appropriate regulatory authorities.
We believe that the production scale is
sufficient for initial market entry of the current drugs in the HerpeCide program.
At present, we move operations to our
cGMP-capable manufacturing facility from the Process Scale-up facility as the operational steps are developed to the level needed
for moving them into the cGMP facility. This requires the development of draft-level Standard Operating Procedures, training,
and drill-through of operations. We now have a functional Quality Assurance and Quality Control Department.
Resource Considerations
We have lost approximately 40% of our
personnel in the Chemistry and Engineering through attrition over the last few years and have not replaced them with new hires.
The remaining staff is busy developing our pre-clinical HerpeCide programs.
Given the limited financing, we have not
been able to attract the necessary talent for replacing the lost staff and for building out the additional independent departments
such as QA/QC. We have been working with our extremely versatile and multi-talented team, in a task-serialized fashion, over the
last several years. While the versatility of the team has enabled us to develop and establish most of the required quality assays
and methods, we are severely limited in our abilities to develop the multiple programs wherein we have already obtained pre-clinical
successful results. Also, we will need to add skilled staff before engaging into drug production for Phase 2 and Phase 3 human
clinical trials.
We operate in a completely novel area
of medicines, which is broadly described as polymeric-micelle based drug conjugates and complex nanomedicines. Our technologies
are also completely novel, and unmatched in the industry. As such, we anticipate a longer training period for new employees than
for normal small chemical or biological drugs. We need talented personnel with specialized training. With the extreme difficulties
in hiring foreigners due to immigration requirements, there is only a severely limited talent pool that may be available or accessible
to us.
We employ the same team that developed
the small-scale synthesis chemistry for translation of those chemical syntheses into clinical-scale processes, and also to perform
the related chemical engineering, quality control, quality assurance, and regulatory tasks along the way. Because of the small
size of our scientific staff, this results in significant serialization of efforts. However, the personnel cost, as well as the
time and expense cost of transfer of knowledge and training of a separate dedicated team is avoided because the same expert scientists
who have developed the chemistries are also involved in scaling them up into process scale. To enable such extensive multi-tasking,
we have a continuous training program in place, with both formal and informal components. We believe that this approach helps
us keep drug development costs as low as possible.
Our BSL-2 Certified Virology Lab
We have established several different
types of assays for screening of candidates against VZV, HSV-1 and HSV-2 in our BSL-2+ Virology lab. We believe that having developed
the internal capabilities for cell culture testing of our ligands and nanoviricides against a variety of viruses has substantially
strengthened our drug development programs. We believe that this internal screening enables speedy evaluation of a much larger
number of candidates than external collaborations allow. This has significantly improved our ability of finding highly effective
ligands and performing structure-activity-relationship studies of the same in a short time period.
We have the ability to work on multiple
types of viruses or multiple virus strains at the same time, as this facility comprises three independent virological rooms. We
also have the capability for performing HIV screening assays based on cell culture in house now, once we re-engage that program.
We also have the ability to perform limited anti-influenza drug screening assays in cell culture in house.
It is now possible for us to implement
several other cell culture-based assays for many different viruses. These capabilities are expected to enable rapid drug development
once we re-engage the drug development efforts in areas beyond the HerpeCide program again.
We do not have the facilities for performing
animal model studies for any of our programs. We depend upon external collaborators for such studies.
Manufacturing Requirements of Some
of Our Drug Candidates
The HerpeCide program drug product batch
requirements are estimated to be fairly modest because of the topical nature of treatment. In consultation with Bio-Analytical
Services, Inc. (BASi) and Biologics Consulting Group (BCG), we had estimated a batch size of approximately 1kg drug substance
to be sufficient for the “Tox Package” (i.e. safety and toxicology) studies of our dermal topical shingles drug candidate.
NV-HHV-101 drug substance manufactured at approximately 1kg scale in a cGMP-compliant manner and formulated into drug products
at different concentrations at scales of up to 5kg was manufactured for the GLP Safety/Toxicology studies in our facility. Performing
the manufacture in house has saved us a significant amount of money, possibly in tens of millions of dollars, as well as in time,
possibly at least one year.
We are estimating that a ~500g batch will
be more than sufficient for initial Phase-I human clinical studies as well. Our current estimate for a Phase 2a human clinical
efficacy study is also in the range of a ~500g batch requirement. We already have the facilities for producing up to 1kg per batch
or more.
As we move our drug candidates into clinical
studies, we plan to perform further scale-up studies. In the current facility, we may be able to manufacture about 20kg to 50kg
of cGMP API (active pharmaceutical ingredient) annually. Depending upon the drug’s potency and indication, this production
size may fetch modest revenues of around $50M to $500M, depending upon the cost metrics, enabling profitable market entry. Such
initial commercialization would allow the Company to turn itself into a stand-alone fully integrated pharmaceutical company, by
enabling capital formation for larger scale manufacturing facilities and fueling further growth.
Patents, Trademarks, Proprietary Rights:
Intellectual Property
The nanomedicine technologies licensed
from TheraCour serve as the foundation for our intellectual property. NanoViricides holds a worldwide exclusive license to certain
technology for several drugs with specific targeting mechanisms 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-1 and HSV-2),
Influenza and Asian Bird Flu Virus. The Company has entered into an Additional License Agreement with TheraCour granting NanoViricides
the exclusive licenses 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.
On September 1, 2005, the Company entered
into a Material License Agreement, (the “License Agreement”) with TheraCour. Initially, TheraCour granted the Company
an exclusive license for technologies developed by TheraCour for six virus types: HIV, HCV, Herpes Simplex Virus (HSV-1 and HSV-2),
Rabies, Asian (bird) flu and Influenza. In consideration for obtaining this exclusive license, we agreed: (1) that TheraCour can
charge its costs (direct and indirect) plus no more than 30% of certain costs as a development fee and such development fees shall
be due and payable in periodic installments as billed; (2) to pay $25,000 per month for usage of lab supplies and chemicals from
existing stock held by TheraCour; (3) to pay the greater of $2,000 or actual costs, for other general and administrative expenses
incurred by TheraCour on our behalf; (4) to make royalty payments of 15% (calculated as a percentage of net sales of the licensed
drugs) to TheraCour; (5) that TheraCour shall retain the exclusive right to develop and manufacture the Licensed Products, exclusively
for NanoViricides, and unless such license is terminated, will not develop or synthesize the Licensed Products for its own sake
or for others; and (6) to pay an advance payment equal to twice the amount of the previous months invoice to be applied as a prepayment
towards expenses. TheraCour may terminate the License upon a material breach by us as specified in the agreement. However, the
Company has the opportunity to cure the breach within 90 days of receipt of notice to terminate the License. On February 15, 2010,
the Company approved an Additional License Agreement with TheraCour. Pursuant to the exclusive Additional License Agreement, in
consideration for the issuance of 2,000,000 shares of the Company’s Series A Preferred Stock, (the “Series A Preferred”),
the Company was granted exclusive license, under the same terms as the original License Agreement, 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. In 2015 TheraCour stopped billing the Company and
the Company stopped paying for the $25,000 per month usage fee for prior existing materials, by mutual agreement. There was no
amendment to the license contract effected for this purpose.
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 the licensed technologies. Further, the licenses are held by NanoViricides for worldwide use. 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 the inability
to conduct its business.
Patents and other proprietary rights are
essential for our operations. If our drugs are protected by a properly designed and enforceable patent, it can be more difficult
for our competitors to use our technology to create competitive products and more difficult for our competitors to obtain a patent
that prevents us from using technology we create. As part of our business strategy, in conjunction with TheraCour, a company controlled
by our founder and the holder of the patents underlying our licensed technology, we actively seek patent protection both in the
United States and internationally and intend to file additional patent applications, when appropriate, to cover improvements in
our compounds, products and technology. We also rely on trade secrets, internal know-how, technological innovations and agreements
with third parties to develop, maintain and protect our competitive position. Our ability to be competitive will depend on the
success of this strategy.
The Company believes that our drugs by
themselves may be eligible for patent protection. The Company, in conjunction with TheraCour, plans on filing patent applications
for protecting these drugs when we have definitive results from in vitro or in vivo studies that enable further drug development
and IND application filing.
The Company has licenses to key patents,
patent applications and rights to proprietary and patent-pending technologies related to our compounds, products and technologies
(see Table 1), but we cannot be certain that issued patents will be enforceable or provide adequate protection or that pending
patent applications will result in issued patents.
Table 1: Intellectual Property, Patents,
and Pending Patents Licensed by the Company
|
Patent or Application
|
|
Date of Issue/
Application
|
|
US Expiry
Date
|
|
International
|
|
Owners
|
|
US6,521,736
(Certain specific amphiphilic polymers).
|
|
Issued: Feb 18, 2003
|
|
Feb 18, 2020
|
|
N/A
|
|
TheraCour Pharma and Univ. of Massachusetts, Lowell. [Nonexclusive license from TheraCour
Pharma].
|
|
|
|
|
|
|
|
|
|
|
PCT/US06/01820
(SOLUBILIZATION AND TARGETED DELIVERY OF DRUGS WITH SELF-ASSEMBLING AMPHIPHILIC POLYMERS).
|
|
Applied: Jan 19, 2006 PCT U.S. Issuance: May 8, 2012.
|
|
October 2028 (estimated)
|
|
Applications are in various prosecution stages. Fifty-two of these have been issued or validated
|
|
TheraCour Pharma, Inc. [Exclusive License].
|
|
|
|
|
|
|
|
|
|
|
PCT/US2007/001607
SELF-ASSEMBLING AMPHIPHILIC POLYMERS AS ANTIVIRAL AGENTS
|
|
Applied: Jan 22, 2007
|
|
Ca. 2029 (estimated)
|
|
Applications are in various prosecution stages. Nine of these have been issued or validated
|
|
TheraCour Pharma, Inc. [Exclusive License].
|
We have previously announced certain important
issuances of patents on the TheraCour® technology underlying our Nanoviricides® drugs. A fundamental patent on the polymeric
micelles composition, structure and uses was issued in the USA with substantially broad claims. This validates the novelty of
our approach as well as our leadership position in the nanomedicines based on polymeric micelle technologies. This patent application
has so far been issued, granted, and/or validated, with substantially similar broad claims as 52 different patents in different
countries and multi-country intellectual property organizations. A fundamental patent on which the nanoviricides® technology
is based (US Patent No. 8,173,764) for “Solubilization and Targeted Delivery of Drugs with Self-Assembling Amphiphilic Polymers”
was issued on May 8, 2012. The 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. NanoViricides, Inc. holds exclusive, perpetual, worldwide licenses
to these technologies for a broad range of antiviral applications and diseases. The other national and regional counterparts of
the international Patent Cooperation Treaty (“PCT”) application number PCT/US06/01820, which was filed in 2006, have
issued as a Singapore National Patent Publication, a South African patent, and also as an ARIPO regional patent, an OAPI regional
patent (covering Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Republic of Congo, Cote d’Ivoire, Equatorial
Guinea, Gabon, Guinea, Guinea Bissau, Mali, Mauritania, Niger, Senegal, and Togo). It has also issued as a granted patent in New
Zealand, China, Mexico, Japan, Australia, Canada, several countries in Europe, Hong Kong, Indonesia, Israel, Korea, Malaysia,
Philippines, Pakistan, and Vietnam among others. Estimated expiry dates range nominally from 2026 to 2027, prior to accounting
for various extensions available in different regions and countries. Additional issuances are continuing in Europe, and in several
other countries around the world.
Another fundamental patent application
on the antivirals developed using the polymeric micelles has so far been issued, granted, and/or validated, with substantially
broad claims as well, as 9 different patents. The counterparts of the international PCT application PCT/US2007/001607 have issued
as a granted patent in ARIPO, Australia, China, Japan, Mexico, New Zealand, OAPI, South Africa, and Korea 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. Further patent prosecution
in several other regions and countries is continuing.
A total of at least, 61 patents have been
issued globally, on the basis of the two international PCT patent families that cover the fundamental aspects of the platform
technology we license from TheraCour. Additional patent grants are expected to continue as the applications progress through prosecution
processes. All of the resulting patents have substantially broad claims.
These patents have nominal expiry dates
in 2026 to 2029. The dates can be further extended in several countries and regions for the additional allowances due to the regulatory
burden of drug development processes, or other local considerations, such as licensing to a local majority held company. Many
countries allow up to five years extension for regulatory delays.
No patent applications have been filed
for the actual drug candidates that we intend to develop as drugs as of now. We intend to file the patent application for HerpeCide
before entering human clinical trials. The estimated expiry date for the HerpeCide patents, if and when issued, would be no earlier
than 2039-2040.
Of the patents and technologies licensed,
the Company believes that it will not be using the intellectual property, compositions of matter, or other aspects described and
secured under the US Patent No. US 6,521,736. The Company believes that this patent describes an inferior technology compared
to the technology in the later patent filings of Dr. Diwan. This patent, the Company believes, discloses prototype materials that
served to establish the proof of principles developed by Dr. Anil Diwan, the Company’s President and co-founder, whether
such materials were possible to create and whether such materials would indeed be capable of encapsulation of pharmaceutically
relevant compounds. The Company believes that the new and novel compositions disclosed in the new patent applications, No. PCT/US06/01820,
and No. PCT/US2007/001607, and additional proprietary intellectual property provide the necessary features that enable the development
of nanoviricides. The Company believes that no other published literature materials or existing patents are capable of providing
all of the necessary features for this development, to the best of our knowledge. However, the Company has no knowledge of the
extensive active internal developments at a number of companies in the targeted therapeutics area.
TheraCour may obtain patents for the compounds
many years before we obtain marketing approval for them. Because patents have a limited life, which may begin to run prior to
the commercial sale of the related product, the commercial value of the patent may be limited. However, we may be able to apply
for patent term extensions, based on delays experienced in marketing products due to regulatory requirements. There is no assurance
we would be able to obtain such extensions. The Company controls the research and work TheraCour performs on its behalf and no
costs may be incurred without the prior authorization or approval of the Company.
Patents relating to pharmaceutical, biopharmaceutical
and biotechnology products, compounds and processes such as those that cover our existing compounds, products and processes and
those that we will likely file in the future, do not always provide complete or adequate protection. Future litigation or reexamination
proceedings regarding the enforcement or validity of our licensor, TheraCour’s existing patents or any future patents, could
invalidate TheraCour’s patents or substantially reduce their protection. In addition, the pending patent applications and
patent applications filed by TheraCour, may not result in the issuance of any patents or may result in patents that do not provide
adequate protection. As a result, we may not be able to prevent third parties from developing the same compounds and products
that we have developed or are developing. In addition, certain countries do not permit enforcement of these patents, and manufacturers
are able to sell generic versions of our products in those countries.
We also rely on unpatented trade secrets
and improvements, unpatented internal know-how and technological innovation. In particular, a great deal of our material manufacturing
expertise, which is a key component of our core material technology, is not covered by patents but is instead protected as a trade
secret. We protect these rights mainly through confidentiality agreements with our corporate partners, employees, consultants
and vendors. These agreements provide that all confidential information developed or made known to an individual during the course
of their relationship with us will be kept confidential and will not be used or disclosed to third parties except in specified
circumstances. In the case of employees, the agreements provide that all inventions made by the individual while employed by us
will be our exclusive property. We cannot be certain that these parties will comply with these confidentiality agreements, that
we have adequate remedies for any breach, or that our trade secrets will not otherwise become known or be independently discovered
by our competitors.
Trademarks
The Company currently has no registered
trademarks.
Presentations and Conferences
The Company continues its efforts at connecting
with additional investors and presenting in investor-oriented business conferences. Some of these are listed below.
Our collaborator, the Moffat group at
Upstate Medical Center, SUNY, Syracuse, NY, presented a poster entitled describing the effectiveness on nanoviricide candidates
against VZV virus in a human skin patch organ culture (“SOC”) model of shingles, at the 31st International Conference
on Antiviral Research held June 11 - June 15, 2018 in Porto, Portugal.
The Company presented a poster entitled
“Novel Nanoviricides® Highly Effective Against Varicella Zoster Virus in Cell Culture” at the 36th Annual Meeting
of the American Society of Virology (ASV) on June 26, 2017. The ASV Meeting was hosted and held at the University of Wisconsin-Madison,
from June 24th to 28th, 2017 (https://extensionconferencecenters.uwex.edu/asv2017/). Dr. Brian Friedrich, Senior Virologist
of the Company, presented the Company’s work on the evaluation of nanoviricides drug candidates for effectiveness against
the shingles virus (Varicella Zoster Virus, VZV, aka Human HerpesVirus-3 or HHV-3) in this poster.
The Company gave an oral presentation
on the “Effect of NanoViricide Anti-viral Agents in a Mouse Model of Acute Retinal Necrosis”, at the 51st
Annual Meeting of the Ocular Microbiology and Immunology Group (OMIG) held at the Astor Crowne Plaza Hotel in New Orleans, LA,
on November 10, 2017. Both tested nanoviricide candidates were effective in decreasing viral load by about 2 to 3 logs at day
3 and demonstrated significant positive clinical effects on controlling HSV-2 G infection in the mouse eye. The study was conducted
in Dr. Brandt Lab at the CORL, University of Wisconsin, Madison, WI.
Previously, on February 22, 2016, the
Company announced that information on its novel proprietary anti-virus platform technology has been published in the book “Handbook
of Clinical Nanomedicine, Vol. 1. Nanoparticles, Imaging, Therapy, and Clinical Applications”, a CRC Press publication.
The chapter entitled “Nanoviricides: Targeted Anti-Viral Nanomaterials” provides an in-depth presentation of the NanoViricides
platform technology, evidence for how nanoviricides® are believed to act plus dramatic results of nanoviricides specifically
targeting certain viral diseases, such as Influenza.
Glossary of Terms
Nano - When used as a prefix for
something other than a unit of measure, as in “nanoscience,” nano means relating to nanotechnology, or on a scale
of nanometers (one billionth of a meter or greater).
Viricide - An agent that reliably
deactivates or destroys a virus.
Nanoviricide ® – An agent
that is made by attaching ligands against a certain virus or family of viruses to a nanomicelle based on the Company’s patent-pending
and proprietary technologies.
Ligand - A short peptide or chemical
molecule fragment that has been designed to specifically recognize one particular type of virus.
Micelle - an aggregate of molecules
in a solution, such as those formed by detergents.
Nanomicelle - A term coined to
describe the micelles formed from the backbone polymer of a nanoviricide sans attached ligands.
Pendant polymeric micelles - A
polymeric micelle forms from a polymer whose chemical constitution is such that even a single chain of the polymer forms a micelle.
A pendant polymer is a polymer that has certain units in its backbone that extend short chains branched away from the backbone.
Pendant Polymeric Micelles therefore are polymeric micelle materials that are a class of pendant polymers, and naturally form
exceptionally well-defined, self-assembling, globular micelles with a core-shell architecture.
Mutations - The ability (of a virus)
to change its genetic structure to avoid the body’s natural defenses. Mutant viruses are created from a parent virus strain
through a process of natural selection under pressure as it replicates in a host.
Investigational New Drug Application
(Investigational New Drug (“IND”) - The process of licensure of a new drug in the US goes through several steps.
A simplified explanation of these steps is as follows. Initially a Company may file a pre-IND application to seek meetings with
the FDA for guidance on work needed for filing an IND application. The Company obtains data on the safety and effectiveness of
the drug substance in various laboratory studies including cell cultures and animal models. The Company also obtains data on chemical
manufacturing of the drug substance. These and certain additional data are used to create an IND that the Company files with the
FDA. After the FDA approves an IND application, the Company may conduct human clinical studies. A Phase 1 human clinical trial
is designed typically to evaluate safety of the drug and maximum permissible dosage level. A Phase 2 human clinical trial that
follows is designed to evaluate effectiveness of the drug against the disease in a small cohort of patients. A Phase 3 human clinical
trial thereafter is designed to evaluate effectiveness and safety in larger groups of patients, often at multiple sites. The Company
may then submit an NDA (New Drug Application) with the data collected in the clinical trials. The FDA may approve the NDA. Once
the NDA is approved, the Company can sell the drug in the USA. European countries have similar processes under the European Medicines
Agency (EMA). Other countries have similar processes.
Drug Development Plan
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. (“TheraCour”), the exclusive source for these nanomaterials. With
sourcing of materials from TheraCour, the Company prefers to manufacture these drugs in our own facility. However, the Company
may manufacture these drugs 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. The Company has received significant interest from certain pharmaceutical
companies for potential licensing or co-development of some of our drug candidates. However, none of these distributor or co-development
agreements is in place at the current time.
Manufacturing
Manufacturing of Research Materials
Nanomaterials that form the basis of our
nanoviricide drugs are produced for research by TheraCour at our facilities in Shelton, Connecticut, under our licensing agreements
with TheraCour.
Manufacturing of Drugs
The Company intends to manufacture Dermal
Topical anti-HSV-1, anti-HSV-2, and anti-VZV drug candidates and drugs, as well as anti-HSV Eye Drops/Gels, Injectable and Oral
FluCide, HIVCide, DengueCide, RabiCide as well as other drugs for pre-clinical animal studies and human clinical studies, in facilities
owned by the Company, through human clinical trials of each of the clinical drug candidates. Our cGMP-capable manufacturing facility
in Shelton, CT has sufficient capacity for supply of the pre-clinical and clinical batches needed for all of our drug candidates
as and when they are anticipated to be needed. The Company may go to a cGMP third party provider for the final fill-and-finish
of the clinical drug products if necessary.
With recent successes in production scale-up,
the Company believes that it now has sufficient capacity at the Shelton cGMP-capable manufacturing facility to enable market-entry
of our first drugs upon approval, potentially enabling the Company to build itself into a fully integrated pharmaceutical company
("FIPCO"), which could provide substantial shareholder value. We note as a risk factor that there is no guarantee that
the Company can take its drug candidates successfully through clinical trials, and if it does, that it can obtain marketing approval,
and if it does, that it can market the drugs successfully. For our future commercial products, we will need to develop additional
manufacturing capabilities and establish additional third-party suppliers to manufacture sufficient quantities of our product
candidates to undertake clinical trials and to manufacture sufficient quantities of any products that are approved for commercial
sale. If we are unable to develop manufacturing capabilities internally or contract for large scale manufacturing with third parties
on acceptable terms for our future antiviral products, our ability to conduct large-scale clinical trials and meet customer demand
for commercial products would be adversely affected.
We believe that the technology we use
to manufacture our products and compounds is proprietary. For our products, we may have to disclose all necessary aspects of this
technology to contract manufacturers to enable them to manufacture the products and compounds for us. We plan to have discussions
with manufacturers under non-disclosure and non-compete agreements that are intended to restrict them from using or revealing
this technology, but we cannot be certain that these manufacturers will comply with these restrictions. In addition, these manufacturers
could develop their own technology related to the work they perform for us that we may need to manufacture our products or compounds.
We could be required to enter into an agreement with that manufacturer if we wanted to use that technology ourselves or allow
another manufacturer to use that technology. The manufacturer could refuse to allow us to use their technology or could demand
terms to use their technology that are not acceptable.
We believe that we are in compliance with
all material environmental regulations related to the manufacture of our products.
Competition
Our products in development target a number
of diseases and conditions that include several different kinds of viral infections. There are many commercially available products
for many of these diseases and a large number of companies and institutions are spending considerable amounts of money and other
resources to develop additional products to treat these diseases. Most of these companies have substantially greater financial
and other resources, larger research and development staffs, and extensive marketing and manufacturing organizations. When and
if we are able to successfully develop products, they would compete with existing products based primarily on:
|
|
·
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insurance and other reimbursement coverage;
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|
|
·
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adaptability to various modes of dosing.
|
There are several drugs in the market
that effectively control HSV cold sores and genital herpes lesions in most patients. These include the nucleoside analogues idoxuridine,
vidarabine, acyclovir, famciclovir, ganciclovir, and derivatives. However, their efficacy is limited or toxicities are high. Brincidofovir,
based on the toxic drug cidofovir, is in development by Chimerix, but certain clinical trials involving brincidofovir have failed
to meet the desired end points. Foscarnet is also used for VZV and ARN, but its toxicity is high. FV-100 was in clinical development
against VZV, but these clinical developments appear to have been abandoned. In addition, pritelivir, antibodies, and some other
drugs are in advanced stages of development against HSV-1 or HSV-2. A gamma globulin was recently approved.
The prevalence of herpes simplex virus
type 1 (HSV-1) and HSV-2 in the United States is 47.8% and 11.9%, respectively, for individuals aged 14 to 49 years, and increases
with age, in the USA, according to CDC. HSV-2 causes a more severe disease that also has significant social costs to the patient.
In spite of the existing drugs, both HSV-1 and HSV-2 cause lifelong infection that continues to reactivate at different rates
in different patients. Thus, in spite of several existing drugs that are already generic, the market size for a highly effective
drug is estimated to be in tens of billions of dollars for each of HSV-1 and HSV-2 treatments.
There are currently no approved drugs
for the treatment of diseases caused by VZV, namely, shingles, PHN, and chickenpox. Valcyclovir or other acyclovir-class drugs
are often prescribed orally but have little effect on shingles. Cidofovir is used in extreme cases of shingles, but it is highly
toxic, limiting benefit of the drug, limiting drug dosage and causing significant side effects. Several pain relievers are being
developed to treat shingles pain and also the PHN pain. Thus, a safe and effective treatment against VZV is an unmet medical need.
There are currently no approved drugs
for the treatment of viral diseases of the external eye.
The current approved drugs for influenza
include the neuraminidase inhibitors Tamiflu, Relenza, and Peramivir, anti-influenza drugs that are sold by Roche, Glaxo SmithKline
(GSK), and BioCryst partners, respectively. In addition, M2 channel inhibitors, generic drugs include amantadine and rimantadine,
both oral tablets that only inhibit the replication of the influenza A virus. There is significant viral resistance to the approved
M2 channel inhibitors especially in the US. Several companies are developing anti-influenza drugs at present. Small chemical classes
include neuraminidase inhibitors, M2-channel inhibitors, and RDRP inhibitors, among others. There are also monoclonal, polyclonal,
and mixed antibodies, as well as enzymes as drugs in development. Xofluza, developed by Shionogi Pharma (Japan) is approved in
Japan and recently in the USA, licensed by Roche/Genentech. It is an influenza endonuclease inhibitor. It appears to be substantially
more effective than existing drugs in reducing viral load and viral shedding, but did not have any effect on the length of the
influenza disease course.
There are a growing number of anti-HIV
drugs being sold or in advanced stages of clinical development. Companies with HCV and HIV products include Gilead, Bristol-Myers
Squibb Company (BMS), Roche, Boehringer Ingelheim, Merck & Co., Inc. (Merck), in addition to several other pharmaceutical
and biotechnology firms.
Currently there are two accepted methods
of rabies prophylaxis: rabies vaccines and rabies immune globulin, manufactured by many foreign and multinational manufacturers
including Aventis Pasteur and Chiron (acquired by Novartis). These accepted methods would be the standard against which our new
anti-rabies drug in development will be judged.
In order to compete successfully, we must
develop proprietary positions in patented drugs for therapeutic markets. Our products, even if successfully tested and developed,
may not be adopted by physicians over other products and may not offer economically feasible alternatives to other therapies.
Government Regulation
Our operations and activities are subject
to extensive regulation by numerous government authorities in the United States and other countries. In the United States, drugs
are subject to rigorous regulation by the United States Food and Drug Administration (“FDA”). The Federal Food, Drug
and Cosmetic Act and other federal and state statutes and regulations govern the testing, manufacture, safety, effectiveness,
labeling, storage, record keeping, approval, advertising and promotion of our products. As a result of these regulations, product
development and the product approval process is very expensive and time consuming.
Regulation by governmental authorities
in the United States and other countries is a significant factor in our research and development and will be a significant factor
in the manufacture and marketing of our proposed products. The nature and extent to which such regulation applies to us will vary
depending on the nature of any products we may develop. Governmental authorities, including the FDA and comparable regulatory
authorities in other countries, regulate the design, development, testing, manufacturing, safety, efficacy, labeling, storage,
record-keeping, advertising, promotion and marketing of pharmaceutical products, including drugs and biologics, under the Federal
Food, Drug, and Cosmetic Act, or FFDCA, and its implementing regulations, and, for biologics, under the Public Health Service
Act, or PHSA, and its implementing regulations. Non-compliance with applicable requirements can result in fines and other judicially
imposed sanctions, including product seizures, import restrictions, injunctive actions and criminal prosecutions of both companies
and individuals. In addition, administrative remedies can involve requests to recall violative products; the refusal of the government
to enter into supply contracts; or the refusal to approve pending product approval applications until manufacturing or other alleged
deficiencies are brought into compliance. The FDA also has the authority to cause the withdrawal of approval of a marketed product
or to impose labeling restrictions. The process of obtaining approvals and the subsequent compliance with appropriate statutes
and regulations require the expenditure of substantial time and money, and there can be no guarantee that approvals will be granted.
FDA Approval Process
The FDA must “license” a drug
before it can be sold in the United States. Other countries have similar regulatory processes, and most are being harmonized under
the ICH guidelines. As of the date of this filing, the FDA has approved other nano-particulate drugs including Emend® by Merck
and Rapamune® by Wyeth, as well as others. The general process for FDA approval is as follows:
Preclinical Testing
The process required by the FDA before
a drug or biological product may be marketed in the United States generally involves the following:
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Completion
of preclinical testing of new pharmaceutical or biological products, generally conducted
in the laboratory and in animal studies in accordance with GLP standard, and applicable
requirements for the humane use of laboratory animals or other applicable regulations
to evaluate the potential efficacy and safety of the product candidate;
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Submission of the results of these studies to the FDA as part
of an Investigational New Drug application, which must become effective before clinical testing in humans can begin;
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Manufacturing of investigational medicine under cGMP standard;
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Performance of adequate and well-controlled human clinical trials
according to GCPs and any additional requirements for the protection of human research patients and their health information,
to establish the safety and efficacy of the product candidate for its intended use;
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Submission to the FDA of a new drug application, or NDA, for
any new chemical entity drug we seek to market that includes substantive evidence of safety, purity, and potency, or safety
and effectiveness from results of nonclinical testing and clinical trials;
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Satisfactory completion of an FDA inspection of the manufacturing
facility or facilities where the product is produced, packaged and distributed, to assess compliance with cGMPs, to assure
that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity;
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Potential FDA audit of the nonclinical study and clinical trial
sites that generated the data in support of the NDA; and
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FDA review and approval of the NDA.
