Annual Statements Open main menu
  1. Annual Statements
  2. » Companies
  3. » NANOVIRICIDES, INC.
  4. » Quarter Report: 2014 March (Form 10-Q)

NANOVIRICIDES, INC. - Quarter Report: 2014 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, 2014

 

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, par value $0.001 per share, as of May 15, 2014, was approximately: 54,536,000

 

 
 

 

NANOVIRICIDES, INC.

FORM 10-Q

INDEX

 

PART I FINANCIAL INFORMATION  
   
Item 1. Financial Statements  
   
Balance Sheets at March 31, 2014 (Unaudited) and June 30, 2013 3
   
Statements of Operations for the Three Months and Nine Months Ended March 31, 2014 and 2013 and for the Period from May 12, 2005 (Inception) through March 31, 2014 (Unaudited) 4
   
Statement of Stockholders’ Equity For the period May 12, 2005 (inception through March 31, 2014 (Unaudited) 5
   
Statements of Cash Flows for the Nine Months Ended March 31, 2014 and 2013 and for the Period from May 12, 2005 (Inception) through March 31, 2014 (Unaudited) 6
   
Notes to the Financial Statements (Unaudited) 7
     
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 33
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 39
     
Item 4. Controls and Procedures 39
     
PART II OTHER INFORMATION  
     
Item 1. Legal Proceedings 41
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 42
     
Item 3. Defaults Upon Senior Securities 42
     
Item 4. Mine Safety Disclosures 43
     
Item 5. Other Information 43
     
Item 6. Exhibits and Reports on Form 8-K 43
     
Signatures 44
   
Certifications  

 

2
 

 

Nanoviricides, Inc.

 

(A Development Stage Company)

Balance Sheets

 

   March 31, 2014   June 30, 2013 
   (Unaudited)     
         
ASSETS          
CURRENT ASSETS:          
Cash and cash equivalents  $33,265,348   $13,923,245 
Prepaid expenses   1,338,895    598,380 
           
Total Current Assets   34,604,243    14,521,625 
           
PROPERTY AND EQUIPMENT          
Property and equipment   5,123,849    1,505,648 
Accumulated depreciation   (1,188,654)   (1,036,752)
           
Property and equipment, net   3,935,195    468,896 
           
TRADEMARK          
Trademark   458,954    458,954 
Accumulated amortization   (48,502)   (41,921)
           
Trademark, net   410,452    417,033 
           
SECURITY DEPOSIT   2,000,000    1,000,000 
           
Total Assets  $40,949,890   $16,407,554 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
CURRENT LIABILITIES:          
Accounts payable  $255,002   $263,258 
Accounts payable – related parties   746,036    710,567 
Accrued expenses   207,096    204,359 
           
Total Current Liabilities   1,208,134    1,178,184 
           
LONG TERM LIABILITIES:          
Debentures payable   3,887,378    3,468,073 
Derivative liability   3,824,986    3,751,645 
Total Long Term Liabilities   7,712,364    7,219,718 
           
Total Liabilities   8,920,498    8,397,902 
           
COMMITMENTS AND CONTINGENCIES          
           
STOCKHOLDERS' EQUITY:          
Series A Convertible Preferred stock, $0.001 par value, 4,000,000 shares designated, 3,017,307 and 2,990,000 shares issued and outstanding, respectively   3,018    2,990 
Series B Convertible Preferred stock, $0.001 par value, 2,857,143 shares designated, none issued and outstanding   -    - 
Series C Convertible Preferred stock, $0.001 par value, 10,000,000 shares designated, none issued and outstanding   -    - 
Common stock, $0.001 par value; 85,714,286 shares authorized; 54,536,081 and 47,026,173 shares issued and outstanding, respectively   54,536    47,026 
Additional paid-in capital   78,531,194    46,259,420 
Deficit accumulated during the development stage   (46,559,356)   (38,299,784)
           
Total Stockholders' Equity   32,029,392    8,009,652 
           
Total Liabilities and Stockholders' Equity  $40,949,890   $16,407,554 

 

See accompanying notes to the financial statements

 

3
 

 

NanoViricides, Inc.

 

(A Development Stage Company)

Statements of Operations 

 

                   For the Period from 
   For the Three Months   For the Three Months   For the Nine Months   For the Nine Months   May 12, 2005 
   Ended   Ended   Ended   Ended   (inception) through 
   March 31, 2014   March 31, 2013   March 31, 2014   March 31, 2013   March 31, 2014 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
                     
OPERATING EXPENSES                         
Research and development  $625,737   $1,359,205   $2,930,436   $3,279,220   $25,734,496 
Refund credit research and development costs   -    -    -    -    (420,842)
General and administrative   607,628    831,353    1,943,123    1,748,582    14,957,971 
                          
Total operating expenses   1,233,365    2,190,558    4,873,559    5,027,802    40,271,625 
                          
LOSS FROM OPERATIONS   (1,233,365)   (2,190,558)   (4,873,559)   (5,027,802)   (40,271,625)
                          
OTHER INCOME (EXPENSE):                         
Interest income   54,789    -    78,850         346,548 
Interest expense   (2,725,716)   (822,278)   (2,972,216)   (770,825)   (3,149,254)
Amortization of discount on convertible debentures   (143,051)   -    (419,305)   -    (1,407,738)
Beneficial conversion feature of convertible debentures   -    -    -    -    (713,079)
Change in fair market value of derivatives   3,752,933    (669,753)   (73,342)   (896,302)   (1,364,208)
                          
Other income (expense), net   938,955    (1,492,031)   (3,386,013)   (1,667,127)   (6,287,731)
                          
LOSS BEFORE INCOME TAX PROVISION   (294,410)   (3,682,589)   (8,259,572)   (6,694,929)   (46,559,356)
                          
INCOME TAX PROVISION   -    -    -    -    - 
                          
NET LOSS  $(294,410)  $(3,682,589)  $(8,259,572)   (6,694,929)  $(46,559,356)
                          
NET LOSS PER COMMON SHARE                         
- BASIC AND DILUTED:  $(0.01)  $(0.08)  $(0.16)   (0.15)     
                          
Weighted average common shares outstanding                         
- basic and diluted   53,318,736    46,701,410    50,307,984    45,686,379      

 

See accompanying notes to the financial statements 

 

4
 

 

NanoViricides, Inc.
Statement of Stockholders' Equity
For the period from May 12, 2005 (inception) through March 31, 2014

 

   Series A Preferred Stock:
Par $0.001		   Series B Preferred Stock:
Par $0.001		   Series C Preferred Stock:
Par $0.001		   Common Stock:
Par $0.001		   Additional   Stock   Deficit Accumulated During the   Total 
   Number of       Number of       Number of       Number of       Paid-in   Subscription   Development   Stockholders' 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Receivable   Stage   Equity 
                                                 
Common shares issued May 12, 2005 (Inception)                                 5,714    6    14    (20)        - 
Share exchange with Edot-com.com Inc., June 1, 2005                                 (5,714)   (6)   (14)   20         - 
Common shares exchanged in reverse acquisition of Edot-com.com Inc., June 1, 2005                                 22,857,143    22,857    (22,837)   (20)        - 
Common shares outstanding Edot-com.com Inc., June 1, 2005                                 5,714,286    5,714    (5,714)             - 
Options granted in connection with reverse acquisition                                 -         -              - 
                                                             
Net loss                                 -         -         (66,005)   (66,005)
                                                             
Balance, June 30, 2005   -    -    -    -    -    -    28,571,429    28,571    (28,551)   (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                                 657,143    657    185,643              186,300 
Common shares issued for interest on debentures, September 30, 2005                                 13,765    14    4,301              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                                 97,143    97    169,903              170,000 
Common shares and warrants issued in connection with private placement of common stock, November 29, 2005                                 85,715    86    149,914              150,000 
Common shares and warrants issued in connection with private placement of common stock, November 30, 2005                                 42,857    43    74,957              75,000 
Common shares and warrants issued in connection with private placement of common stock, December 2, 2005                                 28,571    29    49,971              50,000 
Common shares and warrants issued in connection with private placement of common stock, December 6, 2005                                 242,857    243    424,757              425,000 
Common shares issued for legal services valued at $.95 per share, December 6, 2005                                 5,714    6    18,994              19,000 
Common shares and warrants issued in connection with private placement of common stock, December 12, 2005                                 214,286    214    374,786              375,000 
Common shares and warrants issued in connection with private placement of common stock, December 13, 2005                                 14,286    14    24,986              25,000 
Common shares and warrants issued in connection with private placement of common stock, December 14, 2005                                 14,285    14    24,986              25,000 
Common shares issued in connection with debenture offering, December 15, 2005                                 14,286    14    48,986              49,000 
Common shares and warrants issued in connection with private placement of common stock, December 20, 2005                                 14,285    14    24,986              25,000 
Common shares and warrants issued in connection with private placement of common stock, December 29, 2005                                 14,286    14    24,986              25,000 
Common shares and warrants issued in connection with private placement of common stock, December 30, 2005.                                 14,285    14    24,986              25,000 
Common shares issued for interest on debentures, December 31, 2005                                 5,565    6    17,334              17,340 
Common shares issued for consulting services valued at $1.46 per share, January 9, 2006                                 978    1    5,000              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                                 2,263    2    22,190              22,192 
Options exercised, May 31, 2006                                 514,286    515    89,485              90,000 
Common shares and warrants issued in connection with private placement of common stock, June 15, 2006                                 535,714    536    1,874,464              1,875,000 
Common shares issued for interest on debentures, June 30, 2006                                 4,122    4    22,434              22,438 
                                                             
Net loss                                                     (3,284,432)   (3,284,432)
                                                             
Balance, June 30, 2006   -    -    -    -    -    -    31,108,121    31,108    4,557,805    (20)   (3,350,437)   1,238,456 
                                                             
Common shares issued for interest on debentures, July 31, 2006                                 1,641    2    7,642              7,644 
Common shares issued for conversion of convertible debentures, July 31, 2006                                 952,381    952    999,048              1,000,000 
Exercise of stock warrants, July 31, 2006                                 57,143    57    49,943              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                                 61,714    62    164,098              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                                 215    -    775              775 
Common shares issued for consulting services valued at $1.15 per share, June 20, 2007                                 28,572    29    114,971              115,000 
Common shares issued upon warrants conversion, June 20, 2007                                 265,714    266    619,734              620,000 
Common shares issued upon warrants conversion, June 25, 2007                                 21,429    21    49,979              50,000 
Common shares issued upon warrants conversion, June 30, 2007                                 85,714    86    199,914              200,000 
Common shares issued for consulting services valued at $1.06 per share, June 30, 2007                                 8,540    9    31,791              31,800 
Officers' compensation expense                                 -         27,062              27,062 
                                                             
Net loss                                 -         -         (3,118,963)   (3,118,963)
                                                             
Balance, June 30, 2007   -    -   $-    -    -    -    32,591,184    32,592   $6,937,166   $(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                                 428,571    429    749,571              750,000 
Common shares issued for consulting and legal  services valued at $.75 per share, September 30,  2007                                 7,213    7    18,393              18,400 
Common shares and warrants issued in connection with private placement of common stock, October 16,  2007                                 928,571    929    1,624,071              1,625,000 
Common shares and warrants issued in connection with private placement of common stock, October 16, 2007                                 71,428    71    124,929              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                                 16,329    16    26,884              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                                 17,585    18    27,882              27,900 
Common shares issued for consulting services valued at $.39 per share, April , 2008                                 7,929    8    10,813              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                                 8,526    9    27,891              27,900 
                                                             
Net loss                                 -         -         (2,738,337)   (2,738,337)
                                                             
Balance, June 30, 2008   -    -    -    -    -    -    34,077,336   $34,079   $9,617,397   $-   $(9,207,737)  $443,739 
                                                             
Common shares issued for consulting and legal services valued at $ 1.22 per share, July 31, 2008                                 1,171    1    4,999              5,000 
Common shares issued for consulting services valued at $1.22 per share, July , 2008                                 656    1    2,799              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                                 896,000    896    3,135,104              3,136,000 
Common shares issued to settle account payable                                 42,857    43    149,957              150,000 
Payment of Finder's Fee to Biotech                                 -    -    (14,696)             (14,696)
Common shares issued in connection with Warrant Conversion, August 22, 2008                                 35,714    36    106,214              106,250 
Common shares issued for  legal services valued at $1.24per share, August 31, 2008                                 1,152    1    4,999              5,000 
Common shares issued for consulting services valued at $1.24 per share, August,  2008                                 645    1    2,799              2,800 
Common shares issued for  legal services valued at $1.00 per share, September 30, 2008                                 1,429    1    4,999              5,000 
Common shares issued for consulting services valued at $1.00 per share, September 30, 2008                                 1,600    2    5,598              5,600 
Common shares issued for consulting and legal services valued at $ .71 per share, October 31, 2008                                 2,012    2    4,998              5,000 
Common shares issued for consulting services valued at $.71 per share, October 31, 2008                                 2,254    2    5,598              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                                 2,132    2    4,998              5,000 
Common shares issued for consulting services valued at $.67 per share, November 30, 2008                                 2,388    2    5,598              5,600 
Common shares issued for consulting and legal services valued at $ .83 per share, December 31, 2008                                 1,721    2    4,998              5,000 
Common shares issued for consulting services valued at $.83 per share, December 31 , 2008                                 1,928    2    5,598              5,600 
Common shares issued for legal services valued at $ .60 per share, January 20, 2009                                 2,381    2    4,998              5,000 
Common shares issued for consulting and legal services valued at $ .78 per share, January 31, 2009                                 2,132    2    4,997              4,999 
Common shares issued for consulting services valued at $.78 per share, January 31, 2009                                 2,388    2    5,598              5,600 
Common shares issued for consulting services valued at $ .70 per share, February 1, 2009                                 14,286    14    34,986              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                                 2,012    2    4,997              4,999 
Common shares issued for consulting services valued at $.71 per share, February 15, 2009                                 2,254    2    5,598              5,600 
Common shares issued for consulting and legal services valued at $ .67 per share, March 31, 2009                                 1,831    2    4,998              5,000 
Common shares issued for consulting services valued at $.67 per share, March 31 , 2009                                 2,051    2    5,598              5,600 
Common shares issued to acquire equipment valued at $0.79 per share                                 49,286    49    137,451              137,500 
Common shares issued for consulting and legal services valued at $0.69 per share, April 30, 2009                                 2,059    2    4,998              5,000 
Common shares issued for consulting services valued at $.69 per share, April 30, 2009                                 2,305    2    5,598              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                                 2,171    2    4,998              5,000 
Common shares issued for consulting services valued at $.66 per share, May 31, 2009                                 2,432    2    5,596              5,598 
Common shares issued for consulting services valued at $ .61 per share, June 30, 2009                                 7,063    7    14,993              15,000 
Common shares issued for consulting and legal services valued at $ .56 per share, June 30, 2009                                 2,560    3    4,997              5,000 
Shares issued for consulting services valued at $.56 per share, June 30, 2009                                 2,868    3    5,597              5,600 
Common shares and warrants issued in connection with private placement of common stock, June 30, 2009                                 42,857    43    74,957              75,000 
Common shares and warrants issued in connection with warrant conversion, June 30, 2009                                 585,914    586    1,024,764    (100,000)        925,350 
                                                             
Net loss                                 -         -         (2,787,798)   (2,787,798)
                                                             
Balance, June 30, 2009   -    -    -    -    -    -    35,799,845    35,800    14,545,276    (100,000)   (11,995,535)   2,485,541 
                                                             
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                                 2,165    2    4,998              5,000 
Common shares issued for consulting services valued at $.66 per share, July 31, 2009                                 2,424    2    5,598              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                                 1,861    2    4,998              5,000 
Common shares issued for consulting services valued at $.86 per share, August 31, 2009                                 1,661    2    5,598              5,600 
Common shares issued for consulting services valued at $ .89 per share, September 30, 2009                                 1,798    2    5,598              5,600 
Common shares issued for consulting and legal services valued at $ .89 per share, September 30, 2009                                 1,605    2    4,998              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                                 764,286    764    1,336,736              1,337,500 
Common shares and warrants issued in connection with warrant conversion, September 30, 2009                                 1,074,229    1,074    1,878,826              1,879,900 
Common shares issued for consulting and legal services valued at $ .57 per share, October 1, 2009                                 10,025    10    19,990              20,000 
Common shares issued for Legal services valued at $56.50 per share, October 26, 2009                                 3,571    4    7,059              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                                 1,960    2    4,998              5,000 
Common shares issued for consulting services valued at $.73 per share, October 31, 2009                                 2,195    2    5,598              5,600 
Common shares issued upon conversion of Warrants, November 10, 2009                                 2,857    3    1,437              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                                 9,286    9    25,191              25,200 
Common shares issued for consulting and legal services valued at $ .86 per share, November 30, 2009                                 1,661    2    4,998              5,000 
Common shares issued for consulting services valued at $.86 per share, November 30, 2009                                 2,791    3    8,397              8,400 
Common shares issued for consulting services valued at $ .85 per share, December 31, 2009                                 2,833    3    8,397              8,400 
Common shares issued for consulting and legal services valued at $ .85 per share, December 31, 2009                                 1,687    2    4,998              5,000 
Common shares issued for consulting and legal services valued at $1.043 per share, January 31, 2010                                 1,370    1    4,999              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   2,000,000    2,000                        -    -    5,000              7,000 
Common shares issued for consulting services valued at $1.096 per share, February 28, 2010                                 1,303    1    4,999              5,000 
Common shares issued for employee stock compensation valued at $1.25 per share, March 3, 2010                                 35,714    36    156,214              156,250 
Common shares issued for employee stock compensation valued at $1.25 per share, March 3, 2010                                 35,714    36    156,214              156,250 
Series A Preferred Shares issued for employee stock compensation, March 3, 2010   71,429    71                        -    -    513,752              513,823 
Series A Preferred Shares issued for employee stock compensation, March 3, 2010   71,429    71                        -    -    513,752              513,823 
Series A Preferred Shares issued for employee stock compensation, March 3, 2010   26,786    28                        -    -    192,656              192,684 
Common shares issued for consulting and legal servies valued at $1.25 per share, March 3, 2010                                 286    -    1,250              1,250 
Common shares issued for consulting services valued at $1.417 per share, March 31, 2010                                 1,008    1    4,999              5,000 
Common shares issued in lieu of payment of accounts payable - All Sciences                                 11,321    11    31,689              31,700 
Common shares issued for consulting and legal services valued at $2.087 per share, April 30, 2010                                 685    1    4,999              5,000 
Series B Preferred Shares issued to SeaSide 88, LP, May 12, 2010             142,857    143              -    -    4,999,857              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                                 91,237    91    228              319 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, May 12, 2010             (17,143)   (17)             -    -    (43)             (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                                 113,768    113    285              398 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, May 26, 2010             (17,143)   (17)             -    -    (43)             (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                                 2,943    3    16,874              16,877 
Derivative Liability - Retirement of Series B Preferred Shares, May 26, 2010                                 -    -    151,842              151,842 
Common shares issued for consulting and legal services valued at $2.083 per share, May 31, 2010                                 686    1    4,999              5,000 
Common shares issued for conversion of warrants to Common Stock at $1.00 per share, June 9, 2010                                 55,714    55    194,945              195,000 
Common shares issued for conversion of Series B Preferred Shares at $1.41 per share, June 9, 2010                                 121,920    122    305              427 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, June 9, 2010             (17,143)   (17)             -    -    (43)             (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                                 2,962    3    14,572              14,575 
Derivative Liability - Retirement of Series B Preferred Shares, June 9, 2010                                 -    -    149,354              149,354 
Common shares issued for consulting and legal services valued at $1.77 per share, June 9, 2010                                 3,229    3    19,997              20,000 
Common shares issued for consulting and legal services valued at $1.77 per share, June 9, 2010                                 571    1    3,539              3,540 
Common shares issued for conversion of Series B Preferred Shares at $1.59 per share, June 23, 2010                                 107,973    108    270              378 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, June 23, 2010             (17,143)   (17)             -    -    (43)             (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                                 2,209    2    12,272              12,274 
Derivative Liability - Retirement of Series B Preferred Shares, June 23, 2010                                 -         120,249              120,249 
Common shares issued for consulting and legal services valued at $1.043 per share, June 30, 2010                                 782    1    4,999              5,000 
                                                             
