NANOVIRICIDES, INC. - Quarter Report: 2021 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, 2021

Commission File Number: 001-36081

NANOVIRICIDES, INC.

(Exact name of Company as specified in its charter)

1 Controls Drive

Shelton, Connecticut 06484

(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 registrant has submitted electronically every Interactive Data File required to be submitted 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 registrant was required to submit such files). Yes x    No  ¨

Indicate by check mark whether the Company is a larger accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

Yes  ¨    No  x

Securities registered pursuant to Section 12(b) of the Act:

As of May 14, 2021, there were approximately 11,505,000 shares of common stock of the registrant issued and outstanding.

NanoViricides, Inc.

FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NanoViricides, Inc.

Balance Sheets

See accompanying notes to the financial statements

Nanoviricides, Inc.

Statements of Operations

(Unaudited)

See accompanying notes to the financial statements

NanoViricides, Inc.

Statement of Changes in Stockholders' Equity

For the period from July 1, 2020 through March 31, 2021

(Unaudited)

See accompanying notes to the financial statements

NanoViricides, Inc.

Statement of Changes in Stockholders' Equity

For the period from July 1, 2019 through March 31, 2020

(Unaudited)

See accompanying notes to the financial statements

Nanoviricides, Inc.

Statements of Cash Flows

(Unaudited)

See accompanying notes to the financial statements

NANOVIRICIDES, INC.

March 31, 2021 AND 2020

NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Organization and Nature of Business

NanoViricides, Inc. (the “Company”) is a nano-biopharmaceutical research and development company specializing in the discovery, development, and commercialization of drugs to combat viral infections using its unique and novel nanomedicines technology. NanoViricides is also unique in the bio-pharma field in that it possesses its own state of the art facilities for the design, synthesis, analysis and characterization of the nanomedicines that we develop, as well as for production scale-up, and c-GMP-like production in quantities needed for human clinical trials, where our design, development, and production work is performed. The biological studies such as the effectiveness, safety, bio-distribution and Pharmacokinetics/Pharmacodynamics on our drug candidates are performed by external collaborators and contract organizations.

The Company has several drugs in various stages of early development. COVID-19 has become our lead drug program due to the necessity of responding to the pandemic. The Company began development of a drug to treat COVID-19 patients just as the cases of the novel disease were being reported from China. The Company’s drug candidates for COVID-19 successfully entered core safety pharmacology studies required prior to any human clinical trials around October/November, 2020. The studies were completed in January and February 2021, and the Company has received draft reports from the external Contract Research Organization (CRO). The final quality audited reports on these studies are expected soon and will be required for an Investigational New Drug (IND) Application. The Company is currently working on a pre-IND application to the US Food and Drug Administration (FDA) to seek guidance for an IND. The Company is also involved with tasks needed for setting up and executing human clinical trials for our COVID-19 drug candidates assuming that the IND is approved by the US FDA. As of March 31, 2021, there are 10 COVID-19 drugs that have received Emergency Use Authorization (EUA) and one drug that has received full approval (remdesivir) from the US FDA (https://www.fda.gov/drugs/coronavirus-covid-19-drugs/coronavirus-treatment-acceleration-program-ctap#dashboard). In addition, there are at least three vaccines licensed in the USA and several more are in use internationally. Apart from remdesivir and antibodies, there are very few drugs with direct antiviral effect that have EUA or are in clinical trials. Internationally, virus variants have continued to emerge with resistance to drugs and vaccines. Scientists believe it is only a matter of time before escape variants against existing vaccines and therapeutics become commonplace. Thus the need for therapeutics that the virus would not escape by mutations, such as the broad-spectrum, pan-coronavirus nanoviricides drug candidates, remains unmet.

The Company plans on re-engaging our other lead antiviral program against herpes viruses, i.e. the HerpeCide™ program, as soon as it becomes feasible to conduct the corresponding antiviral human clinical studies. In the HerpeCide program alone, we have drug candidates against at least five indications at different stages of development. Of these, the Company is advancing the shingles drug candidate towards human clinical trials. The IND-enabling Safety/Toxicology studies required for doing so have been completed and we were in the process of preparing an IND application for this drug candidate when the SRAS-CoV-2 virus struck, whereupon we pivoted our efforts to respond to the threat of what has now become the COVID-19 pandemic. In addition, our drug candidates against HSV-1 “cold sores” and HSV-2 “genital herpes” are in advanced studies and are expected to follow the shingles drug candidate into human clinical trials. Shingles in adults and chicken pox in children is caused by the same virus, namely VZV (Varicella-zoster virus, aka HHV-3 or human herpesvirus-3). There are estimated to be approximately 120,000-150,000 annual chickenpox cases in the USA in the post-vaccination-era, i.e. since childhood vaccination with the live attenuated varicella virus Oka strain has become standard. In addition, we have drugs in development against all influenzas in our FluCide™ program, as well as drug candidates against HIV/AIDS, Dengue, Ebola/Marburg, and other viruses.

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 broad, exclusive licenses. The first license agreement we executed with TheraCour on September 1, 2005 (“Exclusive License Agreement”), 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.  Pursuant to the Additional License Agreement, the Company was granted exclusive licenses 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. In addition, on November 1, 2019, the Company entered into a world-wide, exclusive, sub-licensable, license (“VZV License Agreement”) to use, promote, offer for sale, import, export, sell and distribute drugs that treat VZV infections, using TheraCour’s proprietary as well as patented technology and intellectual property. The discovery of ligands and polymer materials as well as formulations, the chemistry and chemical characterization, as well as process development and related work will be performed by TheraCour under the same compensation terms as prior agreements between the parties, with no duplication of costs allowed. Upon commercialization, NanoViricides will pay 15% of net sales to TheraCour, as defined in the agreement. The Company was not required to make any upfront payments to TheraCour and agreed to the following milestone payments to TheraCour; the issuance of 75,000 shares of the Company’s Series A Convertible Preferred Stock upon the grant of an IND Application; $1,500,000 in cash upon completion of Phase I Clinical Trials; $2,500,000 in cash upon completion of Phase II clinical trials; and $5,000,000 in cash upon completion of Phase III clinical trials. The Company has requested TheraCour for a license in the field of coronaviruses. A Memorandum of Understanding (“MOU”) towards licensing this field has been agreed to and executed on June 8, 2020. The MOU was extended until June 15, 2021 with a First Amendment on April 21, 2021, which amendment was given effect as of August 31, 2020. The amendment clarifies that the rights to milestone payments will remain effective even if the final agreement is signed after meeting a milestone.

The MOU provides a limited license to the Company for the entire application of human coronavirus infections (the “COVID License Agreement”), while the full license is being perfected. In furtherance of the COVID License Agreement, the Company has appointed a third party consulting firm for independent evaluation of this market space. The terms of the COVID License Agreement, except as otherwise specified in the MOU, is expected to be generally consistent with the terms of the VZV License Agreement dated November 1, 2019, and shall include consistent milestone payments, royalties and sublicense and income derived from grants and contracts.

