| Equity Transactions | Note 9 – Equity Transactions
Fiscal Year Ended June 30, 2019 Transactions
On July 11, 2018 the Board of Directors approved an extension of the employment agreement with Dr. Anil Diwan, the Company’s President. Pursuant to the terms of the employment agreement, the Company’s Board of Directors authorized the issuance of 26,250 of the Company’s Series A preferred stock to Dr. Anil Diwan. The shares shall be vested in one-third increments on June 30, 2019, June 30, 2020 and June 30, 2021 and are subject to forfeiture. The Company recognized non-cash compensation expense related to the issuance of the Series A preferred stock of $189,040 for the year ended June 30, 2019. The balance of $371,650 will be recognized as the shares vest and service is rendered.
On July 19, 2018, the Company entered into an Employment Agreement with Dr. Irach Taraporewala as Chief Executive Officer of the Company beginning on September 1, 2018. Dr. Taraporewala was granted options to purchase up to 15,000 shares of the Company’s common stock, par value $0.001 per share at an exercise price equal to 20% above the closing bid price of $8.20 of the common stock on September 1, 2018 (“Effective Date”). The options shall vest in three, equal, annual installments commencing on the effective date. The grant date fair value of the options was $35,761 of which $11,920 was recognized and recorded as compensation expense for the year ended June 30, 2019. On January 24, 2019, Dr. Taraporewala resigned as the Chief Executive Officer of NanoViricides, Inc. (the “Company”) for personal reasons and all unvested options were forfeited. (See Note 14).
The Company estimated the fair value of the options granted to Dr. Taraporewala on the date of the grant using a lattice model that values the options based upon a stock price modeled such that it follows a geometric Brownian motion with constant drift and volatility.
For the year ended June 30, 2019, the Scientific Advisory Board was granted fully vested warrants to purchase 2,287 shares of common stock at exercise prices between $6.00‑ $9.40 per share expiring in the fiscal year ending June 30, 2023. These warrants were valued at $5,475 and recorded as consulting expense.
For the year ended June 30, 2019, the Company estimated the fair value of the warrants granted quarterly to the Scientific Advisory Board on the date of grant using the Black-Scholes Option-Pricing Model with the following weighted-average assumptions:
Expected life (year)
4
Expected volatility
47.46-55.12
%
Expected annual rate of quarterly dividends
0.00
%
Risk-free rate(s)
2.14-2.93
%
On February 27, 2019, the Company entered into a Securities Purchase Agreement (the “Agreement”) with certain institutional investors (the “Purchasers”), for a registered direct offering (the “Offering”) of 347,223 shares of common stock (“Shares”) at the purchase price of $7.20 (“Purchase Price”) per share for an aggregate of $2,500,000.
The offer and sale of the Shares in the registered direct offering was registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s shelf registration statement on Form S-3, as amended (File No. 333-216345), which became effective on April 25, 2017. Pursuant to Rule 424(b) under the Securities Act, the Company has filed a prospectus supplement in connection with such offering.
In a concurrent private placement, the Purchasers received warrants (the “Warrants”) to purchase up to 347,223 shares of common stock. The Warrants have an exercise price of $12.20 per share, shall be exercisable on the six-month anniversary of issuance and will expire five (5) years thereafter. The Warrants are exercisable for cash or, solely in the absence of an effective registration statement or prospectus, by cashless exercise.
The Company accounted for the proceeds of the Offering at February 27, 2019 as follows:
Gross proceeds
$
2,500,000
Less: Offering costs
150,000
Net proceeds
2,350,000
Portion allocated to derivative liability - warrants
(1,527,259)
Net proceeds from issuance of common stock
$
822,741
The exercise price of the Warrants is subject to adjustment in the case of customary events such as stock dividends or other distributions on shares of common stock or any other equity or equity equivalent securities payable in shares of common stock, stock splits, stock combinations, reclassifications or similar events affecting our common stock, and also, subject to limitations, upon any distribution of assets, including cash, stock or other property to our stockholders. The exercise of the Warrants is subject to certain beneficial ownership and other limitations set forth in the Warrants. The Company will receive proceeds from the concurrent private placement transaction solely to the extent the Warrants are exercised for cash.
