SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
FORM 10-SB
General
Form for Registration of Securities
Pursuant
to Section 12(b) or (g) of
The
Securities Exchange Act of 1934
NANOVIRICIDES,
INC.
(Name
of small business issuer in our charter)
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Nevada
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8731
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76-0674577
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(State
or other jurisdiction of
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(Primary
Standard Industrial
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(I.R.S.
Employer
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Incorporation
or organization)
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Classification
Code Number)
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Identification
No.)
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135
Wood Street, Suite 205
West
Haven, Connecticut 06516
(203)
937-6137
(Address,
including zip code, and telephone number, including area code, of Registrant’s
principal executive offices)
Copies
to:
Peter
Campitiello, Esq.
Levy
& Boonshoft, P.C.
477
Madison Avenue
New
York, New York 10022
(212)
751-1414
Securities
to be registered pursuant to Section 12(b) of the Act:
None
(Title
of
Class)
Securities
to be registered pursuant to Section 12(g) of the Act:
Common
Stock, $.001 par value per share
(Title
of
Class)
NanoViricides,
Inc.
INDEX
TO THE FORM 10-SB
Table
of Contents
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Page
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PART
I
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ITEM
1.
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Description
Of Business
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3
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ITEM
2.
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Management
Discussion And Analysis Or Plan Of Operations
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42
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ITEM
3.
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Description
Of Property
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48
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ITEM
4.
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Security
Ownership Of Certain Beneficial Owners And Management
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49
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ITEM
5.
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Directors,
Executive Officers, Promoters And Control Persons
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50
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ITEM
6.
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Executive
Compensation
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54
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ITEM
7.
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Certain
Relationships And Related Transactions
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55
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ITEM
8.
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Description
Of Securities
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56
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PART
II
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ITEM
1.
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Market
Price Of And Dividends On The Registrant's Common Equity And
Other
Stockholder Matters
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59
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ITEM
2.
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Legal
Proceedings
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60
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ITEM
3.
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Changes
In And Disagreements With Accountants
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60
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ITEM
4.
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Recent
Sales Of Unregistered Securities
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60
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ITEM
5.
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Indemnification
Of Directors And Officers
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63
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PART
F/S
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Financial
Statement Schedules
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64
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PART
III
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ITEM
1.
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Index
To Exhibits
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84
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SIGNATURES
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PART
I
SPECIAL
NOTE ON FORWARD-LOOKING STATEMENTS
This
Form
10-SB contains forward-looking statements within the meaning of the Securities
Act of 1933, as amended (the "Securities Act") and of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Wherever possible, we have
identified these forward-looking statements by words such as "believes,"
"anticipates," “contemplates," "expects," "intends," "projects," "plans,"
"forecasts," "estimates" and similar expressions.
Forward-looking
statements involve risks and uncertainties and include, but are not limited
to,
statements of future events and our plans and expectations. We may make
additional written or oral forward-looking statements from time to time in
filings with the Securities and Exchange Commission ("SEC"), through press
releases or otherwise. These statements reflect our current views about future
events and financial performance or operations and are applicable only as of
the
date the statements are made. Our actual results may differ materially from
such
statements. Factors that may cause or contribute to such differences include,
but are not limited to, those discussed in "Part I, Item 1. Description of
Business - Factors Affecting Future Performance" and "Part I, Item 2.
Management's Discussion and Analysis or Plan of Operations," as well as those
discussed elsewhere in this Form 10-SB and in the exhibits
attached.
Although
we believe that the assumptions underlying the forward-looking statements in
this Form 10-SB are reasonable, any of the assumptions could prove inaccurate.
There can be no assurance that the results contemplated in such forward-looking
statements will be realized. As discussed under "Part I, Item 1. Description
of
Business - Factors Affecting Future Performance," our business and operations
are subject to substantial risks that increase the uncertainties inherent in
the
forward-looking statements included in this Form 10-SB.
The
inclusion of such forward-looking information should not be regarded as a
representation by us or any other person that the future events, plans or
expectations contemplated herein will be achieved. We disclaim any obligation
to
subsequently revise forward-looking statements to reflect any change in our
expectations or due to the occurrence of unanticipated events.
ITEM
I: DESCRIPTION OF BUSINESS
Corporate
History
NanoViricides,
Inc. was incorporated under the laws of the State of Colorado on July 25, 2000
as Edot-com.com, Inc
.
and
was
organized for the purpose of conducting internet retail sales. On April 1,
2005,
Edot-com.com, Inc.
was
incorporated under the laws of the State of Nevada for the purpose of
re-domiciling the Company as a Nevada corporation, Edot-com.com (Nevada). On
April 15, 2005, Edot-com.com (Colorado) and Edot-com.com (Nevada) were merged
and Edot-com.com, Inc., (ECMM)
a
Nevada
corporation, became the surviving entity.
On
April 15, 2005, the authorized shares of
common
stock was increased to 300,000,000 shares at $.001 par value and the Company
effected a 3.2 - 1 forward stock split effective May 12, 2005.
On
June
1, 2005, Edot-com.com, Inc. acquired NanoViricide, Inc., a privately owned
Florida corporation (“NVI”), pursuant to an Agreement and Plan of Share Exchange
(the “Exchange”). NVI was incorporated under the laws of the State of Florida on
May 12, 2005 and its sole asset was comprised of a licensing agreement with
TheraCour Pharma, Inc. (an approximately 35% shareholder of NVI) for rights
to
develop and commercialize novel and specifically targeted drugs based on
TheraCour's targeting technologies, against a number of human viral diseases.
(For financial accounting purposes, the 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.) Upon consummation of the Exchange,
ECMM adopted the business plan of NVI.
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. As a result
of the Exchange, NVI 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.
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 on the
Pink Sheets 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.,
one
of the Company’s shareholders, to which we have the necessary licenses in
perpetuity 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. Licenses
for additional viral diseases may be acquired as the opportunities present
themselves. We focus our research and clinical programs on specific anti-viral
solutions. 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
NanoViricide Concept
The
Company owns an exclusive worldwide license in perpetuity to technology that
enables the creation of nanoviricides (tm). A “nanoviricide” is a flexible
nano-scale material approximately a few billionths of a meter in size, which
is
chemically programmed to specifically target and attack a particular type of
virus like a guided missile. A nanoviricide also is capable of simultaneously
delivering a devastating payload of active pharmaceutical ingredients (API)
into
the virus particle, thereby completely destroying the enemy.
Background:
The NanoViricides Technology and Approach
The
NanoViricides Technology and Approach
Nanoviricides
are designed to lead to reduction in viremia by a set of multiple concerted
mechanisms:
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1.
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Each
nanoviricide drug is designed as a specifically targeted antiviral
agent
for a particular type of virus or group of viruses. We believe that
this
specific targeting should lead to minimal side effects for the drug.
Often
side effects of a drug may be correlated with non-specific interactions
with the host cells, tissues, and organs. Most existing anti-viral
agents
are known to have non-specific effects against both host cells and
viral
machinery at the same time.
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2.
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A
nanoviricide is designed to specifically seek and attach to a virus
particle, engulfing the virus particle in the process, thereby rendering
it incapable of infecting new cells, and disabling it completely.
This
mechanism of action comprises much more than what the current entry
and
fusion inhibitors are expected to do. The fusion and entry inhibitors
do
not completely cover the virus particle and probably block only a
few
sites on the virus particle, which means the virus particle may still
be
capable of infecting cells using its unblocked attachment sites.
In
contrast, a nanoviricide is expected to engulf the virus particle
completely, because of its larger size and flexible nature, thus
disabling
it completely. The action of nanoviricide in this regard may be expected
to be superior to antibody agents that attack viruses as well. Antibodies,
being large, are expected to block relatively greater portions of
the
virus particle surface compared to small molecule entry inhibitors.
However, antibodies depend upon the human immune system responses
for
clearing up the virus particle. In contrast, nanoviricides are capable
of
acting as completely programmed chemical robots that finish their
task of
destroying the virus particle on their own.
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3.
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A
nanoviricide is capable of encapsulating, or hiding, active pharmaceutical
ingredients (API) in its core, or “belly”. This is expected to reduce
toxic effects of the API. Such encapsulated agents are currently
being
used in anti-cancer therapy and have shown reduced toxicity as well
as
increased efficacy (such as Doxil™). We believe NanoViricides, Inc. is the
first company to bring this proven feature to the anti-viral therapy
platform.
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4.
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A
nanoviricide would deliver any encapsulated API directly into the
core of
the virus particle which would result in maximal effect against the
anti-viral targets, such as the viral genomic materials. This specifically
targeted delivery of the API is expected to minimize toxic effects
and
also improve efficacy of the API.
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5.
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With
this concerted multiply targeted set of mechanisms, a nanoviricide
can be
programmed to (a) prevent the virus particle from being able to infect
new
cells, (b) dismantle the virus particle, and (c) destroy the genetic
material of the virus particle, thereby completely destroying the
enemy.
This complete systems engineered approach to anti-viral therapy is
in
stark contrast with the current piece-meal approaches that lead to
extensive toxicities, limited efficacies, and generation of mutants
through selective incomplete pressure applied by the therapeutic
regime
onto the virus.
|
We
believe that the nanoviricides act by completely novel and distinctly different
mechanisms compared to most existing anti-viral agents. The self-assembling
nanoviricide “trojan horses” are thought to course through the blood stream,
seek their target, i.e. a specific virus particle, attach themselves to the
virus particle target, fuse with the virus particle. This chain of events,
if it
occurs, is expected to destroy the virus particle's ability to infect host
cells. In addition, if the nanoviricide contains an encapsulated API, such
API
may be deployed into the virus particle and may lead to destruction of the
virus
genetic material (such as viral DNA, viral RNA, etc.), and/or key viral
components that the virus carries inside its “belly” (such as the reverse
transcriptase, the protease, and the integrase carried by HIV particles), based
on the capabilities of the API. We believe this gives us an edge in the field
of
anti-viral therapy.
We
believe that nanoviricides are capable of functioning without any dependence
on
the body's immune system, and therefore may be expected to be superior to
antibody-based anti-viral agents, as well as therapeutic vaccines, generally
referred to as immunotherapeutics and immunoprophylactics. Immunotherapeutics
are generally thought to depend upon immune system components of the body for
effectiveness to various extents. Antibody based viral agents such as Hepex
B(tm) (Cubist/ XTL Bio) have been approved by regulatory agencies.
We
believe that the side effects related to systemic toxicity of nanoviricides
may
be substantially lower than with existing anti-viral therapies. We believe
so
because the nanoviricides drugs are specifically targeted to the virus particle
and are expected to have minimal adverse interaction with human
physiology.
We
believe that nanoviricides act by a novel set of multiple, concerted
,
mechanisms. We believe that this makes them unique, and will give them an edge
in the marketplace. However, being so novel, our drugs are not directly
comparable to existing anti-viral therapies and classes of drugs. Thus, the
safety and efficacy of the nanoviricides needs to be established by
experimentation, and cannot be anticipated on the basis of any similar
information regarding existing drugs.
See
Preclinical Safety And Efficacy Studies.
We
believe that the flexible nanoviricides nanomedicines have substantial
advantages over hard sphere nanoparticles in this antiviral drug application.
Hard sphere nanomaterials such as dendritic materials, nanogold shells, silica,
gold or titanium nanospheres, polymeric particles, etc., are generally not
expected to be capable of completely enveloping and neutralizing the virus
particle in the fashion that nanoviricides can.
The
Company believes that our drugs may become the major weapons in the fight
against certain viral diseases, possibly even after the other therapies have
failed. This may occur when administered as solo agents or when administered
in
conjunction with other therapies.
The
Company does not claim to be creating a cure for influenza, HIV or any other
viral disease. The Company's objectives are to create the best possible
anti-viral nanoviricides. Our long-term research efforts are aimed at augmenting
the nanoviricides currently in development with additional agents that together
may lead to either total long term control of or, in many cases, even cure
of
many viral diseases.
The
Company plans to develop several drugs through the preclinical studies and
clinical trial phases in order to obtain US FDA approvals for these drugs.
The
Company also plans to seek regulatory approvals in several international
markets, including developed markets such as Europe, Japan, Australia, and
underdeveloped regions such as Southeast Asia, India, China, and the African
subcontinent. The Company anticipates partnering with medium and large
pharmaceutical companies at various opportunities in order to advance the
various drugs into commercialization. The Company may receive license fees
and
development fees for such partnerships, in addition to royalties based on sales
of any resultant drugs.
The
Company is currently developing early-stage products against H5N1 (Avian Flu),
Common Influenza, Rabies, and Hepatitis C. In addition, we plan on beginning
nanoviricides development against HIV/AIDS, Herpes Simplex Virus, and other
diseases once we have sufficient resources to devote to these projects.
The
Company's headquarters are currently in West Haven, Connecticut.
Our
Product Focus and Technologies
The
Company plans to develop several nanoviricide drugs against a number of human
viral diseases. The Company has a license in perpetuity to develop drugs based
on technologies originally created by TheraCour Pharma, Inc., against the
following human viral diseases: H5N1 (Avian Flu), Human Influenza, Human
Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis C Virus
(HCV), Herpes Simplex Virus (HSV), including all known strains of these viruses.
We
currently have, in early active development, products against H5N1 (Avian Flu),
Common Human Influenza, Rabies, and Hepatitis C. We plan on undertaking the
development of drugs against other viruses when adequate financing becomes
available. 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 has begun preclinical development of a nanoviricide drug for rabies
and
expects to enter into a license for the drug with TheraCour.
Background:
Preclinical Safety And Efficacy Studies
Preliminary
Safety Studies In Vivo
We
have
conducted limited initial safety studies on one of the core TheraCour™
nanomaterials (patent pending). TheraCour technology covers a large range of
nanomaterials in a class known as pendant polymeric micelles. These materials
are self-assembling, flexible, non-particulate, and are stable at room
temperature.
A
given
TheraCour nanomaterial forms the backbone of many nanoviricide antiviral drugs.
One of the TheraCour polymers was tested at a 100mg/kgBW (body-weight) dose
level in mice in a preliminary experiment. In studies involving gross tissue
examination, microscopic histology studies, and blood pathology, no ill-effects
or toxic effects were found. These studies showed that the tested core
nanomaterial did not cause any organic damage in mice at the amounts tested.
All
results were within safe limits.
Higher
dosage levels and studies on additional materials are planned in order to
determine the safety thresholds in laboratory animals.
Preliminary
Efficacy Study on Proof of Principle
A
nanoviricide drug was made using a well-known compound that has known efficacy
against common influenza. This nanoviricide and the free compound were tested
along with appropriate controls in mice infected with very high levels of a
common influenza virus called H1N1. The results indicated that the efficacy
of
the nanoviricide was approximately 50 Times (5,000%) better than that of the
free compound.
This
study indicated that the efficacy of a known virus-binding compound can be
enhanced to extremely high levels by using the nanoviricides technology. We
had
predicted such strong efficacy improvements theoretically. Further work will
be
necessary to substantiate that such effect is seen across a wide range of
compounds.
Preliminary
Cell Culture Studies Against H5N1 Avian Influenza
As
a test
case, we have developed and evaluated the safety and efficacy of nanoviricides
against common influenza and H5N1, one of the highly pathogenic avian influenzas
and a current pandemic threat. In vitro evaluation of 14 substances, including
controls, was performed to evaluate protection of mammalian cells against
infection by the H5N1 subtype. These assays were conducted in Vietnam under
the
auspices of the National Institute of Hygiene and Epidemiology, Hanoi (NIHE)
under the Vietnam Ministry of Health. We identified four different nanoviricides
as being highly effective against H5N1 using two different assays, both
involving cell culture, one using the plaque reduction method and the other
involving microscopic examination, to determine the extent of cytopathic events
(CPE) reduction. All of these nanoviricides were effective at extremely low
concentrations and many of them are considered drug candidates.
The
most
successful of these was a nanoviricide based on an antibody fragment as the
targeting ligand, which led to substantial suppression of CPE at an
extraordinarily low concentration level. This is being developed as
AviFluCide-I™, a drug highly specific to H5N1 that is being developed against
the Vietnam strain. We currently believe that it is very likely to work against
the Indonesian strain although further studies will be required to determine
its
efficacy against various highly pathogenic strains of influenza. If it fails
to
work against the Indonesia 2006 strain, further development may become
necessary.
Another
nanoviricide which is based on a ligand that we designed in-house to be specific
to the group of all or a majority of highly pathogenic avian influenza (HPAI)
viruses, also showed a very high efficacy. This is being developed as
“AviFluCide-HP™”, a drug that is group-specific against emergent and existing
highly pathogenic influenza viruses (including H5N1, H7N3 and others). Non-H5N1
HPAI strains are expected to become the next pandemic threats on the horizon.
At
least one pharmaceutical company has been awarded a contract to develop a
vaccine against a current strain of H7N3. It is well known that influenza
strains drift constantly due to mutation, resortment or recombination events
leading to failure of vaccines.
A
third
nanoviricide is based on a ligand that we designed for attacking all influenza
A
viruses (type-level specificity) has shown strong efficacy against H5N1 as
well.
This is being developed as “FluCide-I™”, a drug designed primarily for use
against serious cases of human influenza.
Preliminary
Efficacy Studies In Vivo
All
but
the antibody-based anti-influenza nanoviricides have been recently tested in
mice in an aggressive study involving extremely high levels of infection with
a
common influenza strain called H1N1. This study was conducted by Dr. Krishna
Menon, the Company’s Chief Regulatory Officer. While a report on this study has
not yet been issued, preliminary results indicate that most of the nanoviricide
technology based drug candidates were better than oseltamivir (Tamiflu(tm)).
FluCide-I may be as much as 10 times (1,000%) superior to Tamiflu in common
influenza.
Further
studies are necessary to substantiate these results.
Implications
of the Study Results
The
implications of such extremely high efficacy improvements are very strong.
Firstly, they provide proof-of-principle for the nanoviricides platform
technology. Secondly, it is evident that once a suitable virus-binding compound
(ligand) is found, we can very quickly develop a drug against that virus.
It
is
also clear that nanoviricides may be expected to define a new plateau in
anti-viral therapy. Other current work in antiviral therapy is generally
resulting in efficacy improvements of a few percent or so. Thus, in the case
of
influenza, recently peramivir(tm, BioCryst) was reported as having approximately
equal efficacy to oseltamivir (Tamiflu, Roche). However, it was suggested that
peramivir may have a superior safety profile and thus may enable use of large
does.
Of
note
is also the fact that peramivir is being developed as an injectable.
Nanoviricides are currently being developed as injectable drugs. There is now
acceptance in the industry, the scientific community, and the public health
community that injectable drugs should be developed and deployed when they
provide high efficacies.
A
new
anti-influenza drug, an entry inhibitor, was recently reported by researchers
at
the University of Wisconsin, Madison, as being highly active against influenza
in mice. It would be of interest to see if this drug is superior to Tamiflu(tm)
and other drugs in development. It appears very likely that using the
nanoviricides technology, the efficacy of such a drug may be enhanced by orders
of magnitude.
It
should
be noted that all of our studies to date were preliminary. Thus, the evidence
we
have developed is indicative, but not considered confirmative, of the
capabilities of the nanoviricides technology's potential. Despite such excellent
early results, there is a risk that nanoviricides may not result in
commercializable drugs. (
See
Part
I
,
Government
Regulation)
Background:
Collaborations and Subcontract Arrangements
Subcontract
to KARD Scientific, Inc.
Owned
and
operated by Dr. Krishna Menon, KARD Scientific Inc. of Wilmington,
Massachusetts, is currently our primary vendor for animal model study design
and
performance. KARD operates its own facilities in Wilmington, Massachusetts.
In
addition, KARD has a contractual arrangement with the Beth Israel Deaconess
Hospital of the Harvard University Medical School.
NanoViricides,
Inc. at present does not have any direct collaborative relationships with Beth
Israel or Harvard University, except through KARD Scientific.
Dr.
Krishna Menon is the Company’s Chief Regulatory Officer.
Collaboration
with the Health Ministry of the Government of Vietnam
On
December 23rd, 2005, Officers of the Company signed two Memoranda of
Understanding with the Vietnamese Government through the Ministry of Health.
These agreements called for cooperation in the development and testing of
certain nanoviricides. The parties agreed that the initial targets would be
the
development of drugs against H5N1 (avian influenza) and rabies. The initial
phase of this agreement called first for laboratory testing, followed by animal
testing of several drug candidates developed by the Company. Preliminary
laboratory testing of FluCide™-I, AviFluCide-I™ and AviFluCide-HP™ were
successfully performed at the laboratories of the National Institute of Hygiene
and Epidemiology in Hanoi (NIHE). The second phase of the project, animal
testing of the Influenza and H5N1 candidates as well as that of RabiCide-I™, the
company’s rabies drug, is expected to commence during the first quarter of 2007.
The testing will utilize the NIHE’s BSL3 (biological safety laboratory level 3)
laboratory which is due to be installed at the NIHE.
Other
Collaborations
The
Nanoviricides approach depends upon significant scientific input as well as
scientific experimentation during various stages of developments. The Company
currently does not have the facilities to conduct most of the anti-viral
studies. The Company depends upon a number of collaborations in order to
minimize capital outlays that would duplicate facilities that we may otherwise
have access to.
We
have
made significant efforts in the past year and continue to do so to obtain
valuable collaborations with renowned agencies, institutions, and commercial
enterprises. As the efforts materialize into formal arrangements, we will be
able to announce them.
We
anticipate that much of our work in the tropical and neglected diseases area
as
well as in areas of interest to bio-defense and emergency preparedness aspects
will be conducted in collaborations with renowned institutions. We anticipate
that substantial amounts of such work may in the future be conducted with public
funding, particularly the parts involving non-profit organizations and public
institutions.
We
also
anticipate certain collaborations that are valuable for our commercial drug
development efforts as well.
It
should
be noted that while the nanomaterials and nanomedicines we are developing are
designed with the above set of ground rules, it is generally not possible to
establish whether each of these mechanisms is actually active or whether it
is
truly responsible for the efficacy observed.
We
believe that mechanisms are guidelines rather than endpoints. Our study
endpoints and development programs are defined for establishing efficacy,
safety, and chemical manufacturing controls, rather than establishing mechanisms
of action.
If
regulatory agencies insist on development of knowledgebase regarding mechanisms
of actions, this may delay approval of nanoviricides drugs substantially.
Currently very little is known about how to scientifically analyze the
combined efficacy of such concerted sets of mechanisms that work together
and very often produce much greater benefit than when each mechanism works
separately. In other words, in the case of nanoviricides drugs, the
whole effect is often much greater than the sum of parts; however, how to
scientifically ascribe such an excess enhancement of efficacy is not yet
well known.
Escape
Mutants
Escape
mutants are a known risk and challenge to any given anti-viral drug. We believe
that we will be able to rapidly develop new drugs with altered ligands that
attack the new attachment sites of the escape mutants. This belief is based
on
the concept that a nanoviricide drug is constructed from several building
blocks. One of these building blocks is the ligand that attaches specifically
to
the virus. Identifying or creating a new ligand that binds to an escape mutant
enables creating a new drug, simply by replacing the ligand part of a drug
already known to be reasonably safe and efficacious. The Company's scientists
have developed strategies for identifying and designing such ligands.
Ligand
Tuning(tm)
A
very
broad-spectrum nanoviricide can be made by using a ligand that binds to a very
large number of types and strains of a given virus. Usually, but not always,
it
is possible to identify a ligand that will provide such a broad specificity
against a particular virus. Thus, for example, if a virus escapes our
FluCide-HP, then it would not be a highly pathogenic type, and would result
in
common-influenza-like morbidity, which is a much lower threat. Similarly, we
can
categorically state that any influenza virus, whether avian H5N1, or avian
HPAI,
or another common influenza virus, is certainly susceptible to our broad
spectrum influenza drug, FluCide-I.
Usually,
the broader the spectrum of a ligand, the lower is its efficacy level by itself.
Thus, it is always beneficial to develop highly efficacious narrow spectrum
drugs against potentially deadly diseases. In addition, the broader spectrum
drugs that include these diseases ensure that the likelihood of escape mutations
is minimized.
Thus
our
Ligand Tuning technology enables us to modify the antiviral spectrum of drug
to
obtain the best effect.
It
is
also possible to make a single nanoviricide drug that has specified spectrum
against a large number of different types of viruses. This will enable emergency
preparedness agencies to stockpile a single drug that can respond to a large
number of threats with high levels of efficacy. This is anticipated to result
in
tremendous economies of scale for the preparedness programs across the world,
because fewer drugs to stockpile also implies fewer issues in response
mobilization and drug deployment.
Background:
Bio-Defense - Emergency Preparedness
NanoViricides
Technology is Well Suited for Bio-Terrorism and Emerging Disease Threat Response
The
Company believes that in situations of bio-terrorism, accidental release of
infectious agents, or natural outbreaks, our building-block based approach
of
nanoviricides drug development will prove of especially great value. We believe
it is possible, in war-like scenario, to develop a response to the biological
weapons attack in a matter of days or weeks. Similarly, we believe that when
a
new virus outbreak occurs (such as a variant of the Asian Bird Flu virus);
this
building block technology may enable us to develop a new drug to fight the
new
threat in a minimal amount of time.
Background:
Bio-Defense “War-like Response” A Novel Scenario enabled by NanoViricides
Technology
The
Company believes that it can help contain epidemics before they can occur in
what the company terms the “War-like” scenario of response to a bio-threat,
whether due to bio-terrorism or natural events. Such a response scenario is
only
made possible because of the unique building-block nature of the nanoviricides
platform technology. In this scenario, a base nanoviricide would be stockpiled
under strategic national and international stockpiling programs, and a new
drug
could be developed against a threat even prior to identifying the actual
pathogen that is the cause of the public health crisis event. This capability
is
seen as extremely valuable because it is anticipated that bioterrorism agents
of
the future as well as natural outbreaks may be of novel pathogens and therefore
identification and diagnosis of the same may take large amounts of time, a
time
period in which an epidemic may threaten to become a pandemic. Such was the
case
with SARS, and other smaller outbreaks. A recent coxsackie virus outbreak in
Northern India resulted in several child fatalities during the pathogen
identification time frame itself, despite being caused by a previously known
pathogen.
Background:
Anti-HIV Drugs
Importance
of Reduction in Viremia
In
the
field of HIV treatment, it is well established that keeping the viremia to
a
minimum level has significant clinical benefits. Thus, in one clinical study,
only 8% of HIV infected patients with a viral load of less than 4350 copies
of
viral mRNA/uL progressed to full-blown AIDS in 5 years. By contrast, 62% of
patients with a viral load of greater than 36,270 copies of mRNA/uL had
developed AIDS in the same period (ref 145 from PATH p254). Viremia is
significantly controlled with the current state of the art
highly
active antiretroviral
therapies (HAART) against HIV, to the extent of almost undetectable viral load
(i.e. less than 50-75 copies of HIV RNA per ml) in many patients. However,
this
is a dynamic condition, in which the rate of creation of new virus particles
is
balanced by the rate of their destruction, primarily by the body's innate
defenses. In addition, once an escape mutation occurs, the HAART therapy loses
its effectiveness and viral load rises sharply. Similarly, other precipitative
events such as a secondary infection can cause progress to the AIDS stage.
The
AIDS stage is characterized by rapidly rising HIV viral loads (viremia), and
concomitantly, rapidly declining CD4+ T cells (an important component of human
immune system). Eventually, the patient dies of complications related to the
debilitation of immune response, often by a variety of secondary infections
or
even neoplasms (cancers) that grow unchecked.
