Company Quick10K Filing
Provectus Biopharmaceuticals
Price0.07 EPS-0
Shares389 P/E-5
MCap27 P/FCF-5
Net Debt-0 EBIT-5
TEV27 TEV/EBIT-6
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-13
10-K 2019-12-31 Filed 2020-03-05
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-13
10-K 2018-12-31 Filed 2019-03-07
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-09
10-K 2017-12-31 Filed 2018-03-23
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-31
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-30
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-03-12
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-03-13
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-10
10-K 2012-12-31 Filed 2013-03-14
10-Q 2012-09-30 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-03-14
10-Q 2011-09-30 Filed 2011-11-08
10-Q 2011-06-30 Filed 2011-08-09
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-16
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-13
10-Q 2010-03-31 Filed 2010-05-17
10-K 2009-12-31 Filed 2010-03-31
8-K 2020-07-11 Officers, Regulation FD, Exhibits
8-K 2020-06-24
8-K 2020-06-24
8-K 2019-12-31
8-K 2019-12-20
8-K 2019-06-26
8-K 2019-05-17
8-K 2019-05-08
8-K 2019-04-29
8-K 2019-03-25
8-K 2019-01-24
8-K 2018-11-26
8-K 2018-07-26
8-K 2018-06-27
8-K 2018-06-27
8-K 2018-04-19
8-K 2018-04-05
8-K 2018-02-23
8-K 2018-02-22
8-K 2018-01-25

PVCT 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32 ex32.htm

Provectus Biopharmaceuticals Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
352311-1-13-252012201420172020
Assets, Equity
-0.6-4.5-8.4-12.2-16.1-20.02012201320152017
Rev, G Profit, Net Income
151050-5-102012201420172020
Ops, Inv, Fin

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from               to        

 

Commission file number 001-36457

 

PROVECTUS BIOPHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   90-0031917

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

     

10025 Investment Drive, Suite 250

Knoxville, Tennessee

  37932
(Address of principal executive offices)   (Zip Code)

 

866-594-5999

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None   N/A   N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [  ] No

 

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

 

Large accelerated filer [  ] Accelerated filer [  ]
       
Non-accelerated filer [X] Smaller reporting company [X]
       
    Emerging growth company [  ]

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

 

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of May 11, 2020, was 390,689,475.

 

 

 

 
 

 

TABLE OF CONTENTS

 

  Page
PART I - FINANCIAL INFORMATION  
   
Cautionary Note Regarding Forward-Looking Statements 1
Item 1. Financial Statements (unaudited) 2
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Statements of Comprehensive Loss 4
Condensed Consolidated Statements of Changes in Stockholders’ Deficiency 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 19
   
PART II - OTHER INFORMATION  
   
Item 1. Legal Proceedings 20
Item 1A. Risk Factors 20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 21
Item 4. Mine Safety Disclosures 21
Item 5. Other Information 21
Item 6. Exhibits 21
   
SIGNATURES 22

 

 
 

 

Cautionary Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined under U.S. federal securities laws. These statements reflect management’s current knowledge, assumptions, beliefs, estimates, and expectations. These statements also express management’s current views of future performance, results, and trends and may be identified by their use of terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “strategy,” “will,” and other similar terms. Forward-looking statements are subject to a number of risks and uncertainties that could cause our actual results to materially differ from those described in the forward-looking statements. Readers should not place undue reliance on forward-looking statements. Such statements are made as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to update such statements after this date, unless otherwise required by law.

 

Risks and uncertainties that could cause our actual results to materially differ from those described in forward-looking statements include those discussed in our filings with the U.S. Securities and Exchange Commission (the “SEC”) (including those described in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019), and:

 

  Our potential receipt of sales from investigational drug products PV-10® and PH-10®, and/or any other halogenated xanthene-based drug products (if and when approved); and licensing, milestone, royalty and/or other payments related to these investigational drug products and/or the Company’s liquidation, dissolution or winding up, or any sale, lease, conveyance or other disposition of any intellectual property relating to halogenated xanthene-based investigational drug products and/or drug substances,

 

  Our ability to raise additional capital, including but not limited to our ability to close on additional tranches of the 2020 Financing pursuant to the 2020 Term Sheet that our Board approved effective as of December 31, 2019, and
     
 

The widespread outbreak of an illness or communicable/infectious disease, such as severe acute respiratory syndrome coronavirus 2, or a public health crisis, could disrupt our business and adversely affect our operations and financial condition.

 

 1 

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31,   December 31, 
   2020   2019 
   (unaudited)     
Assets          
           
Current Assets:          
Cash and cash equivalents  $213,739   $590,706 
Short-term receivables - legal fees, settlement and other, net   74,235    55,058 
Prepaid expenses   240,361    350,249 
           
Total Current Assets   528,335    996,013 
           
Equipment and furnishings, less accumulated depreciation of $68,153 and $64,630, respectively   54,861    58,384 
Operating lease right-of-use asset   176,439    194,400 
Patents, net of accumulated amortization of $11,655,118 and $11,487,338, respectively   60,327    228,107 
           
Total Assets  $819,962   $1,476,904 
           
Liabilities and Stockholders’ Deficiency          
           
Current Liabilities:          
Accounts payable - trade  $1,581,762   $1,125,890 
Accrued interest   75,333    65,333 
Convertible notes payable   1,000,000    500,000 
Other accrued expenses   1,250,227    1,255,266 
Current portion of operating lease liability   79,533    76,423 
           
Total Current Liabilities   3,986,855    3,022,912 
           
Accrued interest   1,763,304    1,501,864 
Accrued interest - related parties   1,360,293    1,226,582 
Convertible notes payable   12,697,000    12,997,000 
Convertible notes payable - related parties   6,770,000    6,670,000 
Non-current portion of operating lease liability   108,070    130,658 
           
Total Liabilities   26,685,522    25,549,016 
           
Commitments and contingencies (Note 9)          
           
Stockholders’ Deficiency:          
Preferred stock; par value $0.001 per share; 25,000,000 shares authorized; Series B Convertible Preferred Stock; 240,000 shares designated; 100 shares issued and outstanding at March 31, 2020 and December 31, 2019; aggregate liquidation preference of $3,500 at March 31, 2020 and December 31, 2019   -    - 
Common stock; par value $0.001 per share; 1,000,000,000 shares authorized; 390,689,475 and 389,889,475 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively   390,689    389,889 
Additional paid-in capital   209,420,675    209,378,835 
Accumulated other comprehensive loss   (33,035)   (24,008)
Accumulated deficit   (235,643,889)   (233,816,828)
           
Total Stockholders’ Deficiency   (25,865,560)   (24,072,112)
           
Total Liabilities and Stockholders’ Deficiency  $819,962   $1,476,904 

 

See accompanying notes to condensed consolidated financial statements.