Note 2 - Liquidity

The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. As reflected in the financial statements, the Company has an accumulated deficit at March 31, 2021 of approximately $112.3 million and a net loss of approximately $6.7 million and net cash used in operating activities of approximately $6.0 million for the nine months then ended. In addition, the Company has not generated any revenues and no revenues are anticipated in the foreseeable future. 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, 2021, the Company had available cash and cash equivalents of approximately $22.9 million.

Since the onset of the COVID-19 pandemic, the Company has focused its efforts primarily on a single lead program to minimize cost outlays, namely, taking the COVID-19 drug candidate against SARS-CoV-2 into human clinical trials. The prior lead program for a shingles drug will follow the COVID-19 drug program.

On July 8, 2020 the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Kingswood Capital Markets, a Division of Benchmark Investments, Inc. (“Kingswood”). The offering was consummated on July 10, 2020, whereby the Company sold 1,369,863 shares of common stock and a fully exercised Underwriters’ over-allotment option of 205,479 additional shares at the public offering price of $7.30 per share. No warrants were issued in this offering. The net proceeds to the Company from the offering was approximately $10.4 million after deducting underwriting discounts and commissions and other estimated offering expenses.

On July 31, 2020, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. and Kingswood (each a “Sales Agent” and collectively, the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through or to the Sales Agents, shares of common stock (the “Placement Shares”), having an aggregate offering price of up to $50 million (the “ATM Offering”). Sales pursuant to the Sales Agreement will be made only upon instructions by the Company to the Sales Agents, and the Company cannot provide any assurances that it will issue any shares pursuant to the Sales Agreement. Actual sales will depend on a variety of factors to be determined by the Company from time to time, including (among others) market conditions, the trading price of the Company’s common stock, capital needs and determinations by the Company of the appropriate sources of funding for the Company. The Company is not obligated to make any sales of common stock under the Sales Agreement and the Company cannot provide any assurances that it will issue any shares pursuant to the Sales Agreement. The Company will pay a commission rate of up to 3.5% of the gross sales price per share sold and agreed to reimburse the Sales Agents for certain specified expenses, including the fees and disbursements of its legal counsel in an amount not to exceed $50,000 and have agreed to reimburse the Sales Agents an amount not to exceed $2,500 per quarter during the term of the Sales Agreement for legal fees to be incurred by the Sales Agents. The Company has also agreed pursuant to the Sales Agreement to provide each Sales Agent with customary indemnification and contribution rights.

On March 2, 2021 the Company sold 814,242 shares of common stock at an average price of $7.83 under the Sales Agreement with B. Riley Securities, Inc. The net proceeds to the Company from the offering was approximately $6.1 million after deducting underwriting discounts and commissions and other offering expenses.

The Company believes that it has several important milestones that it will be achieving in the ensuing year. Management believes that as it achieves these milestones, the Company’s ability to raise additional funds in the public markets would be enhanced.

The Company has not experienced a direct financial adverse impact of the effects of the Coronavirus (COVID-19) pandemic.  However, the pandemic required the Company to reorganize its priorities, because of the impact on the ability to conduct antiviral drug trials for our then lead program for Shingles drug treatment. While clinical trials were in general adversely affected, the ability to enroll patients into the shingles antiviral drug clinical trial with the desired inclusion criteria became limited due to the widespread coronavirus infection. The shingles clinical trial design and conduct would also become more complex. The emergence of widespread health emergencies due to COVID-19 have led to regional quarantines, shutdowns, shortages, disruptions of supply chains, and economic instability. The impact of COVID-19 on the financial markets and the overall economy are highly uncertain and cannot be predicted at this time. Though the Company has not experienced a direct financial impact, if the financial markets and/or the overall economy are impacted for an extended period, the Company’s ability to raise funds, in the future, may be materially adversely affected.

Management believes that the Company’s existing resources will be sufficient to fund its planned operations and expenditures for at least the next twelve months from the issuance of these financial statements. However, the Company cannot provide assurance that its plans will not change or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently anticipates. The Company will need to raise additional capital to fund its long-term operations and research and development plans including human clinical trials for its various drug candidates until it generates revenue which reaches a level sufficient to provide self-sustaining cash flows. The accompanying financial statements do not include any adjustments that may result from the outcome of such unidentified uncertainties.

Note 3 - Summary of Significant Accounting Policies

Basis of Presentation – Interim Financial Information

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 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) that 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, 2020 filed with the SEC on October 13, 2020.

For a summary of significant accounting policies, see the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020 filed on October 13, 2020.

Net Loss per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net 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, warrants and convertible preferred stock.

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

The Company has 371,103 shares of Series A preferred stock outstanding as of March 31, 2021. Only in the event of a “change of control” of the Company, each Series A preferred share is convertible to 3.5 shares of its new common stock. A “change of control” is defined as an event in which the Company’s shareholders become 60% or less owners of a new entity as a result of a change of ownership, merger or acquisition of the Company or the Company’s intellectual property. In the absence of a change of control event, the Series A preferred stock is not convertible into common stock, and does not carry any dividend rights or any other financial effects. At March 31, 2021, the number of potentially dilutive shares of the Company’s common stock into which these Series A preferred shares can be converted into is 1,298,861 and is not included in diluted earnings per share since the shares are contingently convertible only upon a change of control.

Note 4 - Related Party Transactions

Related Parties

Related parties with whom the Company had transactions are:

Mortgage Note Payable - Related Party

On December 16, 2019, the Company entered into an Open End Mortgage Note (the “Note”) with Dr. Anil Diwan, the Company’s founder, Chairman, President and CEO, to loan the Company up to $2,000,000 in two tranches of $1,000,000 (the “Loan”). The Note was paid off on December 31, 2020. The Note bore interest at the rate of 12% per annum and was secured by a mortgage granted against the Company’s headquarters. Dr. Anil Diwan received 10,000 shares of the Company’s Series A preferred stock as a loan origination fee which was amortized over the one year term of the loan using the effective interest method. The fair value of the 10,000 shares of the Company’s Series A preferred stock when issued on December 16, 2019 was $39,301. The Series A preferred stock fair value is based on the greater of the i) the converted value to common at a ratio of 1:3.5; or ii) the value of the voting rights since the Holder would lose the voting rights upon conversion. For the assumptions used in calculating the fair value of the preferred shares, the conversion of the shares is triggered by a change of control. Amortization expense on the loan origination fee for the three and nine months ended March 31, 2021 was $0 and $18,013, respectively, and $9,825 and $11,463 for the three and nine months ended March 31, 2020, respectively. The Company had drawn down $1.1 million of this loan. Interest was payable only on the amount drawn down. The lender had escrowed $132,000 of interest payable pursuant to the Loan. For the three and nine months ended March 31, 2021, the Company incurred interest expense of $0 and $62,773, respectively, and $33,367 and $35,860 for the three and nine months ended March 31, 2020, respectively, which reduced the interest escrow balance included in prepaid expenses.