In
the
very first stage of HIV infection, i.e. immediately after infection, there
is a
rapid rise in HIV viremia in the first few weeks, called the Acute HIV Syndrome
(or Disease). The body's immune system then brings the viremia under control,
in
a dynamic state, called the “Asymptomatic HIV Disease”. This stage lasts for a
median 10 years, and a precipitative event, such as usually a secondary
infection, leads to AIDS. During the asymptomatic stage, it is known that the
level of the steady state viremia correlates with the future progression of
the
disease and the life span of the patient. In most patients, HAART therapy is
usually initiated only after the CD4+ T cell count falls below 350 per ul.
The
two important reasons for delaying the initiation of HAART therapy are (i)
patient's economic conditions, and (ii) the fear that when escape mutants arise
against HAART there is no recourse, although changes in the drug mix may provide
“temporary” control.
While
HAART therapy, when successful, leads to “undetectable” levels of viremia, the
virus levels may still be at about 50 copies per ml, or about 1.5 million
circulating
virions
in the blood and probably many magnitudes more virions inside cells and other
tissues. This is still a very large load of virus. Thus, control of viremia
is
important even in the asymptomatic stage of “latent” HIV infection, even with
HAART therapy.
We
believe that anti-HIV nanoviricides will be able to control viremia in all
three
stages of the HIV disease; viz. the early acute HIV infection syndrome, the
later clinically latent HIV infection, and the late stage of full-blown AIDS.
Escape
Mutants of HIV against Applied Therapy
The
current anti-HIV drugs (NRTI, NNRTI, PI, and EI) lead to a selective pressure
that causes the generation of resistant mutants that then proliferate in a
patient. It is believed that this may be partially because most of these drugs
act during the virus replication cycle, where new synthesis of the virus genome
is taking place. Escape mutants against the entry inhibitor (EI) EnfuVirenz
(Roche) are also known. These occur by the loss of binding of the Enfuvirenz
peptide with the mutated gp41 proteins of the mutant HIV strains. It is believed
that the poor level of inhibition of HIV replication in the EnfuVirenz
combination therapy setting may be capable of generating escape mutants against
this drug.
We
believe that it is possible to create nanoviricides that will minimize the
chances of escape mutants arising, by the use of “conserved domains” as targets
for attachment, among other strategies. Conserved domains are regions of the
virus proteins that remain unchanged across all known mutants and strains.
EnfuVirenz, in contrast, is directed at partially-conserved domains.
The
Company believes that it will be able to rapidly create new drugs against escape
mutants, should they arise, due to our building block approach.
HIV
Types
HIV-1
is
well studied and is known to have a number of subtypes, called clades. While
the
HIV-1 type is prevalent in North America, Europe, and a majority of the world,
a
distinct HIV type called HIV-2 with a marked prevalence in
West
Africa, has recently been spreading worldwide
.
With
the significant international travel, it is expected that such geographic
restrictions on HIV types and subtypes are decreasing rapidly.
“Depots”
or “Reservoirs” of HIV Infection
At
present we do not believe that the current anti-HIV drugs we are developing
will
have a major impact on the reservoirs of HIV infection, i.e. cells that harbor
the HIV genome integrated into their cellular DNA. None of the existing drugs
or
even drugs in various clinical trials, are expected to have any impact on this
major class of HIV infected cells and tissues, to the best of our knowledge.
Integrase Inhibitors (II, a new class of drugs) interfere with the step of
the
integration of the viral genome into cellular DNA, and may possibly lead to
a
reduction in this pool of “HIV depot” cells. However, their effect is yet to be
established in clinical trials which are in progress.
The
Company's Plan of Attacking HIV/AIDS
The
Company is currently developing two drugs against HIV, called HiviCide-I and
HiviCide-II respectively. These two drugs together are expected to encompass
the
currently known array of HIV types and subtypes in the world. These first
nanoviricides drugs are programmed to engulf the virus particles, and dismantle
them.
The
Company does not expect HiviCide-I and HiviCide-II to cure HIV/AIDS in most
patients. The HIV genome copies itself ("integrates") into the human cellular
DNA. This integration process makes HIV almost immortal. This drug development
objective is that long term treatment with HiviCide-I and/or HiviCide-II may
enable a nearly virus-free lifestyle, with far fewer side effects and simpler
dosing regimens than available with current therapies.
It
is
also possible that since the cells that carry the virus genome with their
genomic material usually die in a normal cycle, known as apoptosis; an eventual
cure in some patients may be possible with our HiviCide drugs.
Background:
Influenza
Seasonal
Influenza.
Seasonal
influenza, commonly known as the flu, is a viral infection characterized by
symptoms including fever, cough, sore throat, fatigue, headache, and/or chills.
According to the U.S. Centers for Disease Control and Prevention (“CDC”), an
estimated 5% to 20% of the American population suffers from influenza annually,
more than 200,000 people are hospitalized from flu complications, and
approximately 36,000 people die from the flu in the US. The worldwide death
toll
is estimated at upwards of 200,000 per year. Influenza is particularly dangerous
to the elderly, young children and people with certain health conditions.
Outbreaks of seasonal flu tend to follow predictable patterns usually occurring
in the winter. New vaccines are developed annually based on known flu strains
and are usually available for the annual flu season. There are also antiviral
treatments available for the treatment of people infected with
influenza.
Avian
Influenza.
According
to information from the CDC, avian influenza, or bird flu is an infection caused
by viruses which occur naturally among birds. This form of flu is very
contagious among birds and can lead to serious illness and sometimes death.
There are two main forms of disease that infect domestic poultry, one a low
pathogenic form and the other a highly pathogenic form. The latter form can
cause disease that affects multiple internal organs and with a mortality rate
between 90-100% in these birds within 2 days.
While
there are many different subtypes of the influenza A virus, only three subtypes
are known to be currently circulating among humans. Avian influenza A viruses
are found chiefly in birds, but there have been confirmed cases of infection
in
humans, generally as a result of contact with infected birds. These infections
have led to symptoms of normal flu to more severe and life threatening
conditions. Influenza A (“H5N1”) is a subtype of an influenza virus that is
highly contagious among birds and can be very deadly to them. Of the avian
influenza viruses that have crossed the species barrier to infect humans, the
H5N1 has caused the largest number of detected cases of severe disease and
death
in humans. In 2006, it is suspected that the Indonesia strain of H5N1 may have
mutated to result in limited spread from one person to another, only in close
contact circumstances. It is possible that the substantially high case fatality
rate may be keeping the human to human spread in check. But as influenza A
viruses constantly change, they could mutate over time to have the ability
to
spread among humans.
Pandemic
Influenza
.
Pandemic
flu is a global disease outbreak that occurs when a new influenza virus emerges
so that people have had no previous exposure. This situation occurs very rarely
and only occurred three times in the 20th century.
Flu
Prevention and Treatment.
The
development of effective therapeutics has challenged medical researchers due
to
the seasonal variation in viral strains and the highly infectious nature of
influenza. Patients, therefore, have limited treatment options. Amantadine
and
rimantadine are used for treatment of influenza A but are ineffective against
influenza B. In addition, these drugs cause some adverse side effects, and
the
virus tends to develop resistance to these drugs. For the 2005-2006 flu season,
the CDC has recommended against the use of amantadine and rimantadine for the
treatment or prophylaxis of influenza in the United States due to signs of
resistance.
Vaccines
are
available against the disease but have limitations: people require advance
vaccination; vaccines are limited by their specificity to particular strains
of
the virus; and vaccines offer little protection if the vaccine is inaccurate.
In
addition, many people decline the required injections because of fear and/or
discomfort, as well as side effects such as allergies. The ability of the virus
to change its structure to avoid the body’s natural defenses is a serious
obstacle to developing an effective vaccine against influenza. Different strains
can arise when surface antigens on the virus (the portion of the virus that
causes an immune reaction in humans) undergo minor genetic mutations each year
as the virus replicates. Because of this mutability, the immunity acquired
in
response to infection by a particular strain of the virus does not provide
adequate protection against viruses that subsequently arise. The production
of a
new vaccine each year is not only complex and expensive, but also an inefficient
method of global disease control. The time lag between threat potential
assignment and vaccine production implies that a novel influenza mutant can
develop in the field and may result in very poor vaccine response.
Inhibiting
Influenza Neuraminidase
.
Research
during the past two decades has seen dramatic advances in understanding the
molecular structure and function of the influenza virus. Considerable attention
has been focused on the enzyme neuraminidase, which is located on the surface
of
the virus. Neuraminidase assists in the release and spread of the flu virus
by
breaking the chemical strands that hold the new viruses to the cell surface,
allowing the replicated virus to spread and infect other cells. This process
progresses until the host’s immune response can produce enough antibodies to
bring the infection under control. Inhibiting the neuraminidase enzyme keeps
new
viruses attached to the cell surface, thereby preventing the spread of the
virus
and the further infection of other cells. The subsequent quantities of virus
in
the bloodstream are not enough to cause disease but are sufficient to induce
the
body to mount an immune response.
Roche,
in
collaboration with Gilead Sciences, and GlaxoSmithKline (“GSK”) have currently
approved neuraminidase inhibitors on the market. Roche’s neuraminidase
inhibitor, oseltamivir aka Tamiflu(tm), is a twice-a-day, orally active
neuraminidase inhibitor, while GSK’s neuraminidase inhibitor, Relenza(tm), is
administered by dry powder inhaler twice a day. Both drugs are approved for
marketing in the United States and other countries for treatment of
influenza. Roche’s neuraminidase inhibitor is also approved for
prophylaxis use for prevention of influenza. In addition to these
companies with neuraminidase inhibitors, there are other companies working
to
develop vaccines and other antiviral drugs to be used against various strains
of
influenza.
Some
studies in laboratories suggest that some of these neuraminidase inhibitor
drugs
should work in treating avian influenza infections in humans, but additional
studies are needed to demonstrate the effectiveness of these drugs. Some studies
have reported that Tamiflu has little if any effectiveness in human cases of
H5N1. Some animal studies have reported that as much 100 times greater doses
of
Tamiflu may be needed to obtain good efficacy in mice infected with H5N1. Some
studies have indicated that oseltamivir has limited safety profile in human,
thus limiting how much the dosage can be increased.
BioCryst
is currently developing a neuraminidase inhibitor, peramivir, as an injectable,
for the treatment of common influenza as well as H5N1. While present
annoluncements from BioCryst indicate that injected peramivir is not
significantly more effective than Tamiflu, it appears that they believe that
the
good safety profile of peramivir may allow them to increase dose levels in
the
future studies to improve response.
Some
molecular biology oriented studies have described that there are significant
differences between the neuraminidase of the H5N1 strain and those of the other
common influenza strains that may be responsible for the poor efficacy of
neuraminidase inhibitors as a class against H5N1.
Congress
has recently approved an appropriation of $3.8 billion for 2006 to support
the
development of various countermeasures for a flu pandemic. The appropriation
includes funding for the development of new antiviral agents. Some of this
funding may be available for our Company's development of anti-influenza drugs.
We believe that we have the most unique and novel drugs, that act by completely
novel mechanisms compared to existing drugs. We therefore believe we are in
a
very good position to be eligible for some of this funding. The Company
currently has limited resources in terms of scientific staff that can be devoted
to pursuing such funding opportunities. In addition, typically there is a delay
of 9 months to 2 years from the time of application from funding to receiving
funding, if any, in the grant mechanisms. The Company believes it will also
be
eligible for funding under the Novel Technologies programs under the US
Department of Defense, and Project BioShield program. The Company must carefully
balance its product development priorities and available funds while pursuing
such external funding opportunities.
Background:
Rabies
At
the
request of the Vietnamese Ministry of Health, we initiated development of an
anti-rabies drug. Rabies is a serious public health problem in Vietnam,
Thailand, India, and many other tropical and subtropical countries.
Because
of the significant expense of rabies anti-toxin, there is limited availability
in the rural areas of these underdeveloped countries (The cost in the U.S.
is
approximately $1000 for a course of treatment).
The
drug
is expected to have limited commercial potential. However, rabies is a very
serious and neglected tropical disease. It is likely that should our drug
development efforts be successful, that we may obtain fast track assignment
for
RabiCide development, possibly as an orphan disease drug.
Our
first
RabiCide drug candidates will be tested at NIHE, Vietnam, in the first quarter
of 2007.
Background:
NanoViricides Company Philosophy
NanoViricides,
Inc. is a for-profit company. We have identified several diseases as large
commercially important drug development targets. These include HIV (estimated
yearly sales worldwide, $20-40 Billion ), Hepatitis C (currently over $4
Billion, but expected to become over $40 Billion with the advent of effective
drugs), Herpes Simplex Virus, and Influenzas, among others.
We
believe that our technology and its superior capabilities can have a significant
impact on Emergency Preparedness efforts worldwide, as well as in what we call
“War-like” response to biological threats. Tamiflu sales were driven above $2
billion in 2005 due to stockpiling demand worldwide. We therefore believe that
there is a significant commercial potential in this marketplace as well. This
marketplace is substantially controlled by government agencies and institutions
worldwide, with corresponding benefits as well as drawbacks.
We
believe that we have developed technologies that may significantly alter the
field of medicine in many ways. It is possible at least in theory to develop
nanoviricide drugs against a large number of pathogens, primarily many viruses.
We believe there is a significant potential for developing good nanoviricides
against hemorrhagic viral diseases such as Ebola, Marburg, Hanta, Lassa, among
others.
We
believe that significant effort and scientific developments will be necessary
in
order to develop nanoviricides against drugs that affect the brain, and the
central nervous system (CNS). This issue, a result of the blood-brain barrier,
which does not allow drugs injected in the bloodstream to go into the CNS fluid
is well known and is a major barrier for all drug development against CNS
diseases. An important example is provided by Japanese Encephalitis viruses.
It
is likely that good nanoviricides can be developed against Dengue fever, West
Nile virus, and other diseases that progress only slowly to attack the CNS,
thus
enabling a time window for the nanoviricides to be substantially effective.
It
is not
possible for a small or even a mid-size pharma company to expeditiously tackle
a
large number of disease targets. We are therefore working towards developing
drugs against neglected and tropical diseases in internationally spread out
collaborations. We believe that this is the only way to make a major public
health impact against such diseases in an expeditious manner. We consider
ourselves fortunate in having developed a tool to enable such an impact.
Products
NanoViricides,
Inc. currently has no products for sale.
Products
In Development
The
following table summarizes NanoViricides active development projects as of
September 30, 2006.
Virus
|
Development
Stage
|
Influenza
(Common)
|
Preclinical
|
Avian
Flu (H5N1)
|
Preclinical
|
Avian
Flu-Highly Pathogenic
|
Preclinical
|
Rabies
|
Preclinical
|
HIV/AIDS
|
Early
R&D
|
HCV
|
R&D
to begin in 2007
|
|
·
|
FluCide-I,
is currently in preclinical studies against all common influenzas
as well
as avian influenza H5N1. It is a broad-spectrum anti-influenza
nanoviricide. It is based on ligands that we have developed through
rational drug design. These ligands are based on a well known mechanism
by
which influenza viruses bind to cells. This mechanism involves the
hemagglutinin coat protein of influenza virus binding to sialic acids
on
cell surfaces. In other words, if FluCide-I is ineffective, one may
be
inclined to suggest that the pathogen was not an influenza virus.
|
|
·
|
AviFluCide-I,
is currently in preclinical studies against H5N1, the avian influenza
strain that is considered the current pandemic threat. It is a highly
specific drug that also has extremely high activity against H5N1
in cell
culture studies, much greater than our other two anti-influenza
nanoviricides. Animal studies against H5N1 are planned in the first
quarter of 2007.
|
|
·
|
FluCide-HP,
is currently in preclinical studies against the entire class of highly
pathogenic avian influenza (HPAI) viruses that pandemic threats emerge
from. It has excellent activity in cell culture studies against H5N1.
Its
activity against common influenza is poorer than that of FluCide-I,
yet
better than Tamiflu, in mouse studies. Common (low pathogenicity)
influenza viruses do not have the characteristic surface features
that
HPAI viruses do. The ligand used for FluCide-HP was designed and
developed
by the Company using a rational drug design approach.
|
|
·
|
RabiCide-I,
a nanoviricide against Rabies is expected to enter animal studies
in the
first quarter of 2007. The candidate ligands for this nanoviricide
were
designed by the Company using publicly available information regarding
the
interaction of the rabies virus with cells.
|
|
·
|
HCV
-
A
Hepatitis
C nanoviricide is planned for research and development beginning
in 2007.
The Company has not yet sourced the materials to target this disease.
The
Company has only begun the early stages of a plan to build nanoviricides
against Hepatitis C
|
Despite
the availability of a number of drugs in at least 3 (now 4) drug classes, the
choices of therapies against HIV are limited. This is because escape mutants
that invariably occur during late stages of HIV/AIDS disease progression are
cross-resistant to many drugs in a drug class, and sometimes to the entire
class
of drugs itself.
In
addition, all known NNRTIs, and the EFI EnfuVirenz are believed to be
ineffective against HIV-2. Against this background, we believe that our HiviCide
drugs that act by
novel,
concerted
mechanisms will be welcome addition to the anti-HIV drug repertoire.
Our
first
two HIV drugs, HiviCide-I and HiviCide-II, together are expected to be capable
of attacking and neutralizing most of the existing HIV strains, clades (or
subtypes), and types. The Company believes that our HiviCide drugs will enable
a
long-term nearly virus-free lifestyle for most HIV/AIDS patients, beyond what
is
feasible today with HAART therapy.
|
·
|
HiviCide-I
,
our
first HIV drug to be developed will be a targeted nanoviricide against
HIV
that enters the bloodstream upon injection and is engineered with
specific
recognition ligands that allow multiple point binding to inactivate
HIV
virus in the bloodstream, enabling a nearly virus-free
lifestyle.
|
|
·
|
HiviCide-II
will be a targeted nanoviricide against HIV strains that are not
attacked
by HiviCide-I, and will have the same mechanism of action as HiviCide-I,
except that it will possess a different ligand that specifies attacking
a
different subset of virus strains, types, and subtypes than HiviCide-I.
|
All
of
the above drugs are being developed as injectables.
Currently,
the anti-HIV drug, Enfuvirenz (tm) (Roche) requires a twice daily injection
routine. Enfuvirenz is also highly toxic because of its mechanism of action.
An
anti-influenza drug, peramivir, is being developed as an injectable.
The
second generation of our anti-influenza drugs is expected to be developed as
an
oral/bronchial spray that carries the drug into the bronchial/pulmonary space
which is the primary site infection by influenza viruses.
It
is
also possible to develop nasal sprays as well as skin patches when it is
beneficial to do so against certain pathogens.
Further
into the future, we anticipate developing controlled release and sustained
release forms of the various nanoviricides in order to improve patient
compliance.
Development
Stage of Products
All
of
above products are in various stages of pre-clinical development. The Company
believes that the anti-influenza drugs will advance into second stage of
preclinical studies, known as Tox Package studies, in 2007. The Company also
believes that the anti-HIV drug, HiviCide-I, will advance into preliminary
animal studies in the very near future. All of our developments are subject
to
availability of appropriate levels of financing.
Plan
of Operations
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 via subcontracts to TheraCour Pharma, Inc. (“TheraCour”), the
exclusive source for these nanomaterials. With sourcing of materials from
TheraCour, the Company prefers to manufacture these drugs in our own facility.
However, the Company may manufacture these drugs under subcontract arrangements
with external manufacturers that carry the appropriate regulatory licenses
and
have appropriate capabilities. The Company will 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.
Manufacturing
Manufacturing
of Research Materials
Nanomaterials
that form the basis of our nanoviricide drugs are produced for research by
TheraCour Pharma, Inc. at their research scale production facility in West
Haven, Connecticut. We have been advised by TheraCour that it is in discussions
with several third party contract manufacturing facilities to enable commercial
scale production of the materials and specific drugs adherent to FDA cGMP
(current good manufacturing practice) guidelines as well as similar
international requirements.
Manufacturing
of Drugs
The
Company is presently looking to acquire, build, or lease manufacturing
facilities that would enable GMP manufacturing of our drugs. Until such time,
the Company believes that its current relationship with TheraCour is sufficient
to meet its current manufacturing requirements.
The
Company intends to manufacture AviFluCide-I, AviFluCide-HP, FluCide-I and
RabiCide-I as well as other drugs for pre-clinical animal studies and human
clinical studies, in facilities owned or leased by the Company. In the event
that we cannot secure funding that allows us to establish the necessary
facilities to manufacture such drugs, we plan to subcontract with third party
facilities that have the appropriate capabilities and regulatory licenses
to
manufacture our drugs and materials on a commercial scale.
We
have
no commercial-scale manufacturing facilities at present. For our future
products, we will need to develop additional manufacturing capabilities and
establish additional third party suppliers to manufacture sufficient quantities
of our product candidates to undertake clinical trials and to manufacture
sufficient quantities of any products that are approved for commercial sale.
If
we are unable to develop manufacturing capabilities internally or contract
for
large scale manufacturing with third parties on acceptable terms for our
future
antiviral products, our ability to conduct large-scale clinical trials and
meet
customer demand for commercial products would be adversely affected.
We
believe that the technology we use to manufacture our products and compounds
is
proprietary. For our products, we may have to disclose all necessary aspects of
this technology to contract manufacturers to enable them to manufacture the
products and compounds for us. We plan to have discussions with manufacturers
under non-disclosure and non-compete agreements that are intended to restrict
them from using or revealing this technology, but we cannot be certain that
these manufacturers will comply with these restrictions. In addition, these
manufacturers could develop their own technology related to the work they
perform for us that we may need to manufacture our products or compounds.
We
could be required to enter into an agreement with that manufacturer if we
wanted
to use that technology ourselves or allow another manufacturer to use that
technology. The manufacturer could refuse to allow us to use their technology
or
could demand terms to use their technology that are not acceptable.
We
believe that we are in compliance with all material environmental regulations
related to the manufacture of our products.
Patents
and Proprietary Rights
The
Company has an exclusive license in perpetuity for technologies developed
(with
materials referenced in Table 1 below) by Theracour for the five virus types:
HIV, Hepatitis C Virus, Herpes, Asian (bird) flu and Influenza. Nanoviricides,
Inc has notified TheraCour Pharma of its interest in acquiring licenses for
others viruses and anticipates no difficulty in doing so.
The
significant terms of the current license include:
|
·
|
Theracour
retains exclusive right to develop and manufacture the drugs against
the
five types of human viruses. As to any licensed product (i.e. drugs
developed pursuant to this agreement), TheraCour agrees that it will
manufacture such drug exclusively for the Company, and unless such
license
is terminated, will not manufacture such product for its own sake
or for
others.
|
|
·
|
Development
Fee. Theracour can charge its costs (direct and indirect) plus no
more
than 30% as a Development Fee.
|
|
·
|
Royalties.
The Company shall pay to Theracour a royalty of 15% on its net sales
of
“Licensed Products.”
|
Patents
and other proprietary rights are very important to our business. If we have
a
properly designed and enforceable patent it can be more difficult for our
competitors to use our technology to create competitive products and more
difficult for our competitors to obtain a patent that prevents us from using
technology we create. As part of our business strategy, we actively seek
patent
protection both in the United States and internationally and intend to file
additional patent applications, when appropriate, to cover improvements in
our
compounds, products and technology. We also rely on trade secrets, internal
know-how, technological innovations and agreements with third parties to
develop, maintain and protect our competitive position. Our ability to be
competitive will depend on the success of this strategy.
The
Company believes that the drugs themselves, AviFlucide, FluCide, FluCide-HP,
RabiCide, HiviCide-I and II, and others, may be eligible for patent protection.
The Company plans on filing patent applications for protecting these drugs
at a
suitable time.
The
Company has licensed key patents, patent applications and rights to proprietary
and patent-pending technologies related to our compounds, products and
technologies (see Table 1), but we cannot be certain that issued patents
will be
enforceable or provide adequate protection or that pending patent applications
will result in issued patents.
|
Table
1: Intellectual Property, Patents and Pending Patents Licensed
by The
Company
|
Patent
or Application
|
Date
of Issue/ Application
|
US
Expiry Date
|
International
|
Owners
|
US6,521,736
(Certain
specific amphiphilic polymers).
|
Issued:
Feb
18, 2003
|
Feb
18, 2020
|
N/A
|
TheraCour
Pharma and Univ. of Massachusetts, Lowell. [Nonexclusive license
from
TheraCour Pharma].
|
PCT/US06/01820
(SOLUBILIZATION
AND TARGETED DELIVERY OF DRUGS WITH SELF-ASSEMBLING AMPHIPHILIC
POLYMERS).
|
Applied:
Jan
19, 2006PCT Application.
|
Jan
18, 2023 (estimated)
|
Applications
to be filed.
|
TheraCour
Pharma, Inc. [Exclusive License].
|
Of
the
patents and technologies licensed, the Company believes that the Company
will
not be using the intellectual property, compositions of matter, or other
aspects
described and secured under the US Patent No. US 6,521,736. This patent,
the Company believes, discloses prototype materials that served to establish
the
proof of principles of Dr. Anil Diwan, the Company’s President and Founder
whether such materials were possible to create and whether such materials
would
indeed be capable of encapsulation of pharmaceutically relevant compounds.
The
Company believes that the new and novel compositions disclosed in the new
patent
application, no. PCT/US06/01820, provide the necessary features that enable
the
development of nanoviricides. The Company believes that no other published
literature materials or existing patents are capable of providing all of
the
necessary features for this development, to the best of our knowledge. However,
the Company has no knowledge of the extensive active internal developments
at a
number of companies in the targeted therapeutics area.
We
may
obtain patents for our compounds many years before we obtain marketing approval
for them. Because patents have a limited life, which may begin to run prior
to
the commercial sale of the related product, the commercial value of the patent
may be limited. However, we may be able to apply for patent term extensions,
based on delays experienced in marketing products due to regulatory
requirements. There is no assurance we would be able to obtain such
extensions.
Patents
relating to pharmaceutical, biopharmaceutical and biotechnology products,
compounds and processes such as those that cover our existing compounds,
products and processes and those that we will likely file in the future,
do not
always provide complete or adequate protection. Future litigation or
reexamination proceedings regarding the enforcement or validity of our licensor,
TheraCour Pharma Inc.’s (TheraCour) existing patents or any future patents,
could invalidate TheraCour’s patents or substantially reduce their protection.
In addition, the pending patent applications and patent applications filed
by
TheraCour, may not result in the issuance of any patents or may result in
patents that do not provide adequate protection. As a result, we may not
be able
to prevent third parties from developing the same compounds and products
that we
have developed or are developing. In addition, certain countries do not permit
enforcement of our patents, and manufacturers are able to sell generic versions
of our products in those countries.
We
also
rely on unpatented trade secrets and improvements, unpatented internal know-how
and technological innovation. In particular, a great deal of our material
manufacturing expertise, which is a key component of our core material
technology, is not covered by patents but is instead protected as a trade
secret. We protect these rights mainly through confidentiality agreements
with
our corporate partners, employees, consultants and vendors. These agreements
provide that all confidential information developed or made known to an
individual during the course of their relationship with us will be kept
confidential and will not be used or disclosed to third parties except in
specified circumstances. In the case of employees, the agreements provide
that
all inventions made by the individual while employed by us will be our exclusive
property. We cannot be certain that these parties will comply with these
confidentiality agreements, that we have adequate remedies for any breach,
or
that our trade secrets will not otherwise become known or be independently
discovered by our competitors.
Competition
Our
products and development programs target a number of diseases and conditions
that include several different kinds of viral infections. (Certain of the
competing drugs and manufacturers have been referred to throughout the sections
of
PART
I, Description Of Business
).
