NANOVIRICIDES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

The following discussion should be read in conjunction with the information
contained in the financial statements of the Company and the notes thereto
appearing elsewhere herein and in conjunction with the Management's Discussion
and Analysis of Financial Condition and Results of Operations set forth in the
Company's Annual Report on Form 10-K for the year ended June 30, 2020. Readers
should carefully review the risk factors disclosed in this Form 10-Q, Form 10-K
and other documents filed by the Company with the SEC.

As used in this report, the terms "Company", "we", "our", "us" and "NNVC" refer to NanoViricides, Inc., a Nevada corporation.

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements within the meaning of the
federal securities laws. All statements other than statements of historical fact
made in this report are forward looking. In particular, the statements herein
regarding industry prospects and future results of operations or financial
position are forward-looking statements. These 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," "Company believes," "management believes" and similar
language. These forward-looking statements can be identified by the use of words
such as "believes," "estimates," "could," "possibly," "probably," "anticipates,"
"projects," "expects," "may," "will," or "should," or other variations or
similar words. No assurances can be given that the future results anticipated by
the forward-looking statements will be achieved. Forward-looking statements
reflect management's current expectations and are inherently uncertain. The
forward-looking statements are based on the current expectations of
NanoViricides, Inc. and are inherently 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.



Investors are also advised to refer to the information in our previous filings
with the Securities and Exchange Commission (SEC), especially on Forms 10-K,
10-Q and 8-K, in which we discuss in more detail various important factors that
could cause actual results to differ from expected or historic results. It is
not possible to foresee or identify all such factors. As such, investors should
not consider any list of such factors to be an exhaustive statement of all risks
and uncertainties or potentially inaccurate assumptions.

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 [phone]. Our Website is
located at http://www.Nanoviricides.com.

On September 25, 2013, the Company's common stock began trading on the New York Stock Exchange American under the symbol, "NNVC".

We are a development stage company with several drugs in various stages of pre-clinical development, including late stage IND-enabling non-clinical studies. We have no customers, products or revenues to date, and may never achieve revenues or profitable operations.

Since our founding in 2005, we have developed drug candidates against a number
of different viruses including coronaviruses, influenza viruses, HIV, herpes
viruses (HSV-1, HSV-2, and VZV), and dengue viruses among others. Many of these
candidates have been successfully tested in cell culture and animal studies. The
Company's drug development business model was formed in May 2005 with a license
to the patents and intellectual property held by TheraCour Pharma, Inc.
("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. TheraCour is a privately owned
company, controlled by Dr. Anil Diwan, PhD, principal developer of the
polymeric-micelle based nanomedicines technologies. TheraCour licenses its
intellectual property from AllExcel, Inc., ("Allexcel") a company that is owned
and controlled by Dr. Anil Diwan. The Company has a worldwide exclusive license
to this technology for several drugs with specific targeting mechanisms for the
treatment of a number of human viral diseases including HSV-1, HSV-2, and VZV.
The Company signed a Memorandum of Understanding ("MoU") with respect to
anti-viral treatments for coronavirus derived human infections (the "Field")
with TheraCour in June 2020. The MoU specifically provides a limited, exclusive
license to the Company for all research and development in the Field for further
research and development purposes towards human clinical trials. The MoU was
extended with an amendment in April 2021 to allow completion of licensing by
June 15, 2021.



                                      18





We are currently focused on advancing our drug candidates for treatment of
patients with COVID-19 infection towards human clinical trials, in response to
the current pandemic. We are working on a pre-IND application for COVID-19
treatment at present. We have previously completed IND-enabling studies for a
drug candidate for the treatment of shingles rash caused by reactivation of the
chickenpox virus (aka varicella-zoster virus, VZV). We plan on taking the
shingles drug candidate into human clinical trials after clinical trials of our
COVID-19 drug candidate.



Our other clinical drug candidate, namely NV-HHV-101, a skin cream for the
treatment of shingles rash, has completed IND-enabling pre-clinical studies and
we were in the process of writing the Investigational New Drug ("IND")
application for this drug when the COVID-19 pandemic struck. As we have focused
our efforts on the coronavirus program due to the difficulties of conducting
human clinical trials for shingles during the pandemic we plan on re-engaging
this program and filing an IND once the adverse effects of the coronavirus
pandemic on designing and conducting shingles clinical trials is minimized.



NanoViricides is one of a few biopharma companies that operates its own
cGMP-compliant manufacturing facility. The Company intends to produce its drugs
for clinical trials in this facility. The Company has the capability to produce
sufficient drugs for about 1,000-5,000 patients in a single batch of production,
depending upon the drug and the dosage. This production capacity is anticipated
to be sufficient for first-in-human use in the current SARS-CoV-2 pandemic for
our anti-coronavirus drug in development, as well as for the anticipated
clinical trials of NV-HHV-101 skin cream for the treatment of shingles.

Our COVID-19 Drug Development Program

The need for the broad-spectrum, pan-coronavirus nanoviricide drug treatment
cannot be overstated for combating the COVID-19 pandemic given the current
circumstances and the present status of the pandemic. New virus variants
continue to develop in the field. The variants that have advantages in terms of
transmissibility, infectivity, and escape from antibodies, drugs and vaccines
will continue to evolve and spread, replacing prior variants. This is already
well documented.

The devastatingly severe "second wave" of the pandemic in India that is currently raging appears to have been traced to new variants, including the UK variant B.1.1.7, and novel variants found in India, namely N400K, and a so-called "double mutant" variant, B.1.617. Of these, B.1.617 appears to be taking over and appears to be both more transmissive, severe, and is likely escaping antibodies from previous infections in patients.

Several vaccines have been found to be substantially less effective in
protecting against infection by the South African variant, N501Y-V.2 (also
called lineage B.1.351) than the earlier variants. A mutation present in B.1.351
as well as Brazilian variant P.1 that is thought to be possibly linked to
evasion from antibody drugs and vaccines, E484K, has also been reported in UK in
a further differentiated mutant of the variant of concern lineage B.1.1.7. The
available monoclonal antibody drugs and convalescent plasma antibodies have been
reported to be less effective against several variants.



By the very nature of how they work, vaccines and antibodies tend to be highly
specific to the target virus variant, and do not afford strong protection
against differentiated variants that are evolutionary distant from the target
variant. This scientific fact is now well demonstrated for the COVID-19
pandemic. Developing new vaccines against then known variants, a strategy that
is now being attempted is again subject to new variants spreading in the field
prior to any possibility of sufficient vaccination with the new vaccine
boosters. The goal of herd immunity has also become elusive and now it is being
thought of as unattainable even in the USA.



                                      19

It is therefore clear that an effective broad-spectrum anti-coronavirus drug will be needed before the world can return to normal activity.

We are developing a broad-spectrum antiviral drug candidate, NV-CoV-2, where the
potential for escape of virus variants is minimized by the very design of the
drug for the treatment of COVID-19 infected sick persons. In contrast, vaccines
are not treatments for sick persons, and must be administered to healthy
individuals, and further require several weeks for the recipient's immune system
to become capable of protecting against the target virus strain which still may
not protect against new virus variants circulating by that time.



In addition to NV-CoV-2, we are also developing another anti-coronavirus drug
candidate, NV-CoV-2-R. This drug candidate is comprised of holding remdesivir
inside our polymeric drug candidate NV-CoV-2 by a process known as
encapsulation. Thus NV-CoV-2-R is potentially capable of (1) direct attack on
extracellular virus, to break the "re-infection cycle" by virtue of NV-CoV-2,
and (2) attack on intracellular reproduction of the virus to break the
"replication cycle" as has been validated for remdesivir. If both of these
cycles are broken, in theory, it is expected to result in a cure of the virus
infection, or at least a substantially strong control of the virus infection.
Remdesivir is a challenging drug, because it is rapidly converted by blood and
cellular enzymes into a significantly less potent form. It is also almost
insoluble in aqueous media. These issues have been cited as possible reasons for
different data from clinical trials. In randomized controlled clinical trials,
Gilead reported that remdesivir was effective in reducing the hospital stay of
COVID-19 patients significantly. However, in analysis of field usage of
remdesivir and other clinical trials, WHO reported that remdesivir was not as
effective as was thought based on the clinical trials that led to first its
emergency use approval (EUA) followed by complete approval (Approval) by the US
Food and Drug Administration (FDA). Encapsulation of remdesivir in NV-CoV-2 is
expected to solve these problems. Encapsulation inside NV-CoV-2 is expected to
protect remdesivir from the rapid bodily metabolism, thereby raising the
effective drug concentration in the body, and it is also expected to make
effective drug available over a longer period of time than the Gilead
formulation of remdesivir.



It is important to develop NV-CoV-2 by itself as a drug because the inherent
toxicity of remdesivir which can be inferred from its molecular structure may
limit its usage in certain patient populations.



We were able to achieve the important milestone of completing the creation of
NV-CoV-2-R from NV-CoV-2 and remdesivir in a matter of just a few months. This
rapid development was possible only because of the strong advantages of our
nanoviricide platform technology.



We began development of a nanoviricide drug to treat SARS-CoV-2, the virus that
causes COVID-19 spectrum of diseases and which became a historic worldwide
pandemic, around January 2020, when the news of cases in China broke out. Since
then, we have been working diligently on designing, testing, and advancing drug
candidates against SARS-CoV-2 (see below). We have recently completed safety
pharmacology studies required for filing an IND application with the US FDA of
our COVID-19 drug candidate. We have received an audited report on the GLP
safety/pharmacology studies from the external CRO, and expect to receive the
remaining report(s) soon. We have previously received unaudited draft reports of
these studies. We are awaiting written reports of non-GLP safety/toxicology
studies and non-GLP animal efficacy antiviral efficacy studies. We are preparing
a pre-IND application for submission to the US FDA for our pan-coronavirus drug
candidates to obtain further guidance and plan on submitting an IND application
thereafter. We are in the process of identifying and engaging clinical study
sites for the Phase 1 and Phase 2 human clinical trials of these broad-spectrum
coronavirus infection treatments, in the USA as well as abroad.

The Nanoviricide Platform Technology in Brief

NanoViricides is pioneering a unique platform for developing anti-viral drugs
based on the "bind-encapsulate-destroy" principles. Viruses would not be able to
escape a properly designed nanoviricide® drug by mutations because in doing so
they would lose the ability to bind their cognate cellular receptor(s) and thus
fail to infect productively, becoming incompetent.



The Company develops its class of drugs, that we call nanoviricides®, using a
platform technology. This approach enables rapid development of new drugs
against a number of different viruses. A nanoviricide is a "biomimetic" - it is
designed to "look like" the cell surface to the virus. 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.



                                      20





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.



The Company's technology relies on copying the human cell-surface receptor to
which the virus binds, and further designing and making small chemicals that are
called "ligands" that will bind to the virus in the same fashion as the cognate
receptor. We use molecular modeling techniques for these tasks. These ligands
are then chemically attached to a nanomicelle, to create a nanoviricide.



It is anticipated that when a virus comes in contact with the nanoviricide, not
only would it land on the nanoviricide surface, binding to the copious number of
ligands presented there, but it would also get entrapped because the nanomicelle
polymer would turn around and fuse with the virus lipid envelope, harnessing a
well-known biophysical phenomenon called "lipid-lipid mixing". In a sense, a
nanoviricide drug acts against viruses like a "venus-fly-trap" flower does
against insects. Unlike antibodies that tag the virus and require the human
immune system to take over and complete the task of dismantling the virus, a
nanoviricide is a nanomachine that is designed to not only bind to the virus but
also complete the task of rendering the virus particle ineffective.



Recent Developments



We began development of a nanoviricide drug to treat SARS-CoV-2, the virus that
causes COVID-19 spectrum of diseases, and has become a historic worldwide
pandemic, around January 2020, when the news of cases in China broke out. Since
then, we have been working diligently on designing, testing, and advancing drug
candidates against SARS-CoV-2.