Note 5 - Property and Equipment

Property and equipment, stated at cost, less accumulated depreciation consisted of the following:

Depreciation expense for the three months ended March 31, 2021 and 2020 were $174,076 and $172,862, respectively, and for the nine months ended March 31, 2021 and 2020 were $522,172 and $518,536, respectively.

Note 6 - Trademark and Patents

Trademark and patents, stated at cost, less accumulated amortization consisted of the following:

Amortization expense amounted to $2,067 and $2,069 for the three months ended March 31, 2021 and 2020, respectively, and for the nine months ended March 31, 2021 and 2020 were $6,202 and $6,204, respectively.

Note 7 -  Accrued expenses

Accrued expenses consisted of the following:

Note 8 - Loan Payable

The Company financed its Directors and Officers liability insurance policies through BankDirect for the periods January 1, 2021 to December 31, 2021 and January 1, 2020 to December 31, 2020. The original loan balance as of January 1, 2021 and January 1, 2020 was $235,476 and $155,173, respectively, payable at the rate of $24,062 and $15,874 monthly including interest at an annual rate of 4.74% and 5%, respectively, through October of each year. At March 31, 2021 and June 30, 2020 the loan balance was $165,806 and $62,843, respectively. For the three and nine months ended March 31, 2021, the Company incurred interest expense of $2,516 and $3,282, respectively. For both the three and nine months ended March 31, 2020, the Company incurred interest expense of $1,745.

Note 9 - Equity Transactions

On July 11, 2018 the Board of Directors approved an extension of the employment agreement with Dr. Anil Diwan, the Company’s President. Pursuant to the terms of the employment agreement, the Company’s Board of Directors authorized the issuance of 26,250 shares of the Company’s Series A preferred stock to Dr. Anil Diwan. The shares shall be vested in one-third increments on June 30, 2019, June 30, 2020 and June 30, 2021 and are subject to forfeiture. The Company recognized non-cash compensation expense related to the issuance of the Series A preferred stock of $45,654 and $136,962 for the three and nine months ended March 31, 2021. The balance of $45,654 will be recognized as the remaining 4,375 shares vest and service is rendered for the year ended June 30, 2021.

On July 8, 2020 the Company entered into an Underwriting Agreement with Kingswood. Pursuant to the terms and conditions of the Underwriting Agreement, the Company agreed to issue and sell 1,369,863 shares of our common stock, par value $0.001 per share (the “Underwritten Shares”), at a price to the public of $7.30 per share. Pursuant to the Underwriting Agreement, the Company also granted the underwriter an option to purchase up to an additional 205,479 shares of common stock (together with the Underwritten Shares, the “Shares”) within 45 days after the date of the Underwriting Agreement to cover over-allotments, if any. The shares were issued pursuant to a prospectus supplement dated July 8, 2020 which was filed with the Securities and Exchange Commission on July 9, 2020 in connection with a takedown from the Company’s shelf registration statement on Form S-3, as amended (File No. 333-237370), which became effective on April 2, 2020 and the base prospectus dated April 2, 2020 contained in that registration statement. The offering was consummated on July 10, 2020, whereby the Company sold 1,369,863 shares of common stock and a fully exercised Underwriters’ overallotment of 205,479 additional shares at the public offering price of $7.30 per share. The net proceeds to the Company from the offering was approximately $10.4 million after placement agent fees and other estimated offering expenses.

The Company accounted for the proceeds of the Offering at July 10, 2020 as follows:

On July 31, 2020, the Company entered into a Sales Agreement with the Sales Agents, pursuant to which the Company may offer and sell, from time to time, through or to the Sales Agents, shares of common stock having an aggregate offering price of up to $50 million. On March 2, 2021 the Company sold 814,242 shares of common stock at an average price of approximately $7.83 per share. The shares were issued pursuant to a prospectus supplement dated December 3, 2020 filed with the Securities and Exchange Commission on December 10, 2020 in connection with the Company’s shelf registration statement on Form S-3, as amended (File No. 333-237370), which became effective on April 2, 2020. The net proceeds to the Company from the offering was approximately $6.1 million after placement agent fees and other estimated offering expenses.

The Company accounted for the proceeds of the Offering at July 10, 2020 as follows:

For the three and nine months ended March 31, 2021, the Company’s Board of Directors authorized the issuance of 1,727 and 2,501, respectively fully vested shares of its Series A preferred stock for employee compensation. The Company recorded expense of $25,846 and $38,238, respectively for the three and nine months ended March 31, 2021 related to these issuances.

The fair value of the Series A Preferred stock was the following for the dates indicated:

There is currently no market for the shares of Series A preferred stock and they can only be converted into shares of common stock upon a change of control of the Company as more fully described in the Certificate of Designation. The Company, therefore, estimated the fair value of the Series A preferred stock granted to various employees and others on the date of grant. The Series A preferred stock fair value is based on the greater of i) the converted value to common at a ratio of 1:3.5; or ii) the value of the voting rights since the holder would lose the voting rights upon conversion. The conversion of the shares is triggered by a change of control. The common stock price for the nine months ended March 31, 2021 was in the range $2.87 to $9.97.

During the nine months ended March 31, 2021, the Scientific Advisory Board was granted in August 2020 fully vested warrants to purchase 572 shares of common stock with an exercise price of $6.86 per share expiring in August 2024 and in November 2020 fully vested warrants to purchase 572 shares of common stock with an exercise price of $4.19 per share expiring in November 2024 and in February 2021 fully vested warrants to purchase 572 shares of common stock with an exercise price of $6.05 per share expiring in February 2025. The fair value of the warrants was $1,750 for the three months ended March 31, 2021 and $4,951 for the nine months ended March 31, 2021 and was recorded as consulting expense.

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

For the three and nine months ended March 31, 2021, the Company’s Board of Directors authorized the issuance of 6,131 and 18,677, respectively, fully vested shares of its common stock with a restrictive legend for consulting services. The Company recorded expense of $27,000 and $81,000, respectively, for the three and nine months ended March  31, 2021, which was the fair value on the dates of issuance.

For the three and nine months ended March 31, 2021, the Company’s Board of Directors authorized the issuance of 3,300 and 9,446, respectively, fully vested shares of its common stock with a restrictive legend for Director Services. The Company recorded an expense of $15,000 and $41,250, respectively, for the three and nine months ended March 31, 2021, which was the fair value on the dates of issuance.

For both the three and nine months ended March 31, 2021, the Company’s Board of Directors authorized the issuance of 3,572 of fully vested shares of its common stock for employee compensation. The Company recorded an expense of $15,038 for both the three and nine months ended March 31, 2021 which was the fair value on the date of issuance.

Note 10 - Stock Warrants and Options

Stock Warrants

Of the above warrants, 569 expire in fiscal year ending June 30, 2021; 2,287 expire in fiscal year ending June 30, 2022, 2,287 expire in fiscal year ending June 30, 2023, 2,287 warrants expire in the fiscal year ending June 30, 2024 and 1,716 warrants expire in the fiscal year ending June 30, 2025.

Stock Options

The options expire on August 31, 2021.

Note 11 - Commitments and Contingencies

Legal Proceedings

There are no pending 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.