There
are many commercially available products for these diseases and a large number
of companies and institutions are spending considerable amounts of money
and
other resources to develop additional products to treat these diseases. Our
current products compete with other available products based primarily on:
|
·
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insurance
and other reimbursement coverage;
|
|
·
|
adaptability
to various modes of dosing.
|
Any
other
products we market in the future will also compete with products offered
by our
competitors. If our competitors introduce data that show improved
characteristics of their products, improve or increase their marketing efforts
or simply lower the price of their products, sales of our products could
decrease. We also cannot be certain that any products we may develop in the
future will compare favorably to products offered by our competitors or that
our
existing or future products will compare favorably to any new products that
are
developed by our competitors. Our ability to be competitive also depends
upon
our ability to attract and retain qualified personnel, to obtain patent
protection or otherwise develop proprietary products or processes and to
secure
sufficient capital resources for the substantial period that it takes to
develop
a product.
Government
Regulation
Our
operations and activities are subject to extensive regulation by numerous
government authorities in the United States and other countries. In the United
States, drugs are subject to rigorous regulation by the United States Food
and
Drug Administration (“FDA”). The Federal Food, Drug and Cosmetic Act and other
federal and state statutes and regulations govern the testing, manufacture,
safety, effectiveness, labeling, storage, record keeping, approval, advertising
and promotion of our products. As a result of these regulations, product
development and the product approval process is very expensive and time
consuming.
The
FDA
must approve a drug before it can be sold in the United States. The general
process for this approval is as follows:
Preclinical
Testing
Before
we
can test a drug candidate in humans, we must study the drug in laboratory
experiments and in animals to generate data to support the drug’s potential
safety and benefits. We submit this data to the FDA in an investigational
new
drug application (IND) seeking their approval to test the compound in
humans.
Clinical
Trials
If
the
FDA accepts the investigational new drug application, we study the drug in
human
clinical trials to determine if the drug is safe and effective. These clinical
trials involve three separate phases that often overlap, can take many years
to
compile and are very expensive. These three phases, which are themselves
subject
to considerable regulation, are as follows:
s
Phase 1. The drug is given to a small number of healthy human subjects or
patients to test for safety, dose tolerance, pharmacokinetics, metabolism,
distribution and excretion.
s
Phase 2. The drug is given to a limited patient population to determine the
effect of the drug in treating the disease, the best dose of the drug, and
the
possible side effects and safety risks of the drug.
s
Phase 3. If a compound appears to be effective and safe in Phase 2 clinical
trials, Phase 3 clinical trials are commenced to confirm those results. Phase
3
clinical trials are long-term, involve a significantly larger population,
are
conducted at numerous sites in different geographic regions and are carefully
designed to provide reliable and conclusive data regarding the safety and
benefits of a drug. It is not uncommon for a drug that appears promising
in
Phase 2 clinical trials to fail in the more rigorous and reliable Phase 3
clinical trials.
FDA
Approval Process
If
we
believe that the data from the Phase 3 clinical trials show an adequate level
of
safety and effectiveness, we will file a new drug application (NDA) with the
FDA
seeking approval to sell the drug for a particular use. The FDA will review
the
NDA and often will hold a public hearing where an independent advisory committee
of expert advisors asks additional questions regarding the drug. This committee
makes a recommendation to the FDA that is not binding on the FDA but is
generally followed. If the FDA agrees that the compound has met the required
level of safety and effectiveness for a particular use, it will allow us to
sell
the drug in the United States for that use. It is not unusual, however, for
the
FDA to reject an application because it believes that the drug is not safe
enough or effective enough or because it does not believe that the data
submitted is reliable or conclusive.
At
any
point in this process, the development of a drug could be stopped for a number
of reasons including safety concerns and lack of treatment benefit. We cannot
be
certain that any clinical trials that we are currently conducting, or any that
we conduct in the future, will be completed successfully or within any specified
time period. We may choose, or the FDA may require us, to delay or suspend
our
clinical trials at any time if it appears that the patients are being exposed
to
an unacceptable health risk or if the drug candidate does not appear to have
sufficient treatment benefit.
The
FDA
may also require us to complete additional testing, provide additional data
or
information, improve our manufacturing processes, procedures or facilities
or
may require extensive post-marketing testing and surveillance to monitor the
safety or benefits of our product candidates if it determines that our new
drug
application does not contain adequate evidence of the safety and benefits of
the
drug. In addition, even if the FDA approves a drug, it could limit the uses
of
the drug. The FDA can withdraw approvals if it does not believe that we are
complying with regulatory standards or if problems are uncovered or occur after
approval.
In
addition to obtaining FDA approval for each drug, we obtain FDA approval of
the
manufacturing facilities for any drug we sell, including those of companies
who
manufacture our drugs for us as well as our own and these facilities are subject
to periodic inspections by the FDA. The FDA must also approve foreign
establishments that manufacture products to be sold in the United States and
these facilities are subject to periodic regulatory inspection.
We
believe that HiviCide-I may be eligible for fast track designation, and we
plan
to pursue this possibility. Fast Track products designation may be given to
drugs that treat serious or life-threatening diseases and conditions that are
not adequately addressed by existing drugs by the FDA and such drugs may be
eligible for accelerated six-month review and accelerated approval. Drugs
receiving such accelerated approval must be monitored in post-marketing clinical
trials in order to confirm the safety and benefits of the drug.
We
are
also subject to other federal, state and local regulations regarding workplace
safety and protection of the environment. We use hazardous materials, chemicals,
viruses and various radioactive compounds in our research and development
activities and cannot eliminate the risk of accidental contamination or injury
from these materials. Any misuse or accidents involving these materials could
lead to significant litigation, fines and penalties.
Drugs
are
also subject to extensive regulation outside of the United States. In the
European Union, there is a centralized approval procedure that authorizes
marketing of a product in all countries in the European Union (which includes
most major countries in Europe). If this procedure is not used, under a
decentralized system, an approval in one country of the European Union can
be
used to obtain approval in another country of the European Union under a
simplified application process at present. After approval under the centralized
procedure, pricing and reimbursement approvals are also required in most
countries. These procedures are undergoing revision and modification at present.
We have never received approval for a product in the European Union to
date.
Pricing
and Reimbursement
Insurance
companies, health maintenance organizations (HMOs), other third-party payers
and
federal and state governments seek to limit the amount we can charge for
our
drugs. For example, in certain foreign markets, pricing negotiations are
often
required to obtain approval of a product, and in the United States there
have
been, and we expect that there will continue to be, a number of federal and
state proposals to implement drug price control. In addition, managed care
organizations are becoming more common in the United States and will continue
to
seek lower drug prices. The announcement of these proposals or efforts can
cause
our stock price to decrease, and if these proposals are adopted, our revenues
could decrease.
Our
ability to sell our drugs also depends on the availability of reimbursement
from
governments and private insurance companies. Governments and insurance companies
often demand rebates or predetermined discounts from list prices. We expect
that
products we are developing, particularly for HIV/AIDS indications, will be
subject to reimbursement issues. We cannot be certain that any of our products
that obtain regulatory approval will be reimbursed by governments or insurance
companies.
Regulatory
approval of prices is required in most foreign countries. Certain countries
will
condition their approval of a product on the agreement of the seller not
to sell
that product for more than a certain price in that country and in the past
have
required price reductions after or in connection with product approval. Certain
foreign countries also require that the price of an approved product be reduced
after that product has been marketed for a period of time. We cannot be certain
that regulatory authorities in the future will not establish lower prices
or
that any regulatory action reducing the price of our products in any one
country
will not have the practical effect of requiring us to reduce our prices in
other
countries. Some European governments, notably Germany and Italy, have
implemented, or are considering, legislation that would require pharmaceutical
companies to sell their products subject to reimbursement at a mandatory
discount. Such mandatory discounts would reduce the revenue we receive from
our
drug sales. In certain developing countries that are significantly affected
by
HIV and AIDS, parallel importing and generic competition, whether legal or
not,
may occur and adversely affect revenues from sales of or market share of
HiviCide drugs.
Employees
As
of
September 30, 2006, the Company had five full time employees. The Company
has
subcontracted research and development (“R&D”) to TheraCour . We believe
that we have good relations with our employees and subcontractors.
Reports
to Security Holders
As
a
result of its filing of this Form 10-SB, the Company expects to become
subject to the reporting obligations of the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”). These obligations include filing an annual report
under cover of Form 10-KSB, with audited financial statements, unaudited
quarterly reports on Form 10-QSB and the requisite proxy statements with
regard to annual shareholder meetings. The public may read and copy any
materials the Company files with the Securities and Exchange Commission (the
“Commission”) at the Commission’s Public Reference Room at 100 F Street,
NE, Washington, DC 20549. The public may obtain information on the operation
of
the Public Reference Room by calling the Commission at 1-800-SEC-0030. The
Commission maintains an Internet site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission. Information about the
Company is also available on its Web site at www.nanoviricides.com. Information
included on the Web site is not part of this Form 10-SB.
Website
Our
website address is
www.nanoviricides.com
.
We
intend
to make available, free of charge, through our website, all of our filings
with
the Commission and all amendments to these reports as soon as reasonably
practicable after filing, by providing a hyperlink to the EDGAR website
containing our reports.
Our
Information
Our
principal executive offices are located at 135 Wood St. West Haven, Connecticut
06516 and our telephone number is (203) 937-6137.
RISK
FACTORS
Risk
Factors
This
Registration Statement contains forward-looking statements that involve risks
and uncertainties. These statements can be identified by the use of
forward-looking terminology such as “believes,” “expects,” “intends,” “plans,”
“may,” “will,” “should,” or “anticipation” or the negative thereof or other
variations thereon or comparable terminology. Actual results could differ
materially from those discussed in the forward-looking statements as a result
of
certain factors, including those set forth below and elsewhere in this
Registration Statement. The following risk factors should be considered
carefully in addition to the other information in this Registration Statement,
before purchasing any of the Company’s securities.
Risks
Specific to Us
We
Are A Development Stage Company With A Limited Operating History, Making It
Difficult For You To Evaluate Our Business And Your
Investment.
We
are in
the development stage and our operations and the development of our proposed
products are subject to all of the risks inherent in the establishment of a
new
business enterprise, including but not limited to:
|
·
|
the
absence of an operating history;
|
|
·
|
the
lack of commercialized products;
|
|
·
|
expected
substantial and continual losses for the foreseeable
future;
|
|
·
|
limited
experience in dealing with regulatory
issues;
|
|
·
|
the
lack of manufacturing experience and limited marketing
experience;
|
|
·
|
an
expected reliance on third parties for the development and
commercialization of our proposed
products;
|
|
·
|
a
competitive environment characterized by numerous, well-established
and
well capitalized competitors; and
|
|
·
|
reliance
on key personnel.
|
Because
we are subject to these risks, you may have a difficult time evaluating our
business and your investment in our company.
|
·
|
Our
ability to become profitable depends primarily on the following
factors:
|
|
·
|
our
ability to obtain approval for, and if approved, to successfully
commercialize our nanoviricide
drug;
|
|
·
|
our
ability to bring to market other proprietary drugs that are progressing
through our development process;
|
|
·
|
our
R&D efforts, including the timing and cost of clinical trials; and
|
|
·
|
our
ability to enter into favorable alliances with third-parties who
can
provide substantial capabilities in clinical development, regulatory
affairs, sales, marketing and
distribution.
|
Even
if we successfully develop and market our drug candidates, we may not generate
sufficient or sustainable revenue to achieve or sustain
profitability.
We
Will Need To Raise Substantial Additional Capital In The Future To Fund Our
Operations And We May Be Unable To Raise Such Funds When Needed And On
Acceptable Terms.
We
currently do not have sufficient resources to complete the development and
commercialization of any of our proposed products. Therefore, we may need to
raise substantial additional capital to fund our operations sometime in the
future. We cannot be certain that any financing will be available when needed.
If we fail to raise additional financing as we need it, we may have to delay
or
terminate our own product development programs or pass on opportunities to
in-license or otherwise acquire new products or technologies that we believe
may
be beneficial to our business.
We
expect
to continue to spend capital on:
|
·
|
research
and development programs;
|
|
·
|
preclinical
studies and clinical trials; regulatory
processes;
|
|
·
|
establishment
of our own commercial scale manufacturing and marketing capabilities
or a
search for third party manufacturers and marketing partners to manufacture
and market our products for us.
|
The
amount of capital we may need will depend on many factors, including
the:
|
·
|
progress,
timing and scope of our research and development
programs;
|
|
·
|
progress,
timing and scope of our preclinical studies and clinical
trials;
|
|
·
|
time
and cost necessary to obtain regulatory
approvals;
|
|
Ÿ
|
time
and cost necessary to build our own manufacturing facilities and
obtain
the necessary
regulatory
approvals for those facilities or to seek third party manufacturers
to
manufacture our
products
for us;
|
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·
|
time
and cost necessary to establish our own sales and marketing capabilities
or to
|
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|
seek
marketing partners to market our products for
us;
|
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·
|
time
and cost necessary to respond to technological and market
developments;
|
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·
|
changes
made or new developments in our existing collaborative, licensing
and
|
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·
|
other
commercial relationships; and
|
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·
|
new
collaborative, licensing and other commercial relationships that
we may
establish.
|
Our
fixed
expenses, such as rent, license payments and other contractual commitments,
may
increase in the future, as we may:
|
·
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enter
into leases for new facilities and capital
equipment;
|
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·
|
enter
into additional licenses and collaborative agreements;
and
|
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·
|
incur
additional expenses associated with being a public
company.
|
Development
of pharmaceutical products is a time-consuming process, subject to a number
of
factors, many of which are outside of our control. Consequently, we can provide
no assurance of the successful and timely development of new
drugs.
Our
drug candidates are in their developmental stage. Further development and
extensive testing will be required to determine their technical feasibility
and
commercial viability. Our success will depend on our ability to achieve
scientific and technological advances and to translate such advances into
reliable, commercially competitive drugs on a timely basis. Drugs that we may
develop are not likely to be commercially available for a few years. The
proposed development schedules for our drug candidates may be affected by a
variety of factors, including technological difficulties, proprietary technology
of others, and changes in government regulation, many of which will not be
within our control. Any delay in the development, introduction or marketing
of
our drug candidates could result either in such drugs being marketed at a time
when their cost and performance characteristics would not be competitive in
the
marketplace or in the shortening of their commercial lives. In light of the
long-term nature of our projects, the unproven technology involved and the
other
factors described elsewhere in “Risk Factors”, we may not be able to complete
successfully the development or marketing of any drugs.
We
may fail to successfully develop and commercialize our drug candidates because
they:
|
·
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are
found to be unsafe or ineffective in clinical trials;
|
|
·
|
do
not receive necessary approval from the FDA or foreign regulatory
agencies;
|
|
·
|
fail
to conform to a changing standard of care for the diseases they seek
to
treat; or
|
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·
|
are
less effective or more expensive than current or alternative treatment
methods.
|
Drug
development failure can occur at any stage of clinical trials and as a result
of
many factors and there can be no assurance that we or our collaborators will
reach our anticipated clinical targets. Even if we or our collaborators complete
our clinical trials, we do not know what the long-term effects of exposure
to
our drug candidates will be. Furthermore, our drug candidates may be used in
combination with other treatments and there can be no assurance that such use
will not lead to unique safety issues. Failure to complete clinical trials
or to
prove that our drug candidates are safe and effective would have a
material
adverse
effect on our ability to generate revenue and could require us to reduce the
scope of or discontinue our operations.
We
must comply with significant and complex government regulations, compliance
with
which may delay or prevent the commercialization of our drug
candidates.
The
R&D, manufacture and marketing of drug candidates are subject to regulation,
primarily by the FDA in the United States and by comparable authorities in
other
countries. These national agencies and other federal, state, local and foreign
entities regulate, among other things, R&D activities (including testing in
primates and in humans) and the testing, manufacturing, handling, labeling,
storage, record keeping, approval, advertising and promotion of the products
that we are developing. Noncompliance with applicable requirements can result
in
various adverse consequences, including approval delays or refusals to approve
drug licenses or other applications, suspension or termination of clinical
investigations, revocation of approvals previously granted, fines, criminal
prosecution, recalls or seizures of products, injunctions against shipping
drugs
and total or partial suspension of production and/or refusal to allow a company
to enter into governmental supply contracts.
The
process of obtaining FDA approval has historically been costly and time
consuming. Current FDA requirements for a new human drug or biological product
to be marketed in the United States include: (1) the successful conclusion
of
pre-clinical laboratory and animal tests, if appropriate, to gain preliminary
information on the product’s safety; (2) filing with the FDA of an IND
application to conduct human clinical trials for drugs or biologics; (3) the
successful completion of adequate and well-controlled human clinical
investigations to establish the safety and efficacy of the product for its
recommended use; and (4) filing by a company and acceptance and approval by
the
FDA of a New Drug Application, or NDA, for a drug product or a biological
license application, or BLA, for a biological product to allow commercial
distribution of the drug or biologic. A delay in one or more of the procedural
steps outlined above could be harmful to us in terms of getting our drug
candidates through clinical testing and to market.
The
FDA
reviews the results of the clinical trials and may order the temporary or
permanent discontinuation of clinical trials at any time if it believes the
drug
candidate exposes clinical subjects to an unacceptable health risk.
Investigational drugs used in clinical studies must be produced in compliance
with current good manufacturing practice, or GMP, rules pursuant to FDA
regulations.
Sales
outside the United States of products that we develop will also be subject
to
regulatory requirements governing human clinical trials and marketing for drugs
and biological products and devices. The requirements vary widely from country
to country, but typically the registration and approval process takes several
years and requires significant resources. In most cases, even if the FDA has
not
approved a product for sale in the United States, the product may be exported
to
any country if it complies with the laws of that country and has valid marketing
authorization by the appropriate authority. There are specific FDA regulations
that govern this process.
We
also are subject to the following risks and obligations, related to the approval
of our products:
|
·
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The
FDA or foreign regulators may interpret data from pre-clinical testing
and
clinical trials in different ways than we interpret
them.
|
|
·
|
If
regulatory approval of a product is granted, the approval may be
limited
to specific indications or limited with respect to its distribution.
In
addition, many foreign countries control pricing and coverage under
their
respective national social security
systems.
|
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·
|
The
FDA or foreign regulators may not approve our manufacturing processes
or
manufacturing facilities.
|
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·
|
The
FDA or foreign regulators may change their approval policies or adopt
new
regulations.
|
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·
|
Even
if regulatory approval for any product is obtained, the marketing
license
will be subject to continual review, and newly discovered or developed
safety or effectiveness data may result in suspension or revocation
of the
marketing license.
|
|
·
|
If
regulatory approval of the product candidate is granted, the marketing
of
that product would be subject to adverse event reporting requirements
and
a general prohibition against promoting products for unapproved or
“off-label” uses.
|
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·
|
In
some foreign countries, we may be subject to official release requirements
that require each batch of the product we produce to be officially
released by regulatory authorities prior to its distribution by us.
|
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·
|
We
will be subject to continual regulatory review and periodic inspection
and
approval of manufacturing modifications, including compliance with
current
GMP regulations.
|
We
can provide no assurance that our drug candidates will obtain regulatory
approval or that the results of clinical studies will be
favorable.
The
testing, marketing and manufacturing of any product for use in the United States
will require approval from the FDA. We cannot predict with any certainty the
amount of time necessary to obtain such FDA approval and whether any such
approval will ultimately be granted Preclinical and clinical trials may reveal
that one or more products are ineffective or unsafe, in which event further
development of such products could be seriously delayed or terminated. Moreover,
obtaining approval for certain products may require testing on human subjects
of
substances whose effects on humans are not fully understood or documented.
Delays in obtaining FDA or any other necessary regulatory approvals of any
proposed drug and failure to receive such approvals would have an adverse effect
on the drug’s potential commercial success and on our business, prospects,
financial condition and results of operations. In addition, it is possible
that
a proposed drug may be found to be ineffective or unsafe due to conditions
or
facts that arise after development has been completed and regulatory approvals
have been obtained. In this event, we may be required to withdraw such proposed
drug from the market. To the extent that our success will depend on any
regulatory approvals from government authorities outside of the United States
that perform roles similar to that of the FDA, uncertainties similar to those
stated above will also exist.
Even
if we obtain regulatory approvals, our marketed drug candidates will be subject
to ongoing regulatory review. If we fail to comply with continuing U.S. and
foreign regulations, we could lose our approvals to market these drugs and
our
business would be seriously harmed.
Following
any initial regulatory approval of any drugs we may develop, we will also be
subject to continuing regulatory review, including the review of adverse
experiences and clinical results that are reported after our drug candidates
are
made commercially available. This would include results from any post-marketing
tests or vigilance required as a condition of approval. The manufacturer and
manufacturing facilities we use to make any of our drug candidates will also
be
subject to periodic review and inspection by the FDA. The discovery of any
previously unknown problems with the drug, manufacturer or facility may result
in restrictions on the drug or manufacturer or facility, including withdrawal
of
the drug from the market. If we are required to withdraw all or more of our
drugs from the market, we may be unable to continue revenue generating
operations. We do not have, and currently do not intend to develop, the ability
to manufacture material for our clinical trials or on a commercial scale.
Reliance on third-party manufacturers entails risks to which we would not be
subject if we manufactured drugs ourselves, including reliance on the
third-party manufacturer for regulatory compliance. Our drug promotion and
advertising is also subject to regulatory requirements and continuing FDA
review.
Development
of our drug candidates requires a significant investment in R&D. Our R&D
expenses in turn, are subject to variation based on a number of factors, many
of
which are outside of our control. A sudden or significant increase in our
R&D expenses could materially and adversely impact our results of
operations.
Because
we expect to expend substantial resources on R&D, our success depends in
large part on the results as well as the costs of our R&D. A failure in our
R&D efforts or substantial increase in our R&D expenses would adversely
affect our results of operations. R&D expenditures are uncertain and subject
to much fluctuation. Factors affecting our R&D expenses include, but are not
limited to:
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the
number and outcome of clinical studies we are planning to conduct;
for
example, our R&D expenses may increase based on the number of
late-stage clinical studies that we may be required to
conduct;
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the
number of drugs entering into development from late-stage research;
for
example, there is no guarantee that internal research efforts will
succeed
in generating sufficient data for us to make a positive development
decision or that an external candidate will be available on terms
acceptable to us, and some promising candidates may not yield sufficiently
positive pre-clinical results to meet our stringent development
criteria;
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licensing
activities, including the timing and amount of related development
funding
or milestone payments; for example, we may enter into agreements
requiring
us to pay a significant up-front fee for the purchase of in-process
R&D that we may record as R&D expense;
or
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future
levels of revenue; R&D as a percentage of future potential revenues
can fluctuate with the changes in future levels of revenue and lower
revenues can lead to less spending on R&D
efforts.
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We
are subject to numerous risks inherent in conducting clinical trials any of
which could delay or prevent us from developing or commercializing our drug
candidates
Before
obtaining required regulatory approvals for the commercial sale of any of our
drug candidates, we must demonstrate through pre-clinical testing and clinical
trials that our drug candidates are safe and effective for use in humans. We
must outsource our clinical trials. We have no experience in conducting clinical
trials nor can we be certain that we will successfully finalize agreements
for
clinical trials.
Agreements
with clinical investigators and medical institutions for clinical testing and
with other third parties for data management services place substantial
responsibilities on these parties, which could result in delays in, or
termination of, our clinical trials if these parties fail to perform as
expected. For example, if any of our clinical trial sites fail to comply with
FDA-approved good clinical practices, we may be unable to use the data gathered
at those sites. If these clinical investigators, medical institutions or other
third parties do not carry out their contractual duties or obligations or fail
to meet expected deadlines, or if the quality or accuracy of the clinical data
they obtain is compromised due to their failure to adhere to our clinical
protocols or for other reasons, our clinical trials may be extended, delayed
or
terminated, and we may be unable to obtain regulatory approval for or
successfully commercialize our drug candidates.
We
or regulators may suspend or terminate our clinical trials for a number of
reasons. We may voluntarily suspend or terminate our clinical trials if at
any
time we believe that they present an unacceptable risk to the patients enrolled
in our clinical trials. In addition, regulatory agencies may order the temporary
or permanent discontinuation of our clinical trials at any time if they believe
that the clinical trials are not being conducted in accordance with applicable
regulatory requirements or that they present an unacceptable safety risk to
the
patients enrolled in our clinical trials.
Our
clinical trial operations will be subject to regulatory inspections at any
time.
If regulatory inspectors conclude that we or our clinical trial sites are not
in
compliance with applicable regulatory requirements for conducting clinical
trials, we may receive reports of observations or warning letters detailing
deficiencies, and we will be required to implement corrective actions. If
regulatory agencies deem our responses to be inadequate, or are dissatisfied
with the corrective actions that we or our clinical trial sites have
implemented, our clinical trials may be temporarily or permanently discontinued,
we may be fined, we or our investigators may be precluded from conducting any
ongoing or any future clinical trials, the government may refuse to approve
our
marketing applications or allow us to manufacture or market our drug candidates
or we may be criminally prosecuted. If we are unable to complete clinical trials
and have our products approved due to our failure to comply with regulatory
requirements, we will be unable to commence revenue generating
operations.
Efforts
of government and third-party payors to contain or reduce the costs of health
care may adversely affect our revenues.
Our
ability to earn sufficient returns on our drug candidates may depend in part
on
the extent to which government health administration authorities, private health
coverage insurers and other organizations will provide reimbursement for the
costs of such drugs and related treatments. Significant uncertainty exists
as to
the reimbursement status of newly approved health care drugs, and we do not
know
whether adequate third-party coverage will be available for our drug candidates.
If our current and proposed drugs are not considered cost-effective,
reimbursement to the consumers may not be available or sufficient to allow
us to
sell drugs on a competitive basis. The failure of the government and third-party
payors to provide adequate coverage and reimbursement rates for our drug
candidates could adversely affect the market acceptance of our drug candidates,
our competitive position and our financial performance.
If
we fail to comply with applicable continuing regulatory requirements, we may
be
subject to fines, suspension or withdrawal of regulatory approval, product
recalls and seizures, operating restrictions and criminal prosecutions.
Confidentiality
agreements with employees and others may not adequately prevent disclosure
of
trade secrets and other proprietary information. Disclosure of our trade secrets
or proprietary information could compromise any competitive advantage that
we
have.
We
depend upon confidentiality agreements with our officers, employees,
consultants, and subcontractors to maintain the proprietary nature of the
technology. These measures may not afford us sufficient or complete protection,
and may not afford an adequate remedy in the event of an unauthorized disclosure
of confidential information. In addition, others may independently develop
technology similar to ours, otherwise avoiding the confidentiality agreements,
or produce patents that would materially and adversely affect our business,
prospects, financial condition, and results of operations.
We
will rely upon licensed patents to protect our technology. We may be unable
to
obtain or protect such intellectual property rights, and we may be liable for
infringing upon the intellectual property rights of
others.
Our
ability to compete effectively will depend on our ability to maintain the
proprietary nature of our technologies and the proprietary technology of others
with which we have entered into licensing agreements. We have exclusively
licensed patent applications from TheraCour Pharma, Inc and expect to file
patents of our own in the coming years. There can be no assurance that any
of
these patent applications will ultimately result in the issuance of a patent
with respect to the technology owned by us or licensed to us. The patent
position of pharmaceutical or biotechnology companies, including ours, is
generally uncertain and involves complex legal and factual considerations.
The
standards that the United States Patent and Trademark Office use to grant
patents are not always applied predictably or uniformly and can change. There
is
also no uniform, worldwide policy regarding the subject matter and scope of
claims granted or allowable in pharmaceutical or biotechnology patents.
