Business Context and Reporting Period
Company: NanoViricides, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: February 18, 2015
Context: The Company is issuing a non-reliance notice regarding previously issued financial statements due to accounting errors identified during the preparation of the Form 10-Q for the quarter ended December 31, 2014.
Key Financial Metrics
This filing does not provide specific revenue, profit, cash flow, margin, debt, or liquidity figures. The report focuses exclusively on the identification of accounting errors and the requirement to restate prior financial statements.
Material Changes and Restatements
The Company identified material errors in the accounting treatment of derivative liabilities, necessitating the restatement of the following periods:
- Year ended June 30, 2014: Audited financial statements (Form 10-K).
- Three months ended September 30, 2014 and 2013: Unaudited financial statements (Form 10-Q).
Causes of Restatement:
- Warrant Anti-Dilution Provisions: The Company inadvertently overlooked anti-dilution ratchet provisions in warrants issued during registered direct offerings. These provisions required the warrants to be classified as derivative liabilities rather than equity, resulting in a material understatement of liabilities for the year ended June 30, 2014.
- Series C Convertible Debenture: A contingent embedded derivative was identified in the redemption provision of the Series C Convertible Debenture issued on July 2, 2014. This resulted in a material understatement of derivative liability for the period ended September 30, 2014.
Management Commentary, Risks, and Contingencies
Accounting Firm Changes:
- Li and Company: The former independent registered public accounting firm has been engaged to re-audit the restated financial statements for the year ended June 30, 2014, and to review the unaudited statements for the three months ended September 30, 2014.
- Eisner Amper LLP: Appointed as the independent registered public accounting firm effective December 2, 2014. The Company has discussed the matter with this firm.
Non-Reliance Notice: Investors are explicitly advised not to rely on the previously released financial statements included in the Form 10-K for the year ended June 30, 2014, or the Form 10-Q for the periods ended September 30, 2014 and 2013.
Investor Verification Checklist
- Verify the magnitude of the restated derivative liabilities once the re-audit by Li and Company is complete.
- Review the upcoming restated Form 10-K and Form 10-Q filings for corrected balance sheet and income statement figures.
- Confirm the impact of the reclassification on the Company's reported net income and equity for the affected periods.
- Monitor communications regarding the transition between Li and Company and Eisner Amper LLP.