NanoViricides(NNVC) - 2019 Q4 - Annual Report

PART I Business Overview NanoViricides, Inc. is a development-stage nanobiopharmaceutical company focused on antiviral drug development, primarily advancing NV-HHV-101 for shingles into pre-IND safety/toxicology studies. - Company is a development-stage company with no customers, products, or revenue, and may not achieve revenue or profitability in the future[20] - Company primarily focuses on advancing NV-HHV-101, a topical shingles treatment, into human clinical trials, considered its most advanced candidate[21][53] - Company possesses unique Nanoviricide® platform technology designed to directly attack enveloped virus particles via a "bind-encapsulate-destroy" strategy, also disrupting intracellular viral replication for broad-spectrum antiviral effects[23][28][32] - Company has secured multiple exclusive licenses from TheraCour Pharma, Inc. for HIV, influenza, HSV-1/2, hepatitis, rabies, dengue, Ebola/Marburg, and is negotiating a license for VZV (shingles, chickenpox virus)[24][608] - Company owns a BSL-2 certified virology lab and cGMP manufacturing facility, enabling in-house cell culture screening and kilogram-scale drug production, accelerating development and reducing costs[46][51][155] - In FY2019, the company focused on the HerpeCide™ program, achieving milestones including announcing clinical candidate NV-HHV-101, developing kilogram-scale manufacturing, completing non-GLP safety/toxicology studies, submitting a pre-IND application, and receiving positive FDA feedback[53][63] - The market size for shingles treatment is estimated at over $1 billion, while the total market for the HerpeCide™ program is estimated to exceed $5 billion, with the overall market for the company's potential drugs estimated between $40 billion and $65 billion[21][137][216] Organization and Nature of Business This section details the company's corporate structure and its core business activities as a nanobiopharmaceutical developer. The Nanoviricide® Platform Technology This section describes the proprietary Nanoviricide® platform technology, its mechanism of action, and broad antiviral potential. cGMP Manufacturing Facility This section outlines the company's in-house cGMP manufacturing capabilities and their role in drug development. State of the Company – Drug Development Programs – Focus on HerpeCide™ Program This section provides an overview of the company's current drug development status, with a primary focus on the HerpeCide™ program. HerpeCide Program Collaborations and Program Update This section details collaborations and recent updates regarding the HerpeCide™ drug development program. Shingles and Associated Pain, Postherpetic Neuralgia (PHN) This section discusses the medical conditions of shingles and postherpetic neuralgia, highlighting the market need for effective treatments. HSV-1, HSV-2, Ocular Herpes Keratitis This section covers the company's focus on developing treatments for HSV-1, HSV-2, and ocular herpes keratitis. Viral Acute Retinal Necrosis (v-ARN) This section addresses the company's efforts in developing therapies for viral acute retinal necrosis. cGMP Manufacture This section describes the company's capabilities and processes for cGMP manufacturing. The FluCide™ Program This section outlines the development efforts and status of the FluCide™ program for influenza. DengueCide™ This section details the company's DengueCide™ program aimed at combating dengue virus. HIVCide™ This section provides information on the HIVCide™ program for HIV treatment. EKC This section discusses the company's program targeting Epidemic Keratoconjunctivitis (EKC). Other Drug Programs: Ebola, Rabies and others This section briefly mentions other drug development programs, including those for Ebola and Rabies. Safety and Toxicology Studies This section describes the safety and toxicology studies conducted for the company's drug candidates. Clinical and Regulatory Strategy This section outlines the company's approach to clinical trials and regulatory approvals for its drug pipeline. Large Market Sizes – The Company Targets an Overall Anti-Viral Drug Market Size that Exceeds $40B This section highlights the significant market potential for the company's antiviral drug candidates, exceeding $40 billion. Our Campus in Shelton, CT This section describes the company's facilities located in Shelton, Connecticut. Process Scale-Up Production Capability This section details the company's capabilities for scaling up drug production processes. cGMP Production Capability This section outlines the company's capacity for cGMP-compliant drug production. Resource Considerations This section discusses the resources required for the company's