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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2021

 

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. ☒ 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). ☒ 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 ☒ Smaller reporting company ☒
       
    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 ☒ No

 

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of November 9, 2021, was 419,447,119.

 

 

 

 
 

 

TABLE OF CONTENTS

 

  Page
PART I - FINANCIAL INFORMATION  
   
Cautionary Note Regarding Forward-Looking Statements 1
Item 1. Financial Statements 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 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
Item 4. Controls and Procedures 23
   
PART II - OTHER INFORMATION  
   
Item 1. Legal Proceedings 24
Item 1A. Risk Factors 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
Item 3. Defaults Upon Senior Securities 25
Item 4. Mine Safety Disclosures 25
Item 5. Other Information 25
Item 6. Exhibits 25
   
SIGNATURES 26

 

 
 

 

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, 2020), and Item 1A of Part II of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, 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 through the proceeds of private placement transactions, the exercise of existing warrants and outstanding stock options, and/or public offerings of debt or equity securities, 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

 

    September 30,     December 31,  
    2021     2020  
    (Unaudited)        
Assets                
                 
Current Assets:                
Cash and cash equivalents   $ 254,083     $ 97,231  
Short-term receivables - legal fees, settlement and other, net     1,354       3,930  
Prepaid expenses     251,111       322,518  
                 
Total Current Assets     506,548       423,679  
                 
Equipment and furnishings, less accumulated depreciation of $87,962 and $78,313, respectively     35,052       44,701  
Operating lease right-of-use asset     58,736       120,821  
                 
Total Assets   $ 600,336     $ 589,201  
                 
Liabilities and Stockholders’ Deficiency                
                 
Current Liabilities:                
Accounts payable - trade   $ 1,259,623     $ 956,860  
Deposit for purchase of Series D-1 Preferred Stock     150,000     $ -  
Other accrued expenses     1,806,000       1,500,782  
Current portion of accrued interest     -       2,774,968  
Current portion of accrued interest - related parties     2,044       1,766,493  
Current portion of note payable     68,392       236,228  
Current portion of convertible notes payable     -       16,622,000  
Current portion of convertible notes payable - related parties     200,000       6,770,000  
Current portion of operating lease liability     62,920       84,383  
                 
Total Current Liabilities     3,548,979       30,711,714  
                 
Note payable, non-current portion     -       39,061  
Operating lease liability, non-current portion     -       44,783  
                 
Total Liabilities     3,548,979       30,795,558  
                 
Commitments and contingencies (Note 10)     -          
                 
Stockholders’ Deficiency:                
Preferred stock; par value $0.001 per share; 25,000,000 shares authorized; Series B Convertible Preferred Stock; 240,000 shares designated; 0 and 100 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $3,500 at September 30, 2021 and December 31, 2020, respectively     -       -  
Series D Convertible Preferred Stock; 12,374,000 shares designated; 12,373,247 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $14,164,889 and $0 at September 30, 2021 and December 31, 2020, respectively; (See Note 4. Convertible Notes Payable – Liquidation Preference)     12,373       -   
Series D-1 Convertible Preferred Stock; 9,441,000 shares designated; 9,218,449 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $105,532,804 and $0 at September 30, 2021 and December 31, 2020, respectively; (See Note 4. Convertible Notes Payable – Liquidation Preference)     9,219       -  
Common stock; par value $0.001 per share; 1,000,000,000 shares authorized; 419,447,119 and 398,807,037 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively     419,448       398,808  
Additional paid-in capital     241,440,106       209,923,347  
Accumulated other comprehensive loss     (34,574 )     (34,097 )
Accumulated deficit     (244,795,215 )     (240,494,415 )
                 
Total Stockholders’ Deficiency     (2,948,643 )     (30,206,357 )
                 
Total Liabilities and Stockholders’ Deficiency   $ 600,336     $ 589,201  

 

See accompanying notes to condensed consolidated financial statements.

 

2

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

    2021     2020     2021     2020  
    For the Three Months Ended     For the Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
                   
Operating Expenses:                                
Research and development   $ 608,653     $ 667,523     $ 1,866,776     $ 2,273,423  
General and administrative     438,578       434,355       1,583,148       1,487,543  
Total Operating Expenses     1,047,231       1,101,878       3,449,924       3,760,966  
                                 
Total Operating Loss     (1,047,231 )     (1,101,878 )     (3,449,924 )     (3,760,966 )
Other Income/(Expense):                                
EIDL grant     -       -       -       3,000  
Research and development tax credit     (507 )     1       31,637       27,187  
Investment and interest income     1       823       2       3,414  
Gain from extinguishment     -       -       63,094       -  
Interest expense     (3,522 )     (463,390 )     (945,609 )     (1,278,945 )
Total Other Expense, Net     (4,028 )     (462,566 )     (850,876 )     (1,245,344 )
                                 
Net Loss   $ (1,051,259 )   $ (1,564,444 )   $ (4,300,800 )   $ (5,006,310 )
                                 
Basic and Diluted Loss Per Common Share   $ (0.00 )   $ (0.00 )   $ (0.01 )   $ (0.01 )
                                 
Weighted Average Number of Common Shares Outstanding - Basic and Diluted     409,961,614       393,495,431       405,286,784       393,443,141  

 

See accompanying notes to condensed consolidated financial statements.

 

3

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

    2021     2020     2021     2020  
    For the Three Months Ended     For the Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
                   
Net Loss   $ (1,051,259 )   $ (1,564,444 )   $ (4,300,800 )   $ (5,006,310 )
Other Comprehensive Loss:                                
Foreign currency translation adjustments     (193 )     (1,652 )     (477 )     (8,446 )
Total Comprehensive Loss   $ (1,051,452 )   $ (1,566,096 )   $ (4,301,277 )   $ (5,014,756 )

 

See accompanying notes to condensed consolidated financial statements.

 

4

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

(Unaudited)

 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

 

                                                                                                 
                                                          Accumulated              
    Preferred Stock     Preferred Stock     Preferred Stock                 Additional     Other              
    Series B     Series D     Series D-1     Common Stock     Paid-In     Comprehensive     Accumulated        
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Capital     Loss     Deficit     Total  
                                                                         
Balance at January 1, 2021     100     $ -       -     $ -       -     $ -       398,807,037     $ 398,808     $ 209,923,347     $ (34,097 )   $ (240,494,415 )   $ (30,206,357 )
                                                                                                 
Common stock issued upon exercise of warrants     -       -       -       -       -       -       4,500,000       4,500       235,350       -       -       239,850  
Stock-based compensation:                                                                                                
Common stock     -       -       -       -       -       -       250,000       250       19,500       -       -       19,750  
Comprehensive loss:                                                             -                                  
Net loss     -       -       -       -       -       -       -       -       -       -       (1,669,950 )     (1,669,950 )
Other comprehensive loss     -       -       -       -       -       -       -       -       -       837       -       837  
                                                                                                 
Balance at March 31, 2021     100     $ -       -     $ -       -     $ -       403,557,037     $ 403,558     $ 210,178,197     $ (33,260 )   $ (242,164,365 )   $ (31,615,870 )
                                                                                                 
Common stock issued for services     -       -       -       -       -       -       25,000       25       1,650       -       -       1,675  
Common stock issued upon exercise of warrants     -       -       -       -       -       -       200,000       200       10,460       -       -       10,660  
Stock-based compensation:                                                                                                
Warrants     -       -       -       -       -       -       -       -       488       -       -       488  
Conversion of PRH Notes to Series D Preferred Stock     -       -       12,373,247       12,373       -       -       -       -       3,528,849       -       -       3,541,222  
Conversion of PRH Notes to Series D-1 Preferred Stock     -       -       -       -       9,440,594       9,441       -       -       27,022,417       -       -       27,031,858  
Comprehensive loss:                                                                                                
Net loss     -       -       -       -       -       -       -       -       -       -       (1,579,591 )     (1,579,591 )
Other comprehensive income     -       -       -       -       -       -       -       -       -       (1,121 )     -       (1,121 )
                                                                                                 
