NANOVIRICIDES, INC. The following discussion should be read in conjunction with the information contained in the financial statements of the Company and the notes thereto appearing elsewhere herein and in conjunction with the Company's Annual Report on Form 10-K for the year endedJune 30, 2021 . Readers should carefully review the risk factors disclosed in this Form 10-K and other documents filed by the Company with theSEC .
As used in this report, the terms "Company", "we", "our", "us" and "NNVC" refer
to
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "NNVC believes," "management believes" and similar language. The forward-looking statements are based on the current expectations of NNVC and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. Actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them. Investors are also advised to refer to the information in our previous filings with theSecurities and Exchange Commission (SEC), especially on Forms 10-K, 10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.
Management's Plan of Operation
The Company's drug development business model was formed inMay 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 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 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. The Company completed a license agreement for the field of VZV indications inNovember 2019 from TheraCour. The Company completed a license agreement for the field of human Coronavirus indications inSeptember 2021 from TheraCour. TheraCour has not denied any licenses sought
by
the Company in the past.
Page 91 of 121
The Company discloses the risk that 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. 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.
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.
Page 92 of 121
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 (See, Item 5). 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
NanoViricides technology is now maturing rapidly toward clinical drug trials,
with the new facility, expanded staff, and the financial strength that we have
attained since uplisting to NYSE-MKT (now NYSE American) in September 2013 .
As of June 30, 2021 , the end of the reporting period, we had $20,516,677 in cash
and cash equivalents, prepaid expenses of $307,102 and $9,084,901 of property
and equipment, net of accumulated depreciation. Our liabilities at June 30, 2021
are $351,146 including a short term loan payable of $95,306 payable to
BankDirect, accounts payable of $200,016 payable to third parties and accounts
payable to TheraCour of $31,539 . Stockholders' equity was $29,911,167 at
June 30, 2021 . In comparison, as of June 30, 2020 , we had $13,708,594 in cash
and cash equivalents, prepaid expenses of $277,063 and property and equipment
was $9,544,431 , net of accumulated depreciation. Our liabilities at June 30,
2020 were $2,156,377 , accounts payable of $380,727 payable to third parties, and
accounts payable to TheraCour of $561,580 of which $200,000 is deferred until an
IND filing. Stockholders' equity was $21,757,962 at June 30, 2020 .
During the year ended June 30, 2021 , we spent approximately $8.2 million in cash
toward operating activities and approximately $239,000 in capital investment. In
contrast, we spent approximately $6.7 million in cash toward operating
activities and approximately $8,600 in capital investment in the year ended
June 30, 2020 . We anticipate capital costs of approximately $200,000 in thenext twelve months. As ofJune 30, 2021 , we have a cash and cash equivalent balance of$20,516,677 that is expected to be sufficient to fund our currently budgeted operations for more than one year from the filing of the Company's Form 10K. Additionally, onJuly 8, 2020 , the Company entered into an underwriting agreement (the "Underwriting Agreement") withKingswood Capital Markets , aDivision of Benchmark Investments , Inc. ("Kingswood"). The offering was consummated onJuly 10, 2020 , whereby the Company sold 1,369,863 shares of Common Stock and a fully exercised Underwriters' over-allotment option of 205,479 additional shares the public offering price of$7.30 per share. No warrants were issued in this Offering. The net proceeds to the Company from the offering was approximately$10.4 million after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. Page 93 of 121 OnJuly 31, 2020 , the Company entered into an At Market Issuance Sales Agreement (the "Sales Agreement") withB. Riley Securities, Inc. andKingswood Capital Markets , a division ofBenchmark Investments, Inc. (each a "Sales Agent" and collectively, the "Sales Agents"), pursuant to which the Company may offer and sell, from time to time, through or to the Sales Agents, shares of Common Stock (the "Placement Shares"), having an aggregate offering