Net loss                                 -         -         (4,744,208)   (4,744,208)
                                                             
Balance, June 30, 2010   2,169,644    2,170    74,285    75    -    -    38,280,135    38,280    23,217,895#   -    (16,739,743)   6,518,677 
                                                             
Common shares issued for conversion of Series B Preferred Shares at $1.51 per share, July 7, 2010                                 113,454    113    284              397 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, July 7, 2010             (17,143)   (17)             -         (43)             (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                                 1,731    2    9,971              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                                 132,336    132    331              463 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, July 21, 2010             (17,143)   (17)             -         (43)             (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                                 1,655    2    7,669              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                                 882    1    4,999              5,000 
Common shares issued for conversion of Series B Preferred Shares at $1.14 per share, August 4, 2010                                 150,547    151    376              527 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, August 4, 2010             (17,143)   (17)             -         (43)             (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                                 1,347    1    5,369              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                                 173,248    173    433              606 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, August 18, 2010             (17,143)   (17)             -         (43)             (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                                 886    1    3,067              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                                 1,152    1    4,999              5,000 
Common shares issued for conversion of Series B Preferred Shares at $0.93 per share, September 1, 2010                                 61,523    62    153              215 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, September 1, 2010             (5,714)   (6)             -         (14)             (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                                 219    -    767              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             71,429    71              -         2,499,929              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                                 122,861    123    307              430 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, September 21, 2010             (11,429)   (11)             -         (29)             (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                                 1,335    1    4,999              5,000 
Common shares issued for conversion of Series B Preferred Shares at $0.87 per share, October 5, 2010                                 131,499    131    329              460 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, October 5, 2010             (11,429)   (11)             -         (29)             (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                                 2,648    3    8,052              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                                 129,419    129    323              452 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, October 19, 2010             (11,429)   (11)             -         (29)             (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                                 2,110    2    6,519              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                                 1,387    1    4,999              5,000 
Series A Preferred Shares issued for employee stock compensation, November 1, 2010   8,571    9                        -         53,924              53,933 
Common shares issued for conversion of Series B Preferred Shares at $0.87 per share, November 2, 2010                                 131,804    132    329              461 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, August 4, 2010             (11,429)   (11)             -         (29)             (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                                 1,643    2    4,984              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                                 98,805    99    247              346 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, November 16, 2010             (11,429)   (11)             -         (29)             (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                                 853    1    3,451              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                                 88,733    89    222              311 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, November 30, 2010             (11,428)   (12)             -         (28)             (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                                 405    -    1,918              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                                 979    1    4,999              5,000 
Common shares issued for conversion of warrants to Common Stock at $1.00 per share, December 10, 2010                                 7,143    7    24,993              25,000 
Common shares issued as compensation pursuant to S-8 at $1.28 per share, December 10, 2010                                 14,286    14    63,986              64,000 
Common shares issued for conversion of Series B Preferred Shares at $1.10 per share, December 14, 2010                                 25,954    26    65              91 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, December 14, 2010             (2,857)   (3)             -         (7)             (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                                 99    -    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             71,429    71              -         2,499,929              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                                 1,299    1    6,052              6,053 
Common shares issued for conversion of Series B Preferred Shares at $1.16 per share, January 3, 2011                                 98,227    98    246              344 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, January 3, 2011             (11,429)   (11)             -         (29)             (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                                 2,187    2    8,902              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                                 90,847    91    227              318 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, January 17, 2011             (11,428)   (12)             -         (28)             (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                                 1,829    2    8,053              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                                 101,835    102    254              356 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, January 31, 2011             (11,429)   (11)             -         (29)             (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                                 1,506    2    6,519              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                                 1,168    1    5,999              6,000 
Common shares issued for conversion of warrants at $1.00 per share, February 4, 2011                                 7,143    7    24,993              25,000 
Common shares issued for conversion of Series B Preferred Shares at $1.08 per share, February 14, 2011                                 105,719    106    269              375 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, February 14, 2011             (11,428)   (12)             -         (28)             (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                                 1,318    1    4,985              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                                 115,889    116    293              409 
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             (11,429)   (11)             -         (29)             (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                                 1,000    1    3,451              3,452 
Common shares issued for consulting and legal services valued at $1.22 per share, February 28, 2011                                 1,401    1    5,999              6,000 
Common shares issued for employee stock compensation  at $1.32 per share, March 3, 2011                                 35,714    36    158,089              158,125 
Common shares issued for employee stock compensation at $1.32 per share, March 3, 2011                                 35,714    36    158,089              158,125 
Series A Preferred Shares issued for employee stock compensation, March 3, 2011   71,428    71                        -         574,510              574,581 
Series A Preferred Shares issued for employee stock compensation, March 3, 2011   71,428    71                        -         574,510              574,581 
Series A Preferred Shares issued for employee stock compensation, March 3, 2011   26,786    27                        -         215,441              215,468 
Common shares issued for conversion of Series B Preferred Shares at $1.09 per share, March 14, 2011                                 104,935    105    262              367 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, March 14, 2011             (11,428)   (12)             -         (28)             (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                                 503    1    1,917              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                                 25,710    26    64              90 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, March 28, 2011             (2,857)   (3)             -         (7)             (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                                 99    -    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                                 1,337    1    5,999              6,000 
Common shares issued for conversion of warrants to common stock at $1.00 per share, April 10, 2011                                 2,857    3    9,997              10,000 
Series B Preferred Shares issued to SeaSide 88, LP, April 18, 2011             71,429    71              -         2,499,929              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                                 89,189    89    (49)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, April 18, 2011             (11,429)   (11)             -         (29)             (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                                 1,168    1    5,999              6,000 
Common shares issued for conversion of Series B Preferred Shares at $1.18 per share, May 2, 2011                                 97,065    97    (57)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, May 2, 2011             (11,428)   (12)             -         (28)             (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                                 1,955    2    8,053              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                                 96,143    96    (56)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, May 16, 2011             (11,429)   (11)             -         (29)             (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                                 1,554    2    6,519              6,521 
Common shares issued for conversion of Series B Preferred Shares at $1.23 per share, May 30, 2011                                 93,280    93    (53)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, May 30, 2011             (11,428)   (12)             -         (28)             (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                                 1,163    1    4,985              4,986 
Common shares issued for consulting and legal services valued at $1.47 per share, May 31, 2011                                 1,168    1    5,999              6,000 
Common shares issued for conversion of Series B Preferred Shares at $1.18 per share, June 13, 2011                                 97,135    97    (57)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, June 13, 2011             (11,429)   (11)             -         (29)             (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                                 838    1    3,451              3,452 
Common shares issued for conversion of Series B Preferred Shares at $1.02 per share, June 27, 2011                                 111,957    112    (72)             40 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, June 27, 2011             (11,428)   (12)             -         (28)             (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                                 497    -    1,918              1,918 
Common shares issued for consulting and legal services valued at $1.22 per share, June 30, 2011                                 1,401    1    5,999              6,000 
                                                             
Net loss                                 -         -         (6,477,166)   (6,477,166)
                                                             
Balance, June 30, 2011   2,347,857    2,348    2,857    3    -    -    41,013,828    41,012    33,344,437    -    (23,216,909)   10,170,891 
                                                             
Common shares issued for conversion of Series B Preferred Shares at $1.11 per share, July 11, 2011                                 25,710    26    64              90 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, July 11, 2011             (2,857)   (3)             -         (7)             (10)
Derivative liability - retirement of Series B Preferred Shares, July 11, 2011                                 -         17,881              17,881 
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                                 99    -    381              381 
Series B Preferred Shares issued to SeaSide 88, LP, on July 26, 2011             71,429    71              -         2,499,929              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                                 107,943    108    270              378 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, July 26, 2011             (11,429)   (11)             -         (29)             (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                                 1,361    1    5,999              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                                 124,911    125    312              437 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, August 8, 2011             (11,428)   (12)             -         (28)             (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                                 2,345    2    8,053              8,055 
Common shares issued for conversion of Series B Preferred Shares at $0.95 per share, August 23, 2011                                 119,951    120    300              420 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, August 23, 2011             (11,429)   (11)             -         (29)             (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                                 1,955    2    6,519              6,521 
Common shares issued for consulting and legal services valued at $1.14 per share, August 31, 2011                                 1,504    2    5,998              6,000 
Common shares issued for conversion of Series B Preferred Shares at $0.95 per share, September 6, 2011                                 120,821    121    302              423 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, September 6, 2011             (11,428)   (12)             -         (28)             (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                                 1,504    2    4,984              4,986 
Common shares issued in conversion of Series B Preferred Shares at $0.94 per share, September 19, 2011                                 122,186    122    306              428 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, September 19, 2011             (11,429)   (11)             -         (29)             (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                                 1,055    -    3,452              3,452 
Common shares issued for consulting and legal services valued at $1.07 per share, September 30, 2011                                 1,602    2    5,998              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                                 146,946    147    367              514 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on October 3, 2011             (11,428)   (12)             -    -    (28)             (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                                 649    1    1,917              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                                 41,281    41    103              144 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on October 17, 2011             (2,857)   (3)             -    -    (7)             (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                                 146    -    384              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                                 1,868    2    5,998              6,000 
Series B Preferred Shares issued to SeaSide 88, LP, $.001 par value on November 1, 2011             71,429    71              -    -    2,499,929              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                                 146,225    146    366              512 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on November 2, 2011             (11,429)   (11)             -    -    (29)             (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                                 165,313    165    414              579 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on November  15, 2011             (11,428)   (12)             -    -    (28)             (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                                 2,946    3    7,476              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                                 183,639    184    459              643 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on November  29, 2011             (11,429)   (11)             -    -    (29)             (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                                 2,897    3    6,518              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                                 2,107    2    5,998              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                                 214,661    215    536              751 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on December 13, 2011             (11,429)   (11)             -    -    (29)             (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                                 2,514    3    4,983              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                                 227,653    228    570              798 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on December 27, 2011             (11,428)   (12)             -    -    (28)             (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                                 1,948    2    3,448              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                                 2,687    3    5,997              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                                 225,158    225    563              788 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on January 10, 2012             (11,429)   (11)             -    -    (29)             (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                                 1,069    1    1,917              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                                 59,585    60    149              209 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on January 24, 2012             (2,857)   (3)             -    -    (7)             (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                                 225    -    384              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                                 2,962    3    5,997              6,000 
Series B Preferred Shares issued to SeaSide 88, LP,  $.001 par value on February 8, 2012             71,429    71              -    -    2,499,929              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                                 204,898    205    512              717 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on  February 8, 2012             (11,429)   (11)             -    -    (29)             (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                                 164,589    165    411              576 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on February 22, 2012             (11,428)   (12)             -    -    (28)             (40)
Derivative Liability - Retirement of Preferred Series B on February 22, 2012                                 -    -    68,423              68,423 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.69 on February 22, 2012                                 3,314    3    7,476              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                                 2,219    2    5,998              6,000 
Common shares issued for employee stock compensation  at $.73 per share, March 3, 2012                                 71,429    71    181,803              181,874 
Series A Preferred Shares issued for employee stock compensation, March 3, 2012   169,643    169                        -    -    634,239              634,408 
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.64 per share, .001 par value, on March 07, 2012                                 179,511    180    448              628 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on March 7, 2012             (11,429)   (11)             -    -    (29)             (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                                 2,926    3    6,518              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                                 181,712    182    454              636 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on March  21, 2012             (11,429)   (11)             -    -    (29)             (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                                 2,232    2    4,984              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                                 2,208    2    5,998              6,000 
Shares issued in conversion of Series B Preferred Shares to Common Stock at $.61 per share, .001 par value, on April 4, 2012                                 188,999    189    472              661 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on April 4, 2012             (11,429)   (11)             -    -    (29)             (40)
Derivative Liability - Retirement of Preferred Series B on April 4, 2012                                 -    -    69,098              69,098 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.61 on April 4, 2012                                 1,631    2    3,450              3,452 
Dividend to Seaside 88, LP, paid on April 4, 2012                                 -    -    (3,452)             (3,452)
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.51 per share, .001 par value, on April 18, 2012                                 224,415    224    561              785 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on April 18, 2012             (11,429)   (11)             -    -    (29)             (40)
Derivative Liability - Retirement of Preferred Series B on April 18, 2012                                 -    -    69,224              69,224 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.54 on April 18, 2012                                 1,023    1    1,917              1,918 
Dividend to Seaside 88, LP, paid on April 18, 2012                                 -    -    (1,918)             (1,918)
Shares issued for consulting and legal services rendered at $0.63 per share on April 30, 2012                                 2,728    3    5,997              6,000 
Shares issued in conversion of Series B Preferred Shares to Common Stock at $0.50 per share, .001 par value, on May 2, 2012                                 56,673    57    142              199 
Retirement of Series B Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on  May 2, 2012             (2,857)   (3)             -    -    (7)             (10)
Derivative Liability - Retirement of Preferred Series B on  May 2, 2012                                 -    -    69,892              69,892 
Warrants issued to Scientific Advisory Board on May 15, 2012                                 -    -    47,400              47,400 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.51 on May 2, 2012                                 215    -    384              384 
Dividend to Seaside 88, LP, paid on May 2, 2012                                 -    -    (384)             (384)
Shares issued for consulting and legal services rendered at $0.67 per share on May 31, 2012                                 2,561    3    5,997              6,000 
Series A Preferred Shares amendment of valuation arising from Amendment of certificate of Designation  on June 26, 2012                                 -    -    -              - 
Series C Preferred Shares issued to SeaSide 88, LP,  $.001 par value on June 28, 2012                       714    1    -    -    2,499,999              2,500,000 
Placement Agents Fees related to sale of Convertible Preferred shares on June 28, 2012                                 -    -    (150,000)             (150,000)
Derivative Liability - Issuance of Preferred Series C                                 -    -    (1,090,017)             (1,090,017)
Legal  Fees related to Sale of Convertible Preferred Stock June 28, 2012                                 -    -    (25,000)             (25,000)
Sharees of Series A Preferred issued for legal services rendered   2,857    3                        -    -    3,284              3,287 
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.49 per share, .001 par value, on June 28, 2012                                 85,278    85    213              298 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on June 28, 2012                       (42)   -    -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on June 28, 2012                                 -    -    63,704              63,704 
Series A Preferred Shares issued for employee stock compensation, June 28, 2012   300,000    300                        -    -    344,872              345,172 
Shares issued for consulting and legal services rendered at $0.61 per share on June 30, 2012                                 2,814    2    5,997              5,999 
                                                             
Net loss for the year ended June 30, 2012                                 -    -    -         (6,207,207)   (6,207,207)
                                                             
                                                             
Balance, June 30, 2012   2,820,357    2,820    -    -    672    1    44,460,629    44,460    43,227,028    -    (29,424,116)   13,850,193 
                                                             