Accordingly, we do not know the degree of future protection for our proprietary
rights or the breadth of claims that will be allowed in any patents issued
to us
or to others. Further, we rely on a combination of trade secrets, know-how,
technology and nondisclosure, and other contractual agreements and technical
measures to protect our rights in the technology. If any trade secret, know-how
or other technology not protected by a patent were to be disclosed to or
independently developed by a competitor, our business and financial condition
could be materially adversely affected.
We
do not believe that any of the drug candidates we are currently developing
infringe upon the rights of any third parties nor are they infringed upon by
third parties; however, there can be no assurance that our technology will
not
be found in the future to infringe upon the rights of others or be infringed
upon by others. In such a case, others may assert infringement claims against
us, and should we be found to infringe upon their patents, or otherwise
impermissibly utilize their intellectual property, we might be forced to pay
damages, potentially including treble damages, if we are found to have willfully
infringed on such parties’ patent rights. In addition to any damages we might
have to pay, we may be required to obtain licenses from the holders of this
intellectual property, enter into royalty agreements, or redesign our drug
candidates so as not to utilize this intellectual property, each of which may
prove to be uneconomical or otherwise impossible. Conversely, we may not always
be able to successfully pursue our claims against others that infringe upon
our
technology and the technology exclusively licensed from the TheraCour Pharma
Inc. Thus, the proprietary nature of our technology or technology licensed
by us
may not provide adequate protection against competitors.
Moreover,
the cost to us of any litigation or other proceeding relating to our patents
and
other intellectual property rights, even if resolved in our favor, could be
substantial, and the litigation would divert our management’s efforts.
Uncertainties resulting from the initiation and continuation of any litigation
could limit our ability to continue our operations.
Other
companies or organizations may assert patent rights that prevent us from
developing and commercializing our drug
candidates.
We
are in a relatively new scientific field that has generated many different
patent applications from organizations and individuals seeking to obtain
important patents in the field. Because the field is so new, very few of these
patent applications have been fully processed by government patent offices
around the world, and there is a great deal of uncertainty about which patents
will issue, when, to whom, and with what claims. It is likely that there will
be
significant litigation and other proceedings, such as interference proceedings
in various patent offices, relating to patent rights in the field. Others may
attempt to invalidate our patents or other intellectual property rights. Even
if
our rights are not directly challenged, disputes among third parties could
lead
to the weakening or invalidation of those intellectual property
rights.
Thus,
it
is possible that one or more organizations will hold patent rights to which
we
will need a license. Any license required under any patent may not be made
available on commercially acceptable terms, if at all. In addition, such
licenses are likely to be non-exclusive and, therefore, our competitors may
have
access to the same technology licensed to us. If we fail to obtain a required
license and are unable to design around a patent, we may be unable to
effectively market some of our technology and drug candidates, which could
limit
our ability to generate revenues or achieve profitability and possibly prevent
us from generating revenue sufficient to sustain our operations.
W
e
are dependent upon our license agreement with TheraCour Pharma Inc. If we lose
the right to utilize any of the proprietary information that is the subject
of
the TheraCour Pharma license agreement or any other third-party proprietary
technology on which we depend, we may incur substantial delays and costs in
development of our drug candidates.
The
manufacture and sale of any products developed by us may involve the use of
processes, products or information, the rights to certain of which are owned
by
others. Although we may obtain licenses with regard to the use of such
processes, products and information of others, we cannot assure you that such
licenses will not be terminated or expire during critical periods, that we
will
be able to obtain licenses for other rights that may be important to us, or,
if
obtained, that such licenses will be obtained on commercially reasonable terms.
While we have no reason to believe that our licenses will be terminated and
our
material licenses have no definitive expiration date, such licenses may be
terminated if we breach certain material provisions and fail to cure the breach
in a certain period of time. If we are unable to maintain and/or obtain
third-party licenses, we may have to develop alternatives to avoid infringing
upon the patents of others, potentially causing increased costs and delays
in
drug development and introduction or preclude the development, manufacture,
or
sale of planned products. Additionally, we can provide no assurance that the
patents underlying any licenses will be valid and enforceable. To the extent
any
drugs developed by us are based on licensed technology, royalty payments on
the
licenses will reduce our gross profit from drug sales and may render the sales
of such drugs uneconomical.
We
do not have any facilities appropriate for pre-clinical or clinical testing,
we
lack manufacturing experience and we have no sales and marketing personnel.
We
will, therefore, be dependent upon others for our clinical testing,
manufacturing, sales and marketing.
Our
current facilities do not include accommodation for the testing of our proposed
products in animals to determine their harmful effects and uses and
physiological effects or in humans for the clinical testing required by the
FDA.
We do not have a manufacturing facility that can be used for full-scale
production of our products. In addition, at this time, we do not have any sales
and marketing personnel. In the course of our development program, we will
therefore be required to enter into arrangements with other companies or
universities for our animal testing, human clinical testing, manufacturing,
and
sales and marketing activities. If we are unable to retain third parties for
these purposes on acceptable terms, we may be unable to successfully develop,
manufacture and market our proposed products. In addition, any failures by
third
parties to adequately perform their responsibilities may delay the submission
of
our proposed products for regulatory approval, impair our ability to deliver
our
products on a timely basis or otherwise impair our competitive position. Our
dependence on third parties for the development, manufacture, sale and marketing
of our products may also adversely affect our profit margins.
We
will not be able to sell our products if we or our third party manufacturers
fail to comply with manufacturing regulations.
Before
we
can begin selling our products, we must obtain regulatory approval of our
manufacturing facility and process or the manufacturing facility and process
of
the third party or parties with whom we may outsource our manufacturing
activities. In addition, the manufacture of our products must comply with the
FDA's current Good Manufacturing Practices regulations, commonly known as GMP
regulations. The GMP regulations govern quality control and documentation
policies and procedures. Our manufacturing facilities, if any in the future,
and
the manufacturing facilities of our third party manufacturers will be
continually subject to inspection by the FDA and other state, local and foreign
regulatory authorities, before and after product approval. We cannot guarantee
that we, or any potential third party manufacturer of our products, will be
able
to comply with the GMP regulations or other applicable manufacturing
regulations.
We
license our core technology from a third party and we are dependent upon them
as
they have exclusive development rights
The
Company has entered into a License and Development agreement with TheraCour
Pharma, Inc. (“TheraCour”) (a 35% shareholder of the Company’s Common Stock)
whereby TheraCour has exclusive rights to develop exclusively for us, the
nanoviricide materials the core drugs of our planned business. TheraCour is
a
development stage company with limited financial resources and needs the
Company’s progress payments to further the development of the
nanoviricides
.
See
Also
Item 7. Certain Relationships and Related Transactions.
We
depend
on TheraCour and other third parties to perform manufacturing activities
effectively and on a timely basis. If these third parties fail to perform as
required, this could impair our ability to deliver our products on a timely
basis or cause delays in our clinical trials and applications for regulatory
approval, and these events could harm our competitive position. The
manufacturing process for pharmaceutical products is highly regulated, and
regulators may shut down manufacturing facilities that they believe do not
comply with regulations. We and our manufacturers are subject to the FDA’s
current Good Manufacturing Practices, which are extensive regulations governing
manufacturing processes, stability testing, record-keeping and quality standards
and similar regulations are in effect in other countries. In addition, our
manufacturing operations are subject to routine inspections by regulatory
agencies.
Our
collaborative relationships with third parties could cause us to expend
significant resources and incur substantial business risk with no assurance
of
financial return.
We
anticipate substantial reliance upon strategic collaborations for marketing
and
the commercialization of our drug candidates and we may rely even more on
strategic collaborations for R&D of our other drug candidates. Our business
depends on our ability to sell drugs to both government agencies and to the
general pharmaceutical market. Offering our drug candidates for non-medical
applications to government agencies does not require us to develop new sales,
marketing or distribution capabilities beyond those already existing in the
company. Selling antiviral drugs, however, does require such development. We
plan to sell antiviral drugs through strategic partnerships with pharmaceutical
companies. If we are unable to establish or manage such strategic collaborations
on terms favorable to us in the future, our revenue and drug development may
be
limited. To date, we have not entered into any strategic collaborations with
third parties capable of providing these services. In addition, we have not
yet
marketed or sold any of our drug candidates or entered into successful
collaborations for these services in order to ultimately commercialize our
drug
candidates.
If
we determine to enter into R&D collaborations during the early phases of
drug development, our success will in part depend on the performance of our
research collaborators. We will not directly control the amount or timing of
resources devoted by our research collaborators to activities related to our
drug candidates. Our research collaborators may not commit sufficient resources
to our programs. If any research collaborator fails to commit sufficient
resources, our preclinical or clinical development programs related to this
collaboration could be delayed or terminated. Also, our collaborators may pursue
existing or other development-stage products or alternative technologies in
preference to those being developed in collaboration with us. Finally, if we
fail to make required milestone or royalty payments to our collaborators or
to
observe other obligations in our agreements with them, our collaborators may
have the right to terminate those agreements.
Manufacturers
producing our drug candidates must follow current GMP regulations enforced
by
the FDA and foreign equivalents. If a manufacturer of our drug candidates does
not conform to the current GMP regulations and cannot be brought up to such
a
standard, we will be required to find alternative manufacturers that do conform.
This may be a long and difficult process, and may delay our ability to receive
FDA or foreign regulatory approval of our drug candidates and cause us to fall
behind on our business objectives.
Establishing
strategic collaborations is difficult and time-consuming. Our discussion with
potential collaborators may not lead to the establishment of collaborations
on
favorable terms, if at all. Potential collaborators may reject collaborations
based upon their assessment of our financial, regulatory or intellectual
property position. Even if we successfully establish new collaborations, these
relationships may never result in the successful development or
commercialization of our drug candidates or the generation of sales revenue.
To
the extent that we enter into collaborative arrangements, our drug revenues
are
likely to be lower than if we directly marketed and sold any drugs that we
may
develop.
Management
of our relationships with our collaborators will require:
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significant
time and effort from our management team;
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coordination
of our marketing and R&D programs with the marketing and R&D
priorities of our collaborators;
and
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effective
allocation of our resources to multiple projects.
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As
a consequence of our business, we are inherently at risk for product liability
claims against us. If our insurance coverage for those claims is inadequate,
we
may incur substantial liabilities.
We
face an inherent risk of product liability exposure related to the testing
of
our drug candidates in human clinical trials and will face an even greater
risk
if the drug candidates are sold commercially or otherwise distributed. An
individual may bring a liability claim against us if one of the drug candidates
causes, or merely appears to have caused, an injury. We do not believe the
absence of certain typical regulatory requirements such as Phase II or Phase
III
testing will limit or diminish our potential liability exposure. If we cannot
successfully defend ourselves against the product liability claim, we will
incur
substantial liabilities. Regardless of merit or eventual outcome, liability
claims may result in:
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decreased
demand for our drug candidates;
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injury
to our reputation;
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withdrawal
of clinical trial participants;
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costs
of related litigation;
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diversion
of our management’s time and attention;
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substantial
monetary awards to patients or other claimants;
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the
inability to commercialize drug candidates; and
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increased
difficulty in raising required additional funds in the private and
public
capital markets.
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We
currently do not have product liability insurance. We intend to obtain insurance
coverage and to expand such coverage to include the sale of commercial drugs
if
marketing approval is obtained for any of our drug candidates. However,
insurance coverage is increasingly expensive. We may not be able to maintain
insurance coverage at a reasonable cost and we may not be able to obtain
insurance coverage that will be adequate to satisfy any liability that may
arise.
We
employ the use at our laboratories of certain chemical and biological agents
and
compounds that may be deemed hazardous and we are therefore subject to various
environmental laws and regulations. Compliance with these laws and regulations
may result in significant costs, which could materially reduce our ability
to
become profitable.
We
use hazardous materials, including chemicals and biological agents and compounds
that could be dangerous to human health and safety or the environment. As
appropriate, we safely store these materials and wastes resulting from their
use
at our laboratory facility pending their ultimate use or disposal. We contract
with a third party to properly dispose of these materials and wastes. We are
subject to a variety of federal, state and local laws and regulations governing
the use, generation, manufacture, storage, handling and disposal of these
materials and wastes. We may incur significant costs complying with
environmental laws and regulations adopted in the future.
If
we use biological and hazardous materials in a manner that causes injury, we
may
be liable for damages.
Our
R&D and manufacturing activities will involve the use of biological and
hazardous materials. Although we believe our safety procedures for handling
and
disposing of these materials comply with federal, state and local laws and
regulations, we cannot entirely eliminate the risk of accidental injury or
contamination from the use, storage, handling or disposal of these materials.
We
carry limited biological or hazardous waste insurance coverage, workers
compensation or property and casualty and general liability insurance policies,
which include coverage for damages and fines arising from biological or
hazardous waste exposure or contamination. Accordingly, in the event of
contamination or injury, we could be held liable for damages or penalized with
fines in an amount exceeding our resources and insurance coverages, and our
clinical trials or regulatory approvals could be suspended.
With
our limited resources, we may be unable to effectively manage
growth.
As
of the date of this filing, we have 5 employees and several consultants and
independent contractors. We intend to expand our operations and staff
materially. Our new employees will include a number of key managerial,
technical, financial, R&D and operations personnel who will not have been
fully integrated into our operations. We expect the expansion of our business
to
place a significant strain on our limited managerial, operational and financial
resources. We will be required to expand our operational and financial systems
significantly and to expand, train and manage our work force in order to manage
the expansion of our operations. Our failure to fully integrate our new
employees into our operations could have a material adverse effect on our
business, prospects, financial condition and results of
operations.
We
may not be able to attract and retain highly skilled
personnel.
Our
ability to attract and retain highly skilled personnel is critical to our
operations and expansion. We face competition for these types of personnel
from
other pharmaceutical companies and more established organizations, many of
which
have significantly larger operations and greater financial, technical, human
and
other resources than us. We may not be successful in attracting and retaining
qualified personnel on a timely basis, on competitive terms, or at all. If
we
are not successful in attracting and retaining these personnel, our business,
prospects, financial condition and results of operations will be materially
and
adversely affected.
We
depend upon our senior management and key consultants and their loss or
unavailability could put us at a competitive
disadvantage.
We
currently depend upon the efforts and abilities of our management team, as
well
as the services of several key consultants. The loss or unavailability of the
services of any of these individuals for any significant period of time could
have a material adverse effect on our business, prospects, financial condition
and results of operations. We have not obtained, do not own, nor are we the
beneficiary of, key-person life insurance.
Political
or social factors may delay or impair our ability to market our drug
candidates.
Drugs
developed to treat diseases caused by or to combat the threat of bio-terrorism
will be subject to changing political and social environments. The political
and
social responses to bio-terrorism have been highly charged and unpredictable.
Political or social pressures may delay or cause resistance to bringing our
drug
candidates to market or limit pricing of our drug candidates, which would harm
our business. Changes to favorable laws, such as the Project BioShield Act,
could have a material adverse effect on our ability to generate revenue and
could require us to reduce the scope of or discontinue our operations.
There
are conflicts of interest among our officers, directors and
stockholders.
Certain
of our executive officers and directors and their affiliates are engaged in
other activities and have interests in other entities on their own behalf or
on
behalf of other persons. Neither we nor any of our stockholders will have any
rights in these ventures or their income or profits. In particular:
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Our
executive officers or directors or their affiliates may have an economic
interest in, or other business relationship with, partner companies
that
invest in us.
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Our
executive officers or directors or their affiliates have interests
in
entities that
provide
products or services to us.
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In
any of these cases:
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Our
executive officers or directors may have a conflict between our current
interests and their personal financial and other interests in another
business venture.
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Our
executive officers or directors may have conflicting fiduciary duties
to
us and the other entity.
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The
terms of transactions with the other entity may not be subject to
arm’s
length negotiations and therefore may be on terms less favorable
to us
than those that could be procured through arm’s length
negotiations.
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We
may enter into contracts with various U.S. government agencies. which have
special contracting requirements that give the government agency various rights
or impose on the other party various obligations that can make the contracts
less favorable to the non-government party. Consequently, if a large portion
of
our revenue is attributable to these contracts, our business may be adversely
affected should the governmental parties exercise any of these additional rights
or impose any of these additional obligations.
We
intend to enter into contracts with various U.S. government agencies.
Substantially all of our revenue may be derived from government contracts and
grants. In contracting with government agencies, we will be subject to various
federal contract requirements. Future sales to U.S. government agencies will
depend, in part, on our ability to meet these requirements, certain of which
we
may not be able to satisfy.
U.S.
government contracts typically contain unfavorable termination provisions and
are subject to audit and modification by the government at its sole discretion,
which subjects us to additional risks. These risks include the ability of the
U.S. government to unilaterally:
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suspend
or prevent us for a set period of time from receiving new contracts
or
extending existing contracts based on violations or suspected violations
of laws or regulations;
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terminate
our existing contracts;
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reduce
the scope and value of our existing contracts;
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audit
and object to our contract-related costs and fees, including allocated
indirect costs;
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control
and potentially prohibit the export of our drug candidates;
and
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change
certain terms and conditions in our contracts.
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The
U.S. government may terminate any of its contracts with us either for its
convenience or if we default by failing to perform in accordance with the
contract schedule and terms. Termination for convenience provisions generally
enable us to recover only our costs incurred or committed, and settlement
expenses and profit on the work completed prior to termination. Termination
for
default provisions do not permit these recoveries and make us liable for excess
costs incurred by the U.S. government in procuring undelivered items from
another source.
As
a U.S. government contractor, we may become subject to periodic audits and
reviews. Based on the results of these audits, the U.S. government may adjust
our contract-related costs and fees, including allocated indirect costs. As
part
of any such audit or review, the U.S. government may review the adequacy of,
and
our compliance with, our internal control systems and policies, including those
relating to our purchasing, property, compensation and/or management information
systems. In addition, if an audit or review uncovers any improper or illegal
activity, we may be subject to civil and criminal penalties and administrative
sanctions, including termination of our contracts, forfeiture of profits,
suspension of payments, fines and suspension or prohibition from doing business
with the U.S. government. We could also suffer serious harm to our reputation
if
allegations of impropriety were made against us. In addition, under U.S.
government purchasing regulations, some of our costs, including most financing
costs,
amortization of intangible assets, portions of our R&D costs and some
marketing expenses, may not be reimbursable or allowed under our contracts.
Further, as a U.S. government contractor, we may become subject to an increased
risk of investigations, criminal prosecution, civil fraud, whistleblower
lawsuits and other legal actions and liabilities to which purely private sector
companies are not.
We
may fail to obtain contracts to supply the U.S. government, and we may be unable
to commercialize our drug candidates.
The
U.S. government has undertaken commitments to help secure improved
countermeasures against bio-terrorism. The process of obtaining government
contracts is lengthy and uncertain, and we must compete for each contract.
Moreover, the award of one government contract does not necessarily secure
the
award of future contracts covering the same drug. If the U.S. government makes
significant future contract awards for the supply of its emergency stockpile
to
our competitors, our business will be harmed and it is unlikely that we will
be
able to ultimately commercialize our competitive drug
candidate.
In
addition, the determination of when and whether a drug is ready for large scale
purchase and potential use will be made by the government through consultation
with a number of government agencies, including the FDA, the NIH, the CDC and
the Department of Homeland Security. Congress has approved measures to
accelerate the development of bio-defense drugs through NIH funding, the review
process by the FDA and the final government procurement contracting authority.
While this may help speed the approval of our drug candidates, it may also
encourage competitors to develop their own drug candidates
.
The
market for government stockpiling of H5N1 medicines is fairly new and
uncertain.
At
the present many governments have already stockpiled influenza medicines for
H5N1. We cannot predict with certainty the size of the market, if any.
Consequently, we cannot predict whether sales, if any, to governments will
be
sufficient to fund our business plan and commence revenue generating
operations.
If
the U.S. government fails to continue funding bio-defense drug candidate
development efforts or fails to purchase sufficient quantities of any future
bio-defense drug candidate, we may be unable to generate sufficient revenues
to
continue operations.
We
hope to receive funding from the U.S. government for the development of our
bio-defense drug candidates. Changes in government budgets and agendas, however,
may result in future funding being decreased and de-prioritized, and government
contracts typically contain provisions that permit cancellation in the event
that funds are unavailable to the government agency. Furthermore, we cannot
be
certain of the timing of any future funding, and substantial delays or
cancellations of funding could result from protests or challenges from third
parties. If the U.S. government fails to continue to adequately fund R&D
programs, we may be unable to generate sufficient revenues to continue
operations. Similarly, if we develop a drug candidate that is approved by the
FDA, but the U.S. government does not place sufficient orders for this drug,
our
future business may be harmed.
Risks
Related to the Biotechnology/Biopharmaceutical Industry
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition. We may be unable
to
compete with enterprises equipped with more substantial resources than
us.
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition based primarily
on
scientific and technological factors. These factors include the availability
of
patent and other protection for technology and products, the ability to
commercialize technological developments and the ability to obtain government
approval for testing, manufacturing and marketing. We compete with specialized
biopharmaceutical firms in the United States, Europe and elsewhere, as well
as a
growing number of large pharmaceutical companies that are applying biotechnology
to their operations. Many biopharmaceutical companies have focused their
development efforts in the human therapeutics area, including cancer. Many
major
pharmaceutical companies have developed or acquired internal biotechnology
capabilities or made commercial arrangements with other biopharmaceutical
companies. These companies, as well as academic institutions, government
agencies and private research organizations, also compete with us in recruiting
and retaining highly qualified scientific personnel and consultants. Our ability
to compete successfully with other companies in the pharmaceutical field will
also depend to a considerable degree on the continuing availability of capital
to us.
We
are
aware of numerous products under development or manufactured by competitors
that
are used for the prevention or treatment of certain diseases we have targeted
for drug development. Various companies are developing biopharmaceutical
products that potentially directly compete with our drug candidates even
though
their approach to such treatment is different.
We
expect
that our drug candidates under development and in clinical trials will address
major markets within the anti-viral sector. Our competition will be determined
in part by the potential indications for which drugs are developed and
ultimately approved by regulatory authorities. Additionally, the timing of
the
market introduction of some of our potential drugs or of competitors’ products
may be an important competitive factor. Accordingly, the relative speed with
which we can develop drugs, complete pre-clinical testing, clinical trials,
approval processes and
supply
commercial quantities to market are important competitive factors. We expect
that competition among drugs approved for sale will be based on various factors,
including product efficacy, safety, reliability, availability, price and patent
protection.
The
successful development of biopharmaceuticals is highly uncertain. A variety
of
factors including, pre-clinical study results or regulatory approvals, could
cause us to abandon development of our drug
candidates.
Successful
development of biopharmaceuticals is highly uncertain and is dependent on
numerous factors, many of which are beyond our control. Products that appear
promising in the early phases of development may fail to reach the market for
several reasons including:
·
|
pre-clinical
study results that may show the product to be less effective than
desired
(e.g., the study failed to meet its primary objectives) or to have
harmful
or problematic side effects;
|
·
|
failure
to receive the necessary regulatory approvals or a delay in receiving
such
approvals. Among other things, such delays may be caused by slow
enrollment in clinical studies, length of time to achieve study
endpoints,
additional time requirements for data analysis or a IND and later
NDA,
preparation, discussions with the FDA, an FDA request for additional
pre-clinical or clinical data or unexpected safety or manufacturing
issues;
|
·
|
manufacturing
costs, pricing or reimbursement issues, or other factors that make
the
product not economical; and
|
·
|
the
proprietary rights of others and their competing products and technologies
that may prevent the product from being
commercialized.
|
Success
in pre-clinical and early clinical studies does not ensure that large-scale
clinical studies will be successful. Clinical results are frequently susceptible
to varying interpretations that may delay, limit or prevent regulatory
approvals. The length of time necessary to complete clinical studies and to
submit an application for marketing approval for a final decision by a
regulatory authority varies significantly from one product to the next, and
may
be difficult to predict.
Risks
Related to the Securities Markets and Investments in Our Common
Stock
Because
our common stock is traded on the "pink sheets," your ability to sell your
shares in the secondary trading market may be
limited.
Our
common stock is currently traded on the National Quotation Bureau's "Pink
Sheets" and we expect that after the effectiveness of this registration
statement, our common stock will also be traded in the over-the-counter market
on the OTC Electronic Bulletin Board. Consequently, the liquidity of our common
stock is impaired, not only in the number of shares that are bought and sold,
but also through delays in the timing of transactions, and coverage by security
analysts and the news media, if any, of our company. As a result, prices for
shares of our common stock may be lower than might otherwise prevail if our
common stock was traded on Nasdaq or a national securities
exchange.
Because
our shares are "penny stocks," you may have difficulty selling them in the
secondary trading market.
Federal
regulations under the Securities Exchange Act of 1934 regulate the trading
of
so-called "penny stocks," which are generally defined as any security not listed
on a national securities exchange or Nasdaq, priced at less than $5.00 per
share
and offered by an issuer with limited net tangible assets and revenues. Since
our common stock currently trades on the "Pink Sheets" at less than $5.00 per
share, our shares are "penny stocks" and may not be traded unless a disclosure
schedule explaining the penny stock market and the risks associated therewith
is
delivered to a potential purchaser prior to any trade.
In
addition, because our common stock is not listed on Nasdaq or any national
securities exchange and currently trades at less than $5.00 per share, trading
in our common stock is subject to Rule 15g-9 under the Securities Exchange
Act.
Under this rule, broker-dealers must take certain steps prior to selling a
"penny stock," which steps include:
|
·
|
obtaining
financial and investment information from the
investor;
|
|
·
|
obtaining
a written suitability questionnaire and purchase agreement signed
by the
investor; and
|
|
·
|
providing
the investor a written identification of the shares being offered
and the
quantity of the shares.
|
If
these
penny stock rules are not followed by the broker-dealer, the investor has no
obligation to purchase the shares. The application of these comprehensive rules
will make it more difficult for broker-dealers to sell our common stock and
our
shareholders, therefore, may have difficulty in selling their shares in the
secondary trading market.
Our
stock price may be volatile and your investment in our common stock could suffer
a decline in value.
The
market price of our common stock may fluctuate significantly in response to
a
number of factors, many of which are beyond our control. These factors
include:
|
·
|
progress
of our products through the regulatory
process;
|
|
·
|
results
of preclinical studies and clinical
trials;
|
|
·
|
announcements
of technological innovations or new products by us or our
competitors;
|
|
·
|
government
regulatory action affecting our products or our competitors' products
in
both the United States and foreign
countries;
|
|
·
|
developments
or disputes concerning patent or proprietary
rights;
|
|
·
|
general
market conditions for emerging growth and pharmaceutical
companies;
|
|
·
|
economic
conditions in the United States or
abroad;
|
|
·
|
actual
or anticipated fluctuations in our operating
results;
|
|
·
|
broad
market fluctuations; and
|
|
·
|
changes
in financial estimates by securities
analysts.
|
A
registration of a significant amount of our outstanding restricted stock may
have a negative effect on the trading price of our
stock.
At
September 30, 2006, shareholders of the Company had approximately 90 million
shares of restricted stock, or 80.3% of the outstanding common stock. If we
were
to file a registration statement including all of these shares, and the
registration is allowed by the SEC, these shares would be freely tradable upon
the effectiveness of the planned registration statement. If investors holding
a
significant number of freely tradable shares decide to sell them in a short
period of time following the effectiveness of a registration statement, such
sales could contribute to significant downward pressure on the price of our
stock.
Our
directors and executive officers own or control a sufficient number of shares
of
our common stock to control our company, which could discourage or prevent
a
takeover, even if an acquisition would be beneficial to our
shareholders.
