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NANOVIRICIDES, INC. - Quarter Report: 2012 March (Form 10-Q)

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended March 31, 2012

 

Commission File Number: 333-148471

 

NANOVIRICIDES, INC.

 

(Exact name of Company as specified in its charter)

 

NEVADA   76-0674577
(State or other jurisdiction)   (IRS Employer Identification No.)
of incorporation or organization)    

 

135 Wood Street, Suite 205

West Haven, Connecticut 06516

(Address of principal executive offices and zip code)

 

(203) 937-6137

( Company’s telephone number, including area code)

 

Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   x   No   ¨

 

Indicate by check mark whether the Company has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Company was required to submit and post such files). Yes x   No ¨

 

Indicate by check mark whether the Company is a larger accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer x Smaller reporting company ¨   

 

Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨    No x

 

The number of shares outstanding of the Company's Common Stock as of May 17, 2012 was: 155,285,345.

 

 
 

 

NanoViricides, Inc.

FORM 10-Q

INDEX

 

PART I FINANCIAL INFORMATION  
   
Item 1. Financial Statements  
   
Balance Sheets at March 31, 2012 (Unaudited) and June 30, 2011 3
   
Statements of Operations for the Three Months and Nine Months Ended March 31, 2012 and 2011 and for the Period from May 12, 2005 (Inception) through March 31, 2012 (Unaudited) 4
   
Statements of Cash Flows for the Nine Months Ended March 31, 2012 and 2011 and for the Period from May 12, 2005 (Inception) through March 31, 2012 (Unaudited) 5
   
Statement of Stockholders’ Equity   7
   
Notes to the Financial Statements (Unaudited) 8
   
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations 15
   
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 26
   
Item 4.   Controls and Procedures 26
   
PART II OTHER INFORMATION  
   
Item 1.   Legal Proceedings 28
   
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds 28
   
Item 3.   Defaults Upon Senior Securities 29
   
Item 4.   Mine Safety Disclosures 29
   
Item 5.   Other Information 29
   
Item 6.   Exhibits and Reports on Form 8-K 29
   
Signatures 30
   
Certifications  
     

2
 

 

NANOVIRICIDES, INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

 

   March 31, 
2012 
(Unaudited)
   June 30,  2011 
ASSETS          
CURRENT ASSETS:          
Cash and cash equivalents  $12,984,397   $9,224,023 
Prepaid expenses   295,749    332,294 
Total current assets   13,280,146    9,556,317 
Property and equipment, net   667,561    802,367 
Trademark, net   428,001    399,383 
TOTAL ASSETS  $14,375,708   $10,758,067 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
CURRENT LIABILITIES:          
Accounts payable  $209,016   $79,529 
Accounts payable – related parties   384,929    462,955 
Accrued expenses   50,987    27,173 
Derivative liability   159,138    17,519 
TOTAL CURRENT LIABILITIES   804,070    587,176 
COMMITMENTS AND CONTINGENCIES          
STOCKHOLDERS’ EQUITY          
Series A Convertible Preferred stock, $0.001 par value, 10,000,000 shares designated, 8,811,250 and 8,217,500 shares issued and outstanding, respectively   8,811    8,218 
Series B Convertible Preferred stock, $0.001 par value, 10,000,000 shares designated, 90,000 and 10,000 shares issued and outstanding, respectively   90    10 
Common stock, $0.001 par value; 300,000,000 shares authorized; 153,630,000 and 143,548,394 shares issued and outstanding, respectively   153,662    143,582 
Additional paid-in capital   41,189,132    33,235,990 
Deficit accumulated during the development stage   (27,780,057)   (23,216,909)
TOTAL STOCKHOLDERS’ EQUITY   13,571,638    10,170,891 
 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $14,375,708   $10,758,067 

 

See accompanying notes to the financial statements.

 

3
 

 

NANOVIRICIDES, INC.

 (A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

(Unaudited)

  

   Three Months Ended
March 31,
   Nine Months Ended 
March 31,
   Period from
May 12,
2005
(Inception)
through
March 31,
 
   2012   2011   2012   2011   2012 
Revenues  $   $   $   $   $ 
Operating expenses:                         
Research and development   1,582,705    1,652,309    3,252,745    3,524,784    17,497,963 
Refund credit research and development costs       42,265        42,265    (420,842)
General and administrative   494,080    863,083    1,281,755    1,600,867    10,183,317 
Total operating expenses   2,076,785    2,557,657    4,534,500    5,167,916    27,260,438 
Loss from operations   (2,076,785)   (2,557,657)   (4,534,500)   (5,167,916)   (27,260,438)
                          
Other income (expense):                         
Interest income   30,801    882    40,283    6,572    205,607 
Non cash interest on convertible debentures                   (73,930)
Non cash interest expense on beneficial conversion of convertible debentures                   (713,079)
Change in fair market value of derivative liability   14,131    10,088    (68,931)   (58,200)   61,783 
Total other income (expense)   44,932    10,970    (28,648)   (51,628)   (519,619)
                          
Loss before income taxes   (2,031,853)   (2,546,687)   (4,563,148)   (5,219,544)   (27,780,057)
Income tax provision                    
                          
Net loss  $(2,031,853)  $(2,546,687)  $(4,563,148)  $(5,219,544)  $(27,780,057)
                          
Net loss per common share: - basic and diluted  $(0.013)  $(0.02)  $(0.031)  $(0.04)     
                          
Weighted average common shares outstanding: - basic and diluted   151,556,920    140,222,753    147,890,395    137,995,662      

 

See accompanying notes to the financial statements.

 

4
 

 

NANOVIRICIDES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Nine months Ended   For the
Period 
From 
May 12,
2005
(Inception)
Through
March 31,
 
   March 31, 2012   March 31, 2011   2012 
CASH FLOWS FROM OPERATING ACTIVITIES:               
Net loss  $(4,563,148)  $(5,219,544)   (27,780,057)
Adjustments to reconcile net loss to net cash used in operating activities:               
Preferred shares issued for license           7,000 
Preferred shares issued as compensation   634,408    1,418,565    1,854,738 
Common shares and warrants issued for services   235,875    429,250    3,379,369 
Warrants granted to scientific advisory board   163,800    154,800    1,017,841 
Amortization of deferred compensation           121,424 
Depreciation and amortization   164,739    157,880    804,107 
Change in fair value of derivative liability   (68,961)   58,200    (199,675)
Amortization of deferred financing expenses           51,175 
Non cash interest on convertible debentures           73,930 
Non cash interest expense on beneficial conversion feature of convertible debentures           713,079 
Changes in operating assets and liabilities:               
Prepaid expenses   36,545    (15,070)   (287,749)
Other current assets       42,265    (8,001)
Deferred expenses           (2,175)
Accounts payable   129,487    198,217    553,396 
Accounts payable  – related parties   (78,026)   (754,015)   384,929 
Accrued expenses   23,814    (114,209)   50,987 
Accrued payroll to officers and related payroll tax expense       (22,917)    
Net cash used in operating activities   (3,321,467)   (3,666,578)   (19,265,649)
CASH FLOWS FROM INVESTING ACTIVITIES:               
Purchases of property and equipment   (23,352)   (131,107)   (1,440,717)
Trademark and Patent costs   (35,199)   (39,657)   (458,954)
Net cash used in investing activities   (58,552)   (170,764)   (1,899,671)
CASH FLOWS FROM FINANCING ACTIVITIES:               
Proceeds from issuance of Series B convertible Preferred Stock   7,140,362    4,595,000    19,600,362 
Proceeds from issuance of common stock  in connection with the private placement of common stock, net of issuing cost           11,296,748 
Proceeds from exercise of stock options           90,000 
Proceeds from exercise of warrants attached to convertible debentures       50,000    3,162,590 
Stock subscription received           20 
Net cash provided by financing activities   7,140,362    4,645,000    34,149,718 
NET INCREASE IN CASH AND CASH EQUIVALENTS   3,760,374    807,658    12,984,397 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   9,224,023    6,955,733     
CASH AND CASH EQUIVALENT, ENDING OF PERIOD  $12,984,397   $7,763,391   $12,984,397 
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:               
INTEREST PAID  $   $   $ 
INCOME TAX PAID  $   $   $3,017 

 

See accompanying notes to the financial statements.

 

5
 

 

NANOVIRICIDES, INC.

 (A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

 

   Nine months ended 
March 31,
   For the
Period From
May 12,
2005 
(Inception)
through
March 31,
 
   2012   2011   2012 
NON-CASH FINANCING AND INVESTING ACTIVITIES               
Common stock issued for services  $54,000   $429,250   $11,796,929 
Preferred Stock Issued as compensation       1,418,565    2,638,915 
Stock options issued to the officers as compensation           121,424 
Stock warrants granted to scientific advisory board   163,800    154,800    1,074,241 
Stock warrants granted to brokers           3,563 
Common stock issued for interest on debentures           73,930 
Shares of common stock issued in connection with debenture offering           49,000 
Common stock issued upon conversion of convertible debentures           1,000,000 
Common Stock issued for conversion of Series B Preferred Stock   6,275,327        18,675,327 
Common Stock issued for dividends on Series B Preferred Stock   69,425    77,481    225,418 
Debt discount related to beneficial conversion feature of convertible debt           713,079 
Stock Warrants Issued in connection with Private Placement           7,681,578 
Common stock issued for accounts payable           175,020 
Common stock issued for equipment           137,500 

 

See accompanying notes to the financial statements.

 

6
 

  

NanoViricides, Inc.

(A Development Stage Company)

Statement of Stockholders' Equity

For the period from May 12, 2005 (inception) through September 30, 2011

(Unaudited)

 

                                   Deficit     
                                   Accumulated     
   Series A Preferred Stock: Par $0.001   Series B Preferred Stock: Par $0.001   Common Stock: Par $0.001   Additional   Stock   During the   Total 
   Number of       Number of       Number of       Paid-in   Subscription   Development   Stockholders' 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Receivable   Stage   Equity 
                                         
Common shares issued May 12, 2005 (Inception)                       20,000   $20   $-   $(20)  $    $- 
Share exchange with Edot-com.com Inc., June 1, 2005                       (20,000)   (20)   -    20         - 
Common shares exchanged in reverse acquisition of Edot-com.com Inc., June 1, 2005                       80,000,000    80,000    (79,980)   (20)        - 
Common shares outstanding Edot-com.com Inc., June 1, 2005                       20,000,000    20,000    (20,000)             - 
Options granted in connection with reverse acquisition                                                - 
                                                 - 
Net loss                                           (66,005)   (66,005)
                                                   
Balance, June 30, 2005                       100,000,000    100,000    (99,980)   (20)   (66,005)   (66,005)
                                                   
Discount related to beneficial conversion feature of Convertible debentures, July 13, 2005                                 5,277              5,277 
Legal expenses related private placement of common stock, July 31, 2006                                 (2,175)             (2,175)
Discount related to beneficial conversion feature of Convertible debentures, July 31, 2005                                 5,302              5,302 
Warrants issued to Scientific Advisory Board, August 15, 2005                                 4,094              4,094 
                                                   
Options issued to officers, September 23, 2005                                 87,318              87,318 
Common shares issued for consulting services valued at $.081 per share, September 30, 2005                       2,300,000    2,300    184,000              186,300 
Common shares issued for interest on debentures, September 30, 2005                       48,177    48    4,267              4,315 
Discount related to beneficial conversion feature of Convertible debentures, October 28, 2005                                 166,666              166,666 
Discount related to beneficial conversion feature of Convertible debentures, November 9, 2005                                 166,667              166,667 
Discount related to beneficial conversion feature of Convertible debentures, November 10, 2005                                 45,000              45,000 
Discount related to beneficial conversion feature of Convertible debentures, November 11, 2005                                 275,000              275,000 
Discount related to beneficial conversion feature of Convertible debentures, November 15, 2005                                 49,167              49,167 
Warrants issued to Scientific Advisory Board, November 15, 2005                                 25,876              25,876 
Common shares and warrants issued in connection with private placement of common stock, November 28, 2005                       340,000    340    169,660              170,000 
Common shares and warrants issued in connection with private placement of common stock, November 29, 2005                       300,000    300    149,700              150,000 
Common shares and warrants issued in connection with private placement of common stock, November 30, 2005                       150,000    150    74,850              75,000 
Common shares and warrants issued in connection with private placement of common stock, December 2, 2005                       100,000    100    49,900              50,000 
Common shares and warrants issued in connection with private placement of common stock, December 6, 2005                       850,000    850    424,150              425,000 
Common shares issued for legal services valued at $.95 per share, December 6, 2005                       20,000    20    18,980              19,000 
Common shares and warrants issued in connection with private placement of common stock, December 12, 2005                       750,000    750    374,250              375,000 
Common shares and warrants issued in connection with private placement of common stock, December 13, 2005                       50,000    50    24,950              25,000 
Common shares and warrants issued in connection with private placement of common stock, December 14, 2005                       50,000    50    24,950              25,000 
Common shares issued in connection with debenture offering, December 15, 2005                       50,000    50    48,950              49,000 
Common shares and warrants issued in connection with private placement of common stock, December 20, 2005                       50,000    50    24,950              25,000 
Common shares and warrants issued in connection with private placement of common stock, December 29, 2005                       50,000    50    24,950              25,000 
Common shares and warrants issued in connection with private placement of common stock, December 30, 2005.                       50,000    50    24,950              25,000 
Common shares issued for interest on debentures, December 31, 2005                       19,476    20    17,320              17,340 
Common shares issued for consulting services valued at $1.46 per share, January 9, 2006                       3,425    3    4,998              5,001 
Warrants issued to Scientific Advisory Board, February 15, 2006                                 49,067              49,067 
Warrnats issued to Scientific Advisory Board, May 15, 2006                                 51,048              51,048 
Common shares issued for interest on debentures, March 31, 2005                       7,921    8    22,184              22,192 
                                                   
Options exercised, May 31, 2006                       1,800,000    1,800    88,200              90,000 
Common shares and warrants issued in connection with private placement of common stock, June 15, 2006                       1,875,000    1,875    1,873,125              1,875,000 
Common shares issued for interest on debentures, June 30, 2006                       14,426    14    22,424              22,438 
                                                   
Net loss                                           (3,284,432)   (3,284,432)
                                                   
Balance, June 30, 2006                       108,878,425    108,878    4,480,035    (20)   (3,350,437)   1,238,456 
                                                   
Common shares issued for interest on debentures, July 31, 2006                       5,744    6    7,638              7,644 
Common shares issued for conversion of convertible debentures, July 31, 2006                       3,333,333    3,333    996,667              1,000,000 
                                                   
Exercise of stock warrants, July 31, 2006                       200,000    200    49,800              50,000 
Options issued to Scientific Advisory Board, August 15, 2006                                 30,184              30,184 
Options issued to Scientific Advisory Board, November 15, 2006                                 25,888              25,888 
Common shares issued for consulting services valued at $.76 per share, January 3, 2007                       216,000    216    163,944              164,160 
Options issued to Scientific Advisory Board, February 15, 2007                                 32,668              32,668 
                                                   
Options issued to Scientific Advisory Board, May 15, 2007                                 25,664              25,664 
Common shares issued for consulting services valued at $1.03 per share, June 12, 2007                       752    1    774              775 
Common shares issued for consulting services valued at $1.15 per share, June 20, 2007                       100,000    100    114,900              115,000 
Common shares issued upon warrants conversion, June 20, 2007                       930,000    930    619,070              620,000 
Common shares issued upon warrants conversion, June 25, 2007                       75,000    75    49,925              50,000 
Common shares issued upon warrants conversion, June 30, 2007                       300,000    300    199,700              200,000 
Common shares issued for consulting services valued at $1.06 per share, June 30, 2007                       29,890    30    31,770              31,800 
                                                   
Officers' compensation expense                                 27,062              27,062 
                                                   
Net loss                                           (3,118,963)   (3,118,963)
                                                   
Balance, June 30, 2007            $         114,069,144    114,069   $6,855,689   $(20)   (6,469,400)  $500,338 
                                                   