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Clinical Trials
If the FDA accepts the investigational
new drug application, we study the drug in human clinical trials to determine if the drug is safe and effective. These clinical
trials involve a time-consuming and costly three-phase process that often overlap, can take many years to compile and are very
expensive. These three phases, which are themselves subject to considerable regulation, are as follows:
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Phase 1. The drug is given to a small number of healthy human
subjects or patients to test for safety, dose tolerance, pharmacokinetics, metabolism, distribution and excretion.
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Phase 2. The drug is given to a limited patient population to
determine the effect of the drug in treating the disease, the best dose of the drug, and the possible side effects and safety
risks of the drug.
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Phase 3. If a compound appears to be effective and safe in Phase
2 clinical trials, Phase 3 clinical trials are commenced to confirm those results. Phase 3 clinical trials are long-term,
involve a significantly larger population, are conducted at numerous sites in different geographic regions and are carefully
designed to provide reliable and conclusive data regarding the safety and benefits of a drug. It is not uncommon for a drug
that appears promising in Phase 2 clinical trials to fail in the more rigorous and reliable Phase 3 clinical trials.
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If we believe that the data from the Phase
3 clinical trials show an adequate level of safety and effectiveness, we will file a new drug application (NDA) with the FDA seeking
approval to sell the drug for a particular use. The FDA will review the NDA and often will hold a public hearing where an independent
advisory committee of expert advisors asks additional questions regarding the drug. This committee makes a recommendation to the
FDA that is not binding on the FDA but is generally followed. If the FDA agrees that the compound has met the required level of
safety and effectiveness for a particular use, it will allow us to sell the drug in the United States for that use. It is not
unusual, however, for the FDA to reject an application because it believes that the drug is not safe enough or effective enough
or because it does not believe that the data submitted is reliable or conclusive.
At any point in this process, the development
of a drug could be stopped for a number of reasons including safety concerns and lack of treatment benefit. We cannot be certain
that any clinical trials that we are currently conducting or any that we conduct in the future, will be completed successfully
or within any specified time period. We may choose, or the FDA may require us, to delay or suspend our clinical trials at any
time if it appears that the patients are being exposed to an unacceptable health risk or if the drug candidate does not appear
to have sufficient treatment benefit.
The FDA may also require us to complete
additional testing, provide additional data or information, improve our manufacturing processes, procedures or facilities or may
require extensive post-marketing testing and surveillance to monitor the safety or benefits of our product candidates if it determines
that our new drug application does not contain adequate evidence of the safety and benefits of the drug. In addition, even if
the FDA approves a drug, it could limit the uses of the drug. The FDA can withdraw approvals if it does not believe that we are
complying with regulatory standards or if problems are uncovered or occur after approval.
United States Review and Approval Process
After the completion of clinical trials
of a product candidate, FDA approval of a NDA must be obtained before commercial marketing of the product. The NDA must include
results of product development, laboratory and animal studies, human trials, information on the manufacture and composition of
the product, proposed labeling and other relevant information as well as a significant user fee. The FDA may grant deferrals for
submission of data, or full or partial waivers. The testing and approval processes require substantial time and effort and there
can be no assurance that the FDA will accept the NDA for filing and, even if filed, that any approval will be granted on a timely
basis, if at all.
The FDA may refuse to file any NDA that
it deems incomplete or not properly reviewable at the time of submission and may request additional information. Once the submission
is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is safe, potent,
and/or effective for its intended use, and has an acceptable purity profile, and whether the product is safe and effective for
its intended use, and in each case, whether the product is being manufactured in accordance with cGMP or GTP, if applicable. During
the product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary
to assure the safe use of the product. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS.
The FDA will not approve a NDA without a REMS, if required.
Notwithstanding the submission of relevant
data and information, the FDA may ultimately decide that the NDA does not satisfy its regulatory criteria for approval and deny
approval via a letter detailing such deficiencies. Data obtained from clinical trials are not always conclusive and the FDA may
interpret data differently than we interpret the same data. If the FDA denies an application, the applicant may either resubmit
the NDA, addressing all of the deficiencies identified by the FDA, or withdraw the application.
Expedited FDA Review Programs
The FDA has four program designations
-Fast Track, Breakthrough Therapy, Accelerated Approval, and Priority Review - to facilitate and expedite development and review
of new drugs to address unmet medical needs in the treatment of serious or life-threatening conditions.
The Fast Track program that is intended
to expedite or facilitate the process for reviewing new drug products that treat a serious condition and fill an unmet medical
need. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied.
In Fast Track, the FDA may consider for “rolling review” of sections of the IND on a rolling basis before the complete
application is submitted. Once a drug receives Fast Track designation, early
and frequent communication between the FDA and a drug company is encouraged throughout the entire drug development and review
process. The frequency of communication assures that questions and issues are resolved quickly, often leading to earlier drug
approval and access by patients.
The
FDA may also accelerate the approval of a designated drug through the Breakthrough Therapy designation by expediting
the development and review of drugs that are intended to treat a serious condition and preliminary clinical evidence indicates
that the drug may demonstrate substantial improvement over available therapy on one or more clinically significant endpoints.
If the FDA designates a drug as a breakthrough therapy, the drug is eligible for all Fast Track designation features, intensive
guidance on an efficient drug development program, potentially beginning at Phase 1 and organizational commitment involving senior
managers regarding the development of the drug to ensure that the development program and the design of the clinical trials
is as efficient as practicable.
The Accelerated Approval designation allows
the FDA to approve a product based on an effect on a surrogate or intermediate endpoint that is reasonably likely to predict a
product’s clinical benefit and generally requires the manufacturer to conduct required post-approval confirmatory trials
to verify the clinical benefit.
The Priority Review designation means
that the FDA’s goal is to take action on the IND within six months, compared to ten months under standard review.
Fast Track designation, Priority Review,
Accelerated Approval and Breakthrough Therapy designations do not change the standards for approval but may expedite the development
or approval process.
Orphan Drug Designation
The
Orphan Drug Act provides granting special status to drugs or biological products for rare diseases and conditions affecting fewer
than 200,000 persons. The first developer to receive FDA marketing approval for an orphan drug is entitled to a seven-year exclusive
marketing period in the United States for that product where the FDA will not approve another version of the same product. However,
a drug that the FDA considers to be clinically superior to, or different from, another approved orphan drug, even though for the
same indication, may also obtain approval in the United States during the seven-year exclusive marketing period. In addition,
if the holder of the orphan drug designation cannot assure the availability of sufficient quantities of their orphan drugs to
meet the needs of patients, the FDA could also grant approval to another product.
United States Post-Approval Requirements
Any products for which we receive FDA
approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting
of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and
distribution requirements, and complying with FDA promotion and advertising requirements, which include, among others, standards
for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that are not described
in the product’s approved uses, known as off-label use, limitations on industry-sponsored scientific and educational activities
and requirements for promotional activities involving the internet.
In addition, quality control and manufacturing
procedures must continue to conform to applicable manufacturing requirements after approval to ensure the long-term stability
of the product. We rely, and expect to continue to rely, on third parties for the production of some, or all, clinical and commercial
quantities of our products in accordance with cGMP and GTP regulations, as applicable. Manufacturers and other entities involved
in the manufacture and distribution of approved products are required to register their establishments with the FDA and certain
state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP,
GTP and other laws.
The FDA also may require post-marketing
testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product. Discovery of previously unknown
problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse
publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications
with doctors, and civil or criminal penalties, among others. Also, new government requirements, including those resulting from
new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval
of our product candidates under development.
Foreign Regulatory Review and Approval
Whether or not FDA approval has been obtained,
approval of a product by comparable regulatory authorities in other countries will be necessary prior to commencement of marketing
the product in such countries. The regulatory authorities in each country may impose their own requirements and may refuse to
grant an approval, or may require additional data before granting it, even though the relevant product has been approved by the
FDA or another authority. As with the FDA, the regulatory authorities in the European Union, China and other developed countries
have lengthy approval processes for pharmaceutical products. The process for gaining approval in particular countries varies,
but generally follows a similar sequence to that described for FDA approval.
In the European Union, there is a centralized
approval procedure that authorizes marketing of a product in all countries in the European Union (which includes most major countries
in Europe). If this procedure is not used, under a decentralized system, an approval in one country of the European Union can
be used to obtain approval in another country of the European Union under a simplified application process at present. After approval
under the centralized procedure, pricing and reimbursement approvals are also required in most countries. These procedures are
undergoing revision and modification at present. We have never received approval for a product in the European Union to date.
Other Health Care Laws
In the event any of proposed products
are ever approved for marketing, we may also be subject to healthcare regulation and enforcement by the federal government and
the states and foreign governments where we may market our product candidates, if approved. These laws include, without limitation,
state and federal anti-kickback, fraud and abuse, false claims, physician sunshine and privacy and security laws and regulations.
In addition to obtaining FDA approval
for each drug, we obtain FDA approval of the manufacturing facilities for any drug we sell, including those of companies who manufacture
our drugs for us as well as our own and these facilities are subject to periodic inspections by the FDA. The FDA must also approve
foreign establishments that manufacture products to be sold in the United States and these facilities are subject to periodic
regulatory inspection.
We are also subject to other federal,
state and local regulations regarding workplace safety and protection of the environment. We use hazardous materials, chemicals,
viruses and various radioactive compounds in our research and development activities and cannot eliminate the risk of accidental
contamination or injury from these materials. Any misuse or accidents involving these materials could lead to significant litigation,
fines and penalties.
A Note on US FDA Priority Review Vouchers
The Food and Drug Administration Amendments
Act of September 2007 authorizes the FDA to award a priority review voucher to any company that the FDA has determined is eligible
for priority approval process for a treatment for a neglected tropical disease. The priority review voucher can be traded to another
company in a manner similar to carbon (emissions) credit vouchers. The recipient company can save as much as six months on their
drug review process, and it is anticipated that they would be willing to trade in vouchers with cash benefits to the company developing
drugs against neglected tropical diseases. The regulation became effective as of September 30, 2008.
Economists at Duke University, who proposed
the voucher concept in 2006, have calculated that reduction of the FDA approval time from 18 to six months could be worth more
than $300 million to a company with a top-selling drug with a net present value close to $3 billion. At this level, the voucher
would be expected to offset the substantial investment and risk required for discovery and development of a new treatment for
a neglected tropical disease. (David B. Ridley, Henry G. Grabowski and Jeffrey L. Moe, “Developing Drugs For Developing
Countries”, Health Affairs, 25, no. 2 (2006): 313-324; doi: 10.1377/hlthaff.25.2.313; © 2006 by Project Hope. and (
http://blogs.cgdev.org/globalhealth/2007/10/fda_priority_review.php ). Some of the PRVs have been “sold” for
as much as $250M or so recently.
While there is no indication whether NanoViricides,
Inc. can obtain priority review vouchers for its drugs against neglected tropical diseases, the high efficacies of our drug candidates
lead us to believe that this may be possible. FDA awards priority review status on the basis of several criteria. NanoViricides,
Inc. is currently working on several neglected tropical diseases, including Dengue fever viruses, rabies, Ebola/Marburg viruses,
among others. Of these, Dengue viruses are explicitly included in the list under this Public Law, and the remaining viruses are
eligible for similar treatment according to the language in the Public Law, at the discretion of the Secretary of Health (Food
and Drug Administration Amendments Act of 2007, P.L. 110–85, Sept. 27, 2007, http://www.fda.gov/oc/initiatives/fdaaa/PL110-85.pdf
). The Zika virus was added to this list recently.
Time Schedules, Milestones and Development
Costs
In the ensuing fiscal year, we hope to
meet several important milestones towards establishing human proof-of-concept for the nanoviricides platform:
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Finalize
human clinical trials designs for Phase 1 and Phase 2 trials for NV-HHV-101 for topical
treatment of shingles rash.
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Engage a contract Clinical Research Organization for conducting
the human clinical trials.
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Complete the IND-enabling studies and prepare appropriate reports.
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Complete manufacture of cGMP-compliant drug substance and drug
products in quantities sufficient for anticipated human clinical trials as designed.
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Submit an IND-application to the US FDA, or an appropriate international
regulatory agency.
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Initiate and conduct Phase I human clinical trials, to determine
safety and tolerability of NV-HHV-101 in human subjects.
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If possible, initiate Phase 2 human clinical trials to determine
effectiveness of NV-HHV-101 in controlling shingles rash and to study the effectiveness of NV-HHV-101 regarding shingles pain.
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All of these studies are dependent on
external collaborators providing available time slots for us. Thus, there can be delays in achieving the milestones that are beyond
the Company's control.
Management is actively exploring additional
required funding through debt or equity financing pursuant to its plan. There is no assurance that the Company will be successful
in obtaining sufficient financing on terms acceptable to the Company to fund continuing operations. Management believes that as
a result of the management plan, the Company’s existing resources and access to the capital markets will permit the
Company to fund planned operations and expenditures. However, the Company cannot provide assurance that its plans will not change
or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently anticipates.
We have estimated approximately $500,000 for initiation of Phase 1 clinical trials. The total cost of Phase 1 and Phase 2a trials
will be significantly more. We will need to raise additional funds so that we do not run out of money, and to support continued
program development through Phase 2 studies at least and revenue realization.
In addition to the shingles program milestones
listed above, we will continue to advance the HSV-1 and HSV-2 skin cream drug candidates towards IND-enabling studies. Additional
HerpeCide drug indications (See Table above) will be advanced as opportunities become available, depending upon available resources
(fiscal and manpower), we plan on continuing the work in the FluCide program albeit at a slow rate, with a view towards obtaining
a drug development partnership or other external sources of funding for this program. We plan on continuing internal development
of the HIVCide program at a slow rate. Other programs are currently heavily deprioritized and will be further developed if appropriate
opportunities present themselves.
Drug Development Status
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.
The work-plan we have developed for the
next twelve months is expected to enable us to file an investigational new drug application (IND) late in fiscal year 2019 possibly
around last quarter of calendar year 2019, given our dependence on external collaborators for the studies and study reports. Management
is actively exploring additional required funding through debt or equity financing pursuant to its plan. There is no assurance
that the Company will be successful in obtaining sufficient financing on terms acceptable to the Company to fund continuing operations.
Management believes that as a result of the management plan, the Company’s existing resources and access to the capital
markets will permit the Company to fund planned operations and expenditures. However, the Company cannot provide assurance that
its plans will not change or that changed circumstances will not result in the depletion of its capital resources more rapidly
than it currently anticipates. We will therefore need to raise capital. Our work-plan is extremely dependent on external factors,
collaborations, and unanticipated delays can occur. We have, in the past, experienced unanticipated delays in construction, post-construction
modifications, and equipment set-up at our new Shelton facility that cumulatively effectively delayed our work-plan towards IND
filing of our first drug candidate by more than 24 months. We are now experiencing extreme staffing constraints as well as financing
constraints. We note as a risk factor that these resource constraints may cause further delays in our estimated timelines, unless
we are successful at raising additional funds and at attracting and retaining highly skilled employees with specific skill-sets.
We have taken on the most important risk
in nanomedicines, that of enabling cGMP manufacture, with consistent product from batch to batch, "head on" so to speak.
Having established critical quality parameters in our manufacturing processes ahead of cGMP scale-up, we believe that we have
minimized the risk related to manufacturing capabilities.
During the scale up and optimization of
our production level operations, we continue to work on a number of different polymer backbones (“nanomicelles”) and
several antiviral ligands in order to make sure that different formulation and pharmacokinetic-pharmacodynamic (PK-PD) needs can
be met during the PK-PD programs for our various drug candidates. While this loads up our initial activities, it is expected to
minimize the risk for further drug development towards IND or regulatory filings by making available backup drug candidates with
different PK-PD profiles.
This work-plan is expected to reduce certain
risks 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 our VZV clinical drug candidate in animal models in IND-enabling GLP Safety/Toxicology studies that
are in progress and have so far been successful. We believe these data will enable us to file an Investigational New Drug (“IND”)
application. We believe that in the coming fiscal year we will be able to perform Phase 1 human clinical trials and obtain valuable
information on the safety and tolerability of our VZV clinical drug candidate in humans, towards the goal of performing Phase
2 efficacy human clinical trials. If our studies are not successful, we will have to develop additional drug candidates and perform
further studies, or further advance our other programs, for example HSV-1 or HSV-2 drug candidates, into human clinical trials.
If our studies are successful, we would be more confident in further developing our HerpeCide as well as other program drug candidates
and may be in a position to re-engage our highly valuable drug programs including HIVCide and FluCide.
We believe that coming year's work plan
will establish our entire nanoviricides nanomedicines platform as a viable platform technology for developing highly safe and
effective antiviral drugs. We believe that this should be a value inflection point.
Management intends to use equity-based
and debt financing, as required, to fund the Company’s operations and to raise additional capital for conducting human clinical
trials as we advance our pipeline towards IND stage. 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 financial resources necessary to fund its anticipated obligations over the next year.
The Company is considered to be a development
stage company and will continue in the development stage until generating revenues from the sales of its products or services.
Our Collaborations and Service Contract
Agreements
Our development model is to employ collaborations
and service contract relationships with renowned academic labs, government labs, as well as service contracts with external service
providers in order to minimize our capital requirements.
All of our agreements provide for the
evaluation of Nanoviricides® substances created and provided by the Company to the Laboratory (or Collaborator). In general,
the Laboratory is compensated for certain material and personnel costs for these evaluations. The evaluations involve in vitro
and in vivo scientific studies at the Laboratory using their established protocols. In some cases, the Company provides scientific
input regarding certain modifications to their protocols as may be needed. The Laboratory returns the results and data to the
Company. The Laboratory is allowed to publish the results after allowing time for the Company to protect intellectual property
(IP) as needed. The Company sends nanoviricides as well as positive control (i.e. known therapeutics) and negative control (i.e.
known not to work) compounds as needed in a fully formulated, ready to use form, to the Laboratory. All IP related to the nanoviricide
materials, their formulations and reformulations, and their usage, rests with the Company. Any IP developed by the Laboratory
regarding their own know-how, such as laboratory tests and protocols, their modifications, etc. rests with the Laboratory. Joint
inventions are treated as per applicable US Laws.
The Company tries to choose the scientific
laboratories with the most appropriate facilities and know-how relating to a particular field for the evaluation of an antiviral
agent developed by the Company. The Company also tries to work with more than one laboratory for the evaluation of an antiviral
agent developed by the Company. The Company also tries to work with more than one laboratory for a given group of viruses whenever
possible. We seek to improve confidence by obtaining independent datasets for corroboration of the efficacy and safety of the
nanoviricides we develop. In addition, the Company tries to minimize dependence on a particular Laboratory for the development
of any specific drug candidate in our product pipeline.
To date, the Company has engaged in non-GLP
Efficacy and Safety evaluations in both in vitro (cell culture models) and in vivo (animal models) of our different nanoviricides®
research materials and drug candidates at different laboratories.
Our current relationships are summarized
below:
For Herpes Virus Infections, Shingles,
and for Viral Diseases of the Eye (Adenoviruses, Herpesviruses - Epidemic Kerato-conjunctivitis (EKC), Herpes Keratitis, viral
Acute Retinal Necrosis (vARN)):
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The Moffat Lab at SUNY Upstate Medical Center, Syracuse,
NY.
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The CORL at the University of Wisconsin, Madison, WI
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For IND-enabling non-GLP and cGLP Safety/Toxicology
Studies:
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AR Biosystems, Inc., Odessa, FL (non-GLP studies)
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Bio-Analytical Services, Inc., MI, (“BASi”) –
IND-Enabling non-GLP and GLP “Tox Package” studies
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For Regulatory Pathway and Business Development:
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Biologics Consulting Group (BCG), Alexandria, Virginia
(FDA regulatory pathway)
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Bio-Ensemble, LLC, NJ (Business Development)
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Regulatory Consulting and Advisory
Agreement with Biologics Consulting Group, VA (BCG).
In July 2011 we signed an agreement with
Biologics Consulting Group to help us with our regulatory strategy and filings. Several of the members of the BCG faculty had
experience working as part of the US FDA. BCG helps us with the US FDA regulatory pathway strategies, applications processes,
and with the development of applications as well as drug development program strategies, as needed.
Safety/Toxicology Studies Agreement
with Bio-Analytical Services, Inc. (BASi), MI
In September 2014, we signed an agreement
with BASi. BASi is a pre-clinical contract services organization that specializes in cGLP and GLP-like safety and toxicological
testing of drug candidates and preparation of the “Tox Package” section of an IND application. BASi performed a GLP-like
preliminary safety and toxicology study in which there were no significant compound related adverse events found. Our safety and
toxicology studies for FluCide are being conducted by BASi for submission with an IND application. BASi will also perform the
safety toxicology studies for the anti-herpes nanoviricide drug candidates in our HerpeCide program. We have signed a Master
Services Agreement with Bio-Analytical Services, Inc., MI, (“BASi”) to perform cGLP and GLP-like safety and toxicological
studies that are necessary for filing an IND for each of our drugs.
AR Biosystems, Inc., Odessa, FL
We do not have a Master Services Agreement
with AR Bio. From time to time, we discuss certain non-GLP studies, and if suitable, engage this CRO as needed.
VZV (HHV-3) Nanoviricides Efficacy
Evaluation Agreement with the Moffat Lab at the SUNY Upstate Medical Center, Syracuse, NY.
In October 2016, we entered into an agreement
with SUNY Upstate Medical University for the testing of its nanoviricides® drug candidates against varicella zoster virus,
i.e. the shingles virus. The research will be performed in the laboratory of Dr. Jennifer Moffat and will include in vitro,
ex vivo and possibly in vivo studies. Dr. Moffat has extensive experience in varicella zoster virus (VZV) infection
and antiviral agent discovery. The goal of these studies is to help select a clinical drug development candidate for toxicology
and safety evaluation intended for clinical trials for the treatment of shingles in humans.
VZV is restricted to human tissue and
only infects and replicates in human tissue. The in vitro studies will evaluate the effectiveness of the Company’s
nanoviricides antiviral agents against VZV infection of certain human cells in culture.
The ex vivo studies will evaluate
the efficacy of the Company’s nanoviricides to inhibit VZV in human skin organ cultures. Dr. Moffat has developed the human
skin organ culture VZV infection model for the evaluation of therapeutics. This model is a good representative model of natural
VZV infection in humans as well as an important model for evaluating antiviral activity, because it demonstrates behavior similar
to the skin lesions caused by VZV in human patients.
Dr. Moffat is an internationally recognized
expert on varicella zoster virus, and her research has focused on the pathogenesis and treatment of infection by this virus. The
National Institutes of Health has recognized this VZV model via a contract with Dr. Moffat’s lab for evaluating antiviral
compounds against VZV. Dr. Moffat is the director of two research core facilities at SUNY Upstate: the Center for Humanized Mouse
Models and In vivo Imaging.
The Company has established a direct relationship
with the Moffat lab, without NIH as an intermediary.
On July 10, 2017, the Company announced
the results of successful initial testing of our anti-herpes drug candidates in the ex vivo human skin patch organ culture
(“SOC”) model performed by Dr. Moffat.
The anti-shingles nanoviricides® drug
candidates achieved dramatic reduction in infection of human skin by the varicella-zoster virus (VZV), the shingles virus in this
study. These findings corroborate the previously reported findings of inhibition of VZV infection of human cells in culture. The
antiviral effect of certain nanoviricide drug candidates was substantially greater than the effect of the standard positive control
of cidofovir added into media. Even more remarkably, the effect of these nanoviricides drug candidates was equivalent to a topical
formulation of 1% cidofovir applied directly onto the skin patch. A topical skin cream containing 2% cidofovir is clinically used
in very severe cases of shingles. However, the cytotoxicity of cidofovir is known to cause ulceration of the skin to which it
is applied, followed by natural wound healing.
We have continued our work with the Moffat
Lab, initially for optimization of the drug candidates and chemistries, and recently, driving towards clinical drug candidate
selection.
With these results that corroborate findings
in cell culture studies in both our lab and Dr. Moffat’s Lab, we believe that the anti-shingles topical drug candidate is
worthy of advancing into further IND-enabling pre-clinical development i.e. safety/toxicology studies.
We believe that the VZV drug candidate
program is now our most advanced program to advance into Safety/Toxicology studies that are needed for an IND filing and human
clinical trials. However, at present, we do not have a license from TheraCour to develop and commercialize drugs against VZV License
negotiations are now in progress.
HSV-1 and HSV-2 Nanoviricides Efficacy
Evaluation Agreement with the Collaborative Ophthalmic Research Laboratories (CORL) at the University of Wisconsin, Madison, WI.
In January 2016, we signed an agreement
with CORL. Under this agreement, CORL will perform evaluation of efficacy of our nanoviricides drug candidates in cell culture
assays as well as in small animal studies towards the goal of filing an IND application for ocular Herpes Keratitis, and possibly
for Recurrent Herpes Labialis (RHL, “cold sores”).
This agreement has been extended to include
drug and research material efficacy evaluation studies in animal models of viral Acute Retinal Necrosis (vARN), and in animal
models of HSV-2 genital ulcer. The studies will be performed in the laboratory of Dr. Curtis Brandt, an expert in herpes simplex
virus infections and in evaluating anti-viral agents.
Research and Development Agreement
with Professor Ken Rosenthal’s laboratory at the Northeastern Ohio Medical University (NEOMED, formerly called NEOUCOM)
On May 13, 2010, the Company announced
that it had signed a research and development agreement with Professor Ken Rosenthal’s laboratory at the Northeastern Ohio
Medical University (NEOMED). Pursuant to the terms of this Agreement, Professor Rosenthal and NEOMED evaluated the effectiveness
of nanoviricides drug candidates against Herpes Simplex Viruses, HSV-1 and HSV-2, in both cell culture and animal models. The
focus of this evaluation was the development of drug candidates against herpes skin infections (oral and genital herpes). Dr.
Ken Rosenthal is a professor of microbiology, immunology and biochemistry at NEOMED. He is a leading researcher in the field of
herpes viruses. His laboratory has developed an improved mouse model of skin-infection with HSV to follow the disease progression.
This model has been shown to provide highly uniform and reproducible results. A uniform disease pattern including onset of lesions
and further progression to zosteriform lesions is observed in all animals in this model.
On August 16, 2010, the Company reported
that its anti-Herpes drug candidates demonstrated significant efficacy in the recently completed cell culture studies in Dr. Rosenthal
Lab at NEOMED. Several of the anti-Herpes nanoviricides® demonstrated a dose-dependent maximal inhibition of Herpes
virus infectivity in a cell culture model. Almost complete inhibition of the virus production was observed at clinically usable
concentrations. 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. The H129
strain will be used in subsequent animal testing of nanoviricides. Since then the Company was optimizing formulations for use
in the dermal HSV-1 H129c infection animal model in the Rosenthal lab. The Company also continued to further optimize the anti-herpes
nanoviricides. Our herpes program was run at a lower priority than other programs until recently. In April 2015, after only 4
cycles of SAR (Structure-Activity-Relationship based improvements), our anti-herpes nanoviricides demonstrated strong effectiveness
in the lethal HSV-1 H129c dermal infection model in the Rosenthal Lab at NEOMED. Treatment with certain nanoviricides caused significant
improvements in the clinical observations and led to >85% survival of the infected animals, wherein 100% of the untreated animals
died within 10 days. In August 2015, the Company reported that these results were reproduced in dermal animal model at Transpharm,
with 100% of the nanoviricides treated animals surviving.
Professor Rosenthal retired in December
2014, continued his laboratory and our R&D through April 2015, and has closed the lab thereafter. He is now Professor at Roseman
University of Health Sciences College of Medicine, NV. He continues as Professor Emeritus at Northeast Ohio Medical University
(NEOMED). However, his laboratory is no longer active.
The HSV-1 topical treatment drug candidates
in the HerpeCide program have thus advanced to the lead identification stage. This program is now assigned second priority, following
the top priority of the VZV program, primarily because the regulatory development of anti-VZV drug candidate was projected to
occur much more rapidly than that of the anti-HSV-1 drug candidate.
Anti-Influenza Drug Development Agreement
with the Webster Lab at St Jude Children’s Hospital, Memphis, TN
In
May 2016, we signed a Sponsored Research Agreement with the Webster Lab at St. Jude Children’s
Hospital. Under this Agreement, the Webster Lab will evaluate nanoviricide drug candidates in cell culture studies against a large
number of Influenza viruses to optimize the efficacy and broad-spectrum for a clinical development candidate. Variations on the
previously selected ligand in NV-INF-1 will be performed if necessary when budgetary constraints allow.
The testing of these candidates for anti-influenza
activity will be performed in the laboratory of Dr. Elena Govorkova in collaboration with Dr. Robert G. Webster and will include
both in vitro and in vivo studies. They have extensive experience in influenza virus infections with a large number
of different influenza strains, and in anti-viral agents discovery. The overall objective of these studies will be to help select
clinical drug development candidates for the treatment of influenza virus in humans, using both the injectable and oral administration
routes. Injectable administration is preferable for hospitalized patients that are extremely sick, while oral administration is
preferred for outpatients.
The most optimal candidate will then be
evaluated against a wide variety of Influenza viruses in small animal efficacy studies with a goal of obtaining data for an IND
submission for Injectable FluCide drug candidate for severely ill hospitalized patients, and also for Oral FluCide drug candidate
for outpatients with Influenza.
The Influenza program has been relegated
to lower priority levels due to (a) our belief that the topical drug candidates in the HerpeCide program would reach the clinic
faster and would also have much more rapid clinical development pathway than FluCide, (b) the rapid expansion in breadth of the
HerpeCide program pipeline that has occurred due to efficacy of closely related drug candidates against different viruses in the
Herpes family and against different indications, and (c) extreme resource constraints in terms of both available skilled manpower
and available financing for driving our programs.
Nevertheless, we believe that FluCide
has strong market potential, and therefore we are keeping this program active albeit with limited resource allocation, which has
slowed down the program significantly.
Significant Alliances and Related
Parties
TheraCour Pharma, Inc.
Pursuant to an Exclusive License Agreement
we entered into with TheraCour Pharma, Inc., (TheraCour), the Company was granted exclusive licenses for technologies developed
by TheraCour for the virus types: Human Immunodeficiency Virus (HIV/AIDS), Influenza including Asian Bird Flu Virus, Herpes Simplex
Virus (HSV-1 and HSV-2), Hepatitis C Virus (HCV), Hepatitis B Virus (HBV), and Rabies. The Company has entered into an Additional
License Agreement with TheraCour granting the Company the exclusive licenses for technologies developed by TheraCour for the additional
virus types for Dengue viruses, Japanese Encephalitis virus, West Nile Virus, Viruses causing viral Conjunctivitis (a disease
of the eye) and Ocular Herpes, and Ebola/Marburg viruses.
