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 SeptemberJune 30, 20212022
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.) | |
Knoxville, Tennessee | ||
(Address of principal executive offices) | (Zip Code) |
866-594-5999
(Registrant’s telephone number, including area code)
Not Applicable10025 Investment Drive, Suite 250, Knoxville, TN 37932
(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,August 10, 2022, was .
TABLE OF CONTENTS
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)2021), and Item 1A of Part II of this Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2021,2022, and:
● | Our potential receipt of sales from investigational rose bengal sodium-based 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 rose bengal sodium-based and other 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, | |
● | 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 | |
● | Many companies across a variety of sectors have reported and continue to report disruptions, shortages, and other supply chain-related issues. In the biopharmaceutical sector, delays and interruptions in the supply chain have been particularly pronounced. During this second quarter of 2022, we were able to effectively manage our supply of prescription drug candidates in a manner that avoided any significant interruptions to our clinical programs. |
1 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PROVECTUS BIOPHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, | December 31, | June 30, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Assets | ||||||||||||||||
Current Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 254,083 | $ | 97,231 | $ | 84,274 | $ | 682,984 | ||||||||
Short-term receivables - legal fees, settlement and other, net | 1,354 | 3,930 | ||||||||||||||
Prepaid expenses | 251,111 | 322,518 | ||||||||||||||
Restricted cash | 1,948,335 | 2,423,958 | ||||||||||||||
Short-term receivables | 2,744 | 5,107 | ||||||||||||||
Prepaid expenses and other current assets | 243,394 | 329,908 | ||||||||||||||
Total Current Assets | 506,548 | 423,679 | 2,278,747 | 3,441,957 | ||||||||||||
Equipment and furnishings, less accumulated depreciation of $87,962 and $78,313, respectively | 35,052 | 44,701 | ||||||||||||||
Equipment and furnishings, less accumulated depreciation of $97,215 and $91,178, respectively | 25,799 | 31,836 | ||||||||||||||
Operating lease right-of-use asset | 58,736 | 120,821 | 138,863 | 39,563 | ||||||||||||
Total Assets | $ | 600,336 | $ | 589,201 | $ | 2,443,409 | $ | 3,513,356 | ||||||||
Liabilities and Stockholders’ Deficiency | ||||||||||||||||
Current Liabilities: | ||||||||||||||||
Accounts payable - trade | $ | 1,259,623 | $ | 956,860 | ||||||||||||
Accounts payable | $ | 1,894,201 | $ | 1,287,459 | ||||||||||||
Deposit for purchase of Series D-1 Preferred Stock | 150,000 | $ | - | - | 150,000 | |||||||||||
Unearned grant revenue | 1,990,685 | 2,500,000 | ||||||||||||||
Other accrued expenses | 1,806,000 | 1,500,782 | 2,331,621 | 2,002,486 | ||||||||||||
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 | ||||||||||||||
Accrued interest | 68,389 | 10,578 | ||||||||||||||
Accrued interest - related parties | 14,044 | 6,044 | ||||||||||||||
Notes payable | 142,693 | 238,452 | ||||||||||||||
Convertible notes payable | 1,810,000 | 1,260,000 | ||||||||||||||
Convertible notes payable - related parties | 200,000 | 200,000 | ||||||||||||||
Operating lease liability, current portion | 42,662 | 45,617 | ||||||||||||||
Total Current Liabilities | 3,548,979 | 30,711,714 | 8,494,295 | 7,700,636 | ||||||||||||
Note payable, non-current portion | - | 39,061 | ||||||||||||||
Operating lease liability, non-current portion | - | 44,783 | 96,201 | - | ||||||||||||
Total Liabilities | 3,548,979 | 30,795,558 | 8,590,496 | 7,700,636 | ||||||||||||
Commitments and contingencies (Note 10) | - | |||||||||||||||
Commitments, contingencies, and litigations (Note 11) | - | - | ||||||||||||||
Stockholders’ Deficiency: | ||||||||||||||||
Preferred stock; par value $ | per share; shares authorized;||||||||||||||||
Series D Convertible Preferred Stock; 14,164,889 at June 30, 2022 and December 31, 2021 | shares designated; shares issued and outstanding at June 30, 2022 and December 31, 2021; aggregate liquidation preference of $12,373 | 12,373 | ||||||||||||||
Series D-1 Convertible Preferred Stock; 106,132,320 and $105,532,804 at June 30, 2022 and December 31, 2021, respectively | shares designated; and shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively; aggregate liquidation preference of $9,271 | 9,219 | ||||||||||||||
Preferred stock, value | ||||||||||||||||
Stockholders’ Deficiency: | ||||||||||||||||
Preferred stock; par value $0 and $3,500 at September 30, 2021 and December 31, 2020, respectively | per share; shares authorized; Series B Convertible Preferred Stock; shares designated; and shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $- | - | ||||||||||||||
Series D Convertible Preferred Stock; 14,164,889 and $0 at September 30, 2021 and December 31, 2020, respectively; (See Note 4. Convertible Notes Payable – Liquidation Preference) | shares designated; and shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $12,373 | - | ||||||||||||||
Series D-1 Convertible Preferred Stock; 105,532,804 and $0 at September 30, 2021 and December 31, 2020, respectively; (See Note 4. Convertible Notes Payable – Liquidation Preference) | shares designated; and shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $9,219 | - | ||||||||||||||
Preferred stock value | ||||||||||||||||
Common stock; par value $ | per share; shares authorized; and shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively419,448 | 398,808 | ||||||||||||||
Common stock; par value $ | per share; shares authorized; shares issued and outstanding at June 30, 2022 and December 31, 2021419,447 | 419,447 | ||||||||||||||
Additional paid-in capital | 241,440,106 | 209,923,347 | 241,590,054 | 241,440,106 | ||||||||||||
Accumulated other comprehensive loss | (34,574 | ) | (34,097 | ) | (35,511 | ) | (34,467 | ) | ||||||||
Accumulated deficit | (244,795,215 | ) | (240,494,415 | ) | (248,142,721 | ) | (246,033,958 | ) | ||||||||
Total Stockholders’ Deficiency | (2,948,643 | ) | (30,206,357 | ) | (6,147,087 | ) | (4,187,280 | ) | ||||||||
Total Liabilities and Stockholders’ Deficiency | $ | 600,336 | $ | 589,201 | $ | 2,443,409 | $ | 3,513,356 |
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 |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Grant Revenue | $ | 321,710 | $ | - | $ | 509,315 | $ | - | ||||||||
Operating Expenses: | ||||||||||||||||
Research and development | 816,648 | 602,979 | 1,487,764 | 1,258,123 | ||||||||||||
General and administrative | 583,042 | 619,038 | 1,099,589 | 1,144,570 | ||||||||||||
Total Operating Expenses | 1,399,690 | 1,222,017 | 2,587,353 | 2,402,693 | ||||||||||||
Total Operating Loss | (1,077,980 | ) | (1,222,017 | ) | (2,078,038 | ) | (2,402,693 | ) | ||||||||