On September 15, 2020, we reported in a press release that we have nominated a
clinical candidate for COVID-19, with additional back-up candidates that we
continue to work on advancing further. We have previously reported that our
developmental drug candidates have shown effectiveness against multiple
coronaviruses in cell culture studies, and have shown strong effectiveness in
animal studies against a human coronavirus that uses the same human receptor
(ACE2) as SARS-CoV-2, namely h-CoV-NL63. There are reports that common colds
coronavirus infection has led to protection from SARS-CoV-2 infection. This
protection is most likely associated with infection by hCoV-NL63, because this
is the only common cold virus that uses the same human receptor as SARS-CoV-2.
Thus we believe our results are significant as they have demonstrated a
broad-spectrum anti-coronavirus effectiveness, and, additionally, strong
effectiveness in animal model that indicates that our drug candidates should be
effective against SARS-CoV-2. Studies involving SARS-CoV-2 require BSL3/BSL4
facilities. Performing studies in BSL3/4 facilities is inherently slow, and
requires dependence on high containment laboratory schedules and access. We,
therefore, developed animal models and cell culture studies that can be
conducted in BSL2 facilities. This enabled our rapid drug development.



The broad-spectrum anti-coronavirus activity of our drug candidates is important
because it provides scientific rationale that as a virus mutates, it would not
escape the drug. In addition, we anticipate the drugs we develop should work
against seasonal or commonly circulating coronaviruses as well as potentially
pandemic and pandemic coronaviruses. Antibodies, in contrast tend to be highly
specific and are known to fail when the virus mutates. Vaccines are also known
to fail when a virus mutates.



On November 11, 2020, we announced that we have engaged Calvert Labs to perform
core safety pharmacology studies that are generally required for filing an
Investigational New Drug (IND) application with the US FDA prior to being able
to begin human clinical studies.



                                      21

On or about February 8, 2021, we reported in a press release that our broad-spectrum anti-coronavirus drug candidate for the treatment of COVID-19 infections was found to be well tolerated in safety pharmacology studies required for progressing to human clinical trials.

We reported that our anti-coronavirus drug candidate NV-CoV-2 was found to be
safe in the GLP safety pharmacology studies performed by an external contract
research organization (CRO) in both rat and non-human primate (NHP) models.
Additionally, multiple injections of NV-CoV-2 were also well tolerated in an
extensive non-GLP study in rats that was performed by AR Biosystems, Inc.,
Florida.



On March 2, 2021, we reported in a press release that both of our
anti-coronavirus drug candidates, namely, NV-CoV-2 and NV-CoV-2-R, were found to
be highly effective in comparison to remdesivir against two distinctly different
coronaviruses in our new cell culture studies leading towards a pre-IND
application and thereafter an IND submission for these COVID-19 drug candidates.
Remdesivir is one of the most effective anti-coronavirus drugs in cell culture
studies. Therefore our finding that NV-CoV-2 was highly effective and comparable
to remdesivir in activity in these cell culture studies was pleasantly
surprising. Even more striking was the finding that NV-CoV-2-R exceeded the
effectiveness of remdesivir itself in these cell culture studies. These results
indicate that NV-CoV-2 and NV-CoV-2-R could be some of the strongest weapons in
the fight against coronaviruses and the current COVID-19 global pandemic.



The strong effectiveness of the three drugs NV-CoV-2, NV-CoV-2-R, and remdesivir
against two unrelated coronaviruses (namely hCoV-NL63 and hCoV-229E) indicates
their strong potential for treatment of coronavirus diseases including COVID-19,
irrespective of variants or coronavirus types. The broad-spectrum effectiveness
of the Company's drug candidates is very important as coronavirus variants that
are reported to evade antibodies, potentially causing disease in spite of
vaccination, are becoming widespread as the COVID-19 global pandemic is
progressing into its second year.



Remdesivir is known to be highly effective in cell culture studies against many
coronaviruses as well as Ebola and other viruses. Thus NV-CoV-2-R can be
expected to be at least as effective as remdesivir against all of these viruses
in cell cultures. Moreover, NV-CoV-2-R would be expected to be significantly
superior to remdesivir in human clinical studies, if our encapsulation process
effectively protects remdesivir from bodily metabolism as is anticipated.

On March 9, 2021, we reported that our pan-coronavirus COVID-19 drug candidates NV-CoV-2 and NV-CoV-2-R were found to be highly effective in pre-clinical antiviral animal studies, consistent with their previously reported effectiveness in cell culture studies against infection by human coronaviruses.

Pre-clinical GLP Safety Pharmacology Studies Reported on February 8, 2021

In a GLP neuro-pulmonary safety pharmacology study in rats, the following conclusion was drawn: The intravenous administration of NV-CoV-2 at doses of 25, 50 and 100 mg/kg did not affect respiratory function in rats.

In a GLP cardiovascular function study in the NHP cynomolgus monkeys, the
following conclusion was drawn: Intravenous infusion of NV-CoV-2 at 25, 37.5,
and 50 mg/kg did not have any toxicologic effects on cardiac rhythm or ECG
morphology in cynomolgus monkeys in this study. No significant effects on blood
pressure and heart rate were observed after the intravenous infusion of
NV-CoV-2.



These results were consistent with a more extensive, multiple injection non-GLP
safety and tolerability study in Sprague-Dawley male and female rats. In this
non-GLP study, NV-CoV-2 was injected intravenously (via tail vein) on each of
days 0, 1, 2, 3, 4, and 5. Two different doses were used: 320mg/kg BW per
injection, and 160 mg/kg BW per injection. Clinical observations, body weight,
urine, blood chemistry, post-mortem findings, and organ histology were studied.
In all parameters, NV-CoV-2 was well tolerated at both dosages throughout the
study.

Pre-clinical Cell Culture Efficacy Study Reported on March 2, 2021

The Company studied the effectiveness of NV-CoV-2, NV-CoV-2-R and remdesivir
against two unrelated human coronaviruses: h-CoV-229E (229E), and h-CoV-NL63
(NL63). Of these NL63 uses the same ACE2 human cell receptor to gain entry into
cells as do all variants of SARS-CoV-2 and SARS-CoV-1. Additionally, human
pathology of NL63 infection closely mimics that of SARS-CoV-2, albeit with
limited disease severity. NL-63 is being used as a model for anti-SARS-CoV-2
drug development in various labs including ours (reviewed in: A. Chakraborty and
A. Diwan (2020). "NL63: A Better Surrogate Virus for studying SARS- CoV-2".
Integer Mol Med, 2020, vol.7, pp 1-9, doi: 10.15761/IMM.1000408.). In contrast,
229E uses the cell surface receptor APN for entry rather than ACE2, and causes
common colds. Thus, NL63 and 229E are unrelated human coronaviruses.



                                      22

Pre-clinical Efficacy Study in Lethally Infected Animals Reported on March 9, 2021

NV-CoV-2 and NV-CoV-2-R were found to be highly effective against a fully lethal direct-lung coronavirus infection in rats based on multiple indicators:

Survival: While rats in the untreated infected group succumbed to the disease in
5 to 6 days, the rats in the NV-CoV-2 treatment group survived for 14 days, and
the rats in the NV-CoV-2-R treatment group survived for 16 days. In contrast,
rats treated with remdesivir formulated in SBECD (comparable to the FDA-approved
Veklury® formulation of remdesivir) survived for only 7.5 days. The total dose
of remdesivir was 90mg/kgBW for the remdesivir treated group, and it was
80mg/kgBW when encapsulated in the NV-CoV-2-R group. Thus compared to treatment
with remdesivir, treatment with the Company's drug candidate NV-CoV-2 extended
the lifespan by approximately four times more days. Further, treatment with the
Company's other drug candidate NV-CoV-2-R extended the lifespan by approximately
five times more days.



Body Weight: Both NV-CoV-2 and NV-CoV-2-R protected the animals from body weight
(BW) loss that results from the infection and immune response, in addition to
the substantially increased survival, in this lethal coronavirus infection
model. NV-CoV-2 group lost only about 7% BW (12.5 g/animal) at day 13, and the
NV-CoV-2-R group lost as little as ~1.8% BW (3g/animal) at day 13. In contrast,
the remdesivir group had already lost ~17% BW (30g/animal) by day 7 and
succumbed to the disease soon thereafter.

These results clearly indicate strong effectiveness of NV-CoV-2 as well as NV-CoV-2-R in fighting the coronavirus lung infection and its ill effects, as compared to the FDA-approved drug remdesivir.

As of now, additional studies on histopathology of organs and blood chemistry from this experiment have been completed and we are anticipating the corresponding report shortly for inclusion in our pre-IND submission.

The (1) significant improvement in lifespan by a factor of four to five, and (2)
significant prevention of body weight loss, upon treatment with NV-CoV-2 as well
as NV-CoV-2-R as compared to treatment with the FDA-approved remdesivir are
important indicators for potential human clinical success of the Company's drug
candidates.



The Company studied the effectiveness of these drugs against the human
coronaviruses h-CoV-NL63 (NL63) that uses the same ACE2 human cellular protein
as receptor to gain entry into cells as do all variants of SARS-CoV-2 and
SARS-CoV-1. Additionally, the human pathology of NL63 infection closely mimics
that of SARS-CoV-2, albeit with limited disease severity. NL63 is a circulating
human coronavirus that can be used in BSL2 labs. NL-63 is therefore being used
as a model for anti-SARS-CoV-2 drug development in various labs including ours.



Remdesivir (Veklury®, Gilead) has shown relatively weak effectiveness in animal
and clinical studies in contrast to its strong effectiveness in cell culture
studies. This has been related by scientists to the metabolism of remdesivir in
the blood stream that causes loss of effectiveness. The Company has developed
the drug candidate NV-CoV-2-R by encapsulating ("hiding inside") remdesivir into
NV-CoV-2. The Company believes that this encapsulation should protect remdesivir
from bodily metabolism and thereby significantly increase its clinical
effectiveness.



The strong effectiveness of NV-CoV-2 and NV-CoV-2-R drug candidates in this
animal model is consistent with their previously reported effectiveness in cell
culture studies against infection of two distinctly different human
coronaviruses, hCoV-NL63, which was used in this animal efficacy study, and
hCoV-229E, another circulating coronavirus that uses another receptor, namely
APN. In contrast, while remdesivir was highly effective in the cell culture
studies, it was not very effective in this animal efficacy study, a result that
is consistent with human clinical studies of remdesivir.



                                      23





The effectiveness of NV-CoV-2-R observed in this study can be understood as a
combination of (a) the improvement in the effectiveness of remdesivir due to
encapsulation, and (b) the effectiveness of NV-CoV-2 by itself.



NV-CoV-2-R, the Company believes, is an excellent demonstration of the power of
the nanoviricides platform technology that enables combining multiple modalities
seamlessly into a single drug.

The Company believes that these in vivo study results support a potential synergistic improvement in the drug effect as a result of combining the two different mechanisms of attacking (i) the virus reinfection cycle and (ii) the virus replication cycle simultaneously.

The Company has developed NV-CoV-2 and NV-CoV-2-R based on its platform
nanoviricides® technology. This approach enables rapid development of new drugs
against a number of different viruses. A nanoviricide is a "biomimetic" - it is
designed to "look like" the cell surface to the virus. 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 two
attachment points per antibody.



It is anticipated that when a virus comes in contact with the nanoviricide, not
only would it land on the nanoviricide surface, binding to the copious number of
ligands presented there, but it would also get entrapped because the nanomicelle
polymer would fuse with the virus lipid envelope, harnessing a well-known
biophysical phenomenon called "lipid-lipid mixing". In a sense, a nanoviricide
drug acts against viruses like a "venus-fly-trap" flower does against insects.
Unlike antibodies that tag the virus and require the human immune system to take
over and complete the task of dismantling the virus, a nanoviricide is a
nanomachine that is designed to not only bind to the virus but also complete the
task of rendering the virus particle ineffective.



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, thus blocking the complete lifecycle of
the virus, enabling complete control of a virus infection.