At
September 30, 2006, our directors and executive officers own or control
approximately 56% of our outstanding voting power. Accordingly, these
shareholders, individually and as a group, may be able to influence the outcome
of shareholder votes, involving votes concerning the election of directors,
the
adoption or amendment of provisions in our articles of incorporation and bylaws
and the approval of certain mergers or other similar transactions, such as
sales
of substantially all of our assets. Such control by existing shareholders could
have the effect of delaying, deferring or preventing a change in control of
our
company.
We
do not intend to pay any cash dividends in the foreseeable future and,
therefore, any return on your investment in our capital stock must come from
increases in the fair market value and trading price of the capital
stock.
We
do not
intend to pay any cash dividends in the foreseeable future and, therefore,
any
return on your investment in our capital stock must come from increases in
the
fair market value and trading price of the capital stock.
We
will likely issue additional equity securities which will dilute your share
ownership.
We
will
likely issue additional equity securities to raise capital and through the
exercise of options and warrants that are outstanding or may be outstanding.
These additional issuances will dilute your share ownership.
Because
our common stock is traded only on the pink sheets, your ability to sell your
shares in the secondary trading market may be
limited.
Our
common stock is traded only on the Pink Sheets. Consequently, the liquidity
of
our common stock is impaired, not only in the number of shares that are bought
and sold, but also through delays in the timing of transactions, and coverage
by
security analysts and the news media, if any, of our company. As a result,
prices for shares of our common stock may be different than might otherwise
prevail if our common stock was quoted or traded on a national securities
exchange such as the New York Stock Exchange.
Large
amounts of our common stock will be eligible for resale under Rule 144.
As
of
September 30, 2006, 90,311,770 of 112,417,502 issued and outstanding shares
of
the Company’s common stock are restricted securities as defined under Rule 144
of the Securities Act of 1933, as amended (the “Act”) and under certain
circumstances may be resold without registration pursuant to Rule 144.
Approximately
23,666,770 shares of our restricted shares of common stock are held by
non-affiliates who may avail themselves of the public information requirements
and sell their shares in accordance with Rule 144. As a result, some or all
of
these shares may be sold in accordance with Rule 144 potentially causing the
price of the Company’s shares to decline.
In
general, under Rule 144, a person (or persons whose shares are aggregated)
who
has satisfied a one-year holding period may, under certain circumstances, sell
within any three-month period a number of securities which does not exceed
the
greater of 1% of the then outstanding shares of common stock or the average
weekly trading volume of the class during the four calendar weeks prior to
such
sale. Rule 144 also permits, under certain circumstances, the sale of
securities, without any limitation, by a person who is not an Affiliate, as
such
term is defined in Rule 144(a)(1), of the Company and who has satisfied a
two-year holding period. Any substantial sale of the Company's common stock
pursuant to Rule 144 may have an adverse effect on the market price of the
Company’s shares. This filing will satisfy certain public information
requirements necessary for such shares to be sold under Rule 144.
The
requirements of complying with the Sarbanes-Oxley act may strain our resources
and distract management
We
are
subject to the reporting requirements of the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002. the costs
associated with these requirements may place a strain on our systems and
resources. The Exchange Act requires that we file annual, quarterly and current
reports with respect to our business and financial condition. The Sarbanes-Oxley
Act requires that we maintain effective disclosure controls and procedures
and
internal controls over financial reporting. Historically, as a private company
we have maintained a small accounting staff, but in order to maintain and
improve the effectiveness of our disclosure controls and procedures and internal
control over financial reporting, significant additional resources and
management oversight will be required. This includes, among other things,
retaining independent public accountants. This effort may divert management’s
attention from other business concerns, which could have a material adverse
effect on our business, financial condition, results of operations and cash
flows. In addition, we may need to hire additional accounting and financial
persons with appropriate public company experience and technical accounting
knowledge, and we cannot assure you that we will be able to do so in a timely
fashion.
Our
executive officers, directors and principal stockholders control our business
and may make decisions that are not in our stockholders’ best
interests.
As
of September 30, 2006, our officers, directors, and principal stockholders,
and
their affiliates, in the aggregate, beneficially owned approximately 75% of
the
outstanding shares of our common stock on a fully diluted basis. As a result,
such persons, acting together, have the ability to substantially influence
all
matters submitted to our stockholders for approval, including the election
and
removal of directors and any merger, consolidation or sale of all or
substantially all of our assets, and to control our management and affairs.
Accordingly, such concentration of ownership may have the effect of delaying,
deferring or preventing a change in discouraging a potential acquirer from
making a tender offer or otherwise attempting to obtain control of our business,
even if such a transaction would be beneficial to other
stockholders.
Sales
of additional equity securities may adversely affect the market price of our
common stock and your rights in the Company may be
reduced.
We
expect
to continue to incur drug development and selling, general and administrative
costs, and in order to satisfy our funding requirements, we may need to sell
additional equity securities. The sale or the proposed sale of substantial
amounts of our common stock in the public markets may adversely affect the
market price of our common stock and our stock price may decline substantially.
Our stockholders may experience substantial dilution and a reduction in the
price that they are able to obtain upon sale of their shares. Also, any new
securities issued may have greater rights, preferences or privileges than our
existing common stock.
Because
we will not pay cash dividends, stockholders may have to sell shares in order
to
realize their investment.
We
have
not paid any cash dividends on our common stock and do not intend to pay cash
dividends on our common stock in the foreseeable future. We intend to retain
future earnings, if any, for reinvestment in the development and expansion
of
our business. Any credit agreements, which we may enter into with institutional
lenders, may restrict our ability to pay dividends. Whether we pay cash
dividends in the future will be at the discretion of our board of directors
and
will be dependent upon our financial condition, results of operations, capital
requirements and any other factors that the board of directors decides is
relevant.
ITEM
2:
Management
Discussion and Analysis of Plan of Operation
The
following discussion contains forward-looking statements that involve risks
and
uncertainties.
Our
actual results could differ materially from those anticipated by the
forward-looking information. Factors that may cause such differences include,
but are not limited to, availability and cost of financial resources, results
of
our R&D efforts and clinical trials, product demand, market acceptance and
other factors discussed in this Form 10-SB under the heading “Risk Factors” This
managements discussion and analysis or plan of operation, should be read in
conjunction with our financial statements and the related notes included
elsewhere in this Form 10-SB.
Introduction
NanoViricides,
Inc. was incorporated under the laws of the State of Colorado on July 25, 2000
as Edot-com.com, Inc
.
and
was
organized for the purpose of conducting internet retail sales. On April 1,
2005,
Edot-com.com, Inc.
was
incorporated under the laws of the State of Nevada for the purpose of
re-domiciling the Company as a Nevada corporation, Edot-com.com (Nevada). On
April 15, 2005, the Company and Edot-com.com (Nevada) were merged and
Edot-com.com, Inc.,
a
Nevada
corporation, became the surviving entity.
On
June
1, 2005, the Company acquired NanoViricide, Inc., a privately owned Florida
corporation (“NVI”), pursuant to an Agreement and Plan of Share Exchange (the
“Exchange”). NVI was incorporated under the laws of the State of Florida on May
12, 2005 and its sole asset was comprised of a licensing agreement with
TheraCour Pharma, Inc. (an approximately 35% shareholder of NVI) for rights
to
develop and commercialize novel and specifically targeted drugs based on
TheraCour's targeting technologies, against a number of human viral diseases.
Upon consummation of the Exchange, the Company adopted the business plan of
NVI.
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. As a result
of the Exchange, NVI 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.
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 on the
Pink Sheets to “NNVC”, respectively.
For
financial accounting purposes, this acquisition was a reverse acquisition of
the
Company by NanoViricide (NVI), under the purchase method of accounting, and
was
treated as a recapitalization with NanoViricide as the acquirer. Accordingly,
our historical 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 NanoViricides. With the
acquisition of NanoViricide, we no longer remained an inactive entity and
entered the pharmaceuticals business.
The
Company is considered a development stage company at this time.
Management’s
Plan of Operation
The
Company’s drug development business model was formed in May 2005 with a license
to the patents and intellectual property held by Theracour Pharma, Inc., that
enabled creation of drugs engineered specifically to combat viral diseases
in
humans. T
his
exclusive license from Theracour Pharma serves as a foundation for our
intellectual property.
The
Company was granted a worldwide exclusive perpetual license to this technology
for several drugs with specific targeting mechanisms
in
perpetuity
for the treatment of the following human viral diseases: Human Immunodeficiency
Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis C Virus (HCV), Herpes
Simplex Virus (HSV), Influenza and Asian Bird Flu Virus.
To
date, we have engaged in organizational activities; sourcing compounds and
materials; and experimentation with studies on cell cultures and animals. We
have generated funding through the issuances of debt and private placement
of
common stock.
In
December 2005 we closed a $1,000,000 investment via a private placement of
convertible debt to accredited investors which was converted in July 2006 into
3,333,333 shares of the Company’s common stock; in December 2005 we secured a
$1,370,000 investment via a private placement to accredited investors of
2,740,000 shares of the Company’s common stock; and in June 2006 we secured a
$1,875,000 investment via a private placement to accredited investors of
1,875,000 shares of the Company’s common stock. (See Part II, Item
4)
In
December 2005, the Company signed a Memorandum of Understanding with a division
of the Health Ministry of Vietnam for the development of a drug for H5N1 (avian
flu) and rabies.
Management
believes that it has achieved significant milestones in the development of
anti-influenza drugs for human influenza (H1N1) and bird flu (H5N1); and to
the
best of our knowledge it is possible we may have the world’s most efficacious
drugs to treat these viruses. Management’s beliefs are based on results of
pre-clinical cell culture studies and in vivo animal studies using mice.
Preclinical
Safety And Efficacy Studies
We
have completed initial safety studies on the major constituent of our anti-viral
drug, FluCide-I™. The polymer, which is unique and proprietary to NanoViricides,
was tested for any toxic symptoms or for any ill effects in laboratory animals.
The preliminary results were successful. Additional laboratory data from the
safety studies on the base polymer material were performed. This data included
blood test results, as well as histological (microscopic) examinations of
various organs. These studies showed that the polymer used to construct the
nanomicelle caused no organic damage to the test animals. All results were
within safe limits.
As
a
test case, we have developed and evaluated nanoviricides against influenza
and
H5N1 (one of the highly pathogenic avian influenza subtypes for safety and
efficacy. In vitro (laboratory) evaluation of 14 substances, including controls,
for protection of mammalian cells against infection by the H5N1 subtype. These
assays were conducted in Vietnam under the auspices of the National Institute
of
Hygiene and Epidemiology, Hanoi (NIHE) under the VietNam Ministry of Health.
We
identified four different nanoviricides as being highly effective against H5N1
using two different assays (both involving cell culture, one using the plaque
reduction method and the other involving microscopic examination to determine
the extent of cytopathic events (CPE) reduction. All of these were effective
at
extremely low concentrations and thus are expected to be drug
candidates.
The
best of these was a nanoviricide based on an antibody fragment as the targeting
ligand, which led to near complete suppression of cytopathic effects (CPE)
at an
extraordinarily low concentration level. This is being developed as
AviFluCide-I™, a drug highly specific to H5N1 that is being developed against
the Vietnam strain and is expected to also work against the Indonesian strain
(although further studies will be required to determine its efficacy against
various other highly pathogenic strains of avian influenza).
Another
nanoviricide which is based on a ligand that we designed in-house to be specific
to the group of all or a majority of highly pathogenic avian influenza viruses,
also showed a very high efficacy (group-level specificity). This is being
developed as “AviFluCide-HP™”, a drug that is group-specific against emergent
and existing highly pathogenic influenza viruses (including H5N1, H7Nx and
others).
A
third nanoviricide based on a ligand that we designed for attacking all
influenza A viruses (type-level specificity) showed strong efficacy against
H5N1
as well. This is being developed as “FluCide-I™”, a drug designed primarily for
use against serious cases of human influenza.
It
should
be noted that all of our studies to date were preliminary. Thus, the evidence
we
have developed is indicative, but not considered confirmative, of the
capabilities of the nanoviricides technology's potential. With the success
of
these preliminary studies, the Company has decided to perform further
pre-clinical studies that validate safety and efficacy of its materials and
its
anti-viral drugs FluCide™ and AviFluCide™; in order to file an IND
(Investigational New Drug) application. The IND application, if approved by
the
FDA, will allow the Company to enter into human clinical trials for US FDA
approval for these drugs. The Company needs to be able to provide for the costs
and expenses to perform the necessary preclinical studies and needs to hire
several employees in the upcoming year.
Management
intends to use capital and debt financing to enable the completion of these
goals.
The
Company has ongoing drug research and development. In order to meet its
obligations with the Vietnam M.O.U., the Company developed an anti-rabies drug
which has yet to be tested.
In
addition the Company is working on developing anti-HIV nanoviricides and
nanoviricides against certain other diseases.
It
is too
soon to know if any of these projects will result in commercially viable
drugs.
As
of September 30, 2006 we have a cash balance of approximately $1,777,000 which
will not be sufficient to fund our operations over the next twelve months.
We
believe we will require in excess of $5,000,000 to execute the first part of
our
business plan which covers twelve months of operations. In the event that
funding can be achieved, we shall endeavor to achieve completion of the
following events within the next twelve months:
$1,500,000
|
Research
and Development
|
$
750,000
|
Corporate
overhead
|
$1,250,000
|
Capital
costs
|
$1,500,000
|
Staffing
costs
|
The
Company has limited experience with pharmaceutical drug development. Thus,
our
budget estimates are not based on experience, but rather based on advisements
by
our associates and consultants. As such these budget estimates may not be
accurate. In addition, the actual work to be performed is not known at this
time, other than a broad outline, as is normal with any scientific work. As
further work is performed, additional work may become necessary or change in
plans or workload may occur. Such changes may have an adverse impact on our
estimated budget. Such changes may also have an adverse impact on our projected
timeline of drug development.
The
Company is currently engaged in a national search for an R&D as well as
manufacturing facility. The manufacturing portion of the facility will
eventually need to be certified by the FDA in order for the Company to produce
experimental materials that can be sent to outside scientists for
pharmaco-kinetic, pharmaco-dynamic and toxicology studies. These three sets
of
studies must be completed prior to the Company filing an IND with the FDA to
begin the human safety and efficacy trials (Phase I , II and III ).
The
work-plan we have developed for the next twelve months is expected to enable
us
to file an investigational new drug application in the near future but not
this
year. This work-plan is expected to reduce certain risks of drug development.
We
believe that this upcoming year's 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 needed 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 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 needs.
The
Company is considered to be in the development stage as of June 30, 2006 and
will continue in the development stage until generating revenues from the sales
of its products or services. As a result, our auditors have issued a comment
in
connection with our audit covering our ability to continue as a going concern.
(See footnote 2 to the Company’s financial statements herein.) Management
intends to use capital and debt financing, as required, to fund the Company’s
operations.
There
can
be no assurance that the Company will be able to obtain the additional capital
resources necessary to fund its growth plans, or that such financing will be
available on commercially reasonable terms.
Critical
Accounting Policies
Our
management’s discussion and analysis or plan of operation is based upon our
financial statements, which have been prepared in accordance with generally
accepted accounting principles in the United States, or GAAP. The preparation
of
these financial statements requires us to make estimates and judgments that
affect the reported amounts of our assets, liabilities, revenues, expenses
and
other reported disclosures. We base our estimates on historical experience
and
on various other assumptions that we believe are reasonable under the
circumstances.
The
notes to our financial statements include disclosure of our significant
accounting policies. While all decisions regarding accounting policies are
important, we believe that the following policies could be considered
critical.
Accounting
Basis
-
The
Company has not earned any revenue from limited principal operations.
Accordingly, the Company's activities have been accounted for as those of a
"Development Stage Company" as set forth in Financial Accounting Standards
Board
Statement No. 7 (“SFAS 7"). Among the disclosures required by SFAS 7 are that
the Company's financial statements be identified as those of a development
stage
company, and that the statements of earnings, retained earnings and
stockholders' equity and cash flows disclose activity since the date of the
Company's inception.
Research
and Development
-
Research and development expenses consist primarily of costs associated with
the
preclinical and or clinical trials of drug candidates, compensation and other
expenses for research and development, personnel, supplies and development
materials, costs for consultants and related contract research and facility
costs. Expenditures relating to research and development are expensed as
incurred.
Accounting
for Stock Based Compensation
-
The
Company adopted the fair value recognition provisions of “FASB Statement No.
123(R) Share-Based Payment”, using the modified prospective-transition method.
Under that transition method, compensation cost recognized in the year ended
June 30, 2006 includes compensation cost for all share-based payment granted
based on the grant-date fair value estimated in accordance with provisions
of
FASB 123(R).
Accounting
for Non-Employee Stock Based Compensation
- The Company accounts for shares and options issued for non-employees in
accordance with the provision of Emerging Issue Task Force Issue No. 96-18,
“Accounting for Equity Instruments that are issued to other than Employees for
Acquiring, or in Conjunction with selling Goods or Services”. According to the
provisions of ETIF 96-18, the Company determines the fair value of stock and
options granted to non-employees on the measurement date which is either the
date of a commitment for performance has been reached or when performance has
been completed, depending upon the facts and circumstances. The fair value
of
the shares and options valued at commitment date is expensed immediately as
they
were for past services or expensed over the service period for future
services.
Recent
Accounting Pronouncements
The
FASB
has issued Interpretation No. 46 (FIN-46R) (Revised December 2003),
Consolidation
of Variable Interest Entities
.
FIN-46R
clarifies the application of Accounting Research Bulletin No. 51, “Consolidated
Financial Statements,” to certain entities in which equity investors do not have
the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. It separates
entities into two groups: (1) those for which voting interests are used to
determine consolidation and (2) those for which variable interests are used
to
determine consolidation (the subject of FIN-46R). FIN-46R clarifies how to
identify a variable interest entity and how to determine when a business
enterprise should include the assets, liabilities, non-controlling interests,
and results of activities of a variable interest entity in its consolidated
financial statements.
FIN-46R
requires that a variable interest entity to be consolidated by its “Primary
Beneficiary.” The Primary Beneficiary is the entity, if any, that stands to
absorb a majority of the variable interest entity’s expected losses, or in the
event that no entity stands to absorb a majority of the expected losses, then
the entity that stands to receive a majority of the variable interest entity’s
expected residual returns. If it is reasonably possible that an enterprise
will
consolidate or disclose information about a variable interest entity when FIN-
46R becomes effective, the enterprise is required to disclose in all financial
statements initially issued after December 31, 2003, the nature, purpose, size,
and activities of the variable interest entity and the enterprise’s maximum
exposure to loss as a result of its involvement with the variable interest
entity. At June 30, 2006, the Company evaluated its relationship with TheraCour
Pharma, Inc. for purposes of FIN-46R, and concluded that it is not a variable
interest entity that is subject to consolidation in the Company’s financial
statements
under
FIN-46R.
In
December 2004, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 123 (revised 2004), Share-Based Payment ("SFAS No. 123-R"). SFAS
No.123-R is a revision of SFAS No. 123, as amended, Accounting for Stock-Based
Compensation, and supersedes Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. SFAS No.123-R eliminates the
alternative to use the intrinsic value method of accounting that was provided
in
SFAS No. 123, which generally resulted in no compensation expense recorded
in
the financial statements related to the issuance of equity awards to employees.
SFAS No. 123-R requires that the cost resulting from all share based payment
transactions be recognized in the financial statements. SFAS No. 123-R
establishes fair value as the measurement objective in accounting for
share-based payment arrangements and requires all companies to apply a
fair-value-based measurement method in accounting for generally all share-based
payment transactions with employees. The Company adopted this statement using
the modified prospective transition method for awards made to employee and
directors, which required the application of the accounting standard as of
May
12, 2005 (date of inception).
In
May 2005, the FASB issued Statement No. 154, "Accounting Changes and Error
Corrections", a replacement of Accounting Principles Board Opinion No. 20,
"Accounting Changes", and Statement No. 3, "Reporting Accounting Changes in
Interim Financial Statements" ("SFAS 154"). SFAS 154 changes the requirements
for the accounting for, and reporting of, a change in accounting principle.
Previously, voluntary changes in accounting principles were generally required
to be recognized by way of a cumulative effect adjustment within net income
during the period of the change. SFAS 154 requires retrospective application
to
prior periods' financial statements, unless it is impracticable to determine
either the period of specific effects or the cumulative effect of the change.
SFAS 154 is effective for accounting changes made in fiscal years beginning
after December 15, 2005; however, the statement does not change the transition
provisions of any existing accounting pronouncements. The Company does not
believe adoption of SFAS 154 will have a material effect on its financial
position, cash flows or results of operations.
In
February 2006, the FASB issued Statement of Financial Accounting Standards
No.
155, "Accounting for Certain Hybrid Financial Instruments" ("SFAS 155"), which
amends SFAS No. 133, "Accounting for Derivatives Instruments and Hedging
Activities" ("SFAS 133") and SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS 140").
SFAS 155 amends SFAS 133 to narrow the scope exception for interest-only and
principal-only strips on debt instruments to include only such strips
representing rights to receive a specified portion of the contractual interest
or principle cash flows. SFAS 155 also amends SFAS 140 to allow qualifying
special-purpose entities to hold a passive derivative financial instrument
pertaining to beneficial interests that itself is a derivative instruments.
The
Company is currently evaluating the impact this new Standard, but believes
that
it will not have a material impact on the Company's financial
position.
In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No.
157”). SFAS No.157 defines fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. SFAS No.
157
is effective for the Company beginning with fiscal year 2009. The Company is
in
the process of assessing the effect SFAS No. 157 may have on its financial
statements.
On
September 29, 2006, the FASB issued FASB Statement No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans -- An
Amendment of FASB Statements No. 87, 88, 106, and 132R" ("SFAS 158"). This
new
standard requires an employer to: (a) recognize in its statement of financial
position an asset for a plan's overfunded status or a liability for a plan's
underfunded status; (b) measure a plan's assets and its obligations that
determine its funded status as of the end of the employer's fiscal year (with
limited exceptions); and (c) recognize changes in the funded status of a defined
benefit postretirement plan in the year in which the changes occur. Those
changes will be reported in comprehensive income. The requirement to recognize
the funded status of a benefit plan and the disclosure requirements are
effective for the Company's fiscal year ending June 30, 2007. The requirement
to
measure plan assets and benefit obligations as of the date of the employer's
fiscal year-end statement of financial position is effective for fiscal years
ending after December 15, 2008. The Company has not determined the effect,
if
any, the adoption of SFAS 158 will have on the Company’s financial position and
results of operations.
On
July
13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
in
Income Taxes—an interpretation of FASB Statement No. 109. Interpretation 48
clarifies the accounting for uncertainty in income taxes recognized in an
entity’s financial statements in accordance with Statement 109 and prescribes a
recognition threshold and measurement attribute for financial statement
disclosure of tax positions taken or expected to be taken on a tax return.
Additionally, Interpretation 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. Interpretation 48 is effective for fiscal years
beginning after December 15, 2006, with early adoption permitted. We are
currently evaluating whether the adoption of Interpretation 48 will have a
material effect on our consolidated financial position, results of operations
or
cash flows.
Off-Balance
Sheet Arrangements
We
have not entered into any off-balance sheet arrangements as of June 30, 2006.
ITEM
3. DESCRIPTION OF PROPERTY.
Description
of Property
The
Company’s principal executive offices are located at 135 Wood Street, West
Haven, Connecticut, and include approximately 1,500 square feet of office space
at a base monthly rent of $1,875. The lease expires February 2007.
We
subcontract the laboratory research and development work to TheraCour Pharma,
Inc. which has a 2,500 square foot laboratory in the same building. Management
believes that the space is sufficient for the Company to monitor the
developmental progress at its subcontractors.
The
company is currently engaged in a national search for an R&D as well as
manufacturing facility. The manufacturing portion of the facility will
eventually have to be certified by the FDA in order for the Company to produce
experimental materials that can be sent to outside scientists for
pharmaco-kinetic, pharmaco-dynamic and toxicology studies. These three sets
of
studies must be completed prior to the Company filing an IND with the FDA to
begin the human safety and efficacy trials (Phase I and Phase II).
ITEM
4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(a)
Security
ownership of certain beneficial owners.
The
following table provides information with respect to the anticipated beneficial
ownership of the Company’s common stock as of September 30, 2006, by (1) each of
our stockholders whom we believe will be a beneficial owner of more than 5%
of
our outstanding common stock, (2) each of our directors and executive officers
and (3) all of our directors and executive officers as a group.
Name
and Address of Beneficial Owner
|
|
Amount
and Nature of Beneficial Owner
|
|
Percent
of Class
|
|
Total
Business Services, Inc.
|
|
|
5,834,000
|
|
|
5.19
|
%
|
Chloe
Flynn (1)
|
|
|
1,500,000
|
|
|
1.33
|
%
|
Conor
Flynn (2)
|
|
|
1,500,000
|
|
|
1.33
|
%
|
Theracour
Pharma, Inc.(*)
|
|
|
35,370,000
|
|
|
31.46
|
%
|
Anil
Diwan (3) (*)
|
|
|
10,000,000
|
|
|
9.70
|
%
|
Eugene
Seymour (4) (*)
|
|
|
8,500,000
|
|
|
7.97
|
%
|
Leo
Ehrlich (5) (*)
|
|
|
5,850,000
|
|
|
5.62
|
%
|
Helene
Ehrlich (6) (*)
|
|
|
1,500,000
|
|
|
1.33
|
%
|
Barrett
Ehrlich (6) (*)
|
|
|
500,000
|
|
|
0.44
|
%
|
Elliot
Ehrlich (6) (*)
|
|
|
500,000
|
|
|
0.44
|
%
|
Joshua
Ehrlich (6) (*)
|
|
|
500,000
|
|
|
0.44
|
%
|
Sarah
Ehrlich (6) (*)
|
|
|
500,000
|
|
|
0.44
|
%
|
Krishna
Menon
|
|
|
1,500,000
|
|
|
1.33
|
%
|
Jayant
Tatake
|
|
|
1,200,000
|
|
|
1.07
|
%
|
Randall
Barton (7)
|
|
|
250,000
|
|
|
0.26
|
%
|
Paul
Marks (8)
|
|
|
100,000
|
|
|
0.12
|
%
|
Cy
Stein (9)
|
|
|
75,000
|
|
|
0.10
|
%
|
Harmon
Aronson (10)
|
|
|
250,000
|
|
|
0.26
|
%
|
John
Rossi (11)
|
|
|
50,000
|
|
|
0.08
|
%
|
All
Directors and Executive Officers as a Group (*)
|
|
|
63,220,000
|
|
|
57.84
|
%
|
|
(*)
|
Directors
, Executive Officers, their families, and TheraCour Pharma, of which
Messrs. Diwan and Ehrlich have voting control.
|
|
(1)
|
Chloe
Flynn is the daughter of John Flynn, the sole shareholder and officer
of
Total Business Services, Inc.
|
|
(2)
|
Conor
Flynn is the son of John Flynn, the sole shareholder and officer
of Total
Business Services, Inc.
|
|
(3)
|
Anil
Diwan owns options to acquire an additional 1,000,000 shares of the
Company’s Common Stock and 65% of the voting stock of TheraCour Pharma,
Inc.
|
|
(4)
|
Eugene
Seymour owns options to acquire an additional 500,000 shares of the
Company’s Common Stock
|
|
(5)
|
Leo
Ehrlich owns options to acquire an additional 500,000 shares of the
Company’s Common Stock and 10% of the voting stock of Theracour Pharma,
Inc.
|
|
(6)
|
The
wife and children of Leo Ehrlich, the Company’s Chief Financial
Officer.
|
|
(7)
|
Mr.
Barton owns warrants to acquire 40,000 shares of Common Stock at
prices
from $0.18 to $2.18 per share.
|
|
(8)
|
Mr.
