UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

 

For the fiscal year ended December 31, 2020

 

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

 

For the transition period from ____________ to ____________

 

Commission file number 001-36457

 

PROVECTUS BIOPHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   90-0031917

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

10025 Investment Drive, Suite 250, Knoxville, TN 37932

(Address of principal executive offices) (Zip Code)

 

866-594-5999

(Registrant’s telephone number, including area code)

 

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

 

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

 

Common Stock, par value $0.001 per share

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [  ] Yes [X] No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [  ] Yes [X] No

 

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

 

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

 

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

 

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

 

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

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [  ]

 

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

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of June 30, 2020 was $16,529,509 (computed on the basis of $0.044 per share).

 

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of February 28, 2021 was 403,557,037.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

The information required by Part III is incorporated by reference to portions of the definitive proxy statement to be filed within 120 days after December 31, 2020, pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection with the 2021 annual meeting of stockholders.

 

 

 

 

 

 

TABLE OF CONTENTS

 

PART I    
     
ITEM 1. BUSINESS 2
     
ITEM 1A. RISK FACTORS 8
     
ITEM 1B. UNRESOLVED STAFF COMMENTS 15
     
ITEM 2. PROPERTIES 15
     
ITEM 3. LEGAL PROCEEDINGS 15
     
ITEM 4. MINE SAFETY DISCLOSURES 15
     
PART II    
     
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 16
     
ITEM 6. SELECTED FINANCIAL DATA 17
     
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17
     
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 23
     
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 24
     
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 25
     
ITEM 9A. CONTROLS AND PROCEDURES 25
     
ITEM 9B. OTHER INFORMATION 25
     
PART III    
     
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 26
     
ITEM 11. EXECUTIVE COMPENSATION 26
     
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 26
     
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 26
     
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 26
     
PART IV    
     
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES 27
     
ITEM 16. FORM 10-K SUMMARY 30
     
SIGNATURES 31

 

 

 

 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This Annual Report on Form 10-K 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. While we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will prove correct. Forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from the future results, performance, or achievements expressed in or implied by any forward-looking statement we make. Some of the relevant risks and uncertainties that could cause our actual performance to differ materially from the forward-looking statements contained in this report are discussed below under the heading “Risk Factors” and elsewhere in this Annual Report on Form 10-K. We caution investors that these discussions of important risks and uncertainties are not exclusive, and our business may be subject to other risks and uncertainties which are not detailed there. Investors are cautioned not to place undue reliance on our forward-looking statements. We make forward-looking statements as of the date on which this Annual Report on Form 10-K is filed with the U.S. Securities and Exchange Commission (the “SEC”), and we assume no obligation to update the forward-looking statements after the date hereof whether as a result of new information or events, changed circumstances, or otherwise, except as required by law.

 

1

 

 

PART I

 

ITEM 1. BUSINESS.

 

General

 

Provectus Biopharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, “Provectus” or the “Company”), is a clinical-stage biotechnology company developing immunotherapy medicines for different diseases, with the aims of maximizing the curative impact of these medicines and achieving immunity from treated disease. These investigational drugs are based on an entire, wholly-owned, family of small molecules called halogenated xanthenes (“HXs”); our lead HX molecule is named rose bengal disodium (“RBD”). Former scientists from the U.S. Department of Energy’s Oak Ridge National Laboratory founded Provectus in 2002, identifying and advancing RBD’s dark-effect therapeutic potential and developing RBD and HXs into proprietary molecules. Starting in 2017, new science and business leadership pivoted and then expanded drug discovery and development, targeting global patient populations in a number of disease areas and indications made viable by RBD’s immunotherapeutic potential and new routes of administration.

 

Science

 

RBD possesses an innovative physical chemistry science with broad-spectrum prophylactic and therapeutic medical applications. The prerequisite mechanistic step for these immunotherapies is direct contact between RBD and disease that may lead to disease death repair, RBD treatment-specific innate immune activation, and disease-specific functional adaptive immune response. RBD displays consistent mechanistic behavior across different indications of a disease and across different disease areas, with the potential to be a multi-disease treatment platform and a universal contributor to different medical treatments.

 

Drug Discovery and Development Strategy

 

New company leadership has a compelling vision of accessible and affordable, safe, broad-spectrum small molecule immunotherapies. Provectus’ legacy intralesional (IL) oncology clinical program was pivoted and enhanced to pursue U.S. Food and Drug Administration (“FDA”) and/or Australia’s Therapeutics Good Administration (“TGA”) regulatory advancement for rare or refractory cancers of the skin and cancers of the liver in both single-agent and combination therapy settings.

 

Drug development was expanded to pursue proof-of-concept of systemic RBD administration. Routes of administration and target diseases being developed include oral (“PO”) hematology in relapsed and refractory adult and pediatric leukemias, and PO oncology for prophylactic and/or therapeutic RBD in high-risk adult solid tumor cancers. Drug discovery into RBD treatment has also been deepened to explore different disease areas. Target diseases include virology, such as SARS-CoV-2 (COVID-19); microbiology, such as antibiotic-resistant gram-negative bacteria; ophthalmology, such as diseases of the cornea; and dermatology, such as combination therapy with systemic biologics for psoriasis and atopic dermatitis.

 

2

 

 

RBD and HX Intellectual Property (“IP”)

 

RBD, the active pharmaceutical ingredient (API) in our current investigational immunotherapy medicines, is a systemically-active, environmentally-adaptive stable, and selective small molecule. RBD has a nominal formula of 4,5,6,7-tetrachloro-2’,4’,5’,7’-tetraiodofluorescein disodium. Rose bengal drug substance (“RB DS”) is produced by Provectus’ Quality-by-Design (“QbD”) manufacturing process, which avoids the formation of uncontrolled impurities generally (and also proprietarily) known to be present in commercial-grade rose bengal, and follows International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (“ICH”) Guidelines for pharmaceutical ingredients and current Good Manufacturing Practices (“cGMP”) regulations. Multiple Provectus cGMP RB DS lots have surpassed multi-year stability testing.

 

The Company’s science and molecules are currently protected by global intellectual property that includes composition of matter, manufacturing methods and techniques, pharmaceutical synthesis standards, trade secrets, and concomitant combination therapy use for different disease areas.

 

U.S. Patents

 

We hold a number of patents covering the technologies we have developed and are continuing to develop for the production of investigational drugs and other technologies. All patents material to an understanding of the Company are included in the table below:

 

U.S. Patent No.   Title   Issue Date   Expiration Date
             
7,201,914   Combination antiperspirant and antimicrobial compositions   April 10, 2007   May 15, 2024
             
8,470,296   Improved intracorporeal medicaments for high energy photodynamic treatment of disease   June 25, 2013   July 28, 2022
             
8,530,675   Process for the synthesis of rose bengal and related xanthenes   September 10, 2013   April 21, 2031

 

9,107,887   Combination therapy for cancer   August 15, 2015   March 9, 2032
       
9,273,022   Process for the synthesis of rose bengal and related xanthenes   March 1, 2016   September 17, 2030
       
9,422,260   Process for the synthesis of rose bengal and related xanthenes   August 23, 2016   September 26, 2030
             
9,808,524   Combination of local and systematic immunomodulative therapies for melanoma and liver cancer   November 7, 2017   March 9, 2032
             
9,839,688   Combination of rose bengal and systemic immunomodulative therapies for enhanced treatment of cancer   December 12, 2017   March 9, 2032
             
10,130,658   Method of ex vivo enhancement of immune cell activity for cancer immunotherapy with a small molecule ablative compound   November 20, 2018   December 18, 2035
             
10,471,144   Combination of local rose bengal and systemic immunomodulative therapies for enhanced treatment of cancer   November 12, 2019   November 12 2034

 

3

 

 

International Patents

 

The Indian Patent Office granted the Company’s patent application on May 29, 2020 for the combination of investigational autolytic cancer immunotherapy PV-10 and systemic immunomodulatory therapy, such as immune checkpoint blockade. Pfizer, Inc. is a co-assignee on this patent.

 

The Japan Patent Office granted the Company’s patent application on October 5, 2020 for ex vivo enhancement of immune cell activity for cancer immunotherapy with small molecule ablative compound. H. Lee Moffitt Cancer Center is a co-assignee on this patent.

 

PV-10 Product Pipeline

 

PV-10 is an injectable pharmaceutical formulation of RBD and registration study-ready investigational drug product (“PV-10 DP”). Multiple lots of PV-10 DP have surpassed multi-year stability testing, respectively. PV-10 DP is shipped, stored, and used at room temperature. Provectus has developed two clinical-stage formulations of PV-10: an IL administration for oncology (10% RBD) for the treatment of cancers of the skin and cancers of the liver, and topical (“top.”) application for dermatology (0.01% RBD) for the treatment of inflammatory dermatoses (psoriasis, atopic dermatitis, and actinic keratosis). A third formulation is under development for a currently proprietary disease area. Research into new routes of RBD administration and formulations of PV-10 is ongoing, including PO, intranasal (“IN”), top., and/or intravenous (“IV”) for hematology, oncology, virology, microbiology, and/or ophthalmology.

 

2020 Activity

 

Data from the Company’s clinical trial of PV-10 as a single-agent and in combination with immune checkpoint blockade for the treatment of primary or metastatic tumors of the liver (NCT00986661) was uploaded to the SIR 2020 ePoster Gallery of the canceled Society of Interventional Radiology (“SIR”) 2020 Annual Scientific Meeting, held March 28-April 2, 2020 in Seattle, Washington: “Oncolytic immunotherapy of hepatic tumors with intralesional rose bengal disodium.”

 

Data from ongoing preclinical study of PV-10 was presented at the American Association for Cancer Research (“AACR”) 2020 Virtual Annual Meeting II, held online June 22-24, 2020: “Association of heat shock proteins as chaperone for STING: A potential link in a key immune activation mechanism revealed by the novel anti-cancer agent PV-10.”

 

Updated data from the first cohort of the Company’s autolytic cancer immunotherapy PV-10 were published as an abstract as part of the American Society of Clinical Oncology (“ASCO”) 2020 Virtual Scientific Program, held online May 29-31, 2020: “Cohort 1 results of a phase I study of autolytic immunotherapy of metastatic neuroendocrine neoplasms using intralesional rose bengal disodium.”

 

Updated data from the Company’s expansion cohort of patients with uveal melanoma metastatic to the liver (“mUM”) in its Phase 1 cancers of the liver “basket study” of PV-10 were presented at ASCO: “Percutaneous hepatic injection of rose bengal disodium (PV-10) in metastatic uveal melanoma.”

 

The Company expanded its sponsored research program with Aru Narendran, MD, PhD, Professor, Departments of Pediatrics, Oncology, Biochemistry & Molecular Biology, and Physiology & Pharmacology at the Cumming School of Medicine of the University of Calgary in Calgary, Alberta, Canada. Under ongoing collaboration with Provectus, the Narendran research team has produced preliminary findings that show oral dosing of RBD is effective and well tolerated in an in vivo pediatric leukemia murine model. Data from this work are currently being prepared for publication. As part of the sponsored research expansion, the Narendran team would investigate oral dosing of RBD in in vivo murine models for the treatment of refractory adult solid tumors that are high-risk phenotypes and have high metastatic potential. These cancer types will include head and neck, breast, pancreatic, liver, and colorectal.

 

The Company initiated a new sponsored research program with Michio Kurosu, PhD, Professor, Department of Pharmaceutical Sciences at the College of Pharmacy of the University of Tennessee Health Science Center (“UTHSC”) in Memphis, Tennessee to investigate RBD targeting of multi-drug resistant (“MDR”) bacteria. Dr. Kurosu’s team would undertake in vitro studies on the spectrum of RBD activity against drug-susceptible and drug-resistant bacterial strains, synergistic activity of combinations of RBD and FDA-approved antibiotics for Gram-negative bacteria, the mutation frequency of RBD against bacterial strains, measuring spontaneous bacterial mutations for RBD and these combinations, and gene analyses of mutant bacterial strains to understand resistance mechanisms.

 

4

 

 

Two-year landmark survival, response, and safety data from the Company’s Phase 1b/2 study of PV-10 in combination with KEYTRUDA (pembrolizumab) for the treatment of advanced cutaneous melanoma in patients naive to immune checkpoint blockade (CB) was presented at the European Society for Medical Oncology (“ESMO”) Virtual Congress 2020, held online from September 19-21, 2020: “A phase 1b study of rose bengal disodium and anti-PD-1 in metastatic cutaneous melanoma: results in patients naïve to immune checkpoint blockade.”

 

Preliminary response, safety, and immune correlative data from the Company’s Phase 1b/2 study of PV-10 in combination with KEYTRUDA for the treatment of advanced cutaneous melanoma in patients refractory to immune checkpoint blockade was also presented at ESMO: “A phase 1b study of rose bengal disodium and anti-PD-1 in metastatic cutaneous melanoma: initial results in patients refractory to checkpoint blockade.”

 

In October, the Company announced completion of enrollment of 12 patients into Provectus’ Phase 1 study of PV-10 for the treatment of symptomatic mNET refractory to somatostatin analogs (“SSAs”) and peptide receptor radionuclide therapy (“PRRT”).

 

Non-clinical data from ongoing research on PV-10 as a single-agent and in combination with gemcitabine chemotherapy for the treatment of pancreatic cancer at the Society for Immunotherapy of Cancer’s (“SITC”) 35th Anniversary Annual Meeting & Pre-Conference Programs (“SITC 2020”), held online from November 9-14, 2020: “Intralesional injection of rose bengal augments the efficacy of gemcitabine chemotherapy against pancreatic tumors.”

 

Updated preliminary patient response, safety, and immune correlative data, as well as new preliminary PV-10-treated lesion response data, from the Company’s ongoing Phase 1b/2 study of PV-10 in combination with KEYTRUDA for the treatment of advanced cutaneous melanoma in patients refractory to CB was presented at Melanoma Bridge 2020, held online from December 3-5, 2020. The oral presentation, entitled “Response for combination of PV-10 autolytic immunotherapy and immune checkpoint blockade in checkpoint-refractory patients,” was presented by Dr. Jonathan Zager, Chief Academic Officer at Moffitt Cancer Center, and a surgical oncologist and Senior Member in Moffitt’s Departments of Cutaneous Oncology and Sarcoma.

 

Competition

 

In general, the pharmaceutical and biotechnology industries are competitive, characterized by steady and sometimes disruptive advances in products and technology. A number of companies have developed and continue to develop products that address the areas we have targeted. Some of these companies are pharmaceutical companies and biotechnology companies that are international in scope and very large in size, while others are small companies that have been successful in one or more areas we are targeting. Existing or future pharmaceutical, device, or other competitors may develop products that accomplish similar functions to our technologies in ways that may be less expensive, receive faster regulatory approval, or receive greater market acceptance than our products. Many of our competitors have been in existence longer than we have, have greater capital resources, broader internal structure for research, development, manufacturing and marketing, and may be further along in their respective product cycles.

 

5

 

 

Federal Regulation of Therapeutic Products

 

All of the prescription drug candidates we currently contemplate developing will require approval by the FDA prior to sales within the U.S. and by comparable international governmental healthcare regulatory agencies prior to sale outside the U.S. The FDA and comparable international agencies impose substantial requirements on the manufacturing and marketing of pharmaceutical products. These agencies and other entities regulate, among other things, research and development activities and the testing, manufacturing, quality control, safety and effectiveness claims, labeling, storage, record keeping, approval, advertising, and promotion of our prescription drug candidates. While we attempt to minimize and avoid significant regulatory bars when formulating our products, some degree of regulation from these regulatory agencies is unavoidable.