price of up to$50 million (the "ATM Offering"). Sales pursuant to the Sales Agreement will be made only upon instructions by the Company to the Sales Agents, and the Company cannot provide any assurances that it will issue any Shares pursuant to the Sales Agreement. Actual sales will depend on a variety of factors to be determined by the Company from time to time, including (among others) market conditions, the trading price of the Company's Common Stock, capital needs and determinations by the Company of the appropriate sources of funding for the Company. The Company is not obligated to make any sales of Common Stock under the Sales Agreement and the Company cannot provide any assurances that it will issue any shares pursuant to the Sales Agreement. The Company will pay a commission rate of up to 3.5% of the gross sales price per share sold and agreed to reimburse the Sales Agents for certain specified expenses, including the fees and disbursements of its legal counsel in an amount not to exceed$50,000 and have agreed to reimburse the Sales Agents an amount not to exceed$2,500 per quarter during the term of the Sales Agreement for legal fees to be incurred by the Sales Agents. The Company has also agreed pursuant to the Sales Agreement to provide each Sales Agent with customary indemnification and contribution rights. OnMarch 2, 2021 the Company sold 814,242 shares of common stock at an average price of approximately$7.83 per share under the sales agreement withB. Riley Securities, Inc. The net proceeds to the Company from the offering was approximately$6.1 million after placement agent fees and other estimated offering expenses. The Company has an accumulated deficit atJune 30, 2021 of approximately$114.4 million and a net loss of approximately$8.8 million and net cash used in operating activities of approximately$8.2 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. SinceMay 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. As ofJune 30, 2021 , the Company had available cash and cash equivalents of approximately$20.5 million . 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's ability to raise additional funds in the public markets would be enhanced. Management believes that the Company's existing resources will be sufficient to fund the Company's planned operations and expenditures throughOctober 2022 . 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. Page 94 of 121 Results of Operations
The Company is a biopharmaceutical company and does not have any revenue for the
years ended
Comparison of the Year End
Revenues - The Company is a non-revenue producing entity.
Operating Expenses - Research and development expenses for the year endedJune 30, 2021 increased$1,419,017 to$6,114,541 from$4,695,524 for the year endedJune 30, 2020 . This year-to-year increase is generally attributable to increases in lab supplies and chemicals, employee compensation expenses and lab fees for pre IND studies. General and administrative expenses decreased$671,370 to$2,629,565 for the year endedJune 30, 2021 from$3,300,935 for the year endedJune 30, 2020 . The decrease in general and administrative expenses is generally attributable to decreases in legal and professional expenses and office salaries. Interest Income - Interest income was$9,348 and$17,079 for the years endedJune 30, 2021 and 2020, respectively. Interest income decreased due to lower interest rates for the majority of the year endedJune 30, 2021 . Interest Expense-The Company has incurred interest expense of$85,405 and$93,670 for the years endedJune 30, 2021 andJune 30, 2020 respectively. The decrease results from the payoff of a mortgage loan in December, 2020, offset by an increase in interest paid on a short term loan payable. Income Taxes - There is no provision for income taxes due to ongoing operating losses. As ofJune 30, 2021 , we had estimated cumulative tax benefits and development tax credits and other deferred tax credits resulting in a deferred tax asset of$35,266,699 . This amount has been offset by a full valuation allowance. Page 95 of 121
Net Loss - For the year endedJune 30, 2021 , the Company had a net loss of$8,822,189 , or a basic and fully diluted loss per share of$0.81 compared to a net loss of$13,446,538 , or a basic and fully diluted loss per share of$2.39 for the year endedJune 30, 2020 . The decrease in the Company's net loss for the year endedJune 30, 2021 from the year endedJune 30, 2020 of$4,624,349 is generally attributable to the change in fair value of derivatives and a loss on issuance of Series A shares for accounts payable-related party in the year endedJune 30, 2020 offset by an increase in research and development costs in the year endedJune 30, 2021 .
Comparison of the Year End
Revenues - The Company is a non-revenue producing entity.