In connection with the Offering and the concurrent private placement, the Company engaged Chardan Capital Markets, LLC (the “Placement Agent”) to act as its exclusive placement agent. The Company agreed to pay the Placement Agent a cash placement fee equal to 5% of the aggregate purchase price for the common stock sold in the offering, plus $25,000 in legal fees. The net proceeds from the offering were $2,350,000.
The Company determined the fair value of the Warrants at February 27, 2019 to be $1,527,259. The Company used a lattice model to calculate the fair value of the derivative warrants based on a probability weighted discounted cash flow model. This model is based on future projections of the various potential outcomes. The features that were analyzed and incorporated into the model included the exercise and full reset features. Under applicable accounting guidance contained in ASU 2017-11, adopted by the Company on January 1, 2019, stock warrants are to be accounted for as equity if the warrants contain full-ratchet anti-dilution provisions. The warrants described above contained a full-ratchet anti-dilution feature but also contained other adjustment features which required that the warrants be classified as a derivative liability.
The Warrants were valued as of February 27, 2019 (the issuance date) and June 30, 2019 with the following assumptions:
·
The 5.5-year warrants were issued on February 27, 2019 with an exercise price of $12.20 (subject to adjustments-full ratchet reset).
·
The stock price would fluctuate with the Company’s projected volatility.
·
The Holder would exercise the warrants as they become exercisable (effective registration at issuance) at target prices of the higher of 2 times the projected exercise/reset price or 2 times the stock price.
·
The Holder would exercise the warrant at maturity if the stock price was above the project reset prices.
·
The risk free rate at February 27, 2019 and June 30, 2019 was 2.48% and 1.95% respectively.
·
The fundamental transaction projected with 0% probability increasing 1% per quarter to maximum of 10% and settlement based on the Black Scholes value.
·
Stock price at February 27, 2019 was $9.60
·
Stock price at June 30, 2019 was $4.80
·
The next capital raise is projected to occur during 2020 (annually 12 months from issuance) at prices approximating 100% market triggering a reset event and exercise price adjustment.
·
The stock price would fluctuate with an annual volatility. The projected volatility curve was based on historical volatilities of the Company for the valuation period. The projected annual volatility for the valuation date is:
1 Year
2/27/2019
75
%
6/30/2019
76.1
%
The primary factors driving the economic value of options are stock price; stock volatility; reset events and exercise behavior. Projections of these variables over the remaining term of the warrant are either derived or based on industry averages. Based on the above, a probability was assigned to each scenario for each future period, and the appropriate derivative value was determined for each scenario. The option value was then probability weighted and discounted to the present. (See Note 11).
For the year ended June 30, 2019, the Company’s Board of Directors authorized the issuance of 2,888 shares of its Series A preferred stock, which are fully vested with a restrictive legend for employee compensation. The Company recorded an expense of $48,828, which is the fair value at date of issuance.
The fair value of all Series A preferred stock issued during the year ended June 30, 2019 was the following for the dates indicated:
Date
Shares
Value
7/11/2018
26,250
$
560,690
7/31/2018
129
2,795
8/31/2018
129
2,374
9/30/2018
129
2,598
10/31/2018
129
2,233
11/30/2018
129
1,883
12/31/2018
129
2,245
1/31/2019
129
1,203
2/28/2019
129
1,949
3/01/2019
1,340
24,340
3/31/2019
129
2,336
4/30/2019
129
1,636
5/31/2019
129
1,540
6/30/2019
129
1,696
29,138
$
609,518
There is currently no market for the shares of Series A preferred stock and they can only be converted into shares of common stock upon a change of control of the Company as more fully described in the Certificate of Designation. The Company, therefore, estimated the fair value of the Series A preferred stock granted to various employees and others on the date of grant. The Series A preferred stock fair value is based on the greater of i) the converted value to common stock at a ratio of 1:3.5; or ii) the value of the voting rights since the holder would lose the voting rights upon conversion. The conversion of the shares is triggered by a change of control. The valuations of the Series A preferred stock at each issuance used the following inputs:
a.
The common stock price was in the range $4.00 to $11.60;
b.
The calculated weighted average number of shares of common stock in the period;
c.
A 26.63% premium over the common shares for the voting preferences;
d.