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 a specified portion
of certain direct costs as a Development Fee and such development fees shall be due and payable in periodic installments as billed;
(2) the greater of $2,000 or actual costs monthly, whichever is higher, for other general and administrative expenses incurred
by TheraCour on our behalf; (3) make royalty payments (calculated as a percentage of net sales of the licensed drugs) of 15% to
TheraCour; (4) TheraCour retains the exclusive right to develop and manufacture the licensed drugs. TheraCour will manufacture
the licensed drugs exclusively for NanoViricides, and unless such license is terminated, will not manufacture such product for
its own sake or for others; and (5) TheraCour may request and NanoViricides, Inc. will pay an advance payment (refundable) equal
to twice the amount of the previous month’s invoice to be applied as a prepayment towards expenses. TheraCour may terminate
the license upon a material breach by us as specified in the agreement. However, we may avoid such termination if within 90 days
of receipt of such termination notice we cure the breach.
Development costs and other costs charged
by TheraCour for the years ended June 30, 2019, 2018 and 2017 were $3,119,863, $3,176,977, and $3,368,919 respectively. At June
30, 2019, $823,783 was due to TheraCour.
No royalties are due TheraCour from the
Company’s inception through June 30, 2019.
TheraCour is affiliated with the Company
through Anil Diwan, President, who is a director of the corporation, and owns approximately 90% of the capital stock of TheraCour
Pharma, Inc., which itself owns approximately 11.94% of the Common Stock of the Company at June 30, 2019.
TheraCour owns 470,959 shares of the Company’s
outstanding Common Stock and 100,000 shares of the Company’s Series A Preferred Stock at June 30, 2019.
Employees
As of September 27, 2019, the Company had
approximately seventeen employees, including 12 employees at TheraCour. The Company considers its relationship with its employee
to be stable. In addition, most of the business activities of the Company including accounting and legal work and business development
are provided by subcontractors and consultants. Further, the Company has subcontracted nanomaterials research and development (“R&D”)
to TheraCour under the license agreement with TheraCour. TheraCour currently has a staff of approximately ten, most of who are
scientists with PhD or advanced degrees and experience. The Company has subcontracted its animal studies to various contract research
organizations, government institutes, academic labs, and private institutions. Some of the Company’s R&D work was performed
by agencies in Vietnam. In the future, the Company anticipates having additional service providers. We believe that we have good
relations with our employees and subcontractors.
Reports to Security Holders
As of November 2006, upon filing of its
Form 10-SB and listing on the FINRA OTC Bulletin Board, the Company became subject to the reporting obligations of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). These obligations include filing an annual report under cover
of Form 10-K, with audited financial statements, unaudited quarterly reports on Form 10-Q and the requisite proxy statements with
regard to annual shareholder meetings. The public may read and copy any materials the Company files with the Securities and Exchange
Commission (the “Commission”) at the Commission’s Public Reference Room at 100 F Street, NE, Washington, DC
20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0030.
The Commission maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the Commission. Information about the Company is also available on
its Web site at www.nanoviricides.com. Information included on the Web site is not part of this Form 10-K.
Further, the Company’s Common Stock
has been listed on the NYSE MKT (a US national exchange) since September 25, 2013. The NYSE-American Exchange requires additional
corporate governance, financial and reporting requirements. NYSE MKT has changed its name to “NYSE American” in July
2017.
Website
Our website address is www.nanoviricides.com.
We intend to make available through our
website, all of our filings with the Commission and all amendments to these reports as soon as reasonably practicable after filing,
by providing a hyperlink to the EDGAR website containing our reports.
Our Contact Information
Our principal executive offices are currently
located at 1 Controls Drive, Shelton, Connecticut 06484 and our telephone number is (203) 937-6137 (voice mail). We can be contacted
by email at info@nanoviricides.com.
Description of Property
The Company’s principal executive
offices are located at 1 Controls Drive, Shelton, CT, and include approximately 18,000 square feet of office, laboratory, and
cGMP-capable drug manufacturing space. These facilities are fully owned by the Company. There is no mortgage on these facilities.
We subcontract the laboratory research
and development work to TheraCour Pharma, Inc., under the License Agreement with TheraCour. Management believes that the space
is sufficient for the Company to monitor the developmental progress at its subcontractors.
Legal Proceedings
From time to time, we are a party to legal
proceedings arising in the ordinary course of business. We are not currently a party to any other legal proceedings that we believe
could have a material adverse effect on financial condition or results of operations.
MANAGEMENT
Executive Officers and Directors
The following table
sets forth the name, age and position of each of our directors and executive officers as of September [●], 2019.
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
|
|
Anil Diwan
|
|
60
|
|
President, Chairman of the Board of Directors
|
|
|
|
|
|
|
|
Stanley Glick (1)(2)(3)
|
|
84
|
|
Director, Independent
|
|
|
|
|
|
|
|
James Sapirstein (1)(2)(3)
|
|
58
|
|
Director, Independent
|
|
|
|
|
|
|
|
Mark Day (1)(2)(3)
|
|
47
|
|
Director, Independent
|
|
|
|
|
|
|
|
Meeta Vyas
|
|
61
|
|
Chief Financial Officer
|
|
|
(2)
|
Compensation Committee
|
|
|
(3)
|
Nominating and Corporate Governance Committee
|
Our Amended and Restated
Bylaws provide that our Board of Directors will consist of not less than two or more than seven members, with such number to be
fixed by the Board of Directors and there are currently four members of our Board of Directors, three of which are independent.
The directors are divided into three classes and according to our Bylaws the Directors must be divided evenly among the three
classes.
Our executive officers
are elected by, and serve at the discretion of, our Board of Directors. Dr. Diwan and Ms. Vyas are married. There are no other
family relationships between our executive officers and any director of the Company. The business experience for the past five
years (and, in some instances, for prior years) of each of our executive officers and directors is as follows:
Anil Diwan, PhD, age
60, has been President and the Chairman of the Board of Directors of the Company since consummation of the merger on June 1,
2005 and Executive Chairman in February 2019. Dr. Diwan simultaneously therewith and since its formation, has also served
as the Chief Executive Officer and Director of AllExcel, Inc. (from 1995 to the present) and TheraCour Pharma, Inc. (from 2004
to the present) and is the original inventor of the technologies licensed to NanoViricides Inc., as well as the TheraCour polymeric
micelle technologies and products based on them. Since 1992, he has researched and developed TheraCour nanomaterials. Dr. Diwan
was the first to propose the development of novel pendant polymers for drug delivery that led to an explosion of research in pharmacological
applications of polymeric micelles. Anil has won over 12 NIH SBIR grants. Dr. Diwan holds several issued patents, and three
PCT international patent applications in various stages of prosecution in a number of countries, and has made intellectual property
depositions of several additional patentable discoveries with the patent attorney. Dr. Diwan has held several scholastic
distinctions, including an All-India 9th rank on the Joint Entrance Examination of all IIT’s. He holds a Ph.D. in Biochemical
Engineering from Rice University (1986) and B.S. in Chemical Engineering from Indian Institute of Technology (IIT) Bombay (1980).
The Company concluded Dr. Diwan’s experience plus his status as creator of the Company’s technologies render
him uniquely qualified to serve in these capacities.
Stanley Glick,
CPA, age 84, was appointed as an independent Director and as chair of the Audit Committee of the Company on June 22,
2012. Mr. Glick has over forty years of experience in his long career of providing auditing, accounting, tax, and management
advisory services, to clients in various industries. Mr. Glick has been a member of several Boards of Directors for not-for-profit
organizations in the Westport, CT area. In particular, he has served as a Director and member of Audit Committee of “A Better
Chance” of Westport, CT, from 2000 to 2005. From 1977 until present, Mr. Glick has managed an independent practice
as a Certified Public Accountant in Connecticut and New York States. Prior to forming his own CPA firm, Mr. Glick was employed
by local and regional CPA firms where he performed and supervised audits and financial reporting. Mr. Glick is a member of
the American Institute of Certified Public Accountants, The Connecticut Society of Certified Public Accountants, and the New York
State Society of Certified Public Accountants. He holds a Bachelor of Business Administration degree in Accounting from Baruch
College of Business (now Baruch College of the City University of New York). Mr. Glick is married and lives in Trumbull,
CT. We concluded that Mr. Glick’s broad business, accounting and auditing experience meets the criteria of an independent
director and an “audit committee Financial Expert.
James Sapirstein, R.Ph.,
M.B.A., age 58, has served over thirty years in the pharmaceutical industry. He has been part of almost two dozen
product launches and specifically either led or been a key member of several HIV product launches into a new class of therapeutics
at that time. Most recently from March 18, 2014 until October 3, 2018, he served as the Chief Executive Officer of ContraVir
Pharmaceuticals, Inc., which is a company specializing in the Hepatitis B space. After beginning his career in 1984 with Eli Lilly,
he accepted a position at Hoffmann-LaRoche in 1987, where he served for almost a decade as part of its commercial teams in the
US and abroad. He held a number of positions at Hoffmann-LaRoche, before moving to Bristol Myers Squibb in 1996 the Director of
International Marketing in the Infectious Diseases group. While at BMS, he worked on several important HIV/AIDS projects including
Secure the Future. Mr. Sapirstein started his career in smaller biotech companies when he later joined Gilead Sciences, Inc.
(GILD) in order to lead the Global Marketing team in its launch of Viread (tenofovir) In 2002, he accepted the position of Executive
Vice President Metabolic and Endocrinology for Serono Laboratories before becoming the founding CEO of Tobira Therapeutics in
2006. In 2012, after several years in the infectious diseases space, Mr. Sapirstein became the CEO of Alliqua Therapeutics
at Alliqua, Inc., prior to joining Contravir. Mr. Sapirstein holds board positions on Enochian Biosciences (ENOB), RespireRx
Pharmaceuticals (RSPI) and Leading Biosciences. He also served as the Chairman of BioNJ and a Board Director for BIO, where he
sits on both the Health Section Governing and Emerging Companies Section Governing Boards. Mr. Sapirstein received
his MBA from Fairleigh Dickinson University and B.Pharm. from Rutgers University. We believe Mr. Sapirstein’s extensive
experience as a biotechnology executive and as a board member in biopharma industry and industry associations qualifies him to
serve as a Director of our Company.
Mark Day, PhD.,
age 47, has almost twenty (20) years’ experience in R&D and business development in the biotech industry.
From April 2017 to March 2019, Dr. Day served as the President, Chief Executive Officer and a Director of Bioasis Technologies,
Inc. (OTCMKTS: BIOAF) where Dr. Day was responsible for leading business development, internal and external R&D, translational
medicine and academic sciences. Prior thereto from August 2015 to April 2017, Dr. Day served as the Executive Director, Head of
External Research and Scouting and as a Senior Director from June 2014 to July 2015, both at Alexion Pharmaceuticals (NASDAQ:
ALXN). From April 2012 to May 2014, Dr. Day was the Global Lead, Business Development, at Bristol Meyers-Squibb (NYSE: BMY). The
Company believes Dr. Day’s long history as a pharmaceutical and biotech executive in publicly traded companies, with expertise
in research and business development, render him highly qualified to serve as a member of the Board of Directors.
Meeta Vyas, SB,
MBA, age 61, has served as the Company’s Chief Financial Officer since May 13, 2013. Ms. Vyas has over twenty-five years
of experience in performance and process improvement of both publicly listed companies and non-revenue producing entities, in
areas ranging from Finance and Operations to Strategy and Management. Meeta holds the distinction of being the first Indian woman
to be named CEO of a publicly listed U.S. corporation, Signature Brands, Inc., best known for “Mr. Coffee”
and “Health-O-Meter” brand products. As CEO, acting COO and Vice Chairman of the Board of Signature Brands, Inc.,
she was responsible for the development and implementation of a turnaround plan, resulting in Signature’s return to profitability
and growth. Later, as the CEO of the World-Wide Fund for Nature — India (WWF-India) and then as a Vice President
of the National Audubon Society (USA), both non-revenue generating entities, Meeta successfully raised unrestricted funding that
significantly exceeded annual requirements and also instituted financial processes to measure a variety of performance metrics.
Earlier in her career, she was responsible for designing the strategy and initiating the implementation plan for the highly successful
information technology outsourcing program at General Electric (“GE”). Also at GE, Ms. Vyas ran GE Appliances’
Range Products business unit having revenues exceeding $1 Billion where her team doubled operating income in less than two years.
Prior to that, as a management consultant with McKinsey and Company, she served publicly listed companies in chemicals, industrial,
and technology markets, primarily focusing on growth strategies, valuations, post-merger integrations, and logistics operations.
Ms. Vyas is married to Anil Diwan, the Company’s President and Chairman and principal shareholder of TheraCour Pharma,
Inc. Ms. Vyas holds a MBA in Finance from Columbia University’s Graduate School of Business, and a SB in Chemical Engineering
from the Massachusetts Institute of Technology.
Dr. Diwan and
Ms. Vyas are married. There are no other family relationships between our executive officers and any director of the Company.
Director Independence
Our Common Stock is
listed on the NYSE American under the symbol NNVC. Under the rules of the NYSE American, a majority of a listed company’s
board of directors must be comprised of independent members. In addition, the rules of the NYSE American require that all of our
audit committee, compensation committee and nominating and corporate governance committee members be independent. Audit committee
members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. Under the rules
of the NYSE American, a director will only qualify as an “independent director” if, in the opinion of the company’s
board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director.
In order to be considered
to be independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than
in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1) accept,
directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries
or (2) be an affiliated person of the listed company or any of its subsidiaries.
Our board of directors
undertook a review of its composition, the composition of its committees and the independence of each director. Based upon information
requested from and provided by each director concerning his background, employment and affiliations, including family relationships,
our Board of Directors has determined that Dr. Day, Mr. Sapirstein and Mr. Glick, or three of our four, do not have a relationship
that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each
of these directors is “independent” as that term is defined under the rules of the NYSE American.
Our board of directors
also determined that Dr. Day, Mr. Sapirstein and Mr. Glick, who compose our audit committee, compensation committee,
and our nominating and corporate governance committee, each satisfy the independence standards for those committees established
by the applicable rules and regulations of the SEC and the NYSE American. In making this determination, our board of directors
considered the relationships that each non-employee director has with us and all other facts and circumstances our board
of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.
We intend to comply with all size and independence requirements for committees within the applicable time periods.
EXECUTIVE COMPENSATION
The following table
reflects all forms of compensation for the years ended June 30, 2019 and, 2018:
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
|
Bonus
($)
|
|
|
Stock
Award(s)
($)
|
|
|
Option
Awards
(#)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
|
Anil Diwan
|
|
2019
|
|
$
|
400,000
|
|
|
$
|
—
|
|
|
$
|
189,038
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
589,038
|
|
|
President, Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meeta Vyas
|
|
2019
|
|
$
|
129,600
|
|
|
$
|
24,488
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
154,088
|
|
|
CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irach Taraporewala
|
|
2019
|
|
$
|
144,783
|
|
|
$
|
72,000
|
|
|
$
|
11,920
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
228,703
|
|
|
Former CEO(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Appointed July 19, 2018, resigned effective
February 1, 2019
|
The following table
sets forth for each named executive officer certain information concerning the outstanding equity awards as of June 30, 2019
|
Name and Principal Position
|
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
|
Number
of Securities
Underlying
Unexercised
Options
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of
Shares or
Units of
Stock that
Have Not
Vested
|
|
|
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights that
Have Not
Vested
|
|
|
Equity
Incentive
Plan Awards:
Market or
Payout
Value
of Unearned
Shares,
Units
or Other
Rights that
Have Not
Vested
|
|
|
Anil Diwan, President and Director
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Milton Boniuk, MD
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Mukund Kulkarni(1)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Stanley Glick
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Meeta Vyas
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Irach Taraporewala(2)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1)
|
Resigned July 31, 2019.
|
|
|
(2)
|
Appointed July 19, 2018, resigned effective
February 1, 2019
|
Equity Compensation Plan Information
The NanoViricides,
Inc. Executive Equity Incentive Plan (the “2018 Plan”) was adopted to assist the Company in attracting, motivating,
retaining and rewarding high-quality executives and other employees, officers, directors, consultants and other persons who provide
services to us, by enabling such persons to acquire or increase a proprietary interest in the Company. The 2018 Plan provides
for the issuance of stock options, stock appreciation rights, or SARs, restricted stock, restricted stock units, reload options,
and other stock-based awards. Performance awards may be based on the achievement of certain business or personal criteria
or goals, as determined by the Committee. The total number of shares of our Common Stock that may be subject to the granting of
awards under our 2018 Plan is equal to 250,000 shares and 100,000 shares of our Series A Preferred Stock. To date, no shares of
Common Stock or Series A Preferred Stock have been issued under the 2018 Plan.
Compensation Committee Interlocks and
Insider Participation
None of the members
of our compensation committee is or has been an officer or employee of our company. None of our executive officers currently serves,
or in the past year has served, as a member of the board of directors or compensation committee (or other board committee performing
equivalent functions) of any entity that has one or more of its executive officers serving on our board of directors or compensation
committee.
Employment Agreements and Severance Agreements
On July 11, 2018 the Company and Dr. Diwan,
President and Chairman of the Board of Directors, entered into an extension of employment agreement effective July 1, 2018 for
a term of three years. Dr. Diwan’s will be paid an annual base salary of $400,000. Additionally, Dr. Diwan was awarded a
grant of 26,250 shares of the Company’s Series A Preferred Stock. 8,750 shares vest equally on June 30, 2019, 2020 and 2021.
Any unvested shares are subject to forfeiture. If Dr. Diwan is terminated without cause (cause defined as fraud,
embezzlement, theft, commission of a felony or having been proven to have made an intentional unauthorized disclosure),
the Company is required to pay him six months salary as severance. The Agreement also provides that Dr. Diwan shall be indemnified
to maximum allowable extent permitted under the laws of the State of Nevada including reimbursement for independent counsel related
to duties and obligations provided for the Company unless such action was determined to be in bad faith or a deliberate act of
dishonesty. The agreement also provides customary provisions or reimbursement, non-disclosure, confidentiality and other terms.
The Company and Dr. Irach Taraporewala,
entered into an employment agreement effective September 1, 2018 for Dr. Taraporewala to serve as the Company’s Chief Executive
Officer, for a term of three years. The terms were for an annual base salary of $360,000. Additionally, Dr. Taraporewala was awarded
a grant of 15,000 options to purchase shares of the Company’s Common Stock. 5,000 options vested on September 1, 2018 and
the remainder of the options were to vest over the two-year vesting period, subject to forfeiture. On January 24, 2019, Dr. Taraporewala
resigned as the Chief Executive Officer and the Company and Dr. Taraporewala agreed that Mr. Taraporewala would become a consultant
for the Company for a period of two years. In connection with his resignation and new consulting services, the Company and Mr.
Taraporewala entered into a Confidential Separation and Consulting Agreement and General Release pursuant to which the Company
will pay Mr. Taraporewala monthly consulting payments of three thousand dollars ($3,000) from February 1, 2019, the effective
date of the Agreement, through January 31, 2021. The agreement includes a general release of claims against the Company, obligations
of confidentiality, non-disclosure, non-disparagement and other customary provisions found in similar agreements.
The Company and Dr. Seymour, the Company’s
former Chief Executive Officer and Director, entered into an employment agreement effective July 1, 2015, for a term of three
years. Dr. Seymour’s compensation would be $350,000 for the first year of employment, $375,000 for the second year and $400,000
for the final year. Additionally, Dr. Seymour was awarded a grant of 11,250 shares of the Company’s Series A Preferred Stock.
3,750 shares vested on June 30, 2016, 3,750 shares vested on June 30, 2017 and 3,750 shares were scheduled to vest on June 30,
2018. The employment agreement also provided incentive bonuses of $75,000 per year payable on or before July 31, 2016, 2017 and
2018. The incentive bonuses for 2016 and 2017 have been paid according to the terms of the contract. On January 27, 2018, Dr.
Eugene Seymour resigned as the Chief Executive Officer and as a Director of the Company. On April 30, 2018, the Company and Dr.
Seymour finalized a Severance Agreement. The separation agreement calls for continued payment of his salary through December 2018,
the vesting of 2,500 of the 3,750 Series A Preferred Shares that were originally scheduled to vest on June 30, 2018 and issuance
of warrants to purchase 12,500 shares of the Company’s Common Stock. The remainder of his unvested shares was forfeited.
The warrants were valued at $53,500 and vest in three equal installments over three years with the last installment vesting on
May 1, 2021. The Company reversed the compensation recorded from July 1, 2017 through January 31, 2018 related to the 3,750 shares
that will no longer vest under the terms of the employment agreement and then calculated the fair value of the 2,500 shares as
a result of the modification of the award as of January 27, 2018. The Company then recognized noncash compensation expense related
to the issuance of the Series A Preferred Shares pursuant to the Settlement Agreement of $121,008 for the fiscal year ended June
30, 2018.
On May 30, 2013, the Company entered into
an Employment Agreement with Meeta Vyas to serve as its Chief Financial Officer. The employment agreement provided
for a term of three years with a base salary of $9,000 per month and 129 shares of Series A Preferred Stock, also on a monthly
basis. On January 1, 2015, her compensation was increased to $10,800 per month. The agreement provides that Ms. Vyas may resign
upon 90 days prior written notice and the Company may terminate the Agreement at any time but if the Agreement is terminated by
the Company without cause it is required to compensate Ms. Vyas through the balance of the term. The agreement also provides customary
provisions or reimbursement, non-disclosure, confidentiality and other terms. The Compensation Committee of the Board of Directors
has extended the current provisions of the Employment Agreement pending its review of current industry compensation arrangements
and employment agreements.
Compensation of Directors
At this time, directors, who are officers
of the Company, receive no remuneration for their services as directors of the Company. The Company reimburses directors for expenses
incurred in their service to the Board of Directors. The Company paid accrued fees to its independent directors of $30,000 to
each Director, of which half is paid in the Company’s Common Stock.
|
Name
|
|
Fees
earned or
paid in cash
($)
|
|
|
Stock
awards
($)(1)
|
|
|
Option
awards
($)
|
|
|
All
other
compensation
($)
|
|
|
Total
($)
|
|
|
Mukund Kulkarni(2)
|
|
$
|
23,750
|
|
|
$
|
15,000
|
|
|
|
_
|
|
|
|
_
|
|
|
$
|
38,750
|
|
|
Stanley Glick
|
|
$
|
23,750
|
|
|
$
|
15,000
|
|
|
|
_
|
|
|
|
_
|
|
|
$
|
38,750
|
|
|
James Sapirstein
|
|
$
|
20,000
|
|
|
$
|
11,250
|
|
|
|
_
|
|
|
|
_
|
|
|
$
|
31,250
|
|
|
Mark Day(3)
|
|
$
|
10,000
|
|
|
$
|
3,750
|
|
|
|
_
|
|
|
|
_
|
|
|
$
|
13,750
|
|
|
|
(1)
|
For the director compensation year beginning July
2018, the dollar amounts reported in this column represent the aggregate grant date fair value for financial statement reporting
purposes as calculated in accordance with FASB ASC Topic 718. These amounts reflect our accounting expense for these stock
options and do not represent the actual economic value that may be realized by each applicable non-employee director. The
number of outstanding shares of Common Stock held by each non-employee director as of June 30, 2019 were: Dr. Kulkarni (4,785),
Mr. Glick (5,017), Mr. Sapirstein (1,878), Mr. Day (727).
|
|
|
(2)
|
Resigned July 31, 2019.
|
|
|
(3)
|
Appointed June 6, 2019.
|
Compensation of Scientific Advisory
Board
The Company anticipates holding four Scientific
Advisory Board meetings per annum. As compensation, each member of the Scientific Advisory Board (SAB) will be granted 143 warrants
each quarter to purchase the Company’s Common Stock at 120% of the Company’s closing stock quote on the day following
the meeting. Should the Company not call a quarterly meeting, quarterly warrants will be granted on May 15, August 15, November
15, and February 15. The warrants have a four-year expiration date. In addition, the Company will reimburse each SAB member for
travel and other out-of-pocket expenses incurred in the course of performing their services. For the years ended June 30, 2019,
2018 and 2017, the SAB was granted 2,288, 2,288 and 2,858 stock warrants respectively, The warrants are exercisable into
common shares at prices from $6.00 to $9.40, $12.80 to $31.20 and $28.00 to $40.80 per share, respectively.
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
Compensation of the
Company’s named executive officers and directors is set forth in the section titled “Executive Compensation”.
On May 13, 2013,
Meeta Vyas was appointed as the Company’s Chief Financial Officer. During the term of Ms. Vyas’ service, she
will be compensated on the basis of $9,000 per month and 129 shares of Series A Preferred Stock, also on a monthly
basis. Ms. Vyas is married to Anil Diwan, the President and Chairman of the Company. On January 1, 2015 her compensation
was increased to $10,800 per month.
TheraCour Pharma, Inc.
On May 12, 2005, the
Company entered into a Material License Agreement, amended as of January 8, 2007 (the “License”) with TheraCour Pharma,
Inc., (“TheraCour”), an approximately 12% shareholder. Anil Diwan, our founder, President and Executive Chairman,
owns approximately 90% of TheraCour’s capital stock. The Company was granted exclusive licenses in perpetuity for technologies
developed by TheraCour for the virus types: Human Immunodeficiency Virus (HIV/AIDS), Influenza including Asian Bird Flu Virus,
Herpes Simplex Virus (HSV-1 and HSV-2), Hepatitis C Virus (HCV), Hepatitis B Virus (HBV), and Rabies. On February 15, 2010,
the Company entered into an Additional License Agreement with TheraCour. Pursuant to the exclusive Additional License Agreement,
in consideration for the issuance of 100,000 shares of the Company’s Series A Preferred Stock, (the “Series A Preferred”),
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.
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 a specified portion of certain direct costs as a Development Fee and such development fees shall be due and payable in periodic
installments as billed; (2) pay $25,000 per month for usage of lab supplies and chemicals from existing stock held by TheraCour;
(3) we will pay the greater $2,000 or actual costs monthly, whichever is higher, for other general and administrative expenses
incurred by TheraCour on our behalf; (4) make royalty payments (calculated as a percentage of net sales of the licensed drugs)
of 15% (calculated as a percentage of net sales of the licensed drugs) to TheraCour; (5) TheraCour retains the exclusive right
to develop and manufacture the licensed drugs. TheraCour will manufacture the licensed drugs exclusively for NanoViricides, and
unless such license is terminated, will not manufacture such product for its own sake or for others; and (6) TheraCour may request
and NanoViricides, Inc. will pay an advance payment (refundable) equal to twice the amount of the previous month’s invoice
to be applied as a prepayment towards expenses. TheraCour may terminate the license upon a material breach by us as specified in
the agreement. However, we may avoid such termination if within 90 days of receipt of such termination notice we cure the breach.
On October 2, 2018, we entered into an agreement with TheraCour to defer the $25,000 payment until the earlier of April 2, 2019
or the date that we file an IND with the FDA. On May 9, 2019, we entered into an agreement with TheraCour that extended the April
2, 2019 date to June 30, 2019 and on September 24, 2019 we entered into an agreement with TheraCour that extended such date to
December 31, 2019. As of June 30, 3019 we owed TheraCour $325,000 for deferred development fees.
On July 2, 2014 the
Company issued a 10% Coupon Series C Convertible Debenture (the “Series C Debenture”) in the amount of $5,000,000
to the Milton Boniuk IRA, a trust controlled by a former member of the Company’s Board of Directors, (the “Holder”).
The Series C Debenture was due on June 30, 2018 and was convertible, at the sole option of the Holder, into restricted shares
of the Company’s common stock, par value $0.001 per share at the conversion price of $105.00 per share of common stock and
bore interest at the coupon rate of ten percent (10%) per annum. In conjunction with the issuance of the Series C Debenture, the
Company issued 9,350 shares of its Series A Convertible Preferred Stock (the “Series A”) to the Milton Boniuk IRA.
The Series C Debenture was redeemed on November 13, 2017. For the year ended June 30, 2018, the Holder elected to receive $60,274
(through November 13, 2017) of its coupon interest payment and $125,000 of deferred interest payment in common stock of the Company
and $125,000 of its coupon interest payment and $41,667 of its deferred interest payment in cash. For the year ended June 30,
2017, the Holder elected to receive $375,000 of its coupon interest payment, and $125,000 of deferred interest payment in common
stock of the Company and $125,000 of its coupon interest payment and $41,667 of its deferred interest payment in cash. The Holder
of the Series C Debenture and the Company agreed on November 13, 2017 that the Series C Debenture would be redeemed for the Company’s
common stock. The Holder waived all early redemption payments provided for in the Series C Debenture in consideration for 7,500
shares of the Company’s Series A preferred shares.
TheraCour acquired
property and equipment on behalf of the Company from third party vendors and sold such property and equipment, to the Company,
at cost, in the amounts of $23,666, $30,321, and $33,147, for the fiscal years ended June 30, 2019, 2018, and 2017, respectively.
Accounts payable to
TheraCour were $823,783 and $107,468 at June 30, 2019 and 2018, respectively.
Development costs
charged by and paid to TheraCour Pharma, Inc. were $3,119,863, $3,176,977, and $3,368,919 for the fiscal years ended June 30,
2019, 2018, and 2017, respectively. No royalties are due or have been paid from inception through June 30, 2019.
As of June 30, 2019,
TheraCour owns 470,959 shares of the Company’s outstanding Common Stock and 100,000 shares of Series A Preferred, which
votes at the rate of nine shares of Common Stock per each share of Series A and is convertible into three and one half shares
of Common Stock upon a change in control of the Company. Anil Diwan, the Company’s President and Chairman, also serves as
the CEO and Director of TheraCour and owns approximately 90% of the outstanding capital stock of TheraCour.
Family Relationships
Meeta Vyas, the Company’s
Chief Financial Officer, is the wife of Anil Diwan, our founder, Chairman and President. As of June 30, 2019, there were no other
family relationships between or among our directors, executive officers, or persons nominated or chosen by the Company to become
directors or executive officers.
Review, Approval or Ratification of Transactions with Related
Persons
Under the SEC’s
rules, a related person is a director, officer, nominee for director, or 5% stockholder of the Company since the beginning of
the last fiscal year and their immediate family members. In addition, under the SEC’s rules, a related person transaction
is a transaction or series of transactions in which the company is a participant and the amount involved exceeds $120,000, and
in which any related person had or will have a direct or indirect material interest.
The Board of Directors
has a general practice of requiring directors interested in a transaction not to participate in deliberations or to vote upon
transactions in which they have an interest, and to be sure that transactions with directors, executive officers and major stockholders
are on terms that align the interests of the parties to such agreements with the interests of the stockholders.