Balance at June 30, 2021     100     $ -       12,373,247     $ 12,373       9,440,594     $ 9,441       403,782,037     $ 403,783     $ 240,742,061     $ (34,381 )   $ (243,743,956 )   $ (2,610,679 )
                                                                                                 
Common stock issued upon exercise of warrants     -       -       -       -       -       -       13,352,966       13,353       698,360       -       -       711,713  
Stock-based compensation:                                                                                                
Common stock     -       -       -       -       -       -       25,000       25       1,750       -       -       1,775  
Conversion of Series B Preferred Stock to Common Stock     (100 )     -       -       -       -       -       65,666       66       (66 )     -       -       -  
Conversion of Series D-1 Preferred Stock to Common Stock     -       -       -       -       (222,145 )     (222 )     2,221,450       2,221       (1,999 )     -       -       -  
Comprehensive loss:                                                                                                
Net loss     -       -       -       -       -       -       -       -       -       -       (1,051,259 )     (1,051,259 )
Other comprehensive loss     -       -       -       -       -       -       -       -       -       (193 )     -       (193 )
                                                                                                 
Balance at September 30, 2021     -     $ -       12,373,247     $ 12,373       9,218,449     $ 9,219       419,447,119     $ 419,448     $ 241,440,106     $ (34,574 )   $ (244,795,215 )   $ (2,948,643 )

 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

 

                                  Accumulated              
    Preferred 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 )
                                                                 
Common stock issued for services     -       -       25,000       25       1,125       -       -       1,150  
Comprehensive loss:                                                                
Net loss     -       -       -       -       -       -       (1,614,805 )     (1,614,805 )
Other comprehensive income     -       -       -       -       -       2,233       -       2,233  
                                                                 
Balance at June 30, 2020     100     $ -       390,714,475     $ 390,714     $ 209,421,800     $ (30,802 )   $ (237,258,694 )   $ (27,476,982 )
                                                                 
Common stock issued for services     -       -       37,500       38       2,775       -       -       2,813  
Warrants issued for services     -       -       -       -       865       -       -       865  
Common stock issued upon exercise of warrants     -       -       6,105,062       6,105       319,296       -       -       325,401  
Comprehensive loss:                                                                
Net loss     -       -       -       -       -       -       (1,564,444 )     (1,564,444 )
Other comprehensive loss     -       -       -       -       -       (1,652 )     -       (1,652)
                                                                 
Balance at September 30, 2020     100     $ -       396,857,037     $ 396,857     $ 209,744,736     $ (32,454 )   $ (238,823,138 )   $ (28,713,999 )

 

See accompanying notes to condensed consolidated financial statements.

 

5

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

             
    For the Nine Months Ended  
    September 30,  
    2021     2020  
             
Cash Flows From Operating Activities:                
Net loss   $ (4,300,800 )   $ (5,006,310 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock-based compensation     23,688       4,828  
Non-cash lease expense     62,085       55,190  
Depreciation     9,648       10,467  
Amortization of patents     -       228,107  
Forgiveness of PPP Loan     (62,500 )     -  
Changes in operating assets and liabilities                
Short term receivables     2,448       47,250  
Prepaid expenses     145,639       185,329  
Accounts payable - trade     302,978       (61,026 )
Other accrued expenses     306,116       187,705  
Operating lease liability     (66,246 )     (58,437 )
Accrued interest expense     941,663       1,278,665  
                 
Net Cash Used In Operating Activities     (2,635,281 )     (3,128,232 )
                 
Cash Flows From Financing Activities:                
Proceeds from issuance of convertible notes payable     1,700,000       3,000,000  
Proceeds from issuance of convertible notes payable - related parties     200,000       100,000  
Deposit for purchase of Series D-1 Preferred Stock     150,000       -  
Repayment of short-term note payable     (219,172 )     -  
Proceeds from note payable     -       62,500  
Proceeds from exercise of warrants     962,223       368,040  
Net Cash Provided By Financing Activities    

2,793,051

      3,530,540  
                 
Effect of Exchange Rate Changes on Cash     (918 )     (6,492 )
                 
Net Increase In Cash and Cash Equivalents     156,852       395,816  
                 
Cash and Cash Equivalents, Beginning of Period     97,231       590,706  
                 
Cash and Cash Equivalents, End of Period   $ 254,083     $ 986,522  
                 
Supplemental Disclosures of Cash Flow Information:                
Cash paid during the period for:                
Interest   $ -     $ -  
Income taxes   $ -     $ -  
                 
Non-cash investing and financing activities:                
Purchase of insurance policies financed by short-term note payable   $ (282,667 )   $ -  
Conversion of non-amended 2017 Notes to Series D Preferred Stock   $ 3,541,222     $ -  
Conversion of amended 2017 Notes and 2020 Notes to Series D-1 Preferred Stock   $ 27,031,858     $ -  
Conversion of Series D-1 Preferred Stock to Common Stock   $ 222     $ -  

 

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 developing immunotherapy medicines for different diseases, with the aim of maximizing the curative impact of these medicines and achieving immunity from treated disease. These investigational drugs are based on a wholly owned class of small molecules called halogenated xanthenes (“HXs”). Our lead HX molecule is named rose bengal disodium (“RBD”).

 

  ●

Oncology: PV-10®, an investigational cancer immunotherapy administered by intralesional (“IL”) injection and an injectable formulation of cGMP RBD, is undergoing clinical study for adult solid tumor cancers, such as melanoma and gastrointestinal (“GI”) tumors (including hepatocellular carcinoma (“HCC”), colorectal cancer metastatic to the liver (“mCRC”), neuroendocrine tumors (“NET”) metastatic to the liver (“mNET”), and uveal melanoma metastatic to the liver (“mUM”), among others). Orphan drug designation (“ODD”) status was granted to PV-10 by the U.S. Food and Drug Administration (the “FDA”) for metastatic melanoma in 2006, HCC in 2011, and ocular melanoma (including uveal melanoma) in 2019.

 

Oral formulations of cGMP RBD are also undergoing preclinical study as prophylactic and therapeutic treatments for high-risk and refractory adult solid tumor cancers, such as head and neck, breast, colorectal, and testicular cancers. In vivo data of a colorectal tumor murine model that continuously promotes abnormal cell proliferation and transformation into cancer indicate increased survival in both prophylactic and therapeutic settings.

     
  ● Pediatric Oncology: IL PV-10 is also undergoing preclinical study for pediatric solid tumor cancers (including neuroblastoma, Ewing sarcoma, rhabdomyosarcoma, and osteosarcoma). ODD status was granted to PV-10 by the FDA for neuroblastoma in 2018.
     
  ● Hematology: Oral formulations of cGMP RBD are undergoing preclinical study for refractory and relapsed pediatric blood cancers (including leukemias). In vivo data of an acute lymphoblastic leukemia murine model indicated increased survival.
     
  ● Virology: Systemically administered formulations of cGMP RBD are undergoing preclinical study for the novel strain of coronavirus (“CoV”): severe acute respiratory syndrome (“SARS”) CoV 2 (“SARS-CoV-2”). In silico data indicate docking-based binding affinity to SARS-CoV-2’s main protease, spike protein, and different variants of the spike protein. In vitro data indicate activity against SARS-CoV-2 in African green monkey kidney cell (Vero) and human lung epithelial cell (Calu-3) models, and synergistic activity with remdesivir in a Vero cell model.
     
