Business Context and Reporting Period
Company: NanoViricides, Inc. (NNVC)
Filing Type: Form 10-Q (Unaudited)
Period Ended: September 30, 2011
Business Stage: Development Stage Company
Operations: The Company is a nano-biopharmaceutical firm focused on discovering and developing therapeutics for viral infections (e.g., Influenza, HIV, Herpes, Dengue). It holds exclusive perpetual licenses from TheraCour Pharma, Inc. for its core technology. The Company has no commercialized products and has not generated revenue since inception.
Key Financial Metrics
| Metric | Three Months Ended Sept 30, 2011 | Three Months Ended Sept 30, 2010 |
|---|---|---|
| Revenues | $0 | $0 |
| Net Loss | $(1,139,976) | $(1,097,491) |
| Operating Expenses | $1,140,428 | $1,111,344 |
| Cash and Cash Equivalents (Ending) | $10,879,319 | $7,677,554 |
| Net Cash Used in Operating Activities | $(676,273) | $(1,448,682) |
| Net Cash Provided by Financing Activities | $2,360,654 | $2,295,000 |
| Total Assets | $12,377,127 | $10,758,067 (June 30, 2011) |
| Accumulated Deficit (Inception to Date) | $(24,356,885) | $(23,216,909) (June 30, 2011) |
Material Changes vs. Prior Period
- Net Loss: Increased slightly by approximately $42,000 compared to the same period in 2010, driven by a modest rise in operating expenses.
- Liquidity: Cash balances increased significantly by $1.66 million during the quarter, primarily due to financing activities. This contrasts with the prior year where cash increased by $0.72 million.
- Financing Activity: The Company raised approximately $2.36 million in the quarter through the issuance of Series B Convertible Preferred Stock to Seaside 88, LP. This was a continuation of a financing agreement initiated in April 2011.
- Related Party Transactions: Accounts payable to related parties increased by $247,433 during the quarter, reflecting ongoing development costs charged by TheraCour Pharma, Inc.
Outlook, Risks, and Management Commentary
- Going Concern: Management states the Company has sufficient capital to continue operations through September 30, 2013, based on current expenditure rates and recent financing. However, substantial additional financing will be required for future periods to fund clinical trials and manufacturing.
- Subsequent Event: On November 2, 2011, the Company entered into an agreement to sell up to 500,000 shares of Series B Preferred Stock to Seaside 88, LP for $10.00 per share. An initial closing of 250,000 shares ($2.5 million) occurred on that date.
- Drug Development: The Company declared a clinical candidate for all Influenza viruses (FluCide) and reported significant efficacy in animal studies for HIV (HIVCide) and Herpes. Management anticipates needing an additional $10M to $15M to take a candidate through human clinical trials.
- Internal Controls: Management identified a material weakness in internal controls over financial reporting due to the lack of independent board members and an Audit Committee chaired by a financial expert.
- Risks: The Company has no revenue and expects to incur losses for the foreseeable future. Success depends on the ability to raise additional capital and achieve regulatory approval for drug candidates.
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the $10.9 million cash balance against the projected $11.25 million in expenses for the next 18 months outlined in the MD&A.
- Dilution Risk: Review the terms of the Series B Convertible Preferred Stock agreements with Seaside 88, LP, specifically the conversion pricing mechanisms (VWAP discounts) which may lead to significant common stock dilution.
- Related Party Dependence: Assess the reliance on TheraCour Pharma, Inc. for manufacturing and development, noting that TheraCour is controlled by the Company's President and owns ~25% of the Company.
- Regulatory Timeline: Evaluate the feasibility of the Company's timeline to file an Investigational New Drug (IND) application, given the lack of prior experience in pharmaceutical drug development.
- Internal Controls: Monitor the Company's progress in appointing independent directors to address the disclosed material weakness in internal controls.