NanoViricides(NNVC) - 2021 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements The company reported a net loss of $2.31 million for the three months ended September 30, 2020, an increase from the $1.56 million loss in the same period of 2019. Total assets grew to $31.85 million from $23.91 million at June 30, 2020, primarily due to a significant increase in cash and cash equivalents to $21.79 million, bolstered by a $10.4 million net proceed from an equity offering. The company remains in the development stage with no revenue Balance Sheets Balance Sheet Summary (Unaudited) | Account | September 30, 2020 | June 30, 2020 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $21,791,822 | $13,708,594 | | Total current assets | $22,024,628 | $13,985,657 | | Total Assets | $31,848,180 | $23,914,339 | | Current Liabilities | | | | Mortgage note payable – related party | $1,091,812 | $1,081,987 | | Total current liabilities | $1,865,901 | $2,156,377 | | Total Stockholders' Equity | $29,982,279 | $21,757,962 | - Total assets increased by approximately $7.9 million from June 30, 2020, to September 30, 2020, primarily driven by an increase in cash and cash equivalents resulting from financing activities[9] Statements of Operations Statements of Operations Summary (Unaudited) | Account | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Research and development | $1,573,071 | $1,482,405 | | General and administrative | $697,312 | $505,472 | | Total operating expenses | $2,270,383 | $1,987,877 | | Loss from operations | ($2,270,383) | ($1,987,877) | | Net Loss | ($2,311,233) | ($1,561,133) | | Net loss per common share | ($0.22) | ($0.41) | - The net loss for the quarter increased year-over-year, driven by higher operating expenses in both R&D and G&A, and the absence of a gain from the change in fair value of derivative liability that was present in the prior year's quarter[11] Statements of Changes in Stockholders' Equity - Stockholders' equity increased from $21.76 million at June 30, 2020, to $29.98 million at September 30, 2020. This was primarily due to net proceeds of approximately $10.44 million from the issuance of common stock, offset by a net loss of $2.31 million for the quarter[13] Statements of Cash Flows Cash Flow Summary (Unaudited) | Activity | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,235,945) | ($1,434,010) | | Net cash used in investing activities | ($34,985) | ($4,139) | | Net cash provided by (used in) financing activities | $10,354,158 | ($242,105) | | Net change in cash | $8,083,228 | ($1,680,254) | | Cash at end of period | $21,791,822 | $874,953 | - The company's cash position significantly improved due to $10.35 million in net cash from financing activities, primarily from an issuance of common stock and warrants, which more than offset the $2.24 million cash used in operations[17] Notes to the Financial Statements - The company is a development-stage biopharmaceutical firm with no revenue and an accumulated deficit of approximately $107.9 million as of September 30, 2020. Management believes existing cash of $21.8 million is sufficient to fund operations through November 2021[23][30] - In July 2020, the company raised approximately $10.4 million in net proceeds from an underwritten public offering of common stock. It also entered into an At-The-Market (ATM) offering agreement to sell up to $50 million in common stock[25][26] - The company has exclusive, worldwide licenses from TheraCour Pharma, Inc. for its nanomedicine technology to combat various viral diseases, including a recent MOU for human coronavirus infections. Milestone payments and royalties are due to TheraCour upon commercialization and development progress[22][64] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses its position as a development-stage company with no revenue, focusing on its antiviral drug pipeline. Key developments include nominating a clinical candidate for COVID-19 and advancing it towards an IND filing, with safety pharmacology studies underway. The lead HerpeCide™ program candidate, NV-HHV-101 for shingles, has completed pre-clinical studies. The company's financial condition was strengthened by an $11.5 million gross proceeds offering in July 2020, providing sufficient cash for over two years of operations at the current burn rate. R&D and G&A expenses increased year-over-year, leading to a higher net loss for the quarter Business Overview and Drug Programs - The company is a development-stage biopharma firm with no products or revenue, focusing on pre-clinical drug candidates for various viral infections including influenza, HIV, herpes viruses, and dengue[71][72] - The core technology is a 'bind-encapsulate-destroy' platform that creates biomimetic nanoviricides designed to attack viruses at multiple points, making it difficult for viruses to develop resistance through mutation[77][78] - The company possesses its own cGMP-compliant manufacturing facility, enabling rapid production of drug candidates for clinical trials, which is a significant strategic advantage[75][91] COVID-19 Program Developments - A clinical drug candidate for COVID-19 was nominated on September 15, 2020, and is moving rapidly towards an IND filing to enable human clinical trials[83][86] - The