 

The regulatory process required by the FDA, through which our prescription drug candidates must successfully pass before they may be marketed in the U.S., generally involves pre-clinical laboratory and animal testing, submission of an application that must become effective before clinical trials may begin, adequate and well-controlled human clinical trials to establish the safety and efficacy of the product for its intended indication, and FDA approval to market a given product for a given indication after the appropriate application has been filed. For pharmaceutical products, pre-clinical tests include laboratory evaluation of the product, its chemistry, formulation and stability, as well as in vitro and animal studies to assess the potential safety and efficacy of the product. We will require sponsored work to be conducted in compliance with pertinent local and international regulatory requirements, including those providing for Institutional Review Board approval, national governing agency approval, and patient informed consent, using protocols consistent with ethical principles stated in the Declaration of Helsinki and other internationally recognized standards and delineated by ICH Good Clinical Practice (“GCP”) standards.

 

If the FDA is satisfied with the results and data from pre-clinical tests, it will authorize human clinical trials. Human clinical trials traditionally are conducted in three sequential phases which may overlap. Each of the three phases involves testing and study of specific aspects of the effects of the investigational product on human subjects, including testing for safety, dosage tolerance, side effects, absorption, metabolism, distribution, excretion, and clinical efficacy.

 

Phase 1 clinical trials include the initial introduction of an investigational new drug into humans, or via a new route of administration or new organ system if previously investigated in humans. These studies are closely monitored and may be conducted in patients but may also be conducted in healthy volunteer subjects. These studies are designed to determine the metabolic and pharmacologic actions of the drug in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. While the FDA can cause us to end clinical trials at any phase due to safety concerns, Phase 1 clinical trials are primarily concerned with safety issues. We also attempt to obtain sufficient information about the drug candidate’s pharmacokinetics and pharmacological effects during Phase 1 clinical trials to permit the design of scientifically valid, Phase 2 studies.

 

Phase 1 studies also evaluate drug metabolism, structure-activity relationships, and the mechanism of action in humans. These studies also determine which investigational drugs are used as research tools to explore biological phenomena or disease processes. The total number of subjects included in Phase 1 studies varies with the drug but is generally in the range of 10 to 80.

 

Phase 2 clinical trials include early controlled clinical studies conducted to obtain preliminary data on the effectiveness of the drug for a particular indication or indications in patients with the disease or condition. This phase of testing also helps determine the common short-term side effects and risks associated with the drug. Phase 2 studies are often randomized controlled studies that are closely monitored and conducted in a relatively small number of patients, usually involving up to several hundred people.

 

Phase 3 studies are expanded controlled and uncontrolled trials. They are performed after preliminary evidence suggesting effectiveness of the drug has been obtained in Phase 2 and are intended to gather definitive information about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug. Phase 3 studies also provide an adequate basis for extrapolating the results to the general population and transmitting that information in the physician labeling. Phase 3 studies usually include several hundred to several thousand people.

 

We have established a core clinical development team and have been working with external and FDA-experienced consultants to assist us in developing product-specific development and approval strategies, preparing the required submittals, guiding us through the regulatory process, and providing input into the design and site selection of human clinical studies.

 

6

 

 

The testing and approval process requires substantial time, effort, and financial resources, and we may not obtain FDA approval on a timely basis, if at all. Success in preclinical or early-stage clinical trials does not assure success in later-stage clinical trials. The FDA or research institution conducting the trials may suspend clinical trials or may not permit trials to advance from one phase to another at any time for various reasons, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Once issued, the FDA may withdraw a prescription drug approval if we do not comply with pertinent regulatory requirements and standards or if problems are identified after the product reaches the market. If the FDA grants approval of a prescription drug candidate, the approval may impose limitations, including limits on the indicated uses for which we may market a drug product. In addition, the FDA may require additional testing and surveillance programs to monitor the safety and/or effectiveness of approved drug products that have been commercialized, and the agency has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs. Further, later discovery of previously unknown problems with a drug product may result in restrictions on the product, including withdrawal from the market.

 

Marketing our prescription drug candidates abroad will require similar regulatory approvals by equivalent national authorities and is subject to similar risks. To expedite development, we may pursue some or all of our initial clinical testing and approval activities outside the U.S., and in particular in those countries where our prescription drug candidates may have substantial medical and commercial relevance. In some such cases, any resulting drug products may be brought to the U.S. after substantial offshore experience is gained. Accordingly, we intend to pursue any such development in a manner consistent with U.S. and ICH standards so that the resultant development data is maximally applicable for potential global approval.

 

Board of Director Change

 

On July 11, 2020, the Company announced that Jan Koe had resigned from the Board of Directors (the “Board”). His resignation was not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Koe’s resignation was contemplated by the Amended and Restated Definitive Financing Commitment Term Sheet effective as of March 19, 2017, entered into between the Company and a group of the Company’s stockholders (the “PRH Group”), which set forth the terms on which the PRH Group would provide financing to the Company (the “2017 Term Sheet”).

 

On July 20, 2020, the Company added Webster Bailey to fill this vacant spot on the Board.

 

Human Capital Resources

 

We have two full-time employees. We also engage independent contractors, who currently serve as COO, director of clinical operations, senior scientist, clinical research associates, project manager, information technology manager, controller, patient advocacy manager, and database manager.

 

We believe the Company’s success depends on its ability to attract, develop and retain key personnel. The skills, experience and industry knowledge of key employees and contractors significantly benefit our operations and performance. The Company’s Board of Directors and management oversee various employee and contractor initiatives.

 

Employee health and safety in the workplace is one of the Company’s core values. The COVID-19 pandemic has underscored for us the importance of keeping our employees and contractors safe and healthy. In response to the pandemic, the Company has taken actions aligned with the World Health Organization and the Centers for Disease Control and Prevention to protect its workforce so they can more safely and effectively perform their work.

 

Available Information

 

Our website is located at www.provectusbio.com. We make available free of charge through this website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Reference to our website does not constitute incorporation by reference of the information contained on the site and should not be considered part of this document.

 

The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC as we do. The website is http://www.sec.gov.

 

7

 

 

ITEM 1A. RISK FACTORS.

 

Our business and its future performance may be affected by various factors, the most significant of which are discussed below.

 

We are a clinical-stage drug company, have no prescription drug products approved for commercial sale, have incurred substantial losses, and expect to incur substantial losses and negative operating cash flow for the foreseeable future.

 

We are a clinical-stage drug company that has no prescription drug products approved for commercial sale. We have never generated any substantial revenues and may never achieve substantial revenues or profitability. As of December 31, 2020, we have incurred net losses of approximately $240 million in the aggregate since inception in January 2002. We expect to incur substantial losses and negative operating cash flow for the foreseeable future. We may never achieve or maintain profitability, even if we succeed in developing and commercializing one or more of our prescription drug candidates. We also expect to continue to incur significant operating expenditures and anticipate that our operating and capital expenses may increase substantially in the foreseeable future as we continue to develop and seek regulatory approval for our prescription drug candidates PV-10 and PH-10, implement additional internal systems and infrastructure, and hire additional personnel.

 

We also expect to experience negative operating cash flow for the foreseeable future as we fund our operating losses and any future capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.

 

We need additional capital to conduct our operations and commercialize and/or further develop our prescription drug candidates in 2021 and beyond, and our ability to obtain the necessary funding is uncertain.

 

We need additional capital in 2021 and beyond to continue developing and seeking to commercialize our drug product candidates. We intend to continue with the development of PV-10 and PH-10 on the basis of historical, ongoing, and prospective clinical study and/mechanism, of action results.

 

We have based our estimate of capital needs on assumptions that may prove to be wrong, and we cannot assure you that estimates and assumptions will remain unchanged. On December 31, 2019, our Board approved a Definitive Financing Term Sheet (the “2020 Term Sheet”), which set forth the terms under which we will use our best efforts to arrange for financing of a maximum of $20,000,000 (the “2020 Financing”). We intend to acquire additional funding through the 2020 Financing. We may also seek capital from public or private equity or debt financings or other financing sources that may be available. As of December 31, 2020, we have raised $3,325,000 through the 2020 Financing.

 

Such additional financing may not be available on acceptable terms, or at all. As discussed in more detail below, additional equity financing could result in significant dilution to stockholders. Further, in the event that additional funds are obtained through licensing or other arrangements, these arrangements may require us to relinquish rights to some of our products, product candidates, and technologies that we would otherwise seek to develop and commercialize ourselves. If sufficient capital is not available, we may be required to delay, reduce the scope of, or eliminate one or more of our programs, any of which could have a material adverse effect on our business and may impair the value of our patents and other intangible assets.

 

There is substantial doubt as to our ability to continue as a going concern.

 

Our cash and cash equivalents were $97,231 at December 31, 2020, compared with $590,706 at December 31, 2019. We continue to incur significant operating losses and management expects that significant on-going operating expenditures will be necessary to successfully implement our business plan and develop and market our products. These circumstances raise substantial doubt about our ability to continue as a going concern for a period of one year from the date that the consolidated financial statements included elsewhere in this Annual Report on Form 10-K are issued. Implementation of our plans and our ability to continue as a going concern will depend upon our ability to develop PV-10 and PH-10, and to raise additional capital.

 

8

 

 

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

 

Our investigational drug product candidates are at an early to mid-stage of development and may never obtain U.S. or international regulatory approvals required for us to commercialize our investigational drug product candidates.

 

We will need approval of the FDA to commercialize our investigational drug product candidates in the U.S. and approvals from FDA-equivalent regulatory authorities in international jurisdictions to commercialize our investigational drug product candidates there.

 

We are continuing to pursue clinical development of our most advanced drug product candidates, PV-10 and PH-10, for use as treatments for specific disease indications. The continued and further development of these drug product candidates will require significant additional research, formulation and manufacturing development, and pre-clinical and extensive clinical testing prior to their regulatory approval and commercialization. Pre-clinical and clinical studies of our drug product candidates may not demonstrate the safety and efficacy necessary to obtain regulatory approvals. Pharmaceutical and biotechnology companies have suffered significant setbacks in advanced clinical trials, even after experiencing promising results in earlier trials. Pharmaceutical products that appear to be promising at early stages of development may not reach the market or be marketed successfully for a number of reasons, including a product may be found to be ineffective or have harmful side effects during subsequent pre-clinical testing or clinical trials, a product may fail to receive necessary regulatory clearance, a product may be too difficult to manufacture on a large scale, a product may be too expensive to manufacture or market, a product may not achieve broad market acceptance, others may hold proprietary rights that will prevent a product from being marketed, and others may market equivalent or superior products.

 

Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing. We cannot predict whether our research and clinical approaches will result in drugs that the FDA considers safe for humans and effective for indicated uses. The FDA has substantial discretion in the drug approval process and may require us to conduct additional nonclinical and clinical testing or to perform post-marketing studies. The approval process may also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals may delay commercialization of, and our ability to derive revenues from, our prescription drug candidates, impose costly procedures on us, and diminish any competitive advantages that we may otherwise enjoy.

 

Our research and product development efforts may not be successfully completed and may not result in any successfully commercialized drug products. Further, after commercial introduction of a new drug product, discovery of problems through adverse event reporting could result in restrictions on the product, including withdrawal from the market and, in certain cases, civil or criminal penalties.

 

Even if we comply with all FDA requests, we cannot be sure that we will ever obtain regulatory clearance for any of our drug product candidates. Failure to obtain FDA approval of any of our prescription drug candidates will severely undermine our business by reducing our number of salable drug products and, therefore, corresponding revenues.

 

In international jurisdictions, we must receive approval from the appropriate regulatory authorities before we can commercialize our prescription drug candidates. International regulatory approval processes generally include all of the risks associated with the FDA approval procedures described above.

 

9

 

 

Before obtaining regulatory approval for the sale of our drug product candidates, including PV-10 and PH-10, we must conduct additional clinical trials to demonstrate the safety and efficacy of our drug product candidates. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to timing and outcome. Competition in clinical development has made it difficult to enroll patients at an acceptable rate in some of our clinical trials. Advances in medical technology could make our prescription drug candidates obsolete prior to completion of clinical testing. A failure of one or more of our clinical trials may occur at any stage of testing. The outcome of pre-clinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, pre-clinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy characteristics despite having progressed satisfactorily through pre-clinical studies and initial clinical testing. A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience, have suffered significant setbacks in Phase 3 clinical development, even after seeing promising results in earlier clinical trials.

 

Our research and development expenses may increase in connection with expanding clinical trials of our product candidates in existing indications and undertaking clinical trials of our product candidates in new indications. Because successful development of our drug product candidates is uncertain, we are unable to estimate the actual funds required to complete research and development and commercialize our products under development.

 

Negative or inconclusive results of our future clinical trials of PV-10 and PH-10, or any other clinical trial we conduct, could cause the FDA to require that we repeat or conduct additional clinical studies. Despite the results reported in earlier clinical trials for PV-10 and PH-10, we do not know whether any clinical trials we may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market our product candidates. If later stage clinical trials do not produce favorable results, our ability to obtain regulatory approval for our product candidates, may be adversely impacted.

 

Delays in clinical trials are common and have many causes, and any delay could result in increased costs to us and jeopardize or delay our ability to obtain regulatory approval.

 

Our planned or ongoing clinical trials may not begin on time, have an effective design, enroll a sufficient number of subjects, or be completed on schedule, if at all. Events which may result in delays or unsuccessful completion of clinical trials, including our future clinical trials, include inability to raise funding, initiate or continue a trial, delays in obtaining regulatory approval to commence a trial, delays in reaching agreement with the FDA or other regulatory authorities on final trial design, imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities, delays in reaching agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites, delays in obtaining required institutional review board (“IRB”) approval at each site, delays in recruiting suitable patients to participate in a trial, delays in having subjects complete participation in a trial or return for post-treatment follow-up, delays caused by subjects dropping out of a trial, delays caused by clinical sites dropping out of a trial, time required to add new clinical sites or to obtain regulatory approval and open sites in geographic regions beyond the sites initially planned, and delays by our contract manufacturers to produce and deliver sufficient supply of clinical trial materials.

 

In addition, we may experience a number of unforeseen events during clinical trials for our prescription drug candidates, including PV-10 and PH-10, that could delay or prevent the commencement and/or completion of our clinical trials, including regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site, the clinical study protocol may require one or more amendments delaying study completion, clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us to conduct additional clinical trials or abandon product development programs, the number of subjects required for clinical trials of our product candidates may be larger than we anticipate, subjects may drop out of these clinical trials at a higher rate than we anticipate and enrollment in these clinical trials may be significantly slower than we anticipated requiring us to expand the geographic scope of enrollment of patients, clinical investigators or study subjects may fail to comply with clinical study protocols, trial conduct and data analysis errors may occur, including, but not limited to, data entry and/or processing errors, our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, we might have to suspend or terminate clinical trials of our prescription drug candidates for various reasons, including a finding that the subjects are being exposed to unacceptable health risks, regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements, the cost of clinical trials of our prescription drug candidates may be greater than we anticipate, the supply or quality of our clinical trial materials or other materials necessary to conduct clinical trials of our prescription drug candidates may be insufficient or inadequate, and our prescription drug candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators to suspend or terminate the trials.