  ● Microbiology: Different formulations of cGMP RBD are undergoing preclinical study as potential treatments for multi-drug resistant (“MDR”) bacteria, such as gram-positive and gram-negative.
     
  ● Ophthalmology: Topical formulations of cGMP RBD are undergoing preclinical study as potential treatments for diseases of the eye, such as infectious keratitis.
     
  ● Dermatology: PH-10®, an investigational immuno-dermatology agent administered as a topical gel and formulation of cGMP RBD, is undergoing monotherapy clinical study and preclinical study of combination therapy with approved drugs for inflammatory dermatoses (including psoriasis and atopic dermatitis).
     
  ● Animal Health: Different formulations of cGMP RBD are undergoing development as potential treatments for animal cancers and dermatological disorders.

 

To date, the Company has not generated any revenues or profits 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.

 

7

 

 

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, 2020 filed with the SEC on March 2, 2021. 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 and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

 

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 pandemic, 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 pandemic 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 September 30, 2021.

 

The full extent of the SARS-CoV-2 pandemic impacts on the Company’s operations and financial condition is uncertain. The Company has experienced slower than normal enrollment and treatment of patients, and a prolonged SARS-CoV-2 pandemic could have a material adverse impact on the Company’s business and financial results, including the timing and ability of the Company to raise capital, 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 $254,083 at September 30, 2021. 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 unaudited condensed consolidated 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 2021 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, it will not be able to pay its obligations as they become due.

 

8

 

 

The primary business objective of management is to build the Company into a commercial-stage biotechnology company; however, the Company cannot assure that it will be successful in co-developing, licensing, and/or commercializing PV-10, PH-10, and/or any other halogenated xanthene-based drug candidate developed by the Company or entering into any 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 2021 and beyond. The Company anticipates that these funds will otherwise come from the proceeds of private placement transactions, 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 provide assurance 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, 2020 consolidated financial statements were issued in its 2020 Annual Report, there have been no material changes to the Company’s significant accounting policies, except as disclosed below.

 

Recently Adopted Accounting Standards

 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) Topic 740, Income Taxes. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company adopted ASU 2019-12 on January 1, 2021 and there was no material impact on the Company’s financial statements or disclosures.

 

Convertible Instruments

 

The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with ASC Topic 815: Derivatives and Hedging. The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. Embedded conversion options and any related freestanding instruments are recorded as a discount to the host instrument.

 

If the instrument is determined to not be a derivative liability, the Company then evaluates for the existence of a beneficial conversion feature by comparing the commitment date fair value to the effective conversion price of the instrument.

 

Preferred Stock

 

The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders’ deficiency.

 

Basic and Diluted Loss Per Common Share

 

Basic loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock. The following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

 

    September 30,     September 30,  
    2021     2020  
Warrants     512,500       89,699,866  
Options     3,625,000       2,275,000  
Convertible preferred stock     104,557,737       65,666  
                 
Total potentially dilutive shares     108,695,237       92,040,532  

 

9

 

 

4. Convertible Notes Payable

 

2017 Financing

 

On March 23, 2017, the Company entered into a 2017 Term Sheet with the PRH Group that set forth the terms on which the PRH Group would use their best efforts to arrange for a financing of a minimum of $10,000,000 and maximum of $20,000,000 (the “2017 Financing”). The 2017 Financing was in the form of a secured convertible loan from the PRH Group and other investors in the 2017 Financing, which were evidenced by secured convertible promissory notes (individually a “2017 Note” and collectively, the “2017 Notes”) from the Company to the PRH Group and other investors. Cumulatively through September 30, 2021 and December 31, 2020, the Company had received aggregate proceeds of $20,067,000 from the issuance of the 2017 Notes, respectively, of which $6,770,000 was received from related parties.

 

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 would use its best efforts to arrange for financing of a maximum of $20,000,000 (the “2020 Financing”). The 2020 Financing was in the form of secured convertible loans from investors that were evidenced by secured convertible promissory notes (the “2020 Notes”). The 2020 Term Sheet was similar to the 2017 Term Sheet. Subject to the terms and conditions of the 2020 Term Sheet, the Company used its best efforts to arrange for the 2020 Financing, which amounts were obtained in several tranches. Cumulatively through September 30, 2021 and December 31, 2020, the Company had received proceeds of $5,025,000 and $3,325,000, respectively, in connection with the 2020 Financing, of which $100,000 was received from related parties.

 

Firm Commitment

 

Previously, the Company had not designated the Series D Preferred Stock into which the 2017 Notes and the 2020 Notes (collectively the “Notes”) were convertible into. As a result, the Company did not analyze the Notes for a potential beneficial conversion feature as the definition of a firm commitment had not been met since the Notes were not yet convertible. On June 17, 2021, the required Certificates of Designation were filed with the Delaware Secretary of State. Accordingly, a firm commitment was achieved. The Company analysed the Notes for a beneficial conversion feature and determined that there was none because the Notes have an effective conversion price of $0.2862 per share of underlying common stock, which exceeds the $0.07 per share commitment date closing market price of the common stock.

 

The Series D and D-1 Convertible Preferred Stock

 

The 2017 Notes originally provided that they were convertible into a new class of the Company’s preferred stock, $0.001 par value per share (“Preferred Stock”), at a price per share equal to $0.2862 (the “Original Conversion Price”), which would be convertible into one share (the “Original Conversion Ratio”) of the Company’s common stock, $0.001 par value per share (“Common Stock”).

 

In order to ensure that the Company had sufficient authorized shares of Preferred Stock into which the 2017 Notes would convert, yet keep the economic terms of the 2017 Notes substantially equivalent, the Company entered into amendments (the “Amendments”) to the 2017 Notes (as amended, the “Amended 2017 Notes”) with a large majority of the holders of 2017 Notes to increase the conversion price by 10 times from $0.2862 to $2.862 (the “New Conversion Price”) and to change the conversion ratio by providing that one share of Preferred Stock would be convertible into 10 shares of Common Stock (the “New Conversion Ratio”). The impact of the Amendments was to reduce by 10 times the number of shares of Preferred Stock into which the 2017 Notes would convert, while keeping the economic terms the same by increasing the conversion ratio into Common Stock by 10 times. The 2020 Notes had substantially similar terms to the Amended 2017 Notes, including being convertible into Preferred Stock at the New Conversion Price, with the Preferred Stock being convertible into Common Stock at the New Conversion Ratio.

 

In order to (i) address the fact that a small minority of the holders of 2017 Notes did not execute the Amendments and (ii) ensure economic fairness for all of the holders of the 2017 Notes and 2020 Notes, the Company designated two separate classes of Preferred Stock into which the 2017 Notes and 2020 Notes would convert: (i) the Company’s Series D Convertible Preferred Stock, par value $0.001 per share (the “Series D Convertible Preferred Stock”), was designated for the holders of 2017 Notes who did not execute the Amendments and (ii) the Company’s Series D-1 Convertible Preferred Stock, par value $0.001 per share (the “Series D-1 Convertible Preferred Stock”), was designated for the holders of Amended 2017 Notes (i.e., who did execute the Amendments) and the holders of the 2020 Notes.

 

On June 20, 2021, the outstanding non-amended 2017 Notes converted into 12,373,247 shares of Series D Convertible Preferred Stock at the Original Conversion Price of $0.2862, and all the outstanding Amended 2017 Notes and outstanding 2020 Notes converted into 9,440,594 shares of Series D-1 Convertible Preferred Stock at the New Conversion Price of $2.862.

 

As a result of the conversion of the 2017 Notes and 2020 Notes into convertible preferred stock, all the security interests of these notes in the Company’s intellectual property were released.

