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Item
2.03
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement
of a Registrant.
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On
August 13, 2021, the board of directors (the “Board”) of Provectus Biopharmaceuticals, Inc. (the “Company”) approved
a Financing Term Sheet (the “2021 Term Sheet”), which sets forth the terms under which the Company will use its best efforts
to arrange for financing of a maximum of $5,000,000 (the “2021 Financing”).
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 Convertible
Preferred Stock, par value $0.001 per share (“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
Subject
to the terms and conditions of the 2021 Term Sheet, the Company will use its best efforts to arrange for the 2021 Financing, which amounts
will be obtained in several tranches. The proceeds from the 2021 Financing will be used to fund the Company’s drug discovery and
development program, as currently constituted and envisioned, and to fund the Company’s general and administrative expenses.
Structure
of the Financing
The
2021 Financing will be in the form of an unsecured convertible loan (the “Loan”) from various investors (collectively,
the “Investors”) that will be evidenced by convertible promissory notes (individually, a “2021 Note” and collectively,
the “2021 Notes”). In addition to customary provisions, the 2021 Note contains the following provisions:
(i) The Loan will bear interest at the rate of eight percent (8%) per annum on the outstanding principal amount of the Loan that has been funded to the Company;
(ii) The Loan shall be due and payable in full on the earliest of: (i) the date upon which an event of default occurs and is continuing; (ii) a change of control of the Company; or (iii) twelve months after the issue date of a 2021 Note; and
(iii) The outstanding principal amount and interest payable under the Loan is convertible at the Investor’s option as follows:
(a) The Loan is convertible into shares of the Company’s Series D-1 Preferred Stock at a price per share equal to $2.8620. The Series D-1 Preferred Stock is convertible into ten (10) shares of the Company’s common stock, par value $0.001 per share (“Common Stock”);
(b) In the event the Company conducts a qualified equity financing and receives gross proceeds in the aggregate amount of $20 million, the Loan is convertible into the shares of capital stock being issued by the Company in such qualified equity financing at the price per share being paid by the cash investors in such qualified equity financing; and
(c) In the event the Company conducts a qualified debt financing with more favorable terms than the 2021 Notes and receives gross proceeds in the aggregate amount of $20 million, the 2021 Notes may be exchanged for the debt instrument being issued by the Company in such qualified debt financing.
The
form of the 2021 Note is attached hereto as Exhibit 4.1 and is incorporated herein by reference.
The
foregoing summary of the 2021 Term Sheet does not purport to be complete and is qualified in its entirety by reference to the full text
of the 2021 Term Sheet that will be filed with the Securities and Exchange Commission as an exhibit to the Company’s Quarterly
Report on Form 10-Q for the quarter ending September 30, 2021.
Issuance
of 2021 Note
On
August 16, 2021, the Company entered into a 2021 Note with Heather Raines, CPA, the Company’s Chief Financial Officer, in the principal
amount of $200,000.
The
Company believes the issuance of the securities was exempt from the registration requirements of the Securities Act of 1933, as amended
(the “Securities Act”), by virtue of Section 4(a)(2) of the Securities Act (or Rule 506 of Regulation D promulgated thereunder)
as transactions not involving a public offering.