Warrants issued to Scientific Advisory Board, August 15, 2007                                 14,800              14,800 
Common shares and warrants issued in connection with private placement of common stock, September 21, 2007                       1,500,000    1,500    748,500              750,000 
Common shares issued for consulting and legal  services valued at $.75 per share, September 30,  2007                       25,244    25    18,375              18,400 
Common shares and warrants issued in connection with private placement of common stock, October 16,  2007                       3,250,000    3,250    1,621,750              1,625,000 
Common shares and warrants issued in connection with private placement of common stock, October 16, 2007                       250,000    250    124,750              125,000 
Collection of stock subscriptions receivable, October 17, 2007                                      20         20 
Warrants issued to Scientific Advisory Board, November 15, 2007                                 7,200              7,200 
Common shares issued for consulting and legal services valued at $.49 per share, December 31, 2007                       57,152    57    26,843              26,900 
                                                   
Options issued to officers, January 1, 2008                                 7,044              7,044 
Warrants issued to Scientific Advisory Board, February 15, 2008                                 8,500              8,500 
Common shares issued for consulting and legal services valued at $ .45 per share,March 31, 2008                       61,546    62    27,838              27,900 
Common shares issued for consulting services valued at $.39 per share, April , 2008                       27,750    28    10,793              10,821 
Warrants issued to Scientific Advisory Board, May 15, 2008                                 32,253              32,253 
Common shares issued for consulting services valued at $1.03 per share, June 30, 2008                       29,841    30    27,870              27,900 
                                                   
Net loss                                           (2,738,337)   (2,738,337)
                                                   
Balance, June 30, 2008   -    -    -    -    119,270,677   $119,271   $9,532,205   $-   $(9,207,737)  $443,739 
                                                   
Common shares issued for consulting and legal services valued at $ 1.22 per share, July 31, 2008                       4,098    4    4,996              5,000 
Common shares issued for consulting services valued at $1.22 per share, July , 2008                       2,295    2    2,798              2,800 
Warrants issued to Scientific Advisory Board, August 15, 2008                                 47,500              47,500 
Common shares and warrants issued in connection with private placement of common stock, August 22, 2008                       3,136,000    3,136    3,132,864              3,136,000 
Common shares issued to settle account payable                       150,000    150    149,850              150,000 
                                                   
Payment of Finder's Fee to Biotech                                 (14,696)             (14,696)
Common shares issued in connection with Warrant Conversion, August 22, 2008                       125,000    125    106,125              106,250 
Common shares issued for  legal services valued at $1.24per share, August 31, 2008                       4,032    4    4,996              5,000 
Common shares issued for consulting services valued at $1.24 per share, August,  2008                       2,258    2    2,798              2,800 
Common shares issued for  legal services valued at $1.00 per share, September 30, 2008                       5,000    5    4,995              5,000 
Common shares issued for consulting services valued at $1.00 per share, September 30, 2008                       5,600    6    5,594              5,600 
Common shares issued for consulting and legal services valued at $ .71 per share, October 31, 2008                       7,042    7    4,993              5,000 
Common shares issued for consulting services valued at $.71 per share, October 31, 2008                       7,887    8    5,592              5,600 
Warrants issued to Scientific Advisory Board, November 15, 2008                                 30,500              30,500 
Common shares issued for consulting and legal services valued at $ .67 per share, November 30, 2008                       7,463    7    4,993              5,000 
Common shares issued for consulting services valued at $.67 per share, November 30, 2008                       8,358    8    5,592              5,600 
Common shares issued for consulting and legal services valued at $ .83 per share, December 31, 2008                       6,024    6    4,994              5,000 
Common shares issued for consulting services valued at $.83 per share, December 31 , 2008                       6,747    7    5,593              5,600 
Common shares issued for legal services valued at $ .60 per share, January 20, 2009                       8,333    8    4,992              5,000 
Common shares issued for consulting and legal services valued at $ .78 per share, January 31, 2009                       7,463    7    4,992              4,999 
Common shares issued for consulting services valued at $.78 per share, January 31, 2009                       8,358    8    5,592              5,600 
Common shares issued for consulting services valued at $ .70 per share, February 1, 2009                       50,000    50    34,950              35,000 
Warrants issued to Scientific Advisory Board, February 15, 2009                                 29,000              29,000 
Common shares issued for consulting and legal services valued at $ .71 per share, February 28, 2009                       7,042    7    4,992              4,999 
Common shares issued for consulting services valued at $.71 per share, February 15, 2009                       7,887    8    5,592              5,600 
Common shares issued for consulting and legal services valued at $ .67 per share, March 31, 2009                       6,410    6    4,994              5,000 
Common shares issued for consulting services valued at $.67 per share, March 31 , 2009                       7,179    7    5,593              5,600 
Common shares issued to acquire equipment valued at $0.79 per share                       172,500    173    137,327              137,500 
Common shares issued for consulting and legal services valued at $0.69 per share, April 30, 2009                       7,205    7    4,993              5,000 
Common shares issued for consulting services valued at $.69 per share, April 30, 2009                       8,069    8    5,592              5,600 
Warrants issued to Scientific Advisory Board, May 15, 2009                                 30,600              30,600 
Common shares issued for consulting and legal services valued at $ .66 per share, May 31, 2009                       7,599    8    4,992              5,000 
Common shares issued for consulting services valued at $.66 per share, May 31, 2009                       8,511    9    5,590              5,599 
Common shares issued for consulting services valued at $ .61 per share, June 30, 2009                       24,721    25    14,975              15,000 
Common shares issued for consulting and legal services valued at $ .56 per share, June 30, 2009                       8,961    9    4,991              5,000 
Shares issued for consulting services valued at $.56 per share, June 30, 2009                       10,038    10    5,590              5,600 
Common shares and warrants issued in connection with private placement of common stock, June 30, 2009                       150,000    150    74,850              75,000 
Common shares and warrants issued in connection with warrant conversion, June 30, 2009                       2,050,700    2,051    1,023,299    (100,000)        925,350 
                                                   
Net loss                                           (2,787,798)   (2,787,798)
                                                   
Balance, June 30, 2009   -    -    -    -    125,299,457    125,299    14,455,778    (100,000)   (11,995,535)   2,485,542 
                                                   
Collection of stock subscription receivable                                      100,000         100,000 
Common shares issued for consulting and legal services valued at $ .66 per share, July 31, 2009                       7,576    8    4,992              5,000 
Common shares issued for consulting services valued at $.66 per share, July 31, 2009                       8,485    8    5,592              5,600 
Warrants issued to Scientific Advisory Board, August 15, 2009                                 41,400              41,400 
Common shares issued for consulting and legal services valued at $ .86 per share, August 31, 2009                       6,512    7    4,993              5,000 
Common shares issued for consulting services valued at $.86 per share, August 31, 2009                       5,814    6    5,594              5,600 
Common shares issued for consulting services valued at $ .89 per share, September 30, 2009                       6,292    6    5,594              5,600 
Common shares issued for consulting and legal services valued at $ .89 per share, September 30, 2009                       5,618    6    4,994              5,000 
                                                   
Payment of Finder's Fee                                 (5,250)             (5,250)
Common shares and warrants issued in connection with private placement of common stock, September 30, 2009                       2,675,000    2,675    1,334,825              1,337,500 
Common shares and warrants issued in connection with warrant conversion, September 30, 2009                       3,759,800    3,760    1,876,140              1,879,900 
Common shares issued for consulting and legal services valued at $ .57 per share, October 1, 2009                       35,088    35    19,965              20,000 
Common shares issued for Legal services valued at $56.50 per share, October 26, 2009                       12,500    13    7,050              7,063 
                                                   
Warrants issued for commissions, October 26, 2009                                 3,570              3,570 
Common shares issued for consulting and legal services valued at $ .73 per share, October 31, 2009                       6,859    7    4,993              5,000 
Common shares issued for consulting services valued at $.73 per share, October 31, 2009                       7,682    8    5,592              5,600 
Common shares issued upon conversion of Warrants, November 10, 2009                       10,000    10    1,430              1,440 
Warrants issued to Scientific Advisory Board, November 15, 2009                                 39,600              39,600 
Common shares issued in payment of accounts payable, November 25, 2009                       32,500    33    25,167              25,200 
Common shares issued for consulting and legal services valued at $ .86 per share, November 30, 2009                       5,814    6    4,994              5,000 
Common shares issued for consulting services valued at $.86 per share, November 30, 2009                       9,767    10    8,390              8,400 
Common shares issued for consulting services valued at $ .85 per share, December 31, 2009                       9,917    10    8,390              8,400 
Common shares issued for consulting and legal services valued at $ .85 per share, December 31, 2009                       5,903    6    4,994              5,000 
Common shares issued for consulting and legal services valued at $1.043 per share, January 31, 2010                       4,794    5    4,995              5,000 
Warrants issued to Scientific Advisory Board, February 15, 2010                                 40,200              40,200 
Series A Preferred Shares issued for TheraCour license valued at $.001 par value, February 15, 2010   7,000,000    7,000                                       7,000 
Common shares issued for consulting services valued at $1.096 per share, February 28, 2010                       4,562    5    4,995              5,000 
Common shares issued for employee stock compensation valued at $1.25 per share, March 3, 2010                       125,000    125    156,125              156,250 
Common shares issued for employee stock compensation valued at $1.25 per share, March 3, 2010                       125,000    125    156,125              156,250 
Series A Preferred Shares issued for employee stock compensation, March 3, 2010   250,000    250                        513,573              513,823 
Series A Preferred Shares issued for employee stock compensation, March 3, 2010   250,000    250                        513,573              513,823 
Series A Preferred Shares issued for employee stock compensation, March 3, 2010   93,750    94                        192,590              192,684 
Common shares issued for consulting and legal servies valued at $1.25 per share, March 3, 2010                       1,000    1    1,249              1,250 
Common shares issued for consulting services valued at $1.417 per share, March 31, 2010                       3,529    4    4,996              5,000 
Common shares issued in lieu of payment of accounts payable - All Sciences                       39,625    40    31,660              31,700 
                                                   
Common shares issued for consulting and legal services valued at $2.087 per share, April 30, 2010                       2,396    2    4,998              5,000 
Series B Preferred Shares issued to SeaSide 88, LP, May 12, 2010             500,000    500              4,999,500              5,000,000 
Placement Agents Fees related to sale of Convertible Preferred shares, May 12, 2010                                 (400,000)             (400,000)
Legal  Fees related to Sale of Convertible Preferred Stock, May 12, 2010                                 (50,000)             (50,000)
                                                   
Derivative Liability - Issuance of Series B Preferred Shares                                 (1,787,379)             (1,787,379)
Common shares issued for conversion of Series B Preferred Shares at $1.88 per share, May 12, 2010                       319,331    319                   319 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, May 12, 2010             (60,000)   (60)                            (60)
Derivative Liability - Retirement of Series B Preferred Shares, May 12, 2010                                 128,053              128,053 
Warrants issued to Scientific Advisory Board, May 15, 2010                                 82,800              82,800 
Common shares issued for conversion of Series B Preferred Shares at $1.51 per share, May 26, 2010                       398,189    398                   398 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, May 26, 2010             (60,000)   (60)                            (60)
Dividend paid to Seaside 88, LP, May 26, 2010                                 (16,877)             (16,877)
Common shares issued as Dividend to Seaside 88, LP at $1.64, May 26, 2010                       10,300    10    16,867              16,877 
Derivative Liability - Retirement of Series B Preferred Shares, May 26, 2010                                 151,852              151,852 
Common shares issued for consulting and legal services valued at $2.083 per share, May 31, 2010                       2,400    2    4,998              5,000 
Common shares issued for conversion of warrants to Common Stock at $1.00 per share, June 9, 2010                       195,000    195    194,805              195,000 
Common shares issued for conversion of Series B Preferred Shares at $1.41 per share, June 9, 2010                       426,721    427                   427 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, June 9, 2010             (60,000)   (60)                            (60)
                                                   
Dividend paid to Seaside 88, LP, June 9, 2010                                 (14,575)             (14,575)
Common shares issued as Dividend to Seaside 88, LP at $1.41, June 9, 2010                       10,366    10    14,565              14,575 
Derivative Liability - Retirement of Series B Preferred Shares, June 9, 2010                                 149,364              149,364 
Common shares issued for consulting and legal services valued at $1.77 per share, June 9, 2010                       11,300    11    19,989              20,000 
Common shares issued for consulting and legal services valued at $1.77 per share, June 9, 2010                       2,000    2    3,538              3,540 
Common shares issued for conversion of Series B Preferred Shares at $1.59 per share, June 23, 2010                       377,905    378                   378 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, June 23, 2010             (60,000)   (60)                            (60)
                                                   
Dividend paid to Seaside 88, LP, June 23, 2010                                 (12,274)             (12,274)
Common shares issued as Dividend to Seaside 88, LP at $1.59, June 23, 2010                       7,731    7    12,268              12,275 
Derivative Liability - Retirement of Series B Preferred Shares, June 23, 2010                                 120,254              120,254 
Common shares issued for consulting and legal services valued at $1.043 per share, June 30, 2010                       2,738    2    4,998              5,000 
                                                   
Net loss                                           (4,744,208)   (4,744,208)
                                                   
Balance, June 30, 2010   7,593,750    7,594    260,000    260    133,980,471    133,981    23,116,612    -    (16,739,743)   6,518,704 
                                                   
Common shares issued for conversion of Series B Preferred Shares at $1.51 per share, July 7, 2010                       397,088    397                   397 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, July 7, 2010             (60,000)   (60)                            (60)
                                                   
Dividend paid to Seaside 88, LP, July 7, 2010                                 (9,973)             (9,973)
Common shares issued as dividend to Seaside 88, LP at $1.65 per share, July 7, 2010                       6,061    6    9,967              9,973 
Derivative liability - retirement of Series B Preferred Shares, July 7, 2010                                 116,715              116,715 
Common shares issued for conversion of Series B Preferred Shares at $1.30 per share, July 21, 2010                       463,177    463                   463 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, July 21, 2010             (60,000)   (60)                            (60)
                                                   
Dividend paid to Seaside 88, LP, July 21, 2010                                 (7,671)             (7,671)
Common shares issued as dividend to Seaside 88, LP at $1.32 per share, July 21, 2010                       5,794    6    7,665              7,671 
Derivative liability - retirement of Series B Preferred Shares, July 21, 2010                                 113,700              113,700 
Common shares issued for consulting and legal services valued at $2.087 per share, July 31, 2010                       3,086    3    4,997              5,000 
Common shares issued for conversion of Series B Preferred Shares at $1.14 per share, August 4, 2010                       526,916    527                   527 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, August 4, 2010             (60,000)   (60)                            (60)
                                                   
Dividend paid to Seaside 88, LP, August 4, 2010                                 (5,370)             (5,370)
Common shares issued as dividend to Seaside 88, LP, at $1.14 per share, August 4, 2010                       4,716    5    5,365              5,370 
Derivative liability - retirement of Series B Preferred Shares, August 4, 2010                                 104,480              104,480 
Warrants issued to Scientific Advisory Board, August 15, 2010                                 45,000              45,000 
Common shares issued in conversion of Series B Preferred Shares at $0.99 per share, August 18, 2010                       606,367    606                   606 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, August 18, 2010             (60,000)   (60)                            (60)
                                                   
Dividend paid to Seaside 88, LP, August 18, 2010                                 (3,068)             (3,068)
Common shares issued as dividend to Seaside 88, LP at $0.99 per share, August 18, 2010                       3,101    3    3,065              3,068 
Derivative liability - retirement of Series B Preferred Shares, August 18, 2010                                 104,795              104,795 
Common shares issued for consulting and legal services valued at $1.24 per share, August 31, 2010                       4,032    4    4,996              5,000 
Common shares issued for conversion of Series B Preferred Shares at $0.93 per share, September 1, 2010                       215,332    215                   215 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, September 1, 2010             (20,000)   (20)                            (20)
                                                   
Dividend paid to Seaside 88, LP, September 1, 2010                                 (767)             (767)
Common shares issued as dividend to Seaside 88, LP at $1.00 per share, September 1, 2010                       766    1    766              767 
Derivative liability - retirement of Series B Preferred Shares, September 1, 2010                                 34,841              34,841 
Series B Preferred Shares issued to SeaSide 88, LP,  September 21, 2010             250,000    250              2,499,750              2,500,000 
Placement Agents fees related to sale of Convertible Preferred shares, September 21, 2010                                 (195,000)             (195,000)
Legal fees related to sale of Convertible Preferred Stock, September 21, 2010                                 (10,000)             (10,000)
                                                   