Other Income/(Expense): | ||||||||||||||||
Research and development tax credit | 38,259 | 32,144 | 38,259 | 32,144 | ||||||||||||
Gain from extinguishment | - | 63,094 | - | 63,094 | ||||||||||||
Interest income and interest expense | (38,120 | ) | (452,812 | ) | (68,984 | ) | (942,086 | ) | ||||||||
Total Other Income/(Expense), Net | 139 | (357,574 | ) | (30,725 | ) | (846,848 | ) | |||||||||
Net Loss | $ | (1,077,841 | ) | $ | (1,579,591 | ) | $ | (2,108,763 | ) | $ | (3,249,541 | ) | ||||
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 | 419,447,119 | 403,628,466 | 419,447,119 | 402,910,628 |
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 | For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | June 30, | June 30, | |||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
Net Loss | $ | (1,051,259 | ) | $ | (1,564,444 | ) | $ | (4,300,800 | ) | $ | (5,006,310 | ) | $ | (1,077,841 | ) | $ | (1,579,591 | ) | $ | (2,108,763 | ) | $ | (3,249,541 | ) | ||||||||
Other Comprehensive Loss: | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | (193 | ) | (1,652 | ) | (477 | ) | (8,446 | ) | (328 | ) | (1,121 | ) | (1,044 | ) | (284 | ) | ||||||||||||||||
Total Comprehensive Loss | $ | (1,051,452 | ) | $ | (1,566,096 | ) | $ | (4,301,277 | ) | $ | (5,014,756 | ) | $ | (1,078,169 | ) | $ | (1,580,712 | ) | $ | (2,109,807 | ) | $ | (3,249,825 | ) |
See accompanying notes to condensed consolidated financial statements.
4 |
PROVECTUS BIOPHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
(Unaudited)
FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 2022
Preferred Stock | Preferred Stock | Additional | Accumulated Other | |||||||||||||||||||||||||||||||||||||
Series D | Series D-1 | Common Stock | Paid-In | Comprehensive | Accumulated | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Total | |||||||||||||||||||||||||||||||
Balance at January 1, 2022 | - | 12,373,247 | $ | 12,373 | 9,218,449 | $ | 9,219 | 419,447,119 | $ | 419,447 | $ | 241,440,106 | $ | (34,467 | ) | $ | (246,033,958 | ) | $ | (4,187,280 | ) | |||||||||||||||||||
Common stock issued upon exercise of warrants | ||||||||||||||||||||||||||||||||||||||||
Common stock issued upon exercise of warrants, shares | ||||||||||||||||||||||||||||||||||||||||
Common stock | ||||||||||||||||||||||||||||||||||||||||
Common stock, shares | ||||||||||||||||||||||||||||||||||||||||
Warrants | ||||||||||||||||||||||||||||||||||||||||
Conversion of PRH Notes to Series D Preferred Stock | ||||||||||||||||||||||||||||||||||||||||
Conversion of PRH Notes to Series D Preferred Stock, shares | ||||||||||||||||||||||||||||||||||||||||
Conversion of PRH Notes to Series D-1 Preferred Stock | ||||||||||||||||||||||||||||||||||||||||
Conversion of PRH Notes to Series D-1 Preferred Stock, shares | ||||||||||||||||||||||||||||||||||||||||
Series D-1 Preferred Stock issued for cash | - | - | 52,411 | 52 | - | - | 149,948 | - | - | 150,000 | ||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (1,030,922 | ) | (1,030,922 | ) | |||||||||||||||||||||||||||
Other comprehensive loss | - | - | - | - | - | - | - | (716 | ) | - | (716 | ) | ||||||||||||||||||||||||||||
Balance at March 31, 2022 | - | 12,373,247 | $ | 12,373 | 9,270,860 | $ | 9,271 | 419,447,119 | $ | 419,447 | $ | 241,590,054 | $ | (35,183 | ) | $ | (247,064,880 | ) | $ | (5,068,918 | ) | |||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (1,077,841 | ) | (1,077,841 | ) | |||||||||||||||||||||||||||
Other comprehensive income | - | - | - | - | - | - | - | (328 | ) | - | (328 | ) | ||||||||||||||||||||||||||||
Balance at June 30, 2022 | - | 12,373,247 | $ | 12,373 | 9,270,860 | $ | 9,271 | 419,447,119 | $ | 419,447 | $ | 241,590,054 | $ | (35,511 | ) | $ | (248,142,721 | ) | $ | (6,147,087 | ) |
FOR THE SIX MONTHS ENDED JUNE 30, 2021
Accumulated | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Preferred Stock | Additional | Other | Preferred Stock | Preferred Stock | Preferred Stock | Additional | Accumulated Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series B | Series D | Series D-1 | Common Stock | Paid-In | Comprehensive | Accumulated | 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 | 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 | ) | 100 | - | - | - | - | - | 398,807,037 | $ | 398,808 | $ | 209,923,347 | $ | (34,097 | ) | $ | (240,494,415 | ) | $ | (30,206,357 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued for services | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued for services, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance, value | 100 | - | - | - | - | - | 403,557,037 | 403,558 | 210,178,197 | (33,260 | ) | (242,164,365 | ) | (31,615,870 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued upon exercise of warrants | - | - | - | - | - | - | 4,500,000 | 4,500 | 235,350 | - | - | 239,850 | - | - | - | - | - | - | 200,000 | 200 | 10,460 | - | - | 10,660 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock | - | - | - | - | - | - | 250,000 | 250 | 19,500 | - | - | 19,750 | - | - | - | - | - | - | 25,000 | 25 | 1,650 | - | - | 1,675 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 Preferred Stock, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of PRH Notes to Series D-1 Preferred Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of PRH Notes to Series D-1 Preferred Stock, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Series B Preferred Stock to Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Series B Preferred Stock to Common Stock, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Series D-1 Preferred Stock to Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Series D-1 Preferred Stock to Common Stock, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants issued for services | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | - | - | - | - | 9,440,594 | 9,441 | - | - | 27,022,417 | - | - | 27,031,858 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | (1,579,591 | ) | (1,579,591 | ) | - | - | - | - | - | - | - | - | - | - | (1,579,591 | ) | (1,579,591 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | - | - | - | - | - | - | - | - | - | - | (1,579,591 | ) | (1,579,591 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | - | - | - | - | - | - | - | - | - | (1,121 | ) | - | (1,121 | ) | - | - | - | - | - | - | - | - | - | (1,121 | ) | - | (1,121 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | - | - | - | - | - | - | - | - | - | (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 | ) | 100 | $ | - | 12,373,247 | $ | 12,373 | 9,440,594 | $ | 9,441 | 403,782,037 | $ | 403,783 | $ | 240,742,061 | $ | (34,381 | ) | $ | (243,743,959 | ) | $ | (2,610,682 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ) | |||||||||||||||
Balance | 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) | |||||||||||||||||||||||
Other comprehensive (loss) income | - | - | - | - | - | (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 | ) | |||||||||||||||