 

The rights, preferences and privileges of the Series D Convertible Preferred Stock are set forth in a Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock (the “Series D Certificate of Designation”). The rights, preferences and privileges of the Series D-1 Convertible Preferred Stock are set forth in a Certificate of Designation of Preferences, Rights and Limitations of Series D-1 Convertible Preferred Stock (the “Series D-1 Certificate of Designation”). The Board of Directors of the Company approved each of the Series D Certificate of Designation and Series D-1 Certificate of Designation on June 16, 2021, and each of the Series D Certificate of Designation and Series D-1 Certificate of Designation were filed with the Delaware Secretary of State on June 17, 2021. The Series D Certificate of Designation and Series D-1 Certificate of Designation are the same, other than certain key differences to account solely for the different conversion ratios for the holders of 2017 Notes who did not execute Amendments compared to the holders of Amended 2017 Notes and the holders of 2020 Notes.

 

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Number of Shares

 

The Series D Certificate of Designation established and designated 12,374,000 shares of Series D Convertible Preferred Stock. The Series D-1 Certificate of Designation established and designated 9,441,000 shares of Series D-1 Convertible Preferred Stock.

 

Rank

 

The Series D Convertible Preferred Stock and the Series D-1 Convertible Preferred Stock rank pari passu with each other. The Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock rank senior to the Common Stock and any other class or series of the Company’s capital stock, the terms of which do not provide that shares of such class rank senior to, or pari passu with, the Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock as to dividends and distributions upon a change of control transaction, or the liquidation, winding-up and dissolution of the Company.

 

Dividends

 

The Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock do not have any dividend preference but are entitled to receive, on a pari passu basis, dividends, if any, that are declared and paid on the Common Stock and any other class of the Company’s capital stock that ranks junior or on par to the Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock.

 

Liquidation Preference

 

Upon the occurrence of the liquidation, winding-up or dissolution of the Company or certain mergers, corporate reorganizations or sales of the Company’s assets (each, a “Company Event”), holders of Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock will be entitled to receive a liquidation preference before any distributions are made to holders of any other class or series of the Company’s capital stock junior to the Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock. If a Company Event occurs within two years of June 20, 2021 (the “Date of Issuance”), the holders of Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock will receive for each share of Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock, respectively, an amount in cash equal to the Original Issue Price (as defined in the Series D Certificate of Designation and Series D-1 Certificate of Designation, respectively) multiplied by four. If a Company Event occurs from and after the second anniversary of the Date of Issuance, the holders of Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock will receive for each share of Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock, respectively, an amount in cash equal to the Original Issue Price multiplied by six. The Original Issue Price for the Series D Convertible Preferred Stock is $0.2862, and the Original Issue Price for the Series D-1 Convertible Preferred Stock is $2.862.

 

Voting Rights

 

Holders of shares of Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock will vote together with the holders of Common Stock as a single class. Each share of Series D Convertible Preferred Stock carries the right to one vote per share. Each share of Series D-1 Convertible Preferred Stock carries the right to 10 votes per share.

 

The Company is not permitted to amend, alter or repeal its Certificate of Incorporation or Bylaws in a manner adverse to the relative rights, preferences, qualifications, limitations or restrictions of the Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock without the affirmative vote of a majority of the votes entitled to be cast by holders of outstanding shares of Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock, voting together as a single class with each share of Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock having a number of votes equal to the number of shares of Common Stock then issuable upon conversion of such share of Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock.

 

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Series D and Series D-1 Conversion

 

The Series D Convertible Preferred Stock is convertible at the option of the holders thereof into shares of Common Stock based on a one-for-one conversion ratio. The Series D-1 Convertible Preferred Stock is convertible at the option of the holders thereof into shares of Common Stock based on a one-for-10 conversion ratio. The conversion ratio of the Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock is subject to adjustment for stock splits and combinations, recapitalizations, reclassifications, reorganizations, mergers, and consolidations. The Series D Convertible Preferred Stock and Series D-1 Convertible Preferred Stock will automatically convert into shares of Common Stock upon the fifth anniversary of the Date of Issuance.

 

During the three months ended September 30, 2021, a holder of 222,145 shares of Series D-1 Convertible Preferred Stock voluntarily converted the Preferred Stock into 2,221,450 shares of common stock.

 

2021 Financing

 

On August 13, 2021, the Board approved a Financing Term Sheet (the “2021 Term Sheet”), which sets forth the terms under which the Company will use its best efforts to arrange for financing of a maximum of $5,000,000 (the “2021 Financing”), which amounts will be obtained in several tranches.

 

As of September 30, 2021, the Company had received a 2021 Loan, as defined below, of $200,000 from a related party investor in connection with the 2021 Financing.

 

Pursuant to the 2021 Term Sheet, the 2021 Notes (defined below) will be paid back, convert into shares of the Company’s Series D-1 Preferred Stock, or convert into Company equity securities and/or debt instruments of certain future financings on or before twelve months after the issue date of a 2021 Note, subject to certain exceptions.

 

The 2021 Financing will be in the form of an unsecured convertible loans (the “2021 Loan”) from the investors (the “2021 Loan Investors”) and evidenced by convertible promissory notes (individually, a “2021 Note” and collectively, the “2021 Notes”). In addition to customary provisions, the 2021 Notes will contain the following provisions:

 

(i) The 2021 Loan will bear interest at the rate of eight percent (8%) per annum on the outstanding principal amount of the Loan that has been funded to the Company;

 

(ii) In the event there is a change of control of the Board, the term of the 2021 Notes will be accelerated and all amounts due under the 2021 Notes may be immediately due and payable at the 2021 Loan Investors’ option;

 

(iii) The outstanding principal amount and interest payment under the 2021 Loan may be paid back at maturity at the 2021 Loan Investors’ option;

 

(iv) The outstanding principal amount and interest payable under the 2021 Loan may be convertible at the 2021 Loan Investors’ option into shares of Series D-1 Convertible Preferred Stock at a price per share equal to $2.8620. The Series D-1 Convertible Preferred Stock is convertible into ten (10) shares of common stock; and

 

(v) In the event the Company conducts a qualified equity or debt financing and the Company receives gross proceeds in the aggregate amount of $20 million, the note may be converted into the equity securities and/or debt instruments of such financing at the same terms as those investors.

 

The embedded conversion options associated with the 2021 Note do not require bifurcation and treatment as a derivative liability and they do not represent a beneficial conversion feature because the effective conversion price is not at a discount to the commitment date market price.

 

5. Notes Payable

 

On April 20, 2020, the Company received a $62,500 loan under the CARES Act PPP (the “PPP Loan”). The PPP provides for loans to qualifying businesses for amounts of up to 2.5 times certain of the borrower’s average monthly payroll expenses. On May 20, 2021, the Company applied for forgiveness of the PPP Loan. On June 2, 2021, the Company was awarded full forgiveness of the PPP Loan and accrued interest. The Company recognized a gain on forgiveness of note payable in the period in which it obtained forgiveness and is included in gain from extinguishment on the accompanying condensed consolidated statements of operations.

 

The Company obtained short-term financing from AFCO Insurance Premium Finance for our commercial insurance policies. As of September 30, 2021 and December 31, 2020, the balance of the note payable was $68,392 and $212,790, respectively.

 

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6. Related Party Transactions

 

During the three months ended September 30, 2021 and September 30, 2020, the Company paid Mr. Bruce Horowitz (Capital Strategists) consulting fees of $21,200 and $127,200, respectively, for services rendered.

 

During the nine months ended September 30, 2021 and September 30, 2020, the Company paid Mr. Bruce Horowitz (Capital Strategists) consulting fees of $148,400 and $190,800, respectively, for services rendered.