operations and drug development. Our BSL-2 Certified Virology Lab This section describes the company's BSL-2 certified virology laboratory and its functions. Manufacturing Requirements of Some of Our Drug Candidates This section details the specific manufacturing requirements for certain drug candidates in the company's pipeline. Patents, Trademarks, Proprietary Rights: Intellectual Property This section covers the company's intellectual property portfolio, including patents, trademarks, and proprietary rights. Trademarks This section specifically lists and describes the company's trademarks. Presentations and Conferences This section provides information on the company's participation in presentations and conferences. Glossary of Terms This section offers a glossary of key terms used throughout the report. The Company's Drug Pipeline This section presents an overview of the company's current drug development pipeline. Drug Development Plan This section outlines the strategic plan for the company's drug development initiatives. Manufacturing This section details the company's manufacturing processes and capabilities. Competition This section analyzes the competitive landscape within the biotechnology and biopharmaceutical industries. Government Regulation This section discusses the impact of government regulations on the company's drug development and commercialization efforts. A Note on US FDA Priority Review Vouchers This section provides information regarding the potential benefits of US FDA Priority Review Vouchers. Time Schedules, Milestones and Development Costs This section outlines the projected timelines, key milestones, and associated development costs for the company's programs. Our Collaborations and Service Contract Agreements This section details the company's collaborations and service contract agreements with external parties. Significant Alliances and Related Parties This section identifies significant alliances and related party relationships impacting the company. Employees This section provides information regarding the company's employee base. Reports to Security Holders This section describes the company's reporting practices to its security holders. Website This section provides information about the company's official website. Our Contact Information This section lists the company's contact details. Description of Property This section describes the company's owned or leased properties. Risk Factors The company faces multiple risks, including its development-stage status, funding needs, clinical trial uncertainties, reliance on licensed technology, and competitive pressures. - Company is a development-stage entity with no approved commercial products, has never generated revenue, and may not achieve profitability in the future[322] - Company has incurred substantial operating losses, with an accumulated deficit of $92,116,586 as of June 30, 2019, and expects to continue incurring losses[325] - Company needs to raise substantial additional capital to fund operations, with no assurance of obtaining financing on acceptable terms when needed[326] - Company has limited drug development experience, has not conducted any clinical trials, and must outsource all clinical trials to third parties, increasing risks of delays or failures[329][355][356] - Company has not yet licensed the shingles drug (its primary candidate) from TheraCour, and despite a signed MOU, there is no guarantee of a definitive agreement on favorable terms[349] - Company relies on TheraCour's licensed patents to protect its technology, but patent protection may be inadequate, and some licensed patents expire between 2020 and 2028[365][375] - The biotechnology and biopharmaceutical industries are characterized by rapid technological change and intense competition, and the company may not be able to compete with better-resourced competitors[409][413] - The company's stock price may be highly volatile and could be considered a "penny stock," potentially limiting investor trading ability and increasing transaction costs[422][424] Unresolved Staff Comments There are no unresolved staff comments in this report. - There are no unresolved staff comments in this report[437] Properties The company's main administrative office in Shelton, CT, includes 18,000 square feet of wholly-owned office, lab, and cGMP manufacturing space. - Company's main administrative office is located at 1 Controls Drive, Shelton, CT, comprising approximately 18,000 square feet of office, laboratory, and cGMP-compliant drug manufacturing space[316][438] - These facilities are wholly owned by the company, with no mortgages[316][438] - Company subcontracts laboratory research and development to TheraCour Pharma, Inc., and