Shares issued in conversion of Series C Preferred Shares to Common Stock at $.49 per share, .001 par value, on July 12, 2012                                 60,685    61    151              212 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value onJuly 12, 2012                       (29)   -    -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on July 12, 2012                                 -    -    44,190              44,190 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.49 on JULY 12, 2012                                 5,256    5    9,021              9,026 
Dividend to Seaside 88, LP, paid on July 12, 2012                                 -    -    (9,026)             (9,026)
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.47 per share, .001 par value, on July 26, 2012                                 77,535    78    193              271 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on July 26, 2012                       (37)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series B on July 26, 2012                                 -    -    53,032              53,032 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.47 on July 26, 2012                                 5,221    5    8,624              8,629 
Dividend to Seaside 88, LP, paid on July 26, 2012                                 -    -    (8,629)             (8,629)
Shares issued for consulting and legal services rendered at $0.55 per share on July 31, 2012                                 3,117    3    5,997              6,000 
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.42 per share, .001 par value, on August 8, 2012                                 80,270    80    201              281 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on  August 8, 2012                       (34)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on August 8, 2012                                 -    -    51,555              51,555 
Warrants issued to Scientific Advisory Board on August 15, 2012                                 -    -    40,800              40,800 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.43 on August 8, 2012                                 5,391    5    8,133              8,138 
Dividend to Seaside 88, LP, paid on August 8, 2012                                 -    -    (8,138)             (8,138)
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.48 per share, .001 par value, on August 23, 2012                                 164,226    164    411              575 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on August 23, 2012                       (79)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on August 23, 2012                                 -    -    121,054              121,054 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.43 on August 23, 2012                                 4,573    5    7,679              7,684 
Dividend to Seaside 88, LP, paid on August 23, 2012                                 -    -    (7,684)             (7,684)
Shares issued for consulting and legal services rendered at $0.58 per share on August 31, 2012                                 2,956    3    5,997              6,000 
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.58 per share, .001 par value, on September 5, 2012                                 218,039    218    545              763 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on September 5, 2012                       (126)   (1)   -    -    -              (1)
Derivative Liability - Retirement of Preferred Series C on September 5, 2012                                 -    -    236,481              236,481 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.58 on September 5, 2012                                 3,279    3    6,622              6,625 
Dividend to Seaside 88, LP, paid on September 5, 2012                                 -    -    (6,625)             (6,625)
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.52 per share, .001 par value, on September 19, 2012                                 158,096    158    395              553 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on September 19, 2012                       (81)   -    -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on September 19, 2012                                 -    -    182,575              182,575 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.52 on September 19, 2012                                 2,735    3    4,933              4,936 
Dividend to Seaside 88, LP, paid on September 19 2012                                 -    -    (4,936)             (4,936)
Shares issued for consulting and legal services rendered at $0.62 per share on September 30, 2012                                 2,765    3    5,997              6,000 
Shares issued in conversion of Series C Preferred Shares to Common Stock at $.54 per share, .001 par value, on October 3, 2012                                 124,526    125    311              436 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on October 3, 2012                       (67)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on October 3, 2012                                 -    -    39,945              39,945 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.54 on October 3, 2012                                 2,050    2    3,840              3,842 
Dividend to Seaside 88, LP, paid on October 3, 2012                                 -    -    (3,842)             (3,842)
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.53 per share, .001 par value, on October 17, 2012                                 89,006    89    223              312 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on October 17, 2012                       (47)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on October 3, 2012                                 -    -    28,413              28,413 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.53 on October 17, 2012                                 1,586    2    2,946              2,948 
Dividend to Seaside 88, LP, paid on October 17, 2012                                 -    -    (2,948)             (2,948)
Shares issued for consulting and legal services rendered at $0.61 per share on October 31, 2012                                 4,751    5    9,995              10,000 
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.52 per share, .001 par value, on October 31, 2012                                 80,385    80    201              281 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on  October 31, 2012                       (41)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on October 31, 2012                                 -    -    24,955              24,955 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.53 on October 31, 2012                                 1,280    1    2,312              2,313 
Dividend to Seaside 88, LP, paid on October 31, 2012                                 -    -    (2,313)             (2,313)
Warrants issued to Scientific Advisory Board on November 15, 2012                                 -    -    34,200              34,200 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.43 on November 14, 2012                                 1,092    1    1,755              1,756 
Dividend to Seaside 88, LP, paid on November 14, 2012                                 -    -    (1,756)             (1,756)
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.43 per share, .001 par value, on November 14, 2012                                 109,470    109    274              383 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on November 14, 2012                       (47)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on November 14, 2012                                 -    -    28,407              28,407 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.44 on November 29, 2012                                 734    1    1,120              1,121 
Dividend to Seaside 88, LP, paid on November 29, 2012                                 -    -    (1,121)             (1,121)
Shares issued for consulting and legal services rendered at $0.53 per share on November 30, 2012                                 3,774    4    6,996              7,000 
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.44 per share, .001 par value, on November 29, 2012                                 111,628    112    279              391 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on November 29, 2012                       (49)        -    -    (1)             (1)
Derivative Liability - Retirement of Preferred Series C on November 29, 2012                                 -    -    29,302              29,302 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.43 on December 13, 2012                                 309    -    468              468 
Dividend to Seaside 88, LP, paid on December 13, 2012                                 -    -    (468)             (468)
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.43per share, .001 par value, on December 13, 2012                                 80,680    81    201              282 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on December 13, 2012                       (35)   -    -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on December 13, 2012                                 -    -    20,953              20,953 
Series C Preferred Shares issued to SeaSide 88, LP,  $.001 par value on December 21, 2012                       714         -    -    2,541,872              2,541,872 
Placement Agents Fees related to sale of Convertible Preferred shares on December 21, 2012                                 -    -    (165,000)             (165,000)
Derivative Liability - Issuance of Preferred Series C                                 -    -    -              - 
Legal  Fees related to Sale of Convertible Preferred Stock December 21, 2012                                 -    -    (12,500)             (12,500)
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.44 per share, .001 par value, on December 21, 2012                                 102,080    102    255              357 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on December 21, 2012                       (45)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on December 21, 2012                                 -    -    24,686              24,686 
Shares issued for consulting and legal services rendered at $0.50 per share on December 31 , 2012                                 4,000    4    6,996              7,000 
Shares issued to a Director for services rendered at $0.55 per share on December 31 , 2012                                 2,581    3    4,997              5,000 
Shares issued in conversion of Series C Preferred Shares to Common Stock at $..41 per share, .001 par value, on January 4, 2013                                 99,998    100    250              350 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on january 4, 2013                       (41)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on January 4, 2013                                 -    -    22,488              22,488 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.41 on Jamuary 4, 2013                                 6,259    6    8,986              8,992 
Dividend to Seaside 88, LP, paid on January 4,2013                                 -    -    (8,992)             (8,992)
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0.42 per share, .001 par value, on January 17, 2013                                 110,842    111    277              388 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on January 17, 2013                       (47)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on January 17, 2013                                 -    -    26,329              26,329 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0..42on January 17, 2013                                 5,714    6    8,435              8,441 
Dividend to Seaside 88, LP, paid on January 17, 2013                                 -    -    (8,441)             (8,441)
Shares issued in conversion of Series C Preferred Shares to Common Stock at $0..42 per share, .001 par value, on January 31, 2013                                 78,797    79    197              276 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on  January 31, 2013                       (32)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on January 31, 2013                                 -    -    18,502              18,502 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.41 on January 31, 2013                                 5,400    5    7,808              7,813 
Dividend to Seaside 88, LP, paid on January 31, 2013                                 -    -    (7,813)             (7,813)
Shares issued for consulting and legal services rendered at $0.49 per share on January 31, 2013                                 4,082    4    6,996              7,000 
Shares issued at $0.48 in payment of Debenture interest on February 1, 2013                                 571,429    571    664,926              665,497 
Warrants issued to Scientific Advisory Board on February 15, 2013                                 -    -    31,800              31,800 
Shares issued as Dividend to Seaside 88, LP, .001 par value common stock at $0.41 on February 14, 2013                                 5,172    5    7,371              7,376 
Dividend to Seaside 88, LP, paid on February 14, 2013                                 -    -    (7,376)             (7,376)
Shares issued in conversion of Series C Preferred Shares to  Common Stock at $0.41 per share, .001 par value, on February 14, 2013                                 68,875    69    172              241 
Retirement of Series C Preferred Shares converted into common stock by SeaSide 88, LP, .001 par value on February 14, 2013                       (27)        -    -    -              - 
Derivative Liability - Retirement of Preferred Series C on February 14, 2014                                 -    -    15,985              15,985 
Redemption of Series C Convertible Preferred on February 26, 2013                       (522)             -    (1,714,334)             (1,714,334)
Dividend to Seaside 88, LP, paid on February 26, 2013                                 -    -    (6,002)             (6,002)
Shares issued for consulting and legal services rendered at $0.46per share on February 28, 2013                                 4,348    4    6,996              7,000 
Derivative Liability - Redemption of Preferred Series C on February 26, 2013                                 -    -    42              42 
Common shares issued for employee stock compensation  at $..48 per share, March 1, 2013                                 71,428    71    59,929              60,000 
Series A Preferred Shares issued for employee stock compensation, March 1, 2013   169,643    170                        -    -    444,874              445,044 
Shares issued for consulting and legal services rendered at $0.65 per share on March 31, 2013                                 3,077    3    6,997              7,000 
Shares issued to a Director for services rendered at $0.53 per share on March 31, 2013                                 1,348    2    2,498              2,500 
Shares issued for consulting and legal services rendered at $0.48 per share on April 1, 2013                                 569    1    959              960 
Shares issued for consulting and legal services rendered at $0.49 per share on April 30, 2013                                 3,175    3    6,997              7,000 
Warrants issued to Scientific Advisory Board on May 15, 2013                                 -    -    34,800              34,800 
Shares issued for consulting and legal services rendered at $0.46per share on May 31, 2013                                 3,333    3    6,997              7,000 
Shares issued for consulting and legal services rendered at $0.65 per share on June 30, 2013                                 3,030    3    6,993              6,996 
Shares issued for Directors fees at $0.70 pershare on June 30, 2013                                 4,592    5    11,245              11,250 
                                                           - 
Net loss                                      -    -         (8,875,668)   (8,875,668)
                                                             
                                                             
Balance, June 30, 2013   2,990,000    2,990    -    -    -    -    47,026,173    47,026    46,259,420    -    (38,299,784)   8,009,652 
                                                             
Shares issued for consulting and legal services rendered at $1.93 per share on July 31, 2013                                 3,627    4    6,996              7,000 
Warrants issued to Scientific Advisory Board on August 15, 2013                                 -    -    106,050              106,050 
Shares issued for consulting and legal services rendered at $2.03 per share on August 31, 2013                                 3,449    4    6,996              7,000 
Common shares and warrants issued in connection with private placement of common stock, September 10, 2013                                 2,945,428    2,945    10,306,051              10,308,996 
Costs associated with sale of Securities                                           (113,696)             (113,696)
Warrants issued for commissions, September 10, 2013                                 -    -    113,696              113,696 
Placement Agents Fees related to sale of Common shares and Warrants on September 10, 2013                                 -    -    (618,545)             (618,545)
Common Shares issued to round up fractional shares arising from private placement on September 10,2013                                 5,940    6    (6)               
Common Shares issued in connection with warrant conversion, September 25, 2013                                 35,357    35    185,589              185,624 
Shares issued for consulting and legal services rendered at $2.17 per share on September 30, 2013                                 3,226    3    6,997              7,000 
Shares issued for Directors fees at $2.04 per share on September 30, 2013                                 5,501    6    11,244              11,250 
                                                           - 
                                                             
                                                             
Series A Preferred Shares issued for employee stock compensation, October 1, 2013   5,117    5                        -    -    35,995              36,000 
Shares issued for consulting and legal services rendered at $5.29 per share on October 31, 2013                                 1,323    1    6,999              7,000 
Warrants issued to Scientific Advisory Board on November 15, 2013                                 -    -    31,552              31,552 
Shares issued for consulting and legal services rendered at $5.14 per share on November 30, 2013                                 1,362    1    6,999              7,000 
Common Shares issued in connection with warrant conversion, December 16, 2013                                 7,143    7    24,993              25,000 
Shares issued for consulting and legal services rendered at $5.01 per share on December 31, 2013                                 1,383    2    6,999              7,001 
Shares issued for Directors fees at $5.07 per share on December 31, 2013                                 2,220    2    11,248              11,250 
Series A Preferred Shares issued for employee stock compensation, October 1, 2013   1,495    2                        -    -    26,998              27,000 
                                                             
                                                             
Common Shares issued in connection with warrant conversion, January 21, 2014                                 75,000    75    393,675              393,750 
Common shares and warrants issued in connection with private placement of common stock, January 24 ,2014                                 3,815,285    3,815    20,026,391              20,030,206 
                                                             
Costs associated with sale of Securities January 24, 2014                                           (135,062)             (135,062)
Warrants issued for commissions, January 24, 2014                                 -    -    135,062              135,062 
Placement Agents Fees related to sale of Common shares and Warrants on January 24, 2014                                 -    -    (1,201,815)             (1,201,815)
Shares issued for consulting and legal services rendered at $5.01 per share on January 31, 2014                                 1,828    2    6,998              7,000 
Shares issued at $0.48 in payment of Debenture interest on February 1, 2013                                 571,429    571    2,605,145              2,605,716 
                                                             
Warrants issued to Scientific Advisory Board on February 15, 2014                                 -    -    30,352              30,352 
Shares issued for consulting and legal services rendered at $3.97 per share on February 28, 2014                                 1,763    2    6,998              7,000 
Common Shares issued in connection with warrant conversion, February 6, 2014                                 25,000    25    131,225              131,250 
Rule 16B payment to Additional paid in Capital                                           83,900              83,900 
Shares issued for Directors fees at $5.01 per share on March 31, 2014                                 2,247    2    11,248              11,250 
Shares issued for consulting and legal services rendered at $3.83 per share on March 31, 2014                                 1,397    1    6,999              7,000 
Series A Preferred Shares issued for employee stock compensation, March 31, 2014   20,695    21                        -    -    7,503              7,524 
Net loss                                      -              (8,259,572)   (8,259,572)
                                                             
                                                             
Balance, March 31, 2014   3,017,307    3,018    -    -    -    -    54,536,081    54,535    78,531,194    -    (46,559,356)   32,029,391 

 

 

See accompanying notes to the financial statements

 

5
 

 

NanoViricides, Inc.

 

(A Development Stage Company)

Statements of Cash Flows

 

           For the Period from 
   For the Nine Months   For the Nine Months   May 12, 2005 
   Ended   Ended   (inception) through 
   March 31, 2014   March 31, 2013   March 31, 2014 
   (Unaudited)   (Unaudited)   (Unaudited) 
                
CASH FLOWS FROM OPERATING ACTIVITIES:               
Net loss  $(8,259,572)  $(6,694,929)  $(46,559,356)
                
Adjustments to reconcile net loss to net cash used in operating activities               
Preferred shares issued for license   -    -    7,000 
Preferred shares issued as compensation   70,524    445,044    2,718,765 
Common shares and warrants issued for services   96,750    130,500    3,657,827 
Common shares issued for interest   2,605,716    665,497    3,271,213 
Warrants granted to scientific advisory board   167,954    106,800    1,374,792 
Amortization of deferred compensation   -    -    121,424 
Depreciation   151,902    158,158    1,188,654 
Amortization   6,581    6,580    48,501 
Change in fair value of derivative liability   73,341    669,753    1,364,213 
Amortization of deferred financing expenses   -    -    51,175 
Discount convertible debentures   419,305    -    493,235 
Beneficial conversion feature of convertible debentures   -    -    713,079 
Changes in operating assets and liabilities:               
Prepaid expenses   (740,515)   (227,460)   (1,330,895)
Other current assets   -    -    (8,001)
Deferred expenses   -    -    (2,175)
Accounts payable - trade   (8,256)   (698)   599,382 
Accounts payable - related parties   35,469    264,704    746,036 
Accrued expenses   2,739    50,368    207,096 
                
NET CASH USED IN OPERATING ACTIVITIES   (5,378,062)   (4,425,683)   (31,338,035)
                
CASH FLOWS FROM INVESTING ACTIVITIES:               
Collateral advance for affiliate   (1,000,000)   (1,000,000)   (2,000,000)
Purchase of property and equipment   (3,618,201)   -    (5,123,849)
Purchase of trademark   -    -    (458,955)
                
NET CASH USED IN INVESTING ACTIVITIES   (4,618,201)   (1,000,000)   (7,582,804)
                
CASH FLOWS FROM FINANCING ACTIVITIES:               
Proceeds from issuance of Convertible Debentures   -    6,000,000    6,000,000 
Proceeds from issuance of Convertible Preferred Series B stock, net   -    -    19,462,500 
Proceeds from issuance of Convertible Preferred Series C stock, net   -    608,505    2,835,963 
Proceeds from issuance of common stock and warrants in connection with private placements of common stock, net of issuance costs   28,602,740    -    39,899,488 
Proceeds from exercise of stock options   -    -    90,000 
Proceeds from exercise of warrants   735,626    -    3,898,216 
Collection of stock subscriptions received   -    -    20 
                
NET CASH PROVIDED BY FINANCING ACTIVITIES   29,338,366    6,608,505    72,186,187 
                
NET CHANGE IN CASH   19,342,103    1,182,822    33,265,348 
                
Cash at beginning of period   13,923,245    14,274,985    - 
                
Cash at end of period  $33,265,348   $15,457,807   $33,265,348 
                
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:               
Interest paid  $-   $-   $- 
Income tax paid  $-   $-   $- 
                
NON CASH FINANCING AND INVESTING ACTIVITIES:               
Common stock issued for services rendered  $96,751   $130,500   $12,075,553 
Preferred stock issued as compensation   70,524    445,044    3,692,306 
Stock options issued to the officers as compensation   -    -    121,424 
Stock warrants granted to scientific advisory board   167,954    106,800    1,233,192 
Stock warrants granted to brokers   248,758    -    252,321 
Common stock issued for interest on debentures   2,605,716    2,000,000    2,679,646 
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 upon conversion of Series B Preferred Stock   -         20,320,630 
Common stock issued upon conversion of Series C Preferred Stock        6,352,980    5,396,661 
Common stock issued for dividends on  Preferred Stock        136,393    291,994 
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)

March 31, 2014 AND 2013

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., which 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 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 2,000,000 shares (adjusted for the 3.5 to 1 reverse split) 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 3.5 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 nine votes per share. The Series A Preferred Stock are not entitled to any rights to dividends, have no liquidation preference, and are not to be amended without the holder’s approval. The 2,000,000 shares were valued at the par value of $2,000 (adjusted for the reverse split).

 

7
 

 

We focus our research and clinical programs on specific anti-viral therapeutics. The Company’s platform technology is based on novel biomimetic nanomedicine constructs, called nanoviricides®. A nanoviricide is designed to “fool” the virus into binding to the nanoviricide in the same fashion that it would bind to the host cell. Because the host cell receptor and how the virus binds to it does not change despite all the changes in the virus, the Company believes that our broad-spectrum nanoviricides should continue to work against the virus despite the viral mutations and other changes. 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 held a pre-IND Meeting with the US FDA for its clinical drug candidate NV-INF-1 in the FluCide™ program. The Company is developing this injectable drug (NV-INF-1) for hospitalized patients with severe influenza, including immuno-compromised patients. The Company believes that this drug may also be usable as a single-dose injection in a medical office for less severe cases of influenza. The Company has also developed an oral anti-influenza drug candidate, NV-INF-2, with a very high degree of effectiveness when taken by mouth. This may be the first ever nanomedicine that is orally active. Both of these anti-influenza therapeutic candidates are “broad-spectrum”, i.e. they are 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 including the recent H3N2 influenza. The Company has already demonstrated that they have significantly superior activity when compared to oseltamivir (Tamiflu®) against two unrelated influenza A subtypes, namely, H1N1 and H3N2 in a highly lethal animal model. Both of these drug candidates can be used as prophylactics to protect at-risk personnel such as health-care workers and immediate family members and caretakers of a patient.

 

The Company’s broad-spectrum drug candidate for the treatment of dengue viral infections, DengueCide™, has received “orphan drug” status from both the US FDA and the European Medicines Agency (“EMA”). This orphan drug status carries with it several tax benefits and other financial equivalent incentives. Notably, in the US, orphan drug status will enable us to gain a “Priority Review Voucher” that can be applied to another drug development program or can be sold for a consideration to another pharmaceutical company, once the drug is approved. The Company has therefore prioritized its Dengue drug development program.

 

The Company is also developing an anti-HIV drug. The drug candidates in this HIVCide(™) program were found to have effectiveness equal to that of a triple drug HAART cocktail therapy in the standard humanized SCID-hu Thy/Liv mouse model. Moreover, the nanoviricides were long acting. Viral load suppression continued to hold for more than four weeks after stopping HIVCide treatment. The Company believes that the strong effect and sustained effect indicate that an HIVCide can be developed as a single agent that would provide “Functional Cure” from HIV/AIDS. The Company believes that substantially all HIV virus can be cleared upon HIVCide treatment, except the integrated viral genome in latent cells. This would enable discontinuation of treatment until HIV reemerges from the latent reservoir, which may be several months without any drugs. Moreover, the Company believes that the this therapy would also minimize the chances of HIV transmission. The Company is currently optimizing the anti-HIV drug candidates. These drug candidates are effective against both the R5 and X4 subtypes of HIV-1 in cell cultures. The Company believes that these drug candidates are “broad-spectrum”, i.e. they are expected to be effective against most strains and mutants of HIV, and therefore escape of mutants from our drugs is expected to be minimal.

 

The Company is also developing a broad-spectrum skin cream for the treatment of oral and genital herpes virus infections (i.e. both HSV-1 and HSV-2).