Operating Expenses - Research and development expenses for the year endedJune 30, 2020 decreased$1,226,196 to$4,695,524 from$5,921,720 for the year endedJune 30, 2019 . This year-to-year decrease is generally attributable to a decrease in lab supplies and chemicals, and a decrease in employee compensation expenses and by a decrease in lab fees for pre IND studies. General and administrative expenses increased$562,973 to$3,300,935 for the year endedJune 30, 2020 from$2,737,962 for the year endedJune 30, 2019 . The increase in general and administrative expenses is generally attributable to an increase in legal and professional expenses offset by a decrease in salary and stock compensation paid to retired executive officers and to employees other than research scientists and a decrease in consultants costs unrelated to research and development. Interest Income - Interest income was$17,079 and$55,497 for the years endedJune 30, 2020 and 2019, respectively. Interest income decreased due to lower cash and cash equivalents for the majority of the year endedJune 30, 2020 as well as lower interest rates. Interest Expense-The Company has incurred interest expense of$93,670 and$0 for the years endedJune 30, 2020 andJune 30, 2019 , respectively. The increase is as a result of interest paid on the mortgage note, amortization of the mortgage loan origination fee, and interest paid on a short term loan payable. Loss on issuance of Series A preferred stock for accounts payable - related party - Loss of$142,669 for the year endedJune 30, 2020 represents the difference on the exchange of 100,000 shares of Series A preferred stock with a fair value of$392,669 for$250,000 of previously deferred development fees
owed to TheraCour's. Gain on Warrant Settlement- For the year endedJune 30, 2020 , the gain on warrant settlement resulted from an Exchange Agreement with certain Investors pursuant to a Settlement Agreement with the same investors. The Investors exchanged 347,222 old warrants for 647,224 shares of common stock and 347,222 new warrants. The aggregate fair value of the common stock and New Warrants issued as part of the Exchange Agreement was$7,788,968 . The Old Warrants were remeasured to a fair value of$8,403,462 onJanuary 24, 2020 immediately prior to the exchange. As a result of the Exchange Agreement, a gain on warrant settlement was recognized in the amount of$614,494 calculated as the difference between the fair value of the Old Warrants immediately prior to the exchange and the aggregate fair value of the common stock and New Warrants issued in the exchange. Change in fair value of derivative - Change in fair value of derivative for the year endedJune 30, 2020 decreased$6,025,058 to ($5,845,313 ) from$179,745 for the year endedJune 30, 2019 . For the year endedJune 30, 2020 , the change in fair value of derivatives resulted from an Exchange Agreement with certain Investors pursuant to a Settlement Agreement with the same investors. For the year endedJune 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 onFebruary 27, 2019 . Page 96 of 121 Income Taxes - There is no provision for income taxes due to ongoing operating losses. As ofJune 30, 2020 , we had estimated cumulative tax benefits and development tax credits and other deferred tax credits resulting in a deferred tax asset of$35,089,911 . This amount has been offset by a full valuation allowance. Net Loss - For the year endedJune 30, 2020 , the Company had a net loss of$13,446,538 , or a basic and fully diluted loss per share of$2.39 compared to a net loss of$8,424,440 , or a basic and fully diluted loss per share of$2.35 for the year endedJune 30, 2019 . The increase in the Company's net loss for the year endedJune 30, 2020 from the year endedJune 30, 2019 of$5,022,098 is generally attributable to the change in fair value of derivatives, and an increase in general and administrative expenses, offset by a decrease in research and development costs.
Liquidity and Capital Reserves
The Company had cash and cash equivalents of$20,516,677 and$13,708,594 as ofJune 30, 2021 and 2020, respectively. On the same dates, current liabilities outstanding totaled$351,146 and$2,156,377 , respectively. As ofJune 30, 2021 andJune 30, 2020 , total current liabilities included short term loan payable of$95,306 and$62,843 , respectively Page 97 of 121
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$114,385,313 and$105,563,124 atJune 30, 2021 and 2020, respectively. The Company anticipates several important milestones that it will be achieving in the ensuing year. Management believes that as it achieves these milestones, the Company's ability to raise additional funds in the public markets would
be enhanced. Management believes that the Company's existing resources will be sufficient to fund the Company's planned operations and expenditures through October, 2022. 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. As ofJune 30, 2021 , we have a cash and cash equivalent balance of$20,516,677 that is expected to be sufficient to fund our currently budgeted operations for more than one year from the filing of the Company's Annual Report on Form 10K. Additionally, onJuly 31, 2020 , the Company entered into an At Market Issuance Sales Agreement (the "Sales Agreement") withB. Riley Securities, Inc. andKingswood Capital Markets , a division ofBenchmark Investments, Inc. (collectively, the "Sales Agents"). Sales pursuant to the Sales Agreement will be made only upon instructions by the Company to the Sales Agents, and the Company cannot provide any assurances that it will issue any Shares pursuant to the Sales Agreement. Actual sales will depend on a variety of factors to be determined by the Company from time to time, including (among others) market conditions, the trading price of the Company's common stock, capital needs and determinations by the Company of the appropriate sources of funding for the Company. The Company is not obligated to make any sales of common stock under the Sales Agreement and the Company cannot provide any assurances that it will issue any shares pursuant to the Sales Agreement. OnMarch 2, 2021 the Company sold 814,242 shares of common stock at an average price of$7.83 under the Sales Agreement withB. Riley Securities, Inc. The net proceeds to the Company from the offering was approximately$6.1 million after deducting underwriting discounts and commissions and other offering expenses.