Balance | 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 Six Months Ended | ||||||||
June 30, | ||||||||
2022 | 2021 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net loss | $ | (2,108,763 | ) | $ | (3,249,541 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Stock-based compensation | - | 21,913 | ||||||
Non-cash lease expense | 31,142 | 40,012 | ||||||
Depreciation | 6,037 | 6,432 | ||||||
Gain on forgiveness of PPP Loan and interest | - | (63,094 | ) | |||||
Changes in operating assets and liabilities | ||||||||
Short term receivables | 2,363 | (1,632 | ) | |||||
Prepaid expenses and other current assets | 143,940 | 123,230 | ||||||
Accounts payable - trade | 606,742 | 252,254 | ||||||
Unearned grant revenue | (509,315 | ) | - | |||||
Other accrued expenses | 329,135 | 152,786 | ||||||
Operating lease liability | (37,196 | ) | (42,191 | ) | ||||
Accrued interest expense | 65,811 | 940,212 | ||||||
Net Cash Used In Operating Activities | (1,470,104 | ) | (1,819,619 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from issuance of convertible notes payable | 550,000 | 1,700,000 | ||||||
Repayment of short-term note payable | (153,185 | ) | (95,387 | ) | ||||
Note Payable | - | (85,398) | ||||||
Proceeds from exercise of warrants | - | 250,510 | ||||||
Net Cash Provided By Financing Activities | 396,815 | 1,769,725 | ||||||
Effect of exchange rates on cash, cash equivalents, and restricted cash | (1,044 | ) | 70 | |||||
Net Decrease In Cash, Cash Equivalents, and Restricted Cash | (1,074,333 | ) | (49,824 | ) | ||||
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period | 3,106,942 | 97,231 | ||||||
Cash, Cash Equivalents, and Restricted Cash, End of Period | $ | 2,032,609 | $ | 47,407 | ||||
Cash, cash equivalents and restricted cash consisted of the following: | ||||||||
Cash and cash equivalents | $ | 84,274 | $ | 47,407 | ||||
Restricted cash | 1,948,335 | - | ||||||
$ | 2,032,609 | $ | 47,407 | |||||
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 | $ | (57,426 | ) | $ | (309,710 | ) | ||
Deposit applied for purchase of Series D-1 Preferred Stock | $ | (150,000 | ) | $ | - | |||
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 | ||||
Right-of-use assets obtained in exchange for operating lease liabilities | $ | 130,422 | $ | - |
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”“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”). , a class entirely owned by the Company.
Our lead HX molecule is named rose bengal disodiumsodium (“RBD”RBS”). The Company has established a multi-step approach using quality-by-design principles for synthesizing and manufacturing pharmaceutical-grade RBS by current good manufacturing practice (“cGMP”) and under the guidelines of The International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use. A second HX molecule has been synthesized, 4,5,6,7-tetrabromo-3′,6′-dihydroxy-2′,4′,5′,7′-tetraiodo-3H-spiro[isobenz- ofuran-1,9′-xanthen]-3-one.
● | Oncology: PV-10®, an investigational cancer immunotherapy administered by intralesional (“IL”) injection and an injectable formulation of cGMP
Oral formulations of cGMP | |
● | Pediatric Oncology: IL PV-10 is | |
● | Hematology: Oral formulations of cGMP | |
● | Virology: | |
● | Microbiology: Different formulations of cGMP | |
● | Ophthalmology: Topical formulations of cGMP | |
● | Dermatology: PH-10®, an investigational | |
● | Animal Health: Different formulations of cGMP |
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, 20202021 filed with the SEC on March 2, 2021.29, 2022. 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 ninesix months ended SeptemberJune 30, 20212022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.2022.
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 SeptemberJune 30, 2021.2022.
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;trials, disrupt the Company’s regulatory activities;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, and restricted cash were $254,0832,032,609 at SeptemberJune 30, 2021.2022 which includes $1,948,335 of restricted cash resulting from a grant received from the State of Tennessee. The Company’s working capital deficiency was $6,215,548 and $4,258,679 as of June 30, 2022 and December 31, 2021, respectively. 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(see Note 4)5), 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 20212022 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. CriticalSignificant Accounting Policies
Since the date the Company’s December 31, 20202021 consolidated financial statements were issued in its 20202021 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,October 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting StandardStandards Update (“ASU”) 2019-12,2020-10 Simplifying“Codification Improvements”, which improves consistency by amending the Accounting for Income Taxes. The amendmentsCodification to include all disclosure guidance 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 consistentappropriate disclosure sections and clarifies application of various provisions in the Codification by amending and simplify GAAPadding new headings, cross referencing to other guidance, and refining or correcting terminology. The guidance is effective for other areasthe Company beginning in the first quarter of Topic 740 by clarifying and amending existing guidance.fiscal year 2022 with early adoption permitted. The Company adopted ASU 2019-12this standard on January 1, 20212022 and there was noit did not have a material impacteffect on the Company’sits condensed consolidated financial statements or disclosures.statements.
On May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard. Early adoption is permitted, including adoption in an interim period. If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company adopted this standard on January 1, 2022 and it did not have a material effect on its condensed consolidated financial statements.
Convertible Instruments
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. As of June 30, 2022 and December 31, 2021, the Company’s cash equivalents consist of Treasury bills of $0 and $42,594, respectively.
Restricted Cash
Restricted cash consists of a grant award of $2,500,000 received in cash from the State of Tennessee less expenses and deposits to vendors in the amount of $551,665. See Note 10. Grants.
Cash Concentrations
Cash, cash equivalents, and restricted cash are maintained at financial institutions and, at times, balances may exceed federally insured limits of $250,000, although the Company seeks to minimize this through treasury management. The Company has never experienced any losses related to these balances although no assurance can be provided that it will not experience any losses in the future. As of June 30, 2022 and December 31, 2021, the Company had cash, cash equivalents, and restricted cash balances in excess of FDIC insurance limits of $1,782,609 and $2,856,942, respectively.