Employment Agreements

The Company and Dr. Anil Diwan, President, CEO and Chairman of the Board of Directors, entered into an extension of employment agreement effective July 1, 2018 for a term of three years. Dr. Anil Diwan will be paid an annual base salary of $400,000. Additionally, Dr. Anil  Diwan was awarded a grant of 26,250 shares of the Company’s Series A preferred stock. 8,750 shares vest equally on June 30, 2019, 2020 and 2021. Any unvested shares are subject to forfeiture.

On March 3, 2010, the Company entered into an employment agreement with Dr. Jayant Tatake to serve as Vice President of Research and Development.  The employment agreement provides for a term of four years with a base salary of $150,000.  In addition, the Company issued 1,340 shares of Series A preferred stock and 1,786 shares of common stock upon entering into the agreement, and will issue an additional 1,340 shares of Series A preferred stock and 1,786 shares of common stock on each anniversary date of the agreement. The shares of Series A preferred stock were issued in recognition of Dr. Tatake’s work towards the achievement of several patents by the Company. The Compensation Committee of the Board of Directors has extended the current provisions of the employment agreement pending its review of current industry compensation arrangements and employment agreements.

On March 3, 2010, the Company entered into an employment agreement with Dr. Randall Barton to serve as Chief Scientific Officer.  The employment agreement provided for a term of four years with a base salary of $150,000.  In addition, the Company issued 1,786 shares of common stock upon entering into the agreement, and will issue an additional 1,786 shares of common stock on each anniversary date of the agreement. The Compensation Committee of the Board of Directors has extended the current provisions of the employment agreement pending its review of current industry compensation arrangements and employment agreements.

On May 30, 2013, the Company entered into an employment agreement with Meeta Vyas, wife of our President, CEO and Chairman of the Board, to serve as its Chief Financial Officer.  The employment agreement provided for a term of three years with a base salary of $9,000 per month and 129 shares of Series A preferred stock, also on a monthly basis. On January 1, 2015, her cash compensation was increased to $10,800 per month. The agreement is renewable on an annual basis. The Compensation Committee of the Board of Directors has extended the current provisions of the employment agreement pending its review of current industry compensation arrangements and employment agreements.

License Agreements

The Company is dependent upon its license agreements with TheraCour (See Notes 1 and 4). If the Company lost the right to utilize any of the proprietary information that is the subject of the TheraCour license agreement on which it depends, the Company will incur substantial delays and costs in development of its drug candidates. On November 1, 2019, the Company entered into the VZV Licensing Agreement with TheraCour for an exclusive license for the Company to use, promote, offer for sale, import, export, sell and distribute products for the treatment of VZV derived indications. Process development and related work will be performed by TheraCour under the same compensation terms as prior agreements between the parties, with no duplication of costs allowed. Upon commercialization, NanoViricides will pay 15% of net sales to TheraCour, as defined in the agreement. The Company was not required to make any upfront payments to TheraCour and agreed to the following milestone payments to TheraCour; the issuance of 75,000 shares of the Company’s Series A preferred stock upon the grant of an IND Application; $1,500,000 in cash upon completion of Phase I Clinical Trials; $2,500,000 in cash upon completion of Phase II clinical trials; and $5,000,000 in cash upon completion of Phase III clinical trials. On June 8, 2020, the Company executed a MOU with TheraCour that provides a limited license to the Company for the entire application of human coronavirus infections, while the full license is being perfected. On April 21, 2021 the MOU was extended. The Company has appointed a third party consulting firm for independent evaluation of this market space. Dr. Anil Diwan is recused from these discussions due to a conflict of interest. The terms of the COVID License Agreement, except as otherwise specified in the MOU, is expected to be generally consistent with the VZV License Agreement dated November 1, 2019, and shall include consistent milestone payments, royalties and sublicense and income derived from grants and contracts.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, 2020. Readers should carefully review the risk factors disclosed in this Form 10-Q, Form 10-K and other documents filed by the Company with the SEC.

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

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements within the meaning of the federal securities laws. 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 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,” “Company believes,” “management believes” and similar language. 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. The forward-looking statements are based on the current expectations of NanoViricides, Inc. and are inherently 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.

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.

Organization and Nature of Business

NanoViricides, Inc. (the “Company,” “we,” or “us”) was incorporated in Nevada on April 1, 2005. Our corporate offices are located at 1 Controls Drive, Shelton, Connecticut 06484 and our telephone number is (203) 937-6137. Our Website is located at http://www.Nanoviricides.com. 

On September 25, 2013, the Company’s common stock began trading on the New York Stock Exchange American under the symbol, “NNVC”.

We are a development stage company with several drugs in various stages of pre-clinical development, including late stage IND-enabling non-clinical studies. We have no customers, products or revenues to date, and may never achieve revenues or profitable operations.

Since our founding in 2005, we have developed drug candidates against a number of different viruses including coronaviruses, influenza viruses, HIV, herpes viruses (HSV-1, HSV-2, and VZV), and dengue viruses among others. Many of these candidates have been successfully tested in cell culture and animal studies. The Company’s drug development business model was formed in May 2005 with a license to the patents and intellectual property held by TheraCour Pharma, Inc. (“TheraCour”) that enabled creation of drugs engineered specifically to combat viral diseases in humans. This exclusive license from TheraCour serves as a foundation for our intellectual property. TheraCour is a privately owned company, controlled by Dr. Anil Diwan, PhD, principal developer of the polymeric-micelle based nanomedicines technologies. TheraCour licenses its intellectual property from AllExcel, Inc., (“Allexcel”) a company that is owned and controlled by Dr. Anil Diwan. The Company has a worldwide exclusive license to this technology for several drugs with specific targeting mechanisms for the treatment of a number of human viral diseases including HSV-1, HSV-2, and VZV. The Company signed a Memorandum of Understanding (“MoU”) with respect to anti-viral treatments for coronavirus derived human infections (the “Field”) with TheraCour in June 2020. The MoU specifically provides a limited, exclusive license to the Company for all research and development in the Field for further research and development purposes towards human clinical trials. The MoU was extended with an amendment in April 2021 to allow completion of licensing by June 15, 2021.

We are currently focused on advancing our drug candidates for treatment of patients with COVID-19 infection towards human clinical trials, in response to the current pandemic. We are working on a pre-IND application for COVID-19 treatment at present. We have previously completed IND-enabling studies for a drug candidate for the treatment of shingles rash caused by reactivation of the chickenpox virus (aka varicella-zoster virus, VZV). We plan on taking the shingles drug candidate into human clinical trials after clinical trials of our COVID-19 drug candidate.

Our other clinical drug candidate, namely NV-HHV-101, a skin cream for the treatment of shingles rash, has completed IND-enabling pre-clinical studies and we were in the process of writing the Investigational New Drug (“IND”) application for this drug when the COVID-19 pandemic struck. As we have focused our efforts on the coronavirus program due to the difficulties of conducting human clinical trials for shingles during the pandemic we plan on re-engaging this program and filing an IND once the adverse effects of the coronavirus pandemic on designing and conducting shingles clinical trials is minimized.