 

In addition, the Company is also developing broad-spectrum eye drops that are expected to be effective against a majority of the viral infections of the external eye. Most of these viral infections are from adenoviruses or from herpesviruses. The Company has shown excellent efficacy of its drug candidates against EKC (adenoviral epidemic kerato-conjunctivitis) in an animal model. In addition, the anti-HSV drug candidates have shown excellent efficacy in cell culture studies. The Company is also developing a skin cream formulation for the treatment of herpes cold sores or genital warts. Further, the Company is also developing a broad-spectrum drug against Dengue viruses that is expected to be useful for the treatment of any of the four major serotypes of dengue viruses, including in severe cases of dengue (DSS) and dengue hemorrhagic fever (DHF). DSS and DHF are thought to be caused by prior antibodies against dengue that a patient’s body creates to fight a second unrelated dengue infection, and the second virus uses these antibodies effectively to hitch a ride into human cells, thereby causing a more severe infection than in naive patients. In addition to these six drugs in development, the Company also has research programs against Rabies virus, Ebola and Marburg viruses, and others. To date, the Company does not have any commercialized products.

 

8
 

 

Thus, at present, the Company has six drug programs in its pipeline that have shown significant successes in cell culture as well as animal models. The Company’s platform technology enables rapid development of drug candidates against novel infections. The Company believes that it will continue to expand its pipeline as available funds and opportunities permit.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation – Unaudited 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, 2013 filed with the SEC on September 30, 2013.

 

For a summary of significant accounting policies (which have not changed from June 30, 2013), see the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013.

 

Net Income (Loss) per Common Share

  

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options and warrants.

 

The following table shows the number of potentially outstanding dilutive common shares excluded from the diluted net income (loss) per common share calculation as they were anti-dilutive:

 

9
 

 

   Potentially Outstanding Dilutive Common Shares 
   For the 
Nine months
Ended 
March 31, 2014		   For the 
Nine months
Ended 
March 31, 2013		 
         
Stock options          
           
Stock options issued on September 23, 2005 to the founders of the Company upon formation with an exercise price of $0.10 per share expiring ten (10) years from the date of issuance   535,715    535,715 
           
Sub-total: stock options   535,715    535,715 
           
Warrants          
           
Warrants issued from June 15, 2006 to October 1, 2007 to investors in connection with the Company’s equity financing with an exercise price of $3.50 per share expiring June 30, 2014   513,143    513,143 
           
Warrants issued on August 22, 2008 to investors in connection with the Company’s equity financing with an exercise price of $3.50 per share expiring June 30, 2014   466,486    466,486 
           
Warrants issued from June 15, 2008 through May 15 ,2010 to SAB for services with an exercise price from $2.45 to $9.38  per share expiring June 30, 2014   211,429    211,429 
           
Warrants issued on June 30, 2009 to investors with an exercise price of $3.50 per share expiring June 30, 2014   568,771    568,771 
           
Warrants issued on September 30, 2009 to investors with an exercise price of $3.50 per share expiring June 30, 2014   1,437,871    1,437,871 
           
Warrants issued from August 16, 2010 to May 15, 2011 to SAB for services with an exercise price ranging from $5.15 to $6.34 per share expiring fiscal year ending June 30, 2015   65,714    65,714 
           
Warrants issued from August 16, 2011 to May 15, 2012 to SAB for services with an exercise price ranging from $2.80 to $4.94 per share expiring fiscal year ending June 30, 2016   68,571    68,571 
           
Warrants issued from August 16, 2012 to May 15, 2013 to SAB for services with an exercise price ranging from $1.89 to $5.88 per share expiring fiscal year ending June 30, 2017   68,571    68,571 
           
Warrants issued on September 10, 2013 to investors with an exercise price of $5.25 per share expiring September 10,2018 less Warrants exercised through March 31, 2014   2,802,928    - 
           
Warrants issued on August 15, 2013 to SAB for services with an exercise price of $5.17 per share expiring on August 15, 2017   17,143    - 
           
Warrants issued on September 10, 2013 to Placement Agents as commissions with an exercise price of $5.25 per share expiring February,28, 2018   58,910    - 
           
Warrants issued on November 15, 2013 to SAB for services with an exercise price of $6.56 per share expiring on November 15, 2017   17,143    - 
           
 Warrants issued on January 24, 2014 to investors with an exercise price of $6.05 per share expiring January 24, 2019   2,479,935    - 
           
Warrants issued on January 24,2014 to Placement Agents as commissions with an exercise price of $6.05 per share expiring January 24, 2019   76,306    - 
           
Warrants issued on February 14, 2014 to SAB for services with an exercise price of $3.98 per share expiring on February 14, 2018   17,143    - 
Sub-total: warrants   8,870,064    3,400,556 
Total potentially outstanding dilutive common shares   9,405,779    3,936,271 

 

10
 

 

In addition the Company has issued Convertible Debentures, to investors. A portion of the interest required to be paid on the Debentures is payable in restricted shares of the Company’s $0.001 par value common stock or in warrants, according to the terms of the Debenture.

 

At March 31, 2014 the estimated number of potentially dilutive shares of the Company’s common stock into which these Debentures can be converted is 1,180,878 based upon the Selling price of the Company’s common stock on March 31, 2014. At March 31, 2014 the estimated number of potentially dilutive shares of the Company’s common stock arising from the payment of a portion of the future interest to be paid on the debentures in common shares or warrants is 1,142,858. 

 

Recently Issued Accounting Pronouncements

 

In July 2013, the FASB issued ASU No. 2013-11, Income Tax (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This ASU provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.

 

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20.

 

Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The ASU states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. Although “major” is not defined, the standard provides examples of when a disposal qualifies as a discontinued operation.

 

The ASU also requires additional disclosures about discontinued operations that will provide more information about the assets, liabilities, income and expenses of discontinued operations. In addition, the ASU requires disclosure of the pre-tax profit or loss attributable to a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements.

 

The ASU is effective for public business entities for annual periods beginning on or after December 15, 2014, and interim periods within those years.

  

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 financial statements.

11
 

 

Note 3 – Financial Condition

 

The Company’s financial statements for the interim period ended March 31, 2014 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, 2014 the Company had cash and cash equivalents of $33,265,348. The Company has raised approximately an additional $20 Million in a registered direct offering through a sale of units comprising its common stock and warrants (See below). The Company has sufficient capital to continue its business, at least, through March 31, 2016, 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 with significant capital requirements, the Company has been able to finance its business through sale of its securities.

 

On February 1, 2013 the Company consummated an offering (the “Offering”) in the aggregate amount of $6,000,000 for its Unsecured 8% Coupon Series B Convertible Debenture (the “Debentures”) to four equity investors comprised of private, family investment offices and a charitable foundation. The Debentures are due on January 31, 2017 (the “Maturity Date”) and are convertible into restricted shares of the Registrant’s common stock, par value $0.001 per share (the “Common Stock”) at the market price per share of Common Stock on the date of conversion.

 

On September 9, 2013, the Company entered into a Securities Purchase Agreement (the “Agreement”) with certain purchasers (the “Purchasers”), relating to the offering and sale (the “Offering”) of units (“Units”) at the aggregate purchase price of $3.50 (“Purchase Price”) per Unit, consisting of one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and a warrant to purchase one share of Common Stock (“Warrant”), issuable upon exercise of the Warrant at the exercise price of $5.25 per share (the “Warrant Shares”, collectively with the Units, Common Stock and Warrant, the “Securities”) The Warrants are exercisable immediately and expire five years after issuance. On September 12, 2013, the Company and the Purchasers consummated the purchase and sale of the Securities (the “Closing”), and the Company raised gross proceeds of $10,308,996 before Offering costs of approximately $618,540, which includes placement agent and attorneys’ fees. On September 25, 2013 certain of the warrant holders exercised Warrants to purchase 35,357 shares of common stock at $5.25 per share for a total exercise price of $185,624.25.

 

On January 21, 2014, the Registrant entered into a Securities Purchase Agreement (the “Agreement”) with certain purchasers (the “Purchasers”), relating to the offering and sale (the “Offering”) of units (“Units”) at the aggregate purchase price of $5.25 (“Purchase Price”) per Unit. The price per Unit was equal to a four percent (4%) discount to the 20-day VWAP of the Registrant’s stock price on Friday, January 17, 2014. The exercise price of the Warrant was equal to the closing price of the Registrant’s stock on Friday, January 17, 2014.  Each Unit consisted of one share of the Company’s Common Stock, and Sixty-Five Hundredths (65/100) of a warrant to purchase one share of Common Stock (“Warrant”), issuable upon exercise of the Warrant at the exercise price of $6.05 per share (the “Warrant Shares”, collectively with the Units, Common Stock and Warrant, the “Securities”). The Warrants are exercisable immediately and expire five years after issuance. On January 24, 2014, the Company and the Purchasers consummated the purchase and sale of the Securities (the “Closing”) of 3,815,285 shares of Common Stock and 2,479,935 Warrants, and the Company raised gross proceeds of $20,030,246.25 before estimated expenses of the Offering of approximately $1,200,000, which includes placement agent fees but does not include and attorneys’ fees and other expenses.

 

12
 

 

As a result of the successful sale of the Company’s Common Shares, management believes that the Company has sufficient cash and cash equivalents to meet its budgeted expenditures through, at least, March 31, 2016 at current rate of expenditures.

 

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 $46,559,356 at March 31, 2014 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 2014 and 2013 and a cash and cash equivalent balance of $33,265,348 at March 31, 2014, 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.

 

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 3.5 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 nine 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 2,000,000 shares was valued at their par value or $2,000.   

 

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 $1,719,563 and $1,655,216 for the Nine months ended March 31, 2014, and 2013, respectively and $10,836,378 since inception. As of March 31, 2014, pursuant to its license agreement, the Company has paid a security advance of $702,011 to and held by TheraCour which is reflected in Prepaid Expenses.  No royalties are due TheraCour from the Company’s inception through March 31, 2014.

 

13
 

 

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 17.4% of the Common Stock of the Company.

 

TheraCour owns approximately 9,476,000 shares of the Company’s outstanding common stock as of March 31, 2014.

 

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 former Consulting Chief Regulatory Officer, a non-executive position, was also an officer and principal owner of KARD Scientific. Lab fees charged by KARD Scientific for services for the nine months ended March 31, 2014, and 2013, were $314,155 and $789,198 respectively.

 

KARD Scientific Inc. of Beverly, Massachusetts, was our primary vendor for animal model study design and performance. KARD operated its own facilities in Beverly, Massachusetts. As of approximately December 2013, KARD no longer performs animal studies subcontracts, and does not have the facilities. The payments made to KARD during this quarter represent the payment of final balance and settlement of all open invoices.

 

NanoViricides had a fee for service arrangement with KARD. We did not have an exclusive arrangement with KARD; we did not have a contract with KARD; any work performed by KARD was commissioned by the executive officers of NanoViricides; and we retained all intellectual property resulting from the services by KARD.

 

InnoHaven, LLC

 

Inno-Haven, LLC (“Inno-Haven”), a company controlled by the Company’s founder Anil R. Diwan, was created to acquire 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 sale of approximately $900,000 of NanoViricides common stock that he had acquired as a founder. Inno-Haven has also obtained additional financing from certain other unrelated parties.. Dr. Diwan had also agreed to provide personal guarantees for potential loans and mortgages which could be drawn for the purpose of financing the building and initial build out construction costs. The Company had determined that it in anticipation of human clinical trials, it would reach a point where its drug candidates needed to 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

 

14
 

 

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. Subsequently, on February 11, 2013, the Company entered into a binding Memorandum of Understanding (“MOU”) with Inno-Haven, to lease these facilities for a four-year term. The MOU is subject to a definitive lease agreement (the “Lease Agreement”) to be executed upon final determination of the cost of the facilities. Pursuant to the MOU, the Company has agreed to provide up to $2,000,000 in cash collateral for sums borrowed by Inno-Haven (collectively, the “Loans”) to complete the build-out and renovation of the Leased Premises for the benefit of the Company. The Company has provided plans and specifications and has designated Innohaven as disbursing agent for payments to be made to the various contractors. The Company agreed to file a registration statement for the shares of restricted NNVC Common Stock owned and provided by TheraCour Pharma, Inc., pledged as additional collateral for any or all of the Loans (the “Registrable Shares”). The MOU further provides that, so long as there is no breach of the Lease Agreement by the Company, any distribution of the collateral in accordance with a Loan will first be made from the proceeds of life insurance policies (if applicable), then from the proceeds of the sale of the Registrable Shares, and then, should there be any balance still owing to the lender, from the cash collateral. Also on February 11, 2013, pursuant to the provisions of the MOU, the Company transferred $1,000,000 as cash collateral (the “Cash Collateral”) and agreed to register a number of shares of the Company’s Common Stock, which shares were provided by TheraCour Pharma, Inc., equal to $1,000,000 (the “Collateral Shares”) as collateral pursuant to a Loan and Security Agreement entered into between Inno-Haven and a non-affiliated lender (the “Loan Agreement”) for a loan in the principal amount of $2,000,000. On September 17, 2013, the Company transferred the remaining $1,000,000 cash collateral to Inno-Haven. Moreover, Inno-Haven is required to obtain a life insurance policy to insure the life of Dr. Diwan in the amount of $2,000,000. If Dr. Diwan dies during the term of the Loan Agreement, the lender shall have the option to demand payment of the balance of the loan, but, shall be repaid first from the proceeds of any life insurance policy (if applicable), then from the proceeds of the sale of the Collateral Shares, and then, should there be any balance still owing to the lender, from the Cash Collateral. As of March 31, 2014, the Company had expensed approximately $3.1 million in specific fixtures and improvements required by the Company. No lease has been finalized as of now. Total rent expense paid to Inno-Haven during this period amounted to $0 for the three months ended March 31, 2014 and $0 since February 11, 2013.

 

Note 5 - Prepaid Expenses

 

Prepaid Expenses are summarized as follows:

 

   March 31,
2014		   June 30,
2013		 
TheraCour Pharma, Inc.  $702,011   $546,783 
Innohaven, LLC   500,000    - 
Prepaid Others   136,884    51,597 
   $1,338,895   $598,380 

 

Note 6 – Equity Transactions

 

In accordance with the Registrant’s reverse stock split on a 1 for 3.5 basis, effective September 10, 2013, the Registrant filed a Certificate of Change to its Articles of Incorporation pursuant to Section 78.209 of the Nevada Revised Statutes (the “Amendment”) on September 3, 2013. The Amendment effectuated a reverse stock split of the Registrant’s common stock, par value $0.001 per share (the “Common Stock”) by simultaneously decreasing the number of the Registrant’s authorized and outstanding capital stock on a basis of 1 for 3.5 shares (the “Split”). Accordingly, upon effectiveness of the Split, the Registrant’s authorized capital stock shall consist of (i) 85,714,286 shares of Common Stock and (ii) 5,714,286 blank check preferred shares, par value $0.001 (the “Preferred Stock”), of which approximately 50,028,701 shares of Common Stock and 2,990,000 shares of Preferred Stock were outstanding. All share amounts and per share amounts have been restated to reflect this reverse stock split. In conjunction with the reverse stock split, the Company’s Board of Directors authorized the issuance of 5,940 shares of the Company’s common stock to round up fractional shares resulting from the reverse stock split.

 

The Registrant elected to effectuate the Reverse Split in order that the price of the Common Stock qualify for listing on a national securities exchange. The Amendment was unanimously approved by the Board of Directors so that the Common Stock would comply with such listing requirement

 

On September 9, 2013, the Company entered into a Securities Purchase Agreement (the “Agreement”) with certain purchasers (the “Purchasers”), relating to the offering and sale (the “Offering”) of units (“Units”) at the aggregate purchase price of $3.50 (“Purchase Price”) per Unit, consisting of one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and a warrant to purchase one share of Common Stock (“Warrant”), issuable upon exercise of the Warrant at the exercise price of $5.25 per share (the “Warrant Shares”, collectively with the Units, Common Stock and Warrant, the “Securities”) The Warrants are exercisable immediately and expire five years after issuance.

 

15
 

 

On September 12, 2013, post reverse -split the Company and the Purchasers consummated the purchase and sale of the Securities (the “Closing”), and the Company raised gross proceeds of $10,308,996 before estimated expenses of the Offering of approximately $618,540, which includes placement agent and attorneys’ fees. The Company issued 2,945,428 Units. On September 25, 2013 certain of these Unit Holders exercised 35,357 Warrants to purchase 35,357 shares of the Company’s common stock, par value $0.001 per share, for gross proceeds of $185,624. On January 21, 2014 and February 6, 201 certain of these Unit Holders exercised 75,000 and 25,000 Warrants to respectively purchase 75,000 and 25,000 shares of the Company’s common stock, par value $0.001 per share, for gross proceeds of $393,750 and $131,750 respectively.

 

The Company estimated the relative fair value of the warrants on the date of grant using the Black-Scholes Option-Pricing Model with the following weighted-average assumptions:

 

   September  9, 2013 
     
Expected life (year)   5 
      
Expected volatility   78.39%
      
Expected annual rate of quarterly dividends   0.00%
      
Risk-free rate(s)   1.39%

 

The estimated relative fair value of the warrants issued in conjunction with the aforesaid offering was $4,068,343 at the date of issuance using the Black-Scholes Option Pricing Model.

 

The Offering was made pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-184626), which was declared effective by the Securities and Exchange Commission on December 21, 2012. 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 dated September 9, 2013 among Midtown Partners & Co., LLC and Chardan Capital Markets, LLC (collectively, the “Placement Agents”), the Company paid the Placement Agents an aggregate cash fee representing 6% (3% each) of the gross Purchase Price paid by the Purchasers and warrants to purchase an aggregate of 2% (1% each) of the number of shares of Common Stock sold in the Offering (the “Compensation Warrants”) and substantially similar to the Warrants, at an exercise price equal to $5.25 per share. The Compensation Warrants will otherwise comply with FINRA Rule 5110(g)(1) in that for a period of nine months after the issuance date of the Compensation Warrants, neither the Compensation Warrants nor any warrant shares issued upon exercise of the compensation warrants shall be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the Closing. Upon issuance of the commission warrants , the company recognized Costs associated with the sale of securities ( a capital item ) of $113,696 and a corresponding increase in additional paid in capital of $113,696.

  

On September 25, 2013, the Company’s Common Stock began trading on the NYSE MKT exchange under the symbol NNVC.

 

16
 

 

On January 21, 2014, the Company entered into a Securities Purchase Agreement (the “Agreement”) with certain purchasers (the “Purchasers”), relating to the offering and sale (the “Offering”) of units (“Units”) at the aggregate purchase price of $5.25 (“Purchase Price”) per Unit. The price per Unit was equal to a four percent (4%) discount to the 20-day VWAP of the Company’s stock price on Friday, January 17, 2014. The exercise price of the Warrant was equal to the closing price of the Company’s stock on Friday, January 17, 2014.  Each Unit consisted of one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and Sixty-Five Hundredths (65/100) of a warrant to purchase one share of Common Stock (“Warrant”), issuable upon exercise of the Warrant at the exercise price of $6.05 per share (the “Warrant Shares”, collectively with the Units, Common Stock and Warrant, the “Securities”). The Warrants are exercisable immediately and expire five years after issuance.