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.Reclassifications
If the instrument is determinedCertain prior year balances have been reclassified in order to not be a derivative liability, the Company then evaluates for the existenceconform to current year presentation. These reclassifications had no effect on previously reported results 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 holderoperations 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.loss per 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, | June 30, | June 30, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Warrants | 512,500 | 89,699,866 | 512,500 | 82,589,164 | ||||||||||||
Options | 3,625,000 | 2,275,000 | 3,425,000 | 4,800,000 | ||||||||||||
Convertible preferred stock | 104,557,737 | 65,666 | 105,081,847 | 106,778,757 | ||||||||||||
2021 unsecured convertible notes | 7,311,088 | - | ||||||||||||||
Total potentially dilutive shares | 108,695,237 | 92,040,532 | 116,330,435 | 194,167,921 |
9 |
4. Convertible Notes PayableOther Accrued Expenses
2017 Financing
On March 23, 2017,The following table summarizes 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 Septemberaccrued expenses at June 30, 20212022 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 $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, $ par value per share (“Preferred Stock”), at a price per share equal to $ (the “Original Conversion Price”), which would be convertible into one share (the “Original Conversion Ratio”) of the Company’s common stock, $ 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 $ to $ (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 $ 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 $ 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 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 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.
Number of Shares
The Series D Certificate of Designation established and designated shares of Series D Convertible Preferred Stock. The Series D-1 Certificate of Designation established and designated 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
2021:
HoldersSchedule 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 shareOther Accrued Expenses.
June 30, 2022 | December 31, 2021 | |||||||
Accrued payroll and taxes | $ | 259,008 | $ | 174,533 | ||||
Accrued vacation | 56,356 | 42,871 | ||||||
Accrued directors’ fees | 1,753,089 | 1,560,589 | ||||||
Accrued other expenses | 263,168 | 224,493 | ||||||
Total Other Accrued Expenses | $ | 2,331,621 | $ | 2,002,486 |
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.
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 shares of Series D-1 Convertible Preferred Stock voluntarily converted the Preferred Stock into 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 $ (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:
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. Convertible Notes Payable
On April 20, 2020,2021 Financing
Schedule of Convertible Notes Payable
Non-Related Party | Related Party | |||||||||||
Face Amount | Face Amount | Total | ||||||||||
Balance as of January 1, 2022 | $ | 1,260,000 | $ | 200,000 | $ | 1,460,000 | ||||||
Issued | 50,000 | - | 50,000 | |||||||||
Balance as of March 31, 2022 | $ | 1,310,000 | $ | 200,000 | $ | 1,510,000 | ||||||
Beginning Balance | $ | 1,310,000 | $ | 200,000 | $ | 1,510,000 | ||||||
Issued | 500,000 | - | 500,000 | |||||||||
Balance as of June 30, 2022 | $ | 1,810,000 | $ | 200,000 | $ | 2,010,000 | ||||||
Ending Balance | $ | 1,810,000 | $ | 200,000 | $ | 2,010,000 |
For further details on the terms of the 2021 Notes, refer to our Form 10-K as filed with the SEC on March 29, 2022.
As of June 30, 2022, the Company had received 2021 Notes proceeds of $2,010,000, of which $200,000 is from a related party investor (a Company officer).
Subsequent to June 30, 2022, the Company received 2021 Notes proceeds of $225,000 from a $62,500 loan under the CARES Act PPP (the “PPP Loan”)related party investor (a Company director). See Note 12. Subsequent Events.
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.
6. Notes Payable
The Company obtained short-term financing from AFCO Insurance Premium Finance for our commercial insurance policies. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the balance of the note payable was $68,392142,693 and $212,790238,452, respectively.
6.7. Related Party Transactions
During the three months ended SeptemberJune 30, 20212022 and September 30, 2020,2021, the Company paid Mr. Bruce Horowitz (Capital Strategists) consulting fees of $21,20042,400 and $127,20042,400, respectively, for services rendered. Director fees for Mr. Horowitz for the three months ended June 30, 2022 and 2021 were $18,750 and $18,750, respectively.
During the ninesix months ended SeptemberJune 30, 20212022 and September 30, 2020,2021, the Company paid Mr. Bruce Horowitz (Capital Strategists) consulting fees of $148,40084,800 and $190,800127,200, respectively, for services rendered. Director fees for Mr. Horowitz for the six months ended June 30, 2022 and 2021 were $37,500 and $37,500, respectively.
Accrued director fees for Mr. Horowitz as of SeptemberJune 30, 20212022 and December 31, 20202021 were $56,250318,750 and $75,000281,250, respectively. Total amount owed to Capital Strategists for consulting fees as of June 30, 2022 and December 31, 2021 were $169,600 and $127,200, respectively. Mr. Horowitz serves as both COOChief Operating Officer (“COO”) and a Director.Company director.
See Note 45 for details of other related party transactions.
Director fees during the three months ended SeptemberJune 30, 20212022 and September 30, 20202021 were $96,250 and $96,250, respectively.
Director fees during the ninesix months ended SeptemberJune 30, 20212022 and September 30, 20202021 were $288,750192,500 and $288,750192,500, respectively.
Accrued directors’ fees as of SeptemberJune 30, 20212022 and December 31, 20202021 were $1,464,3391,753,089 and $1,175,5891,560,589, respectively, and are included in other accrued expenses on the accompanying condensed consolidated balance sheet.respectively.
7. Short-term Receivables
The following table summarizes the receivables at September 30, 2021 and December 31, 2020:
Summary of Short-term Receivables
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 |
8. Stockholders’ Deficiency
CommonPreferred Stock
During the ninesix months ended SeptemberJune 30, 2021,2022, the Company issued an aggregate of 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 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 shares of common stock upon the automatic conversion of Series B Convertible Preferred Stock.
Preferred Stock
On June 20, 2021, the Company issued and 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 shares of restricted Series D-1 Convertible Preferred Stock that have not yet been issued.in exchange for an investment of $150,000 from a non-related party.
OptionsAnnual Stockholder Meeting Proposals
During the nine months ended September 30, 2021, a total of options to purchase the Company’s common stock expired.