NanoViricides is one of a few biopharma companies that operates its own cGMP-compliant manufacturing facility. The Company intends to produce its drugs for clinical trials in this facility. The Company has the capability to produce sufficient drugs for about 1,000-5,000 patients in a single batch of production, depending upon the drug and the dosage. This production capacity is anticipated to be sufficient for first-in-human use in the current SARS-CoV-2 pandemic for our anti-coronavirus drug in development, as well as for the anticipated clinical trials of NV-HHV-101 skin cream for the treatment of shingles.

Our COVID-19 Drug Development Program

The need for the broad-spectrum, pan-coronavirus nanoviricide drug treatment cannot be overstated for combating the COVID-19 pandemic given the current circumstances and the present status of the pandemic. New virus variants continue to develop in the field. The variants that have advantages in terms of transmissibility, infectivity, and escape from antibodies, drugs and vaccines will continue to evolve and spread, replacing prior variants. This is already well documented.

The devastatingly severe “second wave” of the pandemic in India that is currently raging appears to have been traced to new variants, including the UK variant B.1.1.7, and novel variants found in India, namely N400K, and a so-called “double mutant” variant, B.1.617. Of these, B.1.617 appears to be taking over and appears to be both more transmissive, severe, and is likely escaping antibodies from previous infections in patients.

Several vaccines have been found to be substantially less effective in protecting against infection by the South African variant, N501Y-V.2 (also called lineage B.1.351) than the earlier variants. A mutation present in B.1.351 as well as Brazilian variant P.1 that is thought to be possibly linked to evasion from antibody drugs and vaccines, E484K, has also been reported in UK in a further differentiated mutant of the variant of concern lineage B.1.1.7. The available monoclonal antibody drugs and convalescent plasma antibodies have been reported to be less effective against several variants.

By the very nature of how they work, vaccines and antibodies tend to be highly specific to the target virus variant, and do not afford strong protection against differentiated variants that are evolutionary distant from the target variant. This scientific fact is now well demonstrated for the COVID-19 pandemic. Developing new vaccines against then known variants, a strategy that is now being attempted is again subject to new variants spreading in the field prior to any possibility of sufficient vaccination with the new vaccine boosters. The goal of herd immunity has also become elusive and now it is being thought of as unattainable even in the USA.

It is therefore clear that an effective broad-spectrum anti-coronavirus drug will be needed before the world can return to normal activity.

We are developing a broad-spectrum antiviral drug candidate, NV-CoV-2, where the potential for escape of virus variants is minimized by the very design of the drug for the treatment of COVID-19 infected sick persons. In contrast, vaccines are not treatments for sick persons, and must be administered to healthy individuals, and further require several weeks for the recipient’s immune system to become capable of protecting against the target virus strain which still may not protect against new virus variants circulating by that time.

In addition to NV-CoV-2, we are also developing another anti-coronavirus drug candidate, NV-CoV-2-R. This drug candidate is comprised of holding remdesivir inside our polymeric drug candidate NV-CoV-2 by a process known as encapsulation. Thus NV-CoV-2-R is potentially capable of (1) direct attack on extracellular virus, to break the “re-infection cycle” by virtue of NV-CoV-2, and (2) attack on intracellular reproduction of the virus to break the “replication cycle” as has been validated for remdesivir. If both of these cycles are broken, in theory, it is expected to result in a cure of the virus infection, or at least a substantially strong control of the virus infection. Remdesivir is a challenging drug, because it is rapidly converted by blood and cellular enzymes into a significantly less potent form. It is also almost insoluble in aqueous media. These issues have been cited as possible reasons for different data from clinical trials. In randomized controlled clinical trials, Gilead reported that remdesivir was effective in reducing the hospital stay of COVID-19 patients significantly. However, in analysis of field usage of remdesivir and other clinical trials, WHO reported that remdesivir was not as effective as was thought based on the clinical trials that led to first its emergency use approval (EUA) followed by complete approval (Approval) by the US Food and Drug Administration (FDA). Encapsulation of remdesivir in NV-CoV-2 is expected to solve these problems. Encapsulation inside NV-CoV-2 is expected to protect remdesivir from the rapid bodily metabolism, thereby raising the effective drug concentration in the body, and it is also expected to make effective drug available over a longer period of time than the Gilead formulation of remdesivir.

It is important to develop NV-CoV-2 by itself as a drug because the inherent toxicity of remdesivir which can be inferred from its molecular structure may limit its usage in certain patient populations.

We were able to achieve the important milestone of completing the creation of NV-CoV-2-R from NV-CoV-2 and remdesivir in a matter of just a few months. This rapid development was possible only because of the strong advantages of our nanoviricide platform technology.

We began development of a nanoviricide drug to treat SARS-CoV-2, the virus that causes COVID-19 spectrum of diseases and which became a historic worldwide pandemic, around January 2020, when the news of cases in China broke out. Since then, we have been working diligently on designing, testing, and advancing drug candidates against SARS-CoV-2 (see below). We have recently completed safety pharmacology studies required for filing an IND application with the US FDA of our COVID-19 drug candidate. We have received an audited report on the GLP safety/pharmacology studies from the external CRO, and expect to receive the remaining report(s) soon. We have previously received unaudited draft reports of these studies. We are awaiting written reports of non-GLP safety/toxicology studies and non-GLP animal efficacy antiviral efficacy studies. We are preparing a pre-IND application for submission to the US FDA for our pan-coronavirus drug candidates to obtain further guidance and plan on submitting an IND application thereafter. We are in the process of identifying and engaging clinical study sites for the Phase 1 and Phase 2 human clinical trials of these broad-spectrum coronavirus infection treatments, in the USA as well as abroad.

The Nanoviricide Platform Technology in Brief

NanoViricides is pioneering a unique platform for developing anti-viral drugs based on the “bind-encapsulate-destroy” principles. Viruses would not be able to escape a properly designed nanoviricide® drug by mutations because in doing so they would lose the ability to bind their cognate cellular receptor(s) and thus fail to infect productively, becoming incompetent.

The Company develops its class of drugs, that we call nanoviricides®, 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. 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 cells. Antibodies in contrast attack a virus particle at only a maximum of two attachment points per antibody.

In addition, the nanoviricide technology also simultaneously enables attacking the rapid intracellular reproduction of the virus by incorporating one or more active pharmaceutical ingredients (APIs) within the core of the nanoviricide. The nanoviricide^® technology is the only technology in the world, to the best of our knowledge, that is capable of both (a) attacking extracellular virus, thereby breaking the reinfection cycle, and simultaneously (b) disrupting intracellular production of the virus, thereby enabling complete control of a virus infection.

The Company’s technology relies on copying the human cell-surface receptor to which the virus binds, and further designing and making small chemicals that are called “ligands” that will bind to the virus in the same fashion as the cognate receptor. We use molecular modeling techniques for these tasks. These ligands are then chemically attached to a nanomicelle, to create a nanoviricide.