believes its existing space is sufficient to monitor subcontractor development progress[317][439] Legal Proceedings The company is not currently involved in any legal proceedings that could materially impact its financial condition or operating results. - The company is not currently involved in any legal proceedings that could have a material adverse effect on its financial condition or operating results[319][440][743] Mine Safety Disclosures This item is not applicable. - This item is not applicable[441] PART II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NYSE American, and it has not paid cash dividends, instead reinvesting earnings into business development. - Company's common stock has traded on NYSE MKT (now NYSE American) under the ticker symbol “NNVC” since September 25, 2013[443] Common Stock High and Low Prices (USD/share) | Quarter End | Low Price | High Price | | :--- | :--- | :--- | | June 30, 2019 | 0.22 | 0.31 | | March 31, 2019 | 0.20 | 0.68 | | December 31, 2018 | 0.20 | 0.40 | | September 30, 2018 | 0.25 | 0.50 | | June 30, 2018 | 0.36 | 0.86 | | March 31, 2018 | 0.80 | 1.08 | | December 31, 2017 | 0.87 | 1.23 | | September 30, 2017 | 0.94 | 1.64 | - As of June 30, 2019, the company had 76,898,295 shares of common stock issued and 154 record holders, with approximately 7,963,000 unexercised warrants[445] - Company has not paid any cash dividends since inception and plans to reinvest future earnings into business[446] - In fiscal year 2019, the company raised $2,500,000 by issuing 6,944,446 shares of common stock at $0.36 per share through a registered direct offering, with a concurrent private placement of 6,944,446 warrants[476][478] - Net proceeds from this offering were primarily used for research and development and working capital[485] Selected Financial Data The company provides a five-year summary of financial data, reflecting continuous operating losses and increasing accumulated deficits as a development-stage entity. Summary of Operating Data (as of June 30) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Research and Development Expenses | $5,921,720 | $5,913,720 | $6,565,966 | $5,028,970 | $3,660,322 | | General and Administrative Expenses | $2,737,962 | $3,411,449 | $3,034,758 | $3,830,531 | $3,402,778 | | Total Operating Expenses | $8,659,682 | $9,325,169 | $9,600,724 | $8,859,501 | $7,063,100 | | Operating Loss | $(8,659,682) | $(9,325,169) | $(9,600,724) | $(8,859,501) | $(7,063,100) | | Net Loss | $(8,424,440) | $(8,563,455) | $(10,304,490) | $(10,724,629) | $(2,198,172) | | Net Loss Per Share (Basic) | $(0.12) | $(0.13) | $(0.17) | $(0.19) | $(0.04) | Summary of Balance Sheet Data (as of June 30) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | $2,555,207 | $7,081,771 | $15,099,461 | $24,162,185 | $31,467,748 | | Working Capital | $(22,732) | $6,440,080 | $10,624,109 | $17,637,629 | $31,081,278 | | Total Assets | $13,448,513 | $18,546,212 | $27,002,814 | $36,633,418 | $44,187,089 | | Long-Term Liabilities | $0 | $0 | $2,015,354 | $6,841,190 | $11,800,327 | | Accumulated Deficit | $(92,116,586) | $(83,692,146) | $(75,128,691) | $(64,824,201) | $(54,099,572) | | Stockholders' Equity | $10,600,360 | $17,664,264 | $20,321,942 | $23,048,214 | $31,785,867 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial challenges as a development-stage entity, including ongoing losses and the need for additional financing, while prioritizing the HerpeCide™ program. - Company has been engaged in R&D activities since inception, focusing on developing targeted antiviral drugs, has not commenced any product commercialization, and has not generated revenue[502][609] - As of June 30, 2019, the company's cash and cash equivalents were $2,555,207, which is insufficient to support current budgeted operations for one year, raising substantial doubt about its ability to continue as a going concern[506][609] - Company has focused all efforts on the HerpeCide™ program, specifically advancing its first clinical candidate, NV-HHV-101, into human clinical trials, in response to limited financial resources[215][525] R&D Expense Allocation (as of June 30) | Program | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | HerpeCide™ Program | $5,601,720 | $5,723,720 | $4,976,266 | | FluCide™ | $150,000 | $150,000 | $150,000 | | HIV-Cide™ | $20,000 | $20,000 | $100,000 | | EKC-Cide™, Other Ocular Viral Infections | $0 | $0 | $540,000 | | Dengue | $0 | $0 | $50,000 | | Other (Ebola, etc.) | $0 | $0 | $50,000 | | Unallocated Stock-Based Compensation | $150,000 | $200,000 | $789,700 | | Total | $5,921,720 | $5,913,720 | $6,565,966 | - Company anticipates a total cash expenditure budget of approximately $7 million for the next 12 months, with