 

Accrued director fees for Mr. Horowitz as of September 30, 2021 and December 31, 2020 were $56,250 and $75,000, respectively. Mr. Horowitz serves as both COO and a Director.

 

See Note 4 for details of other related party transactions.

 

Director fees during the three months ended September 30, 2021 and September 30, 2020 were $96,250 and $96,250, respectively.

 

Director fees during the nine months ended September 30, 2021 and September 30, 2020 were $288,750 and $288,750, respectively.

 

Accrued directors’ fees as of September 30, 2021 and December 31, 2020 were $1,464,339 and $1,175,589, respectively, and are included in other accrued expenses on the accompanying condensed consolidated balance sheet.

 

7. Short-term Receivables

 

The following table summarizes the receivables at September 30, 2021 and December 31, 2020:

 

    September 30, 2021  
    Tax Credit     Legal Fees     Settlement     Total  
                         
Provectus Australia Tax Credit   $ 1,354     $ -     $ -     $ 1,354  
Gross receivable     -       455,500       1,649,043       2,104,543  
Reserve for uncollectibility     -       (455,500 )     (1,649,043 )     (2,104,543 )
Net receivable   $ 1,354     $ -     $ -     $ 1,354  

 

    December 31, 2020  
    Tax Credit     Legal Fees     Settlement     Total  
                         
Provectus Australia Tax Credit   $ 3,930     $ -     $ -     $ 3,930  
Gross receivable     -       455,500       1,649,043       2,104,543  
Reserve for uncollectibility     -       (455,500 )     (1,649,043 )     (2,104,543 )
Net receivable   $ 3,930     $ -     $ -     $ 3,930  

 

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8. Stockholders’ Deficiency

 

Common Stock

 

During the nine months ended September 30, 2021, the Company issued an aggregate of 300,000 shares of immediately vested restricted common stock with a grant date value of $23,200 for services.

 

During the nine months ended September 30, 2021, the Company issued 2,221,450 shares of common stock upon the voluntary conversion of Series D-1 Convertible Preferred Stock.

 

During the nine months ended September 30, 2021, the Company issued 65,666 shares of common stock upon the automatic conversion of Series B Convertible Preferred Stock.

 

Preferred Stock

 

On June 20, 2021, the Company issued 12,373,247 and 9,440,594 shares of Series D and D-1 Convertible Preferred Stock, respectively. See Note 4 - Convertible Notes Payable.

 

During the nine months ended September 30, 2021, the Company received total investments of $150,000 from non-related party investors in exchange for an aggregate of 52,411 shares of restricted Series D-1 Convertible Preferred Stock that have not yet been issued.

 

Options

 

During the nine months ended September 30, 2021, a total of 1,175,000 options to purchase the Company’s common stock expired.

 

The following table summarizes option activity during the nine months ended September 30, 2021:

 

          Weighted Average  
    Shares     Exercise Price  
             
Outstanding and exercisable at January 1, 2021     4,800,000     $ 0.46  
                 
Granted     -       -  
Exercised     -       -  
Forfeited     (1,175,000 )     0.98  
               
Outstanding and exercisable at September 30, 2021     3,625,000     $ 0.32  

 

The following table summarizes information about options outstanding at September 30, 2021:

 

      Number Outstanding and Exercisable     Weighted Average     Intrinsic Value  
      at September 30,     Remaining Contractual     at September 30,  
Exercise Price     2021     Life     2021  
                     
$ 0.12       2,425,000       4.10     $ -  
$ 0.29       100,000       4.10     $ -  
$ 0.67       200,000       1.90     $ -  
$ 0.75       550,000       4.20     $ -  
$ 0.84       150,000       0.70     $ -  
$ 0.88       150,000       2.80     $ -  
$ 0.93       50,000       0.60     $ -  
                             
          3,625,000       3.77     $ -  

 

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Warrants

 

During the nine months ended September 30, 2021, the Company granted three-year immediately vested warrants to purchase an aggregate of 25,000 shares of common stock with an exercise price of $0.2862 per share to an advisory board member. The warrants had an issuance date fair value of an aggregate of $488, which was recognized immediately and is included in general and administrative expenses on the condensed consolidated statements of operations.

 

During the nine months ended September 30, 2021, warrant holders exercised warrants to purchase an aggregate of 18,052,966 shares of common stock at a price of $0.0533 per share. In connection with these exercises, the Company received aggregate cash proceeds of $962,223. On August 30, 2021, a total of 68,723,698 of August 2016 warrants expired.

 

The following table summarizes warrant activity during the nine months ended September 30, 2021:

 

          Weighted Average  
    Shares     Exercise Price  
             
Outstanding and exercisable at January 1, 2021     87,264,164     $ 0.02  
                 
Granted     25,000       0.29  
Exercised     (18,052,966 )     0.05  
Forfeited     (68,723,698 )     0.05  
                 
Outstanding and exercisable at September 30, 2021     512,500     $ 0.92  

 

The following table summarizes information about warrants outstanding at September 30, 2021:

 

      Number Outstanding          
     

and Exercisable

at September 30,

   

Weighted Average

Remaining Contractual

   

Intrinsic Value

at September 30,

 
Exercise Price     2021     Life     2021  
                     
$ 0.29       125,000       1.75     $ -  
$ 1.00       18,000       2.64     $ -  
$ 1.12       366,000       2.64     $ -  
$ 2.00       3,500       2.64     $ -  
                             
          512,500       2.42     $ -  

 

Holders of the outstanding warrants are not entitled to vote and the exercise prices of such warrants are subject to customary anti-dilution provisions.

 

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9. 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 are approximately $7,900 per month.

 

On August 13, 2021, the Company negotiated a reduced rent from July 1, 2021 through December 31, 2021 in the amount of $6,100 per month.

 

Total operating lease expense for the three months ended September 30, 2021 was $15,887, of which, $10,591 was included within research and development and $5,296 was included within general and administrative expenses on the condensed consolidated statement of operations. Total operating lease expense for the three months ended September 30, 2020 was $24,446, of which, $16,297 was included within research and development and $8,149 was included within general and administrative expenses on the condensed consolidated statement of operations.

 

Total operating lease expense for the nine months ended September 30, 2021 was $63,693, of which, $42,462 was included within research and development and $21,231 was included within general and administrative expenses on the condensed consolidated statement of operations. Total operating lease expense for the nine months ended September 30, 2020 was $68,080, of which, $45,387 was included within research and development and $22,693 was included within general and administrative expenses on the condensed consolidated statement of operations.

 

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

 

    For The Nine Months Ended  
    September 30,  
    2021     2020  
Cash paid for amounts included in the measurement of lease liabilities:                
Operating cash flows used in operating leases   $ 64,231     $ 67,774  
                 
Right-of-use assets obtained in exchange for lease obligations:                
Operating leases   $ -     $ -  
                 
Weighted Average Remaining Lease Term                
Operating leases     9 months       1 year 9 months  
                 
Weighted Average Discount Rate                
Operating leases     8.0 %     8.0 %

 

Future minimum payments under the Company’s non-cancellable lease obligations as of September 30, 2021 were as follows:

Years   Amount  
2021   $ 18,447  
2022   46,687  
Total future minimum lease payments     65,134  
Less: amount representing imputed interest     (2,214 )
Total   $ 62,920  

 

10. Commitments, Contingencies and Litigation

 

The Company may, from time to time, be involved in litigation arising in the ordinary course of business or which may be expected to be covered by insurance. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

 

11. Subsequent Events

 

The Company has evaluated events that have occurred after the balance sheet and through the date the financial statements were issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed below.