 

On January 24, 2014, the Company and the Purchasers consummated the purchase and sale of the Securities (the “Closing”) of 3,815,285 shares of Common Stock and 2,479,935 Warrants, and the Company raised gross proceeds of $20,030,206 before estimated expenses of the Offering of approximately $1,200,000, which includes placement agent fees but does not include and attorneys’ fees and other expenses. The Company intends to use the proceeds for general business purposes and expects that it will be able to accelerate the development of its drug candidate pipeline with this additional funding.

 

The Company estimated the relative fair value of the warrants on the date of grant using the Black-Scholes Option-Pricing Model with the following weighted-average assumptions:

 

    January 24, 2014  
       
Expected life (year)     5  
         
Expected volatility     78.44 %
         
Expected annual rate of quarterly dividends     0.00 %
         
Risk-free rate(s)     .37 %

 

The estimated relative fair value of the warrants issued in conjunction with the aforesaid offering was $7,762,196 at the date of issuance using the Black-Scholes Option Pricing Model.

 

The Offering was made pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-184626), which was declared effective by the Securities and Exchange Commission on December 21, 2012 and Form S-3MEF (File No. 333-193439).

 

In connection with the Offering, pursuant to a Placement Agency Agreement dated January 20, 2014 among Midtown Partners & Co., LLC and Chardan Capital Markets, LLC (collectively, the “Placement Agents”), the Company paid the Placement Agents an aggregate cash fee representing 6% of the gross Purchase Price paid by the Purchasers and warrants to purchase an aggregate of 2% of the number of shares of Common Stock sold in the Offering (the “Compensation Warrants”) representing two percent of the Shares and substantially similar to the Warrants, at an exercise price equal to $6.05 per share. The Compensation Warrants will otherwise comply with FINRA Rule 5110(g)(1) in that for a period of six months after the issuance date of the Compensation Warrants, neither the Compensation Warrants nor any warrant shares issued upon exercise of the compensation warrants shall be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the Closing.

 

Unregistered Securities

 

In August, 2013, the Scientific Advisory Board (SAB) was granted warrants to purchase 21,000 shares of Common Stock at $5.17 per share expiring in August, 2017.  These warrants were valued at $106,050 and recorded as consulting expense.

 

17
 

 

In September, 2013, the Company’s Board of Directors authorized the issuance of Warrants to Midtown Partners & Co., LLC and Chardan Capital Markets, LLC (collectively, the “Placement Agents”) to purchase a total of 58,910 shares of Common Stock at $5.25 per share expiring in September, 2018.  These warrants were valued at $113,696 and recorded as Placement Agents Fees related to the sale of Common Shares and Warrants on September 10, 2013.

 

For the three months ended September 30, 2013, the Company's Board of Directors authorized the issuance of 10,311 shares of Common Stock with a restrictive legend for consulting services. The Company recorded an expense of $21,000.

 

For the three months ended September 30, 2013, the Company's Board of Directors authorized the issuance of 5,501 shares of Common Stock with a restrictive legend for Director services. The Company recorded an expense of $11,250.

 

In October, 2013, the Board of Directors authorized the issuance of 5,117 shares of the Company’s Series A Convertible Preferred Stock, $0.001 par value as, employee compensation and recognized an expense of $35,995.

 

In November, 2013, the Scientific Advisory Board (SAB) was granted warrants to purchase 17,143 shares of Common Stock at $6.56 per share expiring in November, 2017.  These warrants were valued at $31,552 and recorded as consulting expense.

 

In December, 2013, the Company issued 7,143 shares of Common Stock with a restrictive legend at $3.50 per share upon the exercise of Warrants.

 

For the three months ended December 31, 2013, the Company's Board of Directors authorized the issuance of 4,069 shares of its Common Stock with a restrictive legend for consulting services. The Company recorded an expense of $21,000.

 

 In December, 2013 the Board of Directors authorized the issuance of 1,495 shares of the Company’s Series A Convertible Preferred Stock, $0.001 par value, as employee compensation and recognized an expense of $26,998.

 

For the three months ended March 31, 2014, the Company's Board of Directors authorized the issuance of 2,247 shares of Common Stock with a restrictive legend for Director services. The Company recorded an expense of $11,250.

 

For the three months ended March 31, 2014, the Company's Board of Directors authorized the issuance of 4,988 shares of common stock with a restrictive legend for consulting services. The Company recorded an expense of $21,000.

 

 For the three months ended March 31, 2014, the Board of Directors authorized the issuance of 20,695 shares of the Company’s Series A Convertible Preferred Stock, $0.001 par value, as employee compensation and recognized an expense of $7,524.

 

Note 7 - Stock Options and Warrants

 

Stock Options

 

In September 2005, 142,857 stock options were granted to Eugene Seymour, our CEO under an employment agreement.  Of these options, 71,429 were vested immediately and are exercisable from September 2005 until September 2015, and the remaining options vested annually on January 1, 2007 and 2008 in two equal amounts.

 

In September 2005, 285,715 stock options were granted to Anil Diwan, our Chairman and President under an employment agreement.  Of these options, 95,238 were vested immediately and are exercisable from September 2005 until September 2015, and the remaining options vested annually on January 1, 2007 and January 1, 2008 in two equal amounts.

 

18
 

 

In September 2005, 500,000 stock options were granted to Leo Ehrlich, our former CFO under an employment agreement. Of these options, 71,429 were vested immediately and are exercisable from September 2005 until September 2015, and the remaining options vest annually in two equal amounts.   On May 16, 2007, Leo Ehrlich resigned as the Company's Chief Financial Officer. At time of his resignation 107,143 options were vested and are exercisable from September 2005 until September 2015. The remaining options were forfeited.

 

The Company has accounted for these options granted to officers under the provisions of paragraph 718-10-30 of the FASB Accounting Standards Codification” and after giving effect to the 3.5 to 1 reverse split of September 9, 2013. Based on fair market value of these options, $7,044 was recognized as stock based compensation expense for the years ended June 30, 2009.  For the nine months ended March 31, 2014 and 2013, the Company did not record any compensation expense related to these options.

 

The following table presents the combined activity of stock options issued for the interim period ended March 31, 2014, as follows:

 

Stock Options   Number of
Shares		     Weighted
Average
Exercise Price
per share ($)		     Weighted
Average
Remaining
Contractual
Term (years)		     Aggregate
Intrinsic
Value ($)		  

Outstanding at June 30, 2013

     535,715       0.35       2.23       850,000  
Granted     -       -       -       -  
Exercised     -       -       -       -  
Expired     -       -       -       -  
Canceled     -       -       -       -  
Outstanding at March 31,2014     535,715              0.35       1.48       1,521,429  

 

As of March 31, 2014 there was no unrecognized compensation cost.

 

Stock Warrants

 

Stock Warrants   Number of 
Shares		     Weighted 
Average 
Exercise
Price 
per share 
($)		     Weighted 
Average 
Remaining 
Contractual Term
(years)		     Aggregate 
Intrinsic Value  
($)		  
Outstanding at June 30, 2013             3,400,556                       -  
                                 
Granted     5,612,008       4.58       2.99       -  
Exercised     142,500       -       -       -  
Expired             -       -       -  
Canceled     -       -       -       -  
      8,870,064       5.00       2.95       134,559  

 

Of the above warrants, 3,197,700 expire in fiscal year ending June 30, 2014; 65,714 expire in fiscal year ending June 30, 2015; and 68,571 expire in fiscal year ended June 30, 2016; 68,571 expire in fiscal year ending June 30, 2017; 51,429 expire in fiscal year ending June 30, 2018; 5,418,079 expire in fiscal year ending June 30, 2020.

 

19
 

 

Note 8 - Share Interest

 

On February 1, 2013, the Company consummated an offering (the “Offering”) in the aggregate amount of $6,000,000 for its Unsecured 8% Coupon Series B Convertible Debenture (the “Debentures”). The Debentures are due on January 31, 2017 (the “Maturity Date”) and are convertible into restricted shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at the conversion price of $3.50 per share of Common Stock after giving effect for the Company’s 3.5 to 1 reverse stock split. The Debentures bear interest at the coupon rate of eight percent (8%) per annum, computed on an annual basis of a 365 day year, payable in quarterly installments on March 31, June 30, September 30 and December 31 of each calendar year until the Maturity Date. For so long as the Debentures remain unpaid, the Company shall issue additional interest to the subscribers after giving effect for the Company’s 3.5 to 1 reverse stock split as follows: (i) at the Closing of the Debenture (the “Closing”), a number of shares of Common Stock equal to the principal amount of the Debenture multiplied by approximately 0.09524; (ii) on the first anniversary of the Closing, a number of shares of Common Stock equal to the principal amount of the Debenture multiplied by approximately 0.09524; (iii) on the second anniversary of the Closing, a number of shares of Common Stock equal to the principal amount of the Debenture multiplied by approximately 0.09524 (collectively, with subsection (ii), the “Interest Shares”); and (iv) on the third anniversary of the Closing, warrants (the “Interest Warrants”) to purchase a number of shares of Common Stock equal to the principal amount of the Debenture multiplied by 0.33, at the exercise price of $3.50 per share of Common Stock which warrant shall expire three years after the date of issuance. The value of the Interest shares payable for the period February 1, 2014 through January 31, 2015 and payable at February 1, 2014 for the was determined to be $2,605,716. The Share Interest was fully vested and non-forfeitable. 

 

Note 9 - 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 $8,695. The term of lease expired on February 28, 2011 and is now on a month-by-month basis.

 

Total rent expense at 135 Wood Street, West Haven, Connecticut amounted to $78,255 and $75,945 for the nine months ended March 31, 2014 and 2013, respectively.

 

On February 11, 2013, the Company entered into a binding Memorandum of Understanding (“MOU”) with Inno-Haven, LLC, a Connecticut Limited Liability Company (“Inno-Haven”), to lease for a four-year term a 18,000 square foot building located at 1 Controls Drive, Shelton, Connecticut (the “Leased Premises”), and for Inno-Haven to renovate the facility at the Company’s direction, to be suitable for laboratory and GMP clean room drug manufacturing. Inno-Haven is controlled by Anil Diwan, the Company’s founder, President and Chairman and controlling shareholder of TheraCour Pharma, Inc., the Company’s principal shareholder (“TheraCour”). The MOU is subject to a definitive lease agreement (the “Lease Agreement”) to be executed upon final determination of the cost of the laboratory and GMP clean room, and which would contain definitive terms regarding rent, taxes, utilities, maintenance and other, similar items. Pursuant to the MOU, the Company has agreed to provide up to $2,000,000 in cash collateral for sums borrowed by Inno-Haven (collectively, the “Loans”) to complete the build-out and renovation of the Leased Premises for the benefit of the Company. The Company agreed to file a registration statement for shares of its restricted Common Stock, provided by TheraCour Pharma, Inc., as additional collateral for any or all of the Loans (the “Registrable Shares”). The Company shall file a registration statement within ninety (90) days of a closing of a Loan (a “Closing”) to cover such Registrable Shares and use its best efforts to have such registration statement declared effective no later than one hundred eighty (180) days following the Closing, and keep such registration statement effective until the termination of the respective collateral agreement, upon request to do so by Inno-Haven. The MOU further provides that, so long as there is no breach of the Lease Agreement by the Company, any distribution of the collateral in accordance with a Loan will first be made from the proceeds of life insurance policies (if applicable), then from the proceeds of the sale of the Registrable Shares, and then, should there be any balance still owing to the lender, from the cash collateral.

 

20
 

 

Also on February 11, 2013, pursuant to the provisions of the MOU, the Company transferred $1,000,000 as cash collateral (the “Cash Collateral”) and agreed to register a number of shares of the Company’s Common Stock, which shares were provided by TheraCour Pharma, Inc., equal to $1,000,000 (the “Collateral Shares”) as collateral pursuant to a Loan and Security Agreement entered into between Inno-Haven and a non-affiliated lender (the “Loan Agreement”) for a loan in the principal amount of $2,000,000. On September 17, 2013 The Company transferred the remaining $1,000,000 cash collateral to Inno-Haven. The value of the Collateral Shares shall be determined every three months and, in the event that the current number of shares of the Common Stock is less than $1,000,000, Inno-Haven may deposit, and the Company shall register, additional shares to equal the aforesaid $1,000,000. Alternatively, Inno-Haven may deposit cash equal to the difference between $1,000,000 and the value of the Collateral Shares. Moreover, Inno-Haven is required to obtain a life insurance policy to insure the life of Dr. Diwan in the amount of $2,000,000. If Dr. Diwan dies during the term of the Loan Agreement, the lender shall have the option to demand payment of the balance of the loan, but, shall be repaid first from the proceeds of any life insurance policy (if applicable), then from the proceeds of the sale of the Collateral Shares, and then, should there be any balance still owing to the lender, from the Cash Collateral. As of March 31, 2014 the Company has utilized approximately $3.6 million for specific fixtures and improvements it required for the new laboratory and cGMP facilities.

 

Total rent expense paid to Inno-Haven during this period amounted to $0 for the nine months ended March 31, 2014 and $0 since February 11, 2013.

 

Legal Proceedings

 

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 about 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, the Company 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). The Company may seek dismissal of the complaint if plaintiff has not posted the demanded security (or engaged the court). The Complaint further seeks unspecified “injunctive relief” in furtherance of the demand for inspection to which the Company believes 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. On or about July 18, 2012, the Plaintiff moved to amend its answer. On or about August 8, 2012, we filed our opposition to Plaintiff’s Motion to Amend and a Motion to Dismiss the Complaint for failure to state a claim upon which relief can be granted. On or about September 13, 2012 the court granted the Plaintiff’s Motion to Amend. On or about September 17, 2012 the Plaintiff served its “Second Amended Shareholder Derivative Complaint” upon our Counsel in Nevada. As in the prior two complaints that this Plaintiff has filed in this action, the Second Amended Complaint sought to compel inspection of the Company’s books and records, sought injunctive relief, an accounting and alleges breach of Fiduciary by Dr. Seymour and Dr. Diwan. On or about October 11, 2012, we filed a Motion to Dismiss the Second Amended Complaint for failure to state a claim upon which relief can be granted. On or about December 4, 2012, the Court granted the Company’s Motion to Dismiss with respect to Dr. Seymour and Dr. Diwan and ordered the case dismissed as to all claims but the Plaintiff’s request to compel documents required to be maintained by the Company’s registered agent in Nevada pursuant to NRS 78.105. On or about December 26, 2012, the Company provided the Plaintiff with each of the documents to which it is entitled. Management believes that the Plaintiff does not have a legal or good faith basis for inspection or copying of its shareholder’s list and intends to vigorously defend the production thereof. In May, 2013, the Plaintiff filed a motion for permission to file a third amended complaint. The Company subsequently filed a motion to dismiss and for Summary Judgment. The Court denied the Motion to Dismiss and for Summary Judgment and ordered the Plaintiff to file its Third Amended Complaint. On or about July 15, 2013 the Company Petitioned the Nevada Supreme Court for a Writ of Prohibition or Mandamus reversing the trial Court’s denial of Summary Judgment. Thereafter, on or about September 20, 2013, the Nevada Supreme Court denied the Company’s Writ Petition. The Company filed its answer to the Third Amended Complaint, which contains only one cause of action which is identical to the sole cause of action which was not dismissed from the Second Amended Complaint. Specifically, the Third Amended Complaint seeks only to compel production of books and records required to be maintained by the Company’s Registered Agent pursuant to NRS 78.105 Management believes that the Company’s registered Agent has provided the Plaintiff with all documents to which it is entitled pursuant to NRS 78.105 and that this lawsuit has no merit or basis. On March 3, 2014 the Company filed a Motion for Summary Judgment. On March 3, 2014 Plaintiff Moved the Nevada Superior Court for permission to file a Fourth Amended Complaint seeking to implead Corporate Stock Transfer, the Company’s Colorado Transfer Agent. The Company has opposed this motion. There has not been a decision on either motion. The Company intends to vigorously defend this lawsuit. Specific monetary damages have not been claimed and as a result no accrual has been made in relation to this litigation.

 

 

21
 

 

On or about July 15, 2013 the same Plaintiff that had filed the repetitive complaints in the Nevada action as set forth in the preceding paragraphs (Yidam, Ltd. v. Eugene Seymour, Anil Diwan, and NanoViricides, Inc.) filed a Shareholder Derivative complaint with the United States District Court for the District of Colorado.  The Plaintiff asserts the action is a shareholder derivative action and the Company is solely a nominal defendant.  The Company maintains that it, as well as the individual defendants, Messrs. Seymour and Diwan, have not been served in the action. However, a default was filed against the Company, which has been vacated. The Complaint alleges that the Company has failed to deliver information requested by the Plaintiff, the identical information the Plaintiff is seeking inspection of in the Nevada action, and that the individual defendants, Messrs. Seymour and Diwan, breached their fiduciary duties to the Company and caused it financial harm.  The Plaintiff demands an order to inspect the Company’s records, an order revoking Messrs. Diwan and Seymour from the Board of Directors, equitable relief, and consequential and punitive damages.  The Company believes these claims have no merit and the Company intends to defend this action vigorously. The Company has moved the District Court to dismiss the action in its entirety though consequential and punitive damages are claimed, no facts have been submitted to support such claim. Management has determined that such claims are specious and not relevant to the Company and no accrual has been made in relation to this litigation.

 

 There are no other legal proceedings against the Company to the best of the Company’s knowledge as of the date hereof and to the Company’s knowledge, no action, suit or proceeding has been threatened against the Company.

 

Note 10 – 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 were no reportable subsequent events to be disclosed.

 

PART I

 

The following discussion should be read in conjunction with the information contained in the 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, 2013. 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.

 

22
 

 

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

 

The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should,” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.

 

Although these forward-looking statements reflect the good faith judgment of our management, such statements can only be based upon facts and factors currently known to us. Forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. As a result, our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under the caption “Risk Factors.” For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should not unduly rely on these forward-looking statements, which speak only as of the date on which they were made. They give our expectations regarding the future but are not guarantees. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. 

 

ITEM I: BUSINESS

 

Organization and Nature of Business

 

NanoViricides, Inc. is a leading company in the application of nanomedicine technologies to the complex issues of viral diseases.

 

We are very happy to report that NanoViricides has won the prestigious “IAIR Award” as the “Best North American Company for Leadership in the Nanomedicine Sector”. These awards are given by the IAIR Group. IAIR (International Alternative Investment Review) is a publication of EDITRICE LE FONTI® SRL, Milan, Italy. In addition, Anil R. Diwan, Ph.D., President, Chairman, and co-Founder of the Company was recognized as the “2014 Researcher of the Year” by BusinessNewHaven, a business journal, and the New Haven magazine, that serve the State of Connecticut. We are pleased with these recognitions and awards that attest to our leadership position in the nanomedicines sector.

 

The nanoviricide® technology enables direct attacks at multiple points on a virus particle. It is believed that such attacks would lead to the virus particle becoming ineffective at infecting host cells. Antibodies in contrast attack a virus particle at only a maximum of two attachment points per antibody.