The Company has developed NV-CoV-2-R based on this encapsulation capability that
is built into its nanoviricide NV-CoV-2. The Company has chosen to encapsulate
remdesivir as the participating drug for blocking the viral replication cycle.
Remdesivir is approved by the US FDA for the treatment of patients hospitalized
with COVID-19. Encapsulation of remdesivir in the Company's nanoviricide
envelope is believed to protect it from metabolism in the body. This protection
can be expected to lead to significant enhancement in the effectiveness of
remdesivir itself (in the encapsulated form), by potentially increasing both the
effective remdesivir concentration and its duration of action. This could be an
additional favorable effect for the Company's anti-coronavirus drug candidate
NV-CoV-2-R. Remdesivir is sponsored by Gilead. The Company is developing its
drug candidates independently at present.



Based on (1) the safety of NV-CoV-2 in the different GLP and non-GLP studies
employing different animal models, and (2) the anti-viral effectiveness in cell
culture as well as in animal studies in comparison to remdesivir, we believe
that our projected dosages would be safe and effective in human clinical trials.
With these findings, the Company believes that it will be possible to administer
repeated dosages of NV-CoV-2 in a human clinical trial, as needed, to achieve
control over the coronavirus infection from SARS-CoV-2 or its variants.



We have received draft reports from most of these studies. We anticipate
receiving final audited reports on the GLP studies shortly, one of which we have
received as of this writing. We are now preparing to submit a pre-IND
application to the US FDA with safety tolerability and effectiveness data to
obtain guidance regarding human clinical trials. Additionally, we are actively
seeking opportunities to engage appropriate sites for human clinical trials,
both in the USA and abroad. Further, we are engaged in the preparation of
clinical trial protocols and other activities that would be necessary for
submitting an IND application to the US FDA.



                                      24

Clinical Trial Drug Substance and Drug Product Manufacture

We have initiated production of a large batch of the drug substances for
NV-CoV-2 and of NV-CoV-2-R under cGMP-compliant conditions for human clinical
trials. NanoViricides is one of a few biopharma companies with the strong
advantage that it has its own cGMP-capable manufacturing facility. This has made
possible rapid translation from synthesis for non-clinical studies to large
scale clinical batch production in a very short timeframe. Our cGMP-capable
facility is capable of producing approximately 4kg of the COVID-19 drug
candidate per batch. We anticipate that this would be sufficient for human
clinical trials, and possibly for initial introduction under Compassionate Use,
Emergency Use Authorization or similar regulatory approval.



Having our own cGMP-capable manufacturing facility has enabled rapid translation
of our drug candidates to the IND application stage, saving years of
manufacturing translation and set-up activities, as well as saving several
millions of dollars of external costs, while ensuring requisite quality
assurance, as compared to using a contract manufacturing organization ("CMO")
for our complex nanomedicine drugs. We believe these benefits will continue to
accrue as our first drug candidate goes through human clinical trials into
commercialization, and will also accrue for the multitude of candidates in our
broad drug pipeline.



We originally intended to manufacture the drug substances (i.e. the active
ingredients in NV-CoV-2 and NV-CoV-2-R drug candidates) in our own manufacturing
facility in Shelton, CT, for further formulation into final drug products at a
contract manufacturing facility. However, the impact of the COVID-19 pandemic
has caused severe supply-and-demand issues. We have therefore upgraded our
facilities to enable complete clinical drug product manufacture, which involves
both formulation and packaging under cGMP-compliant processes. We are currently
in the process of setting up the final drug product packaging at our facility.



The Company has developed NV-CoV-2-R based on the encapsulation capability that
is built into its nanoviricide NV-CoV-2. The Company has chosen to encapsulate
remdesivir as the participating drug for blocking the viral replication cycle.
Remdesivir is approved by the US FDA for the treatment of patients hospitalized
with COVID-19. Encapsulation of remdesivir in the Company's nanoviricide
envelope is expected to protect it from metabolism in the body. This protection
can be expected to lead to significant enhancement in the effectiveness of
remdesivir itself (in the encapsulated form), by potentially increasing both the
effective remdesivir concentration and the duration of action. This could be an
additional favorable effect for the Company's anti-coronavirus drug candidate
NV-CoV-2-R. Remdesivir is sponsored by Gilead. Significant amounts of US
government funding has been used in its development, from NIH as well as from
BARDA. The Company is developing its drug candidates independently at present.

Thus, our anti-coronavirus drug program is moving rapidly towards an IND filing to enable human clinical trials.

COVID-19 Competitive Landscape

Because of the "Operation Warp Speed" program in the USA, and other
international programs that accelerated vaccine developments in both private
sector and public-private partnerships, several vaccines against the original
strain of the SARS-CoV-2 have become available. Significant speed-up in
regulatory agencies, and experts teaming together to solve problems rapidly, as
well as very high levels of funding enabled these developments.



However, it is now well recognized that antiviral drug development, especially
novel pan-coronavirus or broad-spectrum drugs development was neither supported
nor accelerated at various levels, both in the USA as well as internationally.
Instead, fast-tracking was enabled for re-purposing of existing drugs and moving
them into clinical trials against SARS-CoV-2. This has led to failures of
several such programs, as well as an explosion in the number of drug development
efforts as well as the number of clinical trials. Fast tracking was also enabled
for antibody drugs, which are known to be highly specific and known to fail when
variants emerge.



As of March 31, 2021, there are 10 COVID-19 drugs that have received Emergency
Use Authorization (EUA) and one drug that has received full approval
(remdesivir) from the US FDA
(https://www.fda.gov/drugs/coronavirus-covid-19-drugs/coronavirus-treatment-acceleration-program-ctap#dashboard).
In addition, there are at least three vaccines licensed in the USA and several
more are in use internationally. Apart from remdesivir and antibodies, there are
very few drugs with direct antiviral effect that have EUA or are in clinical
trials. Internationally, virus variants have continued to emerge with resistance
to drugs and vaccines. Scientists believe it is only a matter of time before
escape variants against existing vaccines and therapeutics become commonplace.
Thus the need for therapeutics that the virus would not escape by mutations,
such as the broad-spectrum, pan-coronavirus nanoviricides drug candidates,
remains unmet.



                                      25





Nevertheless, given the high rate of vaccination in the USA, and due to the very
large number of clinical trials already under way, it is likely to be very
difficult to engage into clinical trials for our novel coronavirus drug
candidates in the United States. There appears to be several months of lead time
before Phase 1 clinical trials of a novel drug can be initiated, because of the
capacity saturation and hoarding effects in the clinical trials marketplace. We
are therefore looking at sites outside USA, even as we continue our efforts for
engaging sites within the USA. Additionally, it appears that the US FDA is
likely overloaded with the large numbers of clinical trials and applications in
excess of 440 already reviewed and an estimated 600+ in planning stages
(https://www.fda.gov/drugs/coronavirus-covid-19-drugs/coronavirus-treatment-acceleration-program-ctap#dashboard).
All of these factors have introduced significant uncertainties in the timeline
for the execution of our COVID-19 clinical trials program.



Financial Status



On March 2, 2021 in an "At-the-Market" Offering, the Company sold 814,242 shares
of common stock at an average price of $7.83 under the Sales Agreement with B.
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.

As of March 31, 2021, we had approximately $22.9 million in cash and cash equivalents and $9.2 million of property and equipment, net of accumulated depreciation. Our current liabilities are approximately $0.9 million. Stockholder's equity was approximately $31.9 million at March 31, 2021.

During the nine-month period ended March 31, 2021, we used approximately $6.0
million in cash toward operating activities. The available cash is sufficient
for more than twelve months of operations at the current rate of expenditures.
As our COVID-19 and shingles drug programs mature into human clinical trials,
our expenditures are anticipated to increase due to the costs of the clinical
trials. We estimate that we have sufficient funds in hand for initial human
clinical trials for at least one of our drug candidates at this time.



We do not anticipate any major capital costs going forward in the near
future. 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.

NanoViricides' Drug Programs in Brief

We intend to take one of our broad-spectrum anti-coronavirus drug candidate into
human clinical trials as soon as feasible. We intend to seek collaborations to
develop the COVID-19 drug further towards emergency use approval and full
approval by US FDA as well as international regulatory authorities.



Thereafter, we intend to focus on NV-HHV-101, and develop this drug through
initial human clinical trials. We anticipate that, as the NV-HHV-101 drug (skin
cream) for Shingles indication goes into human clinical testing, we would
develop clinical candidates for topical treatment of HSV-1 "cold sores" and
HSV-2 "genital ulcers". Additional indications for these drug candidates or
their derivatives as needed for different routes of administration and other
considerations are expected to expand our drug pipeline in the near future. As
these programs mature, the Company intends to re-engage its FluCide™ and
HIVCide™ programs.



The market size for HerpeCide programs is in several tens of billions of dollars
because neither cures nor very effective treatments are available. Approved
treatments have limited effectiveness, demonstrating a significant unmet medical
need. The market size for Influenza drugs is estimated to be in tens of billions
of dollars.



                                      26





Based on data in a Jain PharmaBiotech report prepared for the Company 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, excluding the market size for
COVID-19 pandemic responsive drugs and vaccines.



Thus, the Company's technology has substantial capabilities and applications,
and the potential to attack as-yet-unsolved problems caused by viral infection,
and thus lead to a great health benefit to individuals and societies. 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 the Company has a bright future with an expanding pipeline as it
furthers the research programs driving towards cures beyond our current
objectives of effective treatments.

The Novel Coronavirus Disease ("COVID-19") Pandemic, caused by the new SARS-CoV-2 virus

On January 30, 2020, the Company confirmed in a press release that it had
already undertaken an effort to develop a treatment for the novel SARS-CoV-2,
a/k/a 2019-nCoV, coronavirus outbreak that appears to have started around
November-December 2019 in Wuhan, China. The new SARS-CoV-2 virus is known to be
closely related to the SARS-CoV of 2002-2003 epidemic. In fact, it has been
shown to use the same cell surface receptor as SARS-CoV, namely ACE2. The
Company determined, based on molecular modeling screening that it had in its
chemicals library ligands that could bind to SARS-CoV S1 spike protein at the
same position where the S1 binds to the human receptor ACE2. It is a reasonable
expectation that these relatively broad-spectrum ligands would also be able to
bind the S1 spike protein of the SARS-CoV-2 coronavirus in the same fashion.
Since then, the Company has generated several nanoviricides based on these
ligands and has tested them in its own BSL2 virology lab facility against known
available human pathogen coronaviruses, including those that use ACE2 as the
cellular receptor, with success.



The Company is developing a therapy or drug to combat the SARS-CoV-2 virus
itself, for the treatment of infected patients, and not a drug that is designed
for reducing clinical symptoms. The drug we are developing is not a vaccine, and
does not have to be given to everyone, but would need to be given only to
patients, if we can develop it successfully. Currently, two antiviral drugs are
in clinical studies or have been approved in emergency protocols for the
treatment of COVID-19 patients. Remdesivir has been approved for use in COVID-19
in the US, and favipravir was approved in the USSR for COVID-19 treatment. Both
of these drugs affect replication of the virus inside cells, and both have shown
limited clinical effectiveness. Additionally, dexamethasone, a corticosteroid,
is used as supportive treatment in late stages to minimize the immune attack
onto lung cells that leads to lung failure.



A drug, such as a nanoviricide that blocks the virus from binding to cells in
the first place may be sufficiently effective by itself in treating COVID-19
patients to be a viable treatment option. Further, a nanoviricide can be
combined with other antiviral drugs that inhibit intracellular replication of
the virus with the potential for a greater effect than either drug, towards
curing the viral infection. The ability of any drug to cure the viral infection
can only be established in human clinical trials.



Viruses are known to escape antibody drugs, small chemical drugs, and vaccines
due to genomic changes such as mutations or recombinations. In contrast, the
NanoViricides platform technology enables development of a drug that a virus is
unlikely to escape by mutation. This is because we develop biomimetics that are
designed to interfere with the virus binding to its cognate cellular receptor,
and are further capable of disabling the virus from binding to cells. It is well
known that in spite of genomic changes, the virus binds to the same cellular
receptor in a conserved manner. Thus, the nanoviricides technology provides a
mechanism that the viruses would not be able to escape due to genomic changes,
provided that the virus-binding ligands are designed to mimic the conserved
binding site on the cellular receptor.