Derivative liability - issuance of Series B Preferred Shares                                 (328,086)             (328,086)
Common shares issued for conversion of Series B Preferred Shares at $0.93 per share, September 21, 2010                       430,015    430                   430 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, September 21, 2010             (40,000)   (40)                            (40)
Derivative liability - retirement of Series B Preferred Shares, September 21, 2010                                 103,012              103,012 
Common shares issued for consulting and legal services valued at $1.07 per share, September 30, 2010                       4,673    5    4,995              5,000 
Common shares issued for conversion of Series B Preferred Shares at $0.87 per share, October 5, 2010                       460,246    460                   460 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, October 5, 2010             (40,000)   (40)                            (40)
                                                   
Dividend paid to Seaside 88, LP, on October 5, 2010                                 (8,055)             (8,055)
Common shares issued as dividend to Seaside 88, LP at $0.87 per share, October 5, 2010                       9,268    9    8,046              8,055 
Derivative liability - Retirement of Series B Preferred Shares, October 5, 2010                                 103,330              103,330 
Common shares issued for conversion of Series B Preferred Shares at $0.88 per share, October 19, 2010                       452,965    453                   453 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, October 19, 2010             (40,000)   (40)                            (40)
                                                   
Dividend paid to Seaside 88, LP, October 19, 2010                                 (6,521)             (6,521)
Common shares issued as dividend to Seaside 88, LP at $0.88 per share, October 19, 2010                       7,384    7    6,514              6,521 
Derivative liability - Retirement of Series B Preferred Shares, October 19, 2010                                 69,635              69,635 
Common shares issued for consulting and legal services valued at $1.03 per share, October 31, 2010                       4,854    5    4,995              5,000 
Series A Preferred Shares issued for employee stock compensation, November 1, 2010   30,000    30                        53,903              53,933 
Common shares issued for conversion of Series B Preferred Shares at $0.87 per share, November 2, 2010                       461,313    461                   461 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, August 4, 2010             (40,000)   (40)                            (40)
                                                   
Dividend paid to Seaside 88, LP, November 2, 2010                                 (4,986)             (4,986)
Common shares issued as dividend to Seaside 88, LP at $0.87 per share, November 2, 2010                       5,751    6    4,980              4,986 
Derivative liability - retirement of Series B Preferred Shares, November 2, 2010                                 69,104              69,104 
Warrants issued to Scientific Advisory Board, November 15, 2010                                 55,800              55,800 
Common shares issued for conversion of Series B Preferred Shares at $1.16 per share, November 16, 2010                       345,817    346                   346 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, November 16, 2010             (40,000)   (40)                            (40)
                                                   
Dividend paid to Seaside 88, LP, November 16, 2010                                 (3,452)             (3,452)
Common shares issued as dividend to Seaside 88, LP at $1.16 per share, November 16, 2010                       2,984    3    3,449              3,452 
Derivative liability - Retirement of Series B Preferred Shares, November 16, 2010                                 69,187              69,187 
Common shares issued for conversion of Series B Preferred Shares at $1.35 per share, November 30, 2010                       310,566    311                   311 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, November 30, 2010             (40,000)   (40)                            (40)
                                                   
Dividend paid to Seaside 88, LP, November 30, 2010                                 (1,918)             (1,918)
Common shares issued as dividend to Seaside 88, LP at $1.35 per share, November 30, 2010                       1,417    1    1,917              1,918 
Derivative liability - Retirement of Series B Preferred Shares, November 30, 2010                                 69,449              69,449 
Common shares issued for consulting and legal services valued at $1.46 per share, November 30, 2010                       3,425    3    4,997              5,000 
Common shares issued for conversion of warrants to Common Stock at $1.00 per share, December 10, 2010                       25,000    25    24,975              25,000 
Common shares issued as compensation pursuant to S-8 at $1.28 per share, December 10, 2010                       50,000    50    63,950              64,000 
Common shares issued for conversion of Series B Preferred Shares at $1.10 per share, December 14, 2010                       90,840    91                   91 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, December 14, 2010             (10,000)   (10)                            (10)
                                                   
Dividend paid to Seaside 88, LP, December 14 2010                                 (384)             (384)
Common shares issued as Dividend to Seaside 88, LP, at $1.10 per share, December 14, 2010                       348    -    384              384 
Derivative liability - retirement of Series B Preferred Shares, December 14, 2010                                 17,438              17,438 
Series B Preferred Shares issued to SeaSide 88, LP, December 21, 2010             250,000    250              2,499,750              2,500,000 
Placement Agents fees related to sale of Convertible Preferred shares, December 21, 2010                                 (200,000)             (200,000)
Common shares issued for consulting and legal services valued at $1.32 per share, December 31, 2010                       4,545    5    5,995              6,000 
Adjustment                            33                   33 
Common shares issued for conversion of Series B Preferred Shares at $1.16 per share, January 3, 2011                       343,796    344                   344 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, January 3, 2011             (40,000)   (40)                            (40)
                                                   
Dividend paid to Seaside 88, LP, January 3, 2011                                 (8,904)             (8,904)
Common shares issued as dividend to Seaside 88, LP at $1.16 per share, January 3, 2011                       7,653    8    8,896              8,904 
Derivative liability - retirement of Series B Preferred Shares, January 3, 2011                                 73,532              73,532 
Common shares issued for conversion of Series B Preferred Shares at $1.26 per share, January 17, 2011                       317,965    318                   318 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, January 17, 2011             (40,000)   (40)                            (40)
                                                   
Dividend paid to Seaside 88, LP, January 17, 2011                                 (8,055)             (8,055)
Common shares issued as dividend to Seaside 88, LP at $1.26 per share, January 17, 2011                       6,403    6    8,049              8,055 
Derivative liability - retirement of Series B Preferred Shares, January 17, 2011                                 70,882              70,882 
Common shares issued for conversion of Series B Preferred Shares at $1.12 per share, January 31, 2011                       356,422    356                   356 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, January 31, 2011             (40,000)   (40)                            (40)
                                                   
Dividend paid to Seaside 88, LP, January 31, 2011                                 (6,521)             (6,521)
Common shares issued as dividend to Seaside 88, LP at $1.24 per share, January 31, 2011                       5,271    5    6,516              6,521 
Derivative liability - retirement ofSeries B Preferred Shares, January 31, 2011                                 72,432              72,432 
Common shares issued for consulting and legal services valued at $1.47 per share, January 31, 2011                       4,087    4    5,996              6,000 
Common shares issued for conversion of warrants at $1.00 per share, February 4, 2011                       25,000    25    24,975              25,000 
Common shares issued for conversion of Series B Preferred Shares at $1.08 per share, February 14, 2011                       370,017    370                   370 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, February 14, 2011             (40,000)   (40)                            (40)
                                                   
Dividend paid to Seaside 88, LP, February 14, 2011                                 (4,986)             (4,986)
Common shares issued as dividend to Seaside 88, LP, at $1.08 per share, February 14, 2011                       4,613    5    4,981              4,986 
Derivative liability - retirement of Series B Preferred Shares, February 14, 2011                                 71,699              71,699 
Warrants issued to Scientific Advisory Board, Feburary 15, 2011                                 54,000              54,000 
Common shares issued for conversion of Series B Preferred Shares at $0.99 per share, February 28, 2011                       405,610    406                   406 
Derivative liability - retirement of Series B Preferred Shares, February 28, 2011                                 71,490              71,490 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, February 28, 2011             (40,000)   (40)                            (40)
                                                   
Dividend paid to Seaside 88, LP, February 28, 2011                                 (3,452)             (3,452)
Common shares issued as dividend to Seaside 88, LP at $0.99 per shares, February 28, 2011                       3,500    4    3,448              3,452 
Common shares issued for consulting and legal services valued at $1.22 per share, February 28, 2011                       4,902    5    5,995              6,000 
Common shares issued for employee stock compensation  at $1.32 per share, March 3, 2011                       125,000    125    158,000              158,125 
Common shares issued for employee stock compensation at $1.32 per share, March 3, 2011                       125,000    125    158,000              158,125 
Series A Preferred Shares issued for employee stock compensation, March 3, 2011   250,000    250                        574,331              574,581 
Series A Preferred Shares issued for employee stock compensation, March 3, 2011   250,000    250                        574,331              574,581 
Series A Preferred Shares issued for employee stock compensation, March 3, 2011   93,750    94                        215,374              215,468 
Common shares issued for conversion of Series B Preferred Shares at $1.09 per share, March 14, 2011                       367,274    367                   367 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, March 14, 2011             (40,000)   (40)                            (40)
                                                   
Dividend paid to Seaside 88, LP, March 14, 2011                                 (1,918)             (1,918)
Common shares issued as Dividend to Seaside 88, LP at $1.09 per shares, March 14, 2011                       1,761    2    1,916              1,918 
Derivative Liability - Retirement of Series B Preferred Shares, March 14, 2011                                 70,566              70,566 
Common shares issued for conversion of Series B Preferred Shares at $1.11 per share, March 28, 2011                       89,986    90                   90 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, March 28, 2011             (10,000)   (10)                            (10)
                                                   
Dividend paid to Seaside 88, LP, March 28, 2011                                 (384)             (384)
Common shares issued as dividend to Seaside 88, LP, at $1.11 per share, March 28, 2011                       345    -    384              384 
Derivative liability - retirement of Series B Preferred Shares, March 28, 2011                                 17,525              17,525 
Common shares issued for consulting and legal services valued at $1.28 per share, March 31, 2011                       4,680    5    5,995              6,000 
Common shares issued for conversion of warrants to common stock at $1.00 per share, April 10, 2011                       10,000    10    9,990              10,000 
Series B Preferred Shares issued to SeaSide 88, LP, April 18, 2011             250,000    250              2,499,750              2,500,000 
Placement Agents fees related to sale of Convertible Preferred shares, April 18, 2011                                 (160,000)             (160,000)
Legal  fees related to Sale of Convertible Preferred Stock, April 18, 2011                                 (25,000)             (25,000)
                                                   
Derivative liability - issuance of Series B Preferred Shares                                 (429,725)             (429,725)
Common shares issued for conversion of Series B Preferred Shares at $1.28 per share, April 18, 2011                       312,163    312    (272)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, April 18, 2011             (40,000)   (40)                            (40)
Derivative liability - retirement of Series B Preferred Shares, April 18, 2011                                 68,756              68,756 
Common shares issued for consulting and legal services valued at $1.47 per share, April 30, 2011                       4,087    4    5,996              6,000 
Common shares issued for conversion of Series B Preferred Shares at $1.18 per share, May 2, 2011                       339,726    340    (300)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, May 2, 2011             (40,000)   (40)                            (40)
Derivative liability - retirement of Series B Preferred Shares, May 2, 2011                                 68,941              68,941 
                                                   
Dividend paid to Seaside 88, LP, May 2, 2011                                 (8,055)             (8,055)
Common shares issued as dividend to Seaside 88, LP at $1.18 per shares, May 2, 2011                       6,841    7    8,048              8,055 
Warrants issued to Scientific Advisory Board, May 15, 2011                                 50,400              50,400 
Common shares issued for conversion of Series B Preferred Shares at $1.19 per share, May 16, 2011                       336,501    337    (297)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, May 16, 2011             (40,000)   (40)                            (40)
Derivative liability - retirement of Series B Preferred Shares, May 16, 2011                                 69,194              69,194 
                                                   
Dividend paid to Seaside 88, LP, May 16, 2011                                 (6,521)             (6,521)
Common shares issued as dividend to Seaside 88, LP at $1.20 per shares, May 16, 2011                       5,438    5    6,516              6,521 
Common shares issued for conversion of Series B Preferred Shares at $1.23 per share, May 30, 2011                       326,480    326    (286)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, May 30, 2011             (40,000)   (40)                            (40)
Derivative liability - retirement of Series B Preferred Shares, May 30, 2011                                 69,464              69,464 
                                                   
Dividend paid to Seaside 88, LP, May 30, 2011                                 (4,986)             (4,986)
Common shares issued as Dividend to Seaside 88, LP at $1.23 per share, May 30, 2011                       4,070    4    4,982              4,986 
Common shares issued for consulting and legal services valued at $1.47 per share, May 31, 2011                       4,087    4    5,996              6,000 
Common shares issued for conversion of Series B Preferred Shares at $1.18 per share, June 13, 2011                       339,971    340    (300)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, June 13, 2011             (40,000)   (40)                            (40)
Derivative liability - retirement of Series B Preferred Shares, June 13, 2011                                 69,727              69,727 
                                                   
Dividend paid to Seaside 88, LP, June 13, 2011                                 (3,452)             (3,452)
Common shares issued as Dividend to Seaside 88, LP at $1.18 per share, June 13, 2011                       2,934    3    3,449              3,452 
Common shares issued for conversion of Series B Preferred Shares at $1.02 per share, June 27, 2011                       391,850    392    (352)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, June 27, 2011             (40,000)   (40)                            (40)
Derivative Liability - Retirement of Series B Preferred Share, June 27, 2011                                 69,973              69,973 
                                                   
Dividend paid to Seaside 88, LP, June 27, 2011                                 (1,918)             (1,918)
Common shares issued as Dividend to Seaside 88, LP at $1.10 per share, June 27, 2011                       1,741    2    1,916              1,918 
Common shares issued for consulting and legal services valued at $1.22 per share, June 30, 2011                       4,902    5    5,995              6,000 
                                                   
Net loss                                           (6,477,166)   (6,477,166)
                                                   
Balance, June 30, 2011   8,217,500    8,218    10,000    10    143,548,394    143,582    33,235,990    -    (23,216,909)   10,170,891 
                                                   
                                                 - 
Common shares issued for conversion of Series B Preferred Shares at $1.11 per share, July 11, 2011                       89,986    90                   90 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, July 11, 2011             (10,000)   (10)                            (10)
Derivative liability - retirement of Series B Preferred Shares, July 11, 2011                                 17,880              17,880 
                                                   
Dividend to Seaside 88, LP, paid on July 11, 2011                                 (381)             (381)
Common shares issued as dividend to Seaside 88, LP at $1.18 per share, July 11, 2011                       345    -    381              381 
Series B Preferred Shares issued to SeaSide 88, LP, on July 26, 2011             250,000    250              2,499,750              2,500,000 
Placement Agents fees related to sale of Convertible Preferred shares, July 26, 2011                                 (150,000)             (150,000)
                                                   
Derivative liability - issuance of Series B Preferred Shares                                 (429,768)             (429,768)
Legal  Fees related to Sale of Convertible Preferred Stock, July 26, 2011                                 (6,250)             (6,250)
Common shares issued in conversion of Series B Preferred Shares to common stock at $1.18 per share, July 26, 2011                       377,800    378                   378 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, July 26, 2011             (40,000)   (40)                            (40)
Derivative liability - retirement of Series B Preferred Shares, July 26, 2011                                 68,425              68,425 
Common shares issued for consulting and legal services valued at $1.26 per share, July 31, 2011                       4,762    5    5,995              6,000 
Warrants issued to Scientific Advisory Board, August 15, 2011                                 56,400              56,400 
Common shares issued for conversion of Series B Preferred Shares at $0.92 per share, August 8, 2011                       437,187    437                   437 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, August 8, 2011             (40,000)   (40)                            (40)
Derivative liability - retirement of Series B Preferred Shares, August 8, 2011                                 69,193              69,193 
                                                   
Dividend to Seaside 88, LP, paid on August 8, 2011                                 (8,055)             (8,055)
Common shares issued as Dividend to Seaside 88, LP at $0.98 per share, August 8, 2011                       8,205    8    8,047              8,055 
Common shares issued for conversion of Series B Preferred Shares at $0.95 per share, August 23, 2011                       419,829    420                   420 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, August 23, 2011             (40,000)   (40)                            (40)
Derivative liability - retirement of Series B Preferred Shares, August 23, 2011                                 69,351              69,351 
                                                   