 

On October 25, 2021, the Company’s grant award of $2,500,000 from the State of Tennessee for the study of animal cancers and dermatological disorders for the period October 15, 2021 to June 30, 2022 was funded.

 

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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 condensed financial statements and our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 2, 2021 (“2020 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 consolidated statement of operations, including trends which might appear, are not necessarily indicative of future operations.

 

Overview

 

Provectus is a clinical-stage biotechnology company developing immunotherapy medicines based on an entire, wholly owned, family of small molecules called HXs. The Company’s lead HX molecule is proprietary cGMP RBD. IL PV-10, a cancer immunotherapy and injectable formulation of cGMP RBD, can induce immunogenic cell death (“ICD”), and is undergoing clinical study for adult solid tumor cancers, such as melanoma and GI tumors (e.g., HCC, mCRC, mNET, mUM), and preclinical study for pediatric solid tumor cancers (e.g., neuroblastoma, Ewing sarcoma, rhabdomyosarcoma, osteosarcoma). Topically administered PH-10, an immune-modulatory agent and formulation of cGMP RBD, is undergoing clinical study for inflammatory dermatoses (e.g., psoriasis, atopic dermatitis). New formulations of and routes of administration for cGMP RBD are being investigated for hematology (e.g., acute myeloid leukemia, acute monocytic leukemia), virology (e.g., SARS-CoV-2), oncology (e.g., high-risk and refractory adult solid tumor cancers), microbiology (e.g., MDR bacteria), and ophthalmology (e.g., infectious keratitis).

 

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. We have taken several temporary precautionary measures intended to help ensure the well-being of our employees and contractors and to minimize disruption to our business. We considered the impact of the SARS-CoV-2 pandemic on our business and operational assumptions and estimates, and determined there were no material adverse impacts on our results of operations and financial position at September 30, 2021.

 

Our Science and Technology

 

Oncology. IL PV-10 drug product is Provectus’ cGMP injectable formulation of the Company’s pharmaceutical-grade (cGMP) RBD (4,5,6,7-tetrachloro-2’,4’,5’,7’-tetraiodofluorescein disodium salt) drug substance. RBD 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).

 

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.

 

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Provectus showed that RBD selectively accumulates in the lysosomes of cancer cells and disrupts them, causing the cancer cells to die. RBD 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.

 

RBD’s lysosomal targeting comprises:

 

  ● Transiting the plasmalemma (i.e., the cell membrane) of cancer cells. RBD penetrates the cell membrane of cancerous cells which normally protects the cancer cell from its surrounding environment. RBD, however, is excluded from normal cells;
     
  ● Accumulating in the lysosomes of cancer cells. As noted above, the physicochemical properties of lysosomes trap RBD;
     
  ● Triggering the release of lysosomal contents. Acute autolysis can occur within 60 minutes. Early preclinical work by Provectus on RBD’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 RBD.

 

Hematology. In primary cells and cell lines derived from pediatric leukemia patients, RBD may lead to stimulator of interferon genes (“STING”) dimerization and the release of interferon gamma, indicating a potential immune activation mechanism of RBD. Heat shock proteins, which chaperone misfolded or abnormally folded proteins, associated with STING dimerization in RBD-treated cells, indicating a mechanism that may lead to enhanced STING activation following RBD-specific treatment.

 

Virology. The Company’s work in this disease area to identify drug activity and elucidate mechanism(s) of action is ongoing.

 

Microbiology. The Company’s work in this disease area to identify drug activity and elucidate mechanism(s) of action is ongoing.

 

Ophthalmology. The Company’s work in this disease area to identify drug activity is ongoing.

 

Dermatology. For psoriasis, pathways significantly improved by monotherapy PH-10 drug product treatment 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 application and a wide-range of central psoriasis-related genes, including IL-23, IL-17, IL-22, S100A7, IL-19, IL-36, and CXCL1, were normalized (i.e., treated lesional skin had values in the same range as baseline non-lesional skin).

 

Animal Health. The Company’s work in this disease area to develop a drug candidate or candidates is ongoing.

 

18

 

 

Our Drug Development Strategy

 

Oncology. The Company’s strategy is to (i) demonstrate the independent action of single-agent IL 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 ICD), (Snyder et al., Sci Immunol 2019) by IL PV-10 treatment, (iii) demonstrate the functional T cell response generated by IL PV-10 treatment, and (iv) contrast and compare IL PV-10 treatment (i.e., safety, activity, and induced immune response) with that of immune checkpoint blockade (“CB”) and other drug classes in single-agent and IL PV-10-based combination therapy settings.

 

This strategy may quicken the advancement of single-agent IL 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 IL PV-10 treatment, such as mNET (NCT02693067). This strategy may also permit the Company to develop and advance a cancer combination therapy involving one or more CB 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 IL PV-10 augments clinical response to existing or emerging SOCs, such as mUM (i.e., combination therapy with an anti-CTLA-4 agent and an anti-PD-1 agent) (NCT00986661).

 

Hematology. The Company and research collaborators are undertaking preclinical work on a potential, systemically administered, cGMP RBD leukemia treatment and/or cancer vaccine for pediatric patients.

 

Virology. The Company and research collaborators are undertaking preclinical work on a potential, systemically administered, cGMP RBD therapy for SARS-CoV-2 and other classes of enveloped and non-enveloped viruses.

 

Microbiology. The Company and research collaborators are undertaking preclinical work on cGMP RBD therapy for MDR bacteria.

 

Ophthalmology. The Company and clinical and research collaborators are undertaking preclinical work on potential, topically administered, cGMP RBD therapy for the treatment of infectious keratitis.

 

Dermatology. The Company’s strategy is to (i) demonstrate 12-week single-agent administration proof-of-concept (“POC”) for topical 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 topical 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 topical PH-10 treatment to include dermatology combination therapy. Our goal for this POC work is to achieve Phase 3 trial-ready status for topical PH-10 in both psoriasis and atopic dermatitis.

 

Animal health. The Company and research collaborators are undertaking work on cGMP RBD therapies for animal cancers and dermatological disorders.

 

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.

 

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.

 

19

 

 

Results of Operations

 

Comparison of the Three Months Ended September 30, 2021 and September 30, 2020

 

Overview

 

Total operating expenses were $1,047,231 for the three months ended September 30, 2021, a decrease of $54,647 or 5.0% compared to the three months ended September 30, 2020. The decrease was driven primarily by lower clinical trial cost and professional fees. Net loss for the three months ended September 30, 2021 was $1,051,259, a decrease of $513,185 or 32.8% which was primarily attributable to lower interest expense costs incurred in connection with the 2017 and 2020 Notes which converted to preferred stock on June 20, 2021.

 

    For the Three Months Ended              
    September 30,     Increase/        
    2021     2020     (Decrease)     % Change  
                         
Operating Expenses:                                
Research and development   $ 608,653     $ 667,523     $ (58,870 )     -8.8 %
General and administrative     438,578       434,355       4,223       1.0 %
Total Operating Expenses     1,047,231       1,101,878       (54,647 )     -5.0 %
                                 
Total Operating Loss     (1,047,231 )     (1,101,878 )     54,647       -5.0 %
Other Income/(Expense):                                
EIDL grant     -       -       -       0.0 %
Research and development tax credit     (507 )     1       (508 )     -50800.0 %
Investment and interest income     1       823       (822 )     -99.9 %
Gain from extinguishment     -       -       -       0.0 %
Interest expense     (3,522 )     (463,390 )     459,868       -99.2 %
Total Other Expense, Net     (4,028 )     (462,566 )     458,538       -99.1 %
                                 
Net Loss   $ (1,051,259 )   $ (1,564,444 )   $ 513,185       -32.8 %

 

Research and Development Expenses

 

Research and development expenses were $608,653 for the three months ended September 30, 2021, a decrease of $58,870 or 8.8% compared to $667,523 for the three months ended September 30, 2020. The decrease was primarily due to (i) reduced cost on clinical trials due to slower recruitment and treatment in clinical trials due to the effects of SARS-CoV-2, (ii) lower payroll and payroll taxes, and (iii) a decrease in rent expense.