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 4 summarizes the primary components of our research and development expenses as allocated, during the periods presented in this Annual Report on Form 10-K.
Page 98 of 121
Table 4: R&D Cost Allocations
Year Ended Year Ended Year Ended
June 30, 2021 June 30, 2020 June 30, 2019
HerpeCide™ Program. Herpes Simplex virus
infections (HSV-1, HSV-2) and VZV Indications:
Cold Sores, Genital Ulcers, Shingles and ARN $ 550,000 $ 1,131,724 $ 5,601,720
Covid -19 5,564,541 3,563,800 -
All Influenzas: FluCide™ - - 150,000
HIV-Cide™ - - 20,000
EKC-Cide™, other Eye Viral Infections - - -
Dengue - - -
Other (Ebola, and other projects) - - -
Unallocated stock compensation -
- 150,000
Total $ 6,114,541 $ 4,695,524 $ 5,921,720 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 that our current available financing is sufficient for accomplishing the goal of filing one IND or equivalent regulatory applications and executing initial human trials. We will need additional financing to execute on our business plan and to complete human clinical trials of our drug candidates into drug approval. Our Coronavirus drug candidate has completed IND-enabling studies, and is expected to rapidly move into human clinical studies in response to the COVID-19 pandemic. Our ShinglesSkin Cream , has completed IND-enabling studies, and we intend to file an IND for this drug once the COVID-19 situation abates. At present, we are working on the scale up of manufacturing of these drug candidates in a manner that will be compliant withUS FDA cGMP and corresponding ICH guidelines. We intend to request a pre-IND meeting with the USFDA for the Coronavirus drug candidate 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 or more drug candidates in the HerpeCide program will also move forward into IND-enabling studies. We intend to further re-engage our FluCide and HIVCide drug development programs once we have established our platform technology with the Coronavirus and HerpeCide program drug candidates. We are thus poised for strong growth with a number of drug candidates in a number of disease indications. Financings Management engaged in efforts to raise financing inSeptember 2019 . OnSeptember 24, 2019 , 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 theState of Nevada , was consummated pursuant to a Certificate of Amendment filed with the Secretary ofState of Nevada onSeptember 23, 2019 . OnDecember 16, 2019 , the Company entered into an Open End Mortgage Note (the "Note") with Dr.Anil Diwan , the Company's founder, Chairman and President, to loan the Company up to$2,000,000 in two tranches of$1,000,000 (the "Loan"). The Note bore interest at a rate of 12% per annum and was secured by a mortgage granted against the Company's headquarters. Dr.Anil Diwan received 10,000 shares of the Company's Series A preferred stock as a loan origination fee. As ofJune 30, 2020 , the Company had drawn down$1.1 million on this loan. OnApril 30, 2020 , the Company andDr. Diwan have mutually agreed to extend the maturity date of the note, at the Company's option, toMay 15, 2021 , with the rest of the terms remaining the same. OnDecember 16, 2020 the Company repaid the mortgage loan. Page 99 of 121
OnDecember 17, 2019 , the Company entered into a Deferred Expense Exchange Agreement with TheraCour, whereby the Company and TheraCour agreed to exchange 100,000 shares of Series A preferred stock with a fair value of$392,669 for$250,000 previously deferred development fees owed to TheraCour. The Company recognized a loss on the exchange of$142,669 .Dr. Diwan is principal shareholder of TheraCour. OnJanuary 24, 2020 , the Company announced in a press release that it had completed an underwritten public offering (the "Offering") with gross proceeds of$8,625,000 before deducting underwriting discounts and other estimated offering expenses. The Offering included 2,500,000 shares of the Company's common stock, and 375,000 additional shares from the exercise of the underwriter's option to purchase to cover over-allotments at the public offering price of$3.00 per share. No warrants were issued in this Offering. The net proceeds to the Company After deducting offering costs was$7,457,575 . OnMay 26, 2020 , the Company announced in a press release that it had raised$10,220,000 in gross proceeds from the sale of 1,400,000, shares of common stock, at a price of$7.30 per share, in a previously announced registered direct offering (the "May Offering"). No warrants were issued in this May Offering. The net proceeds to the Company were approximately$9,219,400 after deducting placement agent fees and other costs. The May Offering closed on