drug candidates have shown broad-spectrum anti-coronavirus activity in cell culture and strong effectiveness in animal models against h-CoV-NL63, a coronavirus that uses the same ACE2 receptor as SARS-CoV-2[83][109][110] - The company is developing a potential cure by encapsulating remdesivir within its nanoviricide, aiming to simultaneously block viral reinfection and intracellular replication while protecting remdesivir from rapid metabolism[124][125] HerpeCide™ Program (NV-HHV-101 for Shingles) - The lead candidate, NV-HHV-101, is a skin cream for shingles rash that has completed IND-enabling pre-clinical studies and has shown strong effectiveness in human skin models, being up to five times more effective than acyclovir in cell culture studies[73][128] - The company manufactured the API and the formulated drug product at its own facility at a ~1kg scale, saving significant time and money compared to using a contract manufacturer[135] - The market for an effective shingles therapy is estimated to be several billion dollars, particularly if it can reduce the incidence of post-herpetic-neuralgia (PHN)[129][134] Results of Operations Analysis Comparison of Operating Expenses | Expense Category | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Research and Development | $1,573,071 | $1,482,405 | | General and Administration | $697,312 | $505,472 | - R&D expenses increased by $90,666 due to higher costs for laboratory supplies, materials, and maintenance[248] - G&A expenses increased by $191,840 primarily due to a rise in professional fees and general operating costs[249] - The net loss increased to $2.31 million from $1.56 million in the prior-year period, mainly due to higher operating expenses and a $421,527 decrease in income from the change in fair value of derivative liabilities[254] Liquidity and Capital Resources - As of September 30, 2020, the company had cash and cash equivalents of $21.79 million[255] - Management believes existing resources are sufficient to fund planned operations for at least the next twelve months, including initial human clinical trials for its SARS-CoV-2 drug candidate[239][255] - The company will need to raise additional capital to fund long-term operations and further clinical trials for its drug pipeline[239][257] Quantitative and Qualitative Disclosures About Market Risk The company states that its primary market risk is non-material interest rate risk associated with its short-term cash equivalent investments. It has no foreign operations, is not exposed to foreign currency fluctuations, and does not use derivative financial instruments for speculative purposes - The company's primary market risk exposure is interest rate risk on its cash equivalents, which is considered non-material[262] - The company has no foreign operations and therefore no exposure to foreign currency exchange rate fluctuations[262] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were not effective as of September 30, 2020. This was due to a previously disclosed material weakness in internal control over financial reporting, which remains unremediated. A remediation plan is in place, involving a financial reporting controls committee to provide oversight and address the weakness - Management concluded that disclosure controls and procedures were not effective as of September 30, 2020[264] - The ineffectiveness is due to a material weakness in internal control over financial reporting identified in the Form 10-K for the fiscal year ended June 30, 2020, which has not yet been remediated[264] - A remediation plan has been established, including a financial reporting controls committee with members from senior management and the Audit Committee to provide oversight[266] PART II OTHER INFORMATION Legal Proceedings The company reports that there are no pending legal proceedings against it, and to its knowledge, no action, suit, or proceeding has been threatened - There are no pending or threatened legal proceedings against the Company as of the reporting date[270] Unregistered Sales of Equity Securities and Use of Proceeds During the quarter, the company issued unregistered securities for services and compensation. This included 387 shares of Series A preferred stock for employee compensation, warrants to purchase 572 shares of common stock for the Scientific Advisory Board, 5,135 shares of common stock for consulting services, and 2,040 shares of common stock for Director services. The company relied on the exemption from registration under Section 4(a)(2) of the Securities Act - Issued 387 shares of Series A preferred stock for employee compensation[271] - Granted warrants to purchase 572 shares of common stock to the Scientific Advisory Board[273] - Issued 5,135 shares of common stock for consulting services and 2,040 shares for Director services[273][274] Defaults Upon Senior Securities None - None[277] Mine Safety Disclosures Not applicable - Not applicable[278] Other Information None - None[279] Exhibits This section lists the exhibits filed with the report, including CEO and CFO certifications (Rule 13(a)-14(a)/15(d)-14(a) and Section 1350) and XBRL data files - Lists required certifications from the CEO and CFO, as well as XBRL instance and taxonomy documents[280]