Business Context and Reporting Period
This Form 8-K was filed by NanoViricides, Inc. (NNVC) on November 6, 2019, reporting events occurring on November 1, 2019. The company is incorporated in Nevada and trades on the NYSE-American. The filing primarily addresses the entry into a material definitive agreement regarding the licensing of products for the treatment of Varicella Zoster Virus.
Key Financial Metrics and Agreement Terms
The filing details a new License Agreement with TheraCour Pharma, Inc. Key financial obligations include:
- Upfront Payments: None required.
- Equity Milestone: Issuance of 75,000 shares of Series A Convertible Preferred Stock upon the grant of an IND Application.
- Cash Milestones:
- $1,500,000 upon completion of Phase I Clinical Trials.
- $2,500,000 upon completion of Phase II Clinical Trials.
- $5,000,000 upon completion of Phase III Clinical Trials.
- Royalties: 15% of net sales of licensed products and income from sublicensed products.
- Development Fees: Costs (direct and indirect) plus 30%, payable in periodic installments as billed.
- Deposit: A refundable deposit equal to estimated development costs for two months, reconciled quarterly.
- Penalty Interest: 1% per month on payments not made within 90 days of the due date.
The filing text does not provide current revenue, profit, cash flow, margins, debt, or liquidity figures for the company.
Material Changes
The primary material change is the execution of an exclusive, worldwide license agreement with TheraCour Pharma, Inc. This agreement grants NanoViricides the right to use, promote, sell, and distribute products for Varicella Zoster Virus indications. TheraCour retains exclusive rights to develop and manufacture these products. This agreement supersedes or adds to previous licensing arrangements, specifically regarding the payment of development fees and deposits.
Outlook, Risks, and Contingencies
Management Commentary and Outlook: The agreement establishes a framework for the development and commercialization of Varicella Zoster Virus treatments, contingent upon successful clinical trial phases to trigger cash and equity milestones.
Risks and Contingencies:
- Termination Risk: TheraCour may terminate the license upon a material breach by NanoViricides. NanoViricides has a 90-day cure period to avoid termination.
- Manufacturing Dependency: TheraCour is the exclusive manufacturer, though NanoViricides retains customary backup manufacture rights.
- Financial Contingency: Significant future cash outflows are contingent on the successful completion of clinical trials (Phases I, II, and III).
Investor Verification Checklist
- Verify the status of the IND Application to determine if the 75,000 Series A Convertible Preferred Stock issuance is imminent.
- Review the full text of the License Agreement (Exhibit 10.1) for specific exclusions regarding the 30% development fee markup.
- Assess the company's current cash position against the potential immediate obligation of the two-month development cost deposit.
- Confirm the timeline for Phase I, II, and III clinical trials to estimate future cash milestone liabilities.
- Check for any prior unpaid development fees or deposits under existing agreements with TheraCour that may be due.