 

 2 

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   For the Three Months Ended 
   March 31, 
   2020   2019 
     
Operating Expenses:          
Research and development  $909,446   $1,037,331 
General and administrative   538,794    759,253 
Total Operating Expenses   1,448,240    1,796,584 
           
Total Operating Loss   (1,448,240)   (1,796,584)
Other Income/(Expense):          
Gain on settlement of lawsuits   -    675,000 
Research and development tax credit   26,251    84,072 
Investment and interest income   79    2,255 
Interest expense   (405,151)   (334,573)
Total Other Income/(Expense)   (378,821)   426,754 
           
Net Loss   $(1,827,061)  $(1,369,830)
           
Basic and Diluted Loss Per Common Share  $(0.00)  $(0.00)
           
Weighted Average Number of Common Shares Outstanding - Basic and Diluted   390,557,607    384,705,639 

 

See accompanying notes to condensed consolidated financial statements.

 

 3 

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

   For the Three Months Ended 
   March 31, 
   2020   2019 
     
Net Loss  $(1,827,061)  $(1,369,830)
Other Comprehensive Loss:          
Foreign currency translation adjustments   (9,027)   (22,363)
Total Comprehensive Loss  $(1,836,088)  $(1,392,193)

 

See accompanying notes to condensed consolidated financial statements.

 

 4 

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

(Unaudited)

 

   FOR THE THREE MONTHS ENDED MARCH 31, 2020 
   Preferred               Accumulated         
   Stock           Additional   Other         
   Series B   Common Stock   Paid-In   Comprehensive   Accumulated     
   Shares   Amount   Shares   Amount   Capital   Loss   Deficit   Total 
                                 
Balance at January 1, 2020   100   $       -    389,889,475   $389,889   $209,378,835   $  (24,008)  $(233,816,828)  $(24,072,112)
                                         
Common stock issued upon exercise of warrants   -    -    800,000    800    41,840    -    -    42,640 
Comprehensive loss:                  -                     
Net loss   -    -    -    -    -    -    (1,827,061)   (1,827,061)
Other comprehensive loss   -    -    -    -    -    (9,027)   -    (9,027)
                                         
Balance at March 31, 2020   100   $-     390,689,475   $ 390,689   $ 209,420,675   $(33,035)  $ (235,643,889)  $ (25,865,560)

 

   FOR THE THREE MONTHS ENDED MARCH 31, 2019 
   Preferred               Accumulated         
   Stock           Additional   Other         
   Series B   Common Stock   Paid-In   Comprehensive   Accumulated     
   Shares   Amount   Shares   Amount   Capital   Loss   Deficit   Total 
                                 
Balance at January 1, 2019   100   $        -    384,614,528   $384,615   $209,092,187   $-   $(226,894,291)  $(17,417,489)
                                         
Common stock issued upon exercise of warrants   -    -    100,000    100    5,230    -    -    5,330 
Comprehensive loss:                  -                     
Net loss   -    -    -    -    -    -    (1,369,830)   (1,369,830)
Other comprehensive loss   -    -    -    -    -    (22,363)   -    (22,363)
                                         
Balance at March 31, 2019   100   $-     384,714,528   $ 384,715   $ 209,097,417   $ (22,363)  $ (228,264,121)  $ (18,804,352)

 

See accompanying notes to condensed consolidated financial statements.

 

 5 

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   For the Three Months Ended 
   March 31, 
   2020   2019 
     
Cash Flows From Operating Activities:          
Net loss  $(1,827,061)  $(1,369,830)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock-based compensation   -    2,650 
Noncash lease expense   17,961    - 
Depreciation   3,523    21,311 
Amortization of patents   167,780    167,780 
Changes in operating assets and liabilities          
Short term receivables   (27,728)   (33,943)
Prepaid expenses   109,888    98,225 
Accounts payable - trade   456,437    (1,857,444)
Other accrued expenses   (2,795)   570,624 
Operating lease liability   (19,478)   - 
Accrued interest expense   405,151    334,574 
           
Net Cash Used In Operating Activities   (716,322)   (2,066,053)
           
Cash Flows From Financing Activities:          
Proceeds from issuance of convertible notes payable   200,000    3,775,000 
Proceeds from issuance of convertible notes payable - related parties   100,000    25,000 
Proceeds from exercise of warrants   42,640    5,330 
Net Cash Provided By Financing Activities   342,640    3,805,330 
           
Effect of Exchange Rate Changes on Cash    (3,285)   (22,363)
           
Net (Decrease) Increase In Cash and Cash Equivalents   (376,967)   1,716,914 
           
Cash and Cash Equivalents, Beginning of Period   590,706    50,986 
           
Cash and Cash Equivalents, End of Period  $213,739   $1,767,900 
           
Non-cash investing and financing activities:          
Offset of related party receivable and payable  $-   $25,000 

 

See accompanying notes to condensed consolidated financial statements.