 

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Moreover, we or the FDA may suspend our clinical trials at any time if it appears we are exposing participants to unacceptable health risks or if the FDA finds deficiencies in our submissions or the conduct of these trials. If initiation or completion of any of our clinical trials for our product candidates, are delayed for any of the above reasons or other reasons, our development costs may increase, the approval process could be delayed, any periods during which we may have the exclusive right to commercialize our prescription drug candidates may be reduced and our competitors may bring drug products to market before us. Any of these events could impair our ability to generate revenues from drug product sales and impair our ability to generate regulatory and commercialization milestones and royalties, all of which could have a material adverse effect on our business.

 

The results of our clinical trials may not support acceptable label claims concerning our prescription drug candidates.

 

Even if our clinical trials are completed as planned, we cannot be certain that their results will support acceptable label claims concerning our drug product candidates. Success in pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will replicate the results of prior clinical trials and pre-clinical testing. The clinical trial process may fail to demonstrate that our prescription drug candidates are safe for humans or effective for indicated uses.

 

This failure could cause us to abandon a prescription drug candidate and may delay development of other prescription drug candidates. Any delay in, or termination of, our clinical trials will delay our ability to commercialize our prescription drug candidates and generate product revenues. In addition, we anticipate that our clinical trials will involve only a small patient population. Accordingly, the results of such trials may not be indicative of future results over a larger patient population.

 

Physicians and patients may not accept and use our prescription drug candidates.

 

Even if the FDA approves our drug product candidates, physicians and patients may not accept and use them. Acceptance and use of our drug products will depend upon a number of factors including perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of our drug products, availability of reimbursement for our drug products from government or other healthcare payers, and effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.

 

Because we expect sales or licensure of our prescription drug candidates, if approved, to generate substantially all of our revenues for the foreseeable future, the failure of any of these drugs to find market acceptance would harm our business and could require us to seek additional financing.

 

We have no sales, marketing or distribution capabilities for our prescription drug candidates.

 

We currently have no sales, marketing or distribution capabilities. Our future success depends, in part, on our ability to enter into and maintain collaborative relationships, the collaborator’s strategic interest in the prescription drug products under development and such collaborator’s ability to successfully market and sell any such drug products. There can be no assurance that we will be able to establish or maintain relationships with third party collaborators or develop in-house sales and distribution capabilities. To the extent that we depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties, and there can be no assurance that such efforts will be successful. In addition, there can also be no assurance that we will be able to market and sell our prescription drug candidates in the U.S. or internationally.

 

Competition in the prescription pharmaceutical and biotechnology industries is intense.

 

Other pharmaceutical and biotechnology companies and research organizations currently engage in or have in the past engaged in research efforts related to treatment of cancer and dermatological conditions, which may compete with our clinical trials for patients and investigator resources, cause lower enrollment than anticipated, and could lead to the development of drug products or treatment therapies that could compete directly with our drug product candidates that we are seeking to develop and market.

 

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Many companies are also developing novel therapies to treat cancer and dermatological conditions and, in this regard, are our competitors. Many of the pharmaceutical companies developing and marketing these competing products have greater financial resources and expertise than we do in research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals, and marketing.

 

Smaller companies may also prove to be competitors, particularly through collaborative arrangements with larger and more established companies that may compete with our efforts to establish similar collaborative arrangements. Academic institutions, government agencies, and other public and private research organizations may also conduct research, seek patent protection, and establish collaborative arrangements for research, clinical development, and marketing of prescription drug candidates similar to ours. These companies and institutions compete with us in recruiting and retaining qualified scientific and management personnel as well as in acquiring technologies complementary to our drug development programs.

 

In addition to the above factors, we expect to face competition in product efficacy and safety, the timing and scope of regulatory consents, availability of resources, reimbursement coverage, price, and patent position, including potentially dominant patent positions of others.

 

Since our prescription drug candidates PV-10 and PH-10 have not yet been approved by the FDA or introduced to the marketplace, we cannot estimate what competition these prescription drug candidates might face when they are finally introduced, if at all. We cannot assure you that these prescription drug candidates will not face significant competition for other approved drug products, investigational drug products, and generic equivalents.

 

If we are unable to secure or enforce patent rights, trademarks, trade secrets or other IP, our business could be harmed.

 

We may not be successful in securing or maintaining proprietary patent protection for our prescription drug candidates and technologies we develop or license. In addition, our competitors may develop prescription drug candidates similar to ours using methods and technologies that are beyond the scope of our IP protection, which could reduce our anticipated sales. While some of our drug product candidates have proprietary patent protection, a challenge to these patents can subject us to expensive litigation. Litigation concerning patents, other forms of IP, and proprietary technology is becoming more widespread and can be protracted and expensive and can distract management and other personnel from performing product development duties.

 

We also rely upon trade secrets, unpatented proprietary know-how, and continuing technological innovation to develop a competitive position. We cannot assure you that others will not independently develop substantially equivalent proprietary technology and techniques or otherwise gain access to our trade secrets and technology, or that we can adequately protect our trade secrets and technology.

 

If we are unable to secure or enforce patent rights, trademarks, trade secrets, or other IP, our business, financial condition, results of operations and cash flows could be materially adversely affected. If we infringe on the IP of others, our business could be harmed.

 

We could be sued for infringing patents and other IP that purportedly cover prescription drug candidates and/or methods of using such prescription drug candidates held by persons other than us. Litigation arising from an alleged infringement could result in removal from the market, or a substantial delay in, or prevention of, the introduction of our prescription drug candidates, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

 

If we do not update and enhance our technologies, they will become obsolete.

 

The pharmaceutical market is characterized by technological change, and our future success will depend on our ability to conduct successful research in our fields of expertise, discover new technologies as a result of that research, develop products based on our technologies, and commercialize those products. While we believe that our current technology is adequate for our present needs, if we fail to stay at the forefront of technological development, we will be unable to compete effectively. Our competitors may use greater resources to develop new pharmaceutical technologies and to commercialize products based on those technologies. Accordingly, our technologies may be rendered obsolete by advances in existing technologies or the development of different technologies by one or more of our current or future competitors.

 

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If we lose any of our key personnel, we may be unable to successfully execute our business plan.

 

Our business is presently managed by key employees, independent contractors, and Board members: (i) Bruce Horowitz, our COO, who is an independent contractor, (ii) Heather Raines, CPA, our CFO, (iii) Dominic Rodrigues, who is vice chair of the Board, and (iv) Eric Wachter, Ph.D., our Chief Technology Officer (“CTO”).

 

In order to successfully execute our business plan, our management and Board must succeed in all of the following critical areas: researching diseases and possible therapies in the areas of oncology and dermatology, developing our prescription drugs candidates, marketing and selling developed prescription drug candidates, obtaining additional capital to finance research and development production, and marketing of our drug products, and managing our business as it grows.

 

Disruption resulting from management transition may have a detrimental impact on our ability to implement our strategy. The reduction in role and/or loss of key employees, contractors, and/or Board members could have a material adverse effect on our operations, and limit or constrain our ability to execute our business plan.

 

Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management.

 

Our certificate of incorporation and bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Among other things, these provisions will (i) permit our Board to issue up to 25,000,000 shares of preferred stock which can be created and issued by the Board without prior stockholder approval, with rights senior to those of the common stock, (ii) provide that all vacancies on our Board, including as a result of newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum, (iii) require that any action to be taken by our stockholders must be affected at a duly called annual or special meeting of stockholders and not be taken by written consent, (iv) provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder’s notice, (v) not provide for cumulative voting rights, thereby allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, and (vi) provide that special meetings of our stockholders may be called only by the Board or by such person or persons requested by a majority of the Board to call such meetings.

 

These and other provisions in our certificate of incorporation, bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our Board or initiate actions that are opposed by our then-current Board, including delaying or impeding a merger, tender offer, or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our Board could cause the market price of our common stock to decline.

 

Our stock price is below $5.00 per share and is treated as a “penny stock,” which places restrictions on broker-dealers recommending the stock for purchase.

 

Our common stock is defined as “penny stock” under the Exchange Act and its rules. The SEC has adopted regulations that define “penny stock” to include common stock that has a market price of less than $5.00 per share, subject to certain exceptions. These rules include the following requirements: (i) broker-dealers must deliver, prior to the transaction, a disclosure schedule prepared by the SEC relating to the penny stock market, (ii) broker-dealers must disclose the commissions payable to the broker-dealer and its registered representative, (iii) broker-dealers must disclose current quotations for the securities, and (iv) a broker-dealer must furnish its customers with monthly statements disclosing recent price information for all penny stocks held in the customer’s account and information on the limited market in penny stocks.

 

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Additional sales practice requirements are imposed on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and must have received the purchaser’s written consent to the transaction prior to sale. If our common stock remains subject to these penny stock rules these disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for our common stock. As a result, fewer broker-dealers may be willing to make a market in our stock, which could affect a shareholder’s ability to sell their shares.

 

Future sales by our stockholders may adversely affect our stock price and our ability to raise funds in new stock offerings.

 

Sales of our common stock in the public market following any prospective offering could lower the market price of our common stock. Sales may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that our management deems acceptable.

 

It is our general policy to retain any earnings for use in our operation.

 

We have never declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if any, for use in our business and therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future, although we intend to issue shares of common stock in satisfaction of the dividend payments due on our Series B Preferred Stock.

 

In the event of the sale, liquidation or dissolution of the Company or any of our assets, holders of shares of a yet-to-be designated Series D Preferred Stock will be entitled to a preference of a multiple of their investment amount, which will reduce the proceeds to be received by holders of our common stock.

 

In connection with the 2017 Financing and 2020 Financing, we have issued convertible notes that will become convertible into shares of a yet-to-be designated Series D Preferred Stock. The Series D Preferred Stock will have a first priority right to receive proceeds from the sale, liquidation or dissolution of us or any of our assets (each, a “Company Event”). If a Company Event occurs within two (2) years of the date of issuance of the Series D Preferred Stock (the “Date of Issuance”), the holders of Series D Preferred Stock will receive a preference of four times (4x) their respective investment amount. If a Company Event occurs after the second (2nd) anniversary of the Date of Issuance, the holders of the Series D Preferred Stock will receive a preference of six times (6x) their respective investment amount. As a result, upon the occurrence of a Company Event, the holders of Series D Preferred Stock would have the right to receive proceeds from any such transaction before our common stockholders. The payment of this preference could result in our common stockholders not receiving any consideration in connection with a Company Event.

 

Effects of SARS-CoV-2.

 

SARS-CoV-2 was reportedly first identified in late-2019 and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the SARS-CoV-2 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 December 31, 2020.

 

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

 

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ITEM 1B. UNRESOLVED STAFF COMMENTS.

 

None.

 

ITEM 2. PROPERTIES.

 

We currently lease approximately 4,500 square feet of space for operations in Century Park, Knoxville, TN. Our monthly rental charge for these offices is approximately $7,944 per month. The lease is for five years and expires on June 30, 2022.

 

Item 3. Legal Proceedings.

 

The information required by this item is incorporated by reference from Part II, Item 8. Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 13 – Litigation.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

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PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Market Information and Holders

 

Our common stock trades on the OTCQB Marketplace under the symbol “PVCT”.

 

As of February 28, 2021, we had 827 active shareholders of record of our common stock.

 

Dividend Policy

 

We have never declared or paid any cash dividends on our common stock. We currently plan to retain future earnings, if any, to finance the growth and development of our business and do not anticipate paying any cash dividends in the foreseeable future. We may incur indebtedness in the future which may prohibit or effectively restrict the payment of dividends, although we have no current plans to do so. Any future determination to pay cash dividends will be at the discretion of our Board of Directors.

 

The holders of our outstanding Series B Preferred Stock are entitled to receive cumulative dividends at the rate per share of 8% per annum of the stated value per share, until the fifth anniversary of the date of issuance of the Series B Preferred Stock. The dividends become payable, at our option, in either cash, out of any funds legally available for such purpose, or in shares of common stock, (i) upon any conversion of the Series B Preferred Stock, (ii) on each such other date as our Board of Directors may determine, subject to written consent of the holders of Series B Preferred Stock holding a majority of the then issued and outstanding Series B Preferred Stock, (iii) upon our liquidation, dissolution or winding up, and (iv) upon occurrence of a fundamental transaction, including any merger or consolidation, sale of all or substantially all of our assets, exchange or conversion of all of our common stock by tender offer, exchange offer or reclassification, provided, however, that if Series B Preferred Stock is converted into shares of common stock at any time prior to the fifth anniversary of the date of issuance of the Series B Preferred Stock, the holder will receive a make-whole payment in an amount equal to all of the dividends that, but for the early conversion, would have otherwise accrued on the applicable shares of Series B Preferred Stock being converted for the period commencing on the conversion date and ending on the fifth anniversary of the date of issuance, less the amount of all prior dividends paid on such converted Series B Preferred Stock before the date of conversion. Make-whole payments are payable at our option in either cash, out of any funds legally available for such purpose, or in shares of common stock. With respect to any dividend payments and make-whole payments paid in shares of common stock, the number of shares of common stock to be issued to a holder of Series B Preferred Stock will be an amount equal to the quotient of (a) the amount of the dividend payable to such holder divided by (b) the conversion price then in effect.

 

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Recent Issuances of Unregistered Securities

 

During the year ended December 31, 2019, we issued 229,090 shares of common stock as incentive compensation with a value of $11,538.

 

During the year ended December 31, 2020, we issued 1,062,500 shares of common stock as incentive compensation with a value of $69,088.

 

During the year ended December 31, 2020, we issued 62,500 three-year immediately vested warrants to board members to purchase an aggregate of 62,500 shares of common stock with exercise price of $.28620 per share. The warrants had an aggregate grant date fair value of $1,372, which was recognized immediately within stock compensation in general and administrative expenses.

 

During the year ended December 31, 2020, pursuant to the Company’s 2017 Equity Compensation Plan (the “Compensation Plan”), we issued 2,425,000 five-year immediately vested stock options to a board member/officer to purchase an aggregate of 2,425,000 shares of common stock with an exercise price of $0.12 per share. The stock options had an aggregate grant date fair value of $62,880, which was recognized immediately within stock compensation in general and administrative expenses.

 

During the year ended December 31, 2020, pursuant to the Compensation Plan, we issued 100,000 five-year immediately vested stock options to a board member to purchase an aggregate of 100,000 shares of common stock with an exercise price of $0.2862 per share. The stock options had an aggregate grant date fair value of $1,414, which was recognized immediately within stock compensation in general and administrative expenses.

 

The issuances of the securities were exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(a)(2) and Rule 506 promulgated under Regulation D thereunder as transactions not involving a public offering.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

Information about the securities authorized for issuance under our equity compensation plans will be set forth under the heading “Equity Compensation Plan Information” in the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act, incorporated by reference in Part III, Item 12 of this Annual Report on Form 10-K.

 

ITEM 6. SELECTED FINANCIAL DATA.

 

Not applicable.

 

ITEM 7. 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 consolidated financial statements and notes thereto included in this Annual Report on Form 10-K. Historical results and percentage relationships set forth in the statement of operations, including trends which might appear, are not necessarily indicative of future operations.