Marks owns warrants to acquire 40,000 shares of Common Stock at prices
from $0.18 to $2.18 per share.
|
|
(9)
|
Mr.
Stein owns warrants to acquire 40,000 shares of Common Stock at prices
from $0.18 to $2.18 per share.
|
|
(10)
|
Mr.
Aronson owns warrants to acquire 40,000 shares of Common Stock at
prices
from $0.18 to $2.18 per share.
|
|
(11)
|
Mr.
Rossi owns warrants to acquire 40,000 shares of Common Stock at prices
from $0.18 to $2.18 per share.
|
ITEM
5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.
Name
|
Age
|
Title
|
|
|
|
Anil
Diwan, PhD.
|
47
|
President,
Chairman of the Board
|
Eugene
Seymour, MD, MPH
|
65
|
Chief
Executive Officer
|
Krishna
Menon, PhD, DVM.
|
61
|
Chief
Regulatory Officer
|
Leo
Ehrlich, CPA
|
48
|
Chief
Financial Officer
|
Randall
Barton, PhD
|
59
|
Chief
Scientific Officer
|
Paul
A. Marks, M.D.
|
81
|
Chairman
of Scientific Advisory Board
|
Harmon
Aronson, PhD
|
63
|
Member,
Scientific Advisory Board
|
Cy
Stein, MD, PhD
|
53
|
Member,
Scientific Advisory Board
|
John
Rossi, PhD.
|
60
|
Member,
Scientific Advisory Board
|
The
Company’s executive officers and directors are elected annually and serve until
the next annual meeting of stockholders.
We
have established a Scientific Advisory Board to advise us on scientific matters.
None of the members of our Scientific Advisory Board is involved in the
management of or day-to-day operations of NanoViricides, Inc.
Eugene
Seymour, MD, MPH,
age 65,
serves as the Company’s Chief Executive Officer. Dr. Seymour obtained a Master's
degree in the Epidemiology of Infectious Diseases at UCLA in addition to his
medical degree. He began clinical practice in Internal Medicine and joined
the
UCLA Medical School faculty. He left UCLA after two years and joined the USC
faculty as Associate Professor. Dr. Seymour served in the Medical Corps of
US
Army Reserve during the Vietnam era and attained the rank of Major. In 1986,
he
was requested by the US government to establish a testing laboratory and run
a
large-scale surveillance program for HIV prevalence in the Hispanic population
in Los Angeles. His laboratory ended up testing over 50,000 people. In 1989,
he
founded StatSure Diagnostic Systems, Inc. (SDS) (formerly Saliva Diagnostic
Systems, Inc.), raised capital and developed the rapid HIV antibody blood test
(Hema-Strip). He took the company public in 1993 as CEO and President. Under
his
direction, the company conducted research studies in Africa, Asia, South and
North America. The Hema-Strip was approved in a number of countries including
Canada, Great Britain and Vietnam, among others, and currently is awaiting
approval from the FDA. He left SDS in 1996 to form a non-profit foundation,
which funded both testing and training programs for health workers in Asia
and
Africa. He became a consultant to the UN Global Program on AIDS and was sent
to
several countries, (Lithuania, Latvia, Estonia and Russia) to interact with
local physicians and assist them in setting up testing programs. Dr. Seymour
holds 8 issued patents, and is married with three children, two of whom are
physicians.
Anil
Diwan, PhD,
age 47,
the Company’s President is the original inventor of the technologies licensed to
NanoViricides Inc, as well as the TheraCour polymeric micelle technologies
and
products based on them. Since 1992, he has researched and developed TheraCour
nanomaterials. Dr. Diwan was the first to propose the development of novel
pendant polymers for drug delivery that led to an explosion of research in
pharmacological applications of polymeric micelles. Anil has won over 12 NIH
SBIR grants. Dr. Diwan holds two patents, one issued and one applied for, and
has made intellectual property depositions of four additional patentable
discoveries with the patent attorney. Dr. Diwan has held several scholastic
distinctions, including an All-India 9th rank on the Joint Entrance Examination
of all IIT’s. He holds a Ph.D. in Biochemical Engineering from Rice University
(1986) and B.S. in Chemical Engineering from Indian Institute of Technology
(IIT) Bombay (1980).
Krishna
Menon, VMD, PhD.
,
age 59
the Company’s Chief Regulatory Officer is an award winning Pharmaceutical
Scientist and Executive. He was awarded the Employee of the Year, Presidents
Award (1999) at Eli Lilly, where he was a significant participant of the team
that developed two drugs GEMZAR and ALIMTA that account for nearly one billion
dollars in annual sales. Prior thereto and from 1997 to 2000, Dr. Menon served
as a Senior Research Scientist at Bayer. Prior thereto and from 1988 to
1997, Dr. Menon was the In Vivo Scientist of Dana-Farber Cancer Institute
Dr. Menon also serves on the board of directors of KARD Scientific, MA, and
Biological Supplies, NY, and scientific advisor to Nexus Pharmaceuticals. He
participated in the development of 8 International and 3 US patents. Dr. Menon
received a PhD from Harvard. While at Harvard, he performed pre-clinical studies
on
AZT
,
an
important anti-HIV drug. Dr. Menon is a member of the drug development advisory
board for various faculties at Harvard.
Leo
Ehrlich. CPA,
age 48,
serves as the Company’s Chief Financial Officer, is Chief Financial Officer of
StatSure Diagnostics Systems, Inc., as well as on the Board of Directors. On
October 8, 1999, Mr. Ehrlich was appointed Chairman of the Board, President,
and
Chief Executive Officer. Prior to joining the Company, he was president of
Immmu
Inc., a privately held vitamin company from January 1998 to September 1999.
Mr.
Ehrlich is a Certified Public Accountant and received his BBA from Bernard
Baruch College of the City University of New York.
Randall
Barton, PhD.
,
age 59,
the Company’s Chief Scientific Officer, is an expert in receptor-based drug
development. From 2002 to 2004, Dr. Barton served as the Director of In-vitro
Cardiovascular Research at Boehringer Ingelheim Pharmaceuticals, Inc.,
Ridgefield, CT. There he was responsible for establishing in vitro drug
discovery in cardiovascular research with a partial focus on exploiting immune
and inflammatory mechanisms. His work encompassed therapeutic target
identification, evaluation, validation, and implementation involving molecular,
biochemical and cellular research for lead optimization of both small molecules
and biological drug candidates. From 1997 to 2002, he was Director of a group
responsible for gene therapy, monoclonal antibody, and biological drug discovery
involving target ID, validation and implementation. This work encompassed both
in vitro and in vivo lead optimization and evaluation. Prior thereto, his work
in immunological and inflammatory diseases involved both small molecule and
monoclonal antibody drug candidates targeting tyrosine kinases, proteases and
cell surface molecules involved in leukocyte activation and migration. Dr.
Barton holds 5 US patents and has 3 patent applications in progress. He has
over
60 scientific publications. He has served in the military in the Department
of
Gastroenterology at the Walter Reed Army Institute of Research. He holds a
Ph.D.
in immunology from the University of Tennessee.
Paul
A. Marks, MD,
age 81
is the Chairman of the Scientific Board. Dr. Marks has a long and distinguished
career as a physician, scientist, teacher and medical administrator. As
President and Chief Executive Officer, Dr. Marks led Memorial Sloan-Kettering
Cancer Center for 19 years, beginning in 1980. He remains a vital part of MSKCC
as President Emeritus and Member of the Sloan-Kettering Institute.
http://www.mskcc.org/mskcc/html/53984.cfm
.
In
addition to being a world famous physician and administrator, he is a former
director of Pfizer; a former director of Tularik, Inc., acquired by Amgen;
and a
cofounder of Aton Pharmaceuticals, later acquired by Merck. Dr. Marks research
in cell biology and cancer genetics has made major contributions toward a new
approach to cancer treatment and prevention, through the development of new
and
more potent chemotherapeutic agents. He also helped establish the highest
standards for research and patient care at MSKCC and has provided leadership
in
the national and international medical science community. Dr. Marks received
his
AB and MD degrees from Columbia University and postdoctoral training at the
National Institutes of Health and the Pasteur Institute. Prior to his tenure
at
MSKCC, he was Professor of Human Genetics and Frode Jensen Professor of Medicine
(1968-1980), Dean of the Faculty of Medicine (1970-1973), and Vice President
for
Health Sciences and Director of the Comprehensive Cancer Center (1973-1980)
at
Columbia University. Dr. Marks is a member of the National Academy of Sciences
and the Institute of Medicine and is a Fellow at the American Academy of Arts
and Sciences. He has been a recipient of numerous honors. He has published
more
than 350 scientific articles in various scholarly journals.
Harmon
Aronson, PhD
,
age 63
has worked in the pharmaceutical industry for the past 26 years. For the past
8
years he has been President of a pharmaceutical consulting firm, specializing
in
FDA compliance activities for both US and international clients. His firm has
helped many companies obtain US FDA approval for their products and maintain
their acceptable status according to Good Manufacturing Practices. Prior to
this, he held executive positions in Quality Management and in Manufacturing
at
a leading generic drug company. During the last 5 years, he has also served
on
the Board of Directors of a drug delivery company and the Scientific Advisory
Board of a diagnostic medical device company. He was awarded the Ph.D. degree
in
Physics from the University of Chicago. Because of his varied background, he
brings a deep understanding of science and technology and how it can be applied
to the research, manufacturing and quality areas of the pharmaceutical
industry.
Cy
Stein, MD, PhD,
age 53
is head of Medical Genitourinary Oncology and Professor of Medicine, Urology
and
Molecular Pharmacology at the Albert Einstein College of Medicine, New York.
He
is a recognized innovator in the development of drugs based on antisense and
RNA
interference, Professor Stein is a pioneer in the anti-sense DNA field and
holds
a number of key patents. He was a co-developer of Genta Inc.’s Genasense
antisense drug that showed efficacy but needs further work. Prof. Stein is
co-editor of the journal
Oligonucleotides
(formerly
Antisense
and Nucleic Acid Drug Development
)
and has
published over 150 papers in the field. Prof. Stein is a medical doctor and
has
a PhD in chemistry. He is an oncologist and was trained at the New York
Hospital/Cornell Medical Center and the National Institutes of Health. He was
a
professor at the College of Physicians and Surgeons at Columbia University
for
13 years prior to taking up the chair at the Albert Einstein College.
John
Rossi, PhD,
age 60.
Dr. Rossi is the Chairman and Professor, Division of Molecular Biology, Beckman
Research Institute and Dean, Graduate School of Biological Sciences, City of
Hope National Medical Center, Duarte, CA., USA and a recognized scientist in
the
field of HIV research, He brings almost twenty five years of basic HIV research
experience to our company. He is on the editorial boards of seven basic science
journals and has extensive experience in the area of research grant review.
His
groundbreaking work in intracellular RNA interference is completely
complimentary to our extra-cellular nanotechnology-based methods of anti-viral
targeting and subsequent viral destruction. In addition to his responsibilities
at the City of Hope, he is also Adjunct Professor, Division of Biomedical
Sciences, University of California, Riverside, Riverside, CA, as well as Adjunct
Professor, Department of Biochemistry and Microbiology, Loma Linda University,
Loma Linda, CA. In addition to his 14 issued patents, he has submitted 14
additional patent applications and disclosures of invention. A number of these
patents and submissions have direct application to our work. Dr. Rossi received
his PhD in microbial genetics from the University of Connecticut. His
post-doctoral fellowship was at Brown University in Providence,
RI
AUDIT
COMMITTEE
Although
its By-laws provide for the appointment of one, the Company is not yet required
to have an Audit Committee as a result of the fact that our common stock is
not
considered a “listed security” as defined in Rule 10A-3 of the Exchange Act.
There are currently no audit committee members that meet the criteria of
“Financial Expert”, however the company is actively working to appoint a
“Financial Expert” in the current year.
CODE
OF ETHICS
We
have
adopted a code of ethics meeting the requirements of Section 406 of the
Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed
to deter wrongdoing and promote honest and ethical conduct; provide full, fair,
accurate, timely and understandable disclosure in public reports; comply with
applicable laws; ensure prompt internal reporting of violations; and provide
accountability for adherence to the provisions of the code of ethic. Our code
of
ethics is filed as an exhibit to this Form 10-SB.
ITEM
6. EXECUTIVE COMPENSATION
.
The
following table reflects all forms of compensation for the year ended June
30,
2006 and for the period from May 12, 2005 (date of inception) through June
30,
2005. No other person received salary or bonus in excess of $100,000 for any
of
these fiscal years.
.
Summary
Compensation Table
|
|
|
|
Annual
Compensation
|
|
Long-Term
Compensation
|
|
|
|
Name
and Principal
Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Other
Annual
Compensation
|
|
Restricted
Stock
Award(s)
($)
|
|
Securities
Underlying
Options/SARs
(#)
|
|
All
Other
Compensation($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eugene
Seymour,
CEO,
Director
|
|
|
2006
|
|
$
|
150,000
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
500,000
|
|
$
|
-
|
|
|
|
|
2005
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anil
Diwan,
President,
Director
|
|
|
2006
|
|
$
|
150,000
|
|
$
|
211,000
|
|
$
|
-
|
|
$
|
-
|
|
|
1,000,000
|
|
$
|
-
|
|
|
|
|
2005
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo
Ehrlich
CFO,
Director
|
|
|
2006
|
|
$
|
150,000
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
500,000
|
|
$
|
-
|
|
|
|
|
2005
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
EMPLOYMENT
AGREEMENTS
On
September 23, 2005, the Company entered into employment agreements with its
three executive officers, Eugene Seymour, Chief Executive Officer, Anil Diwan,
President and Chairman of Board and Leo Ehrlich, Chief Financial Officer. All
three agreements provide a minimum annual base salary of $200,000 for a term
of
three years. This base salary will increase to $250,000 per year upon closing
of
a financing to the Company with minimum gross proceeds of $5,000,000. The
Company is also obligated to pay health and life insurance benefits and
reimburse expenses incurred by the officers on behalf of the company.
Each
executive, if terminated by the Company without cause, would be entitled to
six
months severance pay in the amount of $100,000
.
Additionally the agreements provided the following stock options:
|
·
|
Dr.
Anil Diwan received 1,000,000 options, 333,333 options vested upon
execution of the employment agreement. The remaining options vest
in equal
amounts over the second and third anniversaries of the
agreement.
|
|
·
|
Dr.
Eugene Seymour received 500,000 options, 250,000 options vested upon
execution of the employment agreement. The remaining options vest
in equal
amounts over the second and third anniversaries of the
agreement
|
|
·
|
Leo
Ehrlich received 500,000 options, 250,000 options vested upon execution
of
the employment agreement. The remaining options vest in equal amounts
over
the second and third anniversaries of the
agreement.
|
COMPENSATION
OF DIRECTORS
At
this
time, directors receive no remuneration for their services as directors of
the
Company, nor does the Company reimburse directors for expenses incurred in
their
service to the Board of Directors.
COMPENSATION
OF SCIENTIFIC ADVISORY BOARD
The
Company anticipates holding four Scientific Advisory Board meetings per annum.
As compensation, each member of the Scientific Advisory Board (SAB) will be
granted each quarter 10,000 warrants to purchase the Company’s common stock at
120% of the Company’s closing stock quote on the day following the meeting.
Should the Company not call a quarterly meeting, quarterly options will be
granted on May 15, August 15, November 15, and February 15. The warrants will
have a four year expiration date. In addition the Company will reimburse each
SAB member for travel and other out-of-pocket expenses incurred in the course
of
performing their services. Through June 30, 2006, the SAB was granted a total
of
160,000 stock warrants exercisable into common shares at prices from $0.18
to
$2.20 per share.
ITEM
7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Currently,
we have no independent directors on our Board of Directors, and therefore have
no formal procedures in effect for reviewing and pre-approving any transactions
between us, our directors, officers and other affiliates. We will use our best
efforts to insure that all transactions are on terms at least as favorable
to
the Company as we would negotiate with unrelated third parties.
TheraCour
Pharma, Inc.
On
May
12, 2005, the Company entered into an Exclusive License Agreement (the
“License”) we entered into with TheraCour Pharma, Inc., (“TheraCour”), our
largest shareholder. TheraCour granted the Company an exclusive license in
perpetuity for technologies developed by TheraCour for the five virus types:
HIV, HCV, Herpes, Asian (bird) flu and Influenza. 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) to pay $25,000 per month for usage of lab supplies and chemicals
from existing stock held by TheraCour; (3) to pay the greater of $2,000 or
actual costs, for other general and administrative expenses incurred by
TheraCour on our behalf (4) to make royalty payments of 15% (calculated as
a
percentage of net sales of the licensed drugs) to TheraCour; (5) that TheraCour
would retain the exclusive right to develop and manufacture the drugs licensed
by TheraCour; and (6) to pay an advance payment equal to twice the amount of
the
previous months invoice to be applied as a prepayment towards
expenses.
Development
costs charged by and paid to TheraCour Pharma, Inc. was $692,892 and $30,771
for
the years ended June 30, 2006 and 2005, respectively. No royalties have been
paid through the year ended June 30, 2006.
TheraCour
may
terminate the License upon a material breach by us as specified in the
agreement. However, the Company has the opportunity to cure the breach within
90
days of receipt of notice to terminate the License.
As
of
September 30, 2006, TheraCour owns 35,370,000 shares of the Company’s
outstanding common stock.
Anil
Diwan, the Company’s President and Chairman, also serves as the CEO and Director
of TheraCour and owns approximately 65% of the outstanding capital stock of
TheraCour. Leo Ehrlich, the Company’s Chief Financial Officer, serves as
TheraCour’s Director and owns approximately 10% of the outstanding capital stock
of TheraCour.
KARD
Scientific, Inc.
In
June
2005, the Company engaged KARD Scientific to conduct pre clinical animal studies
and provide the Company with a full history of the study and final report with
the data collected from
Good
Laboratory Practices (
GLP)
style studies. Dr. Krishna Menon, the Company’s Chief Regulatory Officer, is
also an officer and principal owner of KARD Scientific. Lab fees charged by
KARD
Scientific for services for the years ended June 30, 2006 and 2005, were
$206,499 and $0 respectively. In addition the Company paid KARD a $50,000
advance payment towards future fees.
ITEM
8: DESCRIPTION OF SECURITIES
COMMON
STOCK
Number
of Authorized and Outstanding Shares
.
The
Company's Articles of Incorporation authorizes the issuance of 300,000,000
shares of Common Stock, $.001 par value per share, of which 108,878,425 shares
were outstanding on June 30, 2006. All of the outstanding shares of Common
Stock
are fully paid and non-assessable.
Voting
Rights
.
Holders
of shares of Common Stock are entitled to one vote for each share on all matters
to be voted on by the stockholders. Holders of Common Stock have no cumulative
voting rights. Accordingly, the holders of in excess of 50% of the aggregate
number of shares of Common Stock outstanding will be able to elect all of the
directors of the Company and to approve or disapprove any other matter submitted
to a vote of all stockholders.
Other
.
No
shareholder has any preemptive right or other similar right to purchase or
subscribe for any additional securities issued by the Company, and no
shareholder has any right to convert the common stock into other securities.
No
shares of common stock are subject to redemption or any sinking fund provisions.
All the outstanding shares of the Company's common stock are fully paid and
non-assessable. Subject to the rights of the holders of the preferred stock,
if
any, the Company's shareholders of common stock are entitled to dividends when,
as and if declared by the Board from funds legally available therefore and,
upon
liquidation, to a pro-rata share in any distribution to shareholders. The
Company does not anticipate declaring or paying any cash dividends on the common
stock in the foreseeable future.
Preferred
Stock
The
Company's Articles of Incorporation authorizes the issuance of Preferred Stock
in series from time to time with such designation, rights, preferences and
limitations as the Board of Directors of the Company may determine by
resolution. The rights, preferences and limitations of separate series of
preferred stock may differ with respect to such matters as may be determined
by
the Board of Directors, including, without limitation, the rate of dividends,
method and nature of payment of dividends, terms of redemption, amounts payable
on liquidation, sinking fund provisions (if any), conversion rights (if any)
and
voting rights. There are currently no shares of Preferred Stock outstanding.
Common
Stock Purchase Warrants
As
of
June 30, 2006, there were 3,605,000 Common Stock Purchase Warrants outstanding.
Each warrant is exercisable to purchase one share of the Company’s common stock
under the following terms:
|
Ÿ
|
200,000
warrants exercisable at $0.25 per share, and expire on July 31,2006.
These
warrants were issued in connection with the $100,000 Series A Convertible
Debenture Financing.
|
|
Ÿ
|
1,370,000
warrants exercisable at $1.00 per share, and expire on December 31,
2009. These warrants were issued in connection with the $1,370,000
Stock
Subscription Offering closed in December
2005.
|
|
Ÿ
|
1,875,000
warrants exercisable at $2.50 per share, and expire on June 15, 2009.
These warrants were issued in connection with the $1,875,000 Stock
Subscription Offering closed in June
2006.
|
|
Ÿ
|
40,000
warrants exercisable at $0.18 per share, and expire on August 15,
2009.
These warrants were issued as compensation to our Scientific Advisory
Board.
|
|
Ÿ
|
40,000
warrants exercisable at $1.14 per share, and expire on November 15,
2009.
These warrants issued as compensation to our Scientific Advisory
Board.
|
|
Ÿ
|
40,000
warrants exercisable at $2.18 per share, and expire on February 15,
2010.
These warrants were issued as compensation to our Scientific Advisory
Board.
|
|
Ÿ
|
40,000
warrants exercisable at $2.20 per share, and expire on May 15, 2010.
These
warrants were issued as compensation to our Scientific Advisory
Board.
|
Stock
Options
As
of
June 30, 2006, the Company had outstanding an aggregate of 2,000,000 stock
options held by the Company’s officers. Each option is exercisable to purchase
one share of the Company’s Common Stock at $.10 per share. 833,333 of the
options are presently exercisable and 1,166,667 options, vest upon the holder
meeting certain employment conditions.
Convertible
Debentures
As
of
June 30, 2006, the Company had sold an aggregate of $1,000,000 of 9% Series
A
convertible debentures maturing July 31, 2006.
The
debentures accrue interest at the rate of 9%, interest payable quarterly in
an
amount of shares of Common Stock equal to the average closing price for the
preceding fifteen trading days prior to the close of the respective quarterly
period. The principal balance of the Debentures may be repaid, at the debenture
holders' option in cash, or, with a number of shares of common stock equal
to
the lower of seventy percent of the average closing price of the fifteen trading
days prior to maturity or $.30 per share.
In
July
2006, all outstanding debentures were converted by the debenture holders into
3,333,333 shares of the Company’s common stock.
Transfer
Agent
Shares
of
Common Stock are registered at the transfer agent and are transferable at such
office by the registered holder (or duly authorized attorney) upon surrender
of
the Common Stock certificate, properly endorsed. No transfer shall be registered
unless the Company is satisfied that such transfer will not result in a
violation of any applicable federal or state securities laws. The Company's
transfer agent for its Common Stock is Empire Stock Transfer, Inc.,
2470
Saint Rose Pkwy, Suite 304 Henderson, NV 89074, telephone (702)
818-5898.
Penny
Stock
The
Commission has adopted rules that define a “penny stock” as equity
securities under $5.00 per share which are not listed for trading on Nasdaq
(unless the issuer (i) has a net worth of $2,000,000 if in business for
more than three years or $5,000,000 if in business for less than three years
or
(ii) has had average annual revenue of $6,000,000 for the prior three
years). The Company’s securities are characterized as penny stock, and therefore
broker-dealers dealings in the securities are subject to the disclosure
rules of transactions involving penny stock which require the
broker-dealer, among other things, to (i) determine the suitability of
purchasers of the securities and obtain the written consent of purchasers to
purchase such securities and (ii) disclose the best (inside) bid and offer
prices for such securities and the price at which the broker-dealer last
purchased or sold the securities. The additional requirements imposed upon
broker-dealers discourage them from e
ngaging
in transactions in penny stocks, which reduces the liquidity of the Company’s
securities.
Provisions
Having A Possible Anti-Takeover Effect
We
are
subject to the State of Nevada's business combination statute. In general,
the
statute prohibits a publicly held Nevada corporation from engaging in a business
combination with a person who is an interested shareholder for a period of
three
years after the date of the transaction in which that person became an
interested shareholder, unless the business combination is approved in a
prescribed manner. A business combination includes a merger, asset sale or
other
transaction resulting in a financial benefit to the interested shareholder.
An
interested shareholder is a person who, together with affiliates, owns, or,
within three years prior to the proposed business combination, did own 15%
or
more of our voting stock. The statute could prohibit or delay mergers or other
takeovers or change in control attempts and accordingly, may discourage attempts
to acquire our Company.
PART
II
Item
1. Market Price of and Dividends on the Registrant's Common Equity and Other
Shareholder Matters
Market
for Common Equity and Related Stockholder Matters
The
Company’s Common Stock currently trades on the Pink Sheets under the symbol
NNVC. The table below sets forth the high and low prices for the Company’s
Common Stock for the quarters included within 2005 and 2006. Quotations reflect
inter-dealer prices, without retail mark-up, mark-down commission, and may
not
represent actual transactions. Since the Company's common stock trades
sporadically, there is not an established active public market for its common
stock. No assurance can be given that an active market will exist for the
Company's common stock and the Company does not expect to declare dividends
in
the foreseeable future since the Company intends to utilize its earnings, if
any, to finance its future growth, including possible acquisitions.
Quarter ended
|
|
Low price
|
|
High price
|
|
|
|
|
|
|
|
September
30, 2006
|
|
$
|
.99
|
|
$
|
1.68
|
|
June
30, 2006
|
|
$
|
1.06
|
|
$
|
3.05
|
|
March,
31, 2006
|
|
$
|
.83
|
|
$
|
3.75
|
|
December 31,
2005
|
|
$
|
.03
|
|
$
|
1.27
|
|
September 30,
2005
|
|
$
|
.05
|
|
$
|
.30
|
|
June
1, 2005 to June 30, 2005 (1)
|
|
$
|
.04
|
|
$
|
.33
|
|
(1)
Effective date of reverse merger, June 1, 2005
|
The
Company is filing this Registration Statement on Form 10-SB for the purpose
of
enabling its common stock to commence trading on the NASD OTC Bulletin Board.
The Company's Registration Statement on Form 10 must be declared effective
by
the SEC prior to it being approved for trading on the NASD OTC Bulletin Board,
and until such time as this Form 10- SB is declared effective, the Company's
common stock will continue to be quoted on the "Pink Sheets." The Company's
market makers must make an application to the National Association of Securities
Dealers, Inc., or NASD, following the effective date of this Form 10-SB in
order
to have the common stock quoted on the NASD OTC Bulletin Board.
Number
of Shareholders
.
As
of
September 30, 2006, a total of 112,417,502 the Company’s common stock (shares)
are outstanding and held by approximately 110 shareholders of record. Of this
amount, 22,105,732 shares are unrestricted. Approximately 23,667,000 shares
are
restricted securities held by non-affiliates, and the remaining 66,645,000
shares are restricted securities held by affiliates. These shares may only
be
sold in accordance with Rule 144. As of September 30, 2006, there were
3,605,000 warrants and 2,000,000 stock options to purchase the Company’s Common
Stock outstanding.
Dividends
.
The
Company has not paid any dividends since its inception. The Company currently
intends to retain any earnings for use in its business, and therefore does
not
anticipate paying dividends in the foreseeable future.