 

The Company develops its drugs, that we call a nanoviricide®, using a platform technology. This approach enables rapid development of new drugs against a number of different viruses. A nanoviricide is a “biomimetic” - it is designed to “look like” the cell surface to the virus. To accomplish this, we have developed a polymeric micelle structure composed of PEG and fatty acids that is designed to create a surface like the cell membrane, with the fatty acids going inside of the micelle. On this surface, we chemically attach, at regular intervals, virus-binding ligands. The virus is believed to be attracted to the nanomicelle by these ligands, and thereby binds to the nanoviricide using the same glycoproteins that it uses for binding to a host cell. Upon such binding, a “lipid mixing” interaction between the lipid envelope of the virus and the nanomicelle is thought to take place, leading to the virus attempting to enter the nanomicelle. Many different kinds of viruses are likely to get destroyed in the process.

 

We engineer the ligands to “mimic” the same site on the cell surface protein to which the virus binds. These sites do not change no matter how much a given virus mutates. Thus we believe that if a virus so mutates that it is not attacked by our nanoviricide, then it also would not bind to the human host cell receptor effectively and therefore would be substantially reduced in its pathogenicity. Our success at developing broad-spectrum nanoviricides depends upon how successfully we can design decoys of the cell surface receptor as ligands, among other factors.

 

23
 

 

The Company currently has six drugs in development with very large commercial markets. These include (i) Injectable FluCide™ for hospitalized patients with severe influenza, (ii) Oral FluCide™ for out-patients, (iii) DengueCide™, a broad spectrum nanoviricide designed to attack all types of dengue viruses and expected to be effective in the Severe Dengue Disease syndromes including Dengue Hemorrhagic Fever (DHS) and Dengue Shock Syndrome (DSS), (iv) HIVCide™ for HIV/AIDS, (v) HerpeCide™ for cold sores and genital sores caused by HSV, and (vi) Broad-spectrum Anti-Viral Eye drops for adenoviral and herpesviral infections of the external eye. In addition, the Company has research programs to develop drugs against Rabies virus, Ebola and Marburg viruses, as well as the recent MERS Coronavirus (Middle-East Respiratory Syndrome). The Company also has a technology that we call “ADIF” or “Accurate-Drug-In-Field” technology with which an effective drug can be developed against a novel virus right in the field using stockpiled nanoviricides® precursors. The estimated market size for the current drug candidates is well in excess of $40 Billion worldwide.

 

We continue to achieve very strong performance in the testing of these drug candidates. All of our biological testing is conducted by third parties.

 

Of these, our Injectable FluCide is the most advanced. This drug candidate has shown extremely high effectiveness in a lethal influenza infection mouse model against two different types of influenza A virus, namely H1N1 and H3N2. The Company believes that this drug should be effective against most if not all influenza A subtypes, and strains, including the novel H7N9 strain. The Company held a pre-IND Meeting with the US FDA for its clinical drug candidate NV-INF-1 (i.e. Injectable FluCide) in the FluCide program in March 2012. The Company obtained valuable advice and is developing this candidate towards an investigational drug application (“IND”) to the US FDA as well as for similar applications to other international regulatory agencies. The Company recently performed a short preliminary non-GLP study designed to guide the planned GLP Safety and Toxicology studies (“Tox Package”) that are required for an IND filing. On October 7, 2013, the Company announced that in this small animal non-GLP safety/toxicology study of NV-INF-1 drug candidate, even at maximum feasible dosage, the drug was well tolerated and that no adverse events were found at study completion. . On December 2, 2013, the Company reported that detailed laboratory analyses of samples from this non-GLP safety and toxicology study showed no overall systemic effects and no direct effects on the primary organs. This includes liver and kidney tissues as well as liver and kidney function. This is important as the liver and kidneys are major organs involved in drug toxicity. In addition, FluCide showed no adverse effects on the lungs from the treated animals. This is very important because the respiratory system is a primary site of influenza virus infection and tissue damage. These strong safety findings were seen at all doses tested, even at the maximum feasible dose (MFD). MFD was much higher than the therapeutic dose range used to treat influenza virus infections in our animal model efficacy studies. FluCide was administered intravenously by tail-vein injections or by infusion in this study. The non-GLP safety/toxicology study was conducted at KARD Scientific in Massachusetts.

 

These results support the Company’s positive findings in animals that were infected with different influenza A virus strains. In those studies, no safety or toxicology concerns were observed. The Company has previously reported that its FluCide candidate demonstrated extremely high anti-influenza activity in lethal infection animal models using multiple influenza A subtypes. The extremely high anti-influenza activity coupled with the strong safety data were the basis for the selection of this FluCide candidate for further drug development. As previously reported, the results of this study will provide both the basis and focus for the GLP safety and toxicology studies of FluCide that are required for the IND submission to the U.S. FDA. These GLP studies will be performed on both large and small animals at the BASi facility in Indiana.

 

The Company believes that these strong safety data bode well for our other drug programs as well. This is because a nanoviricide is built of two parts – (1) a virus specific ligand, that is chemically attached to (2) a “nanomicelle” or polymeric micelle based on our specific chemistries. It is reasonable to believe that the nanomicelle structures of our other drug candidates should also be safe. In addition, we believe that we have chosen antiviral ligands for our other drug candidates in a very conservative, safety-biased fashion.

 

The Company is currently performing process development and scale up studies on its FluCide drug candidate in its existing facilities. This activity is comprised of three parts: (a) Scale-up and characterization studies of the selected broad-spectrum anti-influenza ligand in FluCide; (b) Scale-up and characterization of the nanomicelle-forming polymer in FluCide; and (c) Scale-up and characterization of the FluCide resulting from chemical conjugation of the ligand with the nanomicelle. The scale-up studies, were necessitated to be performed at this early stage of our drug development because of the extremely high safety of FluCide that resulted in a very large quantity requirement for the GLP Safety/Toxicology studies. The limitations of the current laboratory facilities impose that we produce these materials in multiple batches at present, resulting in extended production and characterization time periods.

 

24
 

 

We have now begun production of the large quantities of the anti-influenza ligand needed for the GLP safety/toxicology study. The production of the polymer and thereafter the production of the FluCide is expected to be undertaken when the scale-up and characterization studies on those aspects are sufficiently progressed. We will then be able to produce the quantities of materials we need for the GLP Safety/Toxicology study of the injectable FluCide drug. We intend to begin the GLP Safety/Toxicology study as soon as feasible.

 

The Company has previously announced that its anti-dengue drug candidate in the DengueCide™ program achieved an unprecedented 50% survival rate in a special mouse model that mimics the most severe dengue disease in humans. This study was performed by Professor Eva Harris at the University of California, Berkeley.

 

On August 12, 2013, the Company announced that this anti-dengue drug candidate has been awarded an orphan drug designation by the US FDA. On November 11, 2013, we announced that this anti-dengue drug candidate was also awarded an orphan drug designation by the European Medicines Agency (EMA). These orphan drug designations provide the Company with several financial and other benefits that have now enabled the Company to give a high priority to the development of this drug.

 

In addition, the Company is developing a flexible, multi-product, pilot manufacturing facility capable of manufacturing any of its drug candidates in c-GMP compliant manner. This facility will be able to provide the cGMP clinical drug substances for its future human clinical studies. (“c-GMP”= current Good Manufacturing Practices, a set of guidelines developed by the US FDA that the manufacture of a drug must adhere to for human clinical trials and future sales. Internationally, there are similar guidelines promoted by local regulatory agencies, and ICH harmonization guidelines promoted by the WHO). A group of private financiers that includes our founder Dr. Anil Diwan has acquired an 18,000 sqft building on 4 acres with possibilities of expansion, in Shelton, CT, via Inno-Haven, LLC, a company formed specifically for that purpose. This building is now undergoing a total renovation to facilitate setting up a modern cGMP drug substance manufacturing facility with injectable drugs capability, as well as supporting analytical and chemistry laboratory facilities.

 

We have assembled a marquee team of experts to help with the design, engineering, architecture, and construction of this facility. Mr. Andrew Hahn continues to provide overall stewardship for this project. He was formerly 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. Mr. Phil Mader and his firm, MPH Engineering, LLC (“MPH”), continue to help with the overall project management and design engineering of the laboratory and cGMP pilot production facility. Prior to founding MPH, from 2000 to 2007, Phil Mader served as the Senior Capital Project Manager at Bristol-Myers Squibb Company in Wallingford, CT (“BMS”). He was involved in the design, implementation, and commissioning of various biology and chemistry laboratory projects within budget and in a timely manner. Ms. Kathyann Cowles of ID3A, LLC, serves as the Principal Architect. Ms. Cowles, co-founder of Id3A, has over thirty years of experience as a licensed Architect and Senior Project Manager for diverse and complex design and construction projects in the academic, science,  technology, corporate and research sectors. This team is working with the expert advice and guidance of the Company’s Scientific Advisor, Dr. Harmon Aronson. Dr. Aronson is a well-known cGMP consultant in the pharmaceutical industry, and was formerly Vice President of Quality Management at Biocraft Laboratories, a company that was acquired by Teva Pharmaceuticals.

 

A majority of the construction phase of this renovation project is now substantially complete, as of the writing of this report, May 12th, 2014.. The project has remained substantially on schedule in spite of significant adverse weather and related delays.

 

We are currently evaluating the lease versus purchase option regarding this facility. We have commissioned an independent consultant report to assist the Company with this decision. Based on this report, the Board has requested the Executive Committee to perform additional detailed studies regarding the potential purchase of this facility. As such, the Company has not engaged into a lease as of the date of this report, with consent from Inno-Haven, LLC.

 

25
 

 

After the construction is completed, and we occupy the premises, we will need to set up new equipment and ensure that its performance is adequate. Thereafter we will need to conduct several validation studies and also establish our new laboratories in the new facility. In addition, we will need to set up cGMP compliant systems for working in this new facility. We will need to establish the scaled up manufacturing processes of our drug candidates under cGMP guidelines in this facility. Only after that, the Company will be able to make cGMP-like material using the same processes as c-GMP material but prior to undergoing the FDA registration process. Such c-GMP-like product can be used for clinical batches for human clinical studies in several countries around the world. The Company is currently investigating all such options in order to expedite the timeline to entering human clinical trials. The Company intends to contract out clinical batch fulfillments to outside established contract manufacturers.

 

In August 2012, we announced that we were successful in developing an anti-influenza drug candidate that was orally effective. We believe this may be the very first targeted nanomedicine that is available via the oral route. Oral availability of FluCide would open up a much larger market than the injectable version. The Company intends to continue to develop the injectable version for hospitalized patients. 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. In addition, we now plan to develop an oral version for out-patients and later also for pediatric patient populations. This oral version will replace the injectable drug that we were developing for out-patients.

 

In September 2012, we announced that the oral version of FluCide was also highly effective against a different strain of influenza A, namely H3N2, in addition to the influenza strain of H1N1 that we had been using for development, in the same lethal animal challenge model. This is an important indication that our drug candidates against influenza are indeed broad-spectrum, i.e. capable of combating most if not all influenza viruses. We will need to perform animal studies against a few additional strains of influenza viruses in order to substantiate that this drug is indeed a broad-spectrum drug candidate. Additional studies in cell cultures against different strains of influenza are also planned. All of these studies are necessary for filing an IND application.

 

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; and (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.

 

Initially we focused on developing only injectable formulations since these afford the maximum bioavailability of the drug inside the body. We have also developed eye drop solutions against EKC in a very short time frame.

 

A skin cream appears to be the right formulation for the treatment of oral and genital warts caused by HSV-1 and HSV-2. Last year we had already observed that our drug candidates, in the solution form, were effective in cell cultures against at least two different strains of HSV-1 in two different laboratories. We needed to make skin creams for conducting animal studies and selected different building blocks for our backbone polymer, and built new drugs against HSV this year. The skin cream drug candidates against HSV were developed within a matter of weeks. The formulation development itself took only a few days. In contrast, many drug development companies spend years in formulations development.

 

We have successfully developed what may be the first ever orally available targeted nanomedicine, in our Flucide program.

 

26
 

 

We demonstrated that we can rapidly develop different formulations because of the inherent strength of the nanoviricide platform technology. The technology also enables us to develop nasal sprays and bronchial aerosols. We plan to develop the appropriate formulations as necessary.

 

We have limited our expenditures on socially conscious projects such as “Neglected Tropical Diseases” (NTD’s), and “Bio-defense” projects to the extent that participatory funding from third parties is available. To this end, we attempt to obtain grants and contracts financing from government and non-government sources. We will continue to work on these programs as time and resources permit. In addition, we continue to develop novel technologies such as ADIF™ (“Accurate-Drug-In-Field™”) which may possibly represent one of the best scientific approaches against manmade and natural novel disease agents. Outbreaks of natural novel viral diseases, such as MERS-CoV, SARS-CoV, H7N9 Influenza, and others, will continue to occur. At present, there is no feasible therapeutic intervention for outbreaks of novel viruses, such as new MERS coronavirus outbreak reported recently.

 

We added two marquee independent board members to our Board of Directors in May/June, 2013. Dr. Milton Boniuk is the Caroline F. Elles Chair Professor of Ophthalmology, in the Alkek Eye Center at the Baylor College of Medicine, Houston, TX, a practicing ophthalmic surgeon, an astute businessperson, a renowned humanitarian, and a strong investor in and supporter of the Company. To date, he has invested $7M into NanoViricides, Inc., through various entities. Dr. Mukund S. Kulkarni, MBA, PhD, is currently the Chancellor of Penn State University, and continues to be Professor of Finance. Together with Mr. Stanley Glick, a practicing CPA and Chair of our Audit Committee, we now have a majority of independent board members.

 

We have continued to successfully raise financing. We had previously completed a $6M convertible debentures placement with our prior investors with long positions in February, 2013. In addition, we completed a registered direct offering of approximately $10M on September 9, 2013, after reverse-split of our common stock by a factor of 3.5 old common shares for 1 new common share. With the newly established stock price, subsequently, we met the eligibility criteria for both NASDAQ and NYSE MKT.

 

On September, 25, 2013, the Company’s common stock began trading on the NYSE MKT exchange under the symbol NNVC. This up-listing from OTC bulletin board was the culmination of a year-long effort spearheaded by Dr. Anil R. Diwan, our founder. The Company had announced at its annual meeting on January 16, 2013, that it had undertaken an initiative to improve its corporate governance, build a stronger and independent board of directors, and prepare the Company for uplisting to a major national exchange. The Company studied and evaluated the processes and performance at the major national exchanges and determined that it was in the best interests of our shareholders to uplist to NYSE MKT. Midtown Capital Partners, LLC, and Chardan Capital Markets, LLC advised the Company throughout this process and also served as the joint placement agents for the $10M registered direct offering referenced above.

 

This uplisting is a major milestone for the Company and an important advance in the Company’s corporate lifecycle.

 

The annual meeting of the Company’s shareholders was held on December 9th in Stamford, CT. The meeting was well attended in spite of poor weather conditions. All of the Directors of the Company were present. In addition, two of the Company’s Scientific Advisory Board members, namely Dr. Harmon Aronson, and Professor Thomas Lentz, also attended the meeting. The Company unveiled its completely redesigned website in connection to the annual meeting. The new website provides access to the CEO’s presentation, our press releases, our technologies, as well as our SEC filings and other documents. This website is built with modern technologies including CSS and HTML5 to allow flexible design and simplifying future updates.

 

As of March 31, 2014, the Company has current assets of approximately $34.6MM and additional cash provided as security deposits for the new facility of $2M, for a total of $36.6MM available cash.. The Company continues to be frugal in its expenditures, and has successfully held the rate of operational cash expenditures at approximately $1.25M this quarter. We believe we have sufficient funds in hand for more than two years of operations at the current rate of expenditure, and including the projected expenditures.

 

27
 

 

We believe we have sufficient funds in hand to complete Phase I and Phase IIa human clinical studies for at least one of our drug candidates, and advance, at least, one more drug candidate into human clinical studies. Our estimate is based on a number of assumptions and cost estimates provided by outside parties. The Company itself does not have the expertise in taking a drug through human clinical trials and as such depends upon outside experts to generate such estimates as well as to help the Company formulate and conduct its drug development programs. As such, these estimates may be grossly in error and there may also be hidden costs that we are not aware of.

 

Our strategy is to minimize capital expenditure. We therefore rely on third party collaborations for the testing of our drug candidates. We continue to engage with our previous collaborators. We also seek to engage with additional collaborators, as necessitated for the progress of our programs.

 

In November 2013, we renewed our contract with the Professor Eva Harris lab at the University of California at Berkeley for evaluation and development of our Denguecide drug candidate. With cases in Florida, Texas and recently in New York, in addition to 25,000 suspected cases reported in Puerto Rico this past summer, dengue virus is clearly becoming an important pathogen of concern in the United States.

 

We have engaged Biologics Consulting Group, Inc., to help us with the US FDA regulatory submissions. We are also engaged with Australian Biologics Pty, Ltd to help us with clinical trials and regulatory approvals in Australia. We believe that cGMP-like manufactured product is acceptable for entering human clinical trials in Australia.

 

In addition, we have recently signed “confidential disclosure agreements” (CDAs) with (1) Lovelace Respiratory Research Institute (LRRI), New Mexico, USA, (2) Public Health England (PHE), UK, and most recently (3) Viroclinics Biosciences, BV, the Netherlands. We anticipate completing master services agreements, after performing our due diligence, with the appropriate parties and, thereafter, initiate antiviral testing programs.

 

We have continued to achieve significant milestones in our drug development activities. All of our drug development programs are presently at pre-clinical stage. We continue to test several drug candidates under each program even though we may achieve extremely strong results with some of the candidates.

 

The Company reports summaries of its studies as the data becomes available to the Company, after analyzing and verifying the same, in its press releases.

 

In July-August 2011, we reported on the anti-HIV studies that were designed to discriminate the comparative effectiveness of different ligands. We reported that our lead anti-HIV candidate achieved anti-HIV efficacy equivalent to a HAART (highly active anti-retroviral therapy) triple drug cocktail in this recently completed animal study. Treatment with this lead anti-HIV nanoviricide reduced HIV levels and protected the human T cells (CD4+/CD8+) to the same extent as treatment with the HAART cocktail. The three drug HAART cocktail used for comparison in this study is one of the combination therapies recommended for initial therapy in humans. No evidence of drug toxicity was observed in the case of nanoviricide drug candidates. We later reported that this lead anti-HIV drug candidate achieved a long term anti-HIV effect with a much shorter dosing regimen and a markedly lower total drug dose than the HAART drug cocktail therapy in a recent animal study. The antiviral effect of the anti-HIV nanoviricide (“HIVCide™”) continued throughout the 48 days of study even though HIVCide dosing was discontinued after only 20 days. The clinical benefit of HIVCide was found to be sustained for at least four weeks after the last drug dose. Treatment with the lead anti-HIV nanoviricide both (1) reduced the HIV viral load and (2) also protected the human T cells (CD4+,CD8+), equally well as compared to treatment with the three-drug HAART cocktail, at 24-days as well as at 48-days, even though the HIVCide treatment was stopped at 20 days. The lead candidate is now undergoing further optimization.