 

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Overview

 

Provectus Biopharmaceuticals, Inc is a clinical-stage biotechnology company developing immunotherapy medicines based on an entire, wholly-owned, family of small molecules called halogenated xanthenes (“HXs”). The Company’s lead HX molecule is proprietary current Good Manufacturing Practice (“cGMP”) rose bengal disodium (“RBD”).

 

Recent Developments

 

2017 Financing

 

On March 23, 2017, the Company entered into the 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”).

 

As of December 31, 2020, the Company had received aggregate Loans, as defined below, of $20,067,000 in connection with the 2017 Financing.

 

The 2017 Financing is in the form of a secured convertible loan (the “1st Loan”) from the PRH Group or other investors in the 2017 Financing (the “1st Loan Investors”). The 1st Loan is evidenced by secured convertible promissory notes (individually a “2017 Note” and collectively, the “2017 Notes”) from the Company to the PRH Group or the 1st Loan Investors. In addition to the customary provisions, the 2017 Notes contains the following provisions:

 

  (i) It is secured by a first priority security interest on the Company’s IP,
     
  (ii) The 1st Loan bears interest at the rate of 8% per annum on the outstanding principal amount of the 2017 Notes that has been funded to the Company,
     
  (iii) The 1st Loan proceeds are held in one or more accounts (the “Escrow”) pending the funding of the tranches of the 2017 Financing pursuant to borrowing requests made by the Company,
     
  (iv) The 2017 Notes, including interest and principal, are due and payable in full on the earlier of: (i) on such date upon which the Company defaults under the 2017 Notes, (ii) upon a change of control of the Company, or (iii) dates ranging from May 31, 2021 to the 18-month anniversary of the funding of the Final Tranche. In the event there is a change of control of the Company’s Board as proposed by any person or group other than the 1st Loan Investors, the term of the 2017 Notes will be accelerated and all amounts due under the 2017 Notes will be immediately due and payable, plus interest at the rate of 8% per annum, plus a penalty in the amount equal to 10 times the outstanding principal amount of the 1st Loan that has been funded to the Company,
     
  (v) The outstanding principal amount and interest payable under the 1st Loan will become convertible at the sole discretion of the 1st Loan Investors into shares of the Company’s Series D Preferred Stock, a new series of preferred stock, that the Company’s Board may designate in the future, at a price per share equal to $0.2862, and
     
 

(vi)

 

Notwithstanding (v) above, the principal amount of the 2017 Notes and the interest payable under the 1st Loan will automatically convert into shares of the Company’s Series D Preferred Stock at a price per share equal to $0.2862 effective on the 18-month anniversary of the funding of the final tranche of the 2017 Financing subject to certain exceptions if the Company’s Board designates such series of preferred stock in the future.

 

Pursuant to the 2017 Term Sheet, the PRH Group concluded its best-efforts activity to arrange for a financing of $20,000,000, which amounts were provided in a number of tranches, between the first tranche on April 4, 2017 and the Final Tranche, on December 20, 2019. As a result, the 2017 Notes under the 1st Loan will convert into shares of Series D Preferred Stock (once designated) of the Company on or before June 20, 2021, which is the 18-month anniversary of the funding of the Final Tranche of the 2017 Financing, subject to certain exceptions.

 

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Upon conversion of the 2017 Notes, the 1st Loan Investors will release their first lien on the Company’s IP.

 

2020 Financing

 

On December 31, 2019, the Board approved a Definitive Financing Term Sheet (the “2020 Term Sheet”), which sets forth the terms under which the Company will use its best efforts to arrange for financing of a maximum of $20,000,000 (the “2020 Financing”).

 

As of December 31, 2020, the Company had received aggregate 2nd Loan, as defined below, of $3,325,000 in connection with the 2020 Financing.

 

Pursuant to the 2020 Term Sheet, the 2020 Notes (defined below) will convert into shares of the Company’s Series D Preferred Stock on or before June 20, 2021, subject to certain exceptions. As of December 31, 2020, and through the date of filing, the Series D Preferred Stock had not been designated by the Board.

 

The 2020 Term Sheet is similar to the 2017 Term Sheet. Subject to the terms and conditions of the 2020 Term Sheet, the Company will use its best efforts to arrange for the 2020 Financing, which amounts will be obtained in several tranches. The proceeds from the 2020 Financing will be used to fund the Company’s clinical development program, as currently constituted and envisioned, and to fund the Company’s general and administrative expenses.

 

The 2020 Financing will be in the form of a secured convertible loan (the “2nd Loan”) from the Investors (the “2nd Loan Investors”) that will be evidenced by convertible promissory notes (individually, a “2020 Note” and collectively, the “2020 Notes”) subordinate to the 2017 Notes in right of payment and to the security interests granted to holders of the 2017 Notes. In addition to customary provisions, the 2020 Notes contains the following provisions:

 

(i) It will be secured by a second priority security interest on the Company’s IP subordinate to the first priority security interest of the 2017 Notes;

 

(ii) The 2nd Loan will bear interest at the rate of eight percent (8%) per annum on the outstanding principal amount of the 2nd Loan that has been funded to the Company;

 

(iii) In the event there is a change of control of the Company’s Board, the term of the 2020 Notes will be accelerated and all amounts due under the 2020 Notes will be immediately due and payable, plus interest at the rate of eight percent (8%) per annum, plus a penalty in the amount equal to ten times (10x) the outstanding principal amount of the 2nd Loan that has been funded to the Company;

 

(iv) The outstanding principal amount and interest payable under the 2nd Loan will become convertible at the sole discretion of the 2nd Loan Investors into shares of the Company’s Series D Preferred Stock, a series of preferred stock to be designated by the Board, at a price per share equal to $2.8620; and

 

(v) Notwithstanding (iv) above, the principal amount of the 2020 Notes and the interest payable under the 2nd Loan will automatically convert into shares of the Company’s Series D Preferred Stock at a price per share equal to $2.8620 effective on June 20, 2021 subject to certain exceptions.

 

Upon conversion of the 2nd Loan, the 2nd Loan Investors will release their second lien on the IP. 2nd Loan Investors in the 2020 Financing will hold Series D Preferred Stock pari passu with the Series D Preferred Stock of 1st Loan Investors in the 2017 Financing.

 

The Series D Preferred Stock

 

As of December 31, 2020, and through the date of filing, the Series D Preferred Stock had not been designated by the Board. Per the terms of the 2017 Notes and 2020 Notes, if the Company has not designated the Series D Preferred Stock or if an insufficient number of Series D Preferred shares exist upon a conversion by a note holder, then the outstanding loans will continue to accrue interest at a rate of 8% per annum until which time the Company has designated a sufficient number of Series D Preferred shares.

 

19

 

 

The Series D Preferred Stock will have a first priority right to receive proceeds from the sale, liquidation or dissolution of the Company or any of the Company’s assets (each, a “Company Event”).

 

If a Company Event occurs within two (2) years of the date of issuance of the Series D Preferred Stock (the “Date of Issuance”), the holders of Series D Preferred Stock will receive a preference of four times (4x) their respective investment amount. If a Company Event occurs after the second (2nd) anniversary of the Date of Issuance, the holders of the Series D Preferred Stock will receive a preference of six times (6x) their respective investment amount.

 

The Series D Preferred Stock will be convertible at the option of the holders thereof into shares of the Company’s common stock based on a formula to achieve a one-for-ten conversion ratio. The Series D Preferred Stock will automatically convert into shares of the Company’s common stock upon the fifth (5th) anniversary of the Date of Issuance.

 

On an as-converted basis, the Series D Preferred Stock will carry the right to ten (10) votes per share. The Series D Preferred Stock will not have any dividend preference but will be entitled to receive, on a pari passu basis, dividends, if any, that are declared and paid on any other class of the Company’s capital stock. The holders of Series D Preferred Stock will not have anti-dilution protection.

 

Exercise of Warrants

 

In 2020 holders of 7,855,062 warrants to purchase the common stock of the Company at $0.0533 per share, have exercised these warrants. The Company has received proceeds in the aggregate amount of $418,675.

 

Components of Operating Results

 

Research and Development Expenses

 

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

 

  costs of conducting clinical trials, including amounts paid to clinical centers, clinical research organizations and consultants, among others;
  salaries and related expenses for personnel, including stock-based compensation expense;
  other outside service costs including cost of contract manufacturing;
  the costs of supplies and reagents;
  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.

 

20

 

 

Comparison of the Years Ended December 31, 2020 and 2019

 

Overview

 

Total operating expenses were $4,963,576 for the year ended December 31, 2020, a decrease of $1,336,120 or 21.2% compared to the year ended December 31, 2019. The decrease was driven by our continued transformation and process improvement efforts within the Company, along with slower recruitment and treatment in clinical trials due to the effects of SARS-CoV-2. Net loss for the year ended December 31, 2020 was $6,677,587, a decrease of $244,950 or 3.5% compared to the year ended December 31, 2019, which resulted from costs incurred in connection with our preclinical and clinical trial programs and general and administrative costs.

 

    For the Years Ended              
    December 31,              
    2020     2019     Increase/(Decrease)     % Change  
                         
Operating Expenses:                                
Research and development   $ 2,812,760     $ 4,002,014     $ (1,189,254 )     -29.7 %
General and administrative     2,150,816       2,297,682       (146,866 )     -6.4 %
Total Operating Expenses     4,963,576       6,299,696       (1,336,120 )     -21.2 %
                                 
Total Operating Loss     (4,963,576 )     (6,299,696 )     (1,336,120 )     21.2 %
Other Income/(Expense):                                
EIDL grant     3,000       -       3,000       0.0 %
Gain on settlement of lawsuits     -       675,000       (675,000 )     -100.0 %
Research and development tax credit     27,694       134,081       (106,387 )     -79.3 %
Investment and interest income     3,415       23,162       (19,747 )     -85.3 %
Interest expense     (1,748,120 )     (1,455,084 )     (293,036 )     20.1 %
Total Other Expense, Net     (1,714,011 )     (622,841 )     (1,091,170 )     175.2 %
                                 
Net Loss   $ (6,677,587 )   $ (6,922,537 )   $ (244,950 )     3.5 %

 

Research and Development

 

Research and development expenses were $2,812,760 for the year ended December 31, 2020, a decrease of $1,189,254 or 29.7% compared to the year ended December 31, 2019. The decrease was due to (i) lower clinical operations due to closure of Phase III study in early 2019 and 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) lower payroll and related taxes due to a lower negotiated employment agreement.

 

The following table summarizes our research and development expenses incurred during the year ended December 31, 2020 and 2019:

 

    For the Years Ended              
    December 31,              
    2020     2019     Increase/(Decrease)     % Change  
                         
Research and development:                                
Clinical trial and research expenses   $ 1,983,498     $ 2,661,530     $ (678,032 )     -25.5 %
Depreciation/amortization     236,754       679,767       (443,013 )     -65.2 %
Insurance     263,074       258,067       5,007       1.9 %
Payroll and taxes     264,983       329,532       (64,549 )     -19.6 %
Rent and utilities     64,451       73,118       (8,667 )     -11.9 %
Total research and development   $ 2,812,760     $ 4,002,014     $ (1,189,254 )     -29.7 %

 

21

 

 

General and Administrative

 

General and administrative expenses were $2,150,816 for the year ended December 31, 2020, a decrease of $146,866 or 6.4% compared to the year ended December 31, 2019. The decrease was due to (i) lower legal fees as we concluded the Company’s lawsuits against former accounting vendors and a former officer, (ii) lower payroll and related taxes due to a lower negotiated employment agreement, and (iii) lower professional fees, partially offset by (iv) increased stock awards to an employee, directors, and consultants.

 

The following table summarizes our general and administrative expenses incurred during the years ended December 31, 2020 and 2019:

 

    For the Years Ended              
    December 31,              
    2020     2019     Increase/(Decrease)     % Change  
                         
General and administrative:                                
Depreciation   $ 5,036     $ 5,445     $ (409 )     -7.5 %
Directors fees     383,065       385,000       (1,935 )     -0.5 %
Insurance     185,516       170,384       15,132       8.9 %
Legal and litigation     485,569       509,810       (24,241 )     -4.8 %
Other general and administrative cost     190,577       117,964       72,613       61.6 %
Payroll and taxes     168,448       305,074       (136,626 )     -44.8 %
Professional fees     698,577       765,654       (67,077 )     -8.8 %
Rent and utilities     32,755       37,525       (4,770 )     -12.7 %
Foreign currency translation     1,273       826       447       54.1 %
Total general and administrative   $ 2,150,816     $ 2,297,682     $ (146,866 )     -6.4 %

 

Other Income/(Expense)

 

Other income decreased by $798,134 from $832,243 for the year ended December 31, 2019 to $34,109 for the year ended December 31, 2020. During the year ended December 31, 2019, the matters with former accounting vendors Bible Harris Smith, PC (“BHS”) and RSM US LLP (“RSM”) were resolved pursuant to a settlement between these parties and the Company, the terms of which are confidential.

 

Interest expense increased by $293,036 from $1,455,084 for the year ended December 31, 2019 to $1,748,120 for the year ended December 31, 2020. The increase was due to the increased number of convertible notes payable relating to the 2020 Notes.

 

The following table summarizes our Other Income/(Expenses) incurred during the years ended December 31, 2020 and 2019:

 

    For the Years Ended              
    December 31,              
    2020     2019     Increase/(Decrease)     % Change  
                         
Other Income/(Expense):                                
EIDL grant     3,000       -       3,000       0.0 %
Gain on settlement of lawsuits     -       675,000       (675,000 )     -100.0 %
Research and development tax credit     27,694       134,081       (106,387 )     -79.3 %
Investment and interest income     3,415       23,162       (19,747 )     -85.3 %
Interest expense     (1,748,120 )     (1,455,084 )     (293,036 )     20.1 %
Total Other Expense     (1,714,011 )     (622,841 )     (1,091,170 )     175.2 %

 

Liquidity and Going Concern

 

Our cash and cash equivalents were $97,231 at December 31, 2020, compared with $590,706 at December 31, 2019. The consolidated financial statements and notes thereto included in this Annual Report on Form 10-K 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 $240,494,415 as of December 31, 2020. These conditions raise substantial doubt about our ability to continue as a going concern for a period of at least one year from the date that the financial statements included elsewhere in this Annual Report on Form 10-K 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.

 

22

 

 

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

 

Access to Capital

 

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

 

The primary business objective of management is to build the Company into a commercial-stage biotechnology company; however, we cannot assure you that management will be successful in implementing the Company’s business plan of developing, licensing, and/or commercializing our prescription drug candidates. Moreover, even if we are successful in improving our current cash flow position, we nonetheless plan to seek additional funds to meet our current and long-term requirements in 2021 and beyond. We anticipate that these funds will otherwise come from the proceeds of private placement transactions, including the 2020 Financing, the exercise of existing warrants and outstanding stock options, or public offerings of debt or equity securities. While we believe that we have a reasonable basis for our expectation that we will be able to raise additional funds, we cannot assure you that we will be able to complete additional financing in a timely manner. In addition, any such financing may result in significant dilution to stockholders.