These practices are
undertaken pursuant to written policies and procedures contained in the Company’s Code Ethics, which requires compliance
with applicable laws and regulations, the avoidance of conflicts of interest, and prohibits the taking of corporate opportunities
for personal benefit. In addition, as a Nevada corporation, we are subject to Section 78.140 of the Nevada Revised Statutes,
which provides, among other things, that related party transactions involving the Company and our directors or officers need to
be approved by a majority of directors, which may include the vote of an interested directors provided that two of the following
circumstances exist:
|
|
(a)
|
The fact of the common directorship, office or financial
interest is known to the board of directors or committee, and the board or committee authorizes, approves or ratifies the
contract or transaction in good faith by a vote sufficient for the purpose without counting the vote or votes of the common
or interested director or directors.
|
|
|
(b)
|
The fact of the common directorship, office or financial
interest is known to the stockholders, and they approve or ratify the contract or transaction in good faith by a majority
vote of stockholders holding a majority of the voting power. The votes of the common or interested directors or officers must
be counted in any such vote of stockholders.
|
|
|
(c)
|
The fact of the common directorship, office or financial
interest is not known to the director or officer at the time the transaction is brought before the board of directors of the
corporation for action.
|
|
|
(d)
|
The contract or transaction is fair as to the corporation
at the time it is authorized or approved.
|
BENEFICIAL OWNERSHIP
OF COMPANY COMMON STOCK BY DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS
The following table
sets forth, as of September 27, 2019, certain information regarding the beneficial ownership of the Company’s Common Stock
and Series A Convertible Preferred Stock outstanding by (i) each person known to us to own or control 5% or more of our Common
Stock, (ii) each of our directors and nominees, (iii) each of our “Named Executive Officers” (as defined in Item 402(a)(3)
of Regulation S-K) and (iv) our current Named Executive Officers and directors and nominees as a group. Unless otherwise indicated,
each person named in the table below has sole voting and investment power with respect to the shares beneficially owned.
|
|
|
Common
Stock
|
|
|
Series
A Convertible
Preferred Stock(1)
|
|
|
|
|
|
Name and Address of Beneficial
Owner
|
|
Amount
and
Nature of
Beneficial
Owner(2)
|
|
|
Percent
of
Class(2)
|
|
|
Amount
and
Nature of
Beneficial
Owner(2)
|
|
|
Percent
of
Class(2)
|
|
|
Percent
of
Voting
Power(3)
|
|
TheraCour Pharma, Inc.(4)
1 Controls Drive
Shelton, CT 06484
|
|
|
470,959
|
|
|
|
12.3
|
%
|
|
|
100,000
|
|
|
|
39.1
|
%
|
|
|
22
|
%
|
Anil Diwan(4)(5)
1 Controls Drive
Shelton, CT 06484
|
|
|
100,269
|
|
|
|
2.6
|
%
|
|
|
76,074
|
|
|
|
29.7
|
%
|
|
|
12.6
|
%
|
Stanley Glick
1 Controls Drive
Shelton, CT 06484
|
|
|
5,017
|
|
|
|
*
|
%
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
%
|
Meeta Vyas(6)
1 Controls Drive
Shelton, CT 06484
|
|
|
7,352
|
|
|
|
*
|
%
|
|
|
9,388
|
|
|
|
3.7
|
%
|
|
|
1.5
|
%
|
James Sapirstein
1 Controls Drive
Shelton, CT 06484
|
|
|
1,878
|
|
|
|
*
|
%
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
%
|
Mark Day
1 Controls Drive
Shelton, CT 06484
|
|
|
727
|
|
|
|
*
|
%
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
%
|
All Directors and Executive Officers as a Group
(5 persons)
|
|
|
586,202
|
|
|
|
14.8
|
%
|
|
|
185,462
|
|
|
|
72.5
|
%
|
|
|
36.1
|
%
|
|
Other 5% Holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Milton Boniuk(7)
1111 Herman Drive, Unit 29E
Houston, TX 77004
|
|
|
523,145
|
|
|
|
13.6
|
%
|
|
|
16,850
|
(8)
|
|
|
6.6
|
%
|
|
|
10.
|
8%
|
|
(1)
|
The Series A Convertible Preferred Shares (the “Series
A”) vote at the rate of nine shares of Common Stock per each share of Series A and is convertible into three and one
half shares of Common Stock upon a change in control of the Company.
|
|
|
|
|
(2)
|
For each shareholder, the calculation of percentage of beneficial ownership is based upon 3,844,921 shares of Common Stock and 255,714 shares of Series A Preferred Stock outstanding, and giving effect to the Reverse Stock Split as of September 24, 2019, and shares of Common Stock subject to options, warrants and/or conversion rights held by the shareholder that are currently exercisable or exercisable within 60 days, which are deemed to be outstanding and to be beneficially owned by the shareholder holding such options, warrants, or conversion rights. The percentage ownership of any shareholder is determined by assuming that the shareholder has exercised all options, warrants and conversion rights to obtain additional securities and that no other shareholder has exercised such rights.
|
|
|
|
|
(3)
|
Amount stated reflects the number
of votes held on all matters submitted to a vote of our stockholders. As of the date of this filing there were issued and
outstanding 3,844,921 shares of Common Stock and 255,714 shares of Series A Convertible Preferred Stock, which votes at the
rate of nine votes per share, or 2,301,426 votes.
|
|
(4)
|
Anil Diwan, the Company’s President and Chairman,
also serves as the CEO and Director of TheraCour Pharma Inc. and owns approximately 90% of the outstanding capital stock of
TheraCour. Anil Diwan has both investment and dispositive power over the NanoViricides shares held by TheraCour Pharma, Inc.
|
|
|
|
|
(5)
|
Anil Diwan, President and Chairman of the Board of Directors.
Does not include 820,959 shares owned by TheraCour Pharma, Inc. after including the Series A Convertible Preferred
Stock on an as converted basis 3 and one-half Shares of Common Stock for each Share of Series A Preferred Stock) (the “Series A
Preferred Stock”), over which Dr. Diwan holds voting and dispositive power on an as converted basis. Does not include
76,074 shares of Series A Preferred Stock. Does not include the beneficial ownership of the securities held by Meeta
Vyas, the wife of Anil Diwan, over which Dr. Diwan disclaims beneficial ownership and voting and dispositive control.
|
|
|
|
|
(6)
|
Includes 1,301 shares held by Connect Capital LLC, over which
Ms. Vyas holds voting and dispositive power. Does not include 9,388 shares of Series A Preferred Stock. Does not
include the beneficial ownership of the securities held by Anil Diwan, the husband of Ms. Vyas, or TheraCour over which
Ms. Vyas disclaims beneficial ownership and voting and dispositive control.
|
|
|
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(7)
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Milton Boniuk, resigned as an Independent Member of the Board of Directors on July 10, 2018. Includes 8,315 shares of Common Stock owned by the reporting person, 32,858 shares of Common Stock owned by the reporting person and his wife Laurie Boniuk, and 343,132 shares of Common Stock owned by Milton Boniuk IRA. Includes 138,840 shares of Common Stock held by Boniuk Interests Ltd. Does not include 16,850 shares of Series A Preferred Stock held by Milton Boniuk IRA, which are not readily convertible. Dr. Boniuk holds voting and dispositive power over Boniuk Interests Ltd. Does not include any shares held by the Boniuk Charitable Foundation since on February 3, 2017, Dr. Boniuk filed a Form 4 which indicated that Dr. Boniuk no longer holds voting and dispositive power over the shares of Common Stock owned by the Boniuk Charitable Foundation.
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(8)
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Held by Milton Boniuk IRA.
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DESCRIPTION OF OUR
SECURITIES
Common Stock
As
of September 27, 2019, our Stock Amended Articles of Incorporation authorizes us
to issue 7,500,000 shares of Common Stock, par value $0.001 per share, and 500,000 shares
of preferred stock, par value $0.001 per share. As of September 27, 2019, a total of 3,944,915 shares
of the Company’s Common Stock are outstanding and held by approximately
154 shareholders of record. This number of shareholders does not reflect the persons or entities that hold their stock in
nominee or street name through various brokerage firms.
Reverse Stock Split
We
effected a one-for-twenty reverse stock split on September 24, 2019. Upon the effectiveness
of the reverse stock split, every 20 shares of outstanding Common Stock and Preferred Stock was decreased
to one share. In accordance with Nevada law, the number of our authorized shares of Common Stock and Preferred Stock were
decreased by a one-for-twenty ratio. Similarly, the number of shares of Common Stock into
which each outstanding option, warrant to purchase Common Stock or Convertible Preferred Stocks convertible or exercisable
into were decreased on a one-for-twenty
basis, and the exercise price of each outstanding option and warrant to purchase Common
Stock or Conversion price of convertible Preferred Stock will be increased proportionately.
Increase in Authorized Number of Shares
As
a result of the Split, the Company’s authorized capital stock was reduced
to 7,500,000 shares of Common Stock and 500,000 shares of Preferred Stock. To increase both these authorized amounts, we
expect to seek shareholder approval of an amendment to our Articles of Incorporation to increase our authorized number of
shares of stock to 150,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock. We currently have 3,655,235
shares of Common Stock available for issuance. If all of our Series A Preferred Stock were to convert to Common Stock and all
of our outstanding warrants and options were exercised, we would be required to issue an additional 1,298,180 shares of
Common Stock, which would leave us with only shares of Common Stock available for issuance. TheraCour Pharma, Inc. and Anil
Diwan, the principal stockholder of TheraCour, hold 176,074 shares of our Series A Preferred Stock collectively and have
agreed not to convert their Series A Preferred Stock, even if a change of control were to occur, until the earliest of the
date the increase in the authorized number of shares of Common Stock is effected or December 31, 2019. The
Warrants that will be issued in this offering are not exercisable until such time as the increase in the authorized number of
shares of Common Stock is effected. We will be obligated, pursuant to the terms of the Warrants, to hold a shareholders
meeting in order to solicit votes in favor of such increase within days of the closing of this offering.
Number of Shareholders
As
of September 27, 2019, a total of 3,944,915 shares of the Company’s
Common Stock are outstanding and held by 154 shareholders of record. This number of shareholders does not reflect the persons or
entities that hold their stock in nominee or street name through various brokerage firms. Of this amount, approximately 2,539,250
shares are unrestricted, of which, approximately 106,001 shares are held by affiliates, 292,821 shares are restricted securities
held by non-affiliates, and the remaining approximate 1,012,950, shares are restricted securities held by affiliates. These shares
may only be sold in accordance with Rule 144. As of September 27, 2019, there were approximately 398,150 warrants to purchase the
Company’s Common Stock outstanding.
The
holders of our Common Stock are entitled to the following rights:
Voting Rights
Each
holder of Common Stock is entitled to one vote for each share held on all matters submitted to a vote of the stockholders.
Dividends
Subject
to the rights of the holders of any preferred stock, the holders of Common Stock are entitled to receive ratably such dividends
as may be declared by our board of directors out of funds legally available for dividends. We have not historically declared or
paid cash dividends on our Common Stock.
Other
Rights
In
the event of a liquidation, dissolution or winding up of us, holders of our Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference, if any, of any then outstanding preferred stock.
Holders of our Common Stock are not entitled to preemptive rights and have no subscription, redemption or conversion privileges.
All outstanding shares of Common Stock are, and all shares of Common Stock issued by us in an offering under this prospectus and
the applicable prospectus supplement will be, fully paid and nonassessable. The rights, preferences and privileges of holders
of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred
stock which our board of directors may designate and that we may issue in one or more offerings under this prospectus or at other
times in the future.
Transfer Agent and
Registrar
The
transfer agent and registrar for our Common Stock is Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive South, Suite 430,
Denver, Colorado 80209, (303) 282-4800.
Listing
Our
Common Stock is listed on the NYSE MKT under the symbol “NNVC.” Any Common Stock we sell under this prospectus, as
it may be supplemented, will be listed on the NYSE MKT.
Preferred
Stock
We
are authorized to issue up to 500,000 shares of preferred stock in one or more series, with such designations, preferences and
relative, participating, option and other special rights, qualifications, limitations or restrictions as determined by our board
of directors, without any further vote or action by our stockholders, including dividend rights, conversion rights, voting rights,
redemption rights and terms of redemption and liquidation preferences. On February 15, 2010, our board had designated an aggregate
of split-adjusted shares of preferred stock as Series A Convertible Preferred Stock (the “Series A”). On January 23,
2016, the Company’s Board of Directors and a majority of the holders of the Company’s Series A shares approved an
amendment to the Certificate of Designation of the Series A Shares to increase the number of authorized Series A Shares from 200,000
to 425,000. On April 1, 2011, our board had designated an aggregate of 100,000 shares of preferred stock as Series B Convertible
Preferred Stock (the “Series B”) and no shares of Series B Preferred Stock are issued or outstanding, and no shares
are available for issuance. On June 27, 2012, our board had designated an aggregate of 250 Shares of Series C Convertible Preferred
Stock (the “Series C Shares”). There are currently no Series C Shares issued or outstanding. No other shares of preferred
stock are issued and outstanding.
As
of September 27, 2019, there were 255,714 shares of Series A Preferred Stock are issued, and outstanding and no other shares of
preferred stock are issued and outstanding.
Our
board may fix the number of shares constituting any series and the designations of these series by adopting a certificate of designation
relating to each series. The prospectus supplement relating to each series will specify the terms of the preferred stock, including:
You
should also refer to the applicable certificate of designation for complete information about the terms, preferences and rights
related to a particular series of our preferred stock, which we will incorporate as an exhibit to the registration statement of
which this prospectus is a part. The prospectus supplement will contain a description of United States federal income tax consequences
relating to the preferred stock, to the extent applicable.
Our
issuance of preferred stock may have the effect of delaying or preventing a change in control. Our issuance of preferred stock
could decrease the amount of earnings and assets available for distribution to the holders of Common Stock or could adversely
affect the rights and powers, including voting rights, of the holders of Common Stock. The issuance of preferred stock could have
the effect of decreasing the market price of our Common Stock.
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the number of shares we are offering;
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the offering price for those shares;
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the maximum number of shares in the series and the
distinctive designation thereof;
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the terms on which dividends will be paid, if any;
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the terms on which the shares will be redeemed,
if at all;
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the liquidation preference, if any;
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the terms of any retirement or sinking fund for
the purchase or redemption of the shares of the series;
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the terms and conditions, if any, on which the shares
of the series will be convertible into, or exchangeable for, shares of any other class or classes of capital stock;
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the voting rights, if any, on the shares of the
series;
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any securities exchange or market on which the shares
will be listed; and
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any other preferences and relative, participating,
operation or other special rights or qualifications, limitations or restrictions of the shares
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Series A Convertible
Preferred Stock
The
Series A Preferred Stock is convertible, solely upon a “change of control”, into shares of our Common Stock at the
rate of three and one-half shares of Common Stock per share of Series A converted. For the purposes of conversion of the Series
A, change of control is defined as (a) an acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Company, by contract or otherwise) of in excess of 40% of the voting securities of the Company
(other than by means of conversion or exercise of the Series A Preferred Stock and the Securities issued together with the Series
A Preferred Stock), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates
with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction
own less than 60% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells
or transfers all or substantially all of its Intellectual Property to another Person and the stockholders of the Company prior
to such transaction own less than 60% of the aggregate voting power of the acquiring entity immediately after the transaction,
or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any
of the events set forth in clauses (a) through (c) above. The Series A Preferred Stock votes at the rate of nine votes per share
of Series A, together with the Common Stock, on all matters to which shareholders of the Company are entitled to vote. Holders
of the Series A Preferred Stock are not entitled to receive dividends or any liquidation preference upon the liquidation, dissolution,
or winding up of the Company.
Warrants
The Company currently
has warrants (the “Warrants”) to purchase 398,156 shares of Common Stock outstanding. 347,223 of the Warrants have
an exercise price of $12.20 per share, are exercisable commencing September 27, 2019 and will expire five (5) years thereafter
and are exercisable for cash or, solely in the absence of an effective registration statement or prospectus, by cashless exercise.
38,433 of the Warrants were issued to members of the Company’s Scientific Advisory Board with varying exercise prices and
expiration dates. 12,500 of the warrants were issued to a former executive officer, have an exercise price of $40.00 per share
and expire on January 27, 2023.
DESCRIPTION OF THE
SECURITIES WE ARE OFFERING
Common Stock
We are offering ________
shares of our Common Stock together with warrants to purchase up to an aggregate of _________ shares of our Common Stock (based
on an assumed combined offering price of $______ the last reported sale price of our Common Stock on the NYSE American on September
__, 2019). Each share of our Common Stock is being sold together with a warrant to purchase one share of Common Stock. The shares
of our Common Stock and related warrants will be issued separately. We are also registering the shares of our Common Stock issuable
from time to time upon exercise of the warrants offered hereby.
The following description
of our capital stock is not complete and is subject to and qualified in its entirety by our amended certificate of incorporation
and amended and restated bylaws, which are filed as exhibits to the registration statement of which this prospectus is a part,
and by the relevant provisions of the Nevada Revised Statutes.
Pre-Funded Warrants
The following summary
of certain terms and provisions of the Pre-Funded Warrants that are being offered hereby is not complete and is subject
to, and qualified in its entirety by the provisions of, the Pre-Funded Warrant. Prospective investors should carefully
review the terms and provisions of the form of Pre-Funded Warrant for a complete description of the terms and conditions
of the Pre-Funded Warrants.
The term “pre-funded” refers
to the fact that the purchase price of our Common Stock in this offering includes almost the entire exercise price that will be
paid under the Pre-Funded Warrants, except for a nominal remaining exercise price of [ $___ ] . The purpose of the Pre-Funded Warrants
is to enable investors that may have restrictions on their ability to beneficially own more than 4.99% (or, upon election of the
holder, 9.99%) of our outstanding Common Stock following the consummation of this offering the opportunity to invest capital into
the Company without triggering their ownership restrictions, by receiving Pre-Funded Warrants in lieu of our Common
Stock which would result in such ownership of more than 4.99% (or 9.99%), and receive the ability to exercise their option to
purchase the shares underlying the Pre-Funded Warrants at such nominal price at a later date.
Duration. The Pre-Funded Warrants
offered hereby will entitle the holders thereof to purchase shares of our Common Stock at a nominal exercise price of $ per share,
commencing immediately on the date of issuance.
Exercise Limitation.
A holder will not have the right to exercise any portion of the Pre-Funded Warrant if the holder (together with
its affiliates) would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of shares of
our Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance
with the terms of the Pre-Funded Warrants. However, any holder may increase or decrease such percentage, provided that
any increase will not be effective until the 61st day after such election.
Exercise Price.
The Pre-Funded Warrants will have an exercise price of $0.01 per share. The exercise price is subject to appropriate
adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar
events affecting our Common Stock and also upon any distributions of assets, including cash, stock or other property to our stockholders.
Transferability.
Subject to applicable laws, the Pre-Funded Warrants may be offered for sale, sold, transferred or assigned without
our consent.
Exchange Listing.
There is no established trading market for the Pre-Funded Warrants and we do not expect a market to develop. In
addition, we do not intend to apply for the listing of the Pre-Funded Warrants on any national securities exchange or
other trading market. Without an active trading market, the liquidity of the Pre-Funded Warrants will be limited.
Fundamental Transactions.
If a fundamental transaction occurs, then the successor entity will succeed to, and be substituted for us, and may exercise
every right and power that we may exercise and will assume all of our obligations under the Pre-Funded Warrants with
the same effect as if such successor entity had been named in the Pre-Funded Warrant itself. If holders of our Common
Stock are given a choice as to the securities, cash or property to be received in a fundamental transaction, then the holder shall
be given the same choice as to the consideration it receives upon any exercise of the Pre-Funded Warrant following such
fundamental transaction.
Rights as a Stockholder.
Except as otherwise provided in the Pre-Funded Warrants or by virtue of such holder’s ownership of shares
of our Common Stock, the holder of a Pre-Funded Warrant does not have the rights or privileges of a holder of our Common
Stock, including any voting rights, until the holder exercises the Pre-Funded Warrant.
Warrants
The following summary
of certain terms and provisions of the warrants offered hereby is not complete and is subject to, and qualified in its entirety
by, the provisions of the Warrant, the form of which has been filed as an exhibit to the registration statement of which this
prospectus is a part. Prospective investors should carefully review the terms and provisions of the form of warrant for a complete
description of the terms and conditions of the Warrants.
Form. The Warrants
will be issued as individual warrant agreements to the investors.
Exercisability.
The Warrants are exercisable at any time after the date our shareholders shall have approved an amendment to our Articles
of Incorporation to increase the number of shares of our authorized Common Stock to permit the issuance of the shares of Common
Stock underlying the Warrants and exercise of the Warrants, expected to be _____ __, 2019, and at any time up to the date
that is five years after their original issuance. The warrants will be exercisable, at the option of each holder, in whole or
in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance
of the shares of Common Stock underlying the Warrants under the Securities Act is effective and available for the issuance of
such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment
in full in immediately available funds for the number of shares of Common Stock purchased upon such exercise. If a registration
statement registering the issuance of the shares of Common Stock underlying the warrants under the Securities Act is not effective
or available and an exemption from registration under the Securities Act is not available for the issuance of such shares, the
holder may, in its sole discretion, elect to exercise the Warrant through a cashless exercise, in which case the holder would
receive upon such exercise the net number of shares of Common Stock determined according to the formula set forth in the warrant.
No fractional shares of Common Stock will be issued in connection with the exercise of a Warrant. In lieu of fractional shares,
we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price.
Increase is Authorized
Shares. The Warrant provides that we will hold a special meeting of shareholders for the purpose of obtaining approval of
an increase in our authorized number of shares of Common Stock. (the "Special Meeting"). The Special Meeting is to be
held as soon as practicable and no later than [December 1, 2019]. We are obligated to use our reasonable best efforts to obtain
such approval and to cause our Board of Directors to recommend to our shareholders that they approve the increase. If, despite
our reasonable best efforts such approval is not obtained on or prior to [December 1, 2019], we are obligated to cause an additional
shareholder meeting to be held every three months thereafter until such approval is obtained
Exercise Limitation.
A holder will not have the right to exercise any portion of the Warrant if the holder (together with its affiliates) would
beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of shares of our Common Stock outstanding
immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the
Warrants. However, any holder may increase or decrease such percentage, provided that any increase will not be effective until
the 61st day after such election.
Exercise Price.
The Warrants will have an exercise price of $_____ per share. The exercise price is subject to appropriate adjustment in the
event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting
our Common Stock and also upon any distributions of assets, including cash, stock or other property to our stockholders.
Transferability.
Subject to applicable laws, the Warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange Listing.
There is no established trading market for the Warrants and we do not expect a market to develop. In addition, we do not intend
to apply for the listing of the Warrants on any national securities exchange or other trading market. Without an active trading
market, the liquidity of the Warrants will be limited.
Fundamental Transactions.
If a fundamental transaction occurs, then the successor entity will succeed to, and be substituted for us, and may exercise
every right and power that we may exercise and will assume all of our obligations under the Warrants with the same effect as if
such successor entity had been named in the Warrant itself. If holders of our Common Stock are given a choice as to the securities,
cash or property to be received in a fundamental transaction, then the holder shall be given the same choice as to the consideration
it receives upon any exercise of the Warrant following such fundamental transaction.
Rights as a Stockholder.
Except as otherwise provided in the warrants or by virtue of such holder’s ownership of shares of our Common Stock,
the holder of a Warrant does not have the rights or privileges of a holder of our Common Stock, including any voting rights, until
the holder exercises the Warrant.
Anti-takeover Effects
of Nevada Law and of Our Charter and Bylaws
In
addition to the features of our charter related to the issuance of preferred stock, which are described above, the Nevada Revised
Statutes (“NRS”) contain several provisions which may make a hostile take-over or change of control of our Company
more difficult to accomplish. They include the following:
Nevada
law, any one or all of the directors of a corporation may be removed by the holders of not less than two-thirds of the voting
power of a corporation’s issued and outstanding stock. All vacancies on the board of directors of a Nevada corporation may
be filled by a majority of the remaining directors, though less than a quorum, unless the articles of incorporation provide otherwise.
In addition, unless otherwise provided in the articles of incorporation, the board may fill the vacancies for the entire remainder
of the term of office of the resigning director or directors. Our Articles of Incorporation do not provide otherwise.
In
addition, Nevada law provides that unless otherwise provided in a corporation’s articles of incorporation or bylaws, shareholders
do not have the right to call special meetings. Our Articles of Incorporation and our Bylaws do not give shareholders this right.
In accordance with Nevada law, we also require advance notice of any shareholder proposals.
Nevada
law provides that, unless otherwise prohibited by any bylaws adopted by the shareholders, the board of directors may amend any
bylaw, including any bylaw adopted by the shareholders. Pursuant to Nevada law, our Articles of Incorporation grant the authority
to adopt, amend or repeal bylaws exclusively to our directors.
Nevada’s
“combinations with interested stockholders” statutes prohibit certain business “combinations” between
certain Nevada corporations and any person deemed to be an “interested stockholder” for two years after the such person
first becomes an “interested stockholder” unless (i) the corporation’s board of directors approves the combination
(or the transaction by which such person becomes an “interested stockholder”) in advance, or (ii) the combination
is approved by the board of directors and sixty percent of the corporation’s voting power not beneficially owned by the
interested stockholder, its affiliates and associates. Furthermore, in the absence of prior approval, certain restrictions may
apply even after such two-year period. For purposes of these statutes, an “interested stockholder” is any person who
is (x) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares
of the corporation, or (y) an affiliate or associate of the corporation and at any time within the two previous years was the
beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation.
Subject to certain timing requirements set forth in the statutes, a corporation may elect not to be governed by these statutes.
However, we have not included any such provision in our Articles of Incorporation or Bylaws, which means these provisions apply
to us.
Nevada’s
“acquisition of controlling interest” statutes contain provisions governing the acquisition of a controlling interest
in certain Nevada corporations. These “control share” laws provide generally that any person who acquires a “controlling
interest” in certain Nevada corporations may be denied certain voting rights, unless a majority of the disinterested stockholders
of the corporation elects to restore such voting rights. These statutes provide that a person acquires a “controlling interest”
whenever a person acquires shares of a subject corporation that, but for the application of these provisions of the NRS, would
enable that person to exercise (1) one-fifth or more, but less than one-third, (2) one-third or more, but less than a majority
or (3) a majority or more, of all of the voting power of the corporation in the election of directors. Once an acquirer crosses
one of these thresholds, shares which it acquired in the transaction taking it over the threshold and within the 90 days immediately
preceding the date when the acquiring person acquired or offered to acquire a controlling interest become “control shares”
to which the voting restrictions described above apply. Our Articles of Incorporation and Bylaws currently contain no provisions
relating to these statutes, and unless our Articles of Incorporation or Bylaws in effect on the tenth day after the acquisition
of a controlling interest were to provide otherwise, these laws would apply to us if we were to (i) have 200 or more stockholders
of record (at least 100 of which have addresses in the State of Nevada appearing on our stock ledger) and (ii) do business in
the State of Nevada directly or through an affiliated corporation. As of the date of this prospectus, we have less than 100 record
stockholders with Nevada addresses. However, if these laws were to apply to us, they might discourage companies or persons interested
in acquiring a significant interest in or control of the company, regardless of whether such acquisition may be in the interest
of our shareholders.
Our articles of incorporation
and/or bylaws provide that:
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our board of directors is classified into three
classes of equal (or roughly equal) size, with all directors serving for a two-year term and the directors of only one class
being elected at each annual meeting of stockholders, so that the terms of the classes of directors are “staggered”;
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the authorized number of directors can be changed
only by resolution of our board of directors;
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our bylaws may be amended or repealed by our board
of directors or our stockholders;
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our board of directors will be authorized to issue,
without stockholder approval, preferred stock, the rights of which will be determined at the discretion of the board of directors
and that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer
to prevent an acquisition that our board of directors does not approve;
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our stockholders must comply with advance notice
provisions to bring business before or nominate directors for election at a stockholder meeting.
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Potential Effects of Authorized but
Unissued Stock
We have shares of
Common Stock and preferred stock available for future issuance without stockholder approval. We may utilize these additional shares
for a variety of corporate purposes, including future public offerings to raise additional capital, to facilitate corporate acquisitions
or payment as a dividend on the capital stock.
The existence of unissued
and unreserved Common Stock and preferred stock may enable our board of directors to issue shares to persons friendly to current
management or to issue preferred stock with terms that could render more difficult or discourage a third-party attempt to obtain
control of us by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of our management.
In addition, the board of directors has the discretion to determine designations, rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of each series
of preferred stock, all to the fullest extent permissible under the Nevada Revised Statutes and subject to any limitations set
forth in our certificate of incorporation. The purpose of authorizing the board of directors to issue preferred stock and to determine
the rights and preferences applicable to such preferred stock is to eliminate delays associated with a stockholder vote on specific
issuances. The issuance of preferred stock, while providing desirable flexibility in connection with possible financings, acquisitions
and other corporate purposes, could have the effect of making it more difficult for a third-party to acquire, or could discourage
a third-party from acquiring, a majority of our outstanding voting stock.
UNDERWRITING
We have entered into
an underwriting agreement with the underwriters named below with respect to the shares of our Common Stock and related Warrants
and Pre-Funded Warrants and related Warrants subject to this offering. Subject to certain conditions, we have agreed to sell to
the underwriters, and the underwriters have agreed to purchase, the number of shares of our Common Stock, Pre-Funded Warrants
and corresponding Warrants provided below opposite each underwriter’s name. Maxim Group LLC is acting as the representative
of the underwriters (the “Representative”).
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Underwriter
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Number of
Shares
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Number of
Pre-Funded
Warrants
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Number of
Warrants
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Maxim Group LLC
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Total
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The underwriters (if
more than one) are offering the shares of our Common Stock and related Warrants and Pre-Funded Warrants and related Warrants subject
to their acceptance of our Common Stock, the Pre-Funded Warrants and the Warrants from us and subject to prior sale. The underwriting
agreement provides that the obligations of the underwriters to pay for and accept delivery of the shares of our Common Stock and
related Warrants and Pre-Funded Warrants and related Warrants offered by this prospectus are subject to the approval of certain
legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the
shares of our Common Stock and related Warrants and Pre-Funded Warrants and related Warrants if any such shares of our Common
Stock and related Warrants or Pre-Funded Warrants and related Warrants are taken.
We have granted the
underwriters an option for a period of 45 days from the date of this prospectus to purchase up to an additional
shares of Common Stock and/or Warrants to purchase
shares of Common Stock at the public offering price, less the underwriting discount.
