Business Context and Reporting Period
Company: NanoViricides, Inc. (NNVC)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: December 31, 2008
Business Stage: Development Stage Company
Operations: The Company is a nano-biopharmaceutical firm focused on discovering and developing therapeutics for viral infections (HIV, Hepatitis, Influenza, Rabies, Ebola, etc.). It holds an exclusive perpetual license from TheraCour Pharma, Inc. for its core technology. The Company has no commercial products or revenues to date.
Key Financial Metrics
| Metric | Six Months Ended Dec 31, 2008 | Six Months Ended Dec 31, 2007 | Inception (May 2005) through Dec 31, 2008 |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Net Loss | $(1,375,255) | $(954,698) | $(10,582,992) |
| Operating Expenses | $1,401,336 | $987,837 | $9,938,144 |
| Cash and Cash Equivalents (Ending) | $1,935,742 | $1,928,572 | $1,935,742 |
| Net Cash Used in Operating Activities | $(1,515,743) | $(1,533,345) | $(8,222,708) |
| Net Cash Provided by Financing Activities | $3,227,554 | $2,500,020 | $10,980,399 |
| Total Assets | $3,140,671 | $1,468,250 (June 30, 2008) | N/A |
| Total Liabilities | $558,636 | $1,024,511 (June 30, 2008) | N/A |
| Stockholders' Equity | $2,582,035 | $443,739 (June 30, 2008) | N/A |
Debt: The Company currently has no long-term debt. It has accounts payable to trade creditors ($303,795) and related parties ($231,356).
Material Changes vs. Prior Period
- Operating Expenses: Increased by approximately 42% for the six-month period ended December 31, 2008 ($1.40M) compared to the same period in 2007 ($987k), driven by higher Research and Development ($832k vs $627k) and General and Administrative costs ($568k vs $526k).
- Liquidity: Cash and cash equivalents increased by $1.12 million during the six months ended December 31, 2008, primarily due to a private placement of common stock and warrants raising approximately $3.23 million in net proceeds.
- Liabilities: Total current liabilities decreased from $1.02 million (June 30, 2008) to $558,636 (December 31, 2008), largely due to the settlement of accrued payroll to officers ($258k reduction) and a reduction in related party payables.
- Assets: Property and equipment increased significantly from $133,738 to $629,116, reflecting capital expenditures for laboratory expansion and equipment.
Guidance, Outlook, Risks, and Contingencies
Going Concern: The filing includes a substantial doubt regarding the Company's ability to continue as a going concern. The Company has incurred significant losses since inception and requires additional financing to sustain operations.
Capital Requirements:
- Current cash ($1.94M) is projected to support operations through approximately September 30, 2009.
- Management estimates a need for an additional $3.0 million to $5.0 million over the next 12 months to fund drug development, capital costs, and staffing.
- Specific budgeted needs include $1.5M for R&D, $1.5M for staffing, $1.25M for capital costs, and $750k for corporate overhead.
Outlook and Strategy:
- The Company plans to pursue co-development agreements with major pharmaceutical companies to generate revenue via upfront payments, milestones, and royalties.
- Key programs include FluCide (Influenza), RabiCide (Rabies), EKCCide (Viral Eye Diseases), and HIVCide (HIV).
- Recent interest from a large pharmaceutical company regarding the viral eye disease candidate is noted, but no agreement has been reached.
Risks and Contingencies:
- Licensing: The Company relies on an exclusive license from TheraCour Pharma, Inc. (a related party). While an amendment to include additional viruses (Dengue, Ebola) is in principle, no written agreement exists yet. Failure to finalize this could impact operations.
- Related Party Transactions: TheraCour, owned by the Company's President, charges development fees and supplies materials. TheraCour has also adopted a Rule 10b5-1 plan to sell up to 1.8 million shares of NanoViricides stock to fund its own facility expansion.
- Internal Controls: Material weaknesses in internal controls regarding timeliness of reporting and segregation of duties were previously identified. Management states steps have been taken to remediate these, including outsourcing financial functions.
Investor Verification Checklist
- Runway Validation: Verify if the Company has secured the projected $3M-$5M in additional financing required to operate past September 2009.
- Licensing Agreement Status: Confirm the status of the written amendment with TheraCour Pharma, Inc. regarding the inclusion of Dengue, Ebola, and other viruses in the license.
- Related Party Dependence: Assess the financial impact of TheraCour's plan to sell 1.8 million shares and the ongoing reliance on TheraCour for manufacturing and materials.
- Internal Control Remediation: Review subsequent filings to confirm the effectiveness of remediation efforts for previously disclosed material weaknesses in internal controls.
- Partnership Progress: Monitor for any formalized co-development or licensing agreements with major pharmaceutical companies, particularly regarding the viral eye disease and HIV candidates.