 

 6 

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Business Organization, Nature of Operations and Basis of Presentation

 

Provectus Biopharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, “Provectus” or the “Company”), is a clinical-stage biotechnology company that is developing a new class of drugs for oncology, hematology, and dermatology based on an entire, wholly-owned, family of small molecules called halogenated xanthenes:

 

  Oncology: Intralesional (aka intratumoral) PV-10, a cancer immunotherapy, is undergoing clinical study for adult solid tumor cancers, like melanoma and gastrointestinal (“GI”) tumors (including hepatocellular carcinoma, metastatic colorectal cancer, metastatic neuroendocrine tumors, and metastatic uveal melanoma, among others). Orphan drug designation status has been granted to PV-10 by the U.S. Food and Drug Administration (the “FDA”) for the treatments of metastatic melanoma in 2006, hepatocellular carcinoma in 2011, and ocular melanoma (including uveal melanoma) in 2019.
     
    PV-10 is also undergoing preclinical study for pediatric solid tumor cancers (including neuroblastoma, Ewing sarcoma, rhabdomyosarcoma, and osteosarcoma). Orphan drug designation status has been granted to PV-10 by the FDA for neuroblastoma in 2018.
     
  Hematology. PV-10 is also undergoing preclinical study for pediatric blood cancers (including leukemia).
     
  Dermatology: Topical PH-10, an immuno-dermatology agent, is undergoing clinical study for inflammatory dermatoses, like psoriasis and atopic dermatitis.

 

To date, the Company has not generated any revenues from planned principal operations. The Company’s activities are subject to significant risks and uncertainties, including failing to successfully develop and license or commercialize the Company’s prescription drug candidates.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information pursuant to Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be reviewed in conjunction with the Company’s audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2019 filed with the SEC on March 5, 2020. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

 

A novel strain of coronavirus (“CoV”), severe acute respiratory syndrome (“SARS”) CoV 2 (“SARS-CoV-2”), was reportedly first identified in late-2019 and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the SARS-CoV-2 outbreak, many companies have experienced disruptions of their operations and the markets they serve. The Company has taken several temporary precautionary measures intended to help ensure the well-being of its employees and contractors, and to minimize business disruption. The Company considered the impact of SARS-CoV-2 on its business and operational assumptions and estimates, and determined there were no material adverse impacts on the Company’s results of operations and financial position at March 31, 2020.

 

The full extent of SARS-CoV-2 future impacts on the Company’s operations and financial condition is uncertain. A prolonged SARS-CoV-2 outbreak could have a material adverse impact on the Company’s business and financial results, including the timing and ability of the Company to initiate and/or complete current and/or future preclinical studies and/or clinical trials; disrupt the Company’s regulatory activities; and/or have other adverse effects on the Company’s clinical development.

 

2. Liquidity and Going Concern

 

The Company’s cash and cash equivalents were $213,739 at March 31, 2020. The Company continues to incur significant operating losses. Management expects that significant on-going operating expenditures will be necessary to successfully implement the Company’s business plan and develop and market its products. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued. Implementation of the Company’s plans and its ability to continue as a going concern will depend upon the Company’s ability to develop PV-10, PH-10, and/or any other halogenated xanthene-based drug products, and to raise additional capital.

 

The Company plans to access capital resources through possible public or private equity offerings, including the 2020 Financing (as defined in Note 4), exchange offers, debt financings, corporate collaborations or other means. In addition, the Company continues to explore opportunities to strategically monetize its lead drug candidates, PV-10 and PH-10, through potential co-development and licensing transactions, although there can be no assurance that the Company will be successful with such plans. The Company has historically been able to raise capital through equity offerings, although no assurance can be provided that it will continue to be successful in the future. If the Company is unable to raise sufficient capital through the 2020 Financing or otherwise, it will not be able to pay its obligations as they become due.

 

Subsequent to March 31, 2020, the Company received an aggregate $50,000 in connection with the 2020 Financing.  In April 2020, the Company received $62,500 from the Paycheck Protection Program (“PPP”) and $3,000 from an Economic Injury Disaster Loan (“EIDL”) grant (“EIDG”) of the Coronavirus Aid, Relief, and Economic Security Act (The “CARES Act”). See Note 10 – Subsequent Events.

 

 7 

 

 

The primary business objective of management is to build the Company into a commercial-stage biotechnology company; however, the Company cannot assure you that it will be successful in developing further, co-developing, licensing, and/or commercializing PV-10, PH-10, and/or any other halogenated xanthene-based drug products of the Company, or entering into any commercial financial transaction. Moreover, even if the Company is successful in improving its current cash flow position, the Company nonetheless plans to seek additional funds to meet its long-term requirements in 2020 and beyond. The Company anticipates that these funds will otherwise come from the proceeds of private placement transactions, including the 2020 Financing, the exercise of existing warrants and outstanding stock options, or public offerings of debt or equity securities. While the Company believes that it has a reasonable basis for its expectation that it will be able to raise additional funds, the Company cannot assure you that it will be able to complete additional financing in a timely manner. In addition, any such financing may result in significant dilution to stockholders.

 

3. Critical Accounting Policies

 

Since the date the Company’s December 31, 2019 consolidated financial statements were issued in its 2019 Annual Report, there have been no material changes to the Company’s significant accounting policies, except as disclosed below.

 

Recently Issued Accounting Standards

 

In March 2020, the Financial Accounting Standards Board (‘FASB”) issued Accounting Standards Update (“ASU”) No. 2020-03, Codification Improvements to Financial Instruments. There are seven issues addressed in this update. Issues 1 – 5 were clarifications and codifications of previous updates. Issue 3 relates only to depository and lending institutions and therefore would not be applicable to the Company. Issue 6 was a clarification on determining the contractual term of a net investment in a lease for purposes of measuring expected credit losses, an issue not applicable to the Company. Issue 7 relates to the regaining control of financial assets sold and the recordation of an allowance for credit losses. The amendment related to issues 1, 2, 4 and 5 became effective immediately upon adoption of the update. Issue 3 becomes effective for fiscal years beginning after December 15, 2019. Issues 6 and 7 become effective on varying dates that relate to the dates of adoption of other updates. Management’s initial analysis is that it does not believe the new guidance will substantially impact the Company’s financial statements. The Company adopted certain provisions which have become effective during fiscal 2020 within ASU 2020-03 and its adoption did not have a material impact on the Company’s condensed consolidated financial statements and financial statement disclosures. The Company is currently evaluating the effect that adopting the remaining new accounting guidance will have on its condensed consolidated financial statements and related disclosures.