The Company has the capacity to produce several thousand doses of the potential
drug at its cGMP-capable multi-purpose manufacturing facility in Shelton, CT,
depending upon the treatment course. If our COVID-19 drug program produces
positive results, then the Company anticipates obtaining assistance from US
government and international agencies for further testing and potential
exploratory clinical use to combat the epidemic. The Company does not at present
have any active collaborations with US or international agencies for this
purpose. Even if the Company can develop a potential drug candidate, significant
support and participation from US and international agencies may be required to
make it available to patients, including taking the candidate through
exploratory clinical trials. The outbreak was declared a global emergency by the
WHO on the same date as our announcement that we were working on therapeutics
development against SARS-CoV-2, January 30, 2020, and has since turned into a
global pandemic with devastating consequences around the world.



                                      27





The Company has expertise in developing broad-spectrum antivirals based on
mimicking human cellular receptors. For example, NV-HHV-101, the Company's lead
drug candidate, which was developed using virus-binding ligands mimicking the
binding of HVEM with HSV viral glycoprotein has been shown to be effective
against not only HSV-1 and HSV-2, but also was found to be highly effective
against VZV, which is a distantly related non-simplex herpesvirus. The Company's
business model is based on licensing technology from TheraCour which has
licensed intellectual property from Allexcel for specific application verticals
of specific viruses, as established at the Company's foundation in 2005.



Several coronaviruses have become endemic human pathogens, such as hCoV- 229E,
NL63, OC43, and HKU1. These continually circulate in the human population and
cause respiratory infections in adults and children world-wide. In contrast,
SARS-CoV has caused only one well-known epidemic, with a mortality rate of about
9%, and MERS-CoV has caused repeated outbreaks, with mortality rates approaching
35%, but with a limited number of cases. A broad-spectrum anti-coronavirus drug,
such as a broad-spectrum nanoviricide that the Company is currently developing,
could be potentially useful for treating most if not all of the different
coronavirus infections that occur every year, and not just for coronavirus
epidemics.



The Company has tested its drug candidates for anti-viral effectiveness against
two distinctly different, unrelated coronaviruses that cause human disease,
namely HCoV-NL63, and HCoV-229E. The assays evaluated the reduction caused by
the drug candidate in cell death upon viral infection, formally known as
cytopathic effects (CPE) assays.



Human coronavirus NL63 (HCoV-NL63) uses the same ACE2 receptor as the SARS-CoV-2
that causes COVID-19. Both in terms of its clinical pathology, and its receptor
usage, it is known to be very similar to SARS-CoV-2, except much milder.
Therefore the Company believes HCoV-NL63 is a good surrogate model for
therapeutics development against SARS-CoV-2. HCoV-NL63 can be studied in a BSL2
lab whereas SARS-CoV-2 currently requires a BSL3 or BSL4 facility. Human
coronavirus 229E causes seasonal common colds, and uses a different but somewhat
related receptor called APN (Aminopeptidase-N), a membrane protein on human
cells.



Our screening program has resulted in the advancement of two drug candidates,
namely NV-CoV-2 and NV-CoV-2-R, into clinical candidate status in a very short
time since initiation of the screening program.



The Company believes the fact that these nanoviricides anti-coronavirus drug
candidates are highly effective against two distinctly different coronaviruses
that use different cellular receptors is very significant. Specifically, it
provides a rational basis to scientists indicating that even if the SARS-CoV-2
coronavirus mutates, the nanoviricides can be expected to continue to remain
effective. Antibodies and vaccines in general cannot be expected to remain
effective if the virus undergoes genomic changes.



Importantly, nanoviricides are designed to act by a novel mechanism of action,
trapping the virus particle like the "Venus-fly-trap" flower does for insects.
Antibodies, in contrast, only label the virus for other components of the immune
system to take care of. It is well known that the immune system is not
functioning properly at least in severe COVID-19 patients.



Human coronavirus NL63 is known to cause severe lower respiratory tract
infections in young children leading to hospitalization. The symptoms are
generally less severe than SARS-CoV-2 but are similar. In most cases, hCoV-NL63
causes relatively mild disease, often associated with croup, bronchiolitis, and
lower respiratory tract disease in children, and is considered to cause some of
the common colds in adults. Thus, the clinical manifestation of hCoV-NL63
infection in pediatric patients is similar to that of SARS-CoV-2, although much
less severe. SARS-CoV-2 causes clinically similar milder forms of disease in
most patients, but moderate to severe disease requiring hospitalizations in
about 15-20% of infected persons. These similarities imply that hCoV-NL63 should
be a reasonable model virus for antiviral cell culture and animal studies in
BSL2 environment in the course of antiviral drug development for SARS-CoV-2.



Thus the Company has been executing rapidly and efficiently, as well as in a
cost-effective and productive manner, towards its goal of advancing the first
drug candidate into human clinical trials as soon as possible. We believe that
taking our first drug candidate into initial human clinical trials will be a
very important milestone in that it would essentially validate our entire
platform technology as being capable of producing drug candidates worthy of
human clinical trials, and potentially of success in those clinical trials.



                                      28

NV-HHV-101 - The Company's Lead Candidate in the HerpeCide™ Program, with First Indication as a Skin Cream for the Treatment of Shingles Rash

NV-HHV-101 has consistently shown strong effectiveness as well as safety in
human skin-based model of VZV infection. In cell culture studies, it was as much
as five times more effective than acyclovir, the current standard of care. Our
anti-VZV drug candidates have also shown strong effectiveness in studies
involving VZV infection of human skin patches ex vivo. These studies were
conducted by Professor Jennifer Moffat at the SUNY Upstate Medical Center in
Syracuse, NY, an internationally recognized expert on varicella-zoster virus
(VZV) infection, pathogenesis, and anti-viral agent discovery. Some of the
earlier work was presented by the Moffat Lab at the 31st International
Conference on Antiviral Research held June 11 - June 15, 2018 in Porto,
Portugal.



There is a significant unmet medical need for the topical treatment of shingles
rash. An effective therapy for shingles has been estimated to have a market size
into several billions of dollars, if it reduces PHN incidence. An effective
therapy against shingles rash reduction alone is estimated to have a market size
of several hundred million dollars to low billion dollars. These market size
estimates have taken into account the potential impact of the new Shingrix® GSK
vaccine and the impact of the existing Zostavax® vaccine.



The Company is also developing drugs against HSV-1 "cold sores" and HSV-2
"genital ulcers", both based on the NV-HHV-101 drug candidate, although final
clinical candidates are in pre-clinical optimization stage for both of these
indications as of now.



Existing drugs given orally or systemically may not reach required
concentrations at the site of shingles outbreak, limiting effectiveness. In
addition, unlike HSV-1 and HSV-2, VZV does not have an effective TK enzyme that
is required for producing active drug forms from the acyclovir class of drugs
(such as Valtrex®), requiring frequent administration of very large doses to
treat shingles. Additionally, a dermal topical cream formulation of Cidofovir is
employed in very severe cases of shingles. Cidofovir is highly toxic,
particularly towards kidneys. A safer, effective, drug is thus an unmet medical
need for the treatment of VZV.



Zostavax and other attenuated VZV (Oka strain) vaccines for chickenpox are
available, but not widely adopted. These vaccines may lead to a less severe form
of shingles in adulthood or at a later age, compared to the "wild type"
chickenpox virus ("rebound shingles"). A new vaccine, Shingrix® has been
introduced by GSK recently, based on subunits or protein fragments of the virus,
which cannot lead to rebound shingles, but suffers from a very severe side
effects profile, and has limited availability at present.



While shingles presents with a debilitating "pins-and-needles" pain associated
with the characteristic rash that is self-limiting within 2-3 weeks in most
patients, in a substantial percentage of patients, it presents as a severe,
debilitating disease that leads to complications including hospitalization(s)
and in some cases may result in extended treatments including subsequent
surgeries.



Limiting initial viral load is expected to minimize the occurrence of such
complications, and is also expected to reduce the incidence of
post-herpetic-neuralgia ("PHN"). PHN is defined as dermatomal nerve pain that
persists for more than 90 days after an outbreak of herpes zoster affecting the
same dermatome. Thus, we anticipate that NV-HHV-101 would have significant
impact in reducing PHN incidence rates. We anticipate extending the NV-HHV-101
indication to include PHN after obtaining marketing approval for the first
indication, namely effect on shingles rash.



Of note, the cGMP-like manufacture of both the active pharmaceutical ingredient
(API, the nanoviricide against VZV), and the fully formulated skin cream (the
drug product candidate), was accomplished at our own facilities at ~1kg scale
(API), saving us millions of dollars and at least one year's worth of time, as
opposed to going to an external contract manufacturer. Approximately 10kg of
fully formulated drug product has already been manufactured. We believe this
scale is sufficient for the requirements of Phase I human clinical trials.



                                      29





The Company has now demonstrated that it has unique expertise in the industry of
performing cGMP manufacture of complex nanomedicine drugs, including cGMP
manufacture of (a) drug substance from simple chemical starting materials, (b)
the formulated drug product, and (c) the final packaged drug.



This establishment and execution of cGMP manufacturing is an extremely
significant milestone for the Company. Our current multi-kg per batch scale of
cGMP manufacturing capacity is expected to be more than sufficient for the
anticipated Phase I and Phase II human clinical trials. In addition, we believe
that our facility can supply required quantities of the drug for Phase III
clinical trials as well. Thus, this in-house cGMP production capability is
expected to result in significant cost savings across all our programs.



Manufacturing nanomedicines, especially under cGMP conditions, has been
identified as a strong risk, and has led to failure of several nanomedicines
programs. NanoViricides co-founder Dr. Anil Diwan and his team have employed
considerations for cGMP manufacture of our nanomedicines right from the design,
development and optimization of the drug candidates, the polymers and ligands
that go into them, as well as the processes employed right from the small
research scale to the initial process verification batches. The rapid success of
translating the research scale production of several grams drug substance in
early CY-2018 to kg-scale cGMP manufacture in early CY-2019 was a result of the
tremendous subject matter expertise of the team. External contract manufacturing
organizations would likely have required at least three years to scale up these
complex products, based on certain discussions we have had.



The Company has previously found that dermally applied nanoviricide drug
candidates in the HerpeCide program led to full survival of lethally infected
animals in a severe infection with the highly pathogenic, neurotropic strain of
HSV-1, namely H129c. Thus the nanoviricide drug candidates applied topically
appear to demonstrate strong efficacy. Topical application has the advantage of
being able to deliver very high drug concentrations locally to completely
eradicate the virus. In contrast, the local concentrations and therefore
effectiveness of orally delivered medications is limited by the toxicity and
bioavailability of the oral drug, as is known for the existing antiviral
therapies for HSV-1, HSV-2, and VZV. Therefore, treating the HSV-1 cold sores,
HSV-2 genital ulcers, or VZV chicken pox lesions or shingles rash using dermal
topical creams is expected to be highly beneficial.



NV-HHV-101 is a broad-spectrum nanomedicine designed to attack herpesviruses
that use the HVEM ("herpesvirus entry mediator") receptor on human cells. This
drug candidate is composed of a flexible polymeric micelle "backbone" to which a
number of small chemical ligands are chemically attached. The ligands in this
case are designed to mimic the binding site of the herpesviruses on HVEM, based
on molecular modeling. NV-HHV-101 is expected to bind to VZV (or HSV-1 or HSV-2)
virus particle via a number of binding sites (i.e. the ligands), thereby
encapsulating the virus particle and destroying its ability to infect human
cells. This "Bind, Encapsulate, Destroy" nanoviricide® strategy is distinctly
different from the mechanism of action of existing antiviral drugs against VZV,
HSV-1, and HSV-2.



The anti-VZV drug development program moved rapidly towards clinical candidate
declaration stage because of several factors, namely (a) that it was simply the
existing HSV-1 drug program in which the existing candidates were re-tested for
effectiveness against VZV, (b) that we have had a highly successful
collaboration with Dr. Moffat Lab at SUNY Syracuse with rapid turnaround times,
and (c) the drug candidates were found to be highly effective against VZV in
these studies.



While the Company has been focused on cGMP production, scale-up, and
establishment of required characterization and analytical tools, we have brought
down our cash expenditure rate significantly by reducing our workforce and by
stopping work on all other programs except the HerpeCide program and the
Covid-19 program.