Underwriter Compensation
We have agreed to
pay the underwriters an aggregate fee equal to 7.0% of the gross proceeds of this offering. We have also agreed to pay the underwriters
an accountable expense allowance for certain of the underwriter’s expenses relating to the offering up to a maximum aggregate
amount of $90,000, including the underwriter’s legal fees incurred in this offering.
We have paid an expense
deposit of $25,000 to the Representative, which will be applied against actual, out-of-pocket accountable expenses that will be
paid by us to the underwriters in connection with this offering. Any portion of the $25,000 expense deposit paid to The Representative
will be returned to us to the extent that offering expenses are not actually incurred by the underwriters in compliance with FINRA
Rule 5110(f)(2)(C).
Discounts and Expenses
The underwriters have
advised us that they propose to offer the shares of our Common Stock, Pre-Funded Warrants and related Warrants to the public at
the respective public offering price set forth on the cover page of this prospectus and to certain dealers at that price less
a concession not in excess of $ per share of our Common Stock
and related Warrant or $ per Pre-Funded Warrants and related Warrants. After
this offering, the public offering price and concession to dealers may be changed by the Representative. No such change shall
change the amount of proceeds to be received by us as set forth on the cover page of this prospectus. The shares of our Common
Stock, Pre-Funded Warrants and related Warrants are offered by the underwriters as stated herein, subject to receipt and acceptance
by them and subject to their right to reject any order in whole or in part. The underwriters have informed us that they do not
intend to confirm sales to any accounts over which they exercise discretionary authority.
The following table
shows the public offering price, underwriting discount payable to the underwriters by us and proceeds before expenses to us, assuming
both no exercise and full exercise of the underwriter’s option to purchase additional shares of Common Stock and/or Warrants.
The underwriting commissions are equal to the combined public offering price per share, of Common Stock and accompanying Warrant
and per Pre-Funded Warrant and accompanying Warrant, less the amount per share the underwriters pay us for the shares of Common
Stock, Pre-Funded Warrants and Warrants:
|
|
|
Per
Share and
Accompanying
Warrant
|
|
|
Per
Pre-
Funded
Warrant and
Accompanying
Warrant
|
|
|
Total without
Over-
Allotment
Option
|
|
|
Total with
Over-
Allotment
Option(1)
|
|
|
Public offering price
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Underwriting discount (7.0%)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Proceeds, before expenses to us (2)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
(1) Assumes exercise of the underwriter’s
over-allotment to purchase shares of Common Stock and Warrants.
(2) Excluding the proceeds, if any, from
the exercise of the Pre-Funded Warrants and Warrants.
Indemnification
We have agreed to
indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.
Lock-up Agreements
We, our officers and
directors and the holders of three percent (3.0%) or more of the outstanding shares of our Common Stock as of the effective date
of this offering, have agreed, subject to limited exceptions, for a period of 180 days after the closing of this offering, not
to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of, directly
or indirectly any shares of Common Stock or any securities convertible into or exchangeable for our Common Stock either owned
as of the date of the underwriting agreement or thereafter acquired without the prior written consent of the Representative. The
Representative, in its sole discretion and at any time or from time to time before the termination of the lock-up period, without
notice, release all or any portion of the securities subject to lock-up agreements.
Underwriter’s Warrants
We have agreed to
issue to the Representative underwriter’s warrants (the “Underwriter’s Warrants” or the “Representative’s
Warrants”) to purchase up to a total of shares of our Common Stock (7% of the shares of Common Stock sold in this offering,
excluding the over-allotment). The Underwriter’s Warrants will be exercisable at any time, and from time to time, in whole
or in part, during the four and a half year period commencing 180 days from the effective date of the registration statement of
which this prospectus is a part, which period shall not extend further than five years from the effective date of the registration
statement of which this prospectus is a part in compliance with FINRA Rule 5110(f)(2)(G)(i). The Underwriter’s Warrants
are exercisable at a per share price equal to $ per share, or 120% of the public offering price per share of Common Stock issued
and sold in this offering (based on the public offering price of $ per share). The Underwriter’s Warrants have been deemed
compensation by FINRA and are therefore subject to a 180 day lock-up pursuant to Rule 5110(g)(1) of FINRA. The Representative
(or permitted assignees under Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these Underwriter’s
Warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call
transaction that would result in the effective economic disposition of the Underwriter’s Warrants or the underlying securities
for a period of 180 days from the effective date of the registration statement of which this prospectus is a part. In addition,
the Underwriter’s Warrants provide for piggyback registration rights upon request, in certain cases. The piggyback registration
right provided will not be greater than seven years from the effective date of this offering in compliance with FINRA Rule 5110(f)(2)(G)(v).
We will bear all fees and expenses attendant to registering the securities issuable on exercise of the Underwriter’s Warrants
other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon
exercise of the Underwriter’s Warrants may be adjusted in certain circumstances including in the event of a stock dividend,
extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation. However, the warrant exercise price
or underlying shares will not be adjusted for issuances of shares of Common Stock at a price below the warrant exercise price.
Right of First Refusal
Subject to the closing
of this offering and certain conditions set forth in the underwriting agreement, until nine (9) months from the closing date of
this offering, the Representative shall have a right of first refusal to act as lead managing underwriter and book runner or minimally
as a co-lead manager and co-book runner and/or co-lead placement agent with at least 50% of the economics for any and all future
public or private equity, equity-linked or debt (excluding commercial bank debt) offerings for us, or any of our successors or
subsidiaries, on terms customary to the Representative during such nine (9) month period.
Price Stabilization, Short Positions
and Penalty Bids
In connection with
this offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions
and penalty bids in accordance with Regulation M under the Exchange Act:
|
|
•
|
Stabilizing transactions permit bids to purchase
the underlying security so long as the stabilizing bids do not exceed a specified maximum.
|
|
|
•
|
Over-allotment involves sales by the underwriters
of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position.
The short position may be either a covered short position or a naked short position. In a covered short position, the number
of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment
option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment
option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or
purchasing shares in the open market.
|
|
|
•
|
Syndicate covering transactions involve purchases
of the Common Stock in the open market after the distribution has been completed in order to cover syndicate short positions.
In determining the source of shares to close out the short position, the underwriters will consider, among other things, the
price of shares available for purchase in the open market as compared to the price at which they may purchase shares through
the over-allotment option. A naked short position occurs if the underwriters sell more shares than could be covered by the
over-allotment option. This position can only be closed out by buying shares in the open market. A naked short position is
more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares
in the open market after pricing that could adversely affect investors who purchase in this offering.
|
|
|
•
|
Penalty bids permit the underwriters to reclaim
a selling concession from a syndicate member when the Common Stock originally sold by the syndicate member is purchased in
a stabilizing or syndicate covering transaction to cover syndicate short positions.
|
These stabilizing
transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price
of our Common Stock or preventing or retarding a decline in the market price of the Common Stock. As a result, the price of our
Common Stock may be higher than the price that might otherwise exist in the open market. These transactions may be discontinued
at any time.
Neither we nor the
underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described
above may have on the price of our shares of Common Stock. In addition, neither we nor the underwriters make any representation
that the underwriters will engage in these transactions or that any transaction, if commenced, will not be discontinued without
notice.
Electronic Distribution
This prospectus in
electronic format may be made available on websites or through other online services maintained by the underwriters, or by their
affiliates. Other than this prospectus in electronic format, the information on the underwriter’s websites and any information
contained in any other websites maintained by the underwriters is not part of this prospectus or the registration statement of
which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriters in their capacity as underwriters,
and should not be relied upon by investors.
Other
From time to time,
the underwriters and/or their affiliates have provided, and may in the future provide, various investment banking and other financial
services for us for which services it has received and, may in the future receive, customary fees. Except for the services provided
in connection with this offering and other than as described below, the underwriters have not provided any investment banking
or other financial services during the 180-day period preceding the date of this prospectus.
Notice to Prospective Investors
in Canada
This prospectus constitutes
an “exempt offering document” as defined in and for the purposes of applicable Canadian securities laws. No prospectus
has been filed with any securities commission or similar regulatory authority in Canada in connection with the offer and sale
of the securities. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon this
prospectus or on the merits of the securities and any representation to the contrary is an offence.
Canadian investors
are advised that this prospectus has been prepared in reliance on section 3A.3 of National Instrument 33-105 Underwriting
Conflicts (“NI 33-105”). Pursuant to section 3A.3 of NI 33-105, this prospectus is exempt from the requirement
that the Company and the underwriter(s) provide Canadian investors with certain conflicts of interest disclosure pertaining to
“connected issuer” and/or “related issuer” relationships that may exist between the Company and the underwriter(s)
as would otherwise be required pursuant to subsection 2.1(1) of NI 33-105.
Resale Restrictions
The offer and sale
of the securities in Canada is being made on a private placement basis only and is exempt from the requirement that the Company
prepares and files a prospectus under applicable Canadian securities laws. Any resale of securities acquired by a Canadian investor
in this offering must be made in accordance with applicable Canadian securities laws, which may vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with Canadian prospectus requirements, pursuant to a statutory
exemption from the prospectus requirements, in a transaction exempt from the prospectus requirements or otherwise under a discretionary
exemption from the prospectus requirements granted by the applicable local Canadian securities regulatory authority. These resale
restrictions may under certain circumstances apply to resales of the securities outside of Canada.
Representations of Purchasers
Each Canadian investor
who purchases securities will be deemed to have represented to the Company, the underwriters and to each dealer from whom a purchase
confirmation is received, as applicable, that the investor is (i) purchasing as principal, or is deemed to be purchasing as principal
in accordance with applicable Canadian securities laws, for investment only and not with a view to resale or redistribution; (ii)
an “accredited investor” as such term is defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions or,
in Ontario, as such term is defined in section 73.3(1) of the Securities Act (Ontario); and (iii) is a “permitted
client” as such term is defined in section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions
and Ongoing Registrant Obligations.
Taxation and Eligibility for Investment
Any discussion of
taxation and related matters contained in this prospectus does not purport to be a comprehensive description of all of the tax
considerations that may be relevant to a Canadian investor when deciding to purchase the securities and, in particular, does not
address any Canadian tax considerations. No representation or warranty is hereby made as to the tax consequences to a resident,
or deemed resident, of Canada of an investment in the securities or with respect to the eligibility of the securities for investment
by such investor under relevant Canadian federal and provincial legislation and regulations.
Rights of Action for Damages or Rescission
Securities legislation
in certain of the Canadian jurisdictions provides certain purchasers of securities pursuant to an offering memorandum (such as
this prospectus), including where the distribution involves an “eligible foreign security” as such term is defined
in Ontario Securities Commission Rule 45-501 Ontario Prospectus and Registration Exemptions and in Multilateral
Instrument 45-107 Listing Representation and Statutory Rights of Action Disclosure Exemptions, as applicable, with
a remedy for damages or rescission, or both, in addition to any other rights they may have at law, where the offering memorandum,
or other offering document that constitutes an offering memorandum, and any amendment thereto, contains a “misrepresentation”
as defined under applicable Canadian securities laws. These remedies, or notice with respect to these remedies, must be exercised
or delivered, as the case may be, by the purchaser within the time limits prescribed under, and are subject to limitations and
defenses under, applicable Canadian securities legislation. In addition, these remedies are in addition to and without derogation
from any other right or remedy available at law to the investor.
Language of Documents
Upon receipt of this
document, each Canadian investor hereby confirms that it has expressly requested that all documents evidencing or relating in
any way to the sale of the securities described herein (including for greater certainty any purchase confirmation or any notice)
be drawn up in the English language only. Par la réception de ce document, chaque investisseur canadien confirme
par les présentes qu’il a expressément exigé que tous les documents faisant foi ou se rapportant de
quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes (incluant,
pour plus de certitude, toute confirmation d’achat ou tout avis) soient rédigés en anglais seulement.
Offers Outside the United States
Other than in the
United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered
by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may
not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection
with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of
this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered
by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
LEGAL MATTERS
McCarter & English,
LLP, East Brunswick, New Jersey will pass upon certain legal matters related to the issuance and sale of the Pre-funded Warrants,
Warrants and Underwriter’s Warrant offered on our behalf and Parsons Behle & Latimer, Reno, Nevada will pass upon certain
legal matters relating to the issuance and sale of the Common Stock offered hereby on our behalf. Gracin & Marlow, LLP, New
York, New York is acting as counsel to the underwriters in this offering
EXPERTS
The balance sheets
of NanoViricides, Inc. as of June 30, 2019 and 2018, and the related statements of operations, changes in stockholders’
equity, and cash flows for each of the years in the three-year period ended June 30, 2019, have been audited by EisnerAmper LLP,
independent registered public accounting firm, as stated in their report, which is incorporated herein, which report includes
an explanatory paragraph about the existence of substantial doubt concerning the Company’s ability to continue as a going
concern. Such financial statements have been incorporated herein in reliance on the report of such firm given upon their authority
as experts in accounting and auditing.
MARKET AND INDUSTRY
DATA
Unless otherwise indicated,
information contained in this prospectus concerning the pharmaceutical industry, including our market opportunity, is based on
information from independent industry analysts, third-party sources and management estimates. Management estimates are derived
from publicly-available information released by independent industry analysts and third-party sources, as well as data from our
internal research, and are based on assumptions made by us based on such data and our knowledge of such industry and market, which
we believe to be reasonable. In addition, while we believe the market opportunity information included in this prospectus is generally
reliable and is based on reasonable assumptions, such data involves risks and uncertainties and are subject to change based on
various factors, including those discussed under the heading “Risk Factors.”
WHERE YOU CAN FIND
MORE INFORMATION
We have filed with
the SEC a registration statement on Form S-1 under the Securities Act with respect to the securities being offered by
this prospectus. This prospectus does not contain all of the information in the registration statement and its exhibits. For further
information with respect to us and the Common Stock offered by this prospectus, we refer you to the registration statement and
its exhibits. Statements contained in this prospectus as to the contents of any contract, agreement, or any other document referred
to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an
exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.
You can read our SEC
filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov. You may also request
a copy of these filings, at no cost, by writing us at 1 Controls Drive, Shelton, Connecticut 06484 or telephoning us at (203) 937-6137.
We are subject to
the information and periodic reporting requirements of the Exchange Act, and we file periodic reports, proxy statements and other
information with the SEC. These periodic reports, proxy statements and other information are available for viewing at the website
of the SEC referred to above. We maintain a website at www.nanoviricides.com. You may access our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable
after such material is electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed
through, our website is not incorporated by reference in, and is not part of, this prospectus.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION OR SECURITIES ACT LIABILITIES
Under our Articles
of Incorporation, our directors will not be personally liable to us or to our shareholders for monetary damages for any breach
of their fiduciary duty as a director, except liability for the following:
|
|
·
|
Any breach of their duty of loyalty to our Company
or to our stockholders.
|
|
|
·
|
Acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law.
|
|
|
·
|
Unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in the Nevada Revised Statutes.
|
|
|
·
|
Any transaction from which the director derived
an improper personal benefit.
|
We believe that these
limitation of liability provisions are necessary to attract and retain qualified persons as directors and officers.
The limitation of
liability provisions in our Articles of Incorporation may discourage shareholders from bringing a lawsuit against our directors
for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers,
even though an action, if successful, might benefit us and other stockholders.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
PART I. FINANCIAL
INFORMATION
Item 1. Financial Statements
NanoViricides, Inc.
Index to the Financial Statements
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of
NanoViricides, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets
of NanoViricides, Inc. (the "Company") as of June 30, 2019 and 2018, and the related statements of operations, changes
in stockholders' equity, and cash flows for each of the years in the three-year period ended June 30, 2019, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of June 30, 2019 and 2018, and the results of its operations and
its cash flows for each of the years in the three-year period ended June 30, 2019, in conformity with accounting principles generally
accepted in the United States of America.
Going Concern
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements,
the Company’s recurring losses from operations and negative cash flows from operating activities raise substantial doubt
about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note
2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we
are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
We have served as the Company's auditor
since 2014.
|
/s/ EISNERAMPER LLP
|
|
|
Iselin, New Jersey
|
|
August 23, 2019, except for Note 1 (Reverse Stock Split)
as to which date is September 25, 2019
|
|
NanoViricides, Inc.
Balance Sheets
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,555,207
|
|
|
$
|
7,081,771
|
|
|
Prepaid expenses
|
|
|
270,214
|
|
|
|
240,257
|
|
|
Total Current Assets
|
|
|
2,825,421
|
|
|
|
7,322,028
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
14,092,177
|
|
|
|
14,018,383
|
|
|
Accumulated depreciation
|
|
|
(3,864,930
|
)
|
|
|
(3,177,290
|
)
|
|
Property and equipment, net
|
|
|
10,227,247
|
|
|
|
10,841,093
|
|
|
|
|
|
|
|
|
|
|
|
|
TRADEMARK AND PATENTS
|
|
|
|
|
|
|
|
|
|
Trademark and patents
|
|
|
458,954
|
|
|
|
458,954
|
|
|
Accumulated amortization
|
|
|
(92,296
|
)
|
|
|
(84,025
|
)
|
|
Trademark and patents, net
|
|
|
366,658
|
|
|
|
374,929
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
|
Security deposits
|
|
|
3,515
|
|
|
|
3,515
|
|
|
Service agreements
|
|
|
25,672
|
|
|
|
4,647
|
|
|
Other Assets
|
|
|
29,187
|
|
|
|
8,162
|
|
|
Total Assets
|
|
$
|
13,448,513
|
|
|
$
|
18,546,212
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
309,893
|
|
|
$
|
223,339
|
|
|
Accounts payable – related parties
|
|
|
823,783
|
|
|
|
107,468
|
|
|
Derivative liability – warrants
|
|
|
1,645,606
|
|
|
|
298,092
|
|
|
Accrued expenses
|
|
|
68,871
|
|
|
|
253,049
|
|
|
Total Current Liabilities
|
|
|
2,848,153
|
|
|
|
881,948
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY:
|
|
|
|
|
|
|
|
|
|
Series A convertible preferred stock, $0.001
par value, 425,000 shares designated, 255,714 and 226,581 shares issued and outstanding, at June 30, 2019 and 2018, respectively
|
|
|
256
|
|
|
|
227
|
|
|
Common stock, $0.001 par value; 7,500,000
shares authorized, 3,844,921, and 3,458,591 shares issued and outstanding at June 30, 2019 and 2018, respectively
|
|
|
3,845
|
|
|
|
3,459
|
|
|
Additional paid-in capital
|
|
|
102,712,845
|
|
|
|
101,352,724
|
|
|
Accumulated deficit
|
|
|
(92,116,586
|
)
|
|
|
(83,692,146
|
)
|
|
Total Stockholders' Equity
|
|
|
10,600,360
|
|
|
|
17,664,264
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
13,448,513
|
|
|
$
|
18,546,212
|
|
See accompanying notes to the financial
statements
NanoViricides, Inc.
Statements of Operations
|
|
|
Year Ended
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
5,921,720
|
|
|
$
|
5,913,720
|
|
|
$
|
6,565,966
|
|
|
General and administrative
|
|
|
2,737,962
|
|
|
|
3,411,449
|
|
|
|
3,034,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
8,659,682
|
|
|
|
9,325,169
|
|
|
|
9,600,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(8,659,682
|
)
|
|
|
(9,325,169
|
)
|
|
|
(9,600,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
55,497
|
|
|
|
100,429
|
|
|
|
60,955
|
|
|
Interest expense on convertible debentures
|
|
|
-
|
|
|
|
(185,274
|
)
|
|
|
(780,767
|
)
|
|
Loss on extinguishment of debt
|
|
|
-
|
|
|
|
(1,348,247
|
)
|
|
|
(332,524
|
)
|
|
Discount on convertible debentures
|
|
|
-
|
|
|
|
(359,214
|
)
|
|
|
(1,347,748
|
)
|
|
Change in fair value of derivatives
|
|
|
179,745
|
|
|
|
2,554,020
|
|
|
|
1,696,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
|
235,242
|
|
|
|
761,714
|
)
|
|
|
(703,766
|
)
|
|
LOSS BEFORE INCOME TAX PROVISION
|
|
|
(8,424,440
|
)
|
|
|
(8,563,455
|
)
|
|
|
(10,304,490
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX PROVISION
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(8,424,440
|
)
|
|
$
|
(8,563,455
|
)
|
|
$
|
(10,304,490
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share- basic
and diluted
|
|
$
|
(2.35
|
)
|
|
$
|
(2.64
|
)
|
|
$
|
(3.43
|
)
|
|
Weighted average common shares – basic and diluted
|
|
|
3,590,070
|
|
|
|
3,246,043
|
|
|
|
3,005,143
|
|
See accompanying
notes to the financial statements.
NanoViricides, Inc.
Statement of Changes in Stockholders' Equity
For the Period from July 1, 2016 through June
30, 2019
|
|
|
Series A Preferred
Stock:
Par $0.001
|
|
|
Common Stock: Par
$0.001
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2016
|
|
|
204,555
|
|
|
$
|
205
|
|
|
|
2,908,985
|
|
|
$
|
2,909
|
|
|
$
|
87,869,301
|
|
|
$
|
(64,824,201
|
)
|
|
$
|
23,048,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Preferred stock issued for employee stock compensation
|
|
|
12,888
|
|
|
|
13
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,272,097
|
|
|
|
-
|
|
|
|
1,272,110
|
|
|
Common stock issued for consulting and legal services rendered
|
|
|
-
|
|
|
|
-
|
|
|
|
8,224
|
|
|
|
8
|
|
|
|
201,305
|
|
|
|
-
|
|
|
|
201,313
|
|
|
Warrants issued to Scientific Advisory Board
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,948
|
|
|
|
-
|
|
|
|
37,948
|
|
|
Common stock issued for employee compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
3,572
|
|
|
|
4
|
|
|
|
82,141
|
|
|
|
-
|
|
|
|
82,145
|
|
|
Common stock issued for Series B debentures
|
|
|
-
|
|
|
|
-
|
|
|
|
216,770
|
|
|
|
217
|
|
|
|
5.332.307
|
|
|
|
-
|
|
|
|
5,332,524
|
|
|
Common stock issued for debenture interest
|
|
|
-
|
|
|
|
-
|
|
|
|
26,094
|
|
|
|
26
|
|
|
|
607,152
|
|
|
|
-
|
|
|
|
607,178
|
|
|
Common stock issued for Directors fees
|
|
|
-
|
|
|
|
-
|
|
|
|
1,697
|
|
|
|
2
|
|
|
|
44,998
|
|
|
|
-
|
|
|
|
45,000
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,304,490
|
)
|
|
|
(10,304,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2017
|
|
|
217,443
|
|
|
$
|
218
|
|
|
|
3,165,342
|
|
|
$
|
3,166
|
|
|
$
|
95,447,249
|
|
|
$
|
(75,128,691
|
)
|
|
$
|
20,321,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Preferred stock issued for employee stock compensation
|
|
|
2,888
|
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
524,255
|
|
|
|
-
|
|
|
|
524,258
|
|
|
Series A Preferred stock forfeited in Separation Agreement
|
|
|
(1,250
|
)
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
Series A Preferred stock issued for Series C debenture
|
|
|
7,500
|
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
314,335
|
|
|
|
|
|
|
|
314,343
|
|
|
Common stock issued for consulting and legal services rendered
|
|
|
-
|
|
|
|
-
|
|
|
|
12,188
|
|
|
|
12
|
|
|
|
156,178
|
|
|
|
-
|
|
|
|
156,190
|
|
|
Warrants issued to Scientific Advisory Board
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,770
|
|
|
|
-
|
|
|
|
16,770
|
|
|
Warrants issued as severance payment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,500
|
|
|
|
-
|
|
|
|
53,500
|
|
|
Common stock issued for employee compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
3,572
|
|
|
|
4
|
|
|
|
65,712
|
|
|
|
-
|
|
|
|
65,716
|
|
|
Common stock issued for Series C debenture
|
|
|
-
|
|
|
|
-
|
|
|
|
275,000
|
|
|
|
275
|
|
|
|
4.729.725
|
|
|
|
-
|
|
|
|
4,730,000
|
|
|
Common stock issued for Directors fees
|
|
|
-
|
|
|
|
-
|
|
|
|
2,489
|
|
|
|
2
|
|
|
|
44,998
|
|
|
|
-
|
|
|
|
45,000
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,563,455
|
)
|
|
|
(8,563,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2018
|
|
|
226,581
|
|
|
$
|
227
|
|
|
|
3,458,591
|
|
|
$
|
3,459
|
|
|
$
|
101,352,724
|
|
|
$
|
(83,692,146
|
)
|
|
$
|
17,664,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Preferred stock issued for employee stock compensation
|
|
|
29,138
|
|
|
|
29
|
|
|
|
-
|
|
|
|
-
|
|
|
|
237,839
|
|
|
|
-
|
|
|
|
237,868
|
|
|
Net proceeds from issuance of common stock in connection with equity financing
|
|
|
-
|
|
|
|
|
|
|
|
347,223
|
|
|
|
347
|
|
|
|
822,394
|
|
|
|
-
|
|
|
|
822,741
|
|
|
Options issued for employee compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,920
|
|
|
|
|
|
|
|
11,920
|
|
|
Common stock issued for consulting and legal services rendered
|
|
|
-
|
|
|
|
-
|
|
|
|
28,210
|
|
|
|
28
|
|
|
|
208,932
|
|
|
|
-
|
|
|
|
208,960
|
|
|
Warrants issued to Scientific Advisory Board
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,475
|
|
|
|
-
|
|
|
|
5,475
|
|
|
Common stock issued for employee compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
3,572
|
|
|
|
4
|
|
|
|
28,568
|
|
|
|
-
|
|
|
|
28,572
|
|
|
Common stock issued for Directors fees
|
|
|
-
|
|
|
|
-
|
|
|
|
7,325
|
|
|
|
7
|
|
|
|
44993
|
|
|
|
-
|
|
|
|
45,000
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,424,440
|
)
|
|
|
(8,424,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
|
|
255,714
|
|
|
$
|
256
|
|
|
|
3,844,921
|
|
|
$
|
3,845
|
|
|
$
|
102,712,845
|
|
|
$
|
(92,116,586
|
)
|
|
$
|
10,600,360
|
|
See accompanying notes to the financial
statements
NanoViricides, Inc.
Statements of Cash Flows
|
|
|
Year
Ended June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(8,424,440
|
)
|
|
$
|
(8,563,455
|
)
|
|
$
|
(10,304,490
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash
used in operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares issued as compensation
|
|
|
237,868
|
|
|
|
524,258
|
|
|
|
1,272,110
|
|
|
Common shares issued as compensation
and for services
|
|
|
282,532
|
|
|
|
266,906
|
|
|
|
328,458
|
|
|
Common shares issued for debenture interest
|
|
|
-
|
|
|
|
60,274
|
|
|
|
607,178
|
|
|
Options granted as compensation
|
|
|
11,920
|
|
|
|
-
|
|
|
|
-
|
|
|
Warrants granted to Scientific Advisory
Board
|
|
|
5,475
|
|
|
|
16,770
|
|
|
|
37,948
|
|
|
Warrants granted for severance agreement
|
|
|
-
|
|
|
|
53,500
|
|
|
|
-
|
|
|
Depreciation
|
|
|
687,640
|
|
|
|
671,789
|
|
|
|
654,685
|
|
|
Amortization
|
|
|
8,271
|
|
|
|
8,269
|
|
|
|
8,269
|
|
|
Change in fair value of derivative liability
|
|
|
(179,745
|
)
|
|
|
(2,554,020
|
)
|
|
|
(1,696,318
|
)
|
|
Amortization of debt discount convertible
debentures
|
|
|
-
|
|
|
|
359,214
|
|
|
|
1,347,748
|
|
|
Loss on extinguishment of debt
|
|
|
-
|
|
|
|
1,348,247
|
|
|
|
332,524
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(29,957
|
)
|
|
|
(50,091
|
)
|
|
|
29,292
|
|
|
Other long term assets
|
|
|
(21,025
|
)
|
|
|
50,767
|
|
|
|
40,612
|
|
|
Accounts payable
|
|
|
86,554
|
|
|
|
87,553
|
|
|
|
39,262
|
|
|
Accounts payable - related parties
|
|
|
716,315
|
|
|
|
(233,227
|
)
|
|
|
(426,759
|
)
|
|
Accrued expenses
|
|
|
(184,178
|
)
|
|
|
219,045
|
|
|
|
(1,598
|
)
|
|
Deferred interest payable
|
|
|
-
|
|
|
|
(41,667
|
)
|
|
|
(166,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(6,802,770
|
)
|
|
|
(7,775,868
|
)
|
|
|
(7,897,746
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(73,794
|
)
|
|
|
(241,822
|
)
|
|
|
(164,978
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from issuance of common stock and warrants
|
|
|
2,350,000
|
|
|
|
-
|
|
|
|
-
|
|
|
Repayment of Series B Debentures payable
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,000,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED
BY (USED IN) FINANCING ACTIVITIES
|
|
|
2,350,000
|
|
|
|
-
|
|
|
|
(1,000,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
(4,526,564
|
)
|
|
|
(8,017,690
|
)
|
|
|
(9,062,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
7,081,771
|
|
|
|
15,099,461
|
|
|
|
24,162,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
2,555,207
|
|
|
$
|
7,081,771
|
|
|
$
|
15,099,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
166,667
|
|
|
$
|
173,589
|
|
|
Income tax paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON CASH FINANCING AND INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for debenture payment
|
|
$
|
-
|
|
|
$
|
230,250
|
|
|
$
|
250,000
|
|
|
Common stock issued for deferred interest
|
|
$
|
-
|
|
|
$
|
6,250
|
|
|
$
|
-
|
|
|
Series A Preferred stock issued for Series
C debenture
|
|
$
|
-
|
|
|
$
|
15,718
|
|
|
$
|
-
|
|
|
Stock warrants classified as a liability issued in connection
with registered direct offering
|
|
$
|
76,363
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the financial
statements
NanoViricides, Inc.
June 30, 2019, 2018 and 2017
Notes to the Financial Statements
Note 1 – Organization, Nature
of Business and Reverse Stock Split
Organization and Nature of Business
NanoViricides, Inc. (the “Company”)
is a nano-biopharmaceutical research and development company specializing in the discovery, development, and commercialization
of drugs to combat viral infections using its unique and novel nanomedicines technology. NanoViricides is also unique in the bio-pharma
field in that it possesses its own state of the art facilities for the design, synthesis, analysis and characterization of the
nanomedicines that we develop, as well as for production scale-up, and c-GMP-like production in quantities needed for human clinical
trials, where our design, development, and production work is performed. The biological studies such as the effectiveness, safety,
bio-distribution and Pharmacokinetics/Pharmacodynamics on our drug candidates are performed by external collaborators and contract
organizations.