 

The CARES Act

 

On March 27, 2020, President Trump signed the CARES Act into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. Under ASC 740 of GAAP, the effects of new legislation are recognized upon enactment. Accordingly, the CARES Act is effective beginning in the quarter ended March 31, 2020. The adoption of the CARES Act provisions did not have a material impact on the Company’s condensed consolidated financial statements.

 

 8 

 

 

4. Convertible Notes Payable

 

2020 Financing

 

On December 31, 2019, the Board approved a Definitive Financing Term Sheet (the “2020 Term Sheet”), which sets forth the terms under which the Company will use its best efforts to arrange for financing of a maximum of $20,000,000 (the “2020 Financing”). Subject to the terms and conditions of the 2020 Term Sheet, the Company will use its best efforts to arrange for the 2020 Financing, which amounts will be obtained in several tranches. The proceeds from the 2020 Financing will be used to fund the Company’s clinical development program, as currently constituted and envisioned, and to fund the Company’s general and administrative expenses.

 

Since financing was launched and through March 31, 2020, the Company had received aggregate Loans of $400,000 in connection with the 2020 Financing.

 

The Series D Preferred Stock

 

As of March 31, 2020, and through the date of filing, the Series D Preferred Stock had not been designated by the Board. Per the terms of the notes issued in connection with the 2017 and 2020 Financings, if the Company has not designated the Series D Preferred Stock or if an insufficient number of Series D Preferred shares exist upon a conversion by a note holder, then the outstanding loans will continue to accrue interest at a rate of 8% per annum until which time the Company has designated a sufficient number of Series D Preferred shares. As a result, the Company did not analyze the notes for a potential beneficial conversion feature as the definition of a firm commitment has not been met since the notes were not convertible as of their respective dates of issuance or as of March 31, 2020.

 

Convertible Notes Payable – Related Parties

 

During the three months ended March 31, 2020, the Company entered into additional related party 2020 Notes in the aggregate principal amount of $100,000.

 

Convertible Notes Payable – Non-Related Parties

 

During the three months ended March 31, 2020, the Company entered into additional non-related party 2020 Notes in the aggregate principal amount of $200,000. As of March 31, 2020, the Company had borrowed $300,000 under these notes.

 

 9 

 

 

5. Related Party Transactions

 

During the three months ended March 31, 2020 and 2019, the Company paid Mr. Bruce Horowitz (Capital Strategists) consulting fees of $52,400 and $110,000, respectively, for services rendered. Accrued director fees for Mr. Horowitz as of March 31, 2020 and 2019 were $18,750 and $18,750, respectively. Mr. Horowitz serves as both COO and a Director.

 

See Note 4 and Note 6 for details of other related party transactions.

 

6. Receivables

 

The following table summarizes the receivables at March 31, 2020 and December 31, 2019:

 

   March 31, 2020 
   Tax Credit   Legal Fees   Settlement   Total 
                 
Provectus Australia Tax Credit  $74,235   $-   $-   $74,235 
Gross receivable   -    455,500    1,649,043    2,104,543 
Reserve for uncollectibility   -    (455,500)   (1,649,043)   (2,104,543)
Net receivable  $74,235   $-   $-   $74,235 

 

   December 31, 2019 
   Tax Credit   Legal Fees   Settlement   Total 
                 
Provectus Australia Tax Credit  $55,058   $-   $-   $55,058 
Gross receivable   -    455,500    1,649,043    2,104,543 
Reserve for uncollectibility   -    (455,500)   (1,649,043)   (2,104,543)
Net receivable  $55,058   $-   $-   $55,058 

 

7. Stockholders’ Deficiency

 

Common Stock

 

During the three months ended March 31, 2020, warrant holders exercised warrants to purchase an aggregate of 800,000 shares of common stock at a price of $0.0533 per share. In connection with these exercises, the Company received aggregate cash proceeds of $42,640.

 

 10 

 

 

8. Leases

 

The Company currently leases 4,500 square feet of corporate office space in Knoxville, Tennessee through an operating lease agreement for a term of five years ending on June 30, 2022. Payments range from approximately $7,300 to $7,800 per month.

 

Total operating lease expense for the three months ended March 31, 2020 was $21,302, of which, $14,201 was included within research and development and $7,101 was included within general and administrative expenses on the condensed consolidated statement of operations. Total operating lease expense for the three months ended March 31, 2019 was $34,806, of which, $23,204 was included within research and development and $11,602 was included within general and administrative expenses on the condensed consolidated statement of operations.

 

As of March 31, 2020, the Company had no leases that were classified as a financing lease. As of March 31, 2020, the Company did not have additional operating and financing leases that have not yet commenced. 

 

A summary of the Company’s right-of-use assets and liabilities is as follows:

 

   Three Months Ended
March 31, 2020
 
     
Cash paid for amounts included in the measurement of lease liabilities:     
Operating cash flows used in operating leases  $22,441 
      
Right-of-use assets obtained in exchange for lease obligations:     
Operating leases  $- 
      
Weighted Average Remaining Lease Term     
Operating leases   2.25 Years 
      
Weighted Average Discount Rate     
Operating leases   8.0%

 

 11 

 

 

Future minimum payments under the Company’s non-cancellable lease obligations as of March 31, 2020 were as follows:

 

Years  Amount 
     
2020   68,225 
2021   92,471 
2022   46,688 
Total future minimum lease payments   207,384 
Less: amount representing imputed interest   (19,781)
Total  $187,603 

 

9. Commitments, Contingencies and Litigation

 

Culpepper Travel Expenses and Related Collection Efforts

 

On December 27, 2016, the then-Board of Directors (the “then-Board”) unanimously voted to terminate then-interim Chief Executive Officer, then-Chief Operating Officer, and former Chief Financial Officer, Peter Culpepper (“Culpepper”), effective immediately, from all positions he held with the Company and each of its subsidiaries, “for cause,” in accordance with the terms of the Amended and Restated Executive Employment Agreement entered into by Culpepper and the Company on April 28, 2014 (the “Culpepper Employment Agreement”), based on the results of the investigation conducted by the Audit Committee of the then-Board regarding improper expense reimbursements to Culpepper.