 

    For the Three Months Ended              
    September 30,     Increase/        
    2021     2020     (Decrease)     % Change  
                         
Operating Expenses:                                
Research and development:                                
Clinical trial and research expenses   $ 497,525     $ 527,415     $ (29,890 )     -5.7 %
Depreciation/amortization     2,161       2,161       -       0.0 %
Insurance     51,982       53,885       (1,903 )     -3.5 %
Payroll and taxes     45,366       66,583       (21,217 )     -31.9 %
Rent and utilities     11,619       17,479       (5,860 )     -33.5 %
Total research and development   $ 608,653     $ 667,523     $ (58,870 )     -8.8 %

 

20

 

 

General and Administrative Expenses

 

General and administrative expenses were $438,578 for the three months ended September 30, 2021, an increase of $4,223 or 1.0% compared to $434,355 for the three months ended September 30, 2020. The increase was primarily due to (i) higher legal fees relating to patents, partially offset by (ii) lower professional fees cost.

 

 

    For the Three Months Ended              
    September 30,     Increase/        
    2021     2020     (Decrease)     % Change  
Operating Expenses:                                
General and administrative:                                
Depreciation   $ 1,054     $ 1,259     $ (205 )     -16.3 %
Directors fees     96,250       94,315       1,935       2.1 %
Insurance     37,138       40,796       (3,658 )     -9.0 %
Legal and litigation     130,683       87,122       43,561       50.0 %
Other general and administrative cost     9,052       16,168       (7,116 )     -44.0 %
Payroll and taxes     43,981       45,102       (1,121 )     -2.5 %
Professional fees     114,496       140,732       (26,236 )     -18.6 %
Rent and utilities     5,883       8,746       (2,863 )     -32.7 %
Foreign currency translation     41       115       (74 )     0.0 %
Total general and administrative   $ 438,578     $ 434,355     $ 4,223       1.0 %

 

Other Income/(Expense)

 

Other income decreased by $1,330 from $824 for the three months ended September 30, 2020 to ($506) for the three months ended September 30, 2021. The decrease was mainly due to lower interest income.

 

Interest expense decreased by $459,868 from $463,390 for the three months ended September 30, 2020 to $3,522 for the three months ended September 30, 2021. The decrease was due to the lower interest expense costs incurred in connection with the 2017 and 2020 Notes which converted to preferred stock on June 20, 2021.

 

Comparison of the Nine Months Ended September 30, 2021 and September 30, 2020

 

Overview

 

Total operating expenses were $3,449,924 for the nine months ended September 30, 2021, a decrease of $311,042 or 8.3% compared to the nine months ended September 30, 2020. The decrease was driven primarily by our continued transformation and process improvement efforts within the Company along with lower amortization due to patents being fully amortized, slower recruitment and treatment in clinical trials due to the effects of SARS-CoV-2 and lower professional fees. Net loss for the nine months ended September 30, 2021 was $4,300,800, a decrease of $705,510 or 14.1% which was primarily attributable to lower costs incurred in connection with our preclinical and clinical trial programs and lower interest expense costs incurred in connection with the 2017 and 2020 Notes which converted to preferred stock on June 20, 2021.

 

    For the Nine Months Ended              
    September 30,     Increase/        
    2021     2020     (Decrease)     % Change  
                         
Operating Expenses:                                
Research and development   $ 1,866,776     $ 2,273,423     $ (406,647 )     -17.9 %
General and administrative     1,583,148       1,487,543       95,605       6.4 %
Total Operating Expenses     3,449,924       3,760,966       (311,042 )     -8.3 %
                                 
Total Operating Loss     (3,449,924 )     (3,760,966 )     (311,042 )     8.3 %
Other Income/(Expense):                                
EIDL grant     -       3,000       (3,000 )     -100.0 %
Research and development tax credit     31,637       27,187       4,450       16.4 %
Investment and interest income     2       3,414       (3,412 )     -99.9 %
Gain from extinguishment     63,094       -       63,094       0.0 %
Interest expense     (945,609 )     (1,278,945 )     333,336       -26.1 %
Total Other Expense, Net     (850,876 )     (1,245,344 )     394,468       -31.7 %
                                 
Net Loss   $ (4,300,800 )   $ (5,006,310 )   $ (705,510 )     14.1 %

 

Research and Development Expenses

 

Research and development expenses were $1,866,776 for the nine months ended September 30, 2021, a decrease of $406,647 or 17.9% compared to $2,273,423 for the nine months ended September 30, 2020. The decrease was primarily due to (i) reduced cost on clinical trials due to slower recruitment and treatment in clinical trials due to the effects of SARS-CoV-2, (ii) lower amortization due to patents being fully amortized, and (iii) a decrease in insurance expense.

 

    For the Nine Months Ended              
    September 30,     Increase/        
    2021     2020     (Decrease)     % Change  
                         
Operating Expenses:                                
Research and development:                                
Clinical trial and research expenses   $ 1,474,732     $ 1,588,856     $ (114,124 )     -7.2 %
Depreciation/amortization     6,485       234,592       (228,107 )     -97.2 %
Insurance     154,763       200,162       (45,399 )     -22.7 %
Payroll and taxes     185,406       201,344       (15,938 )     -7.9 %
Rent and utilities     45,390       48,469       (3,079 )     -6.4 %
Total research and development   $ 1,866,776     $ 2,273,423     $ (406,647 )     -17.9 %

 

21

 

 

General and Administrative Expenses

 

General and administrative expenses were $1,583,148 for the nine months ended September 30, 2021, an increase of $95,605 or 6.4% compared to $1,487,543 for the nine months ended September 30, 2020. The increase was primarily due to (i) higher legal fees relating to patents, (ii) an increase in payroll and related taxes due to an additional employee, partially offset by (iii) a decrease in professional fees.

 

    For the Nine Months Ended              
    September 30,     Increase/        
    2021     2020     (Decrease)     % Change  
                         
Operating Expenses:                                
General and administrative:                                
Depreciation   $ 3,163     $ 3,982     $ (819 )     -20.6 %
Directors fees     288,750       286,815       1,935       0.7 %
Insurance     122,966       136,272       (13,306 )     -9.8 %
Legal and litigation     479,421       304,747       174,674       57.3 %
Other general and administrative cost     55,640       51,941       3,699       7.1 %
Payroll and taxes     152,581       129,024       23,557       18.3 %
Professional fees     452,971       549,061       (96,090 )     -17.5 %
Rent and utilities     22,828       24,484       (1,656 )     -6.8 %
Foreign currency translation     4,828       1,217       3,611       296.7 %
Total general and administrative   $ 1,583,148     $ 1,487,543     $ 95,605       6.4 %

 

 

Other Income/(Expense)

 

Other income increased by $61,132 from $33,601 for the nine months ended September 30, 2020 to $94,733 for the nine months ended September 30, 2021. The increase was mainly due to the PPP loan forgiveness and the research and development tax credit in Australia.

 

Interest expense decreased by $333,336 from $1,278,945 for the nine months ended September 30, 2020 to $945,609 for the nine months ended September 30, 2021. The decrease was due to lower interest expense costs incurred in connection with the 2017 and 2020 Notes which converted to preferred stock on June 20, 2021.

 

Liquidity and Capital Resources

 

Our cash and cash equivalents were $254,083 at September 30, 2021, compared to $97,231 at December 31, 2020. 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 $244,795,217 as of September 30, 2021. 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.