 

In September 2013, we announced that we had further improved the HIVCide drug candidates, based on results of cell culture studies conducted by Southern Research Institute, Frederick, MD. A broad-spectrum anti-HIV-I activity was demonstrated in that HIV-1 Ba-L, a CCR5-using strain as well as HIV-1 IIIB, a CXCR4-using strain, were both inhibited equally well by two different nanoviricide drug candidates in the standard MAGI HIV Antiviral Assay

 

A long and sustained effect of HIVCide would lead to improved patient compliance, which is a sought after goal in HIV therapy. With this new study, we believe that we are close to a “Functional Cure” of HIV wherein the patient can take treatment until the viral load is undetectable and then stop treatment until an episode of virus reawakening occurs. Anti-HIV drug development is very expensive and therefore the Company continues to keep this program at a lower priority than our other drug development programs.

 

28
 

 

In September 2011, we announced that we have selected a clinical candidate, now designated NV-INF-1, for FDA submission in our highly successful FluCide™ anti-influenza therapeutics program. The Company is now developing certain additional information on NV-INF-1, with input from its FDA consultants, for the pre-IND application to the FDA. The Company is planning on two separate indications for NV-INF-1: High strength dosage form for hospitalized patients with severe influenza, and a single course therapy for the out-patients with less severe influenza. We are currently working on putting together the FluCide information in a pre-IND application to the US FDA.

 

In July 2011, we retained the Biologics Consulting Group to help us with our regulatory filings. This led to our pre-IND meeting request to the US FDA in December, 2011, and a pre-IND meeting with the US FDA in March, 2012.

 

In July 2012, we retained Australian Biologics Pty. Ltd., a regulatory affairs consulting firm, to coordinate the regulatory review and approval to conduct the first human trials in Australia for Flucide™, the Company’s broad-spectrum anti-influenza drug. Australian Biologics will also facilitate clinical trial site(s) selection and development of the clinical trials agreements. Dr. Jim Ackland, the Manager of Australian Biologics Pty, Ltd, has extensive experience in this field. Prior to becoming managing director of this company, he was Vice-President, West Coast and Asia Pacific operations for the Biologics Consulting Group, the Company’s US FDA regulatory affairs consulting group. In the 1990’s, he was the Head of Regulatory Affairs, Vaccines, for the CSL Group in Australia. The CSL Group is a global, specialty biopharmaceutical company that researches, develops, manufactures and markets products to treat and prevent serious human medical conditions.

 

In August 2012, we reported that oral effectiveness of anti-influenza FluCide drug was demonstrated in a lethal animal model. Certain anti-influenza drug candidates under our FluCide™ program, when given orally, were nearly as effective as when administered as IV injections. Two different anti-influenza drug candidates were tested in Oral vs. IV comparison, and both of them showed similar results that indicated strong oral effectiveness. The results clearly demonstrated that oral administration of both of these FluCide drug candidates resulted in substantially superior animal protection compared to oseltamivir (Tamiflu®), a standard of care for influenza at present. The studies involved the same highly lethal animal model the Company has continued to use for its influenza drug development program.

 

One of the FluCide drug candidates, when administered orally, enabled the animals to survive as long as 347.4±4.6 hrs. (14.5 days), and when given as an injectable, it allowed the animals to combat the lethal influenza infection for 376.8±7.5 hrs. (15.7 days). Another drug candidate (with a different anti-viral ligand), when given orally, resulted in the animals surviving for as long as 301.3±5.2 hrs. (12.6 days), and when given as a tail-vein injection, for 349.0±3.9 hrs. (14.5 days). For comparison, untreated control animals died in 119.5±1 hrs. (5 days), and oseltamivir (Tamiflu®) treated animals died within just 181.7±4.6 hrs. (7.6 days).

 

The survival data clearly showed that oral as well as IV administration of FluCide drug candidates was substantially superior to oseltamivir. In addition, they showed that FluCide drug candidates when given orally had substantial efficacy, almost matching the effectiveness of the injectable form given at 0.3X of the oral dosage level.

 

One of the FluCide drug candidates, when administered orally, resulted in 1.30 log reduction (or 20X reduction) in lung viral load and matched the viral load reduction on the same drug candidate given as an IV injection. Another drug candidate resulted in 1.23 log viral load reduction when given orally and 1.31 log viral load reduction when given as an injectable. In contrast, oseltamivir (Tamiflu®, given orally at 40mg/kg/d) resulted in only 0.6 log viral load reduction (or only 4X reduction) compared to negative controls. These were the results of lung viral load measured at 108 hours post-infection (hpi). Further, at 180 hpi, the lung viral load remained controlled at about the same level as at 108 hpi with the nanoviricide® drug candidates. In contrast, lung viral load in the oseltamivir treated mice increased to the same level as the negative control (infected untreated) animals prior to their death and the oseltamivir group exhibited a survival of only 182±4 hours.

 

The number of lung plaques and plaque areas (resulting from the influenza virus infection) also were consistent with the data from the lung viral load, and were minimal in the case of the nanoviricide drug candidates whether given as IV or orally. Oseltamivir treatment did not protect the lungs of infected animals anywhere close to the protection afforded by the FluCide drug candidates.

 

29
 

 

These data clearly demonstrated that both oral and IV treatment with nanoviricide drug candidates protected the lungs of the mice infected with influenza virus equally well. It is also clear that this lung protection was the result of the substantial decrease in the lung viral load. In addition, they show that FluCide drug candidates when given orally had substantial efficacy, almost matching the effectiveness of the injectable form given at 0.3X of the oral dosage level.

 

In addition to the antiviral effects, the oral FluCide drug candidates also led to generation of a strong antiviral antibody response. Two different anti-influenza drug candidates were tested in Oral vs. IV comparison. One of the FluCide drug candidates, when administered orally, resulted in 1866±90 micro-g/ml-plasma of anti-influenza antibody, and 1258±59 when administered as IV injections. Another FluCide candidate, when given orally, resulted in 1491±37 ug/ml plasma of anti-influenza antibody, and 1151±53 when administered as IV injections. The untreated infected animals had 190±22 ug/ml antibody response, which was the weakest of all, as expected. Of significance, oseltamivir (Tamiflu) resulted in only 950±64 ug/ml level of antibody response, which was far less than the two oral FluCide groups (p-value <0.0003), and also substantially less than the two IV FluCide groups (p-value <0.04). These p-values were determined for a comparison of FluCide groups against the oseltamivir group using the most stringent parameters, viz. two-tailed, paired, t-test. A smaller p-value indicates a greater confidence that the difference in observations cannot be a result of pure chance. These data also indicated that the antibody response was stronger when FluCide was given orally rather than as IV injection.

 

The generation of a strong antibody response is important. We believe that the strong reduction in viral load caused by FluCide treatment allows the immune system to function normally and generate appropriate antibodies. A strong antibody response implies that the FluCide drug candidates may also be useful as prophylactic therapy of uninfected health care workers and close associates of a patient in addition to treatment of infected patients.

 

All of these data also clearly demonstrated that both injectable and oral FluCide™ candidates were superior to oral oseltamivir (Tamiflu®, Roche), a current standard of care for influenza, in all parameters evaluated.

 

No adverse effects were found, indicating that the FluCide dose could be increased further to achieve much greater levels of effectiveness.

 

The oral FluCide candidate development was the result of chemistry optimization program that the Company has been working on.

 

In September 2012, we announced that the oral FluCide™ drug candidates demonstrated dramatically improved survival in animals administered a lethal dose of the H3N2 influenza A virus. Animals treated with the oral anti-influenza nanoviricide drug candidates survived for much longer as compared to Tamiflu® treated animals.

 

In this H3N2 infection study, animals treated with the best of the oral FluCide™ nanoviricide drug candidates survived 15.6 days while the animals treated with oral Tamiflu survived only 9.6 days. The control animals died within 5 days. The Company has previously reported that animals treated with these same oral anti-influenza nanoviricides protected mice infected with the H1N1 influenza A virus and were similarly substantially superior to oral oseltamivir (Tamiflu).

 

This is the first demonstration of efficacy of the Company’s FluCide drug candidates against a completely unrelated type of influenza A virus (viz. H3N2) in contrast to the H1N1 Influenza A virus that the Company has used for its recent development work leading to its pre-IND application with the US FDA. H3N2 influenza virus is one of the multiple sub-types of influenza A that cause seasonal epidemics. According to the CDC, influenza causes approximately 36,000 deaths every year in the U.S. alone. The Hong Kong Flu pandemic of 1968-1969, which killed an estimated one million people worldwide, was caused by a variant strain of H3N2. The Company believes an orally administered nanoviricide that protect against multiple influenza virus sub-types would be effective in season after season of influenza epidemics. Such a highly effective, broad-spectrum anti-influenza drug is widely anticipated to be highly successful.

 

30
 

 

The Company believes that the anti-influenza drug candidates it has developed are broad-spectrum, i.e. they should work against most if not all of influenza viruses. This is because, in spite of mutations and antigenic drift, all influenza viruses bind to the same cell surface receptor called sialic acid, and the Company has developed small chemical ligands that mimic this receptor, to attack the influenza viruses. These ligands are chemically attached to the Company’s polymeric micelle backbones that mimic the cell membrane, to create the nanoviricides. The Company has previously shown effectiveness of its very early anti-influenza drug candidates against two different strains of H5N1 Bird Flu virus in cell culture studies. The Company has since then improved the ligands as well as the chemistries as reported from time to time.

 

The Company intends to develop data about effectiveness of its drug candidates against certain unrelated influenza A viruses using both cell culture studies and animal models in a reasonable manner. These data will be needed as part of the IND application that the Company is working on. An IND application will be required for the Company to enter into human clinical trials.

 

Previously, in June 2010, the Company reported successful studies in two different cell culture models of dengue virus type 2 infection. These studies were conducted at the Prof. Eva Harris lab at the UC Berkeley. Our results were later confirmed and extended to animal studies.

 

The Company reported that its anti-Dengue drug candidates demonstrated significant protection in the initial animal survival studies of Dengue virus infection, in an animal study protocol modeled to simulate the ADE syndrome. The best nanoviricide drug candidates demonstrated 50% animal survival in this uniformly lethal mouse model. The studies were performed in the laboratory of Dr. Eva Harris, Professor of Infectious Diseases at the University of California, Berkeley (UC Berkeley).

 

Based on this data, the Company believes that it is feasible to develop a single nanoviricide drug against all types of dengue viruses that circumvents the primary issue of antibody-dependent enhancement (ADE) of dengue virus infection. ADE is thought to result in severe dengue disease syndromes such as dengue shock syndrome (DSS) and dengue hemorrhagic fever (DHF).

 

In June, 2010, we also reported that our anti-HIV drug candidates demonstrated efficacy in the recently completed cell culture studies using two distinctly different HIV-1 isolates. These studies were performed in the laboratory of Carol Lackman-Smith at the Southern Research Institute, Frederick, Maryland. These results corroborated our previous findings in Animal Studies. The Company had reported that its best nanoviricide drug candidate against HIV was more than 25 times superior to a three drug combo anti-HIV cocktail based on biomarker test response in all parameters tested. The parameters included improvement in human T cell populations in the animal model and reduction in HIV viral load. The Company has since performed additional studies to optimize the HIV binding ligand and has found ligands that are superior to the one that yielded these strong results. The Company now plans to deploy this new anti-HIV ligand connected to the full strength polymeric micelle that we have also optimized as a new anti-HIV nanoviricide drug candidate. We plan to test this optimized anti-HIV drug candidate in animal studies. Anti-HIV studies are extremely expensive. As such, the Company’s HIVCide program has been slowed down with the current slow financial markets.

 

In August 2010, we reported that our anti-HSV drug candidates exhibited almost complete inhibition of herpes simplex virus HSV-1 in cell culture studies conducted in Professor Ken Rosenthal lab at the Northeastern Ohio Universities Colleges of Medicine and Pharmacy. 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.

  

31
 

 

In March through May 2011, the Company reported that further chemistry optimization led to dramatically improved antiviral efficacy with its optimized FluCide™ drug candidates in its most recent animal study. In the influenza mouse lethal infection model, animals treated with one of the optimized FluCide™ nanoviricide drug candidates survived beyond the stated full duration of study (21 days), and those treated with two additional drug candidates survived almost the full duration of the study. Animals in these three groups survived significantly longer (20.2 to 22.2 days) as compared to the animals treated with Oseltamivir (Tamiflu®) only 8.3 days. In addition, the post-infection treatment with these 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, in this study, these optimized FluCide™ drug candidates achieved 1,000-fold reduction in the levels of infectious virus in the lungs of animals with a lethal level of influenza virus infection. 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 500-fold greater reduction in viral load by FluCide drug candidates over Oseltamivir. Of great clinical significance is the fact that 2 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 the optimized 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.

 

In September 2011, we announced that we have selected a clinical candidate, designated NV-INF-1, for FDA submission in our highly successful FluCide™ anti-influenza therapeutics program. The Company submitted a pre-IND application to the FDA for this clinical candidate and held a pre-IND meeting with the US FDA in March, 2012. In addition, the Company is planning a high strength “piggy-back infusion” dosage form for hospitalized patients with severe influenza. The Company will continue the development of these two drug candidates towards an IND, based on the guidance it received in the first pre- IND meeting.

 

The studies of biological testing of materials provide information that is relatively easy to understand and therefore readily reported. In addition, we continue to engage in substantial work that is needed for the optimization of synthesis routes and for the chemical characterization of the nanoviricide drug candidates. We also continue to work on improving the drug candidates and the virus binding ligands where necessary. We continue to work on creating the information needed for the development of controlled chemical synthesis procedures that is vital for developing c-GMP manufacturing processes.

 

We are also making progress in development of our cGMP manufacturing capability. The Company announced in May 2012 that it had appointed Mr. Andrew Hahn to help with the overall design and construction of its laboratory and cGMP pilot production facility. 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.

 

In addition, the Company announced on October 24, 2011, that information about its novel, proprietary anti-virus platform technology has been published in the book “Bionanotechnology II: Global Prospects.” The chapter entitled “Nanoviricides - A Novel Approach to Antiviral Therapeutics” provides an in-depth presentation of the NanoViricides platform technology.

 

The Company also announced in March 2014 that a fundamental PCT patent application, on which the nanoviricides® technology is based, has resulted in additional issued patents in Australia and the Philippines. As with issuances in other countries including the USA, the Australian and Philippine patents have 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 corresponding original “pi-polymer” international application, namely, PCT/US06/01820, was filed under the Patent Cooperation Treaty (PCT) system in 2006. Several other patents have already been granted previously in this patent family in various countries and regions, including Canada, Europe, Israel, ARIPO, China, HongKong, Japan, Mexico, New Zealand, OAPI, Singapore ,Vietnam and South Africa, and the USA. Prosecution in several other countries continues. In May 2012, the US Patent (No. 8,173,764) was granted for "Solubilization and Targeted Delivery of Drugs with Self-Assembling Amphiphilic Polymers.". The US patent term is expected to last through October 1, 2028, including anticipated 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. Estimated expiry dates for these patents range nominally from 2026 to 2028 with various extensions accounting for delays in clinical trials. Additional issuances are expected in Europe, and in several other countries around the world. 

 

32
 

 

In addition to this basic PCT application that covers the “pi-polymer” structure itself, another PCT application, PCT/US2007/001607, that discloses making antiviral agents from the TheraCour family of polymers and such structures is in various stages of prosecution in several countries, and has already issued in at least seven countries and regions. The counterparts of the international PCT application have issued as a granted patent in New Zealand, OAPI, Pakistan, Australia, South Africa, and Mexico to date. Additional issuances are expected in Europe, USA, and in several other countries around the world. This patent application teaches antivirals based on the TheraCour polymeric micelle technologies, their broad structures and compositions of matter, pharmaceutical compositions, methods of making the same, and their uses. The nominal expiry dates are expected to range from 2027 to 2029.

 

The patents are being issued 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, perpetual, licenses from TheraCour Pharma, Inc. to these technologies and patents 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. NanoViricides currently holds two licenses in perpetuity to develop and sell drugs for the treatment of these viral diseases. These licenses are provided for all the intellectual property held by TheraCour Pharma, Inc. that relates to our antiviral licensed products. These licenses are not limited to underlying patents, but also include the know-how, trade secrets, and other important knowledge-base that is utilized for developing the drugs and making them successful. In addition, these extremely broad licenses are not limited to some specific chemical structures, but comprise all possible structures that we could deploy against the particular virus, based on these technologies. In addition, the licenses are held in perpetuity by NanoViricides for world-wide use. The licenses are also exclusively provided only to NanoViricides for the licensed products so NanoViricides is the only party that can further sublicense the resulting drugs to another party, if it so desires. TheraCour cannot further license anything in our licensed products areas because of the breadth of the license. The licenses can revert only in the case of a default by NanoViricides. The terms of default are such that effectively TheraCour would be able to take the licenses back only in the event that NanoViricides files bankruptcy or otherwise declares insolvency and inability to conduct its business. This structure is standard in the licensing world as it saves the IP from being blocked from commercialization in lengthy and potentially fragmentary bankruptcy proceedings.

 

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, 2013. 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.

 

33
 

 

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.

 

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

 

The nanomedicine technologies developed by TheraCour Pharma, Inc. serve as the foundation for our intellectual property. The Company holds 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.

 

34
 

 

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. Subsequently, 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 sale of NanoViricides common stock that he had acquired as a founder, that netted approximately $900,000 after expenses and income taxes. Dr. Diwan disposed of his shares in accordance with a 10b5.1 trading plan which concluded in October, 2011. Inno-Haven has also obtained additional financing from certain other unrelated parties.. Dr. Diwan had also agreed to provide personal guarantees for potential loans and mortgages which could be drawn for the purpose of financing the building and construction costs

 

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. Subsequently, on February 11, 2013, the Company entered into a binding Memorandum of Understanding (“MOU”) with Inno-Haven, to lease these facilities for a four-year term. The MOU is subject to a definitive lease agreement (the “Lease Agreement”) to be executed upon final determination of the cost of the facilities. Pursuant to the MOU, the Company has agreed to provide up to $2,000,000 in cash collateral for sums borrowed by Inno-Haven (collectively, the “Loans”) to complete the build-out and renovation of the Leased Premises for the benefit of the Company. The Company agreed to file a registration statement for the shares of restricted NNVC Common Stock owned and provided by TheraCour Pharma, Inc., as additional collateral for any or all of the Loans (the “Registrable Shares”). The MOU further provides that, so long as there is no breach of the Lease Agreement by the Company, any distribution of the collateral in accordance with a Loan will first be made from the proceeds of life insurance policies (if applicable), then from the proceeds of the sale of the Registrable Shares, and then, should there be any balance still owing to the lender, from the cash collateral. Also on February 11, 2013, pursuant to the provisions of the MOU, the Company transferred $1,000,000 as cash collateral (the “Cash Collateral”) and agreed to register a number of shares of the Company’s Common Stock, which shares were provided by TheraCour Pharma, Inc., equal to $1,000,000 (the “Collateral Shares”) as collateral pursuant to a Loan and Security Agreement entered into between Inno-Haven and a non-affiliated lender (the “Loan Agreement”) for a loan in the principal amount of $2,000,000. On September 17, 2013, the Company transferred the remaining $1,000,000 cash collateral to Inno-Haven. Moreover, Inno-Haven is required to obtain a life insurance policy to insure the life of Dr. Diwan in the amount of $2,000,000. If Dr. Diwan dies during the term of the Loan Agreement, the lender shall have the option to demand payment of the balance of the loan, but, shall be repaid first from the proceeds of any life insurance policy (if applicable), then from the proceeds of the sale of the Collateral Shares, and then, should there be any balance still owing to the lender, from the Cash Collateral. As of March 31, 2014, the Company had expensed approximately $1.1 million in specific fixtures and improvements required by the Company. No lease has been finalized as of now. Total rent expense paid to Inno-Haven during this period amounted to $-0- for the three months ended March 31, 2014 and $-0- since February 11, 2013.