 

The Company took the position that under the terms of the Culpepper Employment Agreement, Culpepper is owed no severance payments as a result of his termination “for cause” as that term is defined in the Culpepper Employment Agreement. Furthermore, Culpepper is no longer entitled to the 2:1 credit under the Stipulated Settlement Agreement and Mutual Release in the Kleba Derivative Lawsuit Settlement (the “Derivative Lawsuit Settlement”) such that the total $2,240,000 owed by Culpepper pursuant to the Derivative Lawsuit Settlement plus Culpepper’s proportionate share of the litigation cost in the amount of $227,750, less the amount that he repaid as of December 31, 2016, is immediately due and payable. The Company sent Culpepper a notice of default in January 2017 for the total amount he owes the Company and is in the process of pursuing these claims in accordance with the alternative dispute resolution provision of the Culpepper Employment Agreement. The Company has established a reserve of $2,104,543 as of March 31, 2020 and December 31, 2019, which amount represents the amount the Company currently believes Culpepper owes to the Company under the Derivative Lawsuit Settlement (excluding the amount of attorneys’ fees incurred in enforcing the terms of the Derivative Lawsuit Settlement), while the Company pursues collection of this amount.

 

Culpepper disputed that he was terminated “for cause” under the Culpepper Employment Agreement. Pursuant to the alternative dispute resolution provisions of that agreement, the Company and Culpepper participated in a mediation of their dispute on June 28, 2017. Having reached no resolution during the mediation, the parties participated in arbitration under the commercial rules of the American Arbitration Association, arbitrating both Culpepper’s claim for severance against the Company and the Company’s claims against Culpepper for improper expense reimbursements and amounts Culpepper owes the Company under the Derivative Lawsuit Settlement (the “Culpepper Arbitration”).

 

 12 

 

 

On September 12, 2018, the arbitrator issued his final award in favor of the Company. On October 4, 2018, the Company filed a petition with the Chancery Court for Davidson County, Tennessee to confirm the arbitration award. This court entered an order confirming the arbitrator’s award on January 23, 2019.

 

On February 20, 2019, Culpepper filed a motion to alter or amend this judgment. On March 22, 2019, the Chancery Court upheld the arbitration award in favor of the Company. On April 16, 2019, Culpepper filed a Notice of Appeal with the Tennessee Court of Appeals regarding the Chancery Court’s judgment. The Company and Culpepper submitted their respective court of appeal briefs on November 12, 2019 and December 3, 2019, respectively. Oral arguments were held on January 7, 2020. On April 14, 2020, the Court of Appeals affirmed the Chancery Court’s judgement and awarded court costs to the Company. The time for Culpepper to file an application for permission to appeal to the Tennessee Supreme Court runs sixty (60) days from the ruling of the Court of Appeals.

 

10. Subsequent Events

 

Convertible Notes Payable

 

Subsequent to March 31, 2020, the Company entered into 2020 Notes with non-related parties in the aggregate principal amount of $50,000 in connection with 2nd Loans received by the Company for the same amount.

 

Paycheck Protection Program

 

On April 20, 2020, the Company received $62,500 from the CARES Act PPP. The PPP provides for loans to qualifying businesses for amounts of up to 2.5 times their average monthly payroll expenses. The loan principal and accrued interest are forgivable, as long as the borrower uses loan proceeds for eligible purposes during the eight weeks following disbursement, such as payroll, benefits, rent, and utilities, and maintains its payroll levels. The amount of loan forgiveness is reduced if the borrower terminates employees or reduces salaries during this eight-week period, subject to certain qualifications and exclusions. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first seven months. The Company intends to use PPP proceeds it received for purposes consistent with PPP criteria. While the Company currently believes its use of PPP loan proceeds should meet the conditions for forgiveness of the loan, we cannot assure you that we will not take actions that may cause the Company to be ineligible for loan forgiveness in whole or in part or that PPP eligibility requirements may not change that would result in making the Company or the Company’s use of the PPP proceeds ineligible.

 

Economic Injury Disaster Grant

 

On April 29, 2020, the Company received $3,000 from the CARES Act EIDL. In response to the SARS-CoV-2 pandemic, businesses could apply for an EIDL advance, which is designed to provide economic relief to businesses currently experiencing a temporary loss. EIDL advances do not have to be repaid.

 

 13 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion is intended to assist in the understanding and assessment of significant changes and trends related to our results of operations and our financial condition together with our consolidated subsidiaries. This discussion and analysis should be read in conjunction with the accompanying unaudited financial statements and our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 5, 2020 (“2019 Form 10-K”), which includes additional information about our critical accounting policies and practices and risk factors. Historical results and percentage relationships set forth in the statement of operations, including trends which might appear, are not necessarily indicative of future operations.

 

Overview

 

Provectus is a clinical-stage biotechnology company developing a new class of drugs for oncology, hematology, and dermatology based on an entire, wholly-owned, family of chemical small molecules called halogenated xanthenes. Intratumoral (aka intralesional) PV-10®, the first small molecule autolytic immunotherapy, which can induce immunogenic cell death, is undergoing clinical study for adult solid tumor cancers, such as melanoma and GI tumors (e.g., hepatocellular carcinoma, metastatic colorectal cancer, metastatic neuroendocrine tumors, metastatic uveal melanoma), and preclinical study for pediatric solid tumor cancers (e.g., neuroblastoma, Ewing sarcoma, rhabdomyosarcoma, osteosarcoma) and blood cancers (e.g., acute myeloid leukemia). Topical PH-10® is undergoing clinical study for inflammatory dermatoses (e.g., psoriasis, atopic dermatitis).