Dividend paid to Seaside 88, LP, August 23, 2011                                 (6,521)             (6,521)
Common shares issued as Dividend to Seaside 88, LP at $0.95 per share, August 23, 2011                       6,844    7    6,514              6,521 
Common shares issued for consulting and legal services valued at $1.14 per share, August 31, 2011                       5,263    5    5,995              6,000 
Common shares issued for conversion of Series B Preferred Shares at $0.95 per share, September 6, 2011                       422,873    423                   423 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, September 6, 2011             (40,000)   (40)                            (40)
Derivative liability - retirement of Series B Preferred Shares, September 6, 2011                                 69,887              69,887 
                                                   
Dividend paid to Seaside 88, LP, September 6, 2011                                 (4,986)             (4,986)
Common shares issued as Dividend to Seaside 88, LP at $0.95 per share, September 6, 2011                       5,264    5    4,981              4,986 
Common shares issued in conversion of Series B Preferred Shares at $0.94 per share, September 19, 2011                       427,652    428                   428 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, September 19, 2011             (40,000)   (40)                            (40)
Derivative liability - retirement of Series B Preferred Share, September 19, 2011                                 69,970              69,970 
                                                   
Dividend to Seaside 88, LP, paid on September 19, 2011                                 (3,452)             (3,452)
Common shares issued as Dividend to Seaside 88, LP at $0.94 per share, September 19, 2011                       3,691    3    3,449              3,452 
Common shares issued for consulting and legal services valued at $1.07 per share, September 30, 2011                       5,607    6    5,994              6,000 
                                                   
Shares issued in conversion of Series B Preferred Shares to Common Stock at $.78 per share, .001 par value, on October 3, 2011                       514,311    514                   514 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on October 3, 2011             (40,000)   (40)                            (40)
                                                   
Derivative Liability - Retirement of Preferred Series B on October 3, 2011                                 69,496              69,496 
                                                   
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.85 on October 3, 2011                       2,270    2    1,916              1,918 
                                                   
Dividend to Seaside 88, LP, paid on October 3, 2011                                 (1,918)             (1,918)
                                                   
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.69 per share, .001 par value, on October 17, 2011                       144,484    144                   144 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on October 17, 2011             (10,000)   (10)                            (10)
                                                   
Derivative Liability - Retirement of Preferred Series B on October 17, 2011                                 17,790              17,790 
                                                   
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.75 on October 17, 2011                       510    1    383              384 
                                                   
Dividend to Seaside 88, LP, paid on October 17, 2011                                 (384)             (384)
                                                   
Shares issued for consulting and legal services rendered at $0..92 per share on October 31, 2011                       6,537    5    5,995              6,000 
                                                   
Series B Preferred Shares issued to SeaSide 88, LP, $.001 par value on November 1, 2011             250,000    250              2,499,750              2,500,000 
                                                   
Placement Agents Fees related to sale of Convertible Preferred shares on November 1, 2011                                 (160,000)             (160,000)
                                                   
Derivative Liability - Issuance of Preferred Series B                                 (429,804)             (429,804)
                                                   
Legal  Fees related to Sale of Convertible Preferred Stock November 1, 2011                                 (25,000)             (25,000)
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.78 per share, .001 par value, on November 1, 2011                       511,787    512                   512 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on November 2, 2011             (40,000)   (40)                            (40)
                                                   
Derivative Liability - Retirement of Preferred Series B on November 1, 2011                                 68,297              68,297 
Warrants issued to Scientific Advisory Board on November 15, 2011                                 56,400              56,400 
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.69 per share, .001 par value, on November 15, 2011                       578,595    579                   579 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on November  15, 2011             (40,000)   (40)                            (40)
                                                   
Derivative Liability - Retirement of Preferred Series B on November 15, 2011                                 68,411              68,411 
                                                   
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0..73 onNovember 15, 2011                       10,311    10    7,469              7,479 
                                                   
Dividend to Seaside 88, LP, paid on November 15, 2011                                 (7,479)             (7,479)
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.62 per share, .001 par value, on November 29, 2011                       642,735    643                   643 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on November  29, 2011             (40,000)   (40)                            (40)
                                                   
Derivative Liability - Retirement of Preferred Series B on November 29, 2011                                 68,591              68,591 
                                                   
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.64 on November 29, 2011                       10,139    10    6,511              6,521 
                                                   
Dividend to Seaside 88, LP, paid on November 29, 2011                                 (6,521)             (6,521)
                                                   
Shares issued for consulting and legal services rendered at $0.81 per share on November 30, 2011                       7,373    7    5,993              6,000 
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.53 per share, .001 par value, on December 13, 2011                       751,315    751                   751 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on December 13, 2011             (40,000)   (40)                            (40)
                                                   
Derivative Liability - Retirement of Preferred Series B on December 13, 2011                                 68,753              68,753 
                                                   
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.57 on December 13, 2011                       8,798    9    4,977              4,986 
                                                   
Dividend to Seaside 88, LP, paid on December 13, 2011                                 (4,986)             (4,986)
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.51 per share, .001 par value, on December 27, 2011                       796,785    798                   798 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on December 27, 2011             (40,000)   (40)                            (40)
                                                   
Derivative Liability - Retirement of Preferred Series B on December 27, 2011                                 68,965              68,965 
                                                   
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.57 on December 27, 2011                       6,818    7    3,443              3,450 
                                                   
Dividend to Seaside 88, LP, paid on December 27, 2011                                 (3,452)             (3,452)
                                                   
Shares issued for consulting and legal services rendered at $0.64 per share on December 31, 2011                       9,403    9    5,991              6,000 
                                                   
Shares issued in conversion of Series B Preferred Shares to Common Stock at $.51 per share, .001 par value, on January 10, 2012                       788,053    788                   788 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on January 10,2012             (40,000)   (40)                            (40)
                                                   
Derivative Liability - Retirement of Preferred Series B on January 10, 2012                                 69,222              69,222 
                                                   
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.51 onJanuary 10, 2012                       3,742    4    1,914              1,918 
                                                   
Dividend to Seaside 88, LP, paid on January 10, 2012                                 (1,918)             (1,918)
                                                   
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.48 per share, .001 par value, on January 24, 2012                       208,546    209                   209 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on January 24, 2012             (10,000)   (10)                            (10)
                                                   
Derivative Liability - Retirement of Preferred Series B on January 24, 2012                                 69,883              69,883 
                                                   
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.49 on January 24, 2012                       786         383              384 
                                                   
Dividend to Seaside 88, LP, paid on January 24, 2012                                 (384)             (384)
                                                   
Shares issued for consulting and legal services rendered at $0.58 per share on January 31, 2012                       10,367    10    5,990              6,000 
                                                   
Series B Preferred Shares issued to SeaSide 88, LP,  $.001 par value on February 8, 2012             250,000    250              2,499,750              2,500,000 
                                                   
Placement Agents Fees related to sale of Convertible Preferred shares on February 8, 2012                                 (150,000)             (150,000)
                                                   
Derivative Liability - Issuance of Preferred Series B                                 (430,283)             (430,283)
                                                   
Legal  Fees related to Sale of Convertible Preferred Stock February 8, 2012                                 (6,250)             (6,250)
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.56 per share, .001 par value, on February 8, 2012                       717,142    717                   717 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on  February 8, 2012             (40,000)   (40)                            (40)
                                                   
Derivative Liability - Retirement of Preferred Series B on  February 8, 2012                                 68,169              68,169 
Warrants issued to Scientific Advisory Board on February 15, 2012                                 51,000              51,000 
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.69 per share, .001 par value, on  February 22, 2012                       576,062    576                   576 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on February 22, 2012             (40,000)   (40)                            (40)
                                                   
Derivative Liability - Retirement of Preferred Series B on February 22, 2012                                 68,424              68,423 
                                                   
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.69 on February 22, 2012                       11,600    12    7,467              7,479 
                                                   
Dividend to Seaside 88, LP, paid on February 22, 2012                                 (7,479)             (7,479)
                                                   
Shares issued for consulting and legal services rendered at $0.77 per share on February 29, 2012                       7,767    8    5,992              6,000 
                                                   
Common shares issued for employee stock compensation  at $.73 per share, March 3, 2012                       125,000    125    90,812              90,937 
                                                   
Common shares issued for employee stock compensation at $.73 per share, March 3, 2012                       125,000    125    90,812              90,937 
                                                   
Series A Preferred Shares issued for employee stock compensation, March 3, 2012   250,000    250                        266,869              267,119 
                                                   
Series A Preferred Shares issued for employee stock compensation, March 3, 2012   250,000    250                        266,869              267,119 
                                                   
Series A Preferred Shares issued for employee stock compensation, March 3, 2012   93,750    93                        100,076              100,169 
                                                   
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.64 per share, .001 par value, on March 07, 2012                       628,289    628                   628 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on March 7, 2012             (40,000)   (40)                            (40)
                                                   
Derivative Liability - Retirement of Preferred Series B on  March 7, 2012                                 68,602              68,602 
                                                   
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.64 on March 7, 2012                       10,242    10    6,511              6,521 
                                                   
Dividend to Seaside 88, LP, paid on March 7, 2012                                 (6,521)             (6,521)
                                                   
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.63 per share, .001 par value, on March 21, 2012                       635,991    636                   636 
                                                   
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on March  21, 2012             (40,000)   (40)                            (40)
                                                   
Derivative Liability - Retirement of Preferred Series B on March 21, 2012                                 68,862              68,862 
                                                   
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.64 on March 21, 2012                       7,812    8    4,978              4,986 
                                                   
Dividend to Seaside 88, LP, paid on March 21, 2012                                 (4,986)             (4,986)
                                                   
Shares issued for consulting and legal services rendered at $0.78 per share on March 31, 2012                                                  
                        7,728    8    5,992              6,000 
Net loss for the nine months ended March 31, 2012                                                  
                                            (4,563,148)   (4,563,148)
    8,811,250    8,811    90,000    90    153,630,000    153,662    41,189,132    -    (27,780,057)   13,571,638 

 

See accompanying notes to the financial statements

 

7
 

 

NANOVIRICIDES, INC.

(A DEVELOPMENT STAGE COMPANY)

MARCH 31, 2012 AND 2011

NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

 

Note 1 – Organization and Nature of Business

 

NanoViricides, Inc. was incorporated under the laws of the State of Colorado on July 25, 2000 as Edot-com.com, Inc. and was organized for the purpose of conducting internet retail sales.  On April 1, 2005, Edot-com.com, Inc. was incorporated under the laws of the State of Nevada for the purpose of re-domiciling the Company as a Nevada corporation.  On May 12, 2005, the corporations were merged and Edot-com.com, Inc., the Nevada corporation, became the surviving entity.

 

On June 1, 2005, Edot-com.com, Inc. (“ECMM”) acquired Nanoviricide, Inc., a privately owned Florida corporation (“NVI”), pursuant to an Agreement and Plan of Share Exchange (the “Exchange”).  Nanoviricide, Inc. was incorporated under the laws of the State of Florida on May 12, 2005.

 

Pursuant to the terms of the Exchange, ECMM acquired NVI in exchange for an aggregate of 80,000,000 newly issued shares of ECMM common stock resulting in an aggregate of 100,000,000 shares of ECMM common stock issued and outstanding.  NVI then became a wholly-owned subsidiary of ECMM. The ECMM shares were issued to the NVI shareholders on a pro rata basis, on the basis of 4,000 shares of the Company’s common stock for each share of NVI common stock held by such NVI shareholder at the time of the Exchange.

 

As a result of the Exchange transaction, the former NVI stockholders held approximately 80% of the voting capital stock of the Company immediately after the Exchange.  For financial accounting purposes, this acquisition was a reverse acquisition of the Company by NVI, under the purchase method of accounting, and was treated as a recapitalization with NVI as the acquirer. Accordingly, the financial statements have been prepared to give retroactive effect to May 12, 2005 (date of inception), of the reverse acquisition completed on June 1, 2005, and represent the operations of NVI.

 

On June 28, 2005, NVI was merged into its parent ECMM and the separate corporate existence of NVI ceased.   Effective on the same date, Edot-com.com, Inc. changed its name to NanoViricides, Inc. and its stock symbol to “NNVC”, respectively.  The Company is considered a development stage company at this time.

 

NanoViricides,  Inc. (the “Company”), is a nano-biopharmaceutical company whose business goals are to discover, develop and commercialize therapeutics to advance the care of patients suffering from life-threatening viral infections. We are a development stage company with several drugs in various stages of early development. Our drugs are based on several patents, patent applications, provisional patent applications, and other proprietary intellectual property held by TheraCour Pharma, Inc. (“TheraCour”), to which we have the necessary exclusive licenses in perpetuity. The first agreement we executed with TheraCour Pharma on  September 1, 2005, gave us an exclusive, worldwide license for the treatment of the following human viral diseases: Human Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis C Virus (HCV), Herpes Simplex Virus (HSV), Influenza and Asian Bird Flu Virus.

 

On February 15, 2010 the Company executed an Additional License Agreement with TheraCour Pharma, Inc. (“TheraCour”).  Pursuant to the Additional License Agreement, the Company was granted exclusive licenses, in perpetuity, for technologies, developed by TheraCour, for the development of drug candidates for the treatment of Dengue viruses, Ebola/Marburg viruses, Japanese Encephalitis, viruses causing viral Conjunctivitis (a disease of the eye) and Ocular Herpes.  As consideration for obtaining these exclusive licenses, we agreed to pay a onetime licensing fee equal to 7,000,000 shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”).  The Series A Preferred Stock is convertible, only upon sale or merger of the company, or the sale of or license of substantially all of the Company’s intellectual property, into shares of the Company’s common stock at the rate of four shares of common stock for each share of Series A Preferred Stock.  The Series A Preferred Stock has a preferred voting preference at the rate of four votes per share. The Preferred Series A do not contain any rights to dividends, have no liquidation preference, and are not to be amended without the holder’s approval. The 7,000,000 shares were valued at the par value of $7,000.

 

8
 

 

We focus our research and clinical programs on specific anti-viral therapeutics. We are seeking to add to our existing portfolio of products through our internal discovery and clinical development programs and through an in-licensing strategy. The Company has recently filed a pre-IND application to the US FDA for its clinical candidate NV-INF-1 in the FluCide™ program. This anti-influenza therapeutic candidate is expected to be effective against most if not all types of influenzas including Bird Flu H5N1, Highly Pathogenic Influenzas (HPI/HPAI), Epidemic Influenzas such as the 2009 “swine flu” H1N1/A/2009, and Seasonal Influenzas. To date, the Company does not have any commercialized products.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation – Interim Financial Information

 

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission for Interim Reporting.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management,   considered necessary for a fair presentation of the results for the interim periods presented.  Interim results are not necessarily indicative of the results for the full year.  The accompanying financial statements and the information included under the heading “Management’s Discussion and Analysis or Plan of Operation” should be read in conjunction with our company’s audited financial statements and related notes included in our company’s form 10-K for the fiscal year ended June 30, 2011 filed with the SEC on October 13, 2011.

 

For a summary of significant accounting policies (which have not changed from June 30, 2011), see the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011.

 

Recently Issued Accounting Pronouncements

 

FASB Accounting Standards Update No. 2011-05

 

In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 “Comprehensive Income” (“ASU 2011-05”), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now gives entities the option to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.

 

The amendments in this Update should be applied retrospectively and are effective for public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.

 

FASB Accounting Standards Update No. 2011-08

 

In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

 

9
 

 

The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.

 

FASB Accounting Standards Update No. 2011-10

 

In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-10 “Property, Plant and Equipment: Derecognition of in Substance Real Estate-a Scope Clarification” (“ASU 2011-09”). This Update is to resolve the diversity in practice as to how financial statements have been reflecting circumstances when parent company reporting entities cease to have controlling financial interests in subsidiaries that are in substance real estate, where the situation arises as a result of default on nonrecourse debt of the subsidiaries.

 

The amended guidance is effective for annual reporting periods ending after June 15, 2012 for public entities. Early adoption is permitted.

 

FASB Accounting Standards Update No. 2011-11

 

In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.

 

The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.