It is anticipated that when a virus comes in contact with the nanoviricide, not only would it land on the nanoviricide surface, binding to the copious number of ligands presented there, but it would also get entrapped because the nanomicelle polymer would turn around and fuse with the virus lipid envelope, harnessing a well-known biophysical phenomenon called “lipid-lipid mixing”. In a sense, a nanoviricide drug acts against viruses like a “venus-fly-trap” flower does against insects. Unlike antibodies that tag the virus and require the human immune system to take over and complete the task of dismantling the virus, a nanoviricide is a nanomachine that is designed to not only bind to the virus but also complete the task of rendering the virus particle ineffective.

Recent Developments

We began development of a nanoviricide drug to treat SARS-CoV-2, the virus that causes COVID-19 spectrum of diseases, and has become a historic worldwide pandemic, around January 2020, when the news of cases in China broke out. Since then, we have been working diligently on designing, testing, and advancing drug candidates against SARS-CoV-2.

On September 15, 2020, we reported in a press release that we have nominated a clinical candidate for COVID-19, with additional back-up candidates that we continue to work on advancing further. We have previously reported that our developmental drug candidates have shown effectiveness against multiple coronaviruses in cell culture studies, and have shown strong effectiveness in animal studies against a human coronavirus that uses the same human receptor (ACE2) as SARS-CoV-2, namely h-CoV-NL63. There are reports that common colds coronavirus infection has led to protection from SARS-CoV-2 infection. This protection is most likely associated with infection by hCoV-NL63, because this is the only common cold virus that uses the same human receptor as SARS-CoV-2. Thus we believe our results are significant as they have demonstrated a broad-spectrum anti-coronavirus effectiveness, and, additionally, strong effectiveness in animal model that indicates that our drug candidates should be effective against SARS-CoV-2. Studies involving SARS-CoV-2 require BSL3/BSL4 facilities. Performing studies in BSL3/4 facilities is inherently slow, and requires dependence on high containment laboratory schedules and access. We, therefore, developed animal models and cell culture studies that can be conducted in BSL2 facilities. This enabled our rapid drug development.

The broad-spectrum anti-coronavirus activity of our drug candidates is important because it provides scientific rationale that as a virus mutates, it would not escape the drug. In addition, we anticipate the drugs we develop should work against seasonal or commonly circulating coronaviruses as well as potentially pandemic and pandemic coronaviruses. Antibodies, in contrast tend to be highly specific and are known to fail when the virus mutates. Vaccines are also known to fail when a virus mutates.

On November 11, 2020, we announced that we have engaged Calvert Labs to perform core safety pharmacology studies that are generally required for filing an Investigational New Drug (IND) application with the US FDA prior to being able to begin human clinical studies.

On or about February 8, 2021, we reported in a press release that our broad-spectrum anti-coronavirus drug candidate for the treatment of COVID-19 infections was found to be well tolerated in safety pharmacology studies required for progressing to human clinical trials.

We reported that our anti-coronavirus drug candidate NV-CoV-2 was found to be safe in the GLP safety pharmacology studies performed by an external contract research organization (CRO) in both rat and non-human primate (NHP) models. Additionally, multiple injections of NV-CoV-2 were also well tolerated in an extensive non-GLP study in rats that was performed by AR Biosystems, Inc., Florida.

On March 2, 2021, we reported in a press release that both of our anti-coronavirus drug candidates, namely, NV-CoV-2 and NV-CoV-2-R, were found to be highly effective in comparison to remdesivir against two distinctly different coronaviruses in our new cell culture studies leading towards a pre-IND application and thereafter an IND submission for these COVID-19 drug candidates. Remdesivir is one of the most effective anti-coronavirus drugs in cell culture studies. Therefore our finding that NV-CoV-2 was highly effective and comparable to remdesivir in activity in these cell culture studies was pleasantly surprising. Even more striking was the finding that NV-CoV-2-R exceeded the effectiveness of remdesivir itself in these cell culture studies. These results indicate that NV-CoV-2 and NV-CoV-2-R could be some of the strongest weapons in the fight against coronaviruses and the current COVID-19 global pandemic.

The strong effectiveness of the three drugs NV-CoV-2, NV-CoV-2-R, and remdesivir against two unrelated coronaviruses (namely hCoV-NL63 and hCoV-229E) indicates their strong potential for treatment of coronavirus diseases including COVID-19, irrespective of variants or coronavirus types. The broad-spectrum effectiveness of the Company’s drug candidates is very important as coronavirus variants that are reported to evade antibodies, potentially causing disease in spite of vaccination, are becoming widespread as the COVID-19 global pandemic is progressing into its second year.

Remdesivir is known to be highly effective in cell culture studies against many coronaviruses as well as Ebola and other viruses. Thus NV-CoV-2-R can be expected to be at least as effective as remdesivir against all of these viruses in cell cultures. Moreover, NV-CoV-2-R would be expected to be significantly superior to remdesivir in human clinical studies, if our encapsulation process effectively protects remdesivir from bodily metabolism as is anticipated.

On March 9, 2021, we reported that our pan-coronavirus COVID-19 drug candidates NV-CoV-2 and NV-CoV-2-R were found to be highly effective in pre-clinical antiviral animal studies, consistent with their previously reported effectiveness in cell culture studies against infection by human coronaviruses.

Pre-clinical GLP Safety Pharmacology Studies Reported on February 8, 2021

In a GLP neuro-pulmonary safety pharmacology study in rats, the following conclusion was drawn: The intravenous administration of NV-CoV-2 at doses of 25, 50 and 100 mg/kg did not affect respiratory function in rats.

In a GLP cardiovascular function study in the NHP cynomolgus monkeys, the following conclusion was drawn: Intravenous infusion of NV-CoV-2 at 25, 37.5, and 50 mg/kg did not have any toxicologic effects on cardiac rhythm or ECG morphology in cynomolgus monkeys in this study. No significant effects on blood pressure and heart rate were observed after the intravenous infusion of NV-CoV-2.

These results were consistent with a more extensive, multiple injection non-GLP safety and tolerability study in Sprague-Dawley male and female rats. In this non-GLP study, NV-CoV-2 was injected intravenously (via tail vein) on each of days 0, 1, 2, 3, 4, and 5. Two different doses were used: 320mg/kg BW per injection, and 160 mg/kg BW per injection. Clinical observations, body weight, urine, blood chemistry, post-mortem findings, and organ histology were studied. In all parameters, NV-CoV-2 was well tolerated at both dosages throughout the study.

Pre-clinical Cell Culture Efficacy Study Reported on March 2, 2021

The Company studied the effectiveness of NV-CoV-2, NV-CoV-2-R and remdesivir against two unrelated human coronaviruses: h-CoV-229E (229E), and h-CoV-NL63 (NL63). Of these NL63 uses the same ACE2 human cell receptor to gain entry into cells as do all variants of SARS-CoV-2 and SARS-CoV-1. Additionally, human pathology of NL63 infection closely mimics that of SARS-CoV-2, albeit with limited disease severity. NL-63 is being used as a model for anti-SARS-CoV-2 drug development in various labs including ours (reviewed in: A. Chakraborty and A. Diwan (2020). “NL63: A Better Surrogate Virus for studying SARS- CoV-2”. Integer Mol Med, 2020, vol.7, pp 1-9, doi: 10.15761/IMM.1000408.). In contrast, 229E uses the cell surface receptor APN for entry rather than ACE2, and causes common colds. Thus, NL63 and 229E are unrelated human coronaviruses.