 

The Company does not currently have any revenue. All of the Company’s products are in development stage and require successful; development through regulatory processes before commercialization. During the development stage, we have generated funding through the issuances of debt and private placement of common stock and also the sale of our registered securities. The Company does not currently have any long term debt, other than convertible debentures as disclosed earlier. 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.

 

35
 

 

The Company’s Drug Pipeline

 

We currently have, in early, active development, (1) an Injectible FluCide™ for hospitalized patients with severe influenza; (2) Oral FluCide™ for outpatient – both of these drug candidates are expected to be active against Epidemic Influenzas including the current novel H1N1/2009 “Swine flu” virus, H5N1 and other Highly Pathogenic Avian Influenzas (H5N, H7N, H9N HPAI, Bird Flu), as well as common seasonal human Influenzas; (3) HIV Cide, a potential “Functional Cure that is active against both the R5 and X4 strains of HIV, (4) Eye drops against viral diseases of the eye such as Epidemic Kerato-Conjunctivitis (EKC) and Herpes Keratitis, (5) HerpeCide against Herpes virus cold sores and genital Herpes, and (6) DengueCide against Dengue viruses.

 

The epidemic and pandemic potential as well as the constantly changing nature of influenza viruses is well known. The HIV/AIDS worldwide epidemic and the “curse of slow death” nature of HIV viral infection is also well known. Adenoviral Epidemic Kerato-Conjunctivitis (EKC) is a severe pink eye disease that may lead to blurry vision in certain patients after recovery. Herpes simplex viral infections cause keratitis of the eye, and severe cases of infection may sometimes necessitate corneal transplants. Oral and genital herpes is also a well known disease. Degnue viral infection is also known as “ break-bone fever”. What is worse, that when a patient is infected with a dengue virus a second time, if the virus is a different serotype, then it can cause a severe dengue disease, or dengue hemorrhagic syndrome, with very high morbidity and a high rate of fatality. This is because, the patient’s immune system mounts an attack, but the antibodies that it generates, directed at the previous infecting virus, are not effective against the new infection, and instead the new infecting virus uses them to hitch a ride into host cells that it infects more severely. This phenomenon is called “Antibody-Dependent Enhancement” or “ADE” for short.

 

In addition, we recently initiated a research program for the development of a nanoviricide against the MERS Coronavirus (“Middle East Respiratory Syndrome”). Recently, New York Times reported that the first case of MERS infection in the United States was in stable condition. This person, a healthcare worker, flew from Riyadh, Saudi Arabia to Chicago, and then by bus to Indiana (http://www.nytimes.com/2014/05/03/health/mers-virus-found-in-united-states-for-first-time.html?_r=0). MERS is a new coronavirus similar to the SARS virus. It first appeared in 2012 in the Middle East. Since then, about 400 cases have been reported to the World Health Organization; about a third have been fatal. While it has not spread easily between humans, there have been outbreaks within families and in hospitals, where patients have infected paramedics, nurses and doctors, reported the New York Times. The high fatality rate implies that if the virus changes such that its human-to-human transmission is more successful, then this virus can cause significant public health problem, including a potential epidemic.

 

We were able to create potentially useful drug candidates against MERS-CoV in a very rapid time frame, of less than two months, which included synthesis scale-up to multi-gram quantities. This demonstrates how rapidly drugs can be developed using nanoviricides technology.

 

Using our platform technology, NanoViricides, Inc. has already developed novel drug candidates against the MERS virus that mimic the MERS virus binding to the host cell. The Company developed ligands that are designed to bind to the MERS coronavirus spike protein, in the same fashion that the cognate receptor of the virus, DPP-IV, binds to the virus. We performed the ligand design using well established molecular modeling techniques, based on published data regarding the MERS coronavirus spike protein and DPP-IV binding. The ligands were then chemically attached to the nanomicelle base polymer, thus making the nanoviricides drug candidates against the MERS virus. The Company has already successfully scaled up the synthesis to multi-gram scale, sufficient for animal testing, and can easily scale the processes to make kilogram quantities for widespread application in human patients if they are found to be effective and safe.

 

There are no known drugs or vaccines against the MERS coronavirus. No small animal models for testing MERS therapeutics were available until recently. Perlman and collaborators have recently reported a mouse model (http://www.pnas.org/content/early/2014/03/05/1323279111.abstract). In this model, mice were infected with adenovirus carrying the DPP-IV gene to make them susceptible to the MERS virus.

 

Both the safety and effectiveness of any drug has to be determined experimentally. The safety of a nanoviricide drug is expected to depend upon the safety of the nanomicelle portion as well as the safety of the antiviral ligand. If one of drug candidates results in a viable clinical candidate, this me be the fastest timeframe in which an antiviral drug has been designed, and advanced to clinical candidate level.

 

Given the high fatality rate associated with MERS infections, and small numbers of cases, the regulatory pathway for approval processes is uncertain. However, progress has been made with fatal diseases such as Ebola in defining clinical pathways, and we anticipate similar development model to be applied for MERS.

 

36
 

 

We also have research programs against Rabies virus, Ebola/Marburg family of viruses, as well as other Viral hemorrhagic fevers. We also have a research program called ADIF(™) “Accurate-Drug-In-Field”, that we believe is the only way to combat a novel viral threat right in the field before it becomes an epidemic like SARS, bird flu H5N1, Ebola, or other viral outbreak. The Company's ability to achieve progress in the drugs in development is dependent upon available financing and upon the Company's ability to raise capital. The Company will negotiate with TheraCour to obtain licenses for additional viral diseases as necessary. However, there can be no assurance that TheraCour will agree to license these materials to the Company, or to do so on terms that are favorable to the Company.

 

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, 2014, we have current assets plus security deposits of $36.6 MM. This amount is more than sufficient our operations through more than two years or March 31, 2016, at the Company’s current rate of expenditure, and including the projected expenditure for certain human clinical trials.

 

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 our current funds we believe that we 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 or a similar application with an international regulatory agency, and to conduct Phase I and Phase IIa human clinical trials of at least one of our drug candidates. 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 either lease or purchase negotiations with Inno-Haven, LLC (“Inno-Haven”) to acquire the cGMP manufacturing and R&D facility in Shelton, CT, that was built to our specifications. This facility will enable cGMP manufacture of all of our drug substances. We intend to perform the final formulation and fill of the cGMP drug product for clinical trials at a contract manufacturer to be determined. 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 is renovating an 18,000 square foot building in Shelton, CT, on a 4.2 acre lot.  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 has also raised significant amounts of additional financing through affiliated and un-affiliated parties. A lease or purchase agreement has not been completed, but the parties have negotiated a Memorandum of Understanding which will form the basis of the lease terms or the purchase contract, as appropriate.

 

37
 

 

We anticipate that we have sufficient funding to take at least one of our drug candidates through initial Phase I and Phase II human clinical trials. At present, we believe that we may also have sufficient additional funding in hand to take at least one more drug candidate into an IND application stage. These estimates are based on various preliminary discussions and “soft” quotes from contract research organizations that provide pre-clinical and clinical studies support. The estimates are also based on certain time estimates for achievement of various objectives. If we miss these time estimates or if the actual costs of the development are greater than the early estimates we have at present, our drug development cost estimates may be substantially greater than anticipated now. In that case, we may have to re-prioritize our programs and/or seek additional funding.   Also, 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.

 

The Company does not have direct experience in taking a drug through human clinical trials. In addition, we depend upon external collaborators, service providers and consultants for much of our drug development work. As such our projections and estimates may be significantly off from actual future results both in terms of timeline and in terms of cost budgets.

 

We anticipate that we will incur the following additional expenses over the next 24 months.

 

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

 

2. Corporate overhead of $2,000,000: 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 with the United States Food and Drug Administration.

 

In addition the Company anticipates estimated capital costs of $4,000,000 for infrastructure and laboratory facilities for a scaled up research pilot production facility. The Company anticipates that some of this infrastructure funding will be obtained through real estate and industrial loans and related instruments. Further, we estimate approximately $5,000,000 will be needed to take our first drug candidate through Phase I and Phase IIa human clinical trials.

 

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 December 31, 2012, the Company had drawn down $22,500,000 of the $40,000,000 S-3 Shelf Registration. In addition, on October 26, 2012, the Company has filed a new S-3 Shelf Registration Statement for $40,000,000 of common stock, preferred stock, warrants, debt securities and units comprised of those securities. Subsequently we combined the unused portion of the prior shelf registration for a total available Shelf Registration of $57,500,000. As of December 31, 2013, the Company had drawn down approximately $35,000,000 from this shelf registration. Subsequently, on January 21, 2014, the Company completed another registered direct offering based on the remainder of this shelf registration and an additional allowance of 20%, to raise $20M and exhausting the registered shelf. The Offering was made pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-184626), which was declared effective by the Securities and Exchange Commission on December 21, 2012 and Form S-3MEF (File No. 333-193439). 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.

 

With these funds, in addition to certain clinical trials for FluCide and DengueCide, the Company anticipates that it will also be able to expedite development of its four other drug candidates, namely, Oral FluCide, HerpeCide™, HIVCide™, and EKCCide™ into the FDA approval process. In addition, the Company was also able to undertake R&D for a nanoviricide against the MERS virus.

 

38
 

 

The Company anticipates it will have sufficient access to capital even if it decides to develop FluCide through Phase III on its own. The Company believes it will continue to be able to successfully raise financing as needed. 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 December 31, 2015. The Company currently has no long term debt other than the convertible debentures as disclosed.

 

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.

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management has designed our disclosure controls and procedures to provide reasonable assurance of achieving the desired control objectives.

 

 

39
 

 

As required by Exchange Act Rule 13a-15(b), we have carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2013.

 

(a) 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 the Annual Report on Form 10-K our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were 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.

 

(b) Changes in internal control over financial reporting. The Company has established an independent Board of Directors comprising three independent members. Under this Board the Company has established an Audit Committee, a Compensation Committee, a Nomination Committee, and an Executive Committee. The Company has met or exceeded corporate governance standards of the NYSE MKT, a national exchange. On September 25, 2013, the Company’s common stock was listed and began trading on the NYSE MKT.

 

Management’s Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a- 15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America (“GAAP”). We recognize that because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2013. 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 (the “COSO Framework”). Based on its evaluation under the Internal Control - Evaluation Framework, management concluded that our internal control over financial reporting was effective as of June 30, 2013.

 

Changes in Internal Control Over Financial Reporting

 

In June 2013, the Company completed the process of accomplishing an independent board of directors. Simultaneously, the Company also expanded its Audit Committee, chaired by its Director, Mr. Stanley Glick, CPA, to include two additional Board Members, namely, Professor Mukund Kulkarni and Professor Dr. Milton Boniuk. In addition, the Company formalized its Compensation Committee, and Nomination Committee, with the same three independent board members serving on these committees. The Company further formulated an Executive Committee that reports directly to the Board of Directors. The Company’s CEO, Dr. Eugene Seymour, MD, MPH, and its President, Anil R. Diwan, PhD, are ex-officio members of the Executive Committee.

 

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, 2014, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

40
 

 

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 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 about 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, the Company 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). The Company may seek dismissal of the complaint if plaintiff has not posted the demanded security (or engaged the court). The Complaint further seeks unspecified “injunctive relief” in furtherance of the demand for inspection to which the Company believes 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. On or about July 18, 2012, the Plaintiff moved to amend its answer. On or about August 8, 2012, we filed our opposition to Plaintiff’s Motion to Amend and a Motion to Dismiss the Complaint for failure to state a claim upon which relief can be granted. On or about September 13, 2012 the court granted the Plaintiff’s Motion to Amend. On or about September 17, 2012 the Plaintiff served its “Second Amended Shareholder Derivative Complaint” upon our Counsel in Nevada. As in the prior two complaints that this Plaintiff has filed in this action, the Second Amended Complaint sought to compel inspection of the Company’s books and records, sought injunctive relief, an accounting and alleges breach of Fiduciary by Dr. Seymour and Dr. Diwan. On or about October 11, 2012, we filed a Motion to Dismiss the Second Amended Complaint for failure to state a claim upon which relief can be granted. On or about December 4, 2012, the Court granted the Company’s Motion to Dismiss with respect to Dr. Seymour and Dr. Diwan and ordered the case dismissed as to all claims but the Plaintiff’s request to compel documents required to be maintained by the Company’s registered agent in Nevada pursuant to NRS 78.105. On or about December 26, 2012, the Company provided the Plaintiff with each of the documents to which it is entitled. Management believes that the Plaintiff does not have a legal or good faith basis for inspection or copying of its shareholder’s list and intends to vigorously defend the production thereof. In May, 2013, the Plaintiff filed a motion for permission to file a third amended complaint. The Company subsequently filed a motion to dismiss and for Summary Judgment. The Court denied the Motion to Dismiss and for Summary Judgment and ordered the Plaintiff to file its Third Amended Complaint. On or about July 15, 2013 the Company Petitioned the Nevada Supreme Court for a Writ of Prohibition or Mandamus reversing the trial Court’s denial of Summary Judgment. Thereafter, on or about September 20, 2013, the Nevada Supreme Court denied the Company’s Writ Petition. The Company filed its answer to the Third Amended Complaint, which contains only one cause of action which is identical to the sole cause of action which was not dismissed from the Second Amended Complaint. Specifically, the Third Amended Complaint seeks only to compel production of books and records required to be maintained by the Company’s Registered Agent pursuant to NRS 78.105 Management believes that the Company’s registered Agent has provided the Plaintiff with all documents to which it is entitled pursuant to NRS 78.105 and that this lawsuit has no merit or basis. On March 3, 2014 the Company filed a Motion for Summary Judgment. On March 3, 2014 Plaintiff Moved the Nevada Superior Court for permission to file a Fourth Amended Complaint seeking to implead Corporate Stock Transfer, the Company’s Colorado Transfer Agent..The Company has opposed this motion. There has not been a decision on either motion. The Company intends to vigorously defend this lawsuit. Specific monetary damages have not been claimed and as a result no accrual has been made in relation to this litigation.

 

41
 

 

On or about July 15, 2013 the same Plaintiff that had filed the repetitive complaints in the Nevada action as set forth in the preceding paragraph (Yidam, Ltd. v. Eugene Seymour, Anil Diwan, and NanoViricides, Inc.)filed a Shareholder Derivative complaint with the United States District Court for the District of Colorado .  The Plaintiff asserts the action is a shareholder derivative action and the Company is solely a nominal defendant.  The Company maintains that it, as well as the individual defendants, Messrs. Seymour and Diwan, have not been served in the action. However, a default had been filed against the Company, which has been vacated. The Complaint alleges that the Company has failed to deliver information requested by the Plaintiff, the identical information the Plaintiff is seeking inspection of in the Nevada action, and that the individual defendants, Messrs. Seymour and Diwan, breached their fiduciary duties to the Company and caused it financial harm.  The Plaintiff demands an order to inspect the Company’s records, an order revoking Messrs. Diwan and Seymour from the Board of Directors, equitable relief, and consequential and punitive damages.  The Company believes these claims have no merit and the Company intends to defend this action vigorously. The Company has moved the District Court to dismiss the action in its entirety. Though consequential and punitive damages are claimed, no facts have been submitted to support such claim. Management has determined that such claims are specious and not relevant to the Company and no accrual has been made in relation to this litigation.

 

There are no other legal proceedings against the Company to the best of the Company’s knowledge as of the date hereof and to the Company’s knowledge, no action, suit or proceeding has been threatened against the Company.

 

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

 

For the three months ended March 31, 2014, the Company's Board of Directors authorized the issuance of 2,247 shares of its Common Stock with a restrictive legend for Director services.

 

For the three months ended March 31, 2014, the Company's Board of Directors authorized the issuance of 4,988 shares of its Common Stock with a restrictive legend for consulting services.

 

 For the three months ended March 31, 2014 the Board of Directors authorized the issuance of 20,695 shares of the Company’s Series A Convertible Preferred Stock as employee compensation and recognized an expense of $7,524.

 

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 did not utilize an underwriter for the offering of any of the securities, set forth above.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None. 

 

42
 

 

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.
     
101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase
     
101.LAB   XBRL Taxonomy Extension Label Linkbase
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase

  

(b)  Reports on Form 8-K.  During the fiscal quarter ended March 31, 2014, the Company filed the following Current Reports on Form 8-K:  

 

1. On January 21, 2014 the Company filed a Current Report on Form 8-K disclosing it has entered into a Securities Purchase Agreement with certain purchasers, relating to the offering and sale of units (“Units”) at the aggregate purchase price of $5.25 per Unit, consisting of one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and Sixty-Five Hundredths (65/100) of a warrant to purchase one share of Common Stock (“Warrant”), issuable upon exercise of the Warrant at the exercise price of $6.05 per share (the “Warrant Shares”)). The Warrants are exercisable immediately and expire five years after issuance.; as well as the sale of gross proceeds of $20,030,246.25 before estimated expenses of the Offering of approximately $1,200,000 which includes placement agent and attorneys’ fees. The Offering was made pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-184626), which was declared effective by the Securities and Exchange Commission on December 21, 2012 and Form S-3MEF (File No. 333-193439).

 

2. On February 26 2014 the Company filed a Current Report on Form 8-K disclosing that from February 18, 2014 to February 20, 2014, the Company’s President and Chairman Dr. Anil Diwan purchased an aggregate of 50,000 shares of the Registrant’s common stock, par value $0.001 per share (the “Common Stock”) in open market transactions. On February 25, 2014, Dr. Diwan repaid $83,900 to the Company as a result of the “short term profits” accrued from the sale of Common Stock at a higher price and the later purchase at a lower price.

 

3. On February 28, 2014, the Company filed a Current Report on Form 8-K, as amended, disclosing that effective February 25, 2014, the Company amended the terms of warrants (the “Warrants”) to purchase an aggregate of 5,079,078 shares of the Registrant’s common stock, par value $0.001 per share (the “Common Stock”) to extend the expiration date of all the Warrants to June 30, 2014. The Warrants were scheduled to expire on February 28, 2014. No other terms of the Warrants were amended or revised.

 

43
 

 

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 15, 2014

 

NANOVIRICIDES, INC.  
   
/s/ Eugene Seymour, MD  
Name:  Eugene Seymour, M.D.  

Title:  Chief Executive Officer and Director

 

  
(Principal Executive Officer )  
   
/s/ Meeta Vyas  
Name:  Meeta Vyas  
Title:  Chief Financial Officer  
(Principal Financial and Accounting Officer)  

 

44