The calculated weighted average number of total voting shares and the monthly shares representing voting rights of 19.28% to 19.52% of the total;
e.
The conversion value was based on an assumption for calculation purposes only, of a change of control in 4 years from October 31, 2016 and a remaining restricted term of 2.34 to 1.34 years.
f.
31.25% to 33.16% restricted stock discount (based on a restricted stock analysis and call-put analysis curve: 79.20% to 90.60% volatility, 2.50% to 2.35% risk free rate) applied to the converted common.
For the year ended June 30, 2019, the Company’s Board of Directors authorized the issuance of 3,572 fully vested shares of its common stock for employee compensation. The Company recognized a noncash compensation expense of $28,572, which was the fair value on the date of issuance.
For the year ended June 30, 2019, the Company’s Board of Directors authorized the issuance of 28,210 fully vested shares of its common stock with a restrictive legend for consulting services. The Company recorded an expense of $208,960, which was the fair value at the dates of issuance.
For the year ended June 30, 2019, the Company’s Board of Directors authorized the issuance of 7,325 fully vested shares of its common stock with a restrictive legend for director services. The Company recorded an expense of $45,000, which was the fair value at date of issuance.
Fiscal Year Ended June 30, 2020 Transactions
On July 11, 2018 the Board of Directors approved an extension of the employment agreement with Dr. Anil Diwan, the Company’s President. Pursuant to the terms of the employment agreement, the Company’s Board of Directors authorized the issuance of 26,250 of the Company’s Series A preferred stock to Dr. Anil Diwan. The shares shall be vested in one-third increments on June 30, 2019, June 30, 2020 and June 30, 2021 and are subject to forfeiture. The Company recognized non-cash compensation expense related to the issuance of the Series A preferred stock of $189,040 for the year ended June 30, 2020. The balance of $182,610 will be recognized as the remaining 8,750 shares vest and service is rendered for the year ended June 30, 2021.
For the year ended June 30, 2020, the Scientific Advisory Board was granted fully vested warrants to purchase 2,286 shares of common stock at exercise prices between $2.63‑ $12.16 per share expiring in the fiscal year ending June 30, 2024. These warrants were valued at $7,373 and recorded as consulting expense.
For the year ended June 30, 2020, the Company estimated the fair value of the warrants granted quarterly to the Scientific Advisory Board on the date of grant using the Black-Scholes Option-Pricing Model with the following weighted-average assumptions:
Expected life (year)
4
Expected volatility
47.99-90.32
%
Expected annual rate of quarterly dividends
0.00
%
Risk-free rate(s)
0.25-1.63
%
On January 21, 2020, the Company entered into an Underwriting Agreement with Aegis Capital Corp. Pursuant to the terms and conditions of the Underwriting Agreement, we agreed to issue and sell 2,500,000 shares of our common stock, par value $0.001 per share, at a price to the public of $3.00 per share. Pursuant to the Underwriting Agreement, we also granted the underwriter an option to purchase up to an additional 375,000 shares of our common stock within 45 days after the date of the Underwriting Agreement to cover over-allotments, if any. The Final Prospectus for the offering was filed with the U.S. Securities and Exchange Commission pursuant to Rule 424(b)(1) of the Securities Act of 1933, as amended, on January 23, 2020.
The offering was consummated on January 25, 2020. The Company sold the Underwritten Shares and the underwriter exercised its option to purchase an additional 375,000 shares of common stock at the public offering price of $3.00 per share. The net proceeds to the Company after underwriter's commission and agreed upon customary fees and expenses, and deducting the Company's legal and accounting expenses related to the Offering was $7,457,575.