approximately $5 million allocated to R&D and $2 million to general and administrative expenses[538] - Company anticipates additional expenses of approximately $21 million for human clinical development of the shingles skin cream over the two years starting September 1, 2020[539] Management's Plan of Operation This section outlines management's strategic operational plans for the company's drug development and business activities. Current Financial Status This section provides an overview of the company's present financial condition, including cash position and liabilities. Results of Operations This section analyzes the company's financial performance, focusing on revenue, expenses, and net loss. Liquidity and Capital Reserves This section discusses the company's cash position, ability to meet short-term obligations, and capital-raising efforts. Research and Development Costs This section details the expenses incurred for the company's research and development activities. Anticipated Budgets and Expenditures in the Near Future This section outlines the company's projected budgets and expected expenditures for upcoming periods. Off-Balance Sheet Arrangements This section discloses any off-balance sheet arrangements that could impact the company's financial position. Critical Accounting Policies and Estimates This section describes the key accounting policies and estimates that are crucial to the company's financial reporting. Recent Accounting Pronouncements This section discusses recent accounting standards and their potential impact on the company's financial statements. Quantitative and Qualitative Disclosures About Market Risk The company currently does not face market risks related to foreign currency interest rates. - Company does not face market risks related to foreign currency interest rates[560] Financial Statements and Supplementary Data The financial statements and supplementary data required for this report are provided after the signature page. - The financial statements and supplementary data required for this report are provided after the signature page[561] Changes In and Disagreements With Accountants on Accounting and Financial Disclosure There have been no changes or disagreements with accountants regarding accounting and financial disclosures. - There have been no changes or disagreements with accountants regarding accounting and financial disclosures[562] Controls and Procedures Management assessed disclosure controls and internal financial reporting controls as ineffective due to review deficiencies and resource limitations, with remediation plans underway. - As of June 30, 2019, company management assessed its disclosure controls and procedures and internal control over financial reporting as ineffective[565][566] - Key deficiencies include a lack of timely and effective review of 10-K reports, third-party valuation reports, and income taxes, along with insufficient personnel and resources[567] - Company has developed remediation plans, including strengthening financial transaction reviews, engaging external experts for income tax preparation assistance, and forming a financial reporting control committee to oversee internal control improvements[568][569][570] Other Information There is no other information in this report. - There is no other information in this report[573] PART III Directors, Executive Officers, Promoters and Corporate Governance Information for this item will be disclosed by reference to the 2019 Annual Meeting proxy statement or Form 10-K/A, with the company having adopted a formal code of conduct. - Information required for this item will be disclosed by reference to the company's 2019 Annual Meeting of Stockholders' definitive proxy statement or in an amendment to Form 10-K/A[574] - Company has adopted a formal code of business conduct and ethics applicable to all board members, officers, and employees[575] Executive Compensation Information for this item will be disclosed by reference to the 2019 Annual Meeting proxy statement or Form 10-K/A. - Information required for this item will be disclosed by reference to the company's 2019 Annual Meeting of Stockholders' definitive proxy statement or in an amendment to Form 10-K/A[576] Security Ownership of Certain Beneficial Owners, Management, and Related Stockholders Matters Information for this item will be disclosed by reference to the 2019 Annual Meeting proxy statement or Form 10-K/A. - Information required for this item will be disclosed by reference to the company's 2019 Annual Meeting of Stockholders' definitive proxy statement or in an amendment to Form 10-K/A[577] Certain Relationships and Related Transactions and Director Independence Information for this item