 

FASB Accounting Standards Update No. 2011-12

 

In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-12 “Comprehensive Income: Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”). This Update is a deferral of the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income in ASU 2011-05. FASB is to going to reassess the costs and benefits of those provisions in ASU 2011-05 related to reclassifications out of accumulated other comprehensive income. Due to the time required to properly make such a reassessment and to evaluate alternative presentation formats, the FASB decided that it is necessary to reinstate the requirements for the presentation of reclassifications out of accumulated other comprehensive income that were in place before the issuance of Update 2011-05.

 

All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011.

 

Other Recently Issued, but Not Yet Effective Accounting Pronouncements

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

 

10
 

 

Note 3 – Financial Condition

 

The Company’s financial statements for the interim period ended March 31, 2012 have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business.  The Company has a deficit accumulated during the development stage.  In addition, the Company has not generated any revenues and no revenues are anticipated in the short-term.  Since May 2005, the Company has been engaged exclusively in research and development activities focused on developing targeted antiviral drugs.  The Company has not yet commenced any product commercialization.  Such losses are expected to continue for the foreseeable future and until such time, if ever, as the Company is able to attain sales levels sufficient to support its operations. There can be no assurance that the Company will achieve or maintain profitability in the future. As of March 31, 2012 the Company had cash and cash equivalents of $12,984,397. The Company does not currently have any long term debt. The Company has sufficient capital to continue its business, at least, through March 31, 2014, at the current rate of expenditure. The Company therefore would not be considered to have risks relative to its ability to continue as a going concern within the applicable guidelines.

 

While the Company continues to incur significant operating losses and has significant capital requirements, the Company has been able to finance its business through the sale of its securities (See Note 6). On November 2, 2011, the Company entered into an Securities Purchase Agreement (the “Agreement”) with Seaside 88, LP (“Seaside”), relating to the offering and sale (the “Offering”) of up to 500,000 shares of the Company’s Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”) at the purchase price of $10.00 per share (the “Purchase Price”).  On November 2, 2011, Seaside purchased an initial 250,000 shares of the Series B Preferred Stock for an aggregate purchase price of $2,500,000 (the “Initial Closing”).  On February 8, 2012 Seaside purchased the remaining 250,000 shares of the Series B Preferred Stock for the purchase price of $2,500,000 (the “Subsequent Closing”).   The Company has sufficient capital to continue its business, at least, through March 31, 2014, at the current rate of expenditure. The Company therefore would not be considered to have risks relative to its ability to continue as a going concern within the applicable guidelines.

 

Since May 2005, the Company has been engaged exclusively in research and development activities focused on developing targeted antiviral nanomedicines.  The Company has not yet commenced any product commercialization.  The Company has incurred significant losses from operations since its inception, resulting in a deficit accumulated during the development stage of $27,780,057 at March 31, 2012 and expects recurring losses from operations to continue for the foreseeable future and until such time, if ever, as the Company is able to attain sales levels sufficient to support its operations.  There can be no assurance that the Company will achieve or maintain profitability in the future.  Despite the Company’s financings in 2011 and 2010 and a cash and cash equivalent balance of $12,984,397 at March 31, 2012, substantial additional financing will be required in future periods.  The Company may require additional capital to finance planned and currently unplanned capital costs, and additional staffing requirements during the next twenty four months.  The Company has, in the past, adjusted its priorities and goals in line with the cash on hand and capital availability. The Company believes it can adjust its priorities of drug development and its Plan of Operations as necessary, if it is unable to raise such additional funds.

 

Note 4 – Significant Alliances and Related Parties

 

TheraCour Pharma, Inc.

 

Pursuant to an Exclusive License Agreement we entered into with TheraCour Pharma, Inc., (TheraCour), the Company was granted exclusive licenses in perpetuity for technologies developed by TheraCour for the virus types: HIV, HCV, Herpes, Asian (bird) flu, Influenza and rabies.  In consideration for obtaining this exclusive license, we agreed: (1) that TheraCour can charge its costs (direct and indirect) plus no more than 30% of direct costs as a Development Fee and such development fees shall be due and payable in periodic installments as billed, (2) we will pay $25,000 per month for usage of lab supplies and chemicals from existing stock held by TheraCour, (3) we will pay $2,000 or actual costs, whichever is higher for other general and administrative expenses incurred by TheraCour on our behalf, (4) make royalty payments (calculated as a percentage of net sales of the licensed drugs) of 15% to TheraCour Pharma, Inc. and (5) agreed that TheraCour Pharma, Inc. retains the exclusive right to develop and manufacture the licensed drugs. TheraCour Pharma, Inc. agreed that it will manufacture the licensed drugs exclusively for NanoViricides, and unless such license is terminated, will not manufacture such product for its own sake or for others.

 

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On February 15, 2010, the Company executed an Additional License Agreement with TheraCour Pharma, Inc. (“TheraCour”).  Pursuant to the exclusive Additional License Agreement, the Company was granted exclusive licenses, in perpetuity, for technologies developed by TheraCour for the development of drug candidates for the treatment of Dengue viruses, Ebola/Marburg viruses, Japanese Encephalitis, viruses causing viral Conjunctivitis (a disease of the eye) and Ocular Herpes.  As consideration for obtaining these exclusive licenses, we agreed to pay a onetime licensing fee equal to seven million shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”).  The Series A Preferred Stock is convertible, only upon sale or merger of the company, or the sale of or license of substantially all of the Company’s intellectual property, into shares of the Company’s common stock at the rate of four shares of common stock for each share of Series A Preferred Stock.  The Series A Preferred Stock has a preferred voting preference at the rate of four votes per share. The Preferred Series A do not contain any rights to dividends; have no liquidation preference and are not to be amended without the holders approval. The issuance of the 7,000,000 shares was valued at their par value or $7,000.

 

TheraCour Pharma, Inc. may terminate these licenses upon a material breach by us as specified in the agreement.

 

Development costs charged by and paid to TheraCour were $1,359,100 and $876,860 for the nine months ended March 31, 2012, and 2011, respectively and $6,262,005 since inception. As of March 31, 2012, pursuant to its license agreement, the Company has paid a security advance of $256,284 to and held by TheraCour which is reflected in Prepaid Expenses.  No royalties are due TheraCour from the Company’s inception through March 31, 2012.

 

Anil R. Diwan, President, and a director of the Company, is also a Director and President of TheraCour. Dr. Diwan owns approximately 70% of the common stock of TheraCour, which itself owns approximately 21.71% of the Common stock of the Company.

 

TheraCour owns 33,360,000 shares of the Company’s outstanding common stock as of March 31, 2012.

 

KARD Scientific, Inc.

 

In June 2005, the Company engaged KARD Scientific to conduct preclinical animal studies and provide the Company with a full history of the study and final report with the data collected from Good Laboratory Practices (CGLP) style studies. Dr. Krishna Menon, the Company’s Consulting Chief Regulatory Officer, a non-executive position, is also an officer and principal owner of KARD Scientific. Lab fees charged by KARD Scientific for services for the nine months ended March 31, 2012, and 2011, were $336,420 and $719,462 respectively, and $1,689,057 since inception.

 

KARD Scientific Inc. of Beverly, Massachusetts, is currently our primary vendor for animal model study design and performance. KARD operates its own facilities in Beverly, Massachusetts.

 

NanoViricides has a fee for service arrangement with KARD. We do not have an exclusive arrangement with KARD; we do not have a contract with KARD; any work to be performed by KARD must be commissioned by the executive officers of NanoViricides; and we retain all intellectual property resulting from the services by KARD.

 

Note 5 - Prepaid Expenses

 

Prepaid Expenses are summarized as follows:

 

   March 31, 
2011
   June 30, 
2011
 
TheraCour Pharma, Inc.  $256,284   $306,160 
Prepaid Others   39,465    26,134 
   $295,749   $332,294 

 

Note 6 – Equity Transactions

 

On November 2, 2011, the Company entered into an additional Securities Purchase Agreement (the “Agreement”) with Seaside 88, LP (“Seaside”) relating to the offering and sale (the “Offering”) of up to 500,000 shares of the Company’s Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”) at the purchase price of $10.00 per share (the “Purchase Price”).  No warrants were issued in connection with this offering. On November 2, 2011, Seaside purchased an initial 250,000 shares of the Series B Preferred Stock for an aggregate purchase price of $2,500,000 (the “Initial Closing”). Also on November 2, 2011, 40,000 shares of the Series B Preferred Stock automatically converted into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at a conversion price of $0.782 per share.

 

12
 

 

The Follow-on closing occurred on February 8, 2012 at which time Seaside purchased the remaining 250,000 shares of the Series B Preferred Stock for the purchase price of $2,500,000 (the “Subsequent Closing).

 

The Agreement contains representations and warranties and covenants for each party, which must be true and have been performed at each closing.  Additionally, the Company has agreed to indemnify and hold harmless Seaside against certain liabilities in connection with the issuance and sale of the Series B Preferred Stock under the Agreement.

 

The offering was made pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-165221), which was declared effective by the Securities and Exchange Commission on April 29, 2010.  The Company, pursuant to Rule 424(b) under the Securities Act of 1933, has filed with the Securities and Exchange Commission a prospectus supplement relating to the offering.

 

In connection with the offering, pursuant to a placement agency agreement entered into by and between Midtown Partners & Co., LLC (“Midtown”) and the Company, as amended by an Underwriter Agent Agreement Amendment No. 1, dated March 28, 2011 (as amended, the “Placement Agency Agreement”), on November 3, 2011 (the “Placement Agent Agreement”), the Company paid Midtown a cash fee representing 6% of the gross purchase price paid by Seaside for the Series B Preferred Stock, totaling $150,000. The Company also paid a one-time legal expenses fee of $ 25,000 To Midtown on November 3, 2011. In addition, subsequent to the February 8, 2012 follow-on closing (see above), the Company paid Midtown a cash fee representing 6% of the gross purchase price paid by Seaside for the Series B Preferred Stock, totaling $150,000.

 

During the nine months ended March 31, 2012, Seaside converted the following amounts of Series B Preferred Stock into the Company’s Common Stock:

 

Date of
Conversion
  Number of
Shares of
Series B
Converted
   Conversion
Price
   Number of Shares of
.001 par value
Common Stock Issued
Pursuant to
Conversion
   Dividend
Conversion
Price
   Dividend
Shares
Issued
   Total Shares of
.001 par value
Common Stock
Issued to Seaside
 
07/11/2011   10,000    1.11129    89,986    1.11129    345    90,331 
07/26/2011   40,000    1.05876    377,800            377,800 
08/08/2011   40,000    0.91494    437,187    0.98167    8,205    445,392 
08/23/2011   40,000    0.95277    419,829    0.95277    6,844    426,673 
09/06/2011   40,000    0.94591    422,873    0.94733    5,264    428,137 
09/19/2011   40,000    0.93534    427,652    0.93534    3,691    431,343 
10/03/2011   40,000    0.77774    514,311    0.84473    2,270    516,581 
10/17/2011   10,000    0.69212    144,484    0.75149    510    144,994 
11/02/2011   40,000    0.781575    511787            511,787 
11/15/2011   40,000    0.69133    578,595    0.72539    10,311    588,906 
11/29/2011   40,000    0.62234    642,735    0.64311    10,139    652,874 
12/13/2011   40,000    0.5324    751,315    0.56678    8,798    760,113 
12/27/2011   40,000    0.50635    796,785    0.50635    6,818    803,603 
01/10/2012   40,000    0.50758    788,053    0.50758    3,742    791,795 
01/24/2012   10,000    0.47951    208,546    0.48773    786    209,322 
02/08/2012   40,000    0.55777    717,142    0.00000    -    717,142 
02/22/2012   40,000    0.69437    576,062    0.69437    11,600    587,662 
03/07/2012   40,000    0.63665    628,289    0.63665    10,242    638,531 
03/21/2012   40,000    0.62894    635,991    0.63827    7,812    643,803 

 

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Unregistered Securities

 

In August, 2011, the Scientific Advisory Board (SAB) was granted warrants to purchase 60,000 shares of common stock at $1.41 per share expiring in February ,2015.  These warrants were valued at $56,400 and recorded as consulting expense.

 

In November, 2011, the Scientific Advisory Board (SAB) was granted warrants to purchase 60,000 shares of common stock at $.948 per share expiring in November, 2015.  These warrants were valued at $56,400 and recorded as consulting expense.

 

In February, 2012, the Scientific Advisory Board (SAB) was granted warrants to purchase 60,000 shares of common stock at $1.09 per share expiring in February, 2016.  These warrants were valued at $51,000 and recorded as consulting expense.

 

For the nine months ended March 31, 2012, the Company's Board of Directors authorized the issuance of 64,807 shares of its common stock with a restrictive legend for consulting services. The Company recorded an expense of $54,000.

 

Note 7 - Commitments and Contingencies

 

Operating Lease

 

The Company’s principal executive offices are located at 135 Wood Street, West Haven, Connecticut, and include approximately 7,000 square feet of office and laboratory space at a base monthly rent of $7,311. The term of lease expired on February 28, 2011 and is now on a month-by-month basis.

 

Total rent expense amounted to $87,767 and $75,395 for the nine months ended March 31, 2012 and 2011, respectively.

 

Legal Proceedings

 

On or around December 22, 2011, the Connecticut Secretary of the State, as agent for service of process for the Company, was served with a Summons and Complaint in the case entitled David F. Gencarelli, Esq. d/b/a Gencarelli Group v. Nanoviricides, Inc. (Case No. 2011-CA-006555-B) filed in the Superior Court for the district of Columbia Civil Division.  The Complaint for breach of contract, unjust enrichment, and quantum merit claims unpaid legal fees of $77,601.00 Management believes that the lawsuit has no merit or basis and intends to defend the lawsuit vigorously, and as a result no accrual has been made in relation to this litigation.

 

On or around January 18, 2012, the Nevada Agency and Transfer Company, as agent for service of process for the Company in Nevada, was served with a Summons and Complaint in the case entitled Yidam, Ltd. v. Eugene Seymour, Anil Diwan, and Nanoviricides, Inc. (Case No. A-12-654437-B) answerable in the Eighth Judicial District Court of the State of Nevada – Clark County (“Court”).  The Complaint seeks to compel inspection of the Company’s books and records.  On or about February 14, 2012, we filed a Motion to Dismiss the Complaint for failure to state a claim upon which relief can be granted.  The Complaint further seeks unspecified “injunctive relief” in furtherance of the demand for inspection to which it is not entitled.  The Complaint by a holder of less than 1 percent of the common stock of the Company seeks to, inter alia, inspect documents and records of the company to which it is not entitled and in a form and manner the Company argues is not authorized by statute.  Management believes that this lawsuit has no merit or basis and intends to vigorously defend it.  Monetary damages have not been claimed and as a result no accrual has been made in relation to this litigation. On April 9, 2012, the Court dismissed the Complaint for failure to state a Claim for which relief could be granted.

 

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On or around April 13, 2012, the Nevada Agency and Transfer Company, as agent for service of process for the Company in Nevada, was served with a Summons and Complaint in the case entitled Yidam, Ltd. v. Eugene Seymour, Anil Diwan, and Nanoviricides, Inc. ((Case No. A-12-659535-B) answerable in the Eighth Judicial District Court of the State of Nevada – Clark County (“Court”).  The Complaint seeks to compel inspection of the Company’s books and records.  On or about May 2, 2012, we filed a Demand for Security of Costs. Upon filing of the Demand, proceedings relative to the Company are stayed pending posting of the demanded security (or plaintiff engages in motion practice about the Demand).  30 days (+3 for mailing) from service, the Company may seek dismissal of the complaint if plaintiff has not posted the demanded security (or engaged the court).  The Company will have 10 days after service of notice of posting within which to answer or otherwise respond to the complaint. The Complaint further seeks unspecified “injunctive relief” in furtherance of the demand for inspection to which it is not entitled.  The Complaint, by a holder of less than 1 percent of the common stock of the Company, seeks to, inter alia, inspect documents and records of the company to which it is not entitled and in a form and manner the Company argues is not authorized by statute.  Management believes that this lawsuit has no merit or basis and intends to vigorously defend it.  Monetary damages have not been claimed and as a result no accrual has been made in relation to this litigation

 

Note 8 – Subsequent Events

 

Management has evaluated all events that occurred after the balance sheet date through the date when these financial statements were issued to determine if they must be reported. The Management of the Company has determined that there was a reportable subsequent event to be disclosed as follows:

 

On May 8, 2012, the United States Patent and Trademark Office granted Patent No. 8,173,764 for "Solubilization and Targeted Delivery of Drugs with Self-Assembling Amphiphilic Polymers" to the inventors Anil R. Diwan, PhD, Jayant G. Tatake, PhD, and Ann L. Onton, all of who are among the founders of NanoViricides, Inc. The patents have been assigned to AllExcel, Inc., the Company at which the ground-breaking work was performed. AllExcel, Inc. has contractually transferred this intellectual property to TheraCour Pharma, Inc.