Our HerpeCide™ Product Pipeline

We have focused our efforts exclusively on the anti-Coronavirus drug program at
present. Until January 2020, we had focused our efforts almost exclusively on
the HerpeCide™ program.



We currently have at least 10 different drug development programs, attesting to
the strength of our platform technology. We are currently working on the
Coronavirus program at the highest priority of an emergency program. In
addition, we have been working on 3 of the HerpeCide program indications (namely
VZV Shingles, HSV-1 Cold Sores, and HSV-2 genital Ulcers) in parallel, as
explained below (priority level 1). The Herpes Keratitis program and v-ARN
program (see below) are at a lower priority level. In addition, we continue to
work on the FluCide™ program at the lower priority 3. HIVCide™ program is at
priority level 4. We will continue to seek funding for further development in
the remaining programs, namely Dengue and Ebola/Marburg antivirals.



                                      30





The potential broad-spectrum nature of our anti-HSV drug candidates is enabling
several anti-Herpes indications under our HerpeCide™ program. Of these, the (i)
Topical Treatment for Shingles (VZV) is currently moving most rapidly towards
clinical stage. We believe that the other anti-Herpes drug candidates, would
follow this lead drug to the clinical stage, namely, (ii) skin cream for the
treatment of orolabial herpes ("cold sores") and recurrent herpes labialis (RHL)
mostly caused by HSV-1, and (iii) skin cream for the treatment of genital herpes
caused by HSV-2.



In addition, a fourth indication, (iv) ocular eye drops treatment for external
eye herpes keratitis (HK), caused by HSV-1 or HSV-2, is expected to follow into
further drug development. Further, we have announced that we have begun
preclinical drug development work on a fifth indication under the HerpeCide
program, namely (v) viral Acute Retinal Necrosis (v-ARN), intravitreal
injection.



The market size for an effective anti-shingles drug is currently estimated to be
in the range of several billions of dollars, even with the existence of the
shingles vaccine, Shingrix® (GlaxoSmithKline) has been approved, based on a
report performed for the Company by Dr. Myers of BioEnsemble, LLC, pharma
industry consultants, commissioned by the Company. The current vaccine for
prevention of chicken pox in children, i.e. the varicella vaccine, is based on
the live attenuated virus derived from the Oka strain. Un-vaccinated children
usually develop chicken pox at some point in their childhood, and the wild-type
virus then remains latent in their bodies, in nerve ganglia. Similarly,
Varicella vaccinated children may develop mild syndrome when vaccinated and the
weakened Oka strain remains latent in their bodies, All of these children can
develop shingles later in life. It is generally believed that the intensity of
such disease would be much less severe with the weakened vaccine strain than
with the natural or wild type strain. Nevertheless, the severity of the symptoms
and overall effects depend upon the immune status of the individual.
Pre-vaccination era, (i.e. before varicella vaccination was widely adopted in
the USA), there were 3-4 million cases of chicken pox per year (matching the
birth rate). Post-vaccination era, this rate has dropped to about
120,000-150,000 cases in the USA. However, in several developing and
underdeveloped countries, the rates of chicken pox remain high due to limited
access to the vaccine or limited adoption of the vaccine. As stated earlier,
nearly every person may be expected to get shingles at some point in their
lives, with varying severity. A preventive vaccine for adults, namely Zostavax®
is available, based on the attenuated Oka strain. Its effectiveness is variously
estimated at around 60-70%. Its coverage remains low, as most people do not get
this vaccine. Shingrix is a subunit vaccine, that is, it does not contain intact
living virus particles but only certain proteins derived from the virus. As
such, it is expected to not have the issue of "breakthrough disease" which
occurs when the live latent virus from the vaccine itself causes disease.



More specifically, the report estimated that the anti-shingles drug candidate
could reach peak annual sales of as much as $2 billion, depending upon the
effectiveness determined in clinical trials, at an assumed 50% market
penetration, if it is effective in reducing incidence of post-herpetic neuralgia
(PHN). Based on current pre-clinical data, we believe that there is a very
strong probability that the shingles treatment would significantly minimize the
shingles pain, accelerate healing, and minimize nerve damage, thereby minimizing
the occurrence and severity of post-herpetic neuralgia (PHN). Our pre-clinical
drug design efforts have been aimed at developing a treatment for shingles that
would have pain reduction effects as well as healing effects on skin.



Initially, we plan on performing clinical trials based on VZV related biomarkers
and clinical pathology, which we believe would be sufficient for a first
indication for approval of the drug for treatment of shingles by the US FDA.
Sales of an effective drug against shingles with this limited indication are
projected to reach several hundreds of millions of dollars. We plan on
performing observations regarding PHN in these clinical trials so that an
informed PHN clinical trial may be performed later to extend the drug
indication.



We have developed strong chemical manufacturing process controls that enable us
to produce the backbone polymers with highly restricted and reproducible
molecular size range. In fact, we have achieved highly reproducible and scalable
processes that have yielded the same polymer molecular sizes across production
scales from 10g to 500g. In other words, we are now able to control the length
of the backbone polymer to within one monomer unit, irrespective of production
scale, at least up to about 1 kg scale.



                                      31





We believe that this is a remarkable and possibly unmatched achievement in the
field of nanomedicines. We have scaled up the production of the polymer backbone
"nanomicelle" to multiple-kilogram scales, and do not anticipate any
manufacturing constraints at present. We have also achieved kilogram-scale
manufacture of the ligand in NV-HHV-101, and have further scaled up production
of the nanoviricide NV-HHV-101, which is chemical conjugate of the ligand to the
nanoviricide, in a well defined manner to kilogram scale. Additionally we have
scaled up formulation of the resulting drug substance into the skin cream to
multi-kilogram scales. The production of the drug substance and the drug product
is achieved in a cGMP compatible fashion at our own facility.



Our polymer backbone itself is designed based on the route of administration. In
the case of the shingles drug candidate, as well as for HSV-1 cold sores, and
for HSV-2 genital ulcers, the route is dermal topical application.



The ligands currently in use for the nanoviricide drug candidates against VZV
shingles were actually developed using computer models of HSV binding to its
cellular receptor, and not against VZV itself. Our program shifted to advance a
VZV candidate as our first indication due to various considerations that led to
the prioritization of the different drug indications. The Company identified
certain advantages that would enable earlier entry into clinical trials for the
shingles candidates. The shingles drug development program has been moving
rapidly primarily because of the quick turnaround time and high responsiveness
of the Dr. Moffat Lab at SUNY Syracuse, our critical collaborator for human skin
effectiveness studies of our drug candidates.



One of the advantages of the shingles program is that the pre-clinical drug
development is performed directly in a human skin model, bypassing any animal
model, providing significant confidence that a human clinical studies outcome
would parallel the preclinical study outcome. VZV does not infect animals other
than humans.



Thus, we have made significant and substantial progress in the reporting quarter
towards the goal of filing our first IND application, and we continue to build
on this progress.



In addition to VZV, we are also developing dermal topical drugs against HSV-1
cold sores and HSV-2 genital ulcers. Dr. Brandt's Lab at CORL, the University of
Wisconsin, Madison, WI, is validating animal models for the study and evaluation
of relative efficacies of different treatments for HSV-1 infection in mice as
well as for HSV-2 infection in mice. The goal of these developments is to
develop animal models that would be able to discriminate an experimental drug
that is more effective than the current standard of care drugs, from the
standard of care. At present the existing animal models show maximal
effectiveness with the standard of care and therefore cannot discriminate a drug
that might be superior. If their animal models are successful in differentiating
effectiveness of different drug candidates, then we will be able to evaluate our
drug candidates for the treatment of HSV-1 cold sores as well as for the
treatment of HSV-2 genital ulcers, in addition to the VZV testing being
performed.



Acute Retinal Necrosis is characterized by severe ocular inflammation, retinal
necrosis, and a high incidence of retinal detachment (RD) leading to visual loss
and blindness. This disease is caused by members of the herpesvirus family,
including, herpes simplex virus-2 (HSV-2), varicella zoster virus (VZV), and
herpes simplex virus (HSV-1). An estimated 50,000 new and recurrent cases of
ocular herpes per year are reported in the United States alone, and in a small
proportion of the patients, the disease escalates to v-ARN. We anticipate that
ocular herpes or v-ARN may qualify for an orphan disease indication.



We have recently reported that we have extended the contracts with both the
Moffat Lab, UMC, SUNY Syracuse, as well as the Brandt Lab, CORL, UW, Madison to
continue to perform more advanced studies in preparation of an IND for shingles
topical treatment and for v-ARN intravitreal treatment, respectively.

To date, the Company does not have any commercialized products. The Company continues to add to its existing portfolio of products through our internal discovery and clinical development programs and also seeks to do so through an in-licensing strategy.

The Company received an "Orphan Drug Designation" for our DengueCide™ drug from
the USFDA as well as the European Medicines Agency (EMA). This orphan drug
designation carries significant economic benefits for the Company, upon approval
of a drug.



                                      32





We believe we have demonstrated that we can rapidly develop different types of
formulations for different routes of administration, such as injectable, skin
cream, lotion, gel, and even oral, because of the inherent strength of the
nanoviricide platform tailorable technology. The technology also enables us to
develop nasal sprays and bronchial aerosols. We plan to develop the appropriate
formulations as necessary.

All of our drug programs are established to target what we believe are unmet medical needs.

Herpes simplex viral infections cause keratitis of the eye, and severe cases of
infection may sometimes necessitate corneal transplants. Oral and genital herpes
is also a well-known disease, with no cure and existing treatments that are not
very effective. Shingles, caused by VZV, a herpesvirus, does not have an
effective treatment at present, although some drugs are approved for use in
shingles. Adenoviral Epidemic Kerato-Conjunctivitis (EKC) is a severe pink eye
disease that may lead to blurry vision in certain patients after recovery. The
epidemic and pandemic potential as well as the constantly changing nature of
influenza viruses is well known. The HIV/AIDS worldwide epidemic and the "curse
of slow death" nature of HIV viral infection are also well known. Dengue viral
infection is also known as "breakbone fever". What is worse, is that when a
patient is infected with a dengue virus a second time, if the virus is a
different serotype, then it can cause a severe dengue disease, or dengue
hemorrhagic syndrome, with very high morbidity and a high rate of fatality. This
is because, the patient's immune system mounts an attack, but the antibodies
that it generates, directed at the previous infecting virus, are not effective
against the new infection, and instead the new infecting virus uses them to
hitch a ride into host cells that it infects more severely. This phenomenon is
called "Antibody-Dependent Enhancement" or "ADE" for short.



Our current development has focused on API suitable for formulating into a skin
ointment for the treatment of VZV shingles, HSV-1 cold sores, or HSV-2 genital
ulcers. As these drug candidates advance further, we plan on performing fully
integrated drug development for developing eye drops for treatment of external
eye infections such as herpes keratitis (a disease of the external eye).
Thereafter we plan on undertaking the development of suitable materials for
intravitreous or sub-retinal injections for the treatment of certain viral
diseases involving the retina.



In the United States alone, approximately 1 million cases of shingles (i.e.
zoster) occur annually. The risk of zoster increases with age, and with
decreased immune system function, such as occurs in diabetics. Zoster is
characterized by pain and rash. Discrete cutaneous lesions occur in groups on
the skin. The Company believes that this presentation enables topical therapy
for control of the viral outbreak.



One in four patients develop zoster-related pain that lasts more than 30 days.
If it persists more than 3 months, it is called post-herpetic neuralgia (PHN),
and may persist for years. It is thought that zoster-associated pain and PHN is
a result of chronic ganglionitis, i.e. continued low-grade production of the
virus in the infected ganglia and related immune response. The Company believes
that effective control of the virus production would minimize or eliminate PHN,
a debilitating morbidity of zoster.



Zoster occurs mostly in the abdominal region. However, in 20% of cases, it
occurs in the head area, with reactivation involving trigeminal distribution.
These cases of zoster can lead to serious complications including hemorrhagic
stroke (VZV vasculopathy), VZV encephalitis, ophthalmic complications, and may
result in fatalities.