will be disclosed by reference to the 2019 Annual Meeting proxy statement or Form 10-K/A. - Information required for this item will be disclosed by reference to the company's 2019 Annual Meeting of Stockholders' definitive proxy statement or in an amendment to Form 10-K/A[578] Principal Accountant Fees and Services Information for this item will be disclosed by reference to the 2019 Annual Meeting proxy statement or Form 10-K/A. - Information required for this item will be disclosed by reference to the company's 2019 Annual Meeting of Stockholders' definitive proxy statement or in an amendment to Form 10-K/A[579] PART IV Exhibits, Financial Statement Schedules This section lists all exhibits and financial statement schedules included in the company's Form 10-K report, such as corporate documents, agreements, and XBRL files. - This section lists all exhibits and financial statement schedules included in the company's Form 10-K report, including articles of incorporation, warrants, license agreements, employment agreements, securities purchase agreements, and XBRL files[580][582] Form 10-K Summary There is no Form 10-K summary in this report. - There is no Form 10-K summary in this report[581] Signatures This report has been signed by authorized representatives of NanoViricides, Inc., including Dr. Anil R. Diwan and Meeta Vyas. - This report has been signed by authorized representatives of NanoViricides, Inc., including President and Executive Chairman Dr. Anil R. Diwan and Chief Financial Officer Meeta Vyas[584][585] Index to the Financial Statements Report of Independent Registered Public Accounting Firm EISNERAMPER LLP audited the financial statements, affirming fair presentation under U.S. GAAP, while noting substantial doubt about the company's going concern ability due to continuous losses. - EISNERAMPER LLP issued an audit opinion on the company's financial statements, deeming them fairly presented in all material respects in accordance with U.S. GAAP[590] - The company's continuous operating losses and negative operating cash flows raise substantial doubt about its ability to continue as a going concern[591] Balance Sheets As of June 30, 2019, the company reported $2.55 million in cash, $13.45 million in total assets, $2.85 million in total liabilities, and $10.60 million in stockholders' equity, showing decreases in cash and equity from 2018. Summary of Balance Sheets | Metric | June 30, 2019 | June 30, 2018 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $2,555,207 | $7,081,771 | | Prepaid Expenses | $270,214 | $240,257 | | Property and Equipment, Net | $10,227,247 | $10,841,093 | | Trademarks and Patents, Net | $366,658 | $374,929 | | Other Assets | $29,187 | $8,162 | | Total Assets | $13,448,513 | $18,546,212 | | Accounts Payable | $309,893 | $223,339 | | Amounts Due to Related Parties | $823,783 | $107,468 | | Derivative Liabilities – Warrants | $1,645,606 | $298,092 | | Accrued Expenses | $68,871 | $253,049 | | Total Liabilities | $2,848,153 | $881,948 | | Accumulated Deficit | $(92,116,586) | $(83,692,146) | | Total Stockholders' Equity | $10,600,360 | $17,664,264 | Statements of Operations The company reported no revenue and continuous net losses in fiscal years 2019, 2018, and 2017, with R&D and G&A as primary expenses. Summary of Statements of Operations | Metric | Year Ended June 30, 2019 | Year Ended June 30, 2018 | Year Ended June 30, 2017 | | :--- | :--- | :--- | :--- | | Research and Development Expenses | $5,921,720 | $5,913,720 | $6,565,966 | | General and Administrative Expenses | $2,737,962 | $3,411,449 | $3,034,758 | | Total Operating Expenses | $8,659,682 | $9,325,169 | $9,600,724 | | Operating Loss | $(8,659,682) | $(9,325,169) | $(9,600,724) | | Interest Income | $55,497 | $100,429 | $60,955 | | Convertible Debenture Interest Expense | $0 | $(185,274) | $(780,767) | | Loss on Extinguishment of Debt | $0 | $(1,348,247) | $(332,524) | | Convertible Debenture Discount | $0 | $(359,214) | $(1,347,748) | | Change in Fair Value of Derivatives | $179,745 | $2,554,020 | $1,696,318 | | Other Income (Expense), Net | $235,242 | $761,714 | $(703,766) | | Net Loss | $(8,424,440) | $(8,563,455) | $(10,304,490) | | Net Loss Per Share (Basic and Diluted) | $(0.12) | $(0.13) | $(0.17) | Statement of Changes in Stockholders' Equity Stockholders' equity decreased to $10.60 million by June 30, 2019, primarily due to ongoing net losses, despite some equity issuances for compensation and debt. Summary of Changes in Stockholders' Equity | Metric | Balance June 30, 2016 | Balance June 30, 2017 | Balance June 30, 2018 | Balance June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Series A Preferred Stock (Shares) | 4,091,094 | 4,348,744 | 4,531,394 | 