The following table summarizes option activity duringCompany held its annual meeting of stockholders on June 22, 2022. As proposal number 4, stockholders authorized the nine months ended September 30, 2021:
ScheduleCompany’s board of directors (the “Board”) to amend the Company’s Certificate of Incorporation, as amended by the Certificate of Designation of Series D Convertible Preferred Stock Option Activity
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 |
and Certificate of Designation of Series D-1 Convertible Preferred Stock (the “Certificates of Designation”),
Summarya ratio of Stock Options Outstandingbetween 1-for-10 and 1-for-50
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 | $ | - |
Warrants
During, where the nine months ended September 30, 2021,ratio would be determined by the Company granted three-year immediately vested warrantsBoard at its discretion, and to purchase an aggregatemake corresponding amendments to the Certificates of 25,000Designation to provide for the proportional adjustment of certain terms upon a reverse stock split, consistent with the Board’s recommendation. As proposal number 5, the Company’s stockholders also authorized the Board, given the stockholders’ approval of proposal number 4, to amend the Company’s Certificate of Incorporation, as amended by the Certificates of Designation, to decrease the number of authorized shares of the Company’s common stock and preferred stock by the same reverse stock split ratio determined by the Board, consistent with an exercise price of $0.2862 per share to an advisory board member.the Board’s recommendation. The warrants had an issuance date fair value of an aggregate of $488, which was recognized immediately and is included in general and administrative expensesBoard has not acted 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 of August 2016 warrants expired.
The following table summarizes warrant activity during the nine months ended September 30, 2021:
Summary of Warrant Activity
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:
Summary of Warrants Outstanding
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 | $ | - |
Holdersstockholder authorizations as of the outstanding warrants are not entitled to vote and the exercise prices of such warrants are subject to customary anti-dilution provisions.filing date.
9. Leases
The Company currently leasesleased 4,500 square feet of corporate office space in Knoxville, Tennessee through an operating lease agreement for a term of five yearsending on June 30, 2022.2022. Payments arewere approximately $7,900 6,100per month.month due to the Company negotiating a continued reduced rent from January 1, 2022 through June 30, 2022.
On August 13, 2021,June 30, 2022, the lease expired and was not renewed. On June 18, 2022, the Company negotiatedmoved into 2,700 square feet of leased corporate office space in Knoxville, Tennessee through an operating lease agreement for a reducedterm of three years ending June 30, 2025. The monthly base rent ranges from July 1, 2021 through December 31, 2021 in$4,053 to $4,278 over the amount of $6,100 per month.term on the lease.
Total operating lease expense for the three months ended SeptemberJune 30, 20212022 was $15,88723,092, of which, $10,59115,395 was included within research and development and $5,2967,697 was included within general and administrative expenses on the condensed consolidated statement of operations. Total operating lease expense for the three months ended SeptemberJune 30, 20202021 was $24,44623,044, of which, $16,29715,363 was included within research and development and $8,1497,681 was included within general and administrative expenses on the condensed consolidated statement of operations.
Total operating lease expense for the ninesix months ended SeptemberJune 30, 20212022 was $63,69338,051, of which, $42,46225,367 was included within research and development and $21,23112,684 was included within general and administrative expenses on the condensed consolidated statement of operations. Total operating lease expense for the ninesix months ended SeptemberJune 30, 20202021 was $68,08047,806, of which, $45,38731,871 was included within research and development and $22,69315,935 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:
Schedule of Right-of-UseRight-of-use Assets and Liabilities
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 | % |
For The Six Months Ended | ||||||||
June 30, | ||||||||
2022 | 2021 | |||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Operating cash flows used in operating leases | $ | 38,625 | $ | 45,784 | ||||
Right-of-use assets obtained in exchange for lease obligations: | ||||||||
Operating leases | $ | 151,693 | $ | - | ||||
Weighted Average Remaining Lease Term | ||||||||
Operating leases | 3 years | 1 year | ||||||
Weighted Average Discount Rate | ||||||||
Operating leases | 5% - 8.0 | % | 8.0 | % |
Future minimum payments under the Company’s non-cancellable lease obligations as of SeptemberJune 30, 20212022 were as follows:
Schedule of Future Minimum Payment forPayments Under Non-cancellable Lease
Years | Amount | Amount | ||||||
2021 | $ | 18,447 | ||||||
2022 | 46,687 | $ | 24,318 | |||||
2023 | 49,311 | |||||||
2024 | 50,663 | |||||||
2025 | 25,669 | |||||||
Total future minimum lease payments | 65,134 | 149,961 | ||||||
Less: amount representing imputed interest | (2,214 | ) | 11,098 | |||||
Total | $ | 62,920 | $ | 138,863 |
10.Grants
On October 25, 2021, the Company received a 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. As of June 30, 2022, $1,990,685 has been recorded as unearned grant revenue liability on the accompanying condensed consolidated balance sheets. The Company recorded $509,315 of grant revenue during the six months ended June 30, 2022. The grant was pre-funded; therefore, the funds do not need to be used in full by June 30, 2022.
11. Commitments, Contingencies and Litigation
The Company may, from time to time, be involved in litigation arising infrom the ordinary course of business and/or whichthat 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.
11.12. 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 $Convertible Notes Payable
2,500,000
from the State of Tennessee for the study of animal cancers and dermatological disorders for the period October 15, 2021Subsequent to June 30, 2022, was funded.the Company received 2021 Notes proceeds of $225,000 from a related party investor (a Company director).
Common Stock
Subsequent to June 30, 2022, the Company issued an aggregate of 1,500 for services. shares of immediately vested restricted common stock to a consultant with a grant date value of $
Subsequent to June 30, 2022, the Company issued an aggregate of 1,500 as an award. shares of immediately vested restricted common stock to an employee with a grant date value of $
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, 20202021 filed with the SEC on March 2, 29, 2022 (“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.
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:
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.
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
Grant Revenue
Grant income is recognized when qualifying costs are incurred and there is reasonable assurance that conditions of the grant have been met. Cash received from grants in advance of incurring qualifying costs is recorded as unearned grant revenue and recognized as other income when qualifying costs are incurred.
Research and Development Expenses
A large component of our total operating expenses is the Company’s investment in research and development activities, including the clinical development of our product candidates. Research and development expenses represent costs incurred to conduct research and undertake clinical trials to develop our drug product candidates. These expenses consist primarily of:
● | Costs of conducting clinical trials, including amounts paid to clinical centers, clinical research organizations and consultants, among others; | |
● | Salaries and related expenses for personnel, including stock-based compensation expense; | |
● | Other outside service costs including cost of contract manufacturing; | |
● | The costs of supplies and reagents; and, | |
● | Occupancy and depreciation charges. |
We expense research and development costs as incurred.
Research and development activities are central to our business model. We expect our research and development expenses to increase in the future as we advance our existing product candidates through clinical trials and pursue their regulatory approval. Undertaking clinical development and pursuing regulatory approval are both costly and time-consuming activities. As a result of known and unknown uncertainties, we are unable to determine the duration and completion costs of our research and development activities, or if, when, and to what extent we will generate revenue from any subsequent commercialization and sale of our drug product candidates.