 

During the nine months ended September 30, 2021, the Company entered into additional non-related party 2020 Notes in the aggregate principal amount of $1,700,000. On June 20, 2021, the outstanding non-amended 2017 Notes converted into 12,373,247 shares of Series D Convertible Preferred Stock at the Original Conversion Price of $0.2862, and all the outstanding Amended 2017 Notes and outstanding 2020 Notes converted into 9,440,594 shares of Series D-1 Convertible Preferred Stock at the New Conversion Price of $2.862. The outstanding non-amended 2017 Notes, Amended 2017 Notes, and 2020 Notes had totalled $30,573,080 in principal and interest.

 

During the nine months ended September 30, 2021, the Company received total investments of $150,000 from non-related party investors in exchange for an aggregate of 52,411 shares of restricted Series D-1 Convertible Preferred Stock that have not yet been issued.

 

During the nine months ended September 30, 2021, warrant holders exercised warrants to purchase an aggregate of 18,052,966 shares of common stock at an exercise price of $0.0533 per share. In connection with these exercises, the Company received aggregate cash proceeds of $962,445.

 

On August 13, 2021, the Board approved the 2021 Term Sheet, which sets forth the terms under which the Company will use its best efforts to arrange for financing of a maximum of $5,000,000.

 

On August 16, 2021, the Company received a Loan of $200,000 from a related party investor in connection with the 2021 Financing.

 

Management’s plans include selling our equity securities and obtaining other financing, including the 2021 financing, to fund our capital requirements and on-going operations; however, there can be no assurance we will be successful in these efforts. The condensed consolidated 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. The Company has experienced slower than normal enrollment and treatment of patients, and a prolonged SARS-CoV-2 pandemic could have a material adverse impact on the Company’s business and financial results, including the timing and ability of the Company to raise capital, 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. We have taken several temporary precautionary measures intended to help ensure the well-being of our employees and contractors and to minimize disruption to our business. We considered the impact of the SARS-CoV-2 pandemic on our business and operational assumptions and estimates, and determined there were no material adverse impacts on our results of operations and financial position at September 30, 2021.

 

22

 

 

Access to Capital

 

Management plans to access capital resources through possible public or private equity offerings, including the 2021 financing, equity financings, debt financings, corporate collaborations, or other means. If we are unable to raise sufficient capital, 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 2021 and beyond. We anticipate that these funds will otherwise come from the proceeds of private placement transactions, 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 Adopted Accounting Standards

 

Recently adopted 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.

 

23

 

 

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 10.

 

ITEM 1A. RISK FACTORS.

 

There have been no material changes to the risk factors that were disclosed in the 2020 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 2020 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.

 

2021 Financing

 

During the three months ended September 30, 2021, the Company had received aggregate Loan of $200,000 from a related party investor in connection with the 2021 Financing. As of September 30, 2021, the Company had drawn down the entire $200,000 under this note.

 

For further details on the terms of the 2021 Note, refer to our Form 8-K as filed with the SEC on August 18, 2021.

 

Series D-1 Convertible Preferred Stock

 

During the three months ended September 30, 2021, the Company received total investments of $150,000 from non-related party investors in exchange for an aggregate of 52,411 shares of restricted Series D-1 Convertible Preferred Stock that have not yet been issued.

 

Common Stock

 

During the three months ended September 30, 2021, the Company issued an aggregate of 25,000 shares of immediately vested restricted common stock to a consultant for services.

 

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(b) of Regulation D promulgated thereunder) as transactions by an issuer not involving a public offering.

 

24

 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. Mine Safety Disclosures.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS.

 

Exhibit No.   Description
     
4.1   Form of Unsecured Convertible Promissory Note (incorporated by reference to Exhibit 4.1 of the Company’s current report on Form 8-K filed on August 18, 2021).
     
10.1**   2021 Financing Term Sheet.
     
31.1**   Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) (Section 302 Certification).
     
31.2**   Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) (Section 302 Certification).
     
32***   Certification of Principal Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (Section 906 Certification).
     
101.INS   Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
     
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
     
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
     
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
     
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
     
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
     
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

** Filed herewith.

*** Furnished herewith.

 

25

 

 

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.

 

November 10, 2021 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)

 

26

 

 

Exhibit 10.1

 

FINANCING TERM SHEET

BY

PROVECTUS BIOPHARMACEUTICALS, INC.

DATED EFFECTIVE: August 13, 2021

 

The following is a summary of the terms and conditions of a proposed financing plan (the “Plan”) developed by Provectus Biopharmaceuticals, Inc. (the “Company”). The Plan was approved by the Board of Directors of the Company (the “Board”) on August 13, 2021.

 

Total Financing Commitment   This Financing Term Sheet (the “2021 Term Sheet”) envisions that the Company shall use its best efforts to arrange for a financing of a maximum of $5 million (the “2021 Financing”), which amounts may be provided in several tranches.
     
Structure of the Financing   The structure of the 2021 Financing shall be in the form of an unsecured convertible loan (the “Loan”) from various investors (collectively, the “Investors”). The Loan shall be evidenced by one or more convertible promissory notes (the “2021 Notes”) from the Company to each Investor.
     
    The 2021 Notes may be paid back, convert into shares of Series D-1 Convertible Preferred Stock of the Company, or convert into Company equity securities and/or debt instruments of any future financings on or before twelve (12) months after the issue date of a 2021 Note, subject to certain exceptions.

 

    In addition to customary provisions, the 2021 Notes shall contain the following provisions:

 

  (i) that the Loan will bear unsecured;
     
  (ii) that the Loan will bear interest at the rate of eight percent (8%) per annum on the outstanding principal amount of the Loan that has been funded to the Company;
     
  (iii) that in the event there is a change of control of the Company’s Board, the term of the 2021 Note shall be accelerated and all amounts due under the 2021 Note shall be immediately due and payable at the Investor’s option; and
     
  (iv) that the principal amount of the Loan and interest payable under the Loan, at the Investor’s option, shall be paid pack, converted into shares of the Company’s Series D-1 Convertible Preferred Stock, a series of preferred stock designated by the Board, at a price per share equal to $2.8620 (where the preferred stock shall be convertible into ten [10] shares of the Company’s Common Stock), or, in the event there is a future financing of the Company, converted into the equity securities and/or debt instruments of such financing.

 

Use of Proceeds The proceeds from the 2021 Financing shall be used to fund the Company’s drug discovery and development program, as currently constituted and envisioned, and to fund the Company’s general and administrative expenses

 

 

 

 

Exhibit 31.1

 

CERTIFICATION

 

I, Bruce Horowitz, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Provectus Biopharmaceuticals, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 10, 2021 By: /s/ Bruce Horowitz
    Bruce Horowitz
    Chief Operating Officer (Principal Executive Officer)

 

 

 

 

Exhibit 31.2

 

CERTIFICATION

 

I, Heather Raines, CPA, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Provectus Biopharmaceuticals, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
     

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
   

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 10, 2021 By: /s/ Heather Raines
    Heather Raines, CPA
    Chief Financial Officer (Principal Financial Officer)

 

 

 

 

Exhibit 32

 

CERTIFICATION PURSUANT TO RULE 13a-14(b) UNDER

THE SECURITIES EXCHANGE ACT OF 1934 AND

SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

 

Each of the undersigned, Bruce Horowitz, the Chief Operating Officer (principal executive officer) of Provectus Biopharmaceuticals, Inc. (the “Company”), and Heather Raines, CPA, the Chief Financial Officer (principal financial officer) of the Company, certifies, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code, that (1) this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act, and (2) the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

This Certification is signed on November 10, 2021.

 

  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)