5,114,044 | | Common Stock (Shares) | 58,179,699 | 63,306,774 | 69,171,740 | 76,898,295 | | Additional Paid-in Capital | $87,810,143 | $95,382,977 | $101,282,707 | $102,634,934 | | Accumulated Deficit | $(64,824,201) | $(75,128,691) | $(83,692,146) | $(92,116,586) | | Total Stockholders' Equity | $23,048,214 | $20,321,942 | $17,664,264 | $10,600,360 | Statements of Cash Flows In FY2019, the company experienced net cash outflows from operating and investing activities, partially offset by financing inflows, resulting in a reduced cash balance of $2.55 million. Summary of Statements of Cash Flows | Cash Flow Activity | Year Ended June 30, 2019 | Year Ended June 30, 2018 | Year Ended June 30, 2017 | | :--- | :--- | :--- | :--- | | Net Cash Outflow from Operating Activities | $(6,802,770) | $(7,775,868) | $(7,897,746) | | Net Cash Outflow from Investing Activities | $(73,794) | $(241,822) | $(164,978) | | Net Cash Inflow (Outflow) from Financing Activities | $2,350,000 | $0 | $(1,000,000) | | Ending Cash and Cash Equivalents Balance | $2,555,207 | $7,081,771 | $15,099,461 | Notes to the Financial Statements These notes provide detailed information on the company's organization, going concern, accounting policies, related party transactions, and financial items, highlighting ongoing financial challenges and the need for additional funding. - Company is a nanobiopharmaceutical R&D company focused on developing antiviral nanomedicines, possessing its own design, synthesis, analytical, and cGMP manufacturing facilities[606] - As of June 30, 2019, the company's accumulated deficit was approximately $92.1 million, net loss approximately $8.4 million, and net cash outflow from operating activities approximately $6.8 million, raising substantial doubt about its ability to continue as a going concern[609] - Company has secured extensive exclusive licenses from TheraCour Pharma, Inc., covering various virus types, and is negotiating a license for VZV (shingles, chickenpox virus)[608] R&D Costs Paid to Related Party TheraCour Pharma, Inc. | Year | Amount | | :--- | :--- | | Year Ended June 30, 2019 | $3,119,863 | | Year Ended June 30, 2018 | $3,176,977 | | Year Ended June 30, 2017 | $3,368,919 | - As of June 30, 2019, amounts payable to related party TheraCour Pharma, Inc. totaled $823,783, with $300,000 deferred until after IND submission[504][641] - Company in fiscal year 2019 raised $2,500,000 through a registered direct offering and issued warrants, which were classified as derivative liabilities with a fair value of $1,527,259[703][705][706][708] - As of June 30, 2019, the company recorded a full valuation allowance to offset its deferred tax assets of $34,157,707, as management determined these assets are unlikely to be realized[739] Note 1 – Organization and Nature of Business This note describes the company's corporate structure and its primary business as a nanobiopharmaceutical research and development entity. Note 2 – Liquidity and Going Concern This note addresses the company's liquidity position and the significant doubt regarding its ability to continue as a going concern. Note 3 – Summary of Significant Accounting Policies This note outlines the key accounting principles and methods applied in the preparation of the financial statements. Note 4 – Related Party Transactions This note details transactions and relationships between the company and its related parties. Note 5 – Property and Equipment This note provides a breakdown of the company's property and equipment, including their net book values. Note 6 – Trademark and Patents This note describes the company's intellectual property assets, specifically trademarks and patents. Note 7 – Convertible Debentures and Derivatives This note provides information on the company's convertible debentures and derivative financial instruments. Note 8 – Accrued expenses This note details the company's accrued expenses as of the balance sheet date. Note 9 – Equity Transactions This note describes the various equity-related transactions undertaken by the company. Note 10 – Stock Options and Warrants This note provides information on the company's outstanding stock options and warrants. Note 11 – Fair Value Measurement This note explains the methodologies used for fair value measurements of financial instruments. Note 12 – Income Tax Provision This note details the company's income tax provisions, including deferred tax assets and valuation allowances. Note 13 – Commitments and Contingencies This note discloses the company's commitments and potential contingent liabilities. Note 14 - Subsequent Events This note reports significant events that occurred after the balance sheet date but before the financial statements were issued.