General and Administrative Expenses
General and administrative expense consists primarily of salaries, stock-based compensation expense and other related costs for personnel in executive, finance, accounting, business development, legal, information technology and corporate communication functions. Other costs include facility costs not otherwise included in research and development expense, insurance, and professional fees for legal, patent and accounting services.
Results of Operations
Comparison of the Three Months Ended SeptemberJune 30, 20212022 and SeptemberJune 30, 20202021
Overview
Total operating expenses were $1,047,231$1,399,690 for the three months ended SeptemberJune 30, 2021, a decrease2022, an increase of $54,647$177,673 or 5.0%14.5% compared to the three months ended SeptemberJune 30, 2020.2021. The decreaseincrease was driven primarily by lower(i) increased clinical trial cost, (ii) higher insurance costs and (iii) higher professional fees, partially offset by (iv) lower legal and litigation fees. Net loss for the three months ended SeptemberJune 30, 20212022 was $1,051,259,$1,077,841, a decrease of $513,185$501,750 or 32.8%31.8% 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, 2021.2021 and the recognition of grant revenue in the amount of $321,710.
For the Three Months Ended | For the Three Months Ended | |||||||||||||||||||||||||||||||
September 30, | Increase/ | June 30, | ||||||||||||||||||||||||||||||
2021 | 2020 | (Decrease) | % Change | 2022 | 2021 | Increase/(Decrease) | % Change | |||||||||||||||||||||||||
Grant Revenue | $ | 321,710 | $ | - | $ | 321,710 | 0.0 | % | ||||||||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||||||||||
Research and development | $ | 608,653 | $ | 667,523 | $ | (58,870 | ) | -8.8 | % | 816,648 | 602,979 | 213,669 | 35.4 | % | ||||||||||||||||||
General and administrative | 438,578 | 434,355 | 4,223 | 1.0 | % | 583,042 | 619,038 | (35,996 | ) | -5.8 | % | |||||||||||||||||||||
Total Operating Expenses | 1,047,231 | 1,101,878 | (54,647 | ) | -5.0 | % | 1,399,690 | 1,222,017 | 177,673 | 14.5 | % | |||||||||||||||||||||
Total Operating Loss | (1,047,231 | ) | (1,101,878 | ) | 54,647 | -5.0 | % | (1,077,980 | ) | (1,222,017 | ) | 144,037 | -11.8 | % | ||||||||||||||||||
Other Income/(Expense): | ||||||||||||||||||||||||||||||||
EIDL grant | - | - | - | 0.0 | % | |||||||||||||||||||||||||||
Research and development tax credit | (507 | ) | 1 | (508 | ) | -50800.0 | % | 38,259 | 32,144 | 6,115 | 19.0 | % | ||||||||||||||||||||
Investment and interest income | 1 | 823 | (822 | ) | -99.9 | % | ||||||||||||||||||||||||||
Gain from extinguishment | - | - | - | 0.0 | % | - | 63,094 | (63,094 | ) | -100.0 | % | |||||||||||||||||||||
Interest expense | (3,522 | ) | (463,390 | ) | 459,868 | -99.2 | % | |||||||||||||||||||||||||
Total Other Expense, Net | (4,028 | ) | (462,566 | ) | 458,538 | -99.1 | % | |||||||||||||||||||||||||
Interest income and interest expense | (38,120 | ) | (452,812 | ) | 414,692 | -91.6 | % | |||||||||||||||||||||||||
Total Other Income/ (Expense), Net | 139 | (357,574 | ) | 357,713 | -100.0 | % | ||||||||||||||||||||||||||
Net Loss | $ | (1,051,259 | ) | $ | (1,564,444 | ) | $ | 513,185 | -32.8 | % | $ | (1,077,841 | ) | $ | (1,579,591 | ) | $ | 501,750 | -31.8 | % |
Grant Revenue
For the three months ended June 30, 2022 and 2021, there was $321,710 and $0, respectively, of grant revenue recognized related to qualifying expenses that were incurred and included within research and development on the condensed consolidated statements of operations.
Research and Development Expenses
Research and development expenses were $608,653$816,648 for the three months ended SeptemberJune 30, 2021, a decrease2022, an increase of $58,870$213,669 or 8.8%35.4% compared to $667,523$602,979 for the three months ended SeptemberJune 30, 2020.2021. The decreaseincrease was primarily due to (i) reducedincreased cost on clinical trials due to slowerincreased recruitment and treatment in clinical trials, due to the effects of SARS-CoV-2,and (ii) lower payroll and payroll taxes, and (iii) a decrease in rent expense.higher insurance cost.
For the Three Months Ended | ||||||||||||||||||||||||||||||||
September 30, | Increase/ | For the Three Months Ended | ||||||||||||||||||||||||||||||
2021 | 2020 | (Decrease) | % Change | June 30, | ||||||||||||||||||||||||||||
2022 | 2021 | Increase/(Decrease) | % Change | |||||||||||||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||||||||||
Research and development: | ||||||||||||||||||||||||||||||||
Clinical trial and research expenses | $ | 497,525 | $ | 527,415 | $ | (29,890 | ) | -5.7 | % | $ | 674,294 | $ | 465,627 | $ | 208,667 | 44.8 | % | |||||||||||||||
Depreciation/amortization | 2,161 | 2,161 | - | 0.0 | % | 1,765 | 2,162 | (397 | ) | -18.4 | % | |||||||||||||||||||||
Insurance | 51,982 | 53,885 | (1,903 | ) | -3.5 | % | 57,367 | 51,393 | 5,974 | 11.6 | % | |||||||||||||||||||||
Payroll and taxes | 45,366 | 66,583 | (21,217 | ) | -31.9 | % | 67,360 | 67,706 | (346 | ) | -0.5 | % | ||||||||||||||||||||
Rent and utilities | 11,619 | 17,479 | (5,860 | ) | -33.5 | % | 15,862 | 16,091 | (229 | ) | -1.4 | % | ||||||||||||||||||||
Total research and development | $ | 608,653 | $ | 667,523 | $ | (58,870 | ) | -8.8 | % | $ | 816,648 | $ | 602,979 | $ | 213,669 | 35.4 | % |
General and Administrative Expenses
General and administrative expenses were $438,578$583,042 for the three months ended SeptemberJune 30, 2021, an increase2022, a decrease of $4,223$35,996 or 1.0%5.8% compared to $434,355$619,038 for the three months ended SeptemberJune 30, 2020.2021. The increasedecrease was primarily due to (i) higherlower legal fees relating to patents, partially offset by (ii) lowerhigher professional fees, cost.and (iii) increased other general and administration expenses.