Currently available anti-herpes drugs have had limited impact on zoster. Thus,
an effective drug with a good safety profile could have a dramatic impact on
zoster as well as possibly PHN.



External eye infections with HSV-1 have been reported to be the leading cause of
infectious blindness in the developed world, with recurrent episodes of viral
reactivation leading to progressive scarring and opacity of the cornea. HSV
epithelial keratitis afflicts the epithelium of the cornea. In some cases, the
disease progresses to HSV stromal keratitis, which is a serious condition. HSV
stromal keratitis involves the stroma, the layer of tissue in the cornea, which
is deeper in the eye than the epithelium. Its pathology disease involves the HSV
infection of stromal cells, and also involves the inflammatory response to this
infection. It can lead to permanent scarring of the cornea resulting in
diminished vision. More serious cases require corneal replacement surgery. About
75% of corneal replacements are known to fail in a 20-year time frame, due to
graft versus host disease (i.e. rejection of the foreign implant by the body),
requiring a new procedure, or resulting in blindness.



                                      33





Herpes keratitis incidence rates in the USA alone are reported to be in the
range of 65,000 to 150,000 patients per year. Of these, approximately 10,000 per
year may be estimated as requiring corneal transplants. The estimates of
incidence rates vary widely based on source, and are also assumed to be
underreported. A corneal transplant costs approximately $15,000 to $25,000 for
the surgery, with additional costs for follow on drugs and treatments.

This scenario exists in spite of available drugs, namely the acyclovir class of drugs, trifluridine, and others, that are used for treatment of herpes keratitis. The failure of these drugs is primarily due to limited safety resulting in insufficient drug availability at the site of infection.

In addition, the Company is developing broad-spectrum eye drop formulations 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
herpesviruses. The Company has shown excellent efficacy of its drug candidates
against EKC (adenoviral epidemic kerato-conjunctivitis) in an animal model.
Further, our anti-HSV drug candidates have shown excellent efficacy in cell
culture studies, as well as in a lethal skin infection animal model.



Thus, an effective drug with a good safety profile could have a dramatic impact
on ocular viral infections. Merit-based compensation for the herpes keratitis
treatment would enable strong financial incentive and could result in potential
revenues in the several hundreds of millions range, depending upon the
effectiveness of the drug. The Company believes that it has sufficient
production capacity at its current site to supply the US requirement of the drug
for treatment of (ocular) herpes keratitis upon drug licensure.



Topical treatment of herpesvirus infections is important because of the
disfiguring nature of herpesvirus breakouts, the associated local pain, and the
fact that the virus grows in these breakouts to expand its domain within the
human host further. Topical treatment can deliver much higher local levels of
drugs than a systemic treatment can, and thus can be more effective and safer at
the same time. 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 the side effects.



Herpesviruses 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 the side effects, leading to minimizing viral production at the site.
Such effective local control of the virus titer is expected to lead to reduction
in recurrence of herpesvirus "cold sores" or genital ulcers, and reduction in
shingles related PHN.



The potential broad-spectrum nature of our anti-HSV drug candidates is expected
to enable several antiviral 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), a.k.a. 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. Most of these indications do not have satisfactory
treatments at present, if any. Further, the treatment of herpesvirus infections
caused by acyclovir- and famciclovir- resistant mutants is currently an unmet
medical need. Drugs with mechanisms of action other than DNA-polymerase
inhibitors (such as acyclovir) are needed for effective treatment.



The childhood chickenpox vaccine (varicella vaccine) has reduced the cases of
chickenpox, but this is a live attenuated virus vaccine that persists in the
body. All adults who have had chickenpox in childhood continue to harbor the
chickenpox virus, and are expected to develop shingles at some time, with the
risk of shingles increasing with age or weakening of the immune system
surveillance. In addition to the shingles breakout itself, post-herpetic
neuralgia (pain) (PHN) is a significant morbidity of shingles, and to a lesser
extent, of oral and genital herpes. PHN is initially caused probably by the
inflammation and immune response related to the local virus expansion, but
persists well after the virus has subsided, the blisters have scabbed off, and
the skin has recovered, due to the nerve damage that results from the local
large viral load during infection. Current PHN treatments are symptomatic,
affecting the pain signaling circuit (such as novocaine, pramoxine, capsaicin,
etc.), and do not produce lasting control. An effective therapy that results in
strong local control of the virus production during the breakout itself is
expected to minimize the resulting immune responses and nerve damage, and
thereby minimize or possibly eliminate PHN.



                                      34





The Company thus believes that it can develop its broad-spectrum anti-herpes
drug candidate towards at least five topical indications, namely, (a) shingles,
(b) oral herpes ("cold sores"), (c) genital herpes, (d) herpes keratitis
(external eye infection), and (e) ocular herpes including v-ARN (internal eye
infection). As the HerpeCide™ program progresses, it is likely that additional
herpesvirus related pathologies may become amenable to treatment with our
herpesvirus drug candidates.



Our nanoviricides in the HerpeCide™ program at present are designed as topical
treatment for the breakout of shingles or herpes sores. Our animal studies
results are very significant considering that topical acyclovir in the form of a
cream as well as an ointment, are approved for the treatment of cold sores. We
believe our strong anti-herpes nanoviricide® drug candidates are capable of
reaching approval as a drug for topical use against herpes cold sores, based on
these datasets. Further drug development is necessary towards the goal of drug
approval.



Currently, valacyclovir (Valtrex®) is approved as an oral drug for the treatment
of severe shingles, but it has limited effectiveness. Another oral drug known as
"FV-100" was studied in clinical trials for the treatment of shingles by
Bristol-Myers Squibb, and later by Contravir. FV-100 works only against VZV and
does not work against other herpesviruses. A Phase 3 study with PHN as end-point
was completed in November 2017. Further development appears to have been stopped
for FV-100.



There is also a new preventive vaccine for shingles, "Shingrix". Given the
number of cases of severe shingles, we believe that there is an unmet medical
need for developing a topical skin cream for the treatment of shingles, even
with a successful introduction of this vaccine. The Shingrix vaccine has been
recently also been shown to produce adverse effects such as painful injection
site reactions and pain in a significant number of patients. Local application
of a nanoviricide drug should enable delivery of stronger, local doses of
medicine, with a stronger patient benefit, than oral systemic dosing allows.



Existing therapies against HSV include acyclovir and drugs chemically related to
it. These drugs must be taken orally or by injection. Available topical
treatments, including formulations containing acyclovir or chemically related
anti-HSV drugs, are not very effective. Currently, there is no cure for herpes
infection. Brincidofovir (CMX001) is being developed by Chimerix. It failed in a
Phase 3 clinical trial for hCMV in organ transplants, and its Phase1/2 clinical
trial for HSV in neonates was withdrawn recently. Cidofovir is a known highly
effective but also toxic, broad-spectrum nucleoside analog drug that was
modified with a lipidic chain structure to create brincidofovir. Pritelivir, by
AiCuris, is a DNA Helicase/Primase inhibitor (HSV-1 and HSV-2) that has
successfully completed certain Phase 2 clinical trials, and its indication in
immune-compromised patients has received a fast track status from the US FDA.
Letermovir (Merck/AiCuris), a terminase complex inhibitor, is effective only
against hCMV and has entered a Phase 3 clinical study in kidney transplant
patients.



Both the safety and effectiveness of any new drug has to be determined
experimentally. The safety of a nanoviricide drug is expected to depend upon the
safety of the nanomicelle portion as well as the safety of the antiviral ligand.
We have observed excellent safety of our injectable anti-influenza drug
candidates. This leads us to believe that the nanomicelle backbones of these
drug candidates that were evaluated in preliminary safety studies should be safe
in most if not all routes of administration.



We believe that when effective topical treatments against VZV shingles, HSV-1
cold sores and HSV-2 genital ulcers are introduced, their market sizes are
likely to expand substantially, as has been demonstrated in the case of HIV as
well as Hepatitis C.

Our timelines depend upon several assumptions, many of which are outside the control of the Company, and thus are subject to delays.

We are currently focused on the development of an anti-coronavirus drug with urgency. We are also performing topical drug development against several indications related to infections by herpes family viruses.

                                      35

Management Discussion - Current Drug Development Strategy

During the reported quarter, we have focused on development of a drug against
SARS-CoV-2, that causes the COVID-19 spectrum of diseases. We have prioritized
our resources with the goal of filing our first IND in the shortest possible
timeframe.



The Company believes that its anti-coronavirus drug program could result in a
cure for SARS-CoV-2, based on attacking both viral replication and the viral
reinfection cycles. We are developing a next generation nanoviricide in this
program that is capable of attacking the virus particle and also is designed to
encapsulate and deliver another drug to block the intracellular virus
replication.



The Company believes that its anti-herpes drug candidates for the treatment of
cold sores and for genital lesions should lead to effective control of the cold
sores rapidly, and may also lead to a long lag time before a new recurrence
episode occurs. This is because it is believed that recurrence rates increase by
virtue of further infection of new nerve endings from the site of the
herpesvirus outbreak, which result in additional nerve cells harboring the
virus. If this in situ re-infection is limited, which we believe is the primary
mechanism of nanoviricide drugs, then it is expected that the number of HSV
harboring reservoir cells should decrease, and recurrence rate should go down.



The Company believes that it will be able to expand its anti-herpes portfolio in
the future to include many other herpes viruses such as cytomegalovirus (CMV),
HHV-6A, HHV-6B, KSHV, and Epstein-Barr virus (EBV, cause of mononucleosis). This
would lead to a very large number of therapeutic indications beyond the four or
five indications we are currently targeting.

The Company thus continues to expand its portfolio of opportunities, while also making progress towards the clinical trials stage.

Previously, in the FluCide™ program, the Company has demonstrated extremely high
effectiveness in animal models against two unrelated influenza viruses, namely
H1N1 and H3N2. In the HIVCide™ program, in the standard SCID-hy Thy/Liv mouse
model of HIV infection, the Company's drug candidates were found to maintain
viral load to the same level as an approved triple combination drug therapy,
beyond 40 days after the nanoviricide treatment was discontinued, even though
the combo therapy was continued daily. The Company intends to reactivate these
programs upon appropriate collaborations or funding. The Company has also
demonstrated preliminary successes in developing drug candidates against Dengue
viruses, and Ebola virus, among others.



The Company intends to re-engage its anti-influenza drug candidates upon
sufficient financing or upon achieving grants or collaborations for the same. We
are developing Injectable FluCide™ for hospitalized patients with severe
influenza as our first, broad-spectrum anti-influenza drug candidate. We have
demonstrated the very first effective orally available nanomedicine, namely oral
FluCide™ for outpatients with influenza. The development of Oral FluCide is
expected to follow behind Injectable FluCide. Development of an anti-Influenza
drug candidate has been estimated to be an extremely expensive process with a
long drug development timeframe. This is because of the large number of virus
types and subtypes that change rapidly within and over seasons. The Company at
present does not have the resources to engage into a full-fledged anti-Influenza
drug development program. Additionally, Xofluza®, a new drug with a novel
mechanism of action (an endonuclease inhibitor) was very recently approved in
the USA (Roche/Genentech). While it reduced viral load significantly in clinical
trials, it did not have a significant effect on the time course of the clinical
pathology of influenza infection in the clinical trials that led to its
approval. Xofluza is approved for uncomplicated influenza. Information on its
usage and effectiveness in the field in the current influenza seasonal cycle in
the USA is not yet available. All of the current influenza drugs, including
Xofluza have resulted in mutated influenza viruses that are drug-resistant.

Thus, an effective therapy for patients hospitalized with severe influenza continues to be an unmet need. In addition, a single injection treatment of non-hospitalized patients would be a viable drug if it provides superior benefits to existing therapies.

Due to our limited resources, we have now assigned lower development priorities
to our other drug candidates in our pipeline such as DengueCide™ (a broad
spectrum nanoviricide designed to attack all types of dengue viruses and
expected to be effective in the Severe Dengue Disease syndromes including Dengue
Hemorrhagic Fever (DHS) and Dengue Shock Syndrome (DSS)) and HIVCide™ (a
potential "Functional Cure" for HIV/AIDS).