 

During the years ended December 31, 2020 and 2019, our sources and uses of cash were as follows:

 

Net Cash Used in Operating Activities

 

We experienced negative cash flow from operating activities for the years ended December 31, 2020 and 2019 in the amounts of $4,085,795 and $6,190,215, respectively. The net cash used in operating activities for the year ended December 31, 2020 was primarily due to cash used to fund a net loss of $6,677,587, adjusted for non-cash expenses in the aggregate amount of $450,123, less $2,141,669 of cash used to fund changes in the levels of operating assets and liabilities. The net cash used in operating activities for the year ended December 31, 2019 was primarily due to cash used to fund a net loss of $6,922,537, adjusted for non-cash expenses in the aggregate amount of $779,341, plus $47,019 of cash used to fund changes in the levels of operating assets and liabilities.

 

Net Cash Used in Investing Activities

 

During the years ended December 31, 2020 and 2019, net cash used in investing activities was $0 and $0, respectively.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities during the years ended December 31, 2020 and 2019 was $3,600,191 and $6,753,943, respectively. During the year ended December 31, 2020, $3,225,000 were proceeds from the issuance of convertible notes payable, $418,676 were from the exercise of warrants, $105,985 for repayment of short-term note payable, and $62,500 was proceeds received through the PPP loan. During the year ended December 31, 2019, $6,485,000 were proceeds from the issuance of convertible notes payable and $268,943 were from the exercise of warrants.

 

Critical Accounting Policies

 

Our critical accounting policies are included in Note 3 – Significant Accounting Policies of our consolidated financial statements included within this annual report.

 

Recent Accounting Pronouncements

 

Recently issued accounting standards are included in Note 3 – Significant Accounting Policies of our consolidated financial statements included within this annual report.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

23

 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

INDEX TO FINANCIAL STATEMENTS

 

  Page
   
Report of Independent Registered Public Accounting Firm F-1
   
Consolidated Balance Sheets as of December 31, 2020 and 2019 F-2
   
Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019 F-3
   
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2020 and 2019 F-4
   
Consolidated Statements of Changes In Stockholders’ Deficiency for the Years Ended December 31, 2020 and 2019 F-5
   
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019 F-6
   
Notes to Consolidated Financial Statements F-7 – F-25

 

24

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and Board of Directors of

Provectus Biopharmaceuticals, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Provectus Biopharmaceuticals, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ deficiency and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

 

Explanatory Paragraph – Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

Critical Audit Matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

 

/s/ Marcum LLP

 

Marcum llp

 

We have served as the Company’s auditor since 2016.

 

Los Angeles, CA

March 2, 2021

 

F- 1

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONSOLIDATED BALANCE SHEETS

 

    December 31,     December 31,  
    2020     2019  
             
Assets                
                 
Current Assets:                
Cash and cash equivalents   $ 97,231     $ 590,706  
Short-term receivables - legal fees, settlement and other, net     3,930       55,058  
Prepaid expenses     322,518       350,249  
                 
Total Current Assets     423,679       996,013  
                 
Equipment and furnishings, less accumulated depreciation of $78,313 and $64,630, respectively     44,701       58,384  
Operating lease right-of-use asset     120,821       194,400  
Patents, net of accumulated amortization of $11,715,455 and $11,487,338, respectively     -       228,107  
                 
Total Assets   $ 589,201     $ 1,476,904  
                 
Liabilities and Stockholders’ Deficiency                
                 
Current Liabilities:                
Accounts payable - trade   $ 956,860     $ 1,125,890  
Other accrued expenses     1,500,782       1,026,842  
Current portion of accrued interest     2,774,968       65,333  
Current portion of accrued interest - related parties     1,766,493       -  
Current portion of note payable     236,228       228,423  
Current portion of convertible notes payable     16,622,000       500,000  
Current portion of convertible notes payable - related parties     6,770,000       -  
Current portion of operating lease liability     84,383       76,423  
                 
Total Current Liabilities     30,711,714       3,022,912  
                 
Accrued interest, non-current portion     -       1,501,864  
Accrued interest, non-current portion - related parties     -       1,226,582  
Note payable, non-current portion     39,061       -  
Convertible notes payable, non-current portion     -       12,997,000  
Convertible notes payable, non-current portion - related parties     -       6,670,000  
Operating lease liability, non-current portion     44,783       130,658  
                 
Total Liabilities     30,795,558       25,549,016  
                 
Commitments and contingencies (Note 11)                
                 
Stockholders’ Deficiency:                
Preferred stock; par value $0.001 per share; 25,000,000 shares authorized; Series B Convertible Preferred Stock; 240,000 shares designated; 100 shares issued and outstanding at December 31, 2020 and December 31, 2019; aggregate liquidation preference of $3,500 at December 31, 2020 and December 31, 2019     -       -  
Common stock; par value $0.001 per share; 1,000,000,000 shares authorized; 398,807,037 and 389,889,475 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively     398,808       389,889  
Additional paid-in capital     209,923,347       209,378,835  
Accumulated other comprehensive loss     (34,097 )     (24,008 )
Accumulated deficit     (240,494,415 )     (233,816,828 )
                 
Total Stockholders’ Deficiency     (30,206,357 )     (24,072,112 )
                 
Total Liabilities and Stockholders’ Deficiency   $ 589,201     $ 1,476,904  

 

See accompanying notes to consolidated financial statements.

 

F- 2

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

    For the Years Ended  
    December 31,  
    2020     2019  
             
Operating Expenses:                
Research and development   $ 2,812,760     $ 4,002,014  
General and administrative     2,150,816       2,297,682  
Total Operating Expenses     4,963,576       6,299,696  
                 
Total Operating Loss     (4,963,576 )     (6,299,696 )
Other Income/(Expense):                
EIDL grant     3,000       -  
Gain on settlement of lawsuits     -       675,000  
Research and development tax credit     27,694       134,081  
Investment and interest income     3,415       23,162  
Interest expense     (1,748,120 )     (1,455,084 )
Total Other Expense, Net     (1,714,011 )     (622,841 )
                 
Net Loss   $ (6,677,587 )   $ (6,922,537 )
                 
Basic and Diluted Loss Per Common Share   $ (0.02 )   $ (0.02 )
                 
Weighted Average Number of Common Shares Outstanding - Basic and Diluted     393,252,321       386,593,634  

 

See accompanying notes to consolidated financial statements.

 

F- 3

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

    For the Years Ended  
    December 31,  
    2020     2019  
             
Net Loss   $ (6,677,587 )   $ (6,922,537 )
Other Comprehensive Loss:                
Foreign currency translation adjustments     (10,089 )     (24,008 )
Total Comprehensive Loss   $ (6,687,676 )   $ (6,946,545 )

 

See accompanying notes to consolidated financial statements.

 

F- 4

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

 

                                  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, 2019     100     $ -       384,614,528     $ 384,615     $ 209,092,187     $ -     $ (226,894,291 )   $ (17,417,489 )
                                                                 
Common stock issued upon exercise of warrants     -       -       5,045,857       5,045       263,898       -       -       268,943  
Stock-based compensation:                                                                
Option     -       -       -       -       -       -       -       -  
Common stock     -       -       229,090       229       11,309       -       -       11,538  
Warrants     -       -       -       -       11,441       -       -       11,441  
Comprehensive loss:                                                                
Net loss     -       -       -       -       -       -       (6,922,537 )     (6,922,537 )
Other comprehensive loss     -       -       -       -       -       (24,008 )     -       (24,008 )
                                                                 
Balance at December 31, 2019     100     $ -       389,889,475     $ 389,889     $ 209,378,835     $ (24,008 )   $ (233,816,828 )   $ (24,072,112 )
                                                                 
Common stock issued upon exercise of warrants     -       -       7,855,062       7,856       410,821       -       -       418,677  
Stock-based compensation:                                                                
Option     -       -       -       -       64,294       -       -       64,294  
Common stock     -       -       1,062,500       1,063       68,025       -       -       69,088  
Warrants     -       -       -       -       1,372       -       -       1,372  
Comprehensive loss:                                                                
Net loss     -       -       -       -       -       -       (6,677,587 )     (6,677,587 )
Other comprehensive loss     -       -       -       -       -       (10,089 )     -       (10,089 )
                                                                 
Balance at December 31, 2020     100     $ -       398,807,037     $ 398,808     $ 209,923,347     $ (34,097 )   $ (240,494,415 )   $ (30,206,357 )

 

See accompanying notes to consolidated financial statements.

 

F- 5

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    For the Years Ended  
    December 31,  
    2020     2019  
             
Cash Flows From Operating Activities:                
Net loss   $ (6,677,587 )   $ (6,922,537 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock-based compensation     134,754       22,979  
Noncash lease expense     73,579       71,150  
Depreciation     13,683       14,092  
Amortization of patents     228,107       671,120  
Changes in operating assets and liabilities                
Short term receivables     50,321       4,907  
Prepaid expenses     347,107       19,960  
Accounts payable - trade     (170,413 )     (2,186,159 )
Other accrued expenses     244,887       731,134  
Operating lease liability     (77,916 )     (71,945 )
Accrued interest expense     1,747,683       1,455,084  
                 
Net Cash Used In Operating Activities     (4,085,795 )     (6,190,215 )
                 
Cash Flows From Financing Activities:                
Proceeds from issuance of convertible notes payable     3,125,000       6,435,000  
Proceeds from issuance of convertible                
notes payable - related parties     100,000       50,000  
Repayment of short-term note payable     (105,985 )     -  
Proceeds from note payable     62,500       -  
Proceeds from exercise of warrants     418,676       268,943  
Net Cash Provided By Financing Activities     3,600,191       6,753,943  
Effect of Exchange Rate Changes on Cash     (7,871 )     (24,008 )
                 
Net (Decrease)/Increase In Cash and Cash Equivalents     (493,475 )     539,720  
Cash and Cash Equivalents, Beginning of Period     590,706       50,986  
Cash and Cash Equivalents, End of Period   $ 97,231     $ 590,706  
                 
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     318,775     319,102  
Offset of related party receivable and payable   $ -     $ 535,361  

 

See accompanying notes to consolidated financial statements.

 

F- 6

 

 

PROVECTUS BIOPHARMACEUTICALS, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1. Business Organization and Nature of Operations

 

Provectus Biopharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, “Provectus” or the “Company”), is a clinical-stage biotechnology company developing immunotherapy medicines for different diseases, with the aim of maximizing the curative impact of these medicines and achieving immunity from treated disease. These investigational drugs are based on an entire, wholly-owned, family of small molecules called halogenated xanthenes (“HXs”); our lead HX molecule is named rose bengal disodium (“RBD”).

 

 

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

 

Oral formulations of cGMP RBD are also undergoing preclinical study as prophylactic and therapeutic treatments for high-risk adult solid tumor cancers, such as head and neck, breast, pancreatic, liver, and colorectal cancers.

     
  Pediatric Oncology: IL PV-10 is also undergoing preclinical study for pediatric solid tumor cancers (including neuroblastoma, Ewing sarcoma, rhabdomyosarcoma, and osteosarcoma). ODD status has been granted to IL PV-10 by the FDA for neuroblastoma in 2018.
     
  Hematology: Oral formulations of cGMP RBD are undergoing preclinical study for pediatric blood cancers (including leukemia).
     
  Virology: Systemically-administered formulations of cGMP RBD are undergoing preclinical study for the novel strain of coronavirus (“CoV”), severe acute respiratory syndrome (“SARS”) CoV 2 (“SARS-CoV-2”).
     
  Microbiology: Different formulations of cGMP RBD are undergoing preclinical study as potential treatments for multi-drug resistant (“MDR”) bacteria, such as Gram-negative bacteria.
     
  Ophthalmology: Topical formulations of cGMP RBD are undergoing preclinical study as potential treatments for diseases of the eye, such as infectious keratitis.
     
  Dermatology: PH-10®, an investigational immuno-dermatology agent administered as a topical gel and formulation of cGMP RBD, is undergoing clinical study for inflammatory dermatoses (including psoriasis and atopic dermatitis).

 

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.

 

F- 7

 

 

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 December 31, 2020.

 

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

 

2. Liquidity and Going Concern

 

The Company’s cash and cash equivalents were $97,231 at December 31, 2020, compared with $590,706 at December 31, 2019. The Company continues to incur significant operating losses and 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 the 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 and PH-10 and raise additional capital.

 

The Company plans to access capital resources through possible public or private equity offerings, including the 2020 Financing (as defined in Note 4), exchange offers, debt financings, corporate collaborations or other means. In addition, the Company continues to explore opportunities to strategically monetize its lead drug candidates, PV-10 and PH-10, through potential co-development and licensing transactions, although there can be no assurance that the Company will be successful with such plans. The Company has historically been able to raise capital through equity offerings, although no assurance can be provided that it will continue to be successful in the future. If the Company is unable to raise sufficient capital through the 2020 Financing or otherwise, it will not be able to pay its obligations as they become due. Subsequent to December 31, 2020, the Company received an aggregate $1,200,000 in connection with the 2020 Financing. In addition, holders of 4,500,000 warrants to purchase the common stock of the Company at $0.0533 per share, have exercised these warrants, resulting in aggregate proceeds to the Company in the amount of $239,850. See Note 14 – Subsequent Events.

 

The primary business objective of management is to build the Company into a commercial-stage biotechnology company; however, the Company cannot assure that it will be successful in co-developing, licensing, and/or commercializing PV-10, PH-10, and/or any other halogenated xanthene-based drug candidate developed by the Company, or entering into any financial transaction. Moreover, even if the Company is successful in improving its current cash flow position, the Company nonetheless plans to seek additional funds to meet its long-term requirements in 2021 and beyond. The Company anticipates that these funds will otherwise come from the proceeds of private placement transactions, including the 2020 Financing, the exercise of existing warrants and outstanding stock options, or public offerings of debt or equity securities. While the Company believes that it has a reasonable basis for its expectation that it will be able to raise additional funds, the Company cannot 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.

 

F- 8

 

 

3. Significant Accounting Policies

 

Principles of Consolidation

 

Intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant estimates and assumptions include the collectability of receivables, the recoverability and useful lives of long-lived assets, stock-based compensation, accrued liabilities and the valuation allowance related to the Company’s deferred tax assets.

 

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 December 31, 2020 and 2019, the Company’s cash equivalent consists of Treasury bills.

 

Cash Concentrations

 

Cash and cash equivalents 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.

 

Equipment and Furnishings, net

 

Equipment and furnishings are stated at cost less accumulated depreciation. Depreciation of equipment is provided for using the straight-line method over the estimated useful lives of the assets. Computers, leasehold improvements and office equipment are being depreciated over five years; furniture and fixtures are being depreciated over ten years. Maintenance and repairs are charged to operations as incurred. The Company capitalizes cost attributable to the betterment of property and equipment when such betterment extends the useful life of the assets.

 

Long-Lived Assets

 

The Company reviews the carrying values of its long-lived assets for possible impairment whenever an event or change in circumstances indicates that the carrying amount of the assets may not be recoverable. Any long-lived assets held for disposal are reported at the lower of their carrying amounts or fair value less cost to sell. Management has determined there to be no impairment during the years ended December 31, 2020 and 2019.

 

Patent Costs, net

 

Internal patent costs are expensed in the period incurred. Patents purchased are capitalized and amortized over the remaining estimated useful life of the patent.

 

F- 9

 

 

The patents are fully amortized. Annual amortization of the patents was $228,000 in 2020.

 

Related Party Receivables

 

Management estimates the reserve for uncollectibility based on existing economic conditions, the financial conditions of the current and former employees, and the amount and age of past due receivables. Receivables are considered past due if full payment is not received by the contractual due date. Past due amounts are generally written off against the reserve for uncollectibility only after all collection attempts have been exhausted. See Note 7 – Short-term Receivables.