May 22, 2020 . Page 100 of 121 OnJuly 8, 2020 , , the Company entered into an underwriting offering withKingswood Capital Markets , aDivision of Benchmark Investments , Inc. ("Kingswood"). The offering was consummated onJuly 10, 2020 , whereby the Company sold 1,369,863 shares of Common Stock and a fully exercised Underwriters' over-allotment option of 205,479 additional shares the public offering price of$7.30 per share. No warrants were issued in this Offering. The net proceeds to the Company from the offering was approximately$10.4 million after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. Additionally, onJuly 31, 2020 , the Company entered into an At Market Issuance Sales Agreement (the "Sales Agreement") withB. Riley Securities, Inc. andKingswood Capital Markets , a division ofBenchmark Investments, Inc. (each a "Sales Agent" and collectively, the "Sales Agents"), pursuant to which the Company may offer and sell, from time to time, through or to the Sales Agents, shares of Common Stock (the "Placement Shares"), having an aggregate offering price of up to$50 million (the "ATM Offering"). Sales pursuant to the Sales Agreement will be made only upon instructions by the Company to the Sales Agents, and the Company cannot provide any assurances that it will issue any Shares pursuant to the Sales Agreement. Actual sales will depend on a variety of factors to be determined by the Company from time to time, including (among others) market conditions, the trading price of the Company's common stock, capital needs and determinations by the Company of the appropriate sources of funding for the Company. The Company is not obligated to make any sales of common stock under the Sales Agreement and the Company cannot provide any assurances that it will issue any shares pursuant to the Sales Agreement. OnMarch 2, 2021 the Company sold 814,242 shares of common stock at an average price of$7.83 under the Sales Agreement withB. Riley Securities, Inc. The net proceeds to the Company from the offering was approximately$6.1 million after deducting underwriting discounts and commissions and other offering expenses. The Company thus believes that it is in a strong financial position now and can undertake the COVID-19 clinical program, and also, when opportune, reengage the NV-HHV-101 clinical program. The Company also believes that additional non-dilutive financing will be available under the COVID-19 program upon advancing it further toward or into human clinical trials. The Company also believes that due to the pandemic, it will be possible to rapidly take our anti-coronavirus drug into human clinical trials under the COVID-19 regulatory pathways of theUS FDA or other regulatory authorities.
Requirement for
As ofJune 30, 2021 , we had a cash and cash equivalent balance of$20,516,677 that is expected to be sufficient to fund our currently budgeted operations for more than one year from the filing of the Company's Form 10-K. The Company believes that our cash and cash equivalent balance and the proceeds from the ATM offerings will provide sufficient funds for us to continue our operations beyond October, 2022 and to be able to advance at least one of its drug candidates into human clinical trial stage with the available cash. The Company estimates that it will need additional funding to continue further development of its drug candidates through later stages of 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$15.2 million fromOctober 2021 throughOctober 2022 , of which approximately$11.2 million is expected to go towards research and development for our drug candidates, including IND-enabling studies and anticipated human critical trial of our antiviral treatment for COVID, and approximately$4.0 million is budgeted for general and administrative expenses. Page 101 of 121
These anticipated expenses for the subsequent one year period commencing about
1.
vivo and in vitro studies for the Coronavirus program indications, the VZV
(Shingles) drug development program, and other indications in HerpeCide
program, indications in FluCide program, Eye Nanoviricide, DengueCide, and
HIVCide, and Other programs (see Table 2). This includes staffing costs of
approximately
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. Clinical Trial Manufactured Batch of Drug Product approximately
for Phase 1 and 2a for the first Coronavirus (COVID-19) program drug
candidate.
3. Anticipated Clinical Trial Costs for the COVID-19 drug candidate of
approximately $5,000,000 for Phase 1 and 2a. We anticipate that these
clinical trials will be designed with the goal of an emergency useapproval during the current pandemic provided it continues to persist. We
may need to modify the program to seek full-fledged approval for our
broad-spectrum coronavirus drug candidate if the pandemic is resolved by
the time we are completing Phase 2a human clinical trials of this drug
candidate.