 

Our Core Science and Technology

 

Oncology. PV-10 drug product is an injectable formulation of rose bengal disodium (4,5,6,7-tetrachloro-2’,4’,5’,7’-tetraiodofluorescein disodium salt) (“RB”) drug substance (i.e., active pharmaceutical ingredient). PV-10 is a bright rose red solution containing 10% w/v RB in 0.9% saline for injection, which is supplied in single-use glass vials containing 5 mL (to deliver) of solution. PV-10 is administered directly to superficial disease (e.g., cutaneous melanoma) via injection and to visceral disease (e.g., GI tumors) via image-guided percutaneous injection. PV-10 selectively accumulates in the lysosomes of cancer cells. Cancer cells, particularly advanced cancer cells, are very dependent on effective lysosomal functioning (Piao et al., Ann N Y Acad Sci 2016). Cancer progression and metastasis are associated with lysosomal compartment changes (Nishimura et al., Pathol Oncol Res 1998; Gocheva et al., Genes Dev 2006), which are closely correlated with, among other things, invasive growth, angiogenesis, and drug resistance (Fahrenbacher et al., Cancer Res 2005). Physicochemical properties of lysosomes trap PV-10. Lumenal pH of 4.5 to 5 is ideal for the conversion of soluble rose bengal disodium into insoluble rose bengal lactone.

 

Lysosomes are the central organelles for intracellular degradation of biological macromolecules and organelles. Discovered by Christian de Duve, M.D. in 1955, lysosomes have been linked with a number of biological processes like cell death, inflammasome activation, and immune response. In 1959, Dr. de Duve described lysosomes as “suicide bags,” because their rupture led to cell death and tissue autolysis. Lysosomes have been shown to play a role in each of the primary pathways of cell death, which are apoptosis, autophagy, and necrosis. He was awarded the Nobel Prize in 1974 for discovering and characterizing lysosomes.

 

Provectus showed that PV-10 selectively accumulates in the lysosomes of cancer cells and disrupts them, causing the cancer cells to die. PV-10 (RB) has also been shown by Provectus and independent researchers to trigger each major, distinct form of lysosomal cell death; that is, apoptosis, autophagy, and necrosis.

 

 14 

 

 

PV-10’s lysosomal targeting comprises:

 

  Transiting the plasmalemma (i.e., the cell membrane) of cancer cells. PV-10 penetrates the cell membrane of cancerous cells which normally protects the cancer cell from its surrounding environment. PV-10, however, is excluded from normal cells;
     
  Accumulating in the lysosomes of cancer cells. As noted above, the physicochemical properties of lysosomes trap PV-10;
     
  Triggering the release of lysosomal contents. Acute autolysis can occur within 60 minutes. Early preclinical work by Provectus on PV-10’s lysosomal targeting showed identical responses in different disease models, such as Hepa1-6 murine hepatocellular carcinoma, HTB-133 human breast carcinoma, and H96Ar human multi-drug resistant small cell lung carcinoma;
     
  Inducing the rapid cell death of cancer cells. Early trypan blue exclusion work by Provectus confirmed cell death within hours; and,
     
  Intracellular pH consistency with the release of acidic lysosomal contents. Early seminaphthorhodafluor-1 (“SNARF-1”) staining work by Provectus confirmed lower intracellular pH upon exposure to PV-10 (RB).

 

Dermatology. For psoriasis, pathways significantly improved include published psoriasis transcriptomes and cellular responses mediated by IL-17, IL-22, and interferons. Clinical work has shown that more than 500 disease-related genes were down-regulated after four weeks of PH-10 application and expression of a wide-range of central “psoriasis related” genes including IL-23, IL-17, IL-22, S100A7, IL-19, IL-36, and CXCL1 were effectively normalized; that is, treated lesional skin had values in the same range as baseline non-lesional skin. 

 

Our Drug Development Strategy for Oncology and Hematology

 

The Company’s strategy is to (i) demonstrate the independent action of single-agent PV-10; that is, safety and activity in T cell and non-T cell inflamed tumor types, in high and low tumor mutation burden tumor types, and in other tumor type categories, such as gene mutations, (ii) demonstrate the coordinated induction of multiple immune signaling pathways (i.e., functional immunogenic cell death [“ICD”]; Snyder et al., Sci Immunol 2019) by PV-10 treatment, (iii) demonstrate the functional T cell response generated by PV-10 treatment, and (iv) contrast and compare PV-10 treatment – safety, activity, and induced immune response – with that of immune checkpoint inhibition (“CI”) and other drug classes in single-agent and PV-10-based combination therapy settings.

 

This strategy may quicken the advancement of single-agent PV-10 along a pathway-to-approval in solid tumor cancer indications where there is high unmet need, limited activity from other therapies, and the opportunity to display the immune response from PV-10 treatment, such as neuroendocrine tumors (“NET”) metastatic to the liver (“mNET”) (NCT02693067). This strategy may also permit the Company to develop and advance a cancer combination therapy involving one or more CI and/or other drug classes along a pathway-to-approval in a disease indication where there is high unmet need, limited activity from standard of care (“SOC”) treatment, and the opportunity to display how PV-10 augments clinical response to existing or emerging SOCs, such as uveal melanoma metastatic to the liver (“mUM”) (i.e., combination therapy with an anti-CTLA-4 agent and an anti-PD-1 agent) (NCT00986661).

 

In hematology, research collaborators continue their preclinical work to develop a potential PV-10-based leukemia vaccine for pediatric patients. 