 

Research and Development

 

Research and development costs are charged to expense when incurred. An allocation of payroll expenses to research and development is made based on a percentage estimate of time spent. The research and development costs include the following: payroll, consulting and contract labor, lab supplies and pharmaceutical preparations, insurance, rent and utilities, and depreciation and amortization.

 

Leases

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of operating lease right-of-use (“ROU”) assets and lease liabilities on the balance sheet (“ASC 842”) with amendments issued in 2018. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company is also required to recognize and measure new leases at the adoption date and recognize a cumulative-effect adjustment in the period of adoption using a modified retrospective approach, with certain practical expedients available.

 

The Company adopted ASC 842 effective January 1, 2019 and elected to apply the available practical expedients. The standard had an impact on the Company’s consolidated balance sheets but did not have a material impact on the Company’s consolidated statements of operations or cash flows upon adoption. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.

 

Income Taxes

 

The Company accounts for income taxes under the liability method in accordance with Accounting Standards Codification (“ASC”) 740 “Income Taxes”. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established if it is more likely than not that all, or some portion, of deferred income tax assets will not be realized. The Company has recorded a full valuation allowance to reduce its net deferred income tax assets to zero. In the event the Company were to determine that it would be able to realize some or all its deferred income tax assets in the future, an adjustment to the deferred income tax asset would increase income in the period such determination was made.

 

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination. Any recognized income tax positions would be measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement would be reflected in the period in which the change in judgment occurs. The Company would recognize any corresponding interest and penalties associated with its income tax positions in income tax expense. There were no income taxes, interest or penalties incurred in 2020 or 2019.

 

F- 10

 

 

Basic and Diluted Loss Per Common Share

 

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

 

    December 31,  
    2020     2019  
Warrants     87,264,164       126,109,532  
Options     4,800,000       3,000,000  
Convertible preferred stock     65,663       65,663  
                 
Total potentially dilutive shares     92,129,827       129,175,195  

 

The potential dilutive effect of the conversion of the Company’s convertible notes payable has been excluded from this table since the Company’s Series D Preferred Stock has yet to be designated by the Board.

 

Fair Value of Financial Instruments

 

The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company determines the estimated fair value of amounts presented in these consolidated financial statements using available market information and appropriate methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. The estimates presented in the financial statements are not necessarily indicative of the amounts that could be realized in a current exchange between buyer and seller. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. These fair value estimates were based upon pertinent information available as of December 31, 2020 and 2019. The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, receivables, other current assets, accounts payable, and accrued expenses approximate fair values due to the short-term nature of these instruments.

 

The carrying amounts of our credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates are comparable to rates of returns for instruments of similar credit risk.

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 Inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
   
Level 2 Inputs use directly or indirectly observable inputs. These inputs include quoted prices for similar assets and liabilities in active markets as well as other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.
   
Level 3 Inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability.

 

F- 11

 

 

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

 

Both observable and unobservable inputs may be used to determine the fair value of positions that are classified within the Level 3 category. As a result, the unrealized gains and losses for assets within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in historical company data) inputs. Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

Foreign Currency Translation

 

The Company’s reporting currency is the United States Dollar. The functional currencies of the Company’s operating subsidiaries are their local currencies (United States Dollar and Australian Dollar). Australian Dollar denominated assets and liabilities are translated into the United States Dollar at the balance sheet date ($10,552 and $332,446 at December 31, 2020 and $61,380 and $308,915 at December 31, 2019, respectively), and expense and other income accounts are translated at a weighted average exchange rate for the years then ended ($44,994 and $53,210 for the years ended December 31, 2020 and 2019, respectively). Equity is translated at historical rates and the resulting foreign currency translation adjustments are included as a component of accumulated other comprehensive loss (“AOCL”), which is a separate component of shareholders’ deficit. Therefore, the U.S. dollar value of the non-equity translated items in the Company’s consolidated financial statements will fluctuate from period to period, depending on the changing value of the U.S. dollar versus these currencies.

 

The Company engages in foreign currency denomination transactions with its Australian subsidiary. At the date that the transaction is recognized, each asset, liability, revenue, expense, gain or loss arising from the transaction is measured and recorded in the functional currency of the recording entity using the exchange rate in effect at that date. At each balance sheet date, recorded monetary balances denominated in a currency other than the functional currency are adjusted using the exchange rate at the balance sheet date, with gains or losses recorded in other income or other expense.

 

Stock-Based Compensation

 

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date and then is recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. The Company computes the fair value of equity-classified warrants and options granted using the Black-Scholes option pricing model. Option valuation models require the input of highly subjective assumptions including the expected volatility factor of the market price of the Company’s common stock which is determined by reviewing its historical public market closing prices.

 

Recently Issued Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) Topic 740, Income Taxes. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for the Company’s fiscal year beginning after December 15, 2020, with early adoption permitted. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The Company does not expect this ASU to have a material impact on its consolidated financial statements.

 

F- 12

 

 

In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).” ASU 2020-01 states any equity security transitioning from the alternative method of accounting under Topic 321 to the equity method, or vice versa, due to an observable transaction will be remeasured immediately before the transition. In addition, the ASU clarifies the accounting for certain non-derivative forward contracts or purchased call options to acquire equity securities stating such instruments will be measured using the fair value principles of Topic 321 before settlement or exercise. The ASU is effective for fiscal years beginning after December 15, 2020, and will be applied on a prospective basis. Early adoption is permitted. The Company is still evaluating the impact this standard will have on its consolidated financial statements and related disclosures.

 

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

 

In August 2020, FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. The Company is currently evaluating the effect of the adoption of ASU 2020-06 will have on its consolidated financial statements and related disclosures.

 

In October 2020, the FASB issued ASU 2020-10 “Codification Improvements”, which improves consistency by amending the Codification to include all disclosure guidance in the appropriate disclosure sections and clarifies application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. The guidance is effective for the Company beginning in the first quarter of fiscal year 2022 with early adoption permitted. The Company is currently assessing the impact that this pronouncement will have on its consolidated financial statements.

 

F- 13

 

 

Recent Adopted Accounting Pronouncements

  

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company adopted ASU effective January 1, 2020 and it did not have a material impact on the Company’s consolidated financial statements.

 

Reclassifications

 

Certain prior period amounts have been reclassified for comparative purposes to conform with the fiscal 2020 presentation. These reclassifications have no impact on the previously reported net loss.

 

4. Convertible Notes Payable

 

2017 Financing

 

On March 23, 2017, the Company entered into an exclusive Definitive Financing Commitment Term Sheet with a group of the Company’s stockholders (the “PRH Group”), which was amended and restated effective as of March 19, 2017 (the “2017 Term Sheet”) 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”).

 

As of December 31, 2020, the Company had received aggregate 1st Loans, as defined below, of $20,067,000 in connection with the 2017 Financing.

 

The 2017 Financing is in the form of a secured convertible loan (the “1st Loan”) from the PRH Group or other investors in the 2017 Financing (the “1st Loan Investors”). The 1st Loan is evidenced by secured convertible promissory notes (individually a “2017 Note” and collectively, the “2017 Notes”) from the Company to the PRH Group or the 1st Loan Investors. In addition to the customary provisions, the 2017 Notes contains the following provisions:

 

  (i) It is secured by a first priority security interest on the Company’s IP,
     
  (ii) The 1st Loan bears interest at the rate of 8% per annum on the outstanding principal amount of the 2017 Notes that has been funded to the Company,

 

F- 14

 

 

  (iii) The 1st Loan proceeds are held in one or more accounts (the “Escrow”) pending the funding of the tranches of the 2017 Financing pursuant to borrowing requests made by the Company,
     
  (iv) The 2017 Notes, including interest and principal, are due and payable in full on the earlier of: (i) on such date upon which the Company defaults under the 2017 Notes, (ii) upon a change of control of the Company, or (iii) dates ranging from May 15, 2021 to the 18-month anniversary of the funding of the Final Tranche. In the event there is a change of control of the Company’s Board as proposed by any person or group other than the 1st Loan Investors, the term of the 2017 Notes will be accelerated and all amounts due under the 2017 Notes will be immediately due and payable, plus interest at the rate of 8% per annum, plus a penalty in the amount equal to 10 times the outstanding principal amount of the 1st Loan that has been funded to the Company,
     
  (v) The outstanding principal amount and interest payable under the 1st Loan will become convertible at the sole discretion of the 1st Loan Investors into shares of the Company’s Series D Preferred Stock, a new series of preferred stock, that the Company’s Board may designate in the future, at a price per share equal to $0.2862, and
     
 

(vi)

 

Notwithstanding (v) above, the principal amount of the 2017 Notes and the interest payable under the 1st Loan will automatically convert into shares of the Company’s Series D Preferred Stock at a price per share equal to $0.2862 effective on the 18-month anniversary of the funding of the final tranche of the 2017 Financing subject to certain exceptions if the Company’s Board designates such series of preferred stock in the future.

 

Pursuant to the 2017 Term Sheet, the PRH Group concluded its best-efforts activity to arrange for a financing of $20,000,000, which amounts were provided in a number of tranches, between the first tranche on April 4, 2017 and the Final Tranche, on December 20, 2019. As a result, the 2017 Notes under the 1st Loan will convert into shares of Series D Preferred Stock (once designated) of the Company on or before June 20, 2021, which is the 18-month anniversary of the funding of the Final Tranche of the 2017 Financing, subject to certain exceptions.

 

Upon conversion of the 2017 Notes, the 1st Loan Investors will release their first lien on the Company’s IP.

 

2020 Financing

 

On December 31, 2019, the Board approved a Definitive Financing Term Sheet (the “2020 Term Sheet”), which sets forth the terms under which the Company will use its best efforts to arrange for financing of a maximum of $20,000,000 (the “2020 Financing”). The 2020 Financing will be in the form of secured convertible loans from investors that will be evidenced by convertible promissory notes (the “2020 Notes”). The 2020 Term Sheet is similar to the 2017 Term Sheet. Subject to the terms and conditions of the 2020 Term Sheet, the Company will use its best efforts to arrange for the 2020 Financing, which amounts will be obtained in several tranches. The proceeds from the 2020 Financing will be used to fund the Company’s clinical development program, as currently constituted and envisioned, and to fund the Company’s general and administrative expenses.

 

Pursuant to the 2020 Term Sheet, the 2020 Notes (defined below) will convert into shares of the Company’s Series D Preferred Stock on or before June 20, 2021, subject to certain exceptions. As of December 31, 2019, and through the date of filing, the Series D Preferred Stock had not been designated by the Board.

 

F- 15

 

 

The 2020 Financing will be in the form of a secured convertible loan (the “2nd Loan”) from the Investors (the “2nd Loan Investors”) that will be evidenced by convertible promissory notes (individually, a “2020 Note” and collectively, the “2020 Notes”) subordinate to the 2017 Notes in right of payment and to the security interests granted to holders of the 2017 Notes. In addition to customary provisions, the 2020 Notes contains the following provisions:

 

(i) It will be secured by a second priority security interest on the Company’s IP subordinate to the first priority security interest of the 2017 Notes;

 

(ii) The 2nd Loan will bear interest at the rate of eight percent (8%) per annum on the outstanding principal amount of the 2nd Loan that has been funded to the Company;

 

(iii) In the event there is a change of control of the Company’s Board, the term of the 2020 Notes will be accelerated and all amounts due under the 2020 Notes will be immediately due and payable, plus interest at the rate of eight percent (8%) per annum, plus a penalty in the amount equal to ten times (10x) the outstanding principal amount of the 2nd Loan that has been funded to the Company;

 

(iv) The outstanding principal amount and interest payable under the 2nd Loan will become convertible at the sole discretion of the 2nd Loan Investors into shares of the Company’s Series D Preferred Stock, a series of preferred stock to be designated by the Board, at a price per share equal to $2.8620; and

 

(v) Notwithstanding (iv) above, the principal amount of the 2020 Notes and the interest payable under the 2nd Loan will automatically convert into shares of the Company’s Series D Preferred Stock at a price per share equal to $2.8620 effective on June 20, 2021 subject to certain exceptions.

 

Upon conversion of the 2nd Loan, the 2nd Loan Investors will release their second lien on the IP. 2nd Loan Investors in the 2020 Financing will hold Series D Preferred Stock pari passu with the Series D Preferred Stock of 1st Loan Investors in the 2017 Financing.

 

Since the 2020 Financing was launched and through December 31, 2020, the Company had received aggregate 2nd Loans of $3,325,000.

 

Convertible Notes Payable – Related Parties

 

During the year ended December 31, 2019, the Company entered into 2017 Notes with related parties in the aggregate principal amount of $50,000 offset by the application of the 2017 Note in the principal amount of $250,000 that the Company entered into with Timothy Scott (former President) and Leigh Anne Scott on February 28, 2018 that was applied to Dr. Scott’s Kleba Settlement agreement. As of December 31, 2020 and 2019, the Company had borrowed $6,670,000 of 2017 Notes from related parties which were outstanding.

 

During the year ended December 31, 2020, the Company entered into 2020 Notes with related parties in the aggregate principal amount of $100,000. As of December 31, 2020, the Company had borrowed $100,000 of 2020 Notes from related parties which were outstanding.

 

Convertible Notes Payable – Non-Related Parties

 

During the year ended December 31, 2019, the Company entered into 2017 Notes with accredited investors in the aggregate principal amount of $6,335,000. As of December 31, 2020 and 2019, the Company had borrowed $13,397,000 under these notes, all of which were outstanding as of that date. During the year ended December 31, 2019, the Company entered into a 2020 Note with an accredited investor in the principal amount of $100,000. As of December 31, 2019, the Company had borrowed $100,000 under this note.  

 

During the year ended December 31, 2020, the Company entered into 2020 Notes with accredited investors in the aggregate principal amount of $3,125,000. As of December 31, 2020, the Company had borrowed $3,225,000 under these notes, all of which were outstanding as of that date.

 

F- 16

 

 

The Series D Preferred Stock

 

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

 

5. Notes Payable

 

On April 20, 2020, the Company received a $62,500 loan under the CARES Act PPP (the “PPP Loan”). The PPP provides for loans to qualifying businesses for amounts of up to 2.5 times certain of the borrower’s average monthly payroll expenses. The loan principal and accrued interest are forgivable, as long as the borrower uses loan proceeds for eligible uses during a specified period following disbursement, such as payroll, benefits, rent, and utilities, and maintains specified headcount and payroll thresholds. If any portion of a PPP Loan is not forgiven, the unforgiven portion is payable over two years at an interest rate of 1%, with a deferral of payments for the first seven months. The Company intends to use PPP Loan proceeds in a manner that it believes presently qualifies for full forgiveness. We cannot provide assurance that the PPP Loan will be forgiven in full. As of December 31, 2020, the Company had not applied for forgiveness of the PPP Loan. Once an amount is forgiven under the PPP Loan, the Company will recognize a gain on forgiveness of note payable in the period in which it obtained forgiveness.

 

The Company obtained short-term financing from AFCO Insurance Premium Finance for our commercial insurance policies. As of December 31, 2020 and 2019, the balance of the note payable was $212,790 and $228,424, respectively.

 

6. Related Party Transactions

 

During the years ended December 31, 2020 and 2019, the Company paid Mr. Bruce Horowitz (Capital Strategists) consulting fees of $254,400 and $277,200, respectively, for services rendered. Accrued director fees for Mr. Horowitz as of December 31, 2020 and 2019 were $75,000 and $75,000, respectively. Mr. Horowitz serves as both COO and a Director.