The Company accounted for the proceeds of the Offering at January 25, 2020 as follows:
Gross proceeds
$
8,625,000
Less: offering costs
(1,167,425)
Net proceeds from issuance of common stock
$
7,457,575
On January 24, 2020, the Company entered into a Binding Term Sheet which was incorporated on January 27, 2020 in a Settlement Agreement and Mutual Release (the “Settlement Agreement”) with the investor parties (collectively, the “Investors”) to that certain Securities Purchase Agreement dated as of February 27, 2019 (the "Securities Purchase Agreement") to settle an action commenced by the Investors to, among other things, enjoin the Company’s previously disclosed underwritten public offering (the “Action”)
On January 27, 2020, the Company entered into an Exchange Agreement with each of the Investors pursuant to the Settlement Agreement. Pursuant to the terms and conditions of the Exchange Agreement, the Investors agreed to terminate certain restrictive covenants in the Securities Purchase Agreement, including a bar on all offerings of securities below the exercise price of the Warrants to purchase common stock issued February 19, 2019 (the “Old Warrants”), and the Company agreed to exchange 347,222 of the Investors’ Old Warrants for an aggregate of (i) 677,224 shares of common stock and (ii) new warrants, to purchase 347,222 shares of common stock at an exercise price of $3.00 per share and expire on August 24, 2024 (the “New Warrants”). The common stock issued had a fair value of $5,722,543 using the closing price of $8.45 on January 24, 2020 resulting in an increase to common stock of $677 and additional paid in capital of $5,721,866 and the New Warrants had a fair market value of $2,066,425 which was recorded as a derivative liability. The aggregate fair value of the common stock and New Warrants issued as part of the Exchange Agreement was $7,788,968. The Old Warrants were remeasured to a fair value of $8,403,462 on January 24, 2020 immediately prior to the exchange. As a result of the Exchange Agreement, a gain on warrant settlement was recognized in the amount of $614,494 calculated as the difference between the fair value of the Old Warrants immediately prior to the exchange and the aggregate fair value of the common stock and New Warrants issued in the exchange. On March 16, 2020 the shareholders of NanoViricides authorized an increase in the number of authorized common stock to 150,000,000 shares and the New Warrants were issued and exercisable. These warrants contained a full-ratchet anti-dilution feature but also contained other adjustment features which required that the warrants be classified as a derivative liability.
The 347,222 New Warrants were exercised on March 23, 2020 and March 25, 2020 pursuant to a cashless exercise provision resulting in the issuance of 180,087 shares of common stock. The fair value of the warrants were reset to fair value as of March 23, 2020 and March 25, 2020, and, upon exercise of the warrants, the derivative liability was reclassified to equity of $1,153,881.
On May 21, 2020, the Company entered into a Securities Purchase Agreement with certain institutional investors for an offering of 1,400,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share at the purchase price of $7.30 per share. The Shares were issued pursuant to a prospectus supplement dated May 21, 2020 which was filed with the Securities and Exchange Commission on May 22, 2020 in connection with a takedown from the Company’s shelf registration statement on Form S-3, as amended (File No. 333-237370), which became effective on April 2, 2020 and the base prospectus dated April 2, 2020 contained in that registration statement. The Offering closed on May 22, 2020. The net proceeds to the Company from the offering are approximately $9.2 million after placement agent fees and other estimated offering expenses payable by the Company.
The Company accounted for the proceeds of the Offering at May 22, 2020 as follows:
Gross proceeds
$
10,220,000
Less: offering costs
(1,000,600)
Net proceeds from issuance of common stock
$
9,219,400
For the year ended June 30, 2020, the Company’s Board of Directors authorized the issuance of 10,000 fully vested shares of its Series A preferred stock for a loan origination fee to a related party with a fair value of $39,301, which is the fair value at date of issuance. See Note 4.
For the year ended June 30, 2020, the Company’s Board of Directors authorized the issuance of 100,000 fully vested shares of its Series A preferred stock with a fair value of $392,669 in exchange for $250,000 of previously deferred development fees to a related party and recognized a loss on the exchange of $142,669. See Note 4.
For the year ended June 30, 2020, the Company’s Board of Directors authorized the issuance of 2,888 shares of its Series A preferred stock, which are fully vested with a restrictive legend for employee compensation. The Company recorded an expense of $41,857, which is the fair value at date of issuance.
There is currently no market for the shares of Series A preferred stock and they can only be converted into shares of common stock upon a change of control of the Company as more fully described in the Certificate of Designation. The Company, therefore, estimated the fair value of the Series A preferred stock granted to various employees and others on the date of grant. The Series A preferred stock fair value is based on the greater of i) the converted value to common stock at a ratio of 1:3.5; or ii) the value of the voting rights since the holder would lose the voting rights upon conversion. The conversion of the shares is triggered by a change of control. The valuations of the Series A preferred stock at each issuance, except for the period April 1, 2020 through June 30, 2020 used the following inputs:
a.