LONG-TERM
INCENTIVE PLANS AWARDS IN LAST FISCAL YEAR
None
Item
2. Legal Proceedings.
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
3. Changes in and Disagreements with Accountants.
In
June
2006, the Company dismissed Bloom & Co., LLP ("Bloom") as its independent
registered public accounting firm. While Bloom did not complete its audit of
the
Company, nor issue any reports to the Company, there were no disagreements
with
Bloom on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. In May 2006, the Company engaged
Holtz Rubenstein Reminick LLP to be its independent registered public accounting
firm.
Item
4. Recent sales of Unregistered Securities.
Set
forth
below is information regarding common stock issued, warrants issued and stock
options granted by the Company within the past three (3) years. Also included
is
the consideration, if any, received and information related to the provision
of
the Securities Act under which an exemption from registration was
claimed
:
|
1.
|
In
May 2005, prior to the Company’s reverse acquisition by NanoViricide,
Inc., the Company issued 13,750,000 shares of common stock in connection
with a forward split of the Company’s common stock on a 3.2 for 1
basis.
|
|
2.
|
In
June 2005, in connection with the Company’s reverse acquisition by
NanoViricide, Inc., the Company issued 80,000,000 shares of common
stock
to the shareholders of NanoViricide, Inc.
|
|
3.
|
In
June 2005, the Company issued 1,000,000 options to purchase the Company’s
Common Stock each to: Allan Marshall and Robert Weidenbaum, stockholders
who were instrumental in the negotiation, execution, and consummation
of
the acquisition by the Company of Nanoviricide, Inc. The options
were
exercisable at a price of $.05 per share, expiring June 1, 2008. In
May 2006, 1,800,000 options were converted into 1,800,000 shares
of common
stock resulting in proceeds to the Company of $90,000. The remaining
200,000 options were cancelled pursuant to an agreement between the
parties.
|
|
4.
|
In
June 2005, the Company issued 1,000,000 options to purchase the Company’s
Common Stock each to: MJT Consulting, Inc., another party that was
instrumental in the negotiation, execution, and consummation of the
acquisition by the Company of NVI. The options were exercisable at
a price
of $2.50 per share, expiring May 31, 2006. These options were
not converted and have expired.
|
|
5.
|
In
May 2005, the Company's Board of Directors established a Scientific
Advisory Board. As compensation, each member of the Scientific Advisory
Board (SAB) is to be granted quarterly 10,000 warrants to purchase
the
Company’s common stock at 120% of the Company’s closing stock price on the
day following the meeting. Through June 30, 2006, the SAB was granted
a
total of 160,000 stock warrants exercisable into common shares at
prices
from $0.18 to $2.20 per share. These warrants, if not exercised will
expire on various dates through February
2010.
|
|
6.
|
In
September 2005, the Company issued 2,200,000 shares of Common Stock
to
Jayant Tatake (200,000 shares) and Ann Onton (2,000,000 shares) for
scientific consulting compensation for development work on the Company’s
anti viral compounds.
|
|
7.
|
In
September 2005, the Company issued 100,000 shares of Common Stock
to David
F. Gencarelli, an outside consultant, for advising the Company on
government procurements.
|
|
8.
|
In
September 2005, the Company issued 48,177 shares of Common Stock
to the
Series A Debenture Holders in lieu of interest on the Series A Debentures.
|
|
9.
|
In
November and December 2005, the Company closed a private equity financing
for net proceeds of $1,370,000. The Company sold 2,740,000 shares
of
common stock at $.50 per share. These investors also received warrants
for
the purchase of 1,370,000 common shares at $1.00 per share. These
warrants
expire on various dates through December
2008.
|
|
10.
|
In
December 2005, the Company issued 20,000 shares of Common Stock,
to Joseph
Sansone, an outside consultant advising the Company on government
procurements.
|
|
11.
|
In
December 2005, the Company issued 50,000 shares of Common Stock,
to Paul
Taublibe for consulting services
rendered.
|
|
12.
|
In
December 2005, the Company granted 19,476 shares of its common stock
with
a restrictive legend, to the debenture holders in lieu of interest
on
debentures.
|
|
13.
|
In
January 2006, the Company issued 3,425 shares of Common Stock to
an
outside consultant for services.
|
|
14.
|
In
March 2006, the Company granted 7,921 shares of its common stock
with a
restrictive legend, to the debenture holders in lieu of interest
on
debentures.
|
|
15.
|
On
June 15, 2006, the Company closed a private equity financing for net
proceeds of $1,875,000 with several accredited investors pursuant
to
Regulation D of the Securities Act. The Company sold 1,875,000 shares
of
common stock at $1.00 per share. These investors also received warrants
for the purchase of 1,875,000 common shares at $2.50 per share.
|
|
16.
|
From
July through December, 2005, the Company issued $1,000,000 of 9%
Series A Convertible Debentures and 200,000 warrants to purchase
the
Company’s Common Stock, exercisable at a price per common share of
$.25. Interest on these debentures were payable quarterly in common
stock and resulted in the issuance of 90,000 shares of common stock
|
|
17.
|
In
September 2005, 500,000 stock options were granted to Eugene Seymour,
our
CEO under an employment agreement.
|
|
18.
|
In
September 2005, 1,000,000 stock options were granted to Anil
Diwan, our Chairman and President under an employment agreement.
|
|
19.
|
In
September 2005, 500,000 stock options were granted to Leo Ehrlich,
our CFO
under an employment agreement.
|
|
20.
|
In
June 2006, the Company granted 14,426 shares of its common stock
with a
restrictive legend, to the debenture holders in lieu of interest
on
debentures.
|
All
of
the securities set forth above were issued by the Company pursuant to
Section 4(2) of the Securities Act of 1933, as amended, or the
provisions of Rule 504 of Regulation D promulgated under the Securities
Act. All such shares issued contained a restrictive legend and the holders
confirmed that they were acquiring the shares for investment and without intent
to distribute the shares. All of the purchasers were friends or business
associates of the Company’s management and all were experienced in making
speculative investments, understood the risks associated with investments,
and
could afford a loss of the entire investment. The Company has never utilized
an
underwriter for an offering of its securities.
Item
5. Indemnification of Directors and Officers.
Neither
our Articles of Incorporation nor Bylaws prevent us from indemnifying our
officers, directors and agents to the extent permitted under the Nevada Revised
Statute ("NRS"). NRS Section 78.7502, provides that a corporation shall
indemnify any director, officer, employee or agent of a corporation against
expenses, including attorneys’ fees, actually and reasonably incurred by him in
connection with any the defense to the extent that a director, officer, employee
or agent of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to Section 78.7502(1) or
78.7502(2), or in defense of any claim, issue or matter therein. NRS 78.7502(1)
provides that a corporation may indemnify any person who was or is a party
or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or
other enterprise, against expenses, including attorneys’ fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he: (a) is not liable pursuant
to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation,
and,
with respect to any criminal action or proceeding, had no reasonable cause
to
believe his conduct was unlawful.
NRS
Section 78.7502(2) provides that a corporation may indemnify any person who
was
or is a party or is threatened to be made a party to any threatened, pending
or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys’ fees actually and
reasonably incurred by him in connection with the defense or settlement of
the
action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted
in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation.
PART
F/S
NANOVIRICIDES,
INC.
(A
DEVELOPMENT STAGE COMPANY)
Index
to Financial Statements
Report
of Independent Registered Public Accounting Firm
|
65
|
|
|
Financial
Statements
|
|
|
|
|
|
Balance
Sheets - June 30, 2006 and 2005
|
66
|
|
|
|
|
Statements
of Operations - For the Year Ended June 30, 2006, For the Period
May 12,
2005 (Inception) through June, 2005 and For the Cumulative Period
May 12,
2005 (Inception) through June 30, 2006.
|
67
|
|
|
|
|
Statements
of Changes in Shareholders’ Equity (Deficit) - For the Cumulative Period
May 12, 2005 (Inception) through June 30, 2006.
|
68
|
|
|
|
|
Statements
of Cash Flows - For the Year Ended June 30, 2006, For the Period
May 12,
2005 (Inception) through June, 2005 and
For
the Cumulative Period May 12, 2005 (Inception) through June 30,
2006.
|
71
|
|
|
|
Notes
to Financial Statements
|
73
|
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Shareholders of NanoViricides, Inc.
We
have
audited the accompanying balance sheets of NanoViricides, Inc. (a development
stage company) as of June 30, 2006 and 2005, and the related statements of
operations, shareholders' equity (deficit) and cash flows for the year ended
June 30, 2006, the period from May 12, 2005 (date of inception) through June
30,
2005 and the cumulative period from May 12, 2005 (date of inception) through
June 30, 2006. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of NanoViricides, Inc. as of June
30,
2006 and 2005, and the results of its operations and its cash flows for the
year
ended June 30, 2006, the period from May 12, 2005 (date of inception) through
June 30, 2005 and the cumulative period from May 12, 2005 (date of inception)
through June 30, 2006 in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has no viable operations, has suffered significant
operating losses and is dependent upon its shareholders to provide sufficient
working capital to meet its obligations and sustain its operations. These
circumstances raise substantial doubt about the Company's ability to continue
as
a going concern. The accompanying financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.
/s/
Holtz
Rubenstein Reminick LLP
New
York,
New York
October
10, 2006
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
|
|
June
30, 2006
|
|
June
30, 2005
|
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,507,102
|
|
$
|
-
|
|
Prepaid
expenses
|
|
|
213,728
|
|
|
-
|
|
Total
current assets
|
|
|
2,720,830
|
|
|
-
|
|
Property
and equipment, net
|
|
|
2,054
|
|
|
-
|
|
Deferred
expenses, net
|
|
|
6,714
|
|
|
-
|
|
TOTAL
ASSETS
|
|
$
|
2,729,598
|
|
$
|
-
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable - trade
|
|
$
|
44,076
|
|
$
|
10,174
|
|
Accounts
payable - related parties
|
|
|
203,045
|
|
|
38,307
|
|
Accrued
expenses
|
|
|
90,831
|
|
|
17,524
|
|
Accrued
payroll to officers and related payroll tax expense
|
|
|
232,282
|
|
|
-
|
|
Other
payroll taxes payable
|
|
|
3,826
|
|
|
-
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
574,060
|
|
|
66,005
|
|
LONG
TERM DEBT:
|
|
|
|
|
|
|
|
Debentures,
net
|
|
|
917,082
|
|
|
-
|
|
TOTAL
LIABILITIES
|
|
|
1,491,142
|
|
|
66,005
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
SHAREHOLDERS’
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value; 300,000,000 shares authorized at June
30, 2006
and 2005
;
issued and outstanding: 108,878,425 (2006) and 100,000,000
(2005)
|
|
|
108,878
|
|
|
100,000
|
|
Additional
paid-in capital
|
|
|
4,620,238
|
|
|
-
|
|
Deferred
compensation
|
|
|
(40,223
|
)
|
|
-
|
|
Stock
subscription receivable
|
|
|
(20
|
)
|
|
(20
|
)
|
Deficit
accumulated during the development stage
|
|
|
(3,450,417
|
)
|
|
(165,985
|
)
|
TOTAL
SHAREHOLDERS’ EQUITY (DEFICIT)
|
|
|
1,238,456
|
|
|
(66,005
|
)
|
TOTAL
LIABILITIES AND
SHAREHOLDERS’
EQUITY (DEFICIT)
|
|
$
|
2,729,598
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial
statements.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS
|
|
Year
Ended
June
30. 2006
|
|
For
the Period From May 12, 2005
(Inception)
through
June
30,
2005
|
|
For
the Cumulative Period
From
May 12, 2005 (Inception) through
June
30, 2006
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
899,891
|
|
|
30,771
|
|
|
930,662
|
|
General
and administrative (of this amount $376,655was for stock and option
based
compensation to consultants and officers)
|
|
|
1,695,957
|
|
|
35,234
|
|
|
1,731,191
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
2,595,848
|
|
|
66,005
|
|
|
2,661,853
|
|
Loss
from operations
|
|
|
(2,595,848
|
)
|
|
(66,005
|
)
|
|
(2,661,853
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
7,863
|
|
|
-
|
|
|
7,863
|
|
Non
cash interest on convertible debentures
|
|
|
(66,286
|
)
|
|
-
|
|
|
(66,286
|
)
|
Non
cash interest expense on beneficial conversion feature
|
|
|
|
|
|
|
|
|
|
|
of
convertible debentures
|
|
|
(630,161
|
)
|
|
-
|
|
|
(630,161
|
)
|
Total
other expenses
|
|
|
(688,584
|
)
|
|
-
|
|
|
(688,584
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,284,432
|
)
|
$
|
(66,005
|
)
|
$
|
(3,350,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share: basic and diluted
|
|
$
|
(0.03
|
)
|
$
|
(0.00
|
)
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding: basic and diluted
|
|
|
103,591,691
|
|
|
100,000,000
|
|
|
103,327,328
|
|
The
accompanying notes are an integral part of these financial
statements.
NANOVIRICIDES,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
FOR
THE CUMULATIVE PERIOD MAY 12, 2005 (INCEPTION) THROUGH JUNE 30,
2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
Shares
|
|
Par
Value
$.001
|
|
Additional
Paid-in
Capital
|
|
Deferred
Compensation
|
|
Stock
Subscription
Receivable
|
|
Accumulated
Deficit
|
|
Total
Shareholders'
Equity
|
|
Shares
issued May 12, 2005 (Inception)
|
|
|
20,000
|
|
$
|
20
|
|
$
|
-
|
|
$
|
-
|
|
$
|
(20
|
)
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
exchange with Edot-com.com Inc., June 1, 2005
|
|
|
(20,000
|
)
|
|
(20
|
)
|
|
-
|
|
|
-
|
|
|
20
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
exchanged in reverse acquisition of Edot-com.com Inc., June 1,
2005
|
|
|
80,000,000
|
|
|
80,000
|
|
|
-
|
|
|
-
|
|
|
(20
|
)
|
|
(79,980
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edot-com.com
Inc.,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
1, 2005
|
|
|
20,000,000
|
|
|
20,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(20,000
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss period ended June 30, 2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(66,005
|
)
|
|
(66,005
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2005
|
|
|
100,000,000
|
|
|
100,000
|
|
|
-
|
|
|
-
|
|
|
(20
|
)
|
|
(165,985
|
)
|
|
(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
|
|
Options
issued to Scientific Advisory Board, August 15, 2005
|
|
|
-
|
|
|
-
|
|
|
4,094
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,094
|
|
Options
issued to officers, September 23, 2005
|
|
|
-
|
|
|
-
|
|
|
127,541
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
127,541
|
|
Shares
issued for consulting services rendered at $.081 per share, September
30,
2005
|
|
|
2,300,000
|
|
|
2,300
|
|
|
184,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
186,300
|
|
Shares
issued for interest on debentures, September 30, 2005
|
|
|
48,177
|
|
|
48
|
|
|
4,267
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,315
|
|
Discount
related to beneficial conversion feature of Convertible debentures,
October 28, 2005
|
|
|
-
|
|
|
-
|
|
|
166,666
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
166,666
|
|
Discount
related to beneficial conversion feature of Convertible debentures,
November 9, 2005
|
|
|
-
|
|
|
-
|
|
|
166,667
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
166,667
|
|
The
accompanying notes are an integral part of these financial
statements.
NANOVIRICIDES,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(CONTINUED)
FOR
THE CUMULATIVE PERIOD MAY 12, 2005 (INCEPTION) THROUGH JUNE 30,
2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Stock
|
|
|
|
Total
|
|
|
|
Number
|
|
Par
|
|
Paid-in
|
|
Deferred
|
|
Subscription
|
|
Accumulated
|
|
Shareholders'
|
|
|
|
of
Shares
|
|
Value
$.001
|
|
Capital
|
|
Compensation
|
|
Receivable
|
|
Deficit
|
|
Equity
|
|
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
|
|
Options
issued to Scientific Advisory Board, November 15, 2005
|
|
|
-
|
|
|
-
|
|
|
25,876
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,876
|
|
Shares
and warrants issued in connection with private placement of common
stock,
November 28, 2005
|
|
|
340,000
|
|
|
340
|
|
|
169,660
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
170,000
|
|
Shares
and warrants issued in connection with private placement of common
stock,
November 29, 2005
|
|
|
300,000
|
|
|
300
|
|
|
149,700
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
150,000
|
|
Shares
and warrants issued in connection with private placement of common
stock,
November 30, 2005
|
|
|
150,000
|
|
|
150
|
|
|
74,850
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
75,000
|
|
Shares
and warrants issued in connection with private placement of common
stock,
December 2, 2005
|
|
|
100,000
|
|
|
100
|
|
|
49,900
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
Shares
and warrants issued in connection with private placement of common
stock,
December 6, 2005
|
|
|
850,000
|
|
|
850
|
|
|
424,150
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
425,000
|
|
Shares
issued for legal services rendered at $.95 per share, December
6,
2005
|
|
|
20,000
|
|
|
20
|
|
|
18,980
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
19,000
|
|
Shares
and warrants issued in connection with private placement of common
stock,
December 12, 2005
|
|
|
750,000
|
|
|
750
|
|
|
374,250
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
375,000
|
|
Shares
and warrants issued in connection with private placement of common
stock,
December 13, 2005
|
|
|
50,000
|
|
|
50
|
|
|
24,950
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Shares
and warrants issued in connection with private placement of common
stock,
December 14, 2005
|
|
|
50,000
|
|
|
50
|
|
|
24,950
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Shares
issued in connection with debenture offering, December 15,
2005
|
|
|
50,000
|
|
|
50
|
|
|
48,950
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
49,000
|
|
The
accompanying notes are an integral part of these financial
statements.
NANOVIRICIDES,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(CONTINUED)
FOR
THE CUMULATIVE PERIOD MAY 12, 2005 (INCEPTION) THROUGH JUNE 30,
2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Stock
|
|
|
|
Total
|
|
|
|
Number
|
|
Par
|
|
Paid-in
|
|
Deferred
|
|
Subscription
|
|
Accumulated
|
|
Shareholders'
|
|
|
|
Of
Shares
|
|
Value
$.001
|
|
Capital
|
|
Compensation
|
|
Receivable
|
|
Deficit
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
and warrants issued in connection with private placement of common
stock,
December 20, 2005
|
|
|
50,000
|
|
|
50
|
|
|
24,950
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Shares
and warrants issued in connection with private placement of common
stock,
December 29, 2005
|
|
|
50,000
|
|
|
50
|
|
|
24,950
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Shares
and warrants issued in connection with private placement of common
stock,
December 30, 2005.
|
|
|
50,000
|
|
|
50
|
|
|
24,950
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Shares
issued for interest on debentures, December 31, 2005
|
|
|
19,476
|
|
|
19
|
|
|
17,321
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
17,340
|
|
Shares
issued for consulting services rendered at $1.46 per share, January
9,
2006
|
|
|
3,425
|
|
|
4
|
|
|
4,997
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,001
|
|
Options
issued to Scientific Advisory Board on February 15, 2006
|
|
|
-
|
|
|
-
|
|
|
49,067
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
49,067
|
|
Options
issued to Scientific Advisory Board on May 15, 2006
|
|
|
-
|
|
|
-
|
|
|
51,048
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
51,048
|
|
Shares
issued for interest on debentures, March 31, 2005
|
|
|
7,921
|
|
|
8
|
|
|
22,184
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
22,192
|
|
Options
exercised, May 31, 2006
|
|
|
1,800,000
|
|
|
1,800
|
|
|
88,200
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
90,000
|
|
Shares
and warrants issued in connection with private placement of common
stock,
June 15, 2006
|
|
|
1,875,000
|
|
|
1,875
|
|
|
1,873,125
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,875,000
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for interest on debentures, June 30, 2006
|
|
|
14,426
|
|
|
14
|
|
|
22,424
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
22,438
|
|
Deferred
compensation, June 30, 2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(40,223
|
)
|
|
-
|
|
|
-
|
|
|
(40,223
|
)
|
Net
loss year ended June 30, 2006.
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,284,432
|
)
|
|
(3,284,432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2006
|
|
|
108,878,425
|
|
$
|
108,878
|
|
$
|
4,620,238
|
|
$
|
(40,223
|
)
|
$
|
(20
|
)
|
$
|
(3,450,417
|
)
|
$
|
1,238,456
|
|
The
accompanying notes are an integral part of these financial
statements.
NANOVIRICIDES,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
|
|
Year
Ended June 30. 2006
|
|
For
the Period From May 12, 2005
(Inception)
through
June
30,
2005
|
|
For
the Cumulative Period
From
May 12, 2005 (Inception) through
June
30, 2006
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,284,432
|
)
|
$
|
(66,005
|
)
|
$
|
(3,350,437
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services rendered
|
|
|
210,301
|
|
|
-
|
|
|
210,301
|
|
Options
granted to scientific advisory board
|
|
|
130,084
|
|
|
-
|
|
|
130,084
|
|
Amortization
of deferred compensation
|
|
|
87,318
|
|
|
-
|
|
|
87,318
|
|
Depreciation
|
|
|
94
|
|
|
-
|
|
|
94
|
|
Amortization
of deferred financing expenses
|
|
|
44,461
|
|
|
-
|
|
|
44,461
|
|
Non
cash interest on convertible debentures
|
|
|
66,286
|
|
|
-
|
|
|
66,286
|
|
Non
cash interest expense on beneficial conversion feature of convertible
debentures
|
|
|
630,161
|
|
|
-
|
|
|
630,161
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
(213,728
|
)
|
|
-
|
|
|
(213,728
|
)
|
Deferred
expenses
|
|
|
(2,175
|
)
|
|
-
|
|
|
(2,175
|
)
|
Accounts
payable- trade
|
|
|
33,902
|
|
|
10,174
|
|
|
44,076
|
|
Accounts
payable -related parties
|
|
|
164,738
|
|
|
38,307
|
|
|
203,045
|
|
Accrued
expenses
|
|
|
73,307
|
|
|
17,524
|
|
|
90,831
|
|
Accrued
payroll to officers and related payroll tax expense
|
|
|
232,282
|
|
|
-
|
|
|
232,282
|
|
Other
payroll taxes payable
|
|
|
3,826
|
|
|
-
|
|
|
3,826
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(1,823,575
|
)
|
|
-
|
|
|
(1,823,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(2,148
|
)
|
|
-
|
|
|
(2,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(2,148
|
)
|
|
-
|
|
|
(2,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of convertible debentures
|
|
|
1,000,000
|
|
|
-
|
|
|
1,000,000
|
|
Proceeds
from issuance of common stock and warrants in connection with
private
placements of common stock
|
|
|
3,245,000
|
|
|
-
|
|
|
3,245,000
|
|
Proceeds
from exercise of stock options
|
|
|
90,000
|
|
|
-
|
|
|
90,000
|
|
Payment
of legal expenses related to private placement
|
|
|
(2,175
|
)
|
|
-
|
|
|
(2,175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
4,332,825
|
|
|
-
|
|
|
4,332,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
2,507,102
|
|
|
-
|
|
|
2,507,102
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, ENDING
|
|
$
|
2,507,102
|
|
$
|
-
|
|
$
|
2,507,102
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
NANOVIRICIDES,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL
DISCLOSURE OF NON-CASH ACTIVITY
During
the year ended June 30, 2006, the Company had the following non cash activity:
2,200,000
shares of common stock issued for services rendered.
|
|
$
|
178,200
|
|
|
|
|
|
|
100,000
shares of common stock issued for legal services rendered.
|
|
|
8,100
|
|
|
|
|
|
|
2,000,000
stock options issued to the officers as compensation
|
|
|
127,541
|
|
|
|
|
|
|
20,000
shares of common stock issued for services rendered
|
|
|
19,000
|
|
|
|
|
|
|
50,000
shares of common stock issued in connection with debenture
offering
|
|
|
49,000
|
|
|
|
|
|
|
3,425
shares of common stock issued for services rendered
|
|
|
5,001
|
|
|
|
|
|
|
90,000
shares issued for interest on debentures
|
|
|
66,286
|
|
|
|
|
|
|
160,000
stock options granted to scientific advisory board
|
|
|
130,084
|
|
|
|
|
|
|
3,245,000
warrants issued in connection with private placements
|
|
|
1,262,632
|
|
|
|
|
|
|
Debt
discount related to beneficial conversion feature of convertible
debt
|
|
|
713,079
|
|
The
accompanying notes are an integral part of these financial
statements
.
NANOVIRICIDES,
INC
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2006 AND 2005
Note
1. Organization and Nature of Business
NanoViricides,
Inc. was incorporated under the laws of the State of Colorado on July 25, 2000
as Edot-com.com, Inc
.
and
was
organized for the purpose of conducting internet retail sales. On April 1,
2005,
Edot-com.com, Inc
.
was
incorporated under the laws of the State of Nevada for the purpose of
re-domiciling the Company as a Nevada corporation. On May 12, 2005, the
Corporations were merged and Edot-com.com, Inc
.,
a
Nevada
corporation, (the Company), 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 Transaction. 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 01, 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.,
to
which we have the necessary licenses in perpetuity 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. We focus our research and clinical programs
on specific anti-viral solutions. 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.
To date, the Company has not developed any commercial products.
Note
2 -
Substantial
Doubt Regarding Ability to Continue as a Going Concern
Since
May 2005, the Company has been engaged exclusively in research and development
activities focused on developing targeted nano viral drugs. The Company
has not yet commenced any product commercialization. The Company has incurred
significant operating losses since its inception, resulting in an accumulated
deficit of $3,450,417 at June 30, 2006. 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.
Despite the Company’s financings in 2006 and 2005 (See Notes 7 and 8) and a cash
balance of $2,507,102 at June 30, 2006, substantial additional financing will
be
required in future periods, as the Company believes it will require in excess
of
$5,000,000 to fund its operations during the next twelve months.
The
accompanying financial statements have been
prepared assuming that the Company will continue as a going concern which
contemplates the realization of assets and the satisfaction of liabilities
in
the normal course of business. Accordingly, they do not include any adjustments
relating to the realization of the carrying value of assets or the amounts
and
classification of liabilities that might be necessary should the company be
unable to continue as a going concern. The Company's significant
operating losses and significant capital requirements,
however, raise substantial doubt about the
Company's ability to continue as a going
concern.
Note
3. Summary of Significant Accounting Policies
A.
Accounting
Basis
-
The
Company has not earned any revenue from limited principal operations.
Accordingly, the Company's activities have been accounted for as those of a
"Development Stage Company" as set forth in Financial Accounting Standards
Board
Statement No. 7 (“SFAS 7"). Among the disclosures required by SFAS 7 are that
the Company's financial statements be identified as those of a development
stage
company, and that the statements of earnings, retained earnings and
stockholders' equity and cash flows disclose activity since the date of the
Company's inception.
B.
Cash
and Cash Equivalents
- The Company considers highly liquid debt instruments with original maturities
of three months or less to be cash equivalents. In addition, the Company
maintains cash and cash equivalents at financial institutions, which may exceed
federally insured amounts at times.
C.
Property
and Equipment
- Equipment is stated at cost and depreciated over the estimated useful lives
of
the assets (generally five years) using the straight-line method.
D.
Use
of Estimates
- The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of
assets and liabilities and disclosure of contingent assets and liabilities
at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
E.
Research
and Development
-
Research and development expenses consist primarily of costs associated with
the
preclinical and or clinical trials of drug candidates, compensation and other
expenses for research and development, personnel, supplies and development
materials, costs for consultants and related contract research and facility
costs. Expenditures relating to research and development are expensed as
incurred.
F.
Accounting
for Stock Based Compensation
-
The
Company adopted the fair value recognition provisions of “FASB Statement No.
123(R) Share-Based Payment”, using the modified prospective-transition method.
Under that transition method, compensation cost recognized in the year ended
June 30, 2006 includes compensation cost for all share-based payment granted
based on the grant-date fair value estimated in accordance with provisions
of
FASB 123(R).