 

NanoViricides, Inc. holds exclusive worldwide licenses to these technologies for a broad range of antiviral applications and diseases that include All Influenzas including Asian Bird Flu Virus, Human Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis C Virus (HCV), Herpes Simplex Virus (HSV), Dengue viruses, Rabies virus, Ebola/Marburg viruses, Japanese Encephalitis virus, as well as viruses causing viral

 

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

The following discussion should be read in conjunction with the information contained in the consolidated financial statements of the Company and the notes thereto appearing elsewhere herein and in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company's Annual Report on Form 10-K for the year ended June 30, 2011. Readers should carefully review the risk factors disclosed in this Form 10-K and other documents filed by the Company with the SEC.

 

As used in this report, the terms "Company", "we", "our", "us" and "NNVC" refer to NanoViricides, Inc., a Nevada corporation.

 

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "NNVC believes," "management believes" and similar language. The forward-looking statements are based on the current expectations of NNVC and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. Actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them.

 

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Investors are also advised to refer to the information in our previous filings with the Securities and Exchange Commission (SEC), especially on Forms 10-K, 10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.

 

Management’s Plan of Operation

 

The Company’s drug development business model was formed in May 2005 with a license to the patents and intellectual property held by TheraCour Pharma, Inc., that enabled creation of drugs engineered specifically to combat viral diseases in humans. This exclusive, perpetual, world-wide license from TheraCour Pharma serves as the foundation for our intellectual property. The Company was granted a worldwide exclusive perpetual license to this technology for several drugs with specific targeting mechanisms in perpetuity for the treatment of the following human viral diseases: Human Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis C Virus (HCV), Rabies, Herpes Simplex Virus (HSV), Influenza and Asian Bird Flu Virus. The Company has entered into an Additional License Agreement with TheraCour granting the Company the exclusive licenses in perpetuity for technologies developed by TheraCour for the additional virus types: Dengue viruses, Japanese Encephalitis virus, West Nile Virus, Viruses causing viral Conjunctivitis (a disease of the eye) and Ocular Herpes, and Ebola/Marburg viruses. The Company may want to add further virus types to its drug pipeline. The Company would then need to negotiate with TheraCour an amendment to the Licensing Agreement to include those of such additional viruses that the Company determines it wants to follow for further development. We are seeking to add to our existing portfolio of products through our internal discovery pre-clinical development programs and through an in-licensing strategy.

 

The Company intends to perform the regulatory filings and own all the regulatory licenses for the drugs it is currently developing. The Company will develop these drugs in part via subcontracts to TheraCour Pharma, Inc., the exclusive source for these nanomaterials. The Company may manufacture these drugs itself, or under subcontract arrangements with external manufacturers that carry the appropriate regulatory licenses and have appropriate capabilities. The Company intends to distribute these drugs via subcontracts with distributor companies or in partnership arrangements. The Company plans to market these drugs either on its own or in conjunction with marketing partners. The Company also plans to actively pursue co-development, as well as other licensing agreements with other Pharmaceutical companies. Such agreements may entail up-front payments, milestone payments, royalties, and/or cost sharing, profit sharing and many other instruments that may bring early revenues to the Company. Such licensing and/or co-development agreements may shape the manufacturing and development options that the company may pursue. There can be no assurance that the Company will be able to enter into co-development or other licensing agreements.

 

To date, we have engaged in organizational activities; developing and sourcing compounds and preparing nano-materials; and experimentation involving preclinical studies using cell cultures and animals. Several of the Company’s drug candidates have shown excellent levels of efficacy and preliminary safety in animal studies in many different animal models against many different viruses. The Company determined that its anti-Influenza program, “FluCide™”, was the most advanced and obtained and held a pre-IND meeting with the US FDA for the same on March 29, 2012. The Company believes it has gained valuable guidance from the FDA that enables us to develop and execute a product development plan for our anti-influenza drug candidate with the goal of filing an Investigational New Drug (IND) application to the US FDA, and similar applications in other countries in the world.

 

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As the Company’s drug candidates progress towards human clinical studies, it has become necessary to enable that they can be produced under “current Good Manufacturing Practices” (cGMP) guidelines of the US FDA, and other applicable international guidelines (such as WHO and ICH guidelines, as well as other country-specific and region-specific guidelines). In the US, the US FDA requires that at least two validated and consistent batches of the drug be produced under cGMP conditions before any human clinical trials can be allowed. Some other countries may allow research product materials for certain phases of human clinical trials. The Company’s management has studied the possibilities of contract manufacturing of its drug candidates over the last several years and has concluded that building a small pilot scale manufacturing facility where the special needs of the manufacture of its nanomedicines can be met is the most appropriate solution. This approach provides the highest level of control over the quality of the materials and also keeps the intellectual property of the Company well protected. Further, to minimize capital costs to the Company, management determined that a separate entity should be allowed to purchase the real estate, renovate, build and maintain the facilities under the Company’s direction and control. Some of the original investors of NanoViricides, Inc. had shown interest in obtaining a controlling share in such a separate entity. However, as of now these parties have not engaged into financing this entity, citing the extremely low rate of return on this potentially high risk investment. A separate entity, Inno-Haven, LLC (“Inno-Haven”), controlled by Anil R. Diwan, the Company’s founder, was created for this purpose. Inno-Haven purchased an 18,000 sq. ft. light manufacturing building on a 4.2 acre land lot in Shelton, Connecticut in August, 2011. The purchase and related costs were financed by Dr. Diwan through his personal savings, and the saleof NanoViricides common stockthat he had acquired as a founder, that netted approximately $900,000 after expenses and income taxes. The 10b(5) plan was concluded in October, 2011. Inno-Haven has also obtained additional financing from certain other parties. Inno-Haven intends to obtain additional financing from investors other than Dr. Diwan. Dr. Diwan has also agreed to provide personal guarantees for possible loans and mortgages that would be drawn for the purpose of financing the building and construction costs for the extensive renovation intended.

 

The Company has agreed to provide Inno-Haven the specifications and plans for the cGMP pilot facility and laboratory and office spaces that are anticipated to be built by renovating the existing building. As of date, the Company does not have a lease or other written contract agreement with Inno-Haven other than an intent, and the Company is not bound to execute on this plan if it can find a superior alternative.

 

We have generated funding through the issuances of debt and private placement of common stock (see Item 5 Recent Sales of Unregistered Securities), and also the sale of our registered securities. The Company does not currently have any long term debt. We have not generated any revenues and we may not be able to generate revenues in the near future. We may not be successful in developing our drugs and start selling our products when planned, or we may not become profitable in the future. We have incurred net losses in each fiscal period since inception of our operations.

 

Collaborative Agreements and Contracts

 

On December 23, 2005, the Company signed a Memorandum of Understanding (MOU) with the National Institute of Hygiene and Epidemiology in Hanoi (NIHE), a unit of the Vietnamese Government’s Ministry of Health. This Memorandum of Understanding calls for cooperation in the development and testing of certain nanoviricides. The parties agreed that NanoViricides will retain all intellectual property rights with respect to any resulting product and that the initial target would be the development of drugs against H5N1 (avian influenza). NIHE thereafter requested that we develop a drug for rabies, a request to which we agreed. The initial phase of this agreement called first for laboratory testing, followed by animal testing of several drug candidates developed by the Company. Preliminary laboratory testing of FluCide™-I, AviFluCide™ -and AviFluCide-HP™ were successfully performed at the laboratories of the National Institute of Hygiene and Epidemiology in Hanoi (NIHE), against both clade 1 and clade 2 of H5N1 virus isolated in Vietnam. Successful animal testing of RabiCide™, the company’s anti-rabies drug, was performed in Vietnam during the first half of 2007, and reproducibly repeated in 2008. Rabies testing can safely be done at their BSL2 facility. The H5N1 animal testing requires a BSL3 (biological safety laboratory level 3) laboratory. NIHE has acquired a BSL3 animal testing capacity during 2008. While the MOU provides for a final agreement between the Company and NIHE, we have not yet discussed a “final agreement” with NIHE and continue to work under the existing MOU. There are no financial obligations or responsibilities for either the Company or NIHE pursuant to the provisions of the MOU.

 

We have finalized execution of a Materials Cooperative Research and Development Agreement (M-CRADA) with the Centers for Disease Control and Prevention (CDC), Atlanta, GA in July, 2008. This agreement was initiated based on our success against Rabies in the animal studies conducted at NIHE Vietnam. Preliminary animal studies against Rabies were expected to start in the last quarter of calendar year 2009 or first quarter of calendar year 2010. The Company has lowered the priority of this program during the recent economic crisis in order to employ our resources most effectively. Subsequent to the agreement execution, the Company has supplied certain materials to CDC for testing. This testing, if successful, is expected to expand to involve potential use of nanoviricides as (1) a post- infection therapeutic drug against rabies, possibly in conjunction with a rabies vaccine, and (2) a post-exposure prophylactic drug against rabies, to replace costly human or monoclonal antibodies, possibly in conjunction with a rabies vaccine. To date, there is no effective post-infection therapeutic against rabies. Post-exposure prophylaxis market has been estimated to be as much $300M to $500M worldwide.

 

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We have finalized a Materials Transfer Agreement (MTA) with the United States Army Institute of Infectious Diseases (USAMRIID) to develop antiviral agents against Ebola, Marburg and other hemorrhagic viruses in October 2007. Preliminary studies began in February, 2008. Certain nanoviricides candidates were found to be highly successful against Ebola virus in pre-clinical cell culture studies. Ebola virus is known to produce, in vivo, a soluble decoy protein that is a portion of its surface glycoprotein. If the nanoviricides that were successful in the in vitro studies bind to the decoy protein portion of the Ebola virus envelope, then we would expect that the nanoviricides would be neutralized in vivo by the decoy protein. We are therefore developing novel ligands that would potentially bind to the Ebola virus glycoprotein portion that is known to be not a part of the decoy protein. The MTA was extended for another year in October, 2009 to continue these studies. The Company has lowered the priority of this program following the economic crisis of 2008-2009 in order to employ our resources most effectively.

 

We have finalized an agreement with a Medical Institute to perform animal studies of our eye drop formulation of nanoviricides against viral EKC (viral Epidemic Kerato-conjunctivitis) in March, 2008. The first EKC-Cide™  animal study was completed in June, 2008. The study indicated that the best nanoviricide drug candidate showed excellent clearance of clinical signs of the disease, viz. redness of the eye as well as sticky exudates, in a short time after treatment.

 

On May 6, 2009, the Company entered into a Clinical Study Agreement with THEVAC, LLC, a company affiliated with the Emerging Technology Center of the Louisiana State University. At present, TheVac is performing biological testing of anti-herpes nanoviricides. TheVac is conducting studies on the effect of anti-herpes nanoviricide drug candidates against herpes cold sores and genital herpes in cell culture models. In addition, TheVac is also conducting studies on the effect of anti-herpes nanoviricides drug candidates in a mouse model of herpes keratitis. Professor Gus Kousoulas and his team at Louisiana State University have validated and published on this animal model extensively in peer-reviewed scientific journals.

 

On February 16, 2010, the Company announced that it had signed a research and development agreement with Dr. Eva Harris’s laboratory at the University of California, Berkeley (UC Berkeley). Under this agreement, Dr. Harris and coworkers will evaluate the effectiveness of nanoviricides® drug candidates against various dengue viruses. Cell culture models as well as in vivo animal studies will be employed for testing the drug candidates. Dr. Eva Harris is a Professor of Infectious Diseases at UC Berkeley. She is a leading researcher in the field of dengue. Her group has developed a unique animal model for dengue virus infection and disease that effectively emulates the pathology seen in humans. In particular, the critical problem of dengue virus infection, called “Antibody-Dependent Enhancement” (ADE), is reproduced in this animal model. When a person who was previously infected with one serotype of dengue virus is later infected by a different serotype, the antibodies produced by the immune system can lead to increased severity of the second dengue infection, instead of controlling it. ADE thus can lead to severe dengue disease or dengue hemorrhagic fever (DHF).

 

On May 13, 2010, the Company announced that it had entered into a Research and Development Agreement with Professor Ken Rosenthal Lab at NEOUCOM (now called NEOMED). Professor Rosenthal has developed in vitro or cell culture based tests for identifying the effectiveness of antiviral agents against HSV. He has also developed a skin lesion mouse model for HSV infection. Dr. Rosenthal has been involved in the evaluation of HSV vaccines as well as anti-HSV drugs.  His laboratory has developed an improved mouse model of skin-infection with HSV to follow the disease progression. This model has been shown to provide highly uniform and reproducible results. A uniform disease pattern including onset of lesions and further progression to zosteriform lesions is observed in all animals in this model. This uniformity makes it an ideal model for comparative testing of various drug candidates. Dr. Rosenthal is a professor of microbiology, immunology and biochemistry at Northeastern Ohio Universities Colleges of Medicine and Pharmacy (NEOUCOM). He is a leading researcher in the field of herpes viruses. His research interests encompass several aspects of how herpes simplex virus (HSV) interacts with the host to cause disease. His research has addressed how HSV infects skin cells and examined viral properties that facilitate its virulence and ability to cause encephalitis. In addition, Dr. Rosenthal has also been studying a viral protein that makes the HSV more virulent by helping the virus to take over the cellular machinery to make copies of its various parts, assemble these parts together into virus particles and release the virus to infect other cells. He is also researching how the human host immune response works against HSV for the development of protective and therapeutic vaccines.

 

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On August 16, 2010, the Company reported that its anti-Herpes drug candidates demonstrated significant efficacy in the recently completed cell culture studies in Dr. Rosenthal Lab at NEOUCOM.  Several of the anti-Herpes nanoviricides® demonstrated a dose-dependent maximal inhibition of Herpes virus infectivity in a cell culture model. Almost complete inhibition of the virus production was observed at clinically usable concentrations. These studies employed the H129 strain of herpes simplex virus type 1 (HSV-1).  H129 is an encephalitic strain that closely resembles a clinical isolate; it is known to be more virulent than classic HSV-1 laboratory strains. The H129 strain will be used in subsequent animal testing of nanoviricides.

 

On May 17, 2010, the Company announced that it had signed a research and development agreement with the University of California, San Francisco (UCSF), for the testing of its anti-HIV drug candidates.  Cheryl Stoddart, PhD, Assistant Professor in the UCSF Division of Experimental Medicine, will be the Principal Investigator.    The Company plans to continue its anti-HIV in vitro (cell culture) testing program at the Southern Research Institute in Frederick, MD. The Company also plans to continue its anti-HIV in vivo (animal model) testing program at KARD Scientific, MA. The animal model for HIV, the SCID-hu mouse model is a complex and expensive model. Due to budgetary constraints, our anti-HIV program had to be slowed down in the last few years.

 

Subsequent Events.

 

Management has evaluated all events that occurred after the balance sheet date through the date when these financial statements were issued to determine if they must be reported. The Management of the Company has determined that there was a reportable subsequent event to be disclosed as follows:

 

On April 2, 2012, the Company announced that its previously announced pre-IND Meeting was held with the USFDA on March 29th, 2012, as scheduled. This pre-IND meeting focused on FluCide™, designated as NV-INF-1, the Company’s novel anti-influenza drug. The Company received US FDA comments and exchanged a list of questions with the US FDA prior to the Meeting. The Company believes that the US FDA has given us a good roadmap for advancing towards an IND application.