For the Three Months Ended | For the Three Months Ended | |||||||||||||||||||||||||||||||
September 30, | Increase/ | June 30, | ||||||||||||||||||||||||||||||
2021 | 2020 | (Decrease) | % Change | 2022 | 2021 | Increase/(Decrease) | % Change | |||||||||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||||||||||
General and administrative: | ||||||||||||||||||||||||||||||||
Depreciation | $ | 1,054 | $ | 1,259 | $ | (205 | ) | -16.3 | % | $ | 1,055 | $ | 1,055 | $ | - | 0.0 | % | |||||||||||||||
Directors fees | 96,250 | 94,315 | 1,935 | 2.1 | % | 96,250 | 96,250 | - | 0.0 | % | ||||||||||||||||||||||
Insurance | 37,138 | 40,796 | (3,658 | ) | -9.0 | % | 44,672 | 42,262 | 2,410 | 5.7 | % | |||||||||||||||||||||
Legal and litigation | 130,683 | 87,122 | 43,561 | 50.0 | % | 126,087 | 216,723 | (90,636 | ) | -41.8 | % | |||||||||||||||||||||
Other general and administrative cost | 9,052 | 16,168 | (7,116 | ) | -44.0 | % | 34,476 | 15,583 | 18,893 | 121.2 | % | |||||||||||||||||||||
Payroll and taxes | 43,981 | 45,102 | (1,121 | ) | -2.5 | % | 63,575 | 62,540 | 1,035 | 1.7 | % | |||||||||||||||||||||
Professional fees | 114,496 | 140,732 | (26,236 | ) | -18.6 | % | 208,678 | 172,759 | 35,919 | 20.8 | % | |||||||||||||||||||||
Rent and utilities | 5,883 | 8,746 | (2,863 | ) | -32.7 | % | 8,267 | 8,219 | 48 | 0.6 | % | |||||||||||||||||||||
Foreign currency translation | 41 | 115 | (74 | ) | 0.0 | % | (18 | ) | 3,647 | (3,665 | ) | -100.5 | % | |||||||||||||||||||
Total general and administrative | $ | 438,578 | $ | 434,355 | $ | 4,223 | 1.0 | % | $ | 583,042 | $ | 619,038 | $ | (35,996 | ) | -5.8 | % |
Other Income/(Expense)
Other incomeincome/(expense) decreased by $1,330$357,713 from $824($357,574) for the three months ended SeptemberJune 30, 20202021 to ($506)$139 for the three months ended SeptemberJune 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, 2021.2022. 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, 2021.2021, offset by the gain from extinguishment of debt in 2021 relating to the PPP loan forgiveness.
For the Three Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2022 | 2021 | Increase/(Decrease) | % Change | |||||||||||||
Other Income/(Expense): | ||||||||||||||||
Research and development tax credit | $ | 38,259 | $ | 32,144 | $ | 6,115 | 19.0 | % | ||||||||
Gain from extinguishment | - | 63,094 | (63,094 | ) | -100.0 | % | ||||||||||
Interest income and interest expense | (38,120 | ) | (452,812 | ) | 414,692 | -91.6 | % | |||||||||
Total Other Income/(Expenses), Net | $ | 139 | $ | (357,574 | ) | $ | 357,713 | -100.0 | % |
14 |
Comparison of the NineSix Months Ended SeptemberJune 30, 20212022 and SeptemberJune 30, 20202021
Overview
Total operating expenses were $3,449,924$2,587,353 for the ninesix months ended SeptemberJune 30, 2021, a decrease2022, an increase of $311,042$184,660 or 8.3%7.7% compared to the ninesix 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 | % |
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 forgivenessdriven primarily by (i) increased clinical trial cost, (ii) higher insurance costs and the research(iii) higher professional fees, partially offset by (iv) lower legal and development tax credit in Australia.
Interest expense decreased by $333,336 from $1,278,945litigation fees, and (v) lower rent and utility expense. Net loss for the ninesix months ended SeptemberJune 30, 2020 to $945,609 for the nine months ended September 30, 2021. The2022 was $2,108,763, a decrease of $1,140,778 or 35.1% which was dueprimarily attributable to lower interest expense costs incurred in connection with the 2017 and 2020 Notes which converted to preferred stock on June 20, 2021.2021 and the recognition of grant revenue in the amount of $509,315.
For the Six Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2022 | 2021 | Increase/(Decrease) | % Change | |||||||||||||
Grant Revenue | $ | 509,315 | $ | - | $ | 509,315 | 0.0 | % | ||||||||
Operating Expenses: | ||||||||||||||||
Research and development | 1,487,764 | 1,258,123 | 229,641 | 18.3 | % | |||||||||||
General and administrative | 1,099,589 | 1,144,570 | (44,981 | ) | -3.9 | % | ||||||||||
Total Operating Expenses | 2,587,353 | 2,402,693 | 184,660 | 7.7 | % | |||||||||||
Total Operating Loss | (2,078,038 | ) | (2,402,693 | ) | 324,655 | -13.5 | % | |||||||||
Other Income/(Expense): | ||||||||||||||||
Research and development tax credit | 38,259 | 32,144 | 6,115 | 19.0 | % | |||||||||||
Gain from extinguishment | - | 63,094 | (63,094 | ) | -100.0 | % | ||||||||||
Interest income and interest expense | (68,984 | ) | (942,086 | ) | 873,102 | -92.7 | % | |||||||||
Total Other Expense, Net | (30,725 | ) | (846,848 | ) | 816,123 | -96.4 | % | |||||||||
Net Loss | $ | (2,108,763 | ) | $ | (3,249,541 | ) | $ | 1,140,778 | -35.1 | % |
Grant Revenue
For the six months ended June 30, 2022 and 2021, there was $509,315 and $0, respectively, of grant revenue recognized related to qualifying expenses that were incurred and included within research and development on the condensed consolidated statements of operations.
Research and Development Expenses
Research and development expenses were $1,487,764 for the six months ended June 30, 2022, an increase of $229,641 or 18.3% compared to $1,258,123 for the six months ended June 30, 2021. The increase was primarily due to (i) increased cost on clinical trials due to increased recruitment and treatment in clinical trials, and (ii) higher insurance cost, partially offset by (iii) lower payroll and payroll taxes, and (iv) a decrease in rent and utility expenses.