The
fair
value of the Company’s option-based awards granted to executive officers for the
year ended June 30, 2006 were estimated using the Black-Scholes option-pricing
model with following assumptions.
Expected
life in years
|
5
years
|
Risk
free interest rate
|
3.88
to 4.10%
|
Expected
volatility
|
108.00
to 109.00%
|
Dividend
yield
|
0%
|
Computation
of expected volatility for the year ended June 30, 2006, is based on the equity
volatilities of four comparable companies. The computation of expected life
is
as stated in employment contracts. The risk free interest rates used in the
valuations of the fair value are based on risk free bond rates of similar time
periods as the expected life of the stock options. Because the Company has
no
historical forfeiture rates, the stock option expense is not adjusted by an
estimate for forfeiture as required under FASB 123(R).
G.
Accounting
for Non-Employee Stock Based Compensation
- The Company accounts for shares and options issued for non-employees in
accordance with the provision of Emerging Issue Task Force Issue No. 96-18,
“Accounting for Equity Instruments that are issued to other than Employees for
Acquiring, or in Conjunction with selling Goods or Services”. According to the
provisions of ETIF 96-18, the Company determines the fair value of stock and
options granted to non-employees on the measurement date which is either the
date of a commitment for performance has been reached or when performance has
been completed, depending upon the facts and circumstances. The fair value
of
the shares and options valued at commitment date is expensed immediately for
past services or expensed over the service period for future
services.
H.
Income
Taxes
- The Company utilizes Statement of Financial Accounting Standards No. 109,
“Accounting for Income Taxes,” which requires an asset and liability approach to
financial accounting and reporting for income taxes. The difference between
the
financial statement and tax basis of assets and liabilities is determined
annually. Deferred income tax assets and liabilities are computed for those
temporary differences that have future tax consequences using the current
enacted tax laws and rates that apply to the periods in which they are expected
to affect taxable income. Valuation allowances are established, if necessary,
to
reduce the deferred tax asset to the amount that will, more likely than not,
be
realized. Income tax expense is the current tax payable or refundable for the
year plus or minus the net change in the deferred tax assets and
liabilities.
I.
Basis
Earnings (Loss) per Share
- Basic Earnings (Loss) per Share is calculated in accordance with SFAS No.
128,
"Earnings per Share," by dividing income or loss attributable to common
stockholders by the weighted average common stock outstanding. Diluted EPS
is
calculated in accordance with SFAS No. 128 by adjusting weighted average common
shares outstanding by assuming conversion of all potentially dilutive shares.
In
periods where a net loss is recorded, no effect is given to potentially dilutive
securities, since the effect would be antidilutive. Total stock options and
warrants not included in the calculation of common shares outstanding (including
both exercisable and nonexercisable) as of June 30, 2006 and 2005 were
4,398,333and 3,000,000 respectively.
J.
Concentrations
of Risk
- Financial instruments that potentially subject us to a significant
concentration of credit risk consist primarily of cash and cash equivalents.
The
Company maintains deposits in federally insured institutions in excess of
federally insured limits. The Company does not believe it is exposed to
significant credit risk due to the financial position of the depository
institutions in which those deposits are held.
K.
Segment
Reporting
- As of June 30, 2006 the Company has determined that it operates in only one
segment. Accordingly, no segment disclosures have been included in the notes
to
the consolidated financial statements.
L.
New
Accounting Pronouncements Affecting the Company
The
FASB
has issued Interpretation No. 46 (FIN-46R) (Revised December 2003),
Consolidation
of Variable Interest Entities
.
FIN-46R
clarifies the application of Accounting Research Bulletin No. 51, “Consolidated
Financial Statements,” to certain entities in which equity investors do not have
the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. It separates
entities into two groups: (1) those for which voting interests are used to
determine consolidation and (2) those for which variable interests are used
to
determine consolidation (the subject of FIN-46R). FIN-46R clarifies how to
identify a variable interest entity and how to determine when a business
enterprise should include the assets, liabilities, non-controlling interests,
and results of activities of a variable interest entity in its consolidated
financial statements.
FIN-46R
requires that a variable interest entity to be consolidated by its “Primary
Beneficiary.” The Primary Beneficiary is the entity, if any, that stands to
absorb a majority of the variable interest entity’s expected losses, or in the
event that no entity stands to absorb a majority of the expected losses, then
the entity that stands to receive a majority of the variable interest entity’s
expected residual returns. If it is reasonably possible that an enterprise
will
consolidate or disclose information about a variable interest entity when FIN-
46R becomes effective, the enterprise is required to disclose in all financial
statements initially issued after December 31, 2003, the nature, purpose, size,
and activities of the variable interest entity and the enterprise’s maximum
exposure to loss as a result of its involvement with the variable interest
entity. At June 30, 2006, the Company evaluated its relationship with TheraCour
Pharma, Inc. for purposes of FIN-46R, and concluded that it is not a variable
interest entity that is subject to consolidation in the Company’s financial
statements
under
FIN-46R.
In
December 2004, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 123 (revised 2004), Share-Based Payment ("SFAS No. 123-R"). SFAS
No.123-R is a revision of SFAS No. 123, as amended, Accounting for Stock-Based
Compensation, and supersedes Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. SFAS No.123-R eliminates the
alternative to use the intrinsic value method of accounting that was provided
in
SFAS No. 123, which generally resulted in no compensation expense recorded
in
the financial statements related to the issuance of equity awards to employees.
SFAS No. 123-R requires that the cost resulting from all share based payment
transactions be recognized in the financial statements. SFAS No. 123-R
establishes fair value as the measurement objective in accounting for
share-based payment arrangements and requires all companies to apply a
fair-value-based measurement method in accounting for generally all share-based
payment transactions with employees. The Company adopted this statement using
the modified prospective transition method for awards made to employee and
directors, which required the application of the accounting standard as of
May
12, 2005 (date of inception).
In
May 2005, the FASB issued Statement No. 154, "Accounting Changes and Error
Corrections", a replacement of Accounting Principles Board Opinion No. 20,
"Accounting Changes", and Statement No. 3, "Reporting Accounting Changes in
Interim Financial Statements" ("SFAS 154"). SFAS 154 changes the requirements
for the accounting for, and reporting of, a change in accounting principle.
Previously, voluntary changes in accounting principles were generally required
to be recognized by way of a cumulative effect adjustment within net income
during the period of the change. SFAS 154 requires retrospective application
to
prior periods' financial statements, unless it is impracticable to determine
either the period of specific effects or the cumulative effect of the change.
SFAS 154 is effective for accounting changes made in fiscal years beginning
after December 15, 2005; however, the statement does not change the transition
provisions of any existing accounting pronouncements. The Company does not
believe adoption of SFAS 154 will have a material effect on its financial
position, cash flows or results of operations.
In
February 2006, the FASB issued Statement of Financial Accounting Standards
No.
155, "Accounting for Certain Hybrid Financial Instruments" ("SFAS 155"), which
amends SFAS No. 133, "Accounting for Derivatives Instruments and Hedging
Activities" ("SFAS 133") and SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS 140").
SFAS 155 amends SFAS 133 to narrow the scope exception for interest-only and
principal-only strips on debt instruments to include only such strips
representing rights to receive a specified portion of the contractual interest
or principle cash flows. SFAS 155 also amends SFAS 140 to allow qualifying
special-purpose entities to hold a passive derivative financial instrument
pertaining to beneficial interests that itself is a derivative instruments.
The
Company is currently evaluating the impact this new Standard, but believes
that
it will not have a material impact on the Company's financial
position.
In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No.
157”). SFAS No.157 defines fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. SFAS No.
157
is effective for the Company beginning with fiscal year 2009. The Company is
in
the
process
of assessing the effect SFAS No. 157 may have on its financial
statements.
On
September 29, 2006, the FASB issued FASB Statement No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans -- An
Amendment of FASB Statements No. 87, 88, 106, and 132R" ("SFAS 158"). This
new
standard requires an employer to: (a) recognize in its statement of financial
position an asset for a plan's overfunded status or a liability for a plan's
underfunded status; (b) measure a plan's assets and its obligations that
determine its funded status as of the end of the employer's fiscal year (with
limited exceptions); and (c) recognize changes in the funded status of a defined
benefit postretirement plan in the year in which the changes occur. Those
changes will be reported in comprehensive income. The requirement to recognize
the funded status of a benefit plan and the disclosure requirements are
effective for the Company's fiscal year ending June 30, 2007. The requirement
to
measure plan assets and benefit obligations as of the date of the employer's
fiscal year-end statement of financial position is effective for fiscal years
ending after December 15, 2008. The Company has not determined the effect,
if
any, the adoption of SFAS 158 will have on the Company’s financial position and
results of operations.
On
July
13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
in
Income Taxes—an interpretation of FASB Statement No. 109. Interpretation 48
clarifies the accounting for uncertainty in income taxes recognized in an
entity’s financial statements in accordance with Statement 109 and prescribes a
recognition threshold and measurement attribute for financial statement
disclosure of tax positions taken or expected to be taken on a tax return.
Additionally, Interpretation 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. Interpretation 48 is effective for fiscal years
beginning after December 15, 2006, with early adoption permitted. We are
currently evaluating whether the adoption of Interpretation 48 will have a
material effect on our consolidated financial position, results of operations
or
cash flows.
Note
4. Significant Alliances and Related Parties
TheraCour
Pharma, Inc.
Pursuant
to an Exclusive License Agreement we entered into with TheraCour Pharma, Inc.,
(TheraCour), effective as of May 12, 2005, the Company was granted an
exclusive license in perpetuity for technologies developed by TheraCour for
the
five virus types: HIV, HCV, Herpes, Asian (bird) flu and Influenza. 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. (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, (6) TheraCour may request and
NanoViricides, Inc. will pay an advance payment equal to twice the amount of
the
previous months invoice to be applied as a prepayment towards
expenses.
TheraCour
Pharma, Inc.,
may
terminate the license upon a material breach by us as specified in the
agreement. However, we may avoid such termination if within 90 days of receipt
of such termination notice we cure the breach.
Development
costs charged by and paid to TheraCour Pharma, Inc. was $692,892 and $30,771
for
the years ended June 30, 2006 and 2005, respectively. No royalties have been
paid through the year ended June 30, 2006.
TheraCour
Pharma, Inc., is affiliated with the Company through the common control of
it
and our Company by Anil Diwan, President, and Leo Ehrlich, CFO, who are
directors of each corporation, and own approximately75% of the capital stock
of
TheraCour Pharma, Inc., which itself owns approximately 35% of the capital
stock
of the Company.
TheraCour
Pharma, Inc. owns 35,370,000 share of the Company’s outstanding common stock as
of June 30, 2006.
KARD
Scientific, Inc.
In
June
2005, the Company engaged KARD Scientific to conduct pre clinical animal studies
and provide the Company with a full history of the study and final report with
the data collected from
Good
Laboratory Practices (C
GLP)
style studies. Dr. Krishna Menon, the Company’s Chief Regulatory Officer, is
also an officer and principal owner of KARD Scientific. Lab fees charged by
KARD
Scientific for services for the years ended June 30, 2006 and 2005 were $206,499
and $0, respectively. In addition the Company paid KARD a $50,000 advance
payment towards future fees.
Note
5. Prepaid Expenses
Prepaid
expenses at June 30 are summarized as follows:
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
TheraCour
Pharma, Inc.
|
|
$
|
163,728
|
|
$
|
-
|
|
Kard
Scientific, Inc.
|
|
|
50,000
|
|
|
-
|
|
|
|
$
|
213,728
|
|
$
|
-
|
|
(See
Note 4. Significant Alliances and Related Parties)
Note
6. Deferred Financing Expenses
Deferred
Financing Expenses represent the value of cash payments and common stock issued
for attorney fees and to an investor as consideration for debt financing during
the year. As of June 30, 2006, net deferred financing cost was $6,714, which
is
being amortized on a straight-line basis over the term of the debenture.
Amortization expense for the years ended 2006 and 2005 was $44,461 and $ 0,
respectively.
Note
7. Convertible Notes Payable
In
July
2005 the Company’s board of directors authorized the issuance and sale of up to
one million dollars of convertible debentures. These debentures mature July
31,
2006 and carry an interest rate of 9% per year and are convertible into common
stock at the lower of 70% of the average closing price of the common stock
during the 15 days trading days preceding the Maturity Date or $.30 per share.
In accordance with EITF Issue 98-5 “Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, as
amended by EITF 00-27 “Application of Issue No. 98-5 to certain Convertible
Instruments”, the Company had evaluated that the convertible debt had a
beneficial conversion feature as the conversion price was less than the fair
value of the Company's common stock on the measurement date. Accordingly, the
Company recognized this beneficial conversion feature by recording debt discount
and corresponding additional paid in capital, in the amount of $713,079. The
debt discount is being amortized on a straight-line basis over the term of
these
debentures. Amortization expense for the years ended June 30, 2006 and 2005
was
$630,161 and $0, respectively.
As
of
June 30, 2006; the Company issued an aggregate of $1,000,000 in convertible
debentures.
In
July 2006, subsequent to the balance sheet date, the debentures holders
converted all outstanding debentures. As a result of these conversions,
the amounts to be converted ($1,000,000) which existed at June 30, 2006, have
been reflected as long-term liabilities on the Company's June 30, 2006 balance
sheet. Also, as a result of these conversions, the Company is obligated to
issue
an aggregate total of 3,333,333 shares of the Company's $.001 par value common
stock.
For
the
year ended June 30, 2006, interest expense on the convertible notes in the
amount of $66,286, was paid with 90,000 shares of the Company’s common stock.
Note
8. Stock Transactions
Pursuant
to the terms of the reverse acquisition of Nanoviricide, Inc. an aggregate
of
100,000,000 shares of common stock were issued and outstanding as of June 1,
2005, the date of the reverse acquisition. Of this amount, 80,000,000
represented founders shares of Nanoviricide, Inc. and 20,000,000 represented
shares held by shareholders of Edotcom.com (see Note 1).
In
June
2005, Allan Marshall and Robert Weidenbaum, stockholders who were instrumental
in the negotiation, execution, and consummation of the acquisition by
Edotcom.com of Nanoviricide, Inc., each received options to purchase 1,000,000
shares of NVI Common Stock at a price of $.05 per share, expiring May 31, 2008.
In May 2006, options were converted into 1,800,000 shares of common stock
resulting in proceeds to the Company of $90,000. The remaining 200,000 options
were cancelled pursuant to an agreement between the parties.
In
June
2005, MJT Consulting, Inc., another party that was instrumental in the
negotiation, execution, and consummation of the acquisition by ECMM of NVI,
was
granted an option to purchase 1,000,000 shares of NVI Common Stock at a price
of
$2.50 per share, expiring in May 2006. These options were not converted and
have
expired.
In
May
2005, the Company's Board of Directors established a Scientific Advisory Board.
As compensation, each member of the Scientific Advisory Board (SAB) is to be
granted quarterly 10,000 warrants to purchase the Company’s common stock at 120%
of the Company’s closing stock price on the day following the meeting. Through
June 30, 2006, the SAB was granted a total of 160,000 stock warrants exercisable
into common shares at prices from $0.18 to $2.20 per share. These warrants,
if
not exercised will expire on various dates through February 2010.
The
fair value of these warrants in the amount of $130,084 was recorded as
consulting expense.
In
September 2005, the Company's Board of Directors authorized the issuance of
2,200,000 shares of its common stock with a restrictive legend, as scientific
consulting compensation for development work on the Company’s anti viral
compounds. Based upon the fair market value of the common stock on the
commitment date, the Company recorded a consulting expense of $178,200.
In
September 2005, the Company's Board of Directors authorized the issuance of
100,000 shares of its common stock with a restrictive legend, to an outside
consultant advising the Company on government procurements. Based upon the
fair
market value of the common stock on the commitment date, the Company recorded
a
consulting expense of $8,100
In
September 2005, the Company's Board of Directors authorized the issuance of
48,177 shares of its common stock with a restrictive legend, to the debenture
holders in lieu of interest on debentures as set forth in the contract. The
Company recorded an interest expense of $4,315.
In
November and December 2005, the Company closed a private equity financing for
proceeds of $1,370,000. The Company sold 2,740,000 shares of its common stock
at
$.50 per share. These investors also received warrants for the purchase of
1,370,000 common shares at $1.00 per share. These warrants expire
on various dates through December 2008.
The
Company allocated a relative fair value of $483,610 to these $1.00 warrants
by
using the Black-Scholes option pricing model.
In
December 2005, the Company's Board of Directors authorized the issuance of
20,000 shares of its common stock with a restrictive legend to an outside
consultant advising the Company on government procurements. Based upon the
fair
market value of the common stock on the commitment date, the Company recorded
a
consulting expense of $19,000.
In
December 2005, the Company's Board of Directors authorized the issuance of
50,000 shares of its common stock with a restrictive legend, to an investor
in
connection with debt financing. Based upon the fair market value of the common
stock on the commitment date, the Company recorded a deferred financing cost
of
$49,000, which is being amortized using the straight-line method over the term
of the debenture.
In
December 2005, the Company's Board of Directors authorized the issuance of
19,476 shares of its common stock with a restrictive legend, to the debenture
holders in lieu of interest on debentures as set forth in the contract. The
Company recorded an interest expense of $17,340.
From
July
through December 2005, the Company issued $1,000,000 of 9% Series A convertible
debentures with warrants attached to purchase 200,000 shares of common stock
exercisable at a price per common share of $.25 (See Note 14). Interest on
these
debentures was payable quarterly in common stock and resulted in the issuance
of
90,000 shares of common stock. As of June 30, 2006 the Company recorded an
interest expense of $66,286 for the issuance of these shares. The warrants
on
these debentures were exercised in July 2006 (subsequent to the Balance Sheet
date) and resulted in proceeds to the Company of $50,000 and the issuance of
200,000 common shares.
In
January 2006, the Company's Board of Directors authorized the issuance of 3,425
shares of its common stock with a restrictive legend, to an outside consultant
for services. Based upon the fair market value of the common stock on the
commitment date, the Company recorded a consulting expense of $5,001.
In
March
2006, the Company's Board of Directors authorized the issuance of 7,921 shares
of its common stock with a restrictive legend, to the debenture holders in
lieu
of interest on debentures as set forth in the contract.
The
Company recorded an interest expense of $22,192.
In
June
2006, the Company closed a private equity financing for proceeds of $1,875,000.
The Company sold 1,875,000 shares of its common stock. These investors also
received warrants for the purchase of 1,875,000 common shares at $2.50 per
share. These warrants expire in June 2009.
The
Company allocated a relative fair value of $779,022 of these warrants by using
the Black-Scholes option pricing model.
In
June
2006, the Company's Board of Directors authorized the issuance of 14,426 shares
of its common stock with a restrictive legend, to the debenture holders in
lieu
of interest on debentures as set forth in the contract. The Company recorded
an
interest expense of $22,438.
Options
Granted To Officers
In
September 2005, 500,000 stock options were granted to Eugene Seymour, our CEO
under an employment agreement. Of these options, 250,000 are vested immediately
and are exercisable from September 2005 until September 2015, and the remaining
options vest annually in two equal amounts.
In
September 2005, 1,000,000 stock options were granted to Anil Diwan, our Chairman
and President under an employment agreement. Of these options, 333,333 are
vested immediately and are exercisable from September 2005 until September
2015,
and the remaining options vest annually in two equal amounts.
In
September 2005, 500,000 stock options were granted to Leo Ehrlich, our CFO
under
an employment agreement. Of these options, 250,000 are vested immediately and
are exercisable from September 2005 until September 2015, and the remaining
options vest annually in two equal amounts.
The
Company has accounted for these options granted to officers under the provisions
of Financial Accounting Standard No. 123 and SFAS 123R, "Accounting for Stock
Based Compensation."
Based
on fair market value of these options, $87,318 was recognized as stock based
compensation expense, and $40,223 was recorded as deferred compensation.
Note
9. Stock Options And Warrants
Stock
Options
The
following table presents the combined activity of stock options issued for
the
years ended June 30, as follows:
Stock
Options
|
|
Number
of Shares
|
|
Weighted
Average Exercise Price per share ($)
|
|
Weighted
Average Remaining Contractual Term (years)
|
|
Aggregate
Intrinsic Value ($)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at May 12, 2005 (Inception)
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3,000,000
|
|
$
|
0.86
|
|
|
2.33
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Canceled
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at June 30, 2005
|
|
|
3,000,000
|
|
|
0.86
|
|
|
2.25
|
|
|
-
|
|
Granted
|
|
|
2,000,000
|
|
|
0.10
|
|
|
10.00
|
|
|
2,980,000
|
|
Exercised
|
|
|
(1,800,000
|
)
|
|
0.05
|
|
|
-
|
|
|
-
|
|
Expired
|
|
|
(1,000,000
|
)
|
|
2.50
|
|
|
-
|
|
|
-
|
|
Canceled
|
|
|
(200,000
|
)
|
|
0.05
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at June 30, 2006
|
|
|
2,000,000
|
|
$
|
0.10
|
|
|
9.25
|
|
$
|
2,980,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at June 30, 2006
|
|
|
833,333
|
|
$
|
0.10
|
|
|
9.25
|
|
$
|
1,241,666
|
|
As
of June 30, 2006, there was $40,223 of unrecognized compensation cost, related
to non-vested options granted under employment contracts, which is expected
to
be recognized over a weighted average period of 2 years.
Stock
Warrants
The
following table presents the combined activity of stock warrants issued for
the
years ended June 30, as follows:
Stock
Warrants
|
|
Number
of Shares
|
|
Weighted
Average Exercise Price per share ($)
|
|
Weighted
Average Remaining Contractual Term (years)
|
|
Aggregate
Intrinsic Value ($)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at May 12, 2005 (Inception)
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Canceled
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at June 30, 2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Granted
|
|
|
3,605,000
|
|
|
1.72
|
|
|
2.87
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Canceled
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at June 30, 2006
|
|
|
3,605,000
|
|
$
|
1.72
|
|
|
2.65
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at June 30, 2006
|
|
|
3,605,000
|
|
$
|
1.72
|
|
|
2.65
|
|
$
|
-
|
|
Of
above warrants, 200,000 expire in fiscal year ending June 30, 2007, 3,245,000
in
fiscal year ending June 30, 2009, and 160,0000 expire in fiscal year ending
June
30, 2010.
Note
10. Income Taxes
There
was
no current or deferred income tax provision for the year ended June 30, 2006
or
for the period from May 12, 2005 (Inception) to June 30, 2005.
The
Company's deferred tax assets as of June 30 is as follows:
|
|
2006
|
|
2005
|
|
Net
operating loss carryforwards
|
|
$
|
710,800
|
|
$
|
14,900
|
|
Research
and development credit
|
|
|
234,000
|
|
|
-
|
|
Other
|
|
|
329,700
|
|
|
-
|
|
Gross
deferred tax assets
|
|
|
1,308,500
|
|
|
14,900
|
|
Valuation
allowances
|
|
|
(1,308,500
|
)
|
|
(14,900
|
)
|
Deferred
tax assets
|
|
$
|
-
|
|
$
|
-
|
|
At
June
30, 2006, the Company had potentially utilizable Federal and state net operating
loss tax carryforwards of approximately $2,417,000 which will begin to expire
in
the year 2017, if not utilized. The utilization of the Company's net operating
losses may be subject to a substantial limitation due to the "change of
ownership provisions" under Section 382 of the Internal Revenue Code and similar
state provisions. Such limitation may result in the expiration of the net
operating loss carryforwards before their utilization. A valuation allowance
is
provided when it is more likely than not than some portion or all of the
deferred tax assets will not be realized. The net change in the total valuation
allowance for the year ended June 30, 2006 and the period from May 12, 2005
(Inception) to June 30, 2005 was an increase of $1,308,500 and $14,900,
respectively. The tax benefit assumed using the Federal statutory tax rate
of
34% and Connecticut statutory rate of 7.5% has been reduced to an actual benefit
of zero due principally to the aforementioned valuation allowance.
Note
11. Commitments and Contingencies
The
Company’s principal executive offices are located at 135 Wood Street, West
Haven, Connecticut, and include approximately 1500 square feet of office space
at a base monthly rent of $1,875. The lease expires February 2007.
The
Company is
dependent
upon its license agreement with TheraCour Pharma, Inc. (See Note 4). If it
losses the right to utilize any of the proprietary information that is the
subject of the TheraCour Pharma license agreement on which it depends, the
Company will incur substantial delays and costs in development of its drug
candidates.
The
Company, in September 2005, signed employment agreements with its three
executive officers to pay minimum annual base salaries of $200,000 each for
three years. This base salary will increase to $250,000 per year upon closing
of
a financing to the company with gross proceeds of at least $5,000,000. In
addition to salary, the Company is obligated to pay health and life insurance
benefits and reimburse expenses incurred by the officers on behalf of the
company. The Company also granted stock options as part of these employment
agreements. (See Note 8.) Each
executive officer, if terminated by the Company without cause, would be entitled
six months salalry ($100,000) as severance compensation.
While
no legal actions are currently pending, the Company may be party to certain
claims brought against it arising from certain contractual matters. It is not
possible to state the ultimate liability, if any, in these matters. In
management’s opinion, the ultimate resolution of any such claim will not have a
material adverse effect on the financial position of the Company.
Note
12. Subsequent Events
During
July 2006, convertible debentures in the amount of $1,000,000 were converted
into common stock, resulting in the issuance of 3,333,333 common shares. (See
Note 7). Interest due of $66,286 on these debentures was paid with 90,000 shares
of the Company’s common stock.
PART
III
Item
1.
Index to Exhibits
An
index
to and description of the financial statements filed as part of this
Form 10-SB is contained in the section above.
Exhibit No.
|
|
Description
|
|
|
|
3.1
|
|
Articles
of Incorporation, as amended, of the Registrant
|
3.2
|
|
By-laws
of the Registrant
|
|
|
|
4.1
|
|
Specimen
Stock Certificate of the Registrant
|
4.2
|
|
Series
A Convertible Debenture
|
4.3
|
|
Form
of Warrant
|
10.1
|
|
Share
Exchange Agreement between NanoViricide, Inc. and the
Registrant
|
10.2
|
|
Employment
agreement ES
|
10.3
|
|
Employment
agreement AD
|
10.4
|
|
Employment
agreement LE
|
10.5
|
|
Form
of Scientific Advisory Board Agreement
|
10.6
|
|
Amended
License Agreement with TheraCour Pharma, Inc.
|
10.7
|
|
Lease
with landlord
|
10.8
|
|
Form
of First Subscription Agreement
|
10.9
|
|
Form
of Second Subscription Agreement
|
10.10
|
|
Code
of Ethics
|
|
|
|
SIGNATURES
Pursuant
to the requirements of Section 12 of the Securities and Exchange Act of 1934,
the Registrant has duly caused this registration statement to be signed on
its
behalf by the undersigned, thereunto duly authorized on November 13,
2006.
|
|
|
|
NANOVIRICIDES,
INC.
|
|
|
|
|
By:
|
/s/ Eugene
Seymour, MD
|
|
Eugene
Seymour, MD
Chief
Executive Officer
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this Registration
Statement has been signed by the following persons in the capacities indicated
on November 13, 2006.
Signature
|
|
Title
|
|
|
|
|
|
|
/s/
Eugene Seymour, MD
|
|
Chief
Executive Officer
|
Eugene
Seymour, MD
|
|
|
|
|
|
/s/
Anil Diwan, Ph.D.
|
|
President,
Director
|
Anil
Diwan, Ph.D.
|
|
|
|
|
|
/s/
Leo Ehrlich
|
|
Chief
Financial Officer
|
Leo
Ehrlich
|
|
|