 

On May 7, 2012, the Company announced that a fundamental patent, on which the Nanoviricides® technology is based, was due to be issued in the USA on May 8, 2012. The US Patent (No. 8,173,764) is granted for "Solubilization and Targeted Delivery of Drugs with Self-Assembling Amphiphilic Polymers." The patent term is expected to last through October 1, 2026, including an anticipated extension, with the possibility of further extensions in compensation for time spent in clinical trials.

 

This US Patent has been allowed with a very broad range of claims to a large number of families of chemical structure compositions, pharmaceutical compositions, methods of making the same, and uses of the same. The disclosed structures enable self-assembling, biomimetic nanomedicines. NanoViricides, Inc. holds exclusive, perpetual, worldwide licenses to these technologies for a broad range of antiviral applications and diseases.

 

Based on international PCT application number WO 2007/1084126, which was filed in 2006, corresponding patents have also been issued in Mexico, New Zealand, South Africa, and as a regional (OAPI) patent valid in sixteen other African states. Additional issuances are expected in Europe, and in several other countries around the world.

 

On May 8, 2012 the United States Patent and Trademark Office granted Patent No. 8,173,764 for "Solubilization and Targeted Delivery of Drugs with Self-Assembling Amphiphilic Polymers" to the inventors Anil R. Diwan, PhD, Jayant G. Tatake, PhD, and Ann L. Onton, all of who are among the founders of NanoViricides, Inc. The patents have been assigned to AllExcel, Inc., the Company at which the ground-breaking work was performed. AllExcel, Inc. has contractually transferred this intellectual property to TheraCour Pharma, Inc.

NanoViricides, Inc. holds exclusive worldwide licenses to these technologies for a broad range of antiviral applications and diseases that include All Influenzas including Asian Bird Flu Virus, Human Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis C Virus (HCV), Herpes Simplex Virus (HSV), Dengue viruses, Rabies virus, Ebola/Marburg viruses, Japanese Encephalitis virus, as well as viruses causing viral Conjunctivitis (a disease of the eye) and Ocular Herpes, and Ebola/Marburg viruses.

 

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Additional patents have also been filed to protect portions of the proprietary intellectual property on which the licenses from TheraCour to NanoViricides are based.

 

On May 14, 2012, the Company announced that it has retained Mr. Andrew Hahn as a consultant to help with the overall design and construction of its laboratory and cGMP pilot production facility. This facility will be built by renovating an existing 18,000 sq. ft. light manufacturing plant on a 4.2 acre lot in Shelton, CT, as previously announced. Mr. Hahn will help the Company in the overall design, architecture, engineering, and construction of the whole facility that includes the cGMP facility, laboratories, and office spaces. Mr. Hahn recently retired as the Senior Director of Engineering, Pharmaceutical Facilities, Global Engineering, at the Bristol-Myers-Squibb Company Worldwide Medicines Group (BMS). He has almost 30 years of experience in architecture, design and project management in the creation of new and refurbished facilities at Bristol-Myers Squibb Company.

 

Of importance to the Company’s project, he was responsible for the worldwide design and construction of pharmaceutical plants, pilot plants and clinical supply facilities as well as research laboratories and offices while at BMS. Mr. Hahn holds a BA in Architecture from Princeton University. His responsibilities at BMS included overall management of facilities engineering, design, construction, and validation initiatives, overall project planning and management, as well as team-building and staff training in various aspects from architectural and engineering challenges to project management issues.

 

The Company has previously announced the acquisition of the Shelton light industrial building that will house the cGMP pilot production plant, research laboratories and offices, by a separate real-estate holding company called Inno-Haven, LLC. The cGMP pilot plant is being designed to produce sufficient quantities of the drug needed for human clinical trials for each of the various nanoviricides® drug candidates as they advance into the clinical pipeline. This cGMP plant is not intended for the commercial production of drugs for sale. The Company believes that as its drugs progress through the human clinical trials, it will be able to license or partner further drug development and commercialization activities to another pharmaceutical company. There can be no assurance that the Company will be able to enter into co-development or other licensing agreements.

 

The Company’s Drug Pipeline

 

Management believes that it has achieved significant milestones in the development of a number of antiviral nanoviricide drug candidates. We now have high efficacy lead drug candidates against five commercially important diseases, namely, (1) All Influenza viruses (FluCide-I™), (2) HIV (HIVCide-I™), (3) Nanoviricide Eye Drops for Viral Infections of the External Eye, (4) a nanoviricide against Herpes “Cold Sores” and genital herpes, and (5) Dengue viruses. Further, the Company has identified highly active nanoviricide drug candidates against Ebola/Marburg, and against Rabies. In addition, the Company has also established the technology feasibility for (a) broad-spectrum nanoviricides, and (b) Just-in-Time ADIF(™) technology; both of which are well suited for stockpiling to defend against known as well as novel infectious diseases.

 

We continue to achieve significant success in our drug development programs.

 

Our anti-Influenza drug candidate - Flucide

 

On March 29, 2012, the Company held a pre-IND Meeting with the US FAD for NV-INF-1, its anti-Influenza clinical drug candidate in the FluCide™ program. The Company had filed a pre-IND meeting request to the US FDA on December 5, 2011. On January 31, 2012, the Company announced that it had submitted the pre-IND Briefing Documents regarding FluCide to the US FDA. The Company plans to seek two different indications for this drug candidate: (1) uncomplicated out-patient influenza, and (2) hospitalized patients presenting with influenza-like-illness (ILI). The Company received US FDA comments and exchanged a list of questions with the US FDA prior to the pre-IND Meeting. The Company believes that the US FDA has given us a good roadmap for advancing towards an IND application. The Company now intends to undertake the extensive “CMC” (The Chemical, Manufacturing and Controls) studies , safety-toxicology studies as well as additional animal efficacy studies as necessary.

 

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This anti-influenza therapeutic candidate is expected to be effective against most if not all types of influenzas including Bird Flu H5N1, Highly Pathogenic Influenzas (HPI/HPAI), Epidemic Influenzas such as the 2009 “swine flu” H1N1/A/2009, and Seasonal Influenzas.

 

The Company believes that a single-dose therapy, readily administered when the patient first visits the clinic, is likely for out-patient influenza cases. For hospitalized influenza patients, the Company is developing a drug solution that would be piggy-backed onto the customary IV-fluid treatment. These projections are based on our anti-influenza studies in a small animal (mouse) model.

 

On January 31, 2012, the Company announced that it had submitted the pre-IND Briefing Documents regarding FluCide to the US FDA. The Company plans to seek two different indications for this drug candidate: (1) uncomplicated out-patient influenza, and (2) hospitalized patients presenting with influenza-like-illness (ILI).

 

The Company has successfully completed its candidate optimization program against influenzas resulting in drug candidates that are as much as 1,000 times more effective than oseltamivir (Tamiflu®) in reducing lung viral load in lethally H1N1-infected animals and several other observed parameters. With the extremely high efficacy levels of our anti-influenza drug candidates, we were able to combine our multiple influenza drug programs and formulate a single Pan-Influenza drug program, FluCide™, last year. We optimized the drug candidates in the FluCide program this year and were pleasantly surprised to achieve even greater levels of effectiveness, while the drug still appears to be as safe as in previous studies. One of these highly effective drug candidates was nominated as the clinical drug candidate, NV-INF-1. The Company also has several back-up clinical quality candidates for influenza therapy that have resulted from this program.

 

These FluCide studies were conducted by Dr. Krishna Menon, PhD, VMD, MRCS, at KARD Scientific, MA. One million virus particles of Influenza A Strain A/WS/33 (H1N1) were aspirated directly into the lungs of mice. The same quantity of virus infection was repeated at 22 hrs. This influenza model was designed to be uniformly fatal in 100% of the infected, untreated animals within 5 days after infection. Treatment with  the FluCide candidates and Tamiflu® (Roche) commenced 24 hours after the first viral infection. The duration of study was set at 21 days in the protocol. It was extended in order to properly evaluate the longest surviving animals. This is a lethality-based model in which all of the untreated animals die within 5 days, and all of the animals treated with 40mg/kg oseltamivir (oral) die within 8 days. Test animals survived the full duration of the study upon treatment with our FlucideTM drug candidate, indicating an extremely high level of effectiveness against the Influenza virus.

 

These FluCide drug candidates were also found to offer significant protection against devastating lung lesions in this lethal influenza infection animal study.

 

We have reported that post-infection treatment with its optimized FluCide™ drug candidates resulted in dramatic reduction in the number of lung lesions that are caused by a lethal influenza virus infection. Four days post virus infection, animals treated with three of the optimized FluCide™ nanoviricide drug candidates exhibited greater than 95% reduction in the number of lung lesions as compared to the infected yet untreated control animals (p-values < 0.001). In contrast, animals treated with Oseltamivir (Tamiflu®, Roche) showed only a 50% reduction. In another significant finding, no increase in the number or size of the lung lesions was observed over the entire duration of the study in the FluCide™ treated animals. This was not the case for the Oseltamivir-treated animals. This demonstrated that treatment with FluCide drug candidates provided clear and strong protection against lung damage caused by the severe influenza infection.

 

In addition, we also found that these FluCide™ drug candidates led to significant reduction in the damaging white blood cell presence in lung tissue in the same study. These optimized FluCide™ drug candidates resulted in significant reduction in lung tissue presence of leukocytes, and in particular, that of eosinophils in a lethal influenza infection animal model.

 

Eosinophil expansion occurs in response to a viral infection, and is indicative of a viral infection. Various white blood cells (leukocytes) also increase in response to a viral infection. These phenomena are part of the normal immune response. In severe influenza cases, it is thought that patients can go into a stage called “cytokine storm syndrome”. This may be thought of as an all-out attack by an expanded army of white blood cells in response to an uncontrolled viral infection. In an attempt to control the viral infection, the immune system attacks the infected cells as well as nearby normal cells. This can lead to severe lung damage that may rapidly become fatal.

 

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We observed that the reduced white blood cell and eosinophil counts were consistent with the dramatic reduction in lung lesions that we had found to occur upon FluCide treatment in lethally influenza infected animals.

 

We also found that treatment with the FluCide™ drug candidates resulted in a 1000-fold reduction of  influenza viral load in the lungs of animals infected with lethal dose of influenza virus in this study.

 

The amount of infectious virus in the lungs of the infected animals treated with three of the optimized FluCide™ nanoviricide drug candidates was reduced by greater than 1000-fold as compared to the infected untreated control animals (p-values < 0.001), four days after virus infection. In contrast, animals treated with Oseltamivir (Tamiflu®, Roche) showed less than a 2-fold reduction in lung viral load at the same time point. This indicated a >1,000-fold greater reduction in viral load by FluCide drug candidates >700x by a third drug candidate over Oseltamivir.

 

Of great clinical significance is the fact that two of the optimized FluCide™ drug candidates maintained this greatly reduced lung viral load at 7, 13 and 19 days after virus infection in this 21 day study. Thus, treatment with FluCide drug candidates appeared to protect against the complete cycle of infection, virus expansion and spread of infection in the lungs that follows the initial virus infection. This was not the case for the oseltamivir-treated animals. Animals treated with Oseltamivir (Tamiflu®, Roche) showed less than a 2-fold reduction in lung viral load at 4 days and the viral load was increased at 7 days to the same level as that found in the infected, untreated control animals shortly before their death.

 

The Company had previously reported 18.3 days mean survival, in conjunction with a thirty-fold (30X) lung viral load reduction, with its then best anti-influenza drug candidate in the same animal model. After that, our FluCide program progressed to process chemistry optimizations that were expected to provide additional benefits in terms of efficacy and safety improvements. We have reported that these improvements have led to animal survival over the full defined 21 day duration of study for one drug candidate, with two additional drug candidates close behind the top candidate, at 20.2 and 20.4 days, along with a 1,000X reduction in the lung viral load, indicating the success of our process chemistry optimizations.

 

Based on this information, the Company has declared a clinical drug candidate against Influenza that the Company believes is on course for further development towards an IND submission to the FDA. The Company has filed a pre-IND Meeting application to the FDA. Subsequently, the Company has submitted the necessary pre-IND Briefing documents regarding its clinical candidate for influenza, NV-INF-1, to the FDA, on January 31, 2012.

 

A single dose therapy of normal influenza infection appears to be feasible with this anti-influenza nanoviricide clinical candidate. This can be easily administered by a medical officer when the patient goes for the first clinical visit. The Company believes that in most instances no follow-on treatment would be necessary. This expectation is based on the following results from its animal studies: (1) the extremely high treatment effectiveness in inhibiting the cycle of infection, virus expansion and spread of infection and, (2) the significantly long lasting effects of the drug treatment after the drug is discontinued.

 

For severe, hospitalized cases of influenza, we are developing a concentrated solution that is administered by “piggy-back” incorporation into the standard IV fluid supplement system that is commonly used in hospitalized patients.

 

Our anti HIV/Aids drug candidate – HIVCide.

 

We also reported the results of our recent anti-HIV drug development study in the standard humanized mouse model in the HIVCide program. In this model, the immune system of the mouse is replaced by human immune system. Then HIV infection is given. HIV infects the human immune system. The antivirals are then given and tested for their effect on the interaction of HIV with the implanted human immune system. In the previous anti-HIV study, we had found that three different unoptimized anti-HIV nanoviricides exhibited extremely strong effectiveness that was equal to or better than a three drug HAART cocktail (highly effective antiretroviral treatment) in this animal model. We have since developed better optimized ligands to attack the HIV virus particle. In order to find the best ligand, we reduced the amount of ligand attached to the polymer chain in this new study. We believe that we were able to select the best nanoviricide anti-HIV ligand in the new study, which appears to be better than all the ligands tested in the previous study. This new nanoviricide’s effect was still equal to or better than the same three drug HAART cocktail, although we had expected a reduced effect.

 

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What is more, the new anti-HIV nanoviricide drug candidate continued to maintain HIV-1 viral load suppression for at least 28 days after last drug dosing in this recent study. So we believe that an intermittent therapy against HIV/AIDS is feasible with nanoviricides. We believe that such a therapy would allow patients to achieve nominally HIV-free status, and have a normal life, for long periods without drugs. We are now further optimizing the HIVCide drug candidates. In effect, we believe that HIVCide would enable a “functional cure” for HIV, although much work needs to be done as this program matures into a clinical candidate.

 

Our HIVCide studies were conducted by Dr. Krishna Menon, PhD, VMD, MRCS, at KARD Scientific, MA.

 

Nanoviricide technology is built on the TheraCour® polymeric micelle platform technology. The design of these materials is like building blocks. We can select components to achieve desired effects. This tailor-made customizability has many implications. It allows us to (1) rapidly create a new drug against a different virus; (2) rapidly develop a drug with desired length of time for which its effect should persist in the human body; (3) quickly develop new drugs with different routes of administration; among many other benefits.

 

We had always suspected that the polymeric nature of nanoviricides would enable a long drug effectiveness time frame, thus enabling infrequent dosing. We have indications now that this is very likely true, from both FluCide™ and HIVCide™ programs. We have observed sustained antiviral effects for a long time after last drug administration in various animal model studies.

  

Infrequent dosing would translate into ease of patient compliance. Patient compliance is a major issue for all antiviral drug therapies, and particularly for HIV/AIDS.

 

We have been able to develop drugs using many different routes of administration with very little development time and effort.

 

Other drug candidates:

 

In addition to the declared clinical candidate for Influenza, and the anti-HIV drug candidates discussed above, the Company continues to work on pre-clinical studies towards the optimization of drug candidates against HSV, Dengue, and external eye viral diseases. In addition, nanoviricides against Rabies, Ebola/Marburg, Hepatitis C Virus (HCV), and several other viral diseases are at various early stages of research and development and involve a substantial amount of uncertainty as to the development of these drug candidates. Many of these drug programs are expected to result in clinical drug candidates against the respective viral diseases. Thus the Company has a very broad pipeline that is expected to continue to fuel its growth for several years to come.

 

The Company has limited experience with pharmaceutical drug development. Thus, our budget estimates are not based on experience, but rather based on advice given by our associates and consultants. As such these budget estimates may not be accurate. In addition, the actual work to be performed is not known at this time, other than a broad outline, as is normal with any scientific work. As further work is performed, additional work may become necessary or change in plans or workload may occur. Such changes may have an adverse impact on our estimated budget. Such changes may also have an adverse impact on our projected timeline of drug development.