                                      36





We believe we have demonstrated that we can rapidly develop different types of
formulations for different routes of administration, such as injectable, skin
cream, lotion, gel, and even oral, because of the inherent strength of the
nanoviricide platform tailorable technology. The technology also enables us to
develop nasal sprays and bronchial aerosols. We plan to develop the appropriate
formulations as necessary.



Our Campus in Shelton, CT



Our campus at Shelton, CT, is fully operative. With our R&D discovery labs,
Analytical Labs, the Bio labs for virology R&D, the Process Scale-Up production
facility, and the cGMP-capable manufacturing facility established at our Shelton
campus, we are in a strong position than ever to move our drug development
programs into the clinic rapidly. Staff is being trained to achieve full cGMP
compliance to support clinical trial manufacture.

Process Scale-Up Production Capability

The Process Scale-up area is operational at kilogram to multi-kg scales for
different chemical synthesis and processing steps now. It comprises reactors and
process vessels on chassis or skids, ranging from 1L to 50L capacities, as
needed. Many of the reactors and vessels have been designed by us for specific
tasks related to our unique manufacturing processes.



cGMP Production Capability



Our versatile, customizable cGMP-capable manufacturing facility is designed to
support the production of multi-kilogram-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 I, Phase II, and Phase III 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.



We plan to produce multiple batches of a drug product and satisfy that said drug
product is within our own defined specifications. If we are satisfied with such
strong reproducibility of our processes, we plan to register the facility as a
cGMP manufacturing facility with the US FDA.



At present, we plan on moving operations to our cGMP-capable manufacturing suite
as the operational steps are developed to the level needed for moving them into
this facility. This requires the development of draft-level Standard Operating
Procedures, training, and drill-through of operations. We will also need to
establish a Quality Assurance and Quality Control Department. Our current staff
is busy developing our pre-clinical HerpeCide programs. Given our limited
financing, we have not been able to attract the necessary talent for replacing
the lost staff and for building out additional resources for QA/QC. We are
working with available staff, training them further in cGMP requirements and
operations, as well as in QA/QC. This inherently leads to serialization of
efforts, and can lead to extending the timeline. We have been working diligently
to meet our goals in the shortest timeframe possible given these constraints.



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 in normal small
chemical or biological drugs. We continue to seek talented scientists and
engineers with specialized training. However, it is difficult to attract such
talent for a small, pre- revenue pharma company such as ours.



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.



                                      37

Our BSL-2 Certified Virology Lab

We have significantly enhanced our internal anti-viral cell culture testing
capabilities at our Shelton campus. We have achieved BSL-2 (Biological Safety
Level 2) certification from the State of Connecticut for our Virology suite at
the new 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 have established several different types of assays for screening of
candidates against Coronaviruses as well as VZV, HSV-1 and HSV-2 in our lab.
This capability has been instrumental in our rapid development of potential drug
candidates for further investigation towards human clinical trials. 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 and accelerated 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.

NanoViricides Business Strategy in Brief

NanoViricides, Inc. 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 plans to market these drugs either on its
own or in conjunction with marketing partners. The Company also plans to
actively pursue co-development, as well as other licensing agreements with other
Pharmaceutical companies. Such agreements may entail up-front payments,
milestone payments, royalties, and/or cost sharing, profit sharing and many
other instruments that may bring early revenues to the Company. Such licensing
and/or co-development agreements may shape the manufacturing and development
options that the Company may pursue. There can be no assurance that the Company
will be able to enter into co-development or other licensing agreements.

The Company has kept its capital expenditures to a minimum in the past, and we intend to continue to do the same, in order to conserve our cash for drug development purposes, and in order to minimize additional capital requirements.

Collaborations, Agreements and Contracts

Our strategy is to minimize capital expenditures.  We therefore rely on third
party collaborations for the testing of our drug candidates. We continue to
engage with our previous collaborators. We also seek to engage with additional
collaborators, as necessitated for the progress of our programs.

We have engaged Calvert Labs for core safety/pharmacology studies of our anti-coronavirus drug candidates.

We have signed a collaboration agreement with the Professor Moffat Lab at SUNY
Upstate Medical Center, Syracuse, NY, for evaluating safety and effectiveness
studies of drug candidates in cell culture and in animal models for shingles VZV
infections.

We have signed a collaboration agreement with the CORL at the University of Wisconsin, Madison, WI, for HSV-1 and HSV-2, with focus on small animal models for ocular disease.

We have engaged Biologics Consulting Group, Inc., to help us with the US FDA
regulatory submissions. We are also engaged with Australian Biologics Pty, Ltd
to help us with clinical trials and regulatory approvals in Australia. We
believe that cGMP-like manufactured product is acceptable for entering human
clinical trials in Australia.



                                      38





We have contracted NorthEast BioLab, Hamden CT, to conduct the bio-analytical
studies and facilitate the toxicokinetic analyses of NV-HHV-101. These studies
and analyses are part of the required general safety and toxicology studies that
will go into an IND Application to the US FDA. NorthEast BioLab has already
performed the bio-analytical assay development and validation and is in the
process of determining the concentrations of NV-HHV-101 in blood samples from
the general safety and toxicology studies that are required for IND.



We also engaged MB Research Labs, Spinnerstown, PA, to conduct the studies to
assess the dermal sensitization and ocular irritation potential of the drug
candidate. These initial studies involve two separate types of studies: 1)
assess the direct potential of the drug candidate to induce skin sensitization
after repeated treatment of the skin (contact dermal sensitization); and 2)
assess the potential of the drug candidate to cause ocular irritation following
potential exposure. The ocular irritation test (EpiOcularTM Eye Irritation Test,
EIT) is a non-animal test in compliance with multi-national regulatory
guidelines. Additional IND-enabling studies are in progress. Upon completion of
all of these required studies, the Company anticipates filing an IND with the US
FDA to advance NV-HHV-101 into human clinical trials for topical dermal
treatment of the shingles rash as the initial indication.

We anticipate completing master services agreements, after performing our due diligence, with additional parties in furtherance of our anti-viral drug development programs.

We have continued to achieve significant milestones in our drug development
activities. Our lead program, NV-HHV-101 skin cream for the treatment of
shingles rash, is in advanced pre-clinical stage, as we await final reports from
external collaborators to produce and file the IND application with the US FDA.
All of our remaining drug development programs are presently at pre-clinical or
advanced pre-clinical stage.

Patents, Trademarks, Proprietary Rights: Intellectual Property

The nanomedicine technologies licensed from TheraCour, which licenses its
intellectual property from AllExcel, serve as the foundation for our
intellectual property. NanoViricides holds a worldwide exclusive perpetual
license to this technology for several drugs with specific targeting mechanisms
in perpetuity for the treatment of the following human viral diseases: Human
Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis C Virus
(HCV), Rabies, Herpes Simplex Virus (HSV-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 in perpetuity for
technologies developed by TheraCour for the additional virus types: Dengue
viruses, Japanese Encephalitis virus, West Nile Virus, Viruses causing viral
Conjunctivitis (a disease of the eye) and Ocular Herpes, and Ebola/Marburg
viruses.



In addition, on November 1, 2019, NanoViricides entered into a world-wide,
exclusive, sub-licensable, license to use, promote, offer for sale, import,
export, sell and distribute drugs that treat VZV infections, using TheraCour's
proprietary as well as patented technology and intellectual property. The
discovery of ligands and polymer materials as well as formulations, the
chemistry and chemical characterization, as well as process development and
related work will be performed by TheraCour under the same compensation terms as
prior agreements between the parties, with no duplication of costs allowed. The
Company was not required to make any upfront payments to TheraCour and agreed to
the following milestone payments to TheraCour; the issuance of 75,000 shares of
the Company's Series A Convertible Preferred Stock upon the grant of an IND
Application; $1,500,000 in cash upon completion of Phase I Clinical Trials;
$2,500,000 in cash upon completion of Phase II clinical trials; and $5,000,000
in cash upon completion of Phase III clinical trials.



In June 2020, the Company signed a Memorandum of Understanding with TheraCour
for the field of human coronavirus treatments. The Company has obtained a
limited license for the development of nanoviricides drug candidates against
coronaviruses while a final license agreement for this field is in progress. The
Company has initiated an independent review of the field in order to form terms
of the final license agreement, which are expected to be similar to those for
the VZV license agreement. The MOU was extended until June 15, 2021 with a First
Amendment on April 21, 2021, which amendment was given effect as of August 31,
2020. The amendment clarifies that the rights to milestone payments will remain
effective even if the final agreement is signed after meeting a milestone.

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.

                                      39





In addition, these extremely broad licenses are not limited to some specific
chemical structures, but comprise all possible structures that we could deploy
against the particular virus, based on these technologies. In addition, unless
there is an event of default, in which case the license would revert to
TheraCour, the licenses are held in perpetuity by NanoViricides for worldwide
use. The licenses are also exclusively provided to NanoViricides for the
licensed products so NanoViricides is the only party that can further sublicense
the resulting drugs to another party, if it so desires. 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, in the case of the VZV license a failure
to make a milestone payment within 90 days or a failure to use its commercially
reasonable efforts to obtain FDA approval for 24 consecutive months.



A fundamental Patent Cooperation Treaty ("PCT") patent application, on which the
nanoviricides® technology is based, has resulted in additional issued patents in
Europe and Korea. As with issuances in other countries including the United
States, these patents have been allowed with a very broad range of claims to a
large number of families of chemical structure compositions, pharmaceutical
compositions, methods of making the same, and uses of the same. The
corresponding original "pi-polymer" international application, namely,
PCT/US06/01820, was filed under the Patent Cooperation Treaty (PCT) system in
2006. Several other patents have already been granted previously in this patent
family in various countries and regions, including Australia, ARIPO, Canada,
China, Hong Kong, Indonesia, Israel, Japan, Mexico, New Zealand, OAPI,
Philippines, Singapore, Vietnam, South Africa, and the USA. Prosecution in
several other countries continues. In May 2012, the US Patent (No. 8,173,764)
was granted for "Solubilization and Targeted Delivery of Drugs with
Self-Assembling Amphiphilic Polymers." The US patent term is expected to last
through October 1, 2028, including anticipated extensions in compensation for
time spent in clinical trials. This US Patent has been allowed with a very broad
range of claims to a large number of families of chemical structure
compositions, pharmaceutical compositions, methods of making the same, and uses
of the same. The disclosed structures enable self-assembling, biomimetic
nanomedicines. Estimated expiry dates for these patents range nominally from
2027 to 2029 with various extensions accounting for delays in clinical trials.
Additional issuances are expected in Europe, and in several other countries
around the world.



In addition to this basic PCT application that covers the "pi-polymer" structure
itself, another PCT application, PCT/US2007/001607, that discloses making
antiviral agents from the TheraCour family of polymers and such structures is in
various stages of prosecution in several countries, and has already issued in at
least seven countries and regions. The counterparts of the international PCT
application have issued as a granted patent in Australia, Japan, China, ARIPO,
Mexico, New Zealand, OAPI, Pakistan, and, South Africa to date. Additional
issuances are expected in Europe, USA, and in several other countries around the
world. This patent application covers 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.

More than 61 patents have been issued globally on the basis of the two international PCT patent families that cover the fundamental aspects of our platform technology. Additional patent grants are expected to continue as the applications progress through prosecution processes. All of the resulting patents have substantially broad claims.

The patents are issued to the inventors Dr. Anil R. Diwan, PhD, Jayant G. Tatake, PhD, and Ann L. Onton, all of whom are among the founders of NanoViricides, Inc. The patents have been assigned to AllExcel, Inc., the Company at which the groundbreaking work was performed. AllExcel, Inc. has contractually transferred this intellectual property to TheraCour.

Patents and other proprietary rights are essential for our operations. If we
have 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, 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.



                                      40

The Company believes that the drugs by themselves, Coronavirus antiviral treatment, Shingles antiviral topical treatment, HerpeCide for Cold Sores, HerpeCide for genital ulcers, antiviral nanoviricide eye drops, Injectable FluCide, Oral FluCide, DengueCide, HIVCide, RabiCide, and others, would be eligible for patent protection. The Company 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 issued 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 process, or other local
considerations, such as licensing to a local majority held company. Many
countries allow up to five years extension for regulatory delays.