We are a company with
several drugs in various stages of early development. In our lead antiviral program against herpes viruses, i.e. the HerpeCide™
program alone, we have drug candidates against at least five indications at different stages of development. Of these, the Company
is advancing the shingles drug candidate towards human clinical trials. The IND-enabling Safety/Toxicology studies required for
doing so have begun as of the end of December 2018 at the contract research organization (“CRO”) BASi, Indiana. Typically
these studies may last six to nine months. If successful, the Company intends to file an IND after receiving a formal report on
these studies from BASi. In addition, our drug candidates against HSV-1 “cold sores” and HSV-2 “genital herpes”
are in advanced studies and are expected to follow the shingles drug candidate into human clinical trials. Shingles in adults
and chicken pox in children is caused by the same virus, namely VZV (Varicella-zoster virus, aka HHV-3 or human herpesvirus-3).
There are estimated to be approximately 120,000-150,000 annual chickenpox cases in the USA in the post-vaccination-era, i.e. since
childhood vaccination with the live attenuated varicella virus Oka strain has become standard. In addition, we have drugs in development
against all influenzas in our FluCide™ program, as well as drug candidates against HIV/AIDS, Dengue, Ebola/Marburg, and
other viruses.
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 broad, exclusive licenses. The first license agreement we executed with TheraCour
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. Pursuant to the Additional
License Agreement, the Company was granted exclusive licenses 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. We hold exclusive licenses for developing drugs against several different viruses from
TheraCour, including HSV-1 and HSV-2. In addition, we and TheraCour have signed a Memorandum of understanding of the terms of
a license for VZV (Shingles, Chicken pox virus) from TheraCour.
Reverse Stock Split
On September 24, 2019 (the “Effective
Date”), the Company effected a reverse stock split of its outstanding shares of common stock and shares
of preferred stock at a ratio of one-for-twenty (the “Reverse Stock Split”). The Reverse Stock Split,
which was approved by the Company’s Board of Directors under authority granted under the laws of the State of Nevada, was
consummated pursuant to a Certificate of Amendment filed with the Secretary of State of Nevada on September 23, 2019 (the “Certificate
of Amendment”). Unless the context otherwise requires, all references in these Financial Statements to shares of the Company’s
common stock and series A preferred stock, including prices per share of its common stock and series A preferred stock, reflect
the Reverse Stock Split. Fractional shares were not issued, and the final number of shares were rounded
up to the next whole share.
Note 2 – Liquidity and Going Concern
The Company’s financial statements
have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization
of assets and liquidation of liabilities in the normal course of business. As reflected in the financial statements, the Company
has an accumulated deficit at June 30, 2019 of approximately $92.1 million and a net loss of approximately $8.4 million and net
cash used in operating activities of approximately $6.8 million for the fiscal year then ended. In addition, the Company has not
generated any revenues and no revenues are anticipated in the foreseeable future. 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 June 30, 2019, the Company had available cash and cash equivalents of approximately
$2.6 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management adjusted its planned expenditures,
activities, and programs, in accordance with budgetary constraints and in accordance with its expectations of obtaining additional
financing.
The Company has made several adjustments
to its past expenditures in the ensuing annual budget, eliminating several expenses including a reduction in workforce and consultants
to the extent feasible without affecting its program of drug development. In addition, the Company has focused its efforts primarily
on a single lead program to minimize cost outlays, namely, taking the shingles drug candidate against VZV into human clinical
trials. Management’s budget indicates that these changes have freed up sufficient funds to allow for the ensuing costs of
the external advanced IND-enabling studies of this drug candidate. Management has considered several options for financing the
net working capital deficit as well as to obtain additional funds that will be needed for future human clinical trials. The Company
is also evaluating the possibility of obtaining a mortgage on its fully owned cGMP-capable laboratory facility in Shelton, CT,
in order to free up a portion of the fixed capital for usage as liquid working capital.
In addition, the Company believes that
it has several important milestones that it will be achieving in the ensuing year. Management believes that as it achieves these
milestones, the Company would likely experience improvement in the liquidity of the Company’s stock, and would eventually
improve the Company’s ability to raise funds on the public markets at terms that may be favorable to the terms we are offered
at present.
On February 27,
2019, the Company entered into a Securities Purchase Agreement with certain institutional investors, for a registered direct offering.
The Company raised $2,500,000 less placement agents’ fees of $125,000 and placement agent legal fees of $25,000. See Note
9
Management is actively exploring additional
required funding through debt or equity financing pursuant to its plan. There is no assurance that the Company will be successful
in obtaining sufficient financing on terms acceptable to the Company to fund continuing operations. Management believes that as
a result of the management plan, the Company’s existing resources and access to the capital markets will permit the
Company to fund planned operations and expenditures. However, the Company cannot provide assurance that its plans will not change
or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently anticipates.
The accompanying audited financial statements do not include any adjustments that may result from the outcome of such unidentified
uncertainties.
The financial statements do not include
any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 3 – Summary of Significant Accounting Policies
Basis of Presentation
The Company’s financial statements
have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include
all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.
Net Loss per Common Share
Basic net loss per common share is computed
by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss
per common share is computed by dividing net 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, warrants, convertible preferred stock, and convertible debentures.
The following table shows the number
of potentially outstanding dilutive common shares excluded from the diluted net loss per common share calculation, as their effect
were anti-dilutive:
|
|
|
Potentially Outstanding
Dilutive Common Shares
|
|
|
|
|
For
the Years Ended
|
|
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
398,156
|
|
|
|
348,480
|
|
|
Options
|
|
|
5,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
403,156
|
|
|
|
348,480
|
|
The Company has also issued 255,714 shares
of Series A preferred stock to investors and others as of June 30, 2019. 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 of the Company or the Company’s intellectual property. In the absence of a change of
control event, the Series A preferred stock is not convertible into common stock, and does not carry any dividend rights or any
other financial effects. At June 30, 2019, the number of potentially dilutive shares of the Company’s common stock into
which these Series A preferred shares can be converted into is 894,999and is not included in diluted earnings per share since
the shares are contingently convertible only upon a change of control.
The Series B Convertible Debentures were
converted into common stock on February 8, 2017. Series C Convertible Debenture was redeemed for common stock effective November
13, 2017. The Series C Convertible Debenture was excluded from the loss per share calculation for the year ended June 30, 2018
because the impact was anti-dilutive. The Series B and Series C Convertible Debenture were excluded from the loss per share calculation
for the year ended June 30, 2017 because the impact was anti-dilutive.
Use of Estimates
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. The Company bases its estimates on historical experience and on various assumptions that are
believed to be reasonable under the circumstances. The amounts of assets and liabilities reported in the Company’s balance
sheet and the amounts of expenses reported for each of the periods presented are affected by estimates and assumptions, which
are used for, but not limited to, accounting for share-based compensation, accounting for derivatives and accounting for income
taxes. Actual results could differ from those estimates.
Fair Value of Financial Instruments
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.
|
Long-Lived Assets
Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net
cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets and would be charged
to earnings. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market
values and third-party independent appraisals, as considered necessary. The Company has not recorded an impairment charge for
the years ended June 30, 2019, 2018 and 2017.
Cash and Cash Equivalents
The Company considers all highly liquid
instruments with original maturities of three months or less to be cash equivalents.
Property and Equipment
Property and equipment is stated at cost
and depreciated over the estimated useful lives of the assets, using the straight-line method. The Company generally assigns useful
lives of thirty years for assets classified as GMP facility, fifteen years for assets classified as furniture and fixtures, ten
years for assets classified as lab equipment, and five years for assets classified as office equipment. Expenditures for major
additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Upon sale
or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain
or loss is reflected in the statements of operations.
Trademarks and Patents
The Company amortizes the costs of trademarks
and patents on a straight-line basis over their estimated useful lives, the terms of the exclusive licenses and/or agreements,
or the terms of legal lives of the patents, whichever is shorter. Upon becoming fully amortized, the related cost and accumulated
amortization are removed from the accounts.
Research and Development
Research and development expenses consist
primarily of costs associated with the preclinical and/ or clinical trials of drug candidates, compensation and other expenses
for research and development, personnel, supplies and development materials, costs for consultants and related contract research
and facility costs. Expenditures relating to research and development are expensed as incurred.
Stock-Based Compensation
The Company follows the provisions of
ASC 718 – “Stock Compensation”, which requires the measurement of compensation expense for all shared-based
payment awards made to employees and non-employee directors, including employee stock options. Stock-based compensation expense
is based on the grant date fair value estimated in accordance with the provisions of ASC 718 and is generally recognized as an
expense over the requisite service period, net of forfeitures.
The fair value of common stock issued
as employee compensation is the average of the open and close share price on the date the common shares are issued.
The Series A preferred shares are not
traded in any market. The assumptions used to determine the fair value of the Series A preferred shares issued as employee compensation
are presented in Note 9 to the financial statements.
The fair value of each option award is
estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for
inputs are as follows:
|
|
·
|
Expected
term of share options and similar instruments: The expected term of share options and
similar instruments represents the period of time the options and similar instruments
are expected to be outstanding taking into consideration the contractual term of the
instruments and employees’ expected exercise and post-vesting employment termination
behavior into the fair value of the instruments. The Company uses the simplified method
to calculate expected term of share options and similar instruments, as the Company does
not have sufficient historical exercise data to provide a reasonable basis upon which
to estimate the expected term.
|
|
|
·
|
Expected
volatility of the Company’s shares and the method used to estimate it: Expected
volatility is based on the average historical volatility of the Company’s common
stock over the expected term of the option.
|
|
|
·
|
Expected
annual rate of quarterly dividends: The expected dividend yield is based on the Company’s
current dividend yield as the best estimate of projected dividend yield for periods within
the expected term of the option and similar instruments.
|
|
|
·
|
Risk-free
rate(s): The risk-free interest rate is based on the U.S. Treasury yield curve in effect
at the time of grant for periods within the expected term of the option and similar instruments.
|
The Company’s policy is to recognize
compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite
service period for the entire award.
Equity Instruments Issued to Parties
other than Employees for Acquiring Goods or Services
The Company follows the provisions of
“ASC 505 – Equity”, which accounts for equity instruments issued to parties other than employees for acquiring
goods or services. Pursuant to ASC 505, all transactions in which goods or services are the consideration received for the issuance
of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity
instrument issued is the earlier of the date on which the performance is complete or the date at which a commitment for performance
is reached. The assumptions used in determining the fair value of the Series A preferred shares are presented in Note 9 to the
financial statements.
The Company uses the average of the open
and close share price of the Company’s common stock at each measurement date to determine the fair value of the restricted
common stock issued as compensation for goods and services.
The Company has issued securities to acquire
goods or services at or after the delivery of the goods or services for which it contracted. The securities when issued are fully
vested and the Company has recognized such issuances as an immediate expense.
The fair value of share options and similar
instruments is estimated on each measurement date using a Black-Scholes option-pricing valuation model. The ranges of assumptions
for inputs are as follows:
|
|
·
|
Expected
term of share options and similar instruments: The expected term of share options and
similar instruments represents the contractual term of the instruments.
|
|
|
·
|
Expected volatility of the Company’s
shares and the method used to estimate it; Expected volatility is based on the average historical volatility of the Company’s
common stock over the contractual term of the option and similar instruments.
|
|
|
·
|
Expected annual rate of quarterly dividends;
The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend
yield for periods within the contractual term of the option and similar instruments.
|
|
|
·
|
Risk-free rate(s); The risk-free interest rate
is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual term of the option
and similar instruments.
|
Income Tax Provision
The Company uses the asset and liability
method of accounting for deferred income taxes. Deferred income taxes are measured by applying enacted statutory rates to net
operating loss carryforwards and to the differences between the financial reporting and tax bases of assets and liabilities. Deferred
tax assets are reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
The Company recognizes uncertainty in
income taxes in the financial statements using a recognition threshold and measurement attribute of a tax position taken or expected
to be taken in a tax return. The Company applies the “more-likely-than-not” recognition threshold to all tax positions,
commencing at the adoption date of the applicable accounting guidance, which resulted in no unrecognized tax benefits as of such
date. Additionally, there have been no unrecognized tax benefits subsequent to adoption. The Company has opted to classify interest
and penalties that would accrue, if any, according to the provisions of relevant tax law as general and administrative expenses,
in the statements of operations. For the years ended June 30, 2019, 2018 and 2017 there was no such interest or penalty.
Concentrations of Risk
Financial instruments that potentially
subject us to a significant concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains
deposits in federally insured institutions in excess of federally insured limits. The Company does not believe it is exposed to
significant credit risk due to the financial position of the depository institutions in which those deposits are held.
Reclassifications
Certain prior year amounts have been reclassified
for consistency with current year presentation. These reclassifications had no effect on the reported results of operations. The
Company reclassified $1,086,880 and $1,034,258 of expenses for the years ended June 30, 2018 and 2017, respectively, related to
the Company’s laboratory facilities from general and administrative expenses into research and development expenses for
consistency with current year presentation.
Recently Issued Accounting Pronouncements
In June 2018, the FASB issued ASU 2018-07,
“Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share Based Payment Accounting,”
which simplifies the accounting for non-employee share-based payment transactions. The amendments specify that Topic 718 applies
to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s
own operations by issuing share-based payment awards. The standard will be effective for the Company in the first quarter of fiscal
year 2020, although early adoption is permitted. The Company does not expect the adoption of this ASU will have a significant
impact on its financial statements.
In July 2017, the FASB issued Accounting
Standards Update (“ASU”) No. 2017-11. “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity
(Topic 480); Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features, II.
Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain
Mandatorily Redeemable Non-controlling Interests with a Scope Exception (“ASU 2017-11”) ASU 2017-11 revises the guidance
for instruments with down round features in Subtopic 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity,
which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative
accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic
815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round
features are no longer classified as liabilities. ASU 2017-11 is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018, and early adoption is permitted, including adoption in an interim period. ASU
2017-11 provides that upon adoption, an entity may apply this standard retrospectively to outstanding financial instruments with
a down round feature by means of a cumulative-effect adjustment to the opening balance of accumulated deficit in the fiscal year
and interim period adoption. The Company has adopted ASU 2017-11 retrospectively as of January 1, 2019. The adoption of this ASU
did not have any impact on its financial statements.
Note 4 – Related Party Transactions
Related Parties
Related parties with whom the Company
had transactions are:
|
Related
Parties
|
|
Relationship
|
|
|
|
|
|
Anil R. Diwan
|
|
Chairman, President, acting CEO, significant
stockholder and Director
|
|
|
|
|
|
TheraCour Pharma, Inc. (“TheraCour”)
|
|
An entity owned and controlled by a significant
stockholder
|
|
|
|
|
|
Milton Boniuk, MD
|
|
Director (retired July10, 2018) and significant
stockholder
|
Property and Equipment
|
|
|
For the Year Ended
|
|
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
June 30,
2017
|
|
|
During the reporting period, TheraCour acquired property and
equipment on behalf of the Company from third party vendors and sold such property and equipment at cost, to the Company
|
|
$
|
23,666
|
|
|
$
|
30,321
|
|
|
$
|
33,147
|
|
Accounts Payable Related Party
|
|
|
As
of
|
|
|
|
|
June
30,
2019
|
|
|
June
30,
2018
|
|
|
Pursuant to an Exclusive License Agreement we
entered into with TheraCour, the Company was granted exclusive licenses for technologies developed by TheraCour for the virus
types: HIV, HCV, Herpes, Asian (bird) flu, Influenza and rabies. In consideration for obtaining this exclusive license, we
agreed: (1) that TheraCour can charge its costs (direct and indirect) plus no more than 30% of certain direct costs as a development
fee and such development fees shall be due and payable in periodic installments as billed, (2) we will pay $2,000 or actual
costs each month, whichever is higher for other general and administrative expenses incurred by TheraCour on our behalf, (3)
to make royalty payments of 15% (calculated as a percentage of net sales of the licensed drugs) to TheraCour and; (4) to pay
an advance payment equal to twice the amount of the previous months invoice to be applied as a prepayment towards expenses.
On October 2, 2018, the Company entered into an agreement with TheraCour for a waiver of the two months worth of prepaid balance
advance of anticipated invoicing until the filing of an IND and the application of the current advance as a credit against
open invoices. Additionally, TheraCour has agreed to defer $25,000 per month of development fees for twelve months beginning
with July 2018 or until an IND filing by the Company. Accounts payable due TheraCour on the reporting date was
|
|
$
|
823,783
|
|
|
$
|
107,468
|
|
Research and Development Costs Paid
to Related Party
|
|
|
For the Year Ended
|
|
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
June 30,
2017
|
|
|
Development fees and other costs charged by and paid to TheraCour
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 June 30, 2019, 2018 and 2017
|
|
$
|
3,119,863
|
|
|
$
|
3,176,977
|
|
|
$
|
3,368,919
|
|
Debentures Payable to a Director
On November 13, 2017, the Company entered
into a Debenture Redemption Agreement with an entity controlled by Dr. Milton Boniuk to redeem the Series C Debenture (See Note
7). The related shares were issued on March 21, 2018.
Debenture
Interest Payable to a Director
Coupon interest expense on the $5,000,000
Series C Debenture paid to the Milton Boniuk IRA (the “Holder”) for the years ended June 30, 2019, 2018 and 2017 was
$0, $185,274 and $500,000, respectively. The Series C Debenture was redeemed effective November 13, 2017. (See Note 7).
Coupon interest expense paid on the Series
B Debentures to two holders controlled by Dr. Milton Boniuk for the years ended June 30, 2019, 2018 and 2017 was $0, $0 and $187,178,
respectively. The Series B Debentures matured on February 1, 2017. (See Note 7).
Note 5 – Property and Equipment
Property and equipment, stated at cost,
less accumulated depreciation consisted of the following:
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
|
|
GMP Facility
|
|
$
|
8,020,471
|
|
|
$
|
8,011,230
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
260,000
|
|
|
|
260,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Equipment
|
|
|
57,781
|
|
|
|
57,781
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and Fixtures
|
|
|
5,607
|
|
|
|
5,607
|
|
|
|
|
|
|
|
|
|
|
|
|
Lab Equipment
|
|
|
5,748,318
|
|
|
|
5,683,765
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property and Equipment
|
|
|
14,092,177
|
|
|
|
14,018,383
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Accumulated Depreciation
|
|
|
(3,864,930
|
)
|
|
|
(3,177,290
|
)
|
|
Property and Equipment, Net
|
|
$
|
10,227,247
|
|
|
$
|
10,841,093
|
|
Depreciation expense for the years ended
June 30, 2019, 2018 and 2017 was $687,640, $671,789 and $654,685, respectively.
Note 6 – Trademark and Patents
Trademark and patents, stated at cost,
less accumulated amortization consisted of the following:
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
|
|
Trademarks and Patents
|
|
$
|
458,954
|
|
|
$
|
458,954
|
|
|
Less Accumulated Amortization
|
|
|
(92,296
|
)
|
|
|
(84,025
|
)
|
|
Trademarks and Patents, Net
|
|
$
|
366,658
|
|
|
$
|
374,929
|
|
Amortization expense amounted to $8,271,
$8,269, and $8,269 for the years ended June 30, 2019, 2018 and 2017, respectively.
The Company amortizes our trademarks and
patents over their expected original useful lives of 17 years.
Amortization expense in future years is as follows:
Years ended June 30,
|
2020
|
|
$
|
8,271
|
|
|
2021
|
|
|
8,271
|
|
|
2022
|
|
|
8,271
|
|
|
2023
|
|
|
8,271
|
|
|
2024
|
|
|
8,271
|
|
|
Thereafter
|
|
|
325,303
|
|
|
Total amortization
|
|
$
|
366,658
|
|
Note 7 – Convertible Debentures and Derivatives
Debentures - Series B
The Company’s Series B Convertible
Debentures, in the amount of $6 million, matured on January 31, 2017. For the year ended June 30, 2017, the Company paid a total
of $173,589 of coupon interest to Holders in cash and two additional Holders of the Company’s Series B Convertible Debentures
elected to receive $107,178 of their coupon interest payment in shares of the Company’s common stock.
The debt discount had been amortized to
interest expense over the term of the debenture. The Company recognized amortization of this discount as an additional interest
charge to “Discount on convertible debentures” for the year ended June 30, 2017 in the amount of $525,263. The debenture
contained embedded derivatives that were not clearly and closely related to the host instrument. The embedded derivatives were
bifurcated from the host debt instrument and treated as a liability.
On February 8, 2017, the Company entered
into agreements with certain holders (the “Holders”) of the Company’s Series B Convertible Debentures (the “Debentures”).
The Company and the Holders agreed to extinguish an aggregate of $5,027,178 of principal and interest attributable to the Company’s
Series B Debentures, which were payable on January 31, 2017 (the “Maturity Date”) by converting into 217,983 newly-issued,
restricted shares (the “Conversion Shares”) of the Company’s common stock. The number of shares attributable
to the principal being converted was determined by dividing the $5,000,000 principal by $1.1533, the volume weighted average price
(“VWAP”) of the Company’s stock price for the period from December 15, 2016 to January 30, 2017. The $5,000,000
of principal and $27,178 of accrued interest were converted into 216,769 and 1,214 shares of common stock, respectively. The principal
balance of $1,000,000 not converted was paid in cash on February 8, 2017. The Company recognized a non-cash loss on extinguishment
of debt of $332,524 during the year ended June 30, 2017 on the extinguishment of the aforesaid principal attributable to
the Series B Debentures into the Company’s common stock. The loss on extinguishment of debt resulted from the excess of
the market value of the shares issued on February 8, 2017 of $1.23 per share or $5,332,524 in the aggregate, over the $5,000,000
face value of the debt extinguished.
Debenture - Series C
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 “ Series
C Debenture”) from the Milton Boniuk IRA, a trust controlled by a member of the Company’s Board of Directors, (the
“Holder”). The Series C Debenture was due on June 30, 2018 (the “Maturity Date”) and was convertible,
at the sole option of the Holder, into restricted shares of the Company’s common stock, par value $0.001 per share at the
conversion price of $105.00 per share of common stock. The Series C Debenture bore 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. In accordance with the debenture agreement, the interest for
the initial year of the debenture for a total of $500,000 was deferred, to be paid over the remainder of the term at $166,667
per year. The Holder at its option may choose to receive such coupon interest payment in shares of common stock calculated using
the average of the open and close prices of the Company’s common stock on the date such interest payment was due.
The Series C Debenture was redeemed on
November 13, 2017. For the year ended June 30, 2018, the Holder elected to receive $60,274 (through November 13, 2017) of its
coupon interest payment and $125,000 of deferred interest payment in common stock of the Company and $125,000 of its coupon interest
payment and $41,667 of its deferred interest payment in cash. For the year ended June 30, 2017, the Holder elected to receive
$375,000 of its coupon interest payment, and $125,000 of deferred interest payment in common stock of the Company and $125,000
of its coupon interest payment and $41,667 of its deferred interest payment in cash.
On July 2, 2014, in conjunction with the
issuance of the Company’s Series C Debenture, the Company issued 9,350 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 are 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 Series C 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 was bifurcated at its fair value of
$1,879,428 with the remaining balance allocated to the host instrument (Debenture). The total debt discount was amortized over
the actual term of the Series C Debenture using the effective interest method.
The Company recognized amortization of
this discount as an additional interest charge to “Discount on convertible debentures” in the amount of $359,214,
and $822,485 for the years ended June 30, 2018 and 2017, respectively.
The Holder of the Series C Debenture and
the Company agreed on November 13, 2017 that the Series C Debenture would be redeemed for the Company’s common stock, as
described further below. The Holder waived all early redemption payments provided for in the Series C Debenture in consideration
for 7,500 shares of the Company’s Series A preferred shares.
The following represents the balance of
the Debenture payable – Series C, net of discount at November 13, 2017. The debt discount has been amortized to interest
expense over the actual term of the debenture.
|
|
|
November 13,
2017
|
|
|
|
|
|
|
|
Proceeds
|
|
$
|
5,000.000
|
|
|
Debt Discount:
|
|
|
|
|
|
Series A Preferred
|
|
|
(1,152,297
|
)
|
|
Embedded derivative
|
|
|
(1,879,428
|
)
|
|
|
|
|
1,968,275
|
|
|
|
|
|
|
|
|
Accumulated amortization of debt discount
|
|
|
2,347,092
|
|
|
|
|
|
|
|
|
Debenture payable - Series C, net
|
|
$
|
4,315,367
|
|
The Company used a lattice model that
valued the compound embedded derivatives of the Series C Debenture based on a probability weighted discounted cash flow model
at November 13, 2017.
The following assumptions were used for
the valuation of the compound embedded derivative at November 13, 2017:
|
|
·
|
The
balance of the Series C Debenture as of November 13, 2017 is $5,000,000;
|
|
|
·
|
The underlying stock price was used as the
fair value of the common stock; The stock price decreased to $20.00 at November 13, 2017 from $27.00 at June 30, 2017, with
lower projected annual volatility. The warrant value with the $121.00 exercise price decreased due to the decreasing term
remaining;
|
|
|
·
|
The
projected annual volatility was based on the Company historical volatility:
|
|
|
·
|
An
event of default would occur 0% of the time, increasing 1.00% per month to a maximum
of 10%;
|
|
|
·
|
The
Holder would automatically convert the interest if the Company was not in default and
its share value was equivalent to the cash value;
|
|
|
·
|
The
Holder would automatically convert the debenture at maturity if the registration was
effective and the Company was not in default.
|
|
|
·
|
The
weighted cost of capital discount rate (based on the market value of the transaction
at issuance) adjusted for changes in the risk free rate is 21.99%.
|
|
|
·
|
Even
though the shares are restricted the underlying assumption is that any restriction on
resale will be removed either through registration or the passage of time at the time
of issuance.
|
The fair value of the compound embedded
derivatives of the Series C Debenture at November 13, 2017 was $15,449.
The Company’s Series C Debenture
in the amount of $5,000,000 was due to mature on June 30, 2018. On November 13, 2017, the Company entered into a Debenture Redemption
Agreement (the “Agreement”) with the Holder, to redeem (the “Redemption”) its $5,000,000 Series C Debenture
for an aggregate of 275,000 shares of the Company’s $0.001 par value common stock (“Purchase Price”) comprising
250,000 shares for the principal of the Series C Debenture and 25,000 shares for unpaid coupon interest from October 1, 2017 through
June 30, 2018. The unpaid interest included $60,274 of accrued interest through November 13, 2017, $314,726 in coupon interest
through June 30, 2018 and $125,000 of unpaid deferred interest. The price per share was equal to the closing price of the Company’s
common stock on Friday, November 10, 2017 of twenty ($20.00) dollar per share. The Holder waived all early redemption penalty
payments provided for in the Series C Debenture for consideration of 7,500 shares of the Company’s $0.001 par value Series
A preferred stock. The Company did not incur placement agent fees in redemption of the Series C Debenture. The Company recognized
a non-cash loss on extinguishment of debt of $1,348,247 on the extinguishment of the aforesaid principal attributable to the Series
C Debenture into the Company’s common and preferred stock. The loss on extinguishment arises from, the obligation to issue
7,500 shares of the Company’s Series A preferred shares with a fair value of $364,337, as of November 13, 2017, obligation
to issue 15,737 shares of the Company’s $0.001 par value common stock with a fair value of $314,726 as of November 13, 2017,
in consideration of Series C Debenture coupon interest from the redemption date through June 30, 2018, and unamortized discount
of $684,633 as of the redemption date, offset by the derivative liability of ($15,449) as of the redemption date.
Pursuant to the Agreement for the Company’s
Series C Debenture, the Company issued 275,000 shares of its registered common stock from its shelf registration and 7,500 shares
of its Series A preferred stock upon receiving consent to issue the shares pursuant to New York Stock Exchange (“NYSE”)
regulations. The Company submitted a request for authorization to issue the common stock and Series A preferred shares to the
NYSE, which was authorized on March 18, 2018 and the shares were issued on March 21, 2018.
On November 13, 2017, the Company recognized
a liability from the obligation to issue the shares in settlement of the redemption of the Company’s Series C Debenture
totaling $5,864,337. On March 21, 2018, when the shares were issued, the 7,500 Series A preferred shares had a fair value of $314,343
and the common shares had a fair value of $4,730,000.
The change in the fair value of the obligation
to issue registered shares was recorded in the statements of operations as “change in the fair value of derivatives”.
For the year ended June 30, 2018, the gain from change in fair value of the obligation to issue registered shares was $819,994.
On March 21, 2018, when the shares were
issued, the liability for the obligation to issue registered shares of $4,730,000 for the common shares and $314,343 for the Series
A preferred shares was reclasssed to stockholders’ equity.
The Series A preferred stock fair value
as of March 21, 2018 is based on the greater of i) the converted value to common at a ratio of 1:3.5; or 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 at each issuance used the following inputs:
|
|
a.
|
The common stock price was in the range $22.80
to $18.40;
|
|
|
b.
|
The
calculated weighted average number of shares of common stock in the period;
|
|
|
c.
|
A
26.63% premium over the common shares for the voting preferences;
|
|
|
d.
|
The
calculated weighted average number of total voting shares and the monthly shares representing
voting rights of 12.27% to 15.25% 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 October 31, 2016 and a remaining restricted term of 3.00 to
2.59 years;
|
|
|
f.
|
31.69%
to 30.43% restricted stock discount (based on a restricted stock analysis and call-put
analysis curve: 58.33% to 52.49% volatility, 1.62% to 2.30% risk free rate) applied to
the converted common.
|
Note 8 – Accrued expenses
Accrued expenses consisted of the following:
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
|
|
Severance payment
|
|
$
|
57,000
|
|
|
$
|
233,333
|
|
|
Personnel and compensation costs
|
|
|
11,871
|
|
|
|
19,716
|
|
|
Accrued Expenses
|
|
$
|
68,871
|
|
|
$
|
253,049
|
|
Note 9 – Equity Transactions
Fiscal Year Ended June 30, 2017 Transactions
For the year ended June 30, 2017, the
Scientific Advisory Board was granted fully vested warrants to purchase 2,858 shares of common stock at exercise prices between
$28.00- $40.80 per share expiring in the fiscal year ending June 30, 2021. These warrants were valued at $37,948 and
recorded as consulting expense.
For the year ended June 30, 2017, the
Company estimated the 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:
|
Expected life (year)
|
|
|
4
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
55.57% -87.09
|
%
|
|
|
|
|
|
|
|
Expected annual rate of quarterly dividends
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
Risk-free rate(s)
|
|
|
1.00 - 1.79
|
%
|
For the year ended June 30, 2017, the
Company’s Board of Directors authorized the issuance of 2,888 shares of its Series A Convertible Preferred Stock, which
are fully vested with a restrictive legend for employee compensation. The Company recorded an expense of $164,592 which is the
fair value at date of issuance.