Pre-clinical Efficacy Study in Lethally Infected Animals Reported on March 9, 2021

NV-CoV-2 and NV-CoV-2-R were found to be highly effective against a fully lethal direct-lung coronavirus infection in rats based on multiple indicators:

Survival: While rats in the untreated infected group succumbed to the disease in 5 to 6 days, the rats in the NV-CoV-2 treatment group survived for 14 days, and the rats in the NV-CoV-2-R treatment group survived for 16 days. In contrast, rats treated with remdesivir formulated in SBECD (comparable to the FDA-approved Veklury® formulation of remdesivir) survived for only 7.5 days. The total dose of remdesivir was 90mg/kgBW for the remdesivir treated group, and it was 80mg/kgBW when encapsulated in the NV-CoV-2-R group. Thus compared to treatment with remdesivir, treatment with the Company’s drug candidate NV-CoV-2 extended the lifespan by approximately four times more days. Further, treatment with the Company’s other drug candidate NV-CoV-2-R extended the lifespan by approximately five times more days.

Body Weight: Both NV-CoV-2 and NV-CoV-2-R protected the animals from body weight (BW) loss that results from the infection and immune response, in addition to the substantially increased survival, in this lethal coronavirus infection model. NV-CoV-2 group lost only about 7% BW (12.5 g/animal) at day 13, and the NV-CoV-2-R group lost as little as ~1.8% BW (3g/animal) at day 13. In contrast, the remdesivir group had already lost ~17% BW (30g/animal) by day 7 and succumbed to the disease soon thereafter.

These results clearly indicate strong effectiveness of NV-CoV-2 as well as NV-CoV-2-R in fighting the coronavirus lung infection and its ill effects, as compared to the FDA-approved drug remdesivir.

As of now, additional studies on histopathology of organs and blood chemistry from this experiment have been completed and we are anticipating the corresponding report shortly for inclusion in our pre-IND submission.

The (1) significant improvement in lifespan by a factor of four to five, and (2) significant prevention of body weight loss, upon treatment with NV-CoV-2 as well as NV-CoV-2-R as compared to treatment with the FDA-approved remdesivir are important indicators for potential human clinical success of the Company’s drug candidates.

The Company studied the effectiveness of these drugs against the human coronaviruses h-CoV-NL63 (NL63) that uses the same ACE2 human cellular protein as receptor to gain entry into cells as do all variants of SARS-CoV-2 and SARS-CoV-1. Additionally, the human pathology of NL63 infection closely mimics that of SARS-CoV-2, albeit with limited disease severity. NL63 is a circulating human coronavirus that can be used in BSL2 labs. NL-63 is therefore being used as a model for anti-SARS-CoV-2 drug development in various labs including ours.

Remdesivir (Veklury®, Gilead) has shown relatively weak effectiveness in animal and clinical studies in contrast to its strong effectiveness in cell culture studies. This has been related by scientists to the metabolism of remdesivir in the blood stream that causes loss of effectiveness. The Company has developed the drug candidate NV-CoV-2-R by encapsulating (“hiding inside”) remdesivir into NV-CoV-2. The Company believes that this encapsulation should protect remdesivir from bodily metabolism and thereby significantly increase its clinical effectiveness.

The strong effectiveness of NV-CoV-2 and NV-CoV-2-R drug candidates in this animal model is consistent with their previously reported effectiveness in cell culture studies against infection of two distinctly different human coronaviruses, hCoV-NL63, which was used in this animal efficacy study, and hCoV-229E, another circulating coronavirus that uses another receptor, namely APN. In contrast, while remdesivir was highly effective in the cell culture studies, it was not very effective in this animal efficacy study, a result that is consistent with human clinical studies of remdesivir.

The effectiveness of NV-CoV-2-R observed in this study can be understood as a combination of (a) the improvement in the effectiveness of remdesivir due to encapsulation, and (b) the effectiveness of NV-CoV-2 by itself.

NV-CoV-2-R, the Company believes, is an excellent demonstration of the power of the nanoviricides platform technology that enables combining multiple modalities seamlessly into a single drug.

The Company believes that these in vivo study results support a potential synergistic improvement in the drug effect as a result of combining the two different mechanisms of attacking (i) the virus reinfection cycle and (ii) the virus replication cycle simultaneously.

The Company has developed NV-CoV-2 and NV-CoV-2-R based on its platform nanoviricides® 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. 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 cells. Antibodies in contrast attack a virus particle at only two attachment points per antibody.

It is anticipated that when a virus comes in contact with the nanoviricide, not only would it land on the nanoviricide surface, binding to the copious number of ligands presented there, but it would also get entrapped because the nanomicelle polymer would fuse with the virus lipid envelope, harnessing a well-known biophysical phenomenon called “lipid-lipid mixing”. In a sense, a nanoviricide drug acts against viruses like a “venus-fly-trap” flower does against insects. Unlike antibodies that tag the virus and require the human immune system to take over and complete the task of dismantling the virus, a nanoviricide is a nanomachine that is designed to not only bind to the virus but also complete the task of rendering the virus particle ineffective.

In addition, the nanoviricide technology also simultaneously enables attacking the rapid intracellular reproduction of the virus by incorporating one or more active pharmaceutical ingredients (APIs) within the core of the nanoviricide. The nanoviricide® technology is the only technology in the world, to the best of our knowledge, that is capable of both (a) attacking extracellular virus, thereby breaking the reinfection cycle, and simultaneously (b) disrupting intracellular production of the virus, thus blocking the complete lifecycle of the virus, enabling complete control of a virus infection.

The Company has developed NV-CoV-2-R based on this encapsulation capability that is built into its nanoviricide NV-CoV-2. The Company has chosen to encapsulate remdesivir as the participating drug for blocking the viral replication cycle. Remdesivir is approved by the US FDA for the treatment of patients hospitalized with COVID-19. Encapsulation of remdesivir in the Company’s nanoviricide envelope is believed to protect it from metabolism in the body. This protection can be expected to lead to significant enhancement in the effectiveness of remdesivir itself (in the encapsulated form), by potentially increasing both the effective remdesivir concentration and its duration of action. This could be an additional favorable effect for the Company’s anti-coronavirus drug candidate NV-CoV-2-R. Remdesivir is sponsored by Gilead. The Company is developing its drug candidates independently at present.

Based on (1) the safety of NV-CoV-2 in the different GLP and non-GLP studies employing different animal models, and (2) the anti-viral effectiveness in cell culture as well as in animal studies in comparison to remdesivir, we believe that our projected dosages would be safe and effective in human clinical trials. With these findings, the Company believes that it will be possible to administer repeated dosages of NV-CoV-2 in a human clinical trial, as needed, to achieve control over the coronavirus infection from SARS-CoV-2 or its variants.