 

The Company is currently engaged in developing a pilot-scale manufacturing  capability. The manufacturing portion of the facility will eventually need to be certified by the FDA in order for the Company to produce experimental materials that can be used in human clinical trials. It is preferable to use the same quality of materials for pharmaco-kinetic, pharmaco-dynamic and toxicology studies, although the materials for these pre-IND studies do not need to be manufactured in a cGMP-certified facility. These three sets of studies must be completed prior to the Company filing an IND with the FDA to begin the human safety and efficacy trials (Phase I, II and III).

 

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The Company has not yet performed detailed safety profile studies to be included in a “Tox Package” for submission to the FDA for any of our drug candidates. Our studies regarding safety of the various nanoviricide drug candidates to date have been preliminary and of a limited nature. However, the nanoviricides have been well tolerated with no overt adverse effects observed even in animals treated for more than 7 weeks. Management’s beliefs are based on results of pre-clinical cell culture studies and in vivo animal studies using mice.

 

The Company thus has a strong and growing drug pipeline to take us several years into the future. The Company already has technologies in development that promise to yield even better drugs against various diseases as the drugs we are developing now approach their product end of lifecycle.

 

It should be noted that all of our studies to date were preliminary. Thus, the evidence we have developed is indicative, but not considered confirmative, of the capabilities of the nanoviricides technology's potential.

 

Research and Development Costs

 

The Company does not maintain separate accounting line items for each project in development. The Company maintains aggregate expense records for all research and development conducted. Because at this time all of the Company’s projects share a common core material, the Company allocates expenses across all projects at each period-end for purposes of providing accounting basis for each project. Project costs are allocated based upon labor hours performed for each project.

 

The Company has signed several cooperative research and development agreements with different agencies and institutions The Company expects to enter into additional cooperative agreements with other governmental and non-governmental, academic, or commercial, agencies, institutions, and companies. There can be no assurance that a final agreement may be achieved and that the Company will execute any of these agreements. However, should any of these agreements materialize, the Company will implement a system to track these costs by project and account for these projects as customer-sponsored activities and show these project costs separately.

 

Requirement for Additional Capital

 

As of March 31, 2012, we have a cash and cash equivalent balance of $12,984,397 which will be sufficient to fund our operations through more than two years or March 31, 2014, at the Company’s current rate of expenditure.

 

While we now have the necessary funds based on our current operations to last more than the next 24 months, we anticipate undertaking additional expenditures to accelerate our progress to regulatory submissions. With the recent $5M raise in this reported period, we believe that we currently have sufficient funding available to perform Toxicology Package studies, and additional animal efficacy studies, to move at least one of our drug candidates into an Investigational New Drug Application (“IND”) with the US FDA. In order to file an IND application, we also need to enable manufacturing of the drug under US FDA guidelines called cGMP. We estimate that a small, 1kg/batch, production facility would be sufficient to satisfy the Company’s near future needs for supporting the FluCide clinical studies, at least through Phase II. This small batch size requirement is based on the extremely high effectiveness of the influenza clinical candidate observed in animal studies, and therefore must be treated with caution.  We intend to enter into lease negotiations with Inno-Haven, LLC (“Inno-Haven”) to enable cGMP manufacture of our drug products. Inno-Haven is managed by its member Dr. Anil R. Diwan, who is our President and Chairman. Inno-Haven raised financing from Dr. Diwan and others, including some earlier investors of NanoViricides, Inc., and has purchased an 18,000 square foot building in Shelton, CT, on a 4 acre lot, enabling future expansion of operations.  Dr. Diwan raised additional financing through the sale of his NanoViricides stock that he had obtained as a founder under a 10b5-1 plan that was concluded in October, 2011. Inno-Haven plans to raise the balance of financing through applicable and available loan programs such as the SBA-guaranteed bank loans and mortgages, the State of Connecticut programs for development of high tech industry, and additional investors. No lease agreement has been drawn up and the terms of lease have not yet been negotiated.

  

We anticipate that as we file an IND application, we may need an additional $10M to $15M to take one of our drug candidates through certain phases of human clinical trials.  Further additional funding, if available, will allow us to move our other drug candidates towards IND filings. These additional funds will be needed to pay for additional personnel, increased subcontract costs related to the expansion and further development of our drug pipeline, and for additional capital and operational expenditures required to file IND applications. We will accelerate our business plans provided that we can obtain such additional funding. We believe that we currently have adequate financing for our current business plan of operations.

 

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We anticipate that we will incur the following expenses over the next 18 months.

 

1.           Research and Development of $6,700,000: Planned costs for IND-enabling studies for pan-influenza drug candidate, in-vivo and in-vitro studies for pan-influenza FluCide, Eye nanoviricide, HIVCide, HerpeCide, Dengue and Ebola/Marburg, and Rabies programs.

 

2.           Corporate overhead of $1,250,000: This amount includes budgeted office salaries, legal, accounting, investor relations, public relations, and other costs expected to be incurred by being a public reporting company.

 

3.           Capital costs of $2,000,000: This is the estimated cost for equipment and laboratory improvements.

 

4.           Staffing costs of $2,000,000: This is the estimated cost of hiring additional scientific staff and consulting firms to assist with FDA compliance, material characterization, pharmaco-kinetic, pharmaco-dynamic and toxicology studies, and other items related to FDA compliance, as required for development of necessary data for filing an Investigational New Drug Application (IND) with the United States Food and Drug Administration.

 

In March, 2010, the Company filed a Form S-3 Shelf Registration with the Securities and Exchange Commission (SEC) for the sale from time to time of up to $40 million of the Company’s securities.  The registration statement became effective on April 29, 2010. As of March 31, 2012, the Company has drawn down $20,000,000 of the $40,000,000 S-3 Shelf Registration. The Company anticipates further draw downs on this S-3 Shelf Registration to fund its additional capital requirements and expenditures as required.  If we are unable to obtain additional financing, our business plan will be significantly delayed.

 

The Company has limited experience with pharmaceutical drug development. Thus, our budget estimates are not based on experience, but rather based on advice given by our associates and consultants. As such these budget estimates may not be accurate. In addition, the actual work to be performed is not known at this time, other than a broad outline, as is normal with any scientific work. As further work is performed, additional work may become necessary or change in plans or workload may occur. Such changes may have an adverse impact on our estimated budget. Such changes may also have an adverse impact on our projected timeline of drug development.

 

We believe that our current work-plan will lead us to obtain certain information about the safety and efficacy of some of the drugs under development in animal models. If our studies are not successful, we will have to develop additional drug candidates and perform further studies. If our studies are successful, then we expect to be able to undertake further studies in animal models to obtain necessary data regarding the pharmaco-kinetic and pharmaco-dynamic profiles of our drug candidates. We believe these data will then enable us to file an Investigational New Drug (IND) application, towards the goal of obtaining FDA approval for testing the drugs in human patients.

 

Most pharmaceutical companies expect 4 to 10 years of study to be required before a drug candidate reaches the IND stage. We believe that because we are working in the infectious agents area, our studies will have objective response end points, and most of our studies will be of relatively short durations. Our business plan is based on these assumptions. If we find that we have underestimated the time duration of our studies, or we have to undertake additional studies, due to various reasons within or outside of our control, this will grossly and adversely impact both our timelines and our financing requirements.

 

Management intends to use capital and debt financing, as required, to fund the Company’s operations. Management also intends to pursue non-diluting funding sources such as government grants and contracts as well as licensing agreements with other pharmaceutical companies. There can be no assurance that the Company will be able to obtain the additional capital resources necessary to fund its anticipated obligations beyond March 31, 2014. The Company currently has no long term debt.

 

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The Company is considered to be a development stage company and will continue in the development stage until it generates revenues from the sales of its products or services.

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We currently have no foreign operations and are not exposed to foreign currency fluctuations. Our primary exposure to market risk is interest rate risk associated with our short term cash equivalent investments, which the Company deems to be non-material. The Company does not have any financial instruments held for trading or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure. The Company does not have any credit facilities with variable interest rates.

 

ITEM 4.  CONTROLS AND PROCEDURES

 

  (a) Evaluation of disclosure controls and procedures.

 

Based upon an evaluation of the effectiveness of disclosure controls and procedures, our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were not effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the SEC and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

 

Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2011. To evaluate the effectiveness of our internal control over financial reporting, management used the criteria described in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO Framework”). Based on its evaluation under the Internal Control - Evaluation Framework, due to the material weakness described above, management concluded that our internal control over financial reporting was not effective as of March 31, 2012. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected on a timely basis by the Board in the normal course of their duties. See, AUDITOR’S OPINION PARAGRAPH BELOW.

 

The material weakness relates to a lack of a functioning audit committee and a lack of outside directors on the Company’s Board of Directors. We intend to initiate measures to remediate the identified material weakness by establishing a formal audit committee and the appointment of additional outside directors, one or more of whom may be appointed to a fully functioning audit committee.

 

The Company’s annual report on Form 10-K, as amended, includes an attestation report of our registered public accounting firm regarding internal control over financial reporting. The final paragraph of the Auditor’s Report states:

 

“Also in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2011 and 2010 and the results of its operations and its cash flows for the fiscal years then ended and for the period from May 12, 2005 (inception) through June 30, 2011 in conformity with accounting principles generally accepted in the United States of America.”

 

Although its By-laws provide for the appointment of one, the Company is not yet required to have an Audit Committee as a result of the fact that our common stock is not considered a “listed security” as defined in Rule 10A-3 of the Exchange Act. However, the Company is in the process of addressing this issue by establishing an Audit Committee, and has initiated an active search for qualified, independent directors for the audit committee, including one or more members with financial expertise.

 

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  b) Changes in internal control over financial reporting.

 

Other than as described above, there were no material changes in our internal control over financial reporting (as defined in Rule 13a- 15(f) under the Exchange Act) that occurred as of March 31 ,2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

ITEM 1.  LEGAL PROCEEDINGS

 

From time to time, we may be a party to legal proceedings in the ordinary course of our business in addition to those described below. We do not, however, expect such other legal proceedings to have a material adverse effect on our business, financial condition or results of operations.

 

On or around December 22, 3011, the Connecticut Secretary of the State, as agent for service of process for the Company, was served with a Summons and Complaint in the case entitled David F. Gencarelli, Esq. d/b/a Gencarelli Group v. Nanoviricides, Inc. (Case No. 2011-CA-006555-B) filed in the Superior Court for the district of Columbia Civil Division.  The Complaint for breach of contract, unjust enrichment, and quantum meruit claims unpaid legal fees of $77,601.00.  On January 20, 2012, the case was removed to the United States District Court for the District of Columbia and the Company filed an Answer denying the claim and setting forth additional affirmative defenses and a counterclaim for legal fees. .Management believes that this lawsuit has no merit or basis and intends to defend the lawsuit vigorously, and as a result no accrual has been made in relation to this litigation.

 

On or around January 18, 2012, the Nevada Agency and Transfer Company, as agent for service of process for the Company in Nevada, was served with a Summons and Complaint in the case entitled Yidam, Ltd. v. Eugene Seymour, Anil Diwan, and NanoViricides, Inc. (Case No. A-12-654437-B) answerable in the Eighth Judicial District Court of the State of Nevada – Clark County (“Court”).  The Complaint seeks to compel inspection of the Company’s books and records.  On or about February 14, 2012, we filed a Motion to Dismiss the Complaint for failure to state a claim upon which relief can be granted.  The Complaint further seeks unspecified “injunctive relief” in furtherance of the demand for inspection to which it is not entitled.  The Complaint by a holder of less than 1 percent of the common stock of the Company seeks to, inter alia, inspect documents and records of the company to which it is not entitled and in a form and manner the Company argues is not authorized by statute.  Management believes that this lawsuit has no merit or basis and intends to vigorously defend it.  Monetary damages have not been claimed and as a result no accrual has been made in relation to this litigation. On April 9, 2012, the Court dismissed the Complaint for failure to state a Claim for which relief could be granted.

 

On or around April 13, 2012, the Nevada Agency and Transfer Company, as agent for service of process for the Company in Nevada, was served with a Summons and Complaint in the case entitled Yidam, Ltd. v. Eugene Seymour, Anil Diwan, and Nanoviricides, Inc. ((Case No. A-12-659535-B) answerable in the Eighth Judicial District Court of the State of Nevada – Clark County (“Court”).  The Complaint seeks to compel inspection of the Company’s books and records.  On or about May 2, 2012 we filed a Demand for Security of Costs. Upon filing of the Demand, proceedings relative to the Company are stayed pending posting of the demanded security (or plaintiff engages in motion practice about the Demand).  30 days (+3 for mailing) from service, the Company may seek dismissal of the complaint if plaintiff has not posted the demanded security (or engaged the court).  the Company will have 10 days after service of notice of posting within which to answer or otherwise respond to the complaint The Complaint further seeks unspecified “injunctive relief” in furtherance of the demand for inspection to which it is not entitled.  The Complaint, by a holder of less than 1 percent of the common stock of the Company, seeks to, inter alia, inspect documents and records of the company to which it is not entitled and in a form and manner the Company argues is not authorized by statute.  Management believes that this lawsuit has no merit or basis and intends to vigorously defend it.  Monetary damages have not been claimed and as a result no accrual has been made in relation to this litigation

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

In February, 2012, the Scientific Advisory Board (SAB) was granted warrants to purchase 60,000 shares of common stock at $1.09 per share expiring in February , 2016.

 

For the three months ended March 31, 2012, the Company's Board of Directors authorized the issuance of 25,862 shares of its common stock with a restrictive legend to an unrelated party for consulting services.

 

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The securities described above were offered and sold in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act and Rule 506 of Regulation D promulgated thereunder. The agreements executed in connection with this sale contain representations to support the Registrant’s reasonable belief that the Investor had access to information concerning the Registrant’s operations and financial condition, the Investor acquired the securities for their own account and not with a view to the distribution thereof in the absence of an effective registration statement or an applicable exemption from registration, and that the Investor are sophisticated within the meaning of Section 4(2) of the Securities Act and are “accredited investors” (as defined by Rule 501 under the Securities Act). In addition, the issuances did not involve any public offering; the Registrant made no solicitation in connection with the sale other than communications with the Investor; the Registrant obtained representations from the Investor regarding their investment intent, experience and sophistication; and the Investor either received or had access to adequate information about the Registrant in order to make an informed investment decision.  The Company has not utilized an underwriter for an offering of its securities, except in the recent financing completed on February 8, 2012, with Seaside 88, LP, wherein Midtown Capital Partners, LLC were engaged as placement agent for the Company’s securities sold in the offering.

 

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.  MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.  OTHER INFORMATION

 

None.

 

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

 

(a)    Exhibit index

 

Exhibit    
     
31.1   Certification of Chief Executive and Interim Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
     
32.1   Certification of Chief Executive Officer and Interim Chief Financial Officer  required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

(b)  Reports on Form 8-K.  During the fiscal quarter ended March 31, 2012, the Company filed the following Current Reports on Form 8-K:

 

On February 9, 2012,the Registrant filed a Current Report on Form 8-K disclosing that on February 8, 2012, Seaside 88, LP (“Seaside”), Seaside purchased 250,000 shares of the Registrant’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”) at the purchase price of $10.00 per share (the “Purchase Price”) for an aggregate purchase price of $2,500,000. The Registrant also disclosed 40,000 shares of Series B Preferred Stock automatically converted into shares of the Registrant’s common stock, par value $0.001 per share (the “Common Stock”) on February 8, 2012 and 40,000 shares (or such lesser number that remains unconverted) shall convert every fourteen (14) days thereafter.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: May 17, 2012

 

NANOVIRICIDES, INC.  
   
/s/ Eugene Seymour, MD  
Name:  Eugene Seymour, M.D.  
Title:  Chief Executive Officer and Interim  
Chief Financial Officer and Director  
(Principal Executive Officer and Principal Financial Officer)  
   
/s/ Anil Diwan  
Name:  Anil Diwan  
Title:  President and Chairman of the Board of Directors  

 

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