 

See Note 4 and Note 7 for details of other related party transactions.

 

Director fees during the years ended December 31, 2020 and 2019 were $383,065 and $385,000, respectively. Accrued directors’ fees as of December 31, 2020 and 2019 were $1,175,589 and $792,524, respectively.

 

7. Short-term Receivables

 

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

 

    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  

 

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

 

F- 17

 

 

During the year ended December 31, 2019, officers of the Company offset their settlement amounts owed to the Company against accrued payroll and other payables totaling $535,361. This offset reduced the amount of the settlement and was approved by the Company’s Board.

 

8. Stockholders’ Deficiency

 

Authorized Capital

 

As of December 31, 2020, the Company was authorized to issue 1,000,000,000 shares of common stock, $0.001 par value, and 25,000,000 shares of preferred stock, $0.001 par value. The holders of the Company’s common stock are entitled to one vote per share. The preferred stock is designated as follows: 240,000 shares to Series B Convertible Preferred Stock (the “Series B Preferred Stock”) and 24,760,000 shares undesignated.

 

Series B Convertible Preferred Stock

 

On August 25, 2016, the Company filed the Series B Certificate of Designation with the Delaware Secretary of State. The Series B Certificate of Designation provides for the issuance of the Series B Preferred Stock, par value $0.001 per share. In the event of the Company’s liquidation, dissolution, or winding up, holders of Series B Preferred Stock will be entitled to receive the amount of cash, securities or other property to which such holder would be entitled to receive with respect to such shares of Series B Preferred Stock if such shares had been converted to common stock immediately prior to such event (without giving effect for such purposes to any beneficial ownership limitation), subject to the preferential rights of holders of any class or series of the Company’s capital stock specifically ranking by its terms senior to the Series B Preferred Stock as to distributions of assets upon such event, whether voluntarily or involuntarily. The Series B Preferred Stock has no voting rights.

 

The holders of Series B Preferred Stock will be entitled to receive cumulative dividends at the rate per share of 8% per annum of the stated value per share, until the fifth anniversary of the date of issuance of the Series B Preferred Stock. The dividends become payable, at the Company’s option in either cash, out of any funds legally available for such purpose, or in shares of common stock, (i) upon any conversion of the Series B Preferred Stock, (ii) on each such other date as the Board may determine, subject to written consent of the holders of Series B Preferred Stock holding a majority of the then issued and outstanding Series B Preferred Stock, (iii) upon the Company’s liquidation, dissolution or winding up, and (iv) upon occurrence of a fundamental transaction, which includes any merger or consolidation, sale of all or substantially all of the Company’s assets, exchange or conversion of all of the common stock by tender offer, exchange offer or reclassification; provided, however, that if Series B Preferred Stock is converted into shares of common stock at any time prior to the fifth anniversary of the date of issuance of the Series B Preferred Stock, the holder will receive a make-whole payment in an amount equal to all of the dividends that, but for the early conversion, would have otherwise accrued on the applicable shares of Series B Preferred Stock being converted for the period commencing on the conversion date and ending on the fifth anniversary of the date of issuance, less the amount of all prior dividends paid on such converted Series B Preferred Stock before the date of conversion. Make-whole payments are payable at the Company’s option in either cash, out of any funds legally available for such purpose, or in shares of common stock. With respect to any dividend payments and make-whole payments paid in shares of common stock, the number of shares of common stock to be issued to a holder of Series B Preferred Stock will be an amount equal to the quotient of (a) the amount of the dividend payable to such holder divided by (b) the conversion price then in effect.

 

F- 18

 

 

Common Stock Issuances

 

During the year ended December 31, 2019, the Company issued 229,090 shares of immediately vested restricted common stock as payment of services, with an aggregate issuance date fair value of $11,538, which was recognized immediately as stock compensation within general and administrative expenses on the accompanying consolidated statement of operations.

 

During the year ended December 31, 2020, the Company issued 1,062,500 shares of immediately vested restricted common stock with an aggregate issuance date value of $69,088, which was recognized immediately as stock compensation within general and administrative expenses on the accompanying consolidated statement of operations.

 

9. Stock Incentive Plan and Warrants

 

The 2017 Amendment and Restatement of the Provectus Biopharmaceuticals, Inc. 2014 Equity Compensation Plan (the “2017 Equity Compensation Plan”) provides for the issuance of up to 20,000,000 shares of common stock pursuant to stock options for the benefit of eligible employees and directors of the Company. Options granted under the 2017 Equity Compensation Plan are either “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code or options which are not incentive stock options. The stock options are exercisable over a period determined by the Board of Directors (through its Compensation Committee), but generally no longer than 10 years after the date they are granted. As of December 31, 2020, there were 15,312,500 shares available for issuance under the 2017 Equity Compensation Plan. 

 

There were no stock options granted during the year ended December 31, 2019.

 

During the year ended December 31, 2020, the Company issued 2,425,000 five-year immediately vested stock options to an officer/director to purchase an aggregate of 2,425,000 shares of common stock with exercise price of $0.12 per share. The stock options had an aggregate grant date fair value of $62,880, which was recognized immediately as stock compensation within general and administrative expenses on the accompanying statement of operations.

 

During the year ended December 31, 2020, the Company issued 100,000 five-year immediately vested stock options to a director to purchase an aggregate of 100,000 shares of common stock with an exercise price of $0.2862 per share. The stock options had an aggregate grant date fair value of $1,414, which was recognized immediately as stock compensation within general and administrative expenses on the accompanying statement of operations.

 

Stock Options granted during the year ended December 31, 2020 were valued using the Black Scholes Model, with the following assumptions used:

 

    For the Years Ended  
    December 31,  
    2020     2019  
Expected terms (years)     2.50       -  
Expected volatility     93 %     -  
Risk-free interest rate     0.23 %     -  
Expected dividend     0.00 %     -  

 

F- 19

 

 

The following table summarizes option activity during the year ended December 31, 2020 and 2019:

 

          Weighted Average  
    Options     Exercise Price  
             
Outstanding and exercisable at January 1, 2019     3,200,000     $ 0.89  
                 
Granted     -       -  
Exercised     -       -  
Forfeited     (200,000 )     0.88  
                 
Outstanding and exercisable at December 31, 2019     3,000,000     $ 0.88  
                 
Granted     2,525,000       .20  
Exercised     -       -  
Forfeited     (725,000 )     0.88  
                 
Outstanding and exercisable at December 31, 2020     4,800,000     $ 0.46  

 

The following table summarizes information about stock options outstanding at December 31, 2020.

 

      Number Outstanding     Weighted Average
Remaining Contractual
    Number Exercisable  
Exercise Price     at December 31, 2020     Life     at December 31, 2020  
$ 0.12       2,425,000       4.90       2,425,000  
$ 0.29       100,000       4.90       100,000  
$ 0.67       200,000       2.60       200,000  
$ 0.75       950,000       3.11       950,000  
$ 0.84       150,000       1.50       150,000  
$ 0.88       150,000       3.60       150,000  
$ 0.93       575,000       0.76       575,000  
$ 0.99       50,000       0.50       50,000  
$ 1.04       200,000       0.50       200,000  
          4,800,000       3.58       4,800,000  

 

As of December 31, 2020, the intrinsic value of outstanding and exercisable options was $0.

 

Warrants

 

During the year-ended December 31, 2019, holders of warrants exercised warrants to purchase 5,045,857 shares of common stock at a price of $0.053 per share. In connection with the exercises, the Company received cash proceeds of $268,943 and issued 5,045,857 shares of common stock.

 

During the year ended December 31, 2020, holders of warrants exercised warrants to purchase 7,855,062 shares of common stock at a price of $0.053 per share. In connection with the exercises, the Company received cash proceeds of $418,676 and issued 7,855,062 shares of common stock.

 

During the year ended December 31, 2020, the Company issued 62,500 three-year immediately vested warrants to board members to purchase an aggregate of 62,500 shares of common stock with an exercise price of $0.2862 per share. The warrants had an aggregate grant date fair value of $1,372, which was recognized immediately as stock compensation within general and administrative expenses on the accompanying statement of operations.

  

F- 20

 

 

In applying the Black-Scholes option pricing model to warrants granted, the Company used the following assumptions:

 

    For the Years Ended  
    December 31,  
    2020     2019  
Contractual terms (years)     3.00       3.00-5.00  
Expected volatility     93%-95 %     129%-131 %
Risk-free interest rate     .011%-0.18 %     1.82%-2.33 %
Expected dividend     0.00 %     0.00 %

 

The following table summarizes warrant activity during the year ended December 31, 2020 and 2019:

 

          Weighted Average  
    Warrants     Exercise Price  
             
Outstanding and exercisable at January 1, 2019     136,824,138     $ 0.27  
                 
Granted     425,000       0.94  
Exercised     (5,045,857 )     0.05  
Forfeited     (6,093,749 )     1.20  
Outstanding and exercisable at December 31, 2019     126,109,532     $ 0.29  
                 
Granted     62,500       0.29  
Exercised     (7,855,062 )     0.05  
Forfeited     (31,052,806 )     1.06  
Outstanding and exercisable at December 31, 2020     87,264,164     $ 0.02  

 

The following table summarizes information about warrants outstanding at December 31, 2020.

 

      Number Outstanding     Weighted Average     Number Exercisable     Intrinsic Value  
      at December 31,     Remaining Contractual     at December 31,     at December 31,  
Exercise Price     2020     Life     2020     2020  
                           
$ 0.05       86,776,664       0.66       86,776,664     $ 407,850  
$ 0.29       100,000       2.30       100,000     $ -  
$ 1.00       18,000       3.39       18,000     $ -  
$ 1.12       366,000       3.38       366,000     $ -  
$ 2.00       3,500       3.38       3,500     $ -  
                                     
          87,264,164       2.62       87,264,164     $ 407,850  

 

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

 

F- 21

 

 

10. Income Taxes

 

The domestic and foreign components of loss before income taxes from operations for the years ended December 31, 2020 and 2019 are as follows:

 

    Year ended December 31  
    2020     2019  
Domestic   $ (6,632,593 )   $ (6,975,747 )
Foreign     (44,994 )     53,210  
Net Pre-Tax Loss   $ (6,677,587 )   $ (6,922,537 )

 

The income tax provision (benefit) consists of the following:

 

          Year ended December 31  
          2020     2019  
Federal:                  
Current           $ -     $ -  
Deferred     21.00 %     221,598       (1,361,582 )
                         
State and local:                        
Current             -       -  
Deferred     5.14 %     54,186       (332,939 )
      26.14 %     275,784       (1,694,521 )
Change in valuation allowance             (275,784 )     1,694,521  
Income tax provision (benefit)           $ -     $ -  

 

The reconciliations between the statutory federal income tax rate and the Company’s effective tax rate are as follows:

 

    Year Ended December 31  
    2020     2019  
             
Tax benefit at federal statutory rate     (21.0 )%     (21.0 )%
State income taxes, net of federal benefit     (5.1 )%     (5.1 )%
Permanent differences     (0.7 )%     (1.3 )%
Change in valuation allowance     (4.1 )%     24.5 %
Prior year true-up     23.1 %     (0.1 )%
Expiration of state net operating loss carryforwards     4.5 %     3.1 %
Expiration of warrants and options     3.5 %     0.0 %
Miscellaneous     0.0 %     0.0 %
Effective income tax rate     0.0 %     0.1 %

 

The components of the Company’s deferred income taxes are summarized below:

 

    December 31  
    2020     2019  
Deferred Tax Assets:                
Net operating loss carryforwards   $ 42,779,580     $ 41,959,558  
Stock-based compensation     428,726       2,215,928  
Research and development credit carryovers     2,985,215       2,917,857  
Contribution carryovers     10,062       10,062  
Intangible assets    

94,295

     

-

 
Accrued liabilities     1,503,190       1,041,286  
Gross deferred tax assets     47,801,068       48,144,691  
                 
Deferred Tax Liabilities:                
Intangible assets     -       (59,616 )
Prepaid expenses     (82,839 )     (91,084 )
Other     (40,603 )     (40,581 )
Gross deferred tax liabilities     (123,442 )     (191,281 )
                 
Valuation allowance     (47,677,626 )     (47,953,410 )
                 
Deferred tax asset, net of valuation allowance   $ -     $ -  
                 
Change in valuation allowance   $ 275,784     $ (1,694,521 )

 

F- 22

 

 

A valuation allowance against deferred tax assets is required if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets may not be realized. The Company is in the early stages of development and realization of the deferred tax assets is not considered more likely than not. As a result, the Company has recorded a full valuation allowance for the net deferred tax asset.

 

Since inception of the Company on January 17, 2002, the Company has generated federal, state and Australian tax net operating losses of approximately $166 million, $153 million, and $326 thousand. Under the Tax Cuts and Jobs Act, net operating loss incurred after December 31, 2017 may be carried forward indefinitely. The tax loss carry-forwards of the Company may be subject to limitation by Section 382 of the Internal Revenue Code with respect to the amount utilizable each year. This limitation reduces the Company’s ability to utilize net operating loss carry-forwards. Federal net operating losses (“NOL”) totaling $151.4 million expire in various amounts between 2022 and 2037. Federal NOL totaling $14.5 million do not expire.

 

Year Generated   Year Expired   Amount  
2002   2022   $ 5,794,541  
2003   2023     1,520,649  
2004   2024     3,571,227  
2005   2025     5,530,815  
2006   2026     7,192,407  
2007   2027     10,218,952  
2008   2028     7,017,372  
2009   2029     9,573,948  
2010   2030     10,344,298  
2011   2031     11,225,047  
2012   2032     11,193,882  
2013   2033     10,273,181  
2014   2034     9,075,738  
2015   2035     17,455,417  
2016   2036     19,710,699  
2017   2037     11,703,175  
2018   N/A     6,255,067  
2019   N/A     4,085,063  
2020   N/A     4,185,506  
Total NOL       $ 165,926,984  

 

State NOL totaling $153 million expire in various years between 2021 and 2035.

 

Year Generated   Year Expired   Amount  
2006   2021   $ 7,358,979  
2007   2022     10,318,963  
2008   2023     7,106,425  
2009   2024     9,680,770  
2010   2025     10,440,651  
2011   2026     11,362,120  
2012   2027     11,311,394  
2013   2028     10,381,763  
2014   2029     9,278,510  
2015   2030     18,547,287  
2016   2031     20,166,661  
2017   2032     12,131,850  
2018   2033     6,455,113  
2019   2034     4,211,210  
2020   2035     4,185,506  
Total NOL       $ 152,937,202  

 

Australia NOL totaling $326,000 do not expire.

 

Year Generated   Year Expired   Amount  
2017   N/A   $ -  
2018   N/A     290,490  
2019   N/A     35,861  
Total NOL       $ 326,351  

 

The Company has determined that there are no uncertain tax positions as of December 31, 2020 or 2019.

 

The Company files income tax returns in the U.S. federal jurisdiction and the state of Tennessee. The Company intends to permanently reinvest earnings in its foreign subsidiary.

 

To date, the Company’s operations conducted by its Australian subsidiary consist primarily of research and development activities. As of December 31, 2020, there were no accumulated earnings and profits in the Company’s foreign subsidiary. At current tax rates, no additional Federal income taxes (net of available tax credits) would be payable if such earnings were to be repatriated.