For the Six Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2022 | 2021 | Increase/(Decrease) | % Change | |||||||||||||
Operating Expenses: | ||||||||||||||||
Research and development: | ||||||||||||||||
Clinical trial and research expenses | $ | 1,205,985 | $ | 977,207 | $ | 228,778 | 23.4 | % | ||||||||
Depreciation/amortization | 3,929 | 4,324 | (395 | ) | -9.1 | % | ||||||||||
Insurance | 115,890 | 102,781 | 13,109 | 12.8 | % | |||||||||||
Payroll and taxes | 134,475 | 140,040 | (5,565 | ) | -4.0 | % | ||||||||||
Rent and utilities | 27,485 | 33,771 | (6,286 | ) | -18.6 | % | ||||||||||
Total research and development | $ | 1,487,764 | $ | 1,258,123 | $ | 229,641 | 18.3 | % |
15 |
General and Administrative Expenses
General and administrative expenses were $1,099,589 for the six months ended June 30, 2022, a decrease of $44,981 or 3.9% compared to $1,144,570 for the six months ended June 30, 2021. The decrease was primarily due to (i) lower legal fees relating to patents, partially offset by (ii) higher professional fees, (iii) increased payroll and taxes, and (iv) increased other general and administration expenses.
For the Six Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2022 | 2021 | Increase/(Decrease) | % Change | |||||||||||||
Operating Expenses: | ||||||||||||||||
General and administrative: | ||||||||||||||||
Depreciation | $ | 2,109 | $ | 2,109 | $ | - | 0.0 | % | ||||||||
Directors fees | 192,500 | 192,500 | - | 0.0 | % | |||||||||||
Insurance | 92,890 | 85,828 | 7,062 | 8.2 | % | |||||||||||
Legal and litigation | 238,621 | 348,738 | (110,117 | ) | -31.6 | % | ||||||||||
Other general and administrative cost | 57,335 | 46,588 | 10,747 | 23.1 | % | |||||||||||
Payroll and taxes | 127,874 | 108,600 | 19,274 | 17.7 | % | |||||||||||
Professional fees | 375,033 | 338,475 | 36,558 | 10.8 | % | |||||||||||
Rent and utilities | 13,866 | 16,945 | (3,079 | ) | -18.2 | % | ||||||||||
Foreign currency translation | (639 | ) | 4,787 | (5,426 | ) | -113.3 | % | |||||||||
Total general and administrative | $ | 1,099,589 | $ | 1,144,570 | $ | (44,981 | ) | -3.9 | % |
Other Income/(Expense)
Other income/(expense) decreased by $816,123 from ($846,848) for the six months ended June 30, 2021 to ($30,725) for the six months ended June 30, 2022. 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, offset by the gain from extinguishment of debt in 2021 relating to the PPP loan forgiveness.
For the Six Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2022 | 2021 | Increase/(Decrease) | % Change | |||||||||||||
Other Income/(Expense): | ||||||||||||||||
Research and development tax credit | $ | 38,259 | $ | 32,144 | $ | 6,115 | 19.0 | % | ||||||||
Gain from extinguishment | - | 63,094 | (63,094 | ) | -100.0 | % | ||||||||||
Interest income and interest expense | (68,984 | ) | (942,087 | ) | 873,103 | -92.7 | % | |||||||||
Total Other Expenses, Net | $ | (30,725 | ) | $ | (846,848 | ) | $ | 816,123 | -96.4 | % |
Liquidity and Capital Resources
OurThe Company’s cash, and cash equivalents, and restricted cash were $254,083$2,032,609 at SeptemberJune 30, 2021,2022 which includes the $1,948,335 of restricted cash resulting from a grant received from the State of Tennessee, compared to $97,231$3,106,942 at December 31, 2020.2021, which included $2,423,958 of restricted cash. The Company’s working capital deficiency was $6,215,548 and $4,258,679 as of June 30, 2022 and December 31, 2021, respectively. 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$248,142,721 as of SeptemberJune 30, 2021.2022. 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 SeptemberAs of June 30, 2021, the Company entered into additional non-related party 2020 Notes2022, cash required for our current liabilities included approximately $4,350,917 for accounts payable and accrued expenses (including lease liability) and a $142,693 note payable related to our short-term financing of our commercial insurance policies. Also, if not converted prior to maturity, convertible debt in the aggregate principal amount of $1,700,000. On$2,010,000 plus accrued interest will mature one year from the date of the notes. Cash requirements for long-term liabilities were $96,201 at 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 $0.2862,30, 2022. The Company intends to meet these cash requirements from its current cash balance 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.future 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.
16 |
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 SeptemberJune 30, 2021.2022.
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 20212022 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 PoliciesEstimates
ForThe preparation of financial statements and related disclosures must be in conformity with U.S. GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which it relies are reasonably based upon information available to us at the time that it makes these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below.
The following is not intended to be a descriptioncomprehensive list of all of our critical accounting policies seeor estimates. Our accounting policies are more fully described in Note 3 – Critical–Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q.
Stock-Based Compensation
We measure the cost of services received in exchange for an award of equity instruments based on the fair value of the award on the date of grant. The fair value amount of the shares expected to ultimately vest is then recognized over the period for which services are required to be provided in exchange for the award, usually the vesting period. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period that the estimates are revised. We account for forfeitures as they occur.
Research and Development
Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for research and development employees and consultants, facilities expenses, overhead expenses, cost of laboratory supplies, manufacturing expenses, fees paid to third parties and other outside expenses. We accrue for costs incurred as the services are being provided by monitoring the status of the clinical trial or project and the invoices received from our external service providers. We adjust our accrual as actual costs become known.
Recently Adopted Accounting Standards
Recently adopted accounting standards are included in Note 3 – CriticalSignificant 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”).
17 |
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.
Inherent Limitations on Effectiveness of Controls
Even assuming the effectiveness of our controls and procedures, our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error or all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. In general, our controls and procedures are designed to provide reasonable assurance that our control system’s objective will be met, and our principal executive officer and principal financial officer has concluded that our disclosure controls and procedures are effective at the reasonable assurance level. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls in future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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.
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 10.11.
ITEM 1A. RISK FACTORS.
There have been no material changes to the risk factors that were disclosed in the 20202021 Form 10-K, other than set forth below.10-K.
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 SeptemberJune 30, 2021,2022, the Company had received aggregate Loanproceeds of $200,000 from a related party investor in connection with the 2021 Financing.$500,000 pursuant to certain unsecured convertible notes (the “2021 Notes”). As of SeptemberJune 30, 2021,2022, the Company had cumulatively drawn down $2,010,000 under the entire $200,000 under this note.2021 Notes.
For further details on the terms of the 2021 Note,Notes, refer to our Form 8-K10-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.March 29, 2022.
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.
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 | |
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. | |
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.
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. |
August 11, 2022 | 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) |