The common stock price was in the range $2.03 to $10.82;
b.
The calculated weighted average number of shares of common stock in the period;
c.
A 26.63% premium over the common shares for the voting preferences;
d.
The calculated weighted average number of total voting shares and the monthly shares representing voting rights of 14.9% to 18.3% of the total;
e.
Prior to January 1, 2020, the conversion value is based on an assumption for calculation purposes only of a Change of Control in 4 years from October 31, 2016 and a remaining restricted term of 1.08 to .92 years. From January 1, 2020 the conversion value is based on the assumption for calculation purposes only, of a Change of Control in five years from 12/31/2019 for the issuances and a remaining restricted term of 5.00 to 4.84 years;
f.
29.30% to 48.66% restricted stock discount (based on a restricted stock analysis and call-put analysis curve: 80.41% to 82.23% volatility, 1.69% to 1.73% risk free rate) applied to the converted common.
For the period April 1, 2020 through June 30, 2020, the Series A preferred stock fair value is based on the converted value to common stock at a ratio of 1:3.5 multiplied by the monthly average of the daily open and close price of the common stock.
For the year ended June 30, 2020, the Company’s Board of Directors authorized the issuance of 3,572 fully vested shares of its common stock for employee compensation. The Company recognized a noncash compensation expense of $29,251, which was the fair value on the date of issuance.
For the year ended June 30, 2020, the Company’s Board of Directors authorized the issuance of 78,958 fully vested shares of its common stock with a restrictive legend for consulting services. The Company recorded an expense of $254,250, which was the fair value at the dates of issuance.
For the year ended June 30, 2020, the Company’s Board of Directors authorized the issuance of 10,728 fully vested shares of its common stock with a restrictive legend for director services. The Company recorded an expense of $45,000, which was the fair value at date of issuance.
For the year ended June 30, 2020, the Company's Board of Directors authorized the issuance of 25,667 fully vested shares of its common stock with a restrictive legend to satisfy open accounts payable of $77,000 for consulting services. The number of shares issued to settle the accounts payable was calculated using the market price of the common stock on the settlement date.
For the year ended June 30, 2020, the Company's Board of Directors authorized the settlement with a vendor to redeem and cancel 17,200 shares of its common stock with a restrictive legend, which were initially issued in payment of accounts payable of $25,000. The shares were canceled and reported as reductions of common stock issued in exchange for accounts payable reported in the Statement of Changes in Stockholders’ Equity as a decrease of $25,000. The redemption and cancellation had no effect on the results of operations for the year ended June 30, 2020.
Fiscal Year Ended June 30, 2021 Transactions
On July 11, 2018 the Board of Directors approved an extension of the employment agreement with Dr. Anil Diwan, the Company’s President. Pursuant to the terms of the employment agreement, the Company’s Board of Directors authorized the issuance of 26,250 of the Company’s Series A preferred stock to Dr. Anil Diwan. The shares shall be vested in one-third increments on June 30, 2019, June 30, 2020 and June 30, 2021 and are subject to forfeiture. The Company recognized non-cash compensation expense related to the issuance of the Series A preferred stock of $182,610 for the year ended June 30, 2021.
For the year ended June 31, 2021, the Scientific Advisory Board was granted fully vested warrants to purchase 2,288 shares of common stock at exercise prices between $3.94- $6.86 per share expiring in the fiscal year ending June 30, 2025. The fair value of the warrants was $6,103 for the year ended june 30 2021 and recorded as consulting expense.