4. Corporate overhead of
salaries, legal, accounting, investor relations, public relations,
business development, and other costs expected to be incurred by being a
public reporting company.
5. Capital costs of
equipment and laboratory improvements.
We estimate that beyond the current budgetary one-year period ending October 15,
2022 , to the period ending October 15, 2023 human clinical development of the
Skin Cream for Topical Treatment of Shingles, for further clinical studies
towards full-fledged approval of our Coronavirus drug candidate as may be
necessary, and for developing additional drug indications based on the Shingles
skin cream candidate, NV-HHV-101, in the HerpeCide program, we may need
approximately an additional $13 million , or approximately $13 million more than
our current cash reserves. The additional funds will be needed to pay
additional, subcontract costs related to the expansion and further development
of our drug pipeline, for human clinical trials, and for additional capitaland operational expenditures
These anticipated additional expenses for the two-year period commencing
1.
additional indications in HerpeCide program, indications in FluCide
program, Eye Nanoviricide, DengueCide, and HIVCide, and Other programs
(see Table 2). This includes staffing costs of approximately
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. Clinical Trial Manufactured Batch of Drug Product approximately
for Phase 2b and 3 for the Coronavirus program candidate, and
for Phase 1 and 2a for the VZV Shingles program drug candidate.
3. Clinical Trials Costs budgeted as follows: anticipated Phase 2b and 3
Clinical Trial Costs for the Covid-19 of approximately $10,000,000 , and
1,000,000 for the Phase 1 and 2a clinical trials for the skin cream for
Shingles for the Skin Cream for Shingles.
4. Corporate overhead of $5,000,000 .
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5. Capital costs for laboratory and pilot manufacturing equipment of
$2,000,000 .
6. As our programs mature and as we are able to move additional drug
candidates into human clinical trials we will continue to requireadditional funding for such activities. As a rule of thumb, we estimate
that, for each drug candidate that goes into clinical trials, if Phase I
and Phase II are successful, we anticipate approximately
Phase III human clinical trials for that drug candidate to enable us to
file a New Drug Application (NDA) with the
approval. These estimates are based on rough quotes from potential
investigators, and assumptions relative to additional costs. These
estimates assume that our drug candidates are highly effective and
therefore would require relatively few patients in each arm of the each
trial in order to establish statistically significant results.
We believe that as we become a clinical stage company, and as our programs
mature towards FDA approval, the Company's market capitalization should improve
substantially, based on market capitalizations of comparable public companies in
clinical stages. If so, we believe that we will be able to raise the additional
necessary funds through public financings as needed. We believe that our
coronavirus program is maturing rapidly towards human clinical trials, and if we
are successful in achieving an emergency use approval for a coronavirus drug
candidate, we may be able to generate substantial revenues during the current
pandemic using our existing cGMP-capable manufacturing capacity itself.
We believe we have sufficient funding to take our Coronavirus drug candidate
into initial human clinical trials. We will need to raise additional funds to
take NV-HHV-101 and additional Topical HerpeCide drug candidate indications into
an IND application stage. There is no assurance that the Company will be
successful in obtaining sufficient financing on terms acceptable to the Company
to fund these programs. 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 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 work plan will lead us to obtain certain
information about the safety and efficacy of some of the drugs under development
in animal models and very likely, our coronavirus drug candidate in human
clinical trials. 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 and further human clinical studies, expanding into
Phase 2b, and Phase 3 human clinical trials of our drug candidates.
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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 reports 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. We cannot accurately project the timeline of when we would be able to take a drug candidate into clinical studies, nor can we predict when we may be able to achieve our first drug approval, if any. As such we do not provide any guidance on expected timelines. The Company has no experience in having taken a single drug through theUS FDA or any international drug approval process as of now. As such, we may not be able to estimate the time or cost of these studies accurately. However, we try to do our best by using expert consultants and preparing reasonable estimates based on quotations from various contract research organizations.
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. 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
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, non-employee
directors, and non-employees 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.
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RECENT ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Pronouncements
The Company considers the applicability and Impact of all Accounting Standard Updates ("ASU's"). There were no recent ASU's that are expected to have a material impact on the Company's balance sheets or statements of operations.
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