 

11. Commitments

 

Leases

 

The Company currently leases 4,500 square feet of corporate office space in Knoxville, Tennessee through an operating lease agreement for a term of five years ending on June 30, 2022. Payments are approximately $7,900 per month.

 

Total expense for operating leases for the year ended December 31, 2020 was $90,821, of which, $60,547 was included within research and development and $30,274 was included within general and administrative expenses on the consolidated statement of operations. Total expense for operating leases for the year ended December 31, 2019 was $102,378, of which, $68,252 was included within research and development and $34,126 was included within general and administrative expenses on the consolidated statement of operations.

 

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

 

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

 

    For The Years Ended  
    December 31,  
    2020     2019  
             
Cash paid for amounts included in the measurement of lease liabilities:            
Operating cash flows used in operating leases   $ 91,605     $ 89,574  
                 
Right-of-use assets obtained in exchange for lease obligations:                
Operating leases   $ -     $ 265,550  
                 
Weighted Average Remaining Lease Term                
Operating leases     1.50 Years       2.75 Years  
                 
Weighted Average Discount Rate                
Operating leases     8.0 %     8.0 %

 

F- 23

 

 

Future minimum payments under non-cancellable lease as of December 31, 2020 were as follows:

 

Years   Amount  
       
2021     92,471  
2022     46,687  
Total future minimum lease payments     139,158  
Less: amount representing imputed interest     (9,992 )
Total   $ 129,166  

 

12. 401(K) Profit Sharing Plan

 

The Company maintains a retirement plan under Section 401(k) of the Internal Revenue Code, which covers all eligible employees. All employees with U.S. source income are eligible to participate in the plan immediately upon employment. There was no contribution made by the Company in 2020 or 2019.

 

13. Litigation

 

Culpepper Travel Expenses and Related Collection Efforts

 

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

 

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

 

F- 24

 

 

Culpepper disputed that he was terminated “for cause” under the Culpepper Employment Agreement. On June 28, 2017, pursuant to the alternative dispute resolution provisions of that agreement, the Company and Culpepper participated in a mediation of their dispute. Having reached no resolution during the mediation, the parties participated in arbitration under the commercial rules of the American Arbitration Association, arbitrating Culpepper’s claim against the Company for severance and the Company’s claims against Culpepper for improper expense reimbursements and amounts Culpepper owed the Company under the Derivative Lawsuit Settlement. On September 12, 2018, the arbitrator issued his final award in favor of the Company.

 

On October 4, 2018, the Company filed a petition with the Chancery Court for Davidson County, Tennessee to confirm the arbitration award. On January 23, 2019, the Chancery Court entered an order confirming the arbitrator’s award. On February 20, 2019, Culpepper filed a motion to alter or amend the Chancery Court’s judgment. On March 22, 2019, the Chancery Court upheld the arbitration award in favor of the Company.

 

On April 16, 2019, Culpepper filed a Notice of Appeal with the Tennessee Court of Appeals regarding the Chancery Court’s judgment. The Company and Culpepper submitted their respective court of appeal briefs on November 12, 2019 and December 3, 2019, respectively. Oral arguments were held on January 7, 2020. On April 14, 2020, the Court of Appeals affirmed the Chancery Court’s judgment and awarded court costs to the Company.

 

On June 16, 2020, Culpepper filed an application to the Supreme Court of Tennessee for permission to appeal the Court of Appeals’ final decision. On June 30, 2020, the Company filed an answer to the Supreme Court in opposition to Culpepper’s application for permission to appeal. On August 5, 2020, the Supreme Court of Tennessee denied Culpepper’s application.

 

On November 3, 2020, Culpepper filed a petition for writ of certiorari to the Supreme Court of the United States “SCOTUS”). The petition for writ of certiorari was denied by the Supreme Court on January 11, 2021. There are no further avenues for appeal for Culpepper.

 

14. Subsequent Events

 

Convertible Notes Payable

 

Subsequent to December 31, 2020, the Company entered into a 2020 Note with a non-related party accredited investor in the aggregate principal amount of $1,200,000 in connection with 2nd Loans received by the Company for the same amount. None of the proceeds were received from a related party.

 

Exercise of Warrants

 

In addition, holders of 4,500,000 warrants to purchase the common stock of the Company at $0.0533 per share, have exercised these warrants. The Company has received proceeds in the aggregate amount of $239,850.

 

F- 25

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

Not applicable.

 

ITEM 9A. CONTROLS AND PROCEDURES.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures by us are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of the period covered by this report based on the criteria for effective internal control described in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the results of management’s assessment and evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.

 

Evaluation of Disclosure Controls and Procedures

 

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 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 SEC 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 fourth quarter of 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION.

 

None.

 

25

 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

The information called for by this item is incorporated herein by reference to the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act.

 

ITEM 11. EXECUTIVE COMPENSATION.

 

The information called for by this item is incorporated herein by reference to the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The information called for by this item is incorporated herein by reference to the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

The information called for by this item is incorporated herein by reference to the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

The information called for by this item is incorporated herein by reference to the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act.

 

26

 

 

PART IV

 

ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.

 

Financial Statements

 

All financial statements are set forth under Part II, Item 8 of this report.

 

Financial Statement Schedules

 

None

 

Exhibits

 

Exhibit    
No.   Description
     
3.1   Certificate of Incorporation of Provectus Biopharmaceuticals, Inc., as amended (incorporated by reference to Exhibit 3.1 of the Company’s annual report on Form 10-K filed with the SEC on March 31, 2017).
     
3.2   Certificate of Designation for the Company’s Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of the Company’s current report on Form 8-K filed with the SEC on August 25, 2016).
     
3.3   Bylaws of Provectus Biopharmaceuticals, Inc. (incorporated by reference to Exhibit 3.4 of the Company’s annual report on Form 10-K filed with the SEC on March 13, 2014).
     
4.1   Specimen certificate for the Common Stock, par value $0.001 per share, of the Company (incorporated by reference to Exhibit 4.1 of the Company’s annual report on Form 10-KSB filed with the SEC on April 15, 2003).
     
4.2   Specimen certificate for the Common Stock, par value $0.001 per share, of the Company (incorporated by reference to Exhibit 4.1 to the Company’s registration statement on Form S-4, Commission File No. 333-208816, filed with the SEC on December 31, 2015).
     
4.3   Form of Warrant (incorporated by reference to Exhibit 4.1 of the Company’s current report on Form 8-K filed with the SEC on August 25, 2016).
     
4.4†   Description of Securities.
     
10.1*   Confidentiality, Inventions and Non-Competition Agreement dated as of November 26, 2002 between the Company and Timothy C. Scott (incorporated by reference to Exhibit 10.9 of the Company’s annual report on Form 10-KSB filed with the SEC on April 15, 2003).
     
10.2*   Confidentiality, Inventions and Non-Competition Agreement dated as of November 26, 2002, between the Company and Eric A. Wachter (incorporated by reference to Exhibit 10.10 of the Company’s annual report on Form 10-KSB filed with the SEC on April 15, 2003).
     
10.3   Material Transfer Agreement dated as of July 31, 2003 between Schering-Plough Animal Health Corporation and the Company (incorporated by reference to Exhibit 10.15 of the Company’s quarterly report on Form 10-QSB filed with the SEC on August 14, 2003).
     
10.4   Controlled Equity OfferingSM Sales Agreement, dated April 30, 2014, by and between Provectus Biopharmaceuticals, Inc. and Cantor Fitzgerald & Co. (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on April 30, 2014).
     
10.5   Stipulated Settlement Agreement and Mutual Release, dated June 6, 2014, by and among the Company as nominal defendant, H. Craig Dees, Timothy C. Scott, Eric A. Wachter, Peter R. Culpepper, Stuart Fuchs, Kelly M. McMasters, and Alfred E. Smith, IV, as defendants, and Glenn Kleba and Don B. Dale, as plaintiffs (Exhibits Omitted) (incorporated by reference to Exhibit 10.6 of the Company’s quarterly report on Form 10-Q filed with the SEC on August 7, 2014).

 

27

 

 

10.6   Form of Securities Purchase Agreement between Provectus Biopharmaceuticals, Inc. and the purchasers named therein (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on August 25, 2016) (exhibits and schedules have been omitted, and the Company agrees to furnish to the Commission a copy of any omitted exhibits and schedules upon request).
     
10.7   Warrant Agency Agreement, dated August 30, 2016, by and between Provectus Biopharmaceuticals, Inc. and Broadridge Corporate Issuer Solutions, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on August 30, 2016).
     
10.8   Convertible Promissory Note dated February 21, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on February 21, 2017).
     
10.9   Definitive Financing Commitment Term Sheet dated March 19, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s quarterly report on Form 10-Q filed with the SEC on May 10, 2017).
     
10.10   Secured Convertible Promissory Note between the Company and Cal Enterprises LLC, dated April 3, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on April 4, 2017).
     
10.11   First Amendment to Amended and Restated Secured Convertible Promissory Note between the Company and CAL Enterprises LLC, dated January 22, 2018 (incorporated by reference to Exhibit 10.4 of the Company’s quarterly report on Form 10-Q filed with the SEC on May 9, 2018).
     
10.12   Amended and Restated Secured Convertible Promissory Note between the Company and Eric A. Wachter, dated April 3, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on April 4, 2017).
     
10.13   Second Amendment to Amended and Restated Secured Convertible Promissory Note between the Company and Eric Wachter, Ph.D., dated January 22, 2018 (incorporated by reference to Exhibit 10.1 of the Company’s quarterly report on Form 10-Q filed with the SEC on May 9, 2018).
     
10.14   Third Amendment to Amended and Restated Secured Convertible Promissory Note between the Company and Eric Wachter, Ph.D., dated January 22, 2018 (incorporated by reference to Exhibit 10.2 of the Company’s quarterly report on Form 10-Q filed with the SEC on May 9, 2018).
     
10.15   Fourth Amendment to Amended and Restated Secured Convertible Promissory Note between the Company and Eric Wachter, Ph.D., dated January 22, 2018 (incorporated by reference to Exhibit 10.3 of the Company’s quarterly report on Form 10-Q filed with the SEC on May 9, 2018).
     
10.16   Secured Convertible Promissory Note between the Company and Eric A. Wachter, dated January 25, 2018 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed on January 30, 2018).
     
10.17   Secured Convertible Promissory Note between the Company and Timothy C. Scott, dated February 23, 2018 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed on February 26, 2018).
     
10.18   Secured Convertible Promissory Note between the Company and Edward V. Pershing, dated July 26, 2018 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed on July 30, 2018).
     
10.19   2020 Definitive Financing Term Sheet (incorporated by reference to Exhibit 10.39 to the Company’s annual report on Form 10-K filed with the SEC on March 5, 2020).

 

28

 

 

10.20   Form of PRH 2 Secured Convertible Promissory Note (incorporated by reference to Exhibit 4.1 of the Company’s current report on Form 8-K filed January 7, 2020).
     
10.21*   Provectus Pharmaceuticals, Inc. 2012 Stock Plan (incorporated herein by reference to Appendix A of the Company’s definitive proxy statement filed with the SEC on April 30, 2012).
     
10.22*   2017 Amendment and Restatement of the Provectus Biopharmaceuticals, Inc. 2014 Equity Compensation Plan (incorporated herein by reference to Appendix A of the Company’s definitive proxy statement filed with the SEC on April 27, 2017).
     
10.23*   Independent Contractor Agreement, dated April 19, 2017, between the Company and Bruce Horowitz (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on April 20, 2017).
     
10.24*   Amendment No. 1 to the Independent Contractor Agreement, dated May 9, 2017, between the Company and Bruce Horowitz (incorporated by reference to Exhibit 10.6 of the Company’s quarterly report on Form 10-Q filed with the SEC on August 9, 2017).
     
10.25*   Amendment No. 2 to the Independent Contractor Agreement dated April 19, 2017 between the Company and Bruce Horowitz, dated May 8, 2019 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed May 9, 2019).
     
10.26*   Employment Agreement between the Company and Heather Raines, CPA, dated March 25, 2019 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed on March 25, 2019).
     
10.27*   Executive Employment Agreement between the Company and Eric A. Wachter, Ph.D., dated May 17, 2019 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed May 20, 2019).
     
10.28   Indemnification Agreement between the Company and Dominic Rodrigues, dated April 3, 2017 (incorporated by reference to Exhibit 10.3 of the Company’s current report on Form 8-K filed with the SEC on April 4, 2017).
     
10.29   Indemnification Agreement between the Company and Bruce Horowitz, dated April 3, 2017 (incorporated by reference to Exhibit 10.4 of the Company’s current report on Form 8-K filed with the SEC on April 4, 2017).
     
10.30   Indemnification Agreement between the Company and Ed Pershing, dated April 19, 2018 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed on April 24, 2018).
     
10.31   Indemnification Agreement between the Company and Jack Lacey, MD, dated April 19, 2018 (incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed on April 24, 2018).
     
10.32   Indemnification Agreement between the Company and Webster Bailey, effective as of July 20, 2020 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed on July 16, 2020).
     
14   Code of Ethics (incorporated by reference to Exhibit 14 of the Company’s annual report on Form 10-K filed with the SEC on March 16, 2011).
     
21     Subsidiaries of the Company (incorporated by reference to Exhibit 21 of the Company’s annual report on Form 10-K filed with the SEC on March 31, 2017).

 

29

 

 

31.1†   Certification of Principal Executive Officer pursuant to Rules 13a-14(a) of the Securities Exchange Act of 1934.
     
31.2†   Certification of Principal Financial Officer pursuant to Rules 13a-14(a) of the Securities Exchange Act of 1934.
     
32††   Certification Pursuant to 18 U.S.C. Section 1350.
     
101†   The following financial information from Provectus Biopharmaceuticals, Inc.’s Annual Report on Form 10-K for the period ended December 31, 2020, filed with the SEC on March 2, 2021, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheet as of December 31, 2020 and 2019; (ii) the Consolidated Statements of Operations for the years ended December 31, 2020 and 2019; (iii) the Consolidated Statements of Equity for the years ended December 31, 2020 and 2019; (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019; and (v) Notes to Consolidated Financial Statements.

 

Filed herewith.
†† Furnished herewith.
* Indicates a management contract or compensatory plan or arrangement.

 

ITEM 16. FORM 10-K SUMMARY.

 

None.

 

30

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

March 2, 2021

 

  PROVECTUS BIOPHARMACEUTICALS, INC.
   
  By: /s/ Bruce Horowitz                    
    Bruce Horowitz
    Chief Operating Officer (principal executive officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ Heather Raines   Chief Financial Officer   March 2, 2021
Heather Raines, CPA   (principal financial officer and principal accounting officer)    
         
/s/ Bruce Horowitz   Director and Chief Operating Officer   March 2, 2021
Bruce Horowitz   (principal executive officer)    
         
/s/ Webster Bailey   Director   March 2, 2021
Webster Bailey        
         
/s/ John W. Lacey, III, MD   Director   March 2, 2021
John W. Lacey, III, MD        
         
/s/ Ed Pershing   Director and Chairman of the Board   March 2, 2021
Ed Pershing        
         
/s/ Dominic Rodrigues   Director and Vice Chairman of the Board   March 2, 2021
Dominic Rodrigues        

 

31

 

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