For the year ended June 30, 2021, the Company estimated the fair value of the warrants granted quarterly to the Scientific Advisory Board on the date of grant using the Black-Scholes Option-Pricing Model with the following weighted-average assumptions:
Expected life (year)
4
Expected volatility
91.14-91.92
%
Expected annual rate of quarterly dividends
0.00
%
Risk-free rate(s)
0.24-.58
%
On July 8, 2020 the Company entered into an Underwriting Agreement with Kingswood. Pursuant to the terms and conditions of the Underwriting Agreement, the Company agreed to issue and sell 1,369,863 shares of our common stock, par value $0.001 per share (the “Underwritten Shares”), at a price to the public of $7.30 per share. Pursuant to the Underwriting Agreement, the Company also granted the underwriter an option to purchase up to an additional 205,479 shares of common stock (together with the Underwritten Shares, the “Shares”) within 45 days after the date of the Underwriting Agreement to cover over-allotments, if any. The shares were issued pursuant to a prospectus supplement dated July 8, 2020 which was filed with the Securities and Exchange Commission on July 9, 2020 in connection with a takedown from the Company’s shelf registration statement on Form S-3, as amended (File No. 333-237370), which became effective on April 2, 2020 and the base prospectus dated April 2, 2020 contained in that registration statement. The offering was consummated on July 10, 2020, whereby the Company sold 1,369,863 shares of common stock and a fully exercised Underwriters’ overallotment of 205,479 additional shares at the public offering price of $7.30 per share. The net proceeds to the Company from the offering was approximately $10.4 million after placement agent fees and other estimated offering expenses.
The Company accounted for the proceeds of the offering at July 10, 2020 as follows:
Gross proceeds
$
11,499,997
Less: offering costs and expenses
(1,057,781)
Net proceeds from issuance of common stock
$
10,442,216
On July 31, 2020, the Company entered into a Sales Agreement with the Sales Agents, pursuant to which the Company may offer and sell, from time to time, through or to the Sales Agents, shares of common stock having an aggregate offering price of up to $50 million. On March 2, 2021 the Company sold 814,242 shares of common stock at an average price of approximately $7.83 per share. The shares were issued pursuant to a prospectus supplement dated December 3, 2020 filed with the Securities and Exchange Commission on December 10, 2020 in connection with the Company’s shelf registration statement on Form S-3, as amended (File No. 333-237370), which became effective on April 2, 2020. The net proceeds to the Company from the offering was approximately $6.1 million after placement agent fees and other estimated offering expenses.
The Company accounted for the proceeds of the ATM Offering at March 2, 2021 as follows:
Gross proceeds
$
6,374,211
Less: offering costs and expenses
(252,730)
Net proceeds from issuance of common stock
$
6,121,481
For the year ended June 30, 2021, the Company’s Board of Directors authorized the issuance of 2,888 shares of its Series A preferred stock, which are fully vested with a restrictive legend for employee compensation. The Company recorded an expense of $43,696, which is the fair value at date of issuance.
The fair value of the Series A Preferred stock was the following for the dates indicated:
Date
Shares
Value
7/31/2020
129
$
3,155
8/31/2020
129
2,391
9/30/2020
129
1,898
10/31/2020
129
1,749
11/30/2020
129
1,596
12/31/2020
129
1,603
01/31/2021
129
1,632
02/28/2021
129
2,153
03/01/2021
1,340
19,744
03/31/2021
129
2,317
04/30/2021
129
1,749
05/31/2021
129
1,595
06/30/2021
129
1,605
2,888
$
43,187
There is currently no market for the shares of Series A preferred stock and they can only be converted into shares of common stock upon a change of control of the Company as more fully described in the Certificate of Designation. The Company, therefore, estimated the fair value of the Series A preferred stock granted to various employees and others on the date of grant. The Series A preferred stock fair value is based on the greater of i) the converted value to common stock at a ratio of 1:3.5; or ii) the value of the voting rights since the holder would lose the voting rights upon conversion. The conversion of the shares is triggered by a change of control.
The Series A preferred stock fair value is based on the converted value to common stock at a ratio of 1:3.5 multiplied by the monthly average of the daily open and close price of the common stock.
For the year ended June 30, 2021, the Company’s Board of Directors authorized the issuance of 3,572 fully vested shares of its common stock for employee compensation. The Company recognized a noncash compensation expense of $15,038, which was the fair value on the date of issuance.
For the year ended June 30, 2021, the Company’s Board of Directors authorized the issuance of 25,434 fully vested shares of its common stock with a restrictive legend for consulting services. The Company recorded an expense of $108,000, which was the fair value at the dates of issuance.
For the year ended June 30, 2021, the Company’s Board of Directors authorized the issuance of 13,166 fully vested shares of its common stock with a restrictive legend for director services. The Company recorded an expense of $56,250, which was the fair value at date of issuance. |