We have received draft reports from most of these studies. We anticipate receiving final audited reports on the GLP studies shortly, one of which we have received as of this writing. We are now preparing to submit a pre-IND application to the US FDA with safety tolerability and effectiveness data to obtain guidance regarding human clinical trials. Additionally, we are actively seeking opportunities to engage appropriate sites for human clinical trials, both in the USA and abroad. Further, we are engaged in the preparation of clinical trial protocols and other activities that would be necessary for submitting an IND application to the US FDA.

Clinical Trial Drug Substance and Drug Product Manufacture

We have initiated production of a large batch of the drug substances for NV-CoV-2 and of NV-CoV-2-R under cGMP-compliant conditions for human clinical trials. NanoViricides is one of a few biopharma companies with the strong advantage that it has its own cGMP-capable manufacturing facility. This has made possible rapid translation from synthesis for non-clinical studies to large scale clinical batch production in a very short timeframe. Our cGMP-capable facility is capable of producing approximately 4kg of the COVID-19 drug candidate per batch. We anticipate that this would be sufficient for human clinical trials, and possibly for initial introduction under Compassionate Use, Emergency Use Authorization or similar regulatory approval.

Having our own cGMP-capable manufacturing facility has enabled rapid translation of our drug candidates to the IND application stage, saving years of manufacturing translation and set-up activities, as well as saving several millions of dollars of external costs, while ensuring requisite quality assurance, as compared to using a contract manufacturing organization (“CMO”) for our complex nanomedicine drugs. We believe these benefits will continue to accrue as our first drug candidate goes through human clinical trials into commercialization, and will also accrue for the multitude of candidates in our broad drug pipeline.

We originally intended to manufacture the drug substances (i.e. the active ingredients in NV-CoV-2 and NV-CoV-2-R drug candidates) in our own manufacturing facility in Shelton, CT, for further formulation into final drug products at a contract manufacturing facility. However, the impact of the COVID-19 pandemic has caused severe supply-and-demand issues. We have therefore upgraded our facilities to enable complete clinical drug product manufacture, which involves both formulation and packaging under cGMP-compliant processes. We are currently in the process of setting up the final drug product packaging at our facility.

The Company has developed NV-CoV-2-R based on the encapsulation capability that is built into its nanoviricide NV-CoV-2. The Company has chosen to encapsulate remdesivir as the participating drug for blocking the viral replication cycle. Remdesivir is approved by the US FDA for the treatment of patients hospitalized with COVID-19. Encapsulation of remdesivir in the Company’s nanoviricide envelope is expected to protect it from metabolism in the body. This protection can be expected to lead to significant enhancement in the effectiveness of remdesivir itself (in the encapsulated form), by potentially increasing both the effective remdesivir concentration and the duration of action. This could be an additional favorable effect for the Company’s anti-coronavirus drug candidate NV-CoV-2-R. Remdesivir is sponsored by Gilead. Significant amounts of US government funding has been used in its development, from NIH as well as from BARDA. The Company is developing its drug candidates independently at present.

Thus, our anti-coronavirus drug program is moving rapidly towards an IND filing to enable human clinical trials.

COVID-19 Competitive Landscape

Because of the “Operation Warp Speed” program in the USA, and other international programs that accelerated vaccine developments in both private sector and public-private partnerships, several vaccines against the original strain of the SARS-CoV-2 have become available. Significant speed-up in regulatory agencies, and experts teaming together to solve problems rapidly, as well as very high levels of funding enabled these developments.

However, it is now well recognized that antiviral drug development, especially novel pan-coronavirus or broad-spectrum drugs development was neither supported nor accelerated at various levels, both in the USA as well as internationally. Instead, fast-tracking was enabled for re-purposing of existing drugs and moving them into clinical trials against SARS-CoV-2. This has led to failures of several such programs, as well as an explosion in the number of drug development efforts as well as the number of clinical trials. Fast tracking was also enabled for antibody drugs, which are known to be highly specific and known to fail when variants emerge.

As of March 31, 2021, there are 10 COVID-19 drugs that have received Emergency Use Authorization (EUA) and one drug that has received full approval (remdesivir) from the US FDA (https://www.fda.gov/drugs/coronavirus-covid-19-drugs/coronavirus-treatment-acceleration-program-ctap#dashboard). In addition, there are at least three vaccines licensed in the USA and several more are in use internationally. Apart from remdesivir and antibodies, there are very few drugs with direct antiviral effect that have EUA or are in clinical trials. Internationally, virus variants have continued to emerge with resistance to drugs and vaccines. Scientists believe it is only a matter of time before escape variants against existing vaccines and therapeutics become commonplace. Thus the need for therapeutics that the virus would not escape by mutations, such as the broad-spectrum, pan-coronavirus nanoviricides drug candidates, remains unmet.

Nevertheless, given the high rate of vaccination in the USA, and due to the very large number of clinical trials already under way, it is likely to be very difficult to engage into clinical trials for our novel coronavirus drug candidates in the United States. There appears to be several months of lead time before Phase 1 clinical trials of a novel drug can be initiated, because of the capacity saturation and hoarding effects in the clinical trials marketplace. We are therefore looking at sites outside USA, even as we continue our efforts for engaging sites within the USA. Additionally, it appears that the US FDA is likely overloaded with the large numbers of clinical trials and applications in excess of 440 already reviewed and an estimated 600+ in planning stages (https://www.fda.gov/drugs/coronavirus-covid-19-drugs/coronavirus-treatment-acceleration-program-ctap#dashboard). All of these factors have introduced significant uncertainties in the timeline for the execution of our COVID-19 clinical trials program.

Financial Status

On March 2, 2021 in an “At-the-Market” Offering, the Company sold 814,242 shares of common stock at an average price of $7.83 under the Sales Agreement with B. Riley Securities, Inc. The net proceeds to the Company from the offering was approximately $6.1 million after deducting underwriting discounts and commissions and other offering expenses.

As of March 31, 2021, we had approximately $22.9 million in cash and cash equivalents and $9.2 million of property and equipment, net of accumulated depreciation. Our current liabilities are approximately $0.9 million. Stockholder’s equity was approximately $31.9 million at March 31, 2021.

During the nine-month period ended March 31, 2021, we used approximately $6.0 million in cash toward operating activities. The available cash is sufficient for more than twelve months of operations at the current rate of expenditures. As our COVID-19 and shingles drug programs mature into human clinical trials, our expenditures are anticipated to increase due to the costs of the clinical trials. We estimate that we have sufficient funds in hand for initial human clinical trials for at least one of our drug candidates at this time.

We do not anticipate any major capital costs going forward in the near future. The Company believes that it has several important milestones that it will be achieving in the ensuing year. Management believes that as it achieves these milestones, the Company’s ability to raise additional funds in the public markets would be enhanced.

NanoViricides’ Drug Programs in Brief