 

Our Drug Development Strategy for Dermatology

 

The Company’s strategy is to (i) demonstrate 12-week single-agent administration proof-of-concept (“POC”) for PH-10 that includes (a) a preclinical safety study of extended 12-week administration (compared to, previously, four weeks), (b) a clinical mechanism of action study in atopic dermatitis, which would be a “book-end” trial to the already completed clinical mechanism study in psoriasis, (c) Phase 2 randomized controlled trials of PH-10 for the treatment of psoriasis and atopic dermatitis that may potentially utilize SOC comparators, and (d) end-of-Phase 2 meetings with the FDA upon the completion of the abovementioned Phase 2 trials, and (ii) expand POC PH-10 treatment to include dermatology combination therapy. Our goal for this POC work is to achieve Phase 3 trial-ready status for PH-10 in both psoriasis and atopic dermatitis.

 

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Components of Operating Results

 

Research and Development Expenses

 

A large component of our total operating expenses is the Company’s investment in research and development activities, including the clinical development of our product candidates. Research and development expenses represent costs incurred to conduct research and undertake clinical trials to develop our drug product candidates. These expenses consist primarily of:

 

  Costs of conducting clinical trials, including amounts paid to clinical centers, clinical research organizations and consultants, among others;
  Salaries and related expenses for personnel, including stock-based compensation expense;
  Other outside service costs including cost of contract manufacturing;
  The costs of supplies and reagents; and,
  Occupancy and depreciation charges.

 

We expense research and development costs as incurred.

 

Research and development activities are central to our business model. We expect our research and development expenses to increase in the future as we advance our existing product candidates through clinical trials and pursue their regulatory approval. Undertaking clinical development and pursuing regulatory approval are both costly and time-consuming activities. As a result of known and unknown uncertainties, we are unable to determine the duration and completion costs of our research and development activities, or if, when, and to what extent we will generate revenue from any subsequent commercialization and sale of our drug product candidates.

 

General and Administrative Expenses

 

General and administrative expense consists primarily of salaries, stock-based compensation expense and other related costs for personnel in executive, finance, accounting, business development, legal, information technology and corporate communication functions. Other costs include facility costs not otherwise included in research and development expense, insurance, and professional fees for legal, patent and accounting services.

 

 16 

 

 

Results of Operations

 

Comparison of the Three Months Ended March 31, 2020 and March 31, 2019

 

Overview

 

Total operating expenses were $1,448,240 for the three months ended March 31, 2020, a decrease of $348,344 or 19.4% compared to the three months ended March 31, 2019. The decrease was driven primarily by our continued transformation and process improvement efforts within the Company. Net loss for the three months ended March 31, 2020 was $1,827,061, an increase of $457,231 or 33.4% which was primarily attributable to gains recognized in connection with settlements of lawsuits in 2019.

 

    For the Three Months Ended              
    March 31,     Increase/        
    2020     2019     (Decrease)     % Change  
                   
Operating Expenses:                                
Research and development   $ 909,446     $ 1,037,331     $ (127,885 )     -12.3 %
General and administrative     538,794       759,253       (220,459 )     -29.0 %
Total Operating Expenses     1,448,240       1,796,584       (348,344 )     -19.4 %
                                 
Total Operating Loss     (1,448,240 )     (1,796,584 )     (348,344 )     19.4 %
Other Income/(Expense):                                
Gain on settlement of lawsuits     -       675,000       (675,000 )     -100.0 %
Research and development tax credit     26,251       84,072       (57,821 )     -68.8 %
Investment and interest income     79       2,255       (2,176 )     -96.5 %
Interest expense     (405,151 )     (334,573 )     (70,578 )     21.1 %
Total Other Income/(Expense)     (378,821)       426,754       (805,575)     -188.8  %
                                 
Net Loss   $ (1,827,061 )   $ (1,369,830 )   $ 457,231       -33.4 %

 

Research and Development Expenses

 

Research and development expenses were $909,446 for the three months ended March 31, 2020, a decrease of $127,885 or 12.3% compared to the three months ended March 31, 2019. The decrease was primarily due to (i) reduced cost on clinical trials due to closure of MM-31 study, and (ii) a decrease in payroll and related taxes due to a lower negotiated employment agreement.

 

The following table summarizes our research and development expenses incurred during the three months ended March 31, 2020 and March 31, 2019:

 

   For the Three Months Ended         
   March 31,   Increase/     
   2020   2019   (Decrease)   % Change 
                 
Operating Expenses:                    
Research and development:                    
Clinical trial and research expenses  $584,057   $627,535   $(43,478)   -6.9%
Depreciation/amortization   169,942    169,942    -    0.0%
Insurance   73,592    65,963    7,629    11.6%
Payroll and taxes   66,479    149,475    (82,996)   -55.5%
Rent and utilities   15,376    24,416    (9,040)   -37.0%
Total research and development  $909,446   $1,037,331   $(127,885)   -12.3%

 

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General and Administrative Expenses

 

General and administrative expenses were $538,794 for the three months ended March 31, 2020, a decrease of $220,762 or 29.1% compared to the three months ended March 31, 2019. The decrease was primarily due to (i) lower legal fees as we concluded the Company’s lawsuits against former accounting vendors, (ii) a decrease in payroll and related taxes, and (iii) lower professional fees.

 

The following table summarizes our general and administrative expenses incurred during the three months ended March 31, 2020 and March 31, 2019:

 

   For the Three Months Ended         
   March 31,   Increase/     
   2020   2019   (Decrease)   % Change 
                 
Operating Expenses:                    
General and administrative:                    
Depreciation  $1,361   $1,361   $-    0.0%
Directors fees   96,250    96,250    -    0.0%
Insurance   41,866    48,396    (6,530)   -13.5%
Legal and litigation   88,062    193,641    (105,579)   -54.5%
Other general and administrative cost   17,007    22,895    (5,888)   -25.7%
Payroll and taxes   35,486    123,271    (87,785)   -71.2%
Professional fees   250,011    260,212    (10,201)   -3.9%
Rent and utilities   7,660    12,439    (4,779)   -38.4%
Foreign currency translation   1,091    788    303    38.5%
Total general and administrative  $538,794   $759,253   $(220,459)   -29.0%

 

Other Income/(Expense)

 

Other income decreased by $734,997 from $761,327 for the three months ended March 31, 2019 to $26,330 for the three months ended March 31, 2020 which was primarily attributable to gains recognized in connection with settlements of lawsuits in 2019.