On January 25, 2017 the Board of Directors
authorized the issuance of 10,000 fully vested shares of its Series A Convertible Preferred stock to Anil Diwan. The Company recorded
an expense of $512,984.
For the year ended June 30, 2017, the
Company recognized a noncash compensation expense of $297,267 related to Series A Preferred Shares issued on July 21, 2015 in
accordance with Dr. Anil Diwan’s employment agreement that vest over three years. The remaining balance of $267,143 will
be recognized as the remaining shares are vested over the term of the contract.
For the year ended June 30, 2017, the
Company recognized a noncash compensation expense of $297,267 related to Series A Preferred Shares issued on July 21, 2015 in
accordance with Dr. Eugene Seymour’s employment agreement that vest over three years. The remaining balance of $267,143
will be recognized as the remaining shares are vested over the term of the contract.
For the year ended June 30, 2017, the
Company’s Board of Directors authorized the issuance of 3,572 fully vested shares of its common stock for employee compensation.
The Company recognized a noncash compensation expense of $82,145.
The fair value of the Series A Preferred stock was the following
for the dates indicated:
|
Date
|
|
Shares
|
|
|
Value
|
|
|
7/31/2016
|
|
|
129
|
|
|
$
|
11,439
|
|
|
8/31/2016
|
|
|
129
|
|
|
|
11,978
|
|
|
9/30/2016
|
|
|
129
|
|
|
|
10,847
|
|
|
10/31/2016
|
|
|
129
|
|
|
|
9,591
|
|
|
11/30/2016
|
|
|
129
|
|
|
|
7,631
|
|
|
12/31/2016
|
|
|
129
|
|
|
|
6,583
|
|
|
1/25/2017
|
|
|
10,000
|
|
|
|
512,984
|
|
|
1/31/2017
|
|
|
129
|
|
|
|
6,231
|
|
|
2/28/2017
|
|
|
129
|
|
|
|
6,357
|
|
|
3/03/2017
|
|
|
1,340
|
|
|
|
65,630
|
|
|
3/31/2017
|
|
|
129
|
|
|
|
6,493
|
|
|
4/30/2017
|
|
|
129
|
|
|
|
6,679
|
|
|
5/31/2017
|
|
|
129
|
|
|
|
7,500
|
|
|
6/30/2017
|
|
|
129
|
|
|
|
7,633
|
|
|
|
|
|
12,888
|
|
|
$
|
677,576
|
|
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 fair value of the Series A Preferred
Stock granted to various employees and others on the date of grant. The Series A Preferred Stock fair value is based on the greater
of i) the converted value to common at a ratio of 1:3.5; or 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 at each issuance used the following inputs:
|
a.
|
The common stock price was in the range $21.40
to $34.80 (prior to adjustment for the 20 to 1 reverse split);
|
|
|
b.
|
The
calculated weighted average number of shares of common stock in the period;
|
|
|
c.
|
A
26.63% premium over the common shares for the voting preferences;
|
|
|
d.
|
The
calculated weighted average number of total voting shares and the monthly shares representing
voting rights of 10.25% to 12.26% of the total;
|
|
|
e.
|
The
conversion value was based on an assumption for calculation purposes only, for the period
ended September 30, 2016 of a Change of Control in 4 years from March 1, 2013 and a remaining
restricted term of 1.92 to 1.67 years. For the period from October 1, 2016 to June 30,
2017, the conversion value was based on an assumption for calculation purposes only of
a Change of Control in 4 years and a remaining restricted term of 4 to 3.34 years;
|
|
|
f.
|
21.76%
to 38.87% restricted stock discount (based on a restricted stock analysis and call-put
analysis curve: 63.58% to 85.39% volatility, 0.37% to 1.50% risk free rate) applied to
the converted common.
|
For the year ended June 30, 2017, the
Company’s Board of Directors authorized the issuance of 8,224 fully vested shares of its common stock with a restrictive
legend for consulting services. The Company recorded an expense of $201,313, which was the fair value at date of issuance.
For the year ended June 30, 2017, the
Company’s Board of Directors authorized the issuance of 1,697 fully vested shares of its common stock with a restrictive
legend for Director services. The Company recorded an expense of $45,000, which was the fair value at date of issuance.
On February 8, 2017 two Holders of the
Company’s Series B Debentures elected to convert $5,000,000 of the principal into restricted common stock of the Company.
The Company’s Board of Directors authorized the issuance of 216,770 of the Company’s restricted common stock. One
of the Holders is controlled by Dr. Milton Boniuk, a Director of the Company. The second Holder is a foundation established by
him.
For the year ended June 30, 2017 two Holders
of the Company’s Series B Debentures elected to receive $107,178 in restricted common stock of the Company. For the year
ended June 30, 2017, the Company’s Board of Directors authorized the issuance of 4,900 shares of the Company’s restrict
common stock for interest payable to the Holders. One of the Holders is controlled by Dr. Milton Boniuk, a Director of the Company.
The second Holder is a foundation established by Dr. Milton Boniuk.
For the year ended June 30, 2017, the
Company's Board of Directors authorized the issuance of 21,194 shares of its common stock to the Holder of the Company’s
Series C Debentures. The Holder of the Company’s Series C Debentures elected to receive $375,000 of the quarterly interest
payments and $125,000 of the deferred interest in restricted common stock of the Company. One Holder is an entity controlled by
Dr. Milton Boniuk, a director of the Company. The other Holder is a charitable foundation established by Dr. Milton Boniuk.
Fiscal Year Ended June 30, 2018 Transactions
For the year ended June 30, 2018, the
Scientific Advisory Board was granted fully vested warrants to purchase 2,287 shares of common stock at exercise prices between
$12.80- $31.20 per share expiring in the fiscal year ending June 30, 2022. These warrants were valued at $16,770 and
recorded as consulting expense.
For the year ended June 30, 2018, the
Company estimated the 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:
|
Expected life (year)
|
|
|
4
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
53.56% -56.10
|
%
|
|
|
|
|
|
|
|
Expected annual rate of quarterly dividends
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
Risk-free rate(s)
|
|
|
1.67 – 2.84
|
%
|
For the year ended June 30, 2018, Eugene
Seymour was granted five year warrants (the “Warrants”) to purchase 12,500 shares of the Company’s common stock,
par value $0.001 per share (the “Common Stock”) at an exercise price of $40.00 per share, vesting in three, equal
installments over three years with the last installment vesting on May 1, 2021. The fair value of these warrants was $53,500 and
recorded as employee compensation expense for severance.
For the year ended June 30, 2018, the
Company estimated the fair value of the warrants granted to Eugene Seymour on the date of grant using the Black-Scholes Option-Pricing
Model with the following weighted-average assumptions:
|
Expected life (year)
|
|
|
5
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
53.56
|
%
|
|
|
|
|
|
|
|
Expected annual rate of quarterly dividends
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
Risk-free rate(s)
|
|
|
2.56
|
|
For the year ended June 30, 2018, the
Company’s Board of Directors authorized the issuance of 2,888 shares of its Series A Convertible Preferred Stock, which
are fully vested with a restrictive legend for employee compensation. The Company recorded an expense of $136,106, which is the
fair value at date of issuance.
The fair value of the Series A Preferred Stock was the following
for the dates indicated:
|
Date
|
|
Shares
|
|
|
Value
|
|
|
7/31/2017
|
|
|
129
|
|
|
$
|
8,242
|
|
|
8/31/2017
|
|
|
129
|
|
|
|
8,397
|
|
|
9/30/2017
|
|
|
129
|
|
|
|
8,588
|
|
|
10/31/2017
|
|
|
129
|
|
|
|
7,011
|
|
|
11/30/2017
|
|
|
129
|
|
|
|
6,313
|
|
|
12/31/2017
|
|
|
129
|
|
|
|
6,513
|
|
|
1/31/2018
|
|
|
129
|
|
|
|
5,552
|
|
|
2/28/2018
|
|
|
129
|
|
|
|
5,404
|
|
|
3/03/2018
|
|
|
1,340
|
|
|
|
60,725
|
|
|
3/31/2018
|
|
|
129
|
|
|
|
5,811
|
|
|
4/30/2018
|
|
|
129
|
|
|
|
5,215
|
|
|
5/31/2018
|
|
|
129
|
|
|
|
4,639
|
|
|
6/30/2018
|
|
|
129
|
|
|
|
3,696
|
|
|
|
|
|
2,888
|
|
|
$
|
136,106
|
|
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 fair value of the Series A Preferred
Stock granted to various employees and others on the date of grant. The Series A Preferred Stock fair value is based on the greater
of i) the converted value to common at a ratio of 1:3.5; or 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 at each issuance used the following inputs:
|
a.
|
The common stock price was in the range $11.60
to $22.80 ;
|
|
|
b.
|
The
calculated weighted average number of shares of common stock in the period;
|
|
|
c.
|
A
26.63% premium over the common shares for the voting preferences;
|
|
|
d.
|
The
calculated weighted average number of total voting shares and the monthly shares representing
voting rights of 10.25% to 15.50% of the total;
|
|
|
e.
|
The
conversion value was based on an assumption for calculation purposes only, for the period
ended September 30, 2016 of a Change of Control in 4 years from March 1, 2013 and a remaining
restricted term of 1.92 to 1.67 years. For the period from October 1, 2016 to June 30,
2017, the conversion value was based on an assumption for calculation purposes only of
a Change of Control in 4 years and a remaining restricted term of 4 to 3.34 years;
|
|
|
f.
|
21.76%
to 38.87% restricted stock discount (based on a restricted stock analysis and call-put
analysis curve: 53.22% to 85.39% volatility, 0.37% to 2.10% risk free rate) applied to
the converted common.
|
For the year ended June 30, 2018, the
Company recognized a noncash compensation expense of $267,144 related to Series A Preferred Shares issued on July 21, 2015 in
accordance with Dr. Anil Diwan’s employment agreement that vest over the three years ended June 30, 2018.
For the year ended June 30, 2018, the
Company recognized a noncash compensation expense of $121,008 related to Series A Preferred Shares issued on July 21, 2015 in
accordance with Dr. Eugene Seymour’s employment agreement that vested over three years. On January 27, 2018, Dr. Eugene
Seymour resigned as Chief Executive Officer and as a Director of the Company. See Note 12.
For the year ended June 30, 2018, the
Company’s Board of Directors authorized the issuance of 7,500 shares of its Series A Convertible Preferred Stock, which
are fully vested with a restrictive legend to the Holder of the Company’s Series C Convertible Debenture in consideration
for its waiver of all early redemption payments provided for in the Debenture. See Note 7. The Company recorded an expense of
$314,343, which is the fair value at date of issuance.
For the year ended June 30, 2018, the
Company’s Board of Directors authorized the issuance of 3,572 fully vested shares of its common stock for employee compensation.
The Company recognized a noncash compensation expense of $65,716.
For the year ended June 30, 2018, the
Company’s Board of Directors authorized the issuance of 12,188 fully vested shares of its common stock with a restrictive
legend for consulting services. The Company recorded an expense of $156,190, which was the fair value at the dates of issuance.
For the year ended June 30, 2018, the
Company’s Board of Directors authorized the issuance of 2,489 fully vested shares of its common stock with a restrictive
legend for Director services. The Company recorded an expense of $45,000, which was the fair value at date of issuance.
For
the year ended June 30, 2018 the Holder of the Company’s Series C Debentures elected to receive 275,000 shares of the Company’s
restricted common stock in redemption for its $5,000,000 Series C Debenture, quarterly interest payments of $375,000 and deferred
interest of $125,000. For the year ended June 30, 2018, the Company’s Board of Directors authorized the issuance of 275,000
shares of the Company’s restricted common stock for the redemption of the debenture payable to the Holder and quarterly
and deferred interest payments. (See Note 7)
Fiscal Year Ended June 30, 2019 Transactions
On July 11, 2018 the Board of Directors
approved an extension of the employment agreement with Dr. Anil Diwan, the Company’s President. Pursuant to the terms of
the employment agreement, the Company’s Board of Directors authorized the issuance of 26,250 of the Company’s Series
A preferred stock to Dr. Anil Diwan. The shares shall be vested in one-third increments on June 30, 2019, June 30, 2020 and June
30, 2021 and are subject to forfeiture. The Company recognized non-cash compensation expense related to the issuance of the Series
A preferred stock of $189,040 for the year ended June 30, 2019. The balance of $371,650 will be recognized as the shares vest
and service is rendered.
On July 19, 2018, the Company entered
into an Employment Agreement with Dr. Irach Taraporewala as Chief Executive Officer of the Company beginning on September 1, 2018.
Dr. Taraporewala was granted options to purchase up to 15,000 shares of the Company’s common stock, par value $0.001 per
share at an exercise price equal to 20% above the closing bid price of $8.20 of the common stock on September 1, 2018 (“Effective
Date”). The options shall vest in three, equal, annual installments commencing on the effective date. The grant date fair
value of the options was $35,761 of which $11,920 was recognized and recorded as compensation expense for the year ended June
30, 2019. On January 24, 2019, Dr. Taraporewala resigned as the Chief Executive Officer of NanoViricides, Inc. (the “Company”)
for personal reasons and all unvested options were forfeited. (See Note 13).
The Company estimated the fair value of
the options granted to Dr. Taraporewala on the date of the grant using a lattice model that values the options based upon a stock
price modeled such that it follows a geometric Brownian motion with constant drift and volatility.
For the year ended June 30, 2019, the
Scientific Advisory Board was granted fully vested warrants to purchase 2,287 shares of common stock at exercise prices between
$6.00- $9.40 per share expiring in the fiscal year ending June 30, 2023. These warrants were valued at $5,475 and recorded
as consulting expense.
For the year ended June 30, 2019, the
Company estimated the 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:
|
Expected life (year)
|
|
|
4
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
47.46-55.12
|
%
|
|
|
|
|
|
|
|
Expected annual rate of quarterly dividends
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
Risk-free rate(s)
|
|
|
2.14-2.93
|
%
|
On February 27, 2019, the Company entered
into a Securities Purchase Agreement (the “Agreement”) with certain institutional investors (the “Purchasers”),
for a registered direct offering (the “Offering”) of 347,223 shares of common stock (“Shares”) at the
purchase price of $7.20 (“Purchase Price”) (adjusted for the 20 to 1 reverse stock split) per share for an aggregate
of $2,500,000.
The offer and sale of the Shares in the registered
direct offering was registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the
Company’s shelf registration statement on Form S-3, as amended (File No. 333-216345), which became effective on April 25,
2017. Pursuant to Rule 424(b) under the Securities Act, the Company has filed a prospectus supplement in connection with such
offering.
In a concurrent private placement, the
Purchasers received warrants (the “Warrants”) to purchase up to 347,223 shares of Common Stock. The Warrants have
an exercise price of $12.20 per share, shall be exercisable on the six month anniversary of issuance and will expire five (5)
years thereafter. The Warrants are exercisable for cash or, solely in the absence of an effective registration statement or prospectus,
by cashless exercise.
The Company accounted for the proceeds of
the Offering at February 27, 2019 as follows:
|
Gross proceeds
|
|
$
|
2,500,000
|
|
|
Less: Offering costs
|
|
|
150,000
|
|
|
Net proceeds
|
|
|
2,350,000
|
|
|
|
|
|
|
|
|
Portion allocated to derivative liability
- warrants
|
|
|
(1,527,259
|
)
|
|
|
|
|
|
|
|
Net proceeds from
issuance of common stock
|
|
$
|
822,741
|
|
The exercise price of the Warrants is subject
to adjustment in the case of customary events such as stock dividends or other distributions on shares of common stock or any
other equity or equity equivalent securities payable in shares of common stock, stock splits, stock combinations, reclassifications
or similar events affecting our common stock, and also, subject to limitations, upon any distribution of assets, including cash,
stock or other property to our stockholders. The exercise of the Warrants is subject to certain beneficial ownership and other
limitations set forth in the Warrants. The Company will receive proceeds from the concurrent private placement transaction solely
to the extent the Warrants are exercised for cash.
In connection with the Offering and the concurrent
private placement, the Company engaged Chardan Capital Markets, LLC (the “Placement Agent”) to act as its exclusive
placement agent. The Company agreed to pay the Placement Agent a cash placement fee equal to 5% of the aggregate purchase price
for the common stock sold in the offering, plus $25,000 in legal fees. The net proceeds from the offering were $2,350,000.
The Company determined the fair value of the
Warrants at February 27, 2019 to be $1,527,259. The Company used a lattice model to calculate the fair value of the derivative
warrants based on a probability weighted discounted cash flow model. This model is based on future projections of the various
potential outcomes. The features that were analyzed and incorporated into the model included the exercise and full reset features.
Under applicable accounting guidance contained in ASU 2017-11, adopted by the Company on January 1, 2019, stock warrants are to
be accounted for as equity if the warrants contain full-ratchet anti-dilution provisions. The warrants described above contained
a full-ratchet anti-dilution feature but also contained other adjustment features which required that the warrants be classified
as a derivative liability.
The Warrants were valued as of February 27,
2019 (the issuance date) and June 30, 2019 with the following assumptions:
|
|
-
|
The 5.5-year warrants were issued on February 27, 2019 with
an exercise price of $12.20 (adjusted for the 20 to 1 reverse3 stock
split) per share(subject to adjustments-full ratchet reset).
|
|
|
-
|
The stock price would fluctuate with the Company’s projected
volatility.
|
|
|
-
|
The Holder would exercise the warrants as they become exercisable
(effective registration at issuance) at target prices of the higher of 2 times the projected exercise/reset price or 2 times
the stock price.
|
|
|
-
|
The Holder would
exercise the warrant at maturity if the stock price was above the project reset prices.
|
|
|
-
|
The risk free rate at February 27, 2019 and
June 30, 2019 were 2.48% and 1.95% respectively.
|
|
|
-
|
The
fundamental transaction projected with 0% probability increasing 1% per quarter to maximum
of 10% and settlement based on the Black Scholes value.
|
|
|
-
|
Stock price at February 27, 2019 was $9.60
|
|
|
-
|
Stock price at June 30, 2019 was $4.80
|
|
|
-
|
The next capital raise is projected to occur during 2020 (annually
12 months from issuance) at prices approximating 100% market triggering a reset event and exercise price adjustment.
|
|
|
-
|
The stock price would fluctuate with an annual volatility. The
projected volatility curve was based on historical volatilities of the Company for the valuation period. The projected annual
volatility for the valuation date is:
|
|
1 Year
|
|
|
|
|
2/27/2019
|
|
|
75
|
%
|
|
6/30/2019
|
|
|
76.1
|
%
|
The primary factors driving the economic value
of options are stock price; stock volatility; reset events and exercise behavior. Projections of these variables over the remaining
term of the warrant are either derived or based on industry averages. Based on the above, a probability was assigned to each scenario
for each future period, and the appropriate derivative value was determined for each scenario. The option value was then probability
weighted and discounted to the present. (See Note 11).
For the year ended June 30, 2019, the
Company’s Board of Directors authorized the issuance of 2,888 shares of its Series A preferred stock, which are fully vested
with a restrictive legend for employee compensation. The Company recorded an expense of $48,828, which is the fair value at date
of issuance.
The fair value of all Series A preferred stock issued during
the year ended June 30, 2019 was the following for the dates indicated:
|
Date
|
|
Shares
|
|
|
Value
|
|
|
7/11/2018
|
|
|
26,250
|
|
|
$
|
560,690
|
|
|
7/31/2018
|
|
|
129
|
|
|
|
2,795
|
|
|
8/31/2018
|
|
|
129
|
|
|
|
2,374
|
|
|
9/30/2018
|
|
|
129
|
|
|
|
2,598
|
|
|
10/31/2018
|
|
|
129
|
|
|
|
2,233
|
|
|
11/30/2018
|
|
|
129
|
|
|
|
1,883
|
|
|
12/31/2018
|
|
|
129
|
|
|
|
2,245
|
|
|
1/31/2019
|
|
|
129
|
|
|
|
1,203
|
|
|
2/28/2019
|
|
|
129
|
|
|
|
1,949
|
|
|
3/01/2019
|
|
|
1,340
|
|
|
|
24,340
|
|
|
3/31/2019
|
|
|
129
|
|
|
|
2,336
|
|
|
4/30/2019
|
|
|
129
|
|
|
|
1,636
|
|
|
5/31/2019
|
|
|
129
|
|
|
|
1,540
|
|
|
6/30/2019
|
|
|
129
|
|
|
|
1,696
|
|
|
|
|
|
29,138
|
|
|
$
|
609,518
|
|
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 fair value of the Series A preferred
stock granted to various employees and others on the date of grant. The Series A preferred stock fair value is based on the greater
of i) the converted value to common stock at a ratio of 1:3.5; or 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 at each issuance used the following inputs:
|
a.
|
The common stock price was in the range $4.00
to $11.60 (prior to adjustment for the reverse stock split);
|
|
|
b.
|
The
calculated weighted average number of shares of common stock in the period;
|
|
|
c.
|
A
26.63% premium over the common shares for the voting preferences;
|
|
|
d.
|
The
calculated weighted average number of total voting shares and the monthly shares representing
voting rights of 19.28% to 19.52% of the total;
|
|
|
e.
|
The
conversion value was based on an assumption for calculation purposes only, of a change
of control in 4 years from October 31, 2016 and a remaining restricted term of 2.34 to
1.34 years.
|
|
|
f.
|
31.25%
to 33.16% restricted stock discount (based on a restricted stock analysis and call-put
analysis curve: 79.20% to 90.60% volatility, 2.50% to 2.35% risk free rate) applied to
the converted common.
|
For the year ended June 30, 2019, the
Company’s Board of Directors authorized the issuance of 3,572 fully vested shares of its common stock for employee compensation.
The Company recognized a noncash compensation expense of $28,572, which was the fair value on the date of issuance.
For the year ended June 30, 2019, the
Company’s Board of Directors authorized the issuance of 28,210 fully vested shares of its common stock with a restrictive
legend for consulting services. The Company recorded an expense of $208,960, which was the fair value at the dates of issuance.
For the year ended June 30, 2019, the
Company’s Board of Directors authorized the issuance of 7,325 fully vested shares of its common stock with a restrictive
legend for director services. The Company recorded an expense of $45,000, which was the fair value at date of issuance.
Note 10 – Stock Options and Warrants
The following table presents the activity of stock options
for the year ended June 30, 2019 as follows:
|
Stock
Options
|
|
Number
of
Shares
|
|
|
Weighted
Average
Exercise
Price
per share ($)
|
|
|
Weighted
Average
Remaining
Contractual
Term (years)
|
|
|
Aggregate
Intrinsic
Value ($)
|
|
|
Outstanding at June 30, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Granted
|
|
|
15,000
|
|
|
|
10.00
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited
|
|
|
10,000
|
|
|
|
10.00
|
|
|
|
-
|
|
|
|
-
|
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding and exercisable at June 30, 2019
|
|
|
5,000
|
|
|
$
|
10.00
|
|
|
|
2.16
|
|
|
|
-
|
|
The exercise price per share is adjusted for the 20 to 1 reverse
split
There were no options outstanding and exercisable at June 30,
2018 and 2017.
Of the above options, 5,000 became vested
and exercisable on September 1, 2018. The options expire on August 31, 2021. On January 24, 2019, Dr. Taraporewala resigned as
the Chief Operating Officer of the Company and the 10,000 remaining unvested options were forfeited. See Note 13.
The Company estimated the fair value of
the options granted to Dr. Taraporewala on the date of the grant using a lattice model that values the options based upon a stock
price modeled such that is follows a geometric Brownian motion with constant drift and volatility.
For the year ended June 30, 2019, the
Company recognized compensation expense of $11,920 related to 5,000 vested options granted to Dr. Taraporewala. For the years
ended June 30, 2018 and 2017, there was no compensation expense recorded. As of June 30, 2019, there was no unrecognized compensation
cost.
|
Stock Warrants
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price
per share ($)
|
|
|
Weighted
Average
Remaining
Contractual
Term (years)
|
|
|
Aggregate
Intrinsic
Value ($)
|
|
|
Outstanding and exercisable at June 30, 2016
|
|
|
330,835
|
|
|
$
|
99.20
|
|
|
|
2.55
|
|
|
$
|
4,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,858
|
|
|
|
34.20
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding and exercisable at June 30, 2017
|
|
|
333,693
|
|
|
$
|
98.60
|
|
|
|
1.36
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
14,787
|
|
|
|
37. 40
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding and exercisable at June 30, 2018
|
|
|
348,480
|
|
|
$
|
96.00
|
|
|
|
.53
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
349,509
|
|
|
|
12,20
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
299,833
|
|
|
|
101.60
|
|
|
|
-
|
|
|
|
-
|
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding and exercisable at June 30, 2019
|
|
|
398,156
|
|
|
$
|
18.20
|
|
|
|
4.69
|
|
|
$
|
-
|
|
Of the above warrants; 31,001 expire in
fiscal year ending June 30, 2020; 2,858 expire in fiscal year ending June 30, 2021; 2,287 expire in fiscal year ending June 30,
2022; 14,787 expire in fiscal year ending June 30, 2023; and 347,223 expire in fiscal year ending June 30, 2025.
Note 11 – Fair Value Measurement
Fair value measurements
At June 30, 2019 and 2018, the fair value
of derivative liabilities is estimated using a lattice model that is 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 June 30, 2019 and 2018, the estimated
fair values of the liabilities measured on a recurring basis are as follows:
|
|
|
Fair Value Measurements at
|
|
|
|
|
June 30, 2019:
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability – Warrants
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
1,645,606
|
|
|
Total derivatives
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,645,606
|
|
|
|
|
Fair Value Measurements at
|
|
|
|
|
June 30, 2018:
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability – Warrants
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
298,092
|
|
|
Total derivatives
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
298,092
|
|
In a concurrent private placement to the
Offering on February 27, 2019, the Purchasers received warrants (the “Warrants”) to purchase up to 347,223 shares
of common stock. The Warrants have an exercise price of $12.20 per share, shall be exercisable on the six month anniversary of
issuance and will expire five (5) years thereafter. The Warrants are exercisable for cash or, solely in the absence of an effective
registration statement or prospectus, by cashless exercise.
The Company accounts for stock purchase
warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreements. Under
applicable accounting guidance contained in ASU 2017-11, adopted by the Company on January 1, 2019, stock warrants are to be accounted
for as equity if the warrants contain full-ratchet anti-dilution provisions. The warrants issued on February 27, 2019, contained
a full-ratchet anti-dilution feature but also contained other adjustment features which required that the warrants be classified
as a derivative liability.
The Company used a lattice model to calculate
the fair value of the derivative warrants based on a probability weighted discounted cash flow model. This model is based on future
projections of the various potential outcomes. The features that were analyzed and incorporated into the model included the exercise
and full reset provisions.
The multi-nomial lattice methodology was
used to value the Warrants (issued February 27, 2019) as of June 30, 2019, with the following assumptions:
|
Assumptions
|
|
June 30, 2019
|
|
|
Dividend yield
|
|
|
0.00
|
%
|
|
Risk-free rate for term
|
|
|
1.95
|
%
|
|
Volatility
|
|
|
76.1
|
%
|
|
Maturity dates (term remaining)
|
|
|
5.16 years
|
|
|
Stock Price
|
|
$
|
4.80
|
|
The Warrants were valued as of February
27, 2019 (the issuance date) and June 30, 2019 with the following assumptions:
|
|
-
|
The 5.5 year warrants issued on February 27,
2019 (expire February 27, 2024) included with an exercise price of $12.20 per share (subject to adjustments – full ratchet
reset and fundamental transactions).
|
|
|
-
|
The
stock price would fluctuate with the Company projected volatility.
|
|
|
-
|
The
Holder would exercise the warrant as they become exercisable (effective registration
at issuance) at target prices of the higher of 2 times the projected reset exercise price
or 2 times the stock price.
|
|
|
-
|
The
Holder would exercise the warrant at maturity if the stock price was above the project
reset prices.
|
|
|
-
|
The
next capital raise is projected to occur during 2020 (annually 12 months from issuance)
at prices approximating 100% of market triggering a reset event and exercise price adjustment.
|
|
|
-
|
The
fundamental transaction projected with 0% probability increasing 1% per quarter to maximum
of 10% and settlement based on the Black Scholes value.
|
|
|
-
|
The
stock price would fluctuate with an annual volatility. The projected volatility curve
was based on historical volatilities of the Company for the valuation period.
|
In conjunction with the Company’s
registered direct offerings of Units, consisting of the Company’s common stock and warrants, on September 12, 2013 and January
24, 2014 the Company issued warrants. At June 30, 2019 and June 30, 2018, respectively, the total number of these warrants outstanding
were -0- and 271,262 respectively.
The Company accounts for stock purchase
warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreements. Under
applicable accounting guidance, stock warrants must be accounted for as derivative financial instruments if the warrants contain
full-ratchet anti-dilution provisions, which preclude the warrants from being considered indexed to its own stock. The warrants
described above contained a full-ratchet anti-dilution feature and were thus classified as a derivative liability.
The Company used a lattice model to calculate
the fair value of the derivative warrants based on a probability weighted discounted cash flow model. This model is based on future
projections of the various potential outcomes. The features that were analyzed and incorporated into the model included the exercise
and full reset features.
The Warrants were valued as of June 30,
2018 with the following assumptions:
|
|
-
|
The
5-year warrants issued on 9/12/13 and 1/24/14 included Investor and Placement Agent Warrants
with an exercise price of $105.00 and $121.00 (subject to adjustments-full ratchet reset).
A reset event occurred during the quarter ended September 30, 2014 adjusting the $121.00
exercise price to $105.00 per share
|
|
|
-
|
The
stock price would fluctuate with the Company projected volatility.
|
|
|
-
|
The
Holder would exercise the warrant as they become exercisable (effective registration
at issuance) at target prices of the higher of 2 times the projected exercise/reset
price or 2 times the stock price.
|
|
|
-
|
The
next capital raise would fluctuate with an annual volatility. The projected volatility
curve was based on historical volatilities of the Company for the valuation periods.
The projected annual volatility for the valuation dates are:
|
The primary factors driving the economic
value of options are stock price; stock volatility; reset events and exercise behavior. Projections of these variables over the
remaining term of the warrant are either derived or based on industry averages. Based on the above, a probability was assigned
to each scenario for each future period, and the appropriate derivative value was determined for each scenario. The option value
was then probability weighted and discounted to the present.