The estimated expiry date for HerpeCide patents, if and when issued, would be no
earlier than 2040. 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 FluCide and HerpeCide compounds on or about when the drug
candidates are entering human clinical trials, depending upon prevailing
considerations regarding the confidentiality of the information.



We may obtain patents for our 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
our 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

On April 20, 2010, the United States Patent and Trademark Office granted trademark registration number 3,777,001 to the Company for the standard character mark "nanoviricides" (the "Mark") for International Class 5, pharmaceutical preparation for the treatment of viral diseases.

Analysis of Financial Condition, and Result of Operations

As of March 31, 2021, we had cash and cash equivalents of $22,899,518, prepaid
expenses of $331,551 and net property and equipment of $9,174,355. Accounts
payable, loan payable and accrued expenses were $871,344, inclusive of account
payables to a related party of $583,075, of which $200,000 is deferred until the
filing of an IND. The accounts payable-related party was offset by a two month
advance of $491,000. Stockholders equity was $31,889,781 at March 31, 2021.



                                      41





In comparison, as of June 30, 2020, we  had $13,708,594 in cash and cash
equivalents, prepaid expenses of $277,063 and $9,544,431 of net property and
equipment. Our liabilities were $2,156,377 including a short term mortgage loan
of $1,081,987 payable to Dr. Anil Diwan, accounts payable of $380,727 and
accounts payable to a related party of $561,580 of which $200,000 of such
accounts payable is deferred until the filing of an IND. Stockholders' equity
was $21,757,962 at June 30, 2020.



During the nine-month period ended March 31, 2021, we used $5,986,138 in cash
toward operating activities. During the nine-month period ended March 31, 2020
we used $4,957,235 in cash toward operating activities.

We do not anticipate any major capital costs going forward in the near future.

The Company believes that its existing resources will be sufficient to fund its
planned operations and expenditures for at least the next twelve months from the
issuance of these financial statements. However, the Company will need to raise
additional capital to fund its long term operations and research and development
plans until it generates revenue which reaches a level sufficient to provide
self-sustaining cash flows. 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 March
2, 2021 "At the Market" Offering the Company has sufficient funds in hand for
initial human clinical trials of its first drug candidate for the treatment of
SARS-CoV-2 infection. Management believes we will have to raise additional
capital to fund and perform additional projected work, including further
required clinical trials of the first drug candidate towards approval, as well
as engaging in further IND-enabling development and subsequent anticipated IND
filings of human clinical trials of additional HerpeCide program drug
candidates.



The Company does not currently have any revenue. All of the Company's products
are in the development stage and require successful development through
regulatory processes before commercialization. We have generated funding through
the issuances of debt and private placement of common stock and also the sale of
our registered securities. The Company does not currently have any short or
long-term debt. We have not generated any revenues and we may not be able to
generate revenues in the near future. We may not be successful in developing our
drugs and start selling our products when planned, or we may not become
profitable in the future. We have incurred net losses in each fiscal period
since inception of our operations.

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.
Far fewer man-hours are spent on the projects at low priority than the projects
at high priority. In this quarter, we have focused primarily on our COVID-19
program drug candidates.



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 need to 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 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.



                                      42





We believe that we have developed or have planned to develop sufficient data on
our first drug candidate, for the treatment of SARS-CoV-2 infection, to support
an IND filing, towards the goal of obtaining FDA approval for testing the drug
in human patients.



We have previously completed IND-enabling studies for a drug candidate for the
treatment of shingles rash caused by reactivation of the chickenpox virus (aka
varicella-zoster virus, VZV). We plan on taking the shingles drug candidate into
human clinical trials after clinical trials of our COVID-19 drug candidate.



The FDA may require additional studies to be done before approving the IND.
Assuming that the FDA allows us to conduct human clinical studies as we intend
to propose, we believe that this coming year's work plan will lead us to obtain
certain information about the safety and efficacy of one of the drugs under
development in human clinical studies. 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 Phase
II and Phase III human clinical studies, additional studies in animal models to
obtain any necessary data regarding the pharmaco-kinetic and pharmaco-dynamic
profiles of our drug candidates towards drug approval or licensure from
regulatory agencies. In addition, we also plan to develop the same drug for
commercial approval for additional indications for the same drug, such as
pediatric applications, special case applications for certain classes of
immune-compromised patients, among others, provided that appropriate levels of
funding become available. We believe that adding further indications would
significantly expand market penetration and improve return on investment for our
drugs.



Results of Operations

The Company is a biopharmaceutical company and did not have any revenue for the three and nine month periods ended March 31, 2021.

Revenues - The Company is currently a non-revenue producing entity.

Research and Development Expenses - Research and development expenses for the
three months ended March 31, 2021 increased $330,045 to $1,464,177 from
$1,134,132 for the three months ended March 31, 2020. Research and development
expenses for the nine months ended March 31, 2021 increased $901,826 to
$4,530,448 from $3,628,622 for the nine months ended March 31, 2020. The
increase in the cost of research and development expenses for the three and nine
months ended March 31, 2021 is due to increases in outside lab fees, laboratory
payroll, laboratory supplies and materials.



General and Administration Expenses - General and administrative expenses for
the three months ended March 31, 2021 decreased $764,873 to $643,358 from
$1,408,231 for the three months ended March 31, 2020. General and administrative
expenses for the nine months ended March 31, 2021 decreased $396,658 to
$2,139,392 from $2,536,050 for the nine months ended March 31, 2020. The
decrease in general and administrative expenses during the three and nine months
ended March 31, 2021 compared to the prior period resulted primarily from
decreases in professional fees and in operating expenses in general.



Interest Income - Interest income for the three months ended March 31, 2021
decreased $7,243 to $2,021 from $9,264 for the three months ended March 31,
2020. Interest income for the nine months ended March 31, 2021 decreased $8,998
to $6,267 from $15,265 for the nine months ended March 31, 2020. The decrease in
interest income for the three and nine months ended March 31, 2021 is due to a
decrease in interest rates, offset, in part, by increases in cash and cash
equivalents.



                                      43





Interest Expense - Interest expense decreased $42,421 to $2,516 for the three
months ended March 31, 2021 from $44,937 for the three months ended March 31,
2020. Interest expense increased $34,650 to $83,718 for the nine months ended
March 31, 2021 from $49,068 for the nine months ended March 31, 2020. The
decrease in interest expense for the three months ended March 31, 2021 is a
result of the repayment of the Open End Mortgage Note and the complete
amortization of the mortgage loan origination fee at December 31, 2020. The
increase in interest expense for the nine months ended March 31, 2021 is a
result of the interest paid on an open end mortgage note, amortization of the
mortgage loan origination fee, and interest paid on a short term loan payable.



Loss on disposal of property and equipment - For the three and nine months ended
March 31, 2021 the Company recognized a loss of $0 and $2,026, respectively from
disposal of nonfunctioning equipment.



Loss on issuance of Series A preferred stock for accounts payable - related
party - For the three and nine months ended March 31, 2020, the Company
recognized a loss of $0 and $142,669, respectively arising from the difference
in fair value of 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.



Gain on warrant settlement - For both the three and nine months ended March 31,
2021, the Company recognized $0 arising from the warrant settlement. For both
the three and nine months ended March 31, 2020, the Company recognized a gain of
$614,494 arising from the exchange of new warrants for the old warrants.



Change in fair value of derivative - Change in fair value of derivative for the
three months ended March 31, 2021 decreased $6,119,762 to $0 from $6,119,762
expense for the three months ended March 31, 2020. Change in fair value of
derivative for the nine months ended March 31, 2021 decreased $5,845,313 to $0
from $5,845,313 expense for the nine months ended March 31, 2020. The decrease
resulted from the elimination of derivative liabilities with the exercise of the
Company's outstanding warrants in January 2020.

Income Taxes - There is no provision for income taxes due to ongoing operating losses.

Net Loss - For the three months ended March 31, 2021, the Company had a net loss
of $(2,108,030) or $(0.19) per share compared to a net loss of $(8,083,304) or
$(1.24) per share for the three months ended March 31, 2020. For the nine months
ended March 31, 2021, the Company had a net loss of $(6,749,317) or $(0.63) per
share compared to a net loss of $(11,571,963) or $(2.45) per share for the nine
months ended March 31, 2020. The decrease in the net loss for the three months
ended March 31, 2021 is attributable mainly to a decrease in the loss from the
change in fair value of derivative liabilities of $(6,119,772), offset by a
decrease in the gain on warrant settlement of $614,494 and by a decrease in
operating expenses for the three months ended March 31, 2021. The decrease in
the net loss for the nine months ended March 31, 2021 is attributable mainly to
a decrease in the loss from the change in fair value of derivative liabilities
of $(5,845,313), offset by a decrease in the gain on warrant settlement of
$614,494, and by a decrease in operating expenses for the nine months ended
March 31, 2021.

Liquidity and Capital Reserves

The Company had cash and cash equivalents of $22,899,518, and prepaid expenses
of $331,551 as of March 31, 2021 and accounts payable, loan payable, and accrued
expenses were $871,344, inclusive of accounts payable of $583,075 to a related
party of which $200,000 is deferred until the filing of an IND. The accounts
payable-related party was offset by a two month advance of $491,000. 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 $112,312,441 at March 31, 2021. 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. On July 31, 2020, the Company entered into a Sales
Agreement with 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
having an aggregate offering price of up to $50 million. On March 2, 2021 the
Company sold 814,242 shares of common stock at an average price of approximately
$7.83 per share. The net proceeds to the Company from the offering was
approximately $6.1 million after placement agent fees and other estimated
offering expenses.



                                      44





The Company believes that its existing resources will be sufficient to fund its
planned operations and expenditures for at least the next twelve months from the
issuance of these financial statements.



In addition, the Company believes that it has several important milestones that
it anticipates achieving in the ensuing year. Management believes that assuming
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 more favorable
to the terms we are offered at present.



The Company has not experienced a direct financial adverse impact of the effects
of the Coronavirus (COVID-19) pandemic.  However, the pandemic required the
Company to reorganize its priorities, because of the impact on the ability to
conduct antiviral drug trials for our then lead program for shingles drug
treatment. While clinical trials were in general adversely affected, the ability
to enroll patients into the shingles antiviral drug clinical trial with the
desired inclusion criteria became limited due to the widespread coronavirus
infection. The shingles clinical trial design and conduct would also become more
complex. The emergence of widespread health emergencies due to COVID-19 have led
to regional quarantines, shutdowns, shortages, disruptions of supply chains, and
economic instability. The impact of COVID-19 on the financial markets and the
overall economy are highly uncertain and cannot be predicted at this time.
Though the Company has not experienced a direct financial impact, if the
financial markets and/or the overall economy are impacted for an extended
period, the Company's ability to raise funds, in the future, may be materially
adversely affected.



The Company believes that its existing resources will be sufficient to fund its
planned operations and expenditures for at least the next twelve months from the
issuance of these financial statements. However, the Company will need to raise
additional capital to fund its long-term operations and research and development
plans including human clinical trials for its various drug candidates until it
generates revenue which reaches a level sufficient to provide self-sustaining
cash flows. There is no assurance that the Company will be successful in
obtaining sufficient financing on terms acceptable to the Company. The Company
believes that 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.



Our estimates for external costs are based on various preliminary discussions
and "soft" quotes from contract research organizations that provide pre-clinical
and clinical studies support. The estimates are also based on certain time
estimates for achievement of various objectives. If we miss these time estimates
or if the actual costs of the development are greater than the early estimates
we have at present, our drug development cost estimates may be substantially
greater than anticipated now. In that case, we may have to re-prioritize our
programs and/or seek additional funding.

The Company does not have direct experience in taking a drug through human clinical trials. In addition, we depend upon external collaborators, service providers and consultants for much of our drug development work.

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 such additional capital resources or that such financing will be
on terms that are favorable to the Company.

Off Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements during the nine months ended March 31, 2021.

© Edgar Online, source Glimpses