 

Interest expense increased by $70,578 from $334,573 for the three months ended March 31, 2019 to $405,151 for the three months ended March 31, 2020. The increase was due to the increased number of convertible notes payable outstanding relating to the PRH Notes.

 

Liquidity and Capital Resources

 

Our cash and cash equivalents were $213,739 at March 31, 2020, compared to $590,706 at December 31, 2019. The condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q have been prepared on a basis that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We have continuing net losses and negative cash flows from operating activities. In addition, we have an accumulated deficit of $235,643,889 as of March 31, 2020. These conditions raise substantial doubt about our ability to continue as a going concern for a period within one year from the date that the financial statements included elsewhere in this Quarterly Report on Form 10-Q are issued. Our financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. Our ability to continue as a going concern depends on our ability to obtain additional financing as may be required to fund current operations.

 

Management’s plans include selling our equity securities and obtaining other financing to fund our capital requirement and on-going operations, including the 2020 Financing; however, there can be no assurance we will be successful in these efforts. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern. Significant funds will be needed to continue and complete our ongoing and planned clinical trials.

 

The SARS-CoV-2 pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact our ability to raise additional funds and may also impact the volatility of our stock price and trading in our stock. Moreover, the pandemic has also significantly impacted economies worldwide, which could result in adverse effects on our business and operations. We cannot be certain what the overall impact of the SARS-CoV-2 pandemic will be on our business. It has the potential to adversely affect our business, financial condition, results of operations, and prospects.

 

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Access to Capital

 

Management plans to access capital resources through possible public or private equity offerings, including the 2020 Financing, exchange offers, debt financings, corporate collaborations or other means. If we are unable to raise sufficient capital through the 2020 Financing or otherwise, we will not be able to pay our obligations as they become due.

 

The primary business objective of management is to build the Company into a commercial-stage biotechnology company; however, we cannot assure you that management will be successful in implementing the Company’s business plan of developing, licensing, and/or commercializing our prescription drug product candidates. Moreover, even if we are successful in improving our current cash flow position, we nonetheless plan to seek additional funds to meet our current and long-term requirements in 2020 and beyond. We anticipate that these funds will otherwise come from the proceeds of private placement transactions, including the 2020 Financing, the exercise of existing warrants and outstanding stock options, or public offerings of debt or equity securities. While we believe that we have a reasonable basis for our expectation that we will be able to raise additional funds, we cannot assure you that we will be able to complete additional financing in a timely manner. In addition, any such financing may result in significant dilution to stockholders.

 

Critical Accounting Policies

 

For a description of our critical accounting policies, see Note 3 – Critical Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

 

Recently Issued Accounting Standards

 

Recently issued accounting standards are included in Note 3 – Critical Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as special purpose entities (“SPEs”).

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our principal executive officer and principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

The information required by this item is incorporated by reference from Part I, Item 1. Financial Statements, Notes to Condensed Consolidated Financial Statements, Note 9.

 

ITEM 1A. RISK FACTORS. 

 

There have been no material changes to the risk factors that were disclosed in the 2019 Form 10-K, other than set forth below.

 

Our business, financial condition and results of operations may be adversely affected by the severe acute respiratory syndrome (SARS)-associated CoV-2 (SARS-CoV-2) pandemic or other similar outbreaks of contagious diseases.

 

Outbreaks of contagious diseases and other adverse public health developments, affecting us and/or the third parties on which we rely, could have a material and adverse effect on our business, financial condition and results of operations. The severe acute respiratory syndrome (SARS)-associated CoV-2 (SARS-CoV-2) pandemic, which was reported to have begun in late-2019 and has spread worldwide, may affect our ability to initiate and/or complete current and/or or future preclinical studies and/or clinical trials; disrupt our regulatory activities; and/or have other adverse effects on our clinical development. In addition, stay-at-home orders, business closures, travel restrictions, supply chain disruptions and employee or independent contractor illness or quarantines could result in disruptions to our operations, which could adversely impact our results from operations and financial condition. The SARS-CoV-2 pandemic has also caused substantial disruption in capital and financial markets and adversely impacted economies worldwide, any and/or all of which may disrupt our business, negatively impact our ability to raise additional funds, and adversely affect our results of operations and financial condition. Moreover, many risk factors set forth in the 2019 Form 10-K should be interpreted as heightened risks as a result of the impact of the SARS-CoV-2 pandemic. The extent to which the SARS-CoV-2 pandemic may impact our business, financial condition and results of operations will depend on the manner in which this pandemic continues to evolve and future developments in response thereto, which are highly uncertain and cannot be predicted with confidence as of the date of this Form 10-Q.

 

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

 

2020 Financing

 

During the three months ended March 31, 2020, the Company entered into additional 2020 Notes with a related party investor in the aggregate principal amount of $100,000. As of March 31, 2020, the Company had drawn down the entire $100,000 under these notes.

 

During the three months ended March 31, 2020, the Company entered into additional 2020 Notes with non-related party accredited investors in the aggregate principal amount of $200,000. As of March 31, 2020, the Company had drawn down the entire $200,000 under these notes.

 

The Company believes that such transactions were exempt from the registration requirements of the Securities Act of 1933, as amended, (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act (or Rule 506 of Regulation D promulgated thereunder) as transactions by an issuer not involving a public offering.

 

For further details on the terms of the 2017 and 2020 Notes, refer to our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on March 5, 2020.

 

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. Mine Safety Disclosures.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS.

 

 

** Filed herewith.

*** Furnished herewith.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  PROVECTUS BIOPHARMACEUTICALS, INC.
                                       
May 13, 2020 By: /s/ Bruce Horowitz
    Bruce Horowitz
    Chief Operating Officer (Principal Executive Officer)
     
  By: /s/ Heather Raines
    Heather Raines, CPA
    Chief Financial Officer (Principal Financial Officer)

 

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