The following table presents the activity
for liabilities measured at estimated fair value using unobservable inputs for the years ended June 30, 2017, 2018 and 2019:
|
|
|
|
|
|
Fair Value Measurement
Using Significant
|
|
|
|
|
|
|
|
Unobservable
Inputs
|
|
|
|
|
Obligation
to issue
shares
|
|
|
Derivative
liability –
Series B
|
|
|
Derivative
liability –
Series C
|
|
|
Derivative
liability -
warrant
|
|
|
Balance at July 1, 2016
|
|
$
|
-
|
|
|
$
|
203,030
|
|
|
$
|
343,673
|
|
|
$
|
3,197,182
|
|
|
Additions during the year
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Change in fair value
|
|
|
-
|
|
|
|
(203,030
|
)
|
|
|
(311,460
|
)
|
|
|
(1,181,828
|
)
|
|
Transfer in and/or out of Level 3
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance at July 1, 2017
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
32,213
|
|
|
$
|
2,015,354
|
|
|
Additions during the year
|
|
|
5,864,337
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Change in fair value
|
|
|
(819,994
|
)
|
|
|
-
|
|
|
|
(16,764
|
)
|
|
|
(1,717,262
|
)
|
|
Transfer in and/or out of Level 3
|
|
|
(5,044,343
|
)
|
|
|
-
|
|
|
|
(15,449
|
)
|
|
|
-
|
|
|
Balance at July 1, 2018
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
298,092
|
|
|
Additions during the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,527,259
|
|
|
Change in fair value
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(179,745
|
)
|
|
Transfer in and/or out of Level 3
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance at June 30, 2019
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,645,606
|
|
Note 12 – Income Tax Provision
On December 22, 2017 the U.S. President
signed the Tax Cuts and Jobs Act (the “Tax Act”) into law. Effective January 1, 2018, among other changes, the Tax
Act (1) reduces the U.S. federal tax rate from 35 percent to 21 percent, (2) changes the rules relating to net operating loss
carryforwards and carrybacks, (3) eliminates the corporate alternative minimum tax (“AMT”) and changes how existing
AMT credits can be realized and (4) requires companies to pay a onetime transition tax on certain unrepatriated earnings of foreign
subsidiaries.
The Tax Act did not have a material impact
on our financial statements since our temporary differences in the United States are fully offset by a valuation allowance and
we do not have any significant offshore earnings from which to record the mandatory transition tax.
On December 22, 2017, the SEC issued guidance
under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”)
directing taxpayers to consider the impact of the Tax Act as “provisional” when it does not have the necessary information
available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax
law. The changes in the Tax Act are broad and complex. The impact on the Company’s financial statements is immaterial, primarily
because the Company has a valuation allowance on deferred tax assets.
The Company has no current tax expense
due to its losses.
The income tax expense for the years ended
June 30, 2019, 2018, and 2017 differed from the amounts computed by applying the U.S. federal income tax rate of 21%, 28.1% and
34% respectively as follows:
|
|
|
For the Year
Ended
|
|
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
June 30,
2017
|
|
|
Federal Statutory Rate
|
|
|
-21.00
|
%
|
|
|
-28.10
|
%
|
|
|
-34.00
|
%
|
|
Research and Development Credit
|
|
|
-9.21
|
%
|
|
|
0.40
|
%
|
|
|
-6.87
|
%
|
|
State Tax Rate
|
|
|
-7.49
|
%
|
|
|
-3.79
|
%
|
|
|
-4.95
|
%
|
|
Stock Based Compensation
|
|
|
0.14
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
Change in Statutory Federal Rate
|
|
|
80.30
|
%
|
|
|
62.36
|
%
|
|
|
-
|
%
|
|
Valuation Allowance
|
|
|
-42.74
|
%
|
|
|
-30.87
|
%
|
|
|
45.82
|
%
|
|
Effective Tax Rate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
The significant components of the Company’s
deferred tax assets and liabilities at June 30, 2019 and 2018 are as follows:
|
|
|
June
30,
2019
|
|
|
June
30,
2018
|
|
|
Net operating losses
|
|
$
|
22,191,536
|
|
|
$
|
24,839,394
|
|
|
Research and development credit
|
|
|
6,980,633,
|
|
|
|
6,198,377
|
|
|
Other
|
|
|
4,985,538
|
|
|
|
6,047,301
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross deferred tax assets
|
|
|
34,157,707
|
|
|
|
37,085,072
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: valuation allowance
|
|
|
(34,157,707
|
)
|
|
|
(37,085,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
At June 30, 2019 and 2018, the Company
has recorded a full valuation allowance against its net deferred tax assets of $34,157,707 and $37,085,072, respectively, since
in the judgment of management, these assets are not more than likely than not to be realized. The change in the valuation allowance
during the year ended June 30, 2019 was $(2,927,366).
As of June 30, 2019, the Company has approximately
$78,000,000, of gross net operating loss carryforwards available to reduce future taxable income, if any for federal and state
tax purposes. Approximately $70,000,000 of federal net operating losses can be carried forward to future tax years and expire
in 2024. The federal net operating loss generated for the year ended June 30, 2019 of approximately $8,000,000 can be carried
forward indefinitely. However, the deduction for net operating losses incurred in tax years beginning after January 1, 2018 is
limited to 80% of annual taxable income. As of June 30, 2019, credit carryforwards for federal and state purposes are $6,584,541
and $396,092, respectively. The state net operating loss and credit carryforwards begin to expire in 2024.
Due to the change in ownership provisions
of the Internal Revenue Code, the availability of the Company’s net operating loss carry-forwards could be subject to annual
limitations against taxable income in future periods, which could substantially limit the eventual utilization of such carryforwards.
The Company has not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore
no determination has been made whether the net operating loss carryforward is subject to any Internal Revenue Code Section 382
limitation. To the extent there is a limitation, there could be a reduction in the deferred tax asset with an offsetting reduction
in the valuation allowance.
The Company applies the elements of FASB
ASC 740-10 “Income Taxes - Overall” regarding accounting for uncertainty in income taxes. This clarifies the accounting
for uncertainty in income taxes recognized in financial statements and required impact of a tax position to be recognized in the
financial statements if that position is more likely than not of being sustained by the taxing authority. As of June 30, 2019
the Company did not have any unrecognized tax benefits and has not accrued any interest or penalties through 2018 The Company
does not expect to have any unrecognized tax benefits within the next twelve months. The Company’s policy is to recognize
interest and penalties related to tax matters within the income tax provision.
Note 13 – Commitments and Contingencies
Legal Proceedings
There are no pending 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.
Employment Agreements
The Company and Dr. Diwan, President and
Chairman of the Board of Directors, entered into an extension of employment agreement effective July 1, 2018 for a term of three
years. Dr. Diwan’s will be paid an annual base salary of $400,000. Additionally, Dr. Diwan was awarded a grant of 26,250
shares of the Company’s Series A Preferred Stock. 8,750 shares vest equally on June 30, 2019, 2020 and 2021. Any unvested
shares are subject to forfeiture.
The Company and Dr. Irach Taraporewala,
the Company’s Chief Executive Officer, entered into an employment agreement effective September 1, 2018, for a term of three
years. Dr. Taraporewala would be paid an annual base salary of $360,000. Additionally, Dr. Taraporewala was awarded a grant of
15,000 options to purchase shares of the Company’s common stock. 5,000 options vested on September 1, 2018 and the remainder
of the options would vest over the two-year vesting period and are subject to forfeiture. On January 24, 2019, Dr. Taraporewala
resigned as the Chief Executive Officer of the Company for personal reasons. Also on that date, the Company and Dr. Taraporewala
agreed that Dr. Taraporewala would become a consultant for the Company for a period of two years. In connection with his resignation
and new consulting services, the Company and Dr. Taraporewala entered into a Confidential Separation and Consulting Agreement
and General Release (the “Agreement”) pursuant to which the Company will pay Dr. Taraporewala monthly consulting payments
of $3,000 from February 1, 2019, the effective date of the Agreement, through January 31, 2021. The Agreement includes a general
release of claims against the Company, obligations of confidentiality, non-disclosure, non-disparagement and other customary provisions
found in similar agreements. The remaining 10,000 options not vested upon resignation have been forfeited.
On March 3, 2010, the Company entered
into an employment agreement with Dr. Jayant Tatake to serve as Vice President of Research and Development. The employment
agreement provides for a term of four years with a base salary of $150,000. In addition, the Company issued 1,340 shares
of Series A preferred stock and 1,786 shares of common stock upon entering into the agreement, and will issue an additional 1,340
shares of Series A preferred stock and 1,786 shares of common stock on each anniversary date of the agreement. The shares of Series
A preferred stock were issued in recognition of Dr. Tatake’s work towards the achievement of several patents by the Company.
The Compensation Committee of the Board of Directors has extended the current provisions of the employment agreement pending its
review of current industry compensation arrangements and employment agreements.
On March 3, 2010, the Company entered
into an employment agreement with Dr. Randall Barton to serve as Chief Scientific Officer. The employment agreement
provided for a term of four years with a base salary of $150,000. In addition, the Company issued 1,786 shares of common
stock upon entering into the agreement, and will issue an additional 1,786 shares of common stock on each anniversary date of
the agreement. The Compensation Committee of the Board of Directors has extended the current provisions of the employment agreement
pending its review of current industry compensation arrangements and employment agreements.
On May 30, 2013, the Company entered into
an employment agreement with Meeta Vyas to serve as its Chief Financial Officer. The employment agreement provided
for a term of three years with a base salary of $9,000 per month and 129 shares of Series A preferred stock, also on a monthly
basis. On January 1, 2015, her cash compensation was increased to $10,800 per month. The agreement is renewable on an annual basis.
The Compensation Committee of the Board of Directors has extended the current provisions of the employment agreement pending its
review of current industry compensation arrangements and employment agreements.
License Agreements
The Company is dependent upon its license
agreement with TheraCour (See Note 4). If the Company lost the right to utilize any of the proprietary information that is the
subject of the TheraCour license agreement on which it depends, the Company will incur substantial delays and costs in development
of its drug candidates. The Company and TheraCour have signed a Memorandum of Understanding of the terms of a license for VZV
(shingles, chicken pox virus. Drafts of the proposed license agreement with TheraCour have been exchanged by the attorneys, of
the respective parties, for finalizing the agreement.
Note 14 - Subsequent Events
See Note 1 “Reverse Split”
_________ Shares
of Common Stock
or
Pre-Funded Warrants
to Purchase up to _________ Shares of Common Stock
Warrants to Purchase
up to _________ Shares of Common Stock
PROSPECTUS
Book-Running Manager
Maxim Group LLC
,
2019
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance
and Distribution
The following table sets forth the costs
and expenses, other than underwriting discounts, paid or payable by NanoViricides, Inc., or the Registrant, in connection with
the sale and distribution of the securities being registered. All amounts are estimated except the SEC registration fee.
|
Item
|
|
Amount
|
|
|
SEC registration fee
|
|
$
|
2,217.72
|
|
|
FINRA Filing Fee
|
|
$
|
3,245.00
|
|
|
Legal fees and expenses
|
|
|
*
|
|
|
Accounting fees and expenses
|
|
|
*
|
|
|
Printing and engraving expenses
|
|
|
*
|
|
|
Transfer agent and registrar fees and expenses
|
|
|
*
|
|
|
Miscellaneous fees and expenses
|
|
|
*
|
|
|
Total
|
|
$
|
|
|
* To be filed by amendment.
Item 14. Indemnification of Directors
and Officers
Neither our Articles
of Incorporation nor Bylaws prevent us from indemnifying our officers, directors and agents to the extent permitted under the
Nevada Revised Statute ("NRS"). NRS Section 78.7502, provides that a corporation shall indemnify any director, officer,
employee or agent of a corporation against expenses, including attorneys’ fees, actually and reasonably incurred by him
in connection with any the defense to the extent that a director, officer, employee or agent of a corporation has been successful
on the merits or otherwise in defense of any action, suit or proceeding referred to Section 78.7502(1) or 78.7502(2), or in defense
of any claim, issue or matter therein. NRS 78.7502(1) provides that a corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including
attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with
the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
NRS Section 78.7502(2)
provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection
with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith
and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.
Insofar as indemnification
for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim of indemnification against such liabilities (other than the payment by us of expenses
incurred or paid by a director, officer or controlling person of ours in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless
in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
In addition, we entered
into an indemnification agreement with its President and Chairman. This agreement will require us to indemnify these individuals
to the fullest extent permitted under the NRS law against liabilities that may arise by reason of their service to us and to advance
and reimburse expenses incurred as a result of any proceeding against them as to which they could be indemnified. We may enter
into indemnification agreements with future directors and executive officers.
Item 15. Recent Sales of Unregistered
Securities.
The following issuances have been adjusted
to reflect the one-for-twenty (1:20) reverse Stock Split of the Company’s authorized and outstanding Capital Stock that
was effected on September 24, 2019.
On July 11, 2018 the Board of Directors
approved an extension of the employment agreement with Dr. Anil Diwan, the Company’s President. Pursuant to the terms of
the employment agreement, the Company’s Board of Directors authorized the issuance of 26,250 of the Company’s Series
A preferred stock to Dr. Anil Diwan. The shares shall be vested in one-third increments on June 30, 2019, June 30, 2020 and June
30, 2021 and are subject to forfeiture. The Company recognized non-cash compensation expense related to the issuance of the Series
A preferred stock of $189,040 for the year ended June 30, 2019.
On July 19, 2018, the Company entered
into an Employment Agreement with Dr. Irach Taraporewala as Chief Executive Officer of the Company beginning on September 1, 2018.
Dr. Taraporewala was granted options to purchase up to 15,000 shares of the Company’s Common Stock, par value $0.001 per
share at an exercise price equal to 20% above the closing bid price of $0.41 of the Common Stock on September 1, 2018 (“Effective
Date”). The options shall vest in three, equal, annual installments commencing on the effective date. On January 24, 2019,
Dr. Taraporewala resigned as the Chief Executive Officer of NanoViricides, Inc. for personal reasons. All unvested options were
forfeited.
For the year ended June 30, 2019, the
Scientific Advisory Board was granted fully vested warrants to purchase 2,287 shares of Common Stock at exercise prices between
$6.00- $9.40 per share expiring in the fiscal year ending June 30, 2023.
On February 27, 2019, the Company entered
into a Securities Purchase Agreement with certain institutional investors (the “Purchasers”), for a registered direct
offering of 347,223 shares of Common Stock at the purchase price of $7.20 per share for an aggregate of $2,500,000. The offer
and sale of the shares in the registered direct offering was registered under the Securities Act of 1933, as amended (the “Securities
Act”), pursuant to the Company’s shelf registration statement on Form S-3, as amended (File No. 333-216345), which
became effective on April 25, 2017. Pursuant to Rule 424(b) under the Securities Act, the Company has filed a prospectus supplement
in connection with such offering.
In a concurrent private placement, the
Purchasers received warrants (the “Warrants”) to purchase up to 347,223 shares of Common Stock. The Warrants have
an exercise price of $12.20 per share, shall be exercisable on the six month anniversary of issuance and will expire five (5)
years thereafter. The Warrants are exercisable for cash or, solely in the absence of an effective registration statement or prospectus,
by cashless exercise. The exercise price of the Warrants is subject to adjustment in the case of customary events such as stock
dividends or other distributions on shares of Common Stock or any other equity or equity equivalent securities payable in shares
of Common Stock, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock, and also, subject
to limitations, upon any distribution of assets, including cash, stock or other property to our stockholders. The exercise of
the Warrants is subject to certain beneficial ownership and other limitations set forth in the Warrants. The Company will receive
proceeds from the concurrent private placement transaction solely to the extent the Warrants are exercised for cash.
For the year ended June 30, 2019, the
Company’s Board of Directors authorized the issuance of 2,888 shares of its Series A preferred stock, which are fully vested
with a restrictive legend for employee compensation.
For the year ended June 30, 2019, the
Company’s Board of Directors authorized the issuance of 3,572 fully vested shares of its Common Stock for employee compensation.
For the year ended June 30, 2019, the
Company’s Board of Directors authorized the issuance of 28,210 fully vested shares of its Common Stock with a restrictive
legend for consulting services.
For the year ended June 30, 2019, the
Company’s Board of Directors authorized the issuance of 7,325 fully vested shares of its Common Stock with a restrictive
legend for Director services.
Fiscal Year Ending June 30, 2018 Transactions
For the year ended June 30, 2018, the
Scientific Advisory Board was granted fully vested warrants to purchase 2,287 shares of Common Stock at exercise prices between
$12.80- $31.20 per share expiring in the fiscal year ending June 30, 2022. These warrants were valued at $16,770 and
recorded as consulting expense.
For the year ended June 30, 2018, Eugene
Seymour was granted five year warrants (the “Warrants”) to purchase 12,500 shares of the Company’s Common Stock,
par value $0.001 per share (the “Common Stock”) at an exercise price of $40.00 per share, vesting in three, equal
installments over three years with the last installment vesting on May 1, 2021, as part of the Severance Agreement. The fair value
of these warrants were valued at $53,500 and recorded as Employee compensation expense.
For the year ended June 30, 2018, the
Company’s Board of Directors authorized the issuance of 2,888 shares of its Series A Convertible Preferred Stock, which
are fully vested with a restrictive legend for employee compensation. The Company recorded an expense of $136,106, which is the
fair value at date of issuance.
For the year ended June 30, 2018, the
Company’s Board of Directors authorized the issuance of 7,500 shares of its Series A Convertible Preferred Stock, which
are fully vested with a restrictive legend to the Holder of the company’s Series C Convertible Debenture in consideration
for its waiver of all early redemption payments provided for in the Debenture.
For the year ended June 30, 2018, the
Company’s Board of Directors authorized the issuance of 3.572 fully vested shares of its Common Stock for employee compensation for
severance.
For the year ended June 30, 2018, the
Company’s Board of Directors authorized the issuance of 12,188fully vested shares of its Common Stock with a restrictive
legend for consulting services. The Company recorded an expense of $156,190, which was the fair value at the dates of issuance.
For the year ended June 30, 2018, the
Company’s Board of Directors authorized the issuance of 2,489 fully vested shares of its Common Stock with a restrictive
legend for Director services. The Company recorded an expense of $45,000, which was the fair value at date of issuance.
For the year ended June 30, 2018 the Holders
of the Company’s Series C Debentures elected to receive 275,000 shares of the Company’s restricted Common Stock in
redemption for its $5,000,000 Series C Debenture, quarterly interest payments of $375,000 and deferred interest of $125,000. For
the year ended June 30, 2018, the Company’s Board of Directors authorized the issuance of 275,000 shares of the Company’s
restricted Common Stock for the redemption of the debenture payable to the Holder and quarterly and deferred interest payments.
Fiscal Year Ending June 30, 2017 Transactions
For the year ended June 30, 2017, the
Scientific Advisory Board was granted fully vested warrants to purchase 2,858 shares of Common Stock at exercise prices between
$28.00- $40.80 per share expiring in the fiscal year ending June 30, 2021.
For the year ended June 30, 2017, the
Company’s Board of Directors authorized the issuance of 2,888 shares of its Series A Convertible Preferred Stock that are
fully vested with a restrictive legend for employee compensation.
On January 25, 2017 the Board of Directors
authorized the issuance of 10,000 fully vested shares of its Series A Convertible Preferred stock to Anil Diwan.
For the year ended June 30, 2017, the
Company’s Board of Directors authorized the issuance of 3,572 fully vested shares of its Common Stock for employee compensation.
For the year ended June 30, 2017, the
Company’s Board of Directors authorized the issuance of 8.224 fully vested shares of its Common Stock with a restrictive
legend for consulting services.
For the year ended June 30, 2017, the
Company’s Board of Directors authorized the issuance of 1,697 fully vested shares of its Common Stock with a restrictive
legend for Director services.
On February 8, 2017 two Holders of the
Company’s Series B Debentures elected to convert $5,000,000 of the principal into restricted Common Stock of the Company.
The Company’s Board of Directors authorized the issuance of 216,770 of the Company’s restricted Common Stock. One
of the Holders is controlled by Dr. Milton Boniuk, a then Director of the Company. The second Holder is a foundation established
by Dr. Milton Boniuk.
For the year ended June 30, 2017 two Holders
of the Company’s Series B Debentures elected to receive $107,178 in restricted Common Stock of the Company. For the year
ended June 30, 2017, the Company’s Board of Directors authorized the issuance of 4,900 shares of the Company’s restricted
Common Stock for interest payable to the Holders. One of the Holders is controlled by Dr. Milton Boniuk, a then Director of the
Company. The second Holder is a foundation established by Dr. Milton Boniuk.
For the year ended June 30, 2017, the
Company's Board of Directors authorized the issuance of 21,194 shares of its Common Stock to the Holder of the Company’s
Series C Debentures. The Holder of the Company’s Series C Debentures elected to receive $375,000 of the quarterly interest
payments and $125,000 of the deferred interest in restricted Common Stock of the Company. One Holder is an entity controlled by
Dr. Milton Boniuk, a then Director of the Company. The other Holder is a charitable foundation established by Dr. Milton Boniuk.
Redemption and Conversion of Debenture
Series B Into Common Stock
A substantial portion of the Company’s
Series B Convertible Debentures, with a maturity date of January 31, 2017, were redeemed with restricted Common Stock, effectively
retaining $5 million in cash for the Company.
On February 8, 2017, the Company entered
into agreements with certain holders (the “Holders”) of the Company’s Series B Convertible Debentures (the “Debentures”).
The Company and the Holders agreed to redeem an aggregate of $5,000,000 of principal and accrued interest of $27,178 of the Debentures,
which was payable on January 31, 2017 (the “Maturity Date”) into 216,770 newly-issued, restricted shares (the “Redemption
Shares”) of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”). The redemption
price of the Redemption Shares for the principal amount was $1.1533 representing the volume weighted average price of the Common
Stock on the NYSE MKT from December 15, 2016 to January 30, 2017, as recommended by the Company’s Board of Directors on December
11, 2016 at a Board meeting. Dr. Boniuk abstained from voting at the meeting. This redemption price was at a premium of the closing
bid price of the Common Stock on the Maturity Date of $1.1500. The price for the interest amount, pursuant to the terms of the
Debentures was the closing price of the Common Stock on the Maturity Date. In connection with the conversion, the Holders agreed
to waive any and all prepayment, redemption and conversion rights under the original Debentures in full and final satisfaction
for the acceptance of the Conversion Shares.
The Company offered this redemption proposal
to all holders of the Series B Convertible Debentures, with a total principal value of $6,000,000. Holders of Debentures in the
aggregate principal amount of $5,000,000 accepted the Company’s offer. The holders that accepted the offer included Dr.
Milton Boniuk, a then Director of the Company, and a foundation established by him. The remaining Debentures in the amount of
$1,000,000 principal, with accrued interest as of the Maturity Date, were repaid to the holders thereof in cash.
This redemption, permitted the Company
to retain $5,000,000 of cash and, with the repayment to the other holders, decrease current liabilities by approximately $6,000,000.
No agents were retained and no commissions or fees were paid for this conversion, other than usual attorneys’ fees.
All of the unregistered securities set
forth above were issued by the Company pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, or the provisions
of Regulation D promulgated under the Securities Act. All such shares issued contained a restrictive legend and the holders confirmed
that they were acquiring the shares for investment and without intent to distribute the shares. All of the purchasers were experienced
in making speculative investments, understood the risks associated with investments, and could afford a loss of the entire investment.
Except as set forth above, the Company did not utilize an underwriter or a placement agent for any of these offerings of its securities.
Item 16. Exhibits and Financial Statement
Schedules
The following exhibits
are being filed with this Registration Statement:
|
Exhibits
|
|
Description
|
|
Filed
/ furnished /
incorporated by
reference from
|
|
Incorporated
by
reference from exhibit
|
|
Date
filed
|
|
1.1*
|
|
Form of Underwriting Agreement
|
|
|
|
|
|
|
|
3.1
|
|
Amended
and Restated Articles of Incorporation
|
|
Schedule
14C
|
|
A
|
|
April
23, 2009
|
|
3.2
|
|
Certificate
of Change
|
|
Form
8-K
|
|
3.1
|
|
September
9, 2013
|
|
3.3
|
|
Certificate of Change
|
|
Form 8-K
|
|
3.1
|
|
September 26, 2019
|
|
3.4
|
|
Amended
and Restated Bylaws
|
|
Form
10-Q
|
|
3.1
|
|
February
22, 2010
|
|
4.1
|
|
Specimen
Common Stock Certificate of the Registrant
|
|
Form
10-SB
|
|
4.1
|
|
November
14, 2006
|
|
4.2
|
|
Certificate
of Designation of Series A Convertible Preferred Stock
|
|
Form
10-Q
|
|
4.1
|
|
February
22, 2010
|
|
4.3*
|
|
Certificate of Amendment to Certificate of Designation of Series A Convertible Preferred Stock
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|
|
|
|
|
|
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4.4*
|
|
Certificate of Amendment to Certificate of Designation of Series A Convertible Preferred Stock
|
|
|
|
|
|
|
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4.5
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|
Form
of Warrant
|
|
Form
8-K
|
|
10.2
|
|
March
1, 2019
|
|
4.6*
|
|
Form of Pre-Funded
Warrant
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|
|
|
|
|
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4.7*
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Form of Common Stock Purchase
Warrant
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|
|
|
|
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4.8*
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Form of Representative’s
Warrant
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|
|
|
|
|
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5.1(a)**
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Opinion of Parsons Behle & Latimer
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|
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5.1(b)**
|
|
Opinion of McCarter & English LLP
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|
|
|
|
|
|
|
10.1
|
|
Form
of Scientific Advisory Board Agreement
|
|
Form
10-SB
|
|
10.5
|
|
November
14, 2006
|
|
10.2
|
|
Amended
License Agreement with TheraCour Pharma, Inc.
|
|
Form
10-SB
|
|
10.6
|
|
November
14, 2006
|
|
10.3
|
|
Form
of First Subscription Agreement
|
|
Form
10-SB
|
|
10.8
|
|
November
14, 2006
|
|
10.4
|
|
Form
of Second Subscription Agreement
|
|
Form
10-SB
|
|
10.9
|
|
November
14, 2006
|
|
10.5
|
|
Amendment
to License Agreement with TheraCour Pharma, Inc.
|
|
Form
10-SB
|
|
10.11
|
|
January
17, 2007
|
|
10.6
|
|
Memorandum
of Understanding with Vietnam’s National Institute of Hygiene and Epidemiology (NIHE) dated December 23, 2005
|
|
Form
10-SB
|
|
10.12
|
|
January
17, 2007
|
|
10.7*
|
|
Employment Agreement with M Vyas
|
|
|
|
|
|
|
|
10.8
|
|
Agreement
of Purchase and Sale between the Registrant and Inno-Haven, LLC
|
|
Form
8-K
|
|
10.1
|
|
January
7, 2015
|
|
10.9
|
|
Conversion
and Settlement Agreement
|
|
Form
8-K
|
|
10.1
|
|
February
13, 2017
|
|
10.10
|
|
Confidential
Separation Agreement and General Release of Eugene Seymour
|
|
Form
8-K
|
|
10.1
|
|
May
4, 2018
|
|
10.11
|
|
Employment
Agreement with Anil Diwan
|
|
Form
8-K
|
|
10.1
|
|
July
23, 2018
|
|
10.12
|
|
Employment
Agreement with Irach Taraporewala
|
|
Form
8-K
|
|
10.2
|
|
July
23, 2018
|
|
10.13
|
|
Securities
Purchase Agreement, dated February 27, 2019, between the Registrant and certain purchasers
|
|
Form
8-K
|
|
10.1
|
|
March
1, 2019
|
|
10.14
|
|
Letter
Agreement with Chardan Capital Markets, LLC
|
|
Form
8-K
|
|
10.3
|
|
March
1, 2019
|
|
10.15
|
|
Director
Retainer Agreement, dated as of June 6, 2019, between the Registrant and Mark Day
|
|
Form
8-K
|
|
10.1
|
|
June
10, 2019
|
|
10.16*
|
|
Form of Series A Conversion Waiver
|
|
|
|
|
|
|
|
14.1
|
|
Code
of Ethics
|
|
Form
10-SB
|
|
10.10
|
|
November
14, 2006
|
|
23.1*
|
|
Consent of EisnerAmper LLC.
|
|
|
|
|
|
|
|
23.2**
|
|
Consent of Parsons Behle & Latimer (included in Exhibit 5.1(a))
|
|
|
|
|
|
|
|
23.3**
|
|
Consent of McCarter & English LLP (included in Exhibit 5.1(b))
|
|
|
|
|
|
|
|
24.1*
|
|
Power of Attorney (included on the signature page of this registration statement)
|
|
|
|
|
|
|
* Filed herewith.
** To be filed on amendment.
|
(b)
|
Financial Statement Schedules
|
No financial statement
schedules are provided because the information called for is not required or is shown either in the financial statements or the
notes thereto.
Item 17. Undertakings
The undersigned registrant
hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
(iii) To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That,
for the purpose of determining liability under the Securities Act to any purchaser: each prospectus filed pursuant to Rule 424(b) as
part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other
than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That,
for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution
of the securities:
The undersigned registrant
undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser
by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered
to offer or sell such securities to such purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule
424;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to
by the undersigned registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of the Securities
Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Shelton, Connecticut, on the 27th day of September, 2019.
|
|
NANOVIRICIDES, INC.
|
|
|
|
|
|
|
By:
|
/s/ Anil Diwan, PhD
|
|
|
|
Anil Diwan, PhD
|
|
|
|
Interim Chief Executive Officer and President
|
We, the undersigned hereby severally constitute
and appoint Anil Diwan our true and lawful attorney-in-fact and agent, with full power to sign for us, and in our names in the
capacities indicated below, any and all amendments to this registration statement (including pre-effective and post-effective
amendments), any subsequent registration statements pursuant to Rule 462 of the Securities Act of 1933, as amended, and to file
the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue hereof. This power of attorney may be executed in counterparts.
Pursuant to the requirements of the Securities
Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Anil Diwan
|
|
President and
|
|
September 27, 2019
|
|
Anil Diwan
|
|
Executive Chairman (Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Meeta Vyas
|
|
Chief Financial Officer
|
|
September 27, 2019
|
|
Meeta Vyas
|
|
(Principal Financial Officer and Principal Accounting Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Stanley Glick
|
|
Director
|
|
September 27, 2019
|
|
Stanley Glick
|
|
|
|
|
|
|
|
|
|
|
|
/s/ James Sapirstein
|
|
Director
|
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September 27, 2019
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James Sapirstein
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/s/ Mark Day
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Director
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September 27, 2019
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Mark Day
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