the
Securities Act of 1933, as amended
Registration
No. 333-147783
Prospectus
Supplement No. 3
22,436,231
Shares of Common Stock
This
prospectus supplement No. 3 supplements and amends the prospectus dated June 11,
2009, which constitutes a part of the Post Effective Amendment No. 1 to
Registration Statement on Form SB-2 (No. 333-147783) as initially filed with the
Securities and Exchange Commission on December 3, 2007, as subsequently amended
prior to effectiveness on January 7, 2008 and January 28, 2008, and which was
supplemented and amended by prospectus supplement No. 1 dated June 29, 2009 and
prospectus supplement No. 2 dated August 13, 2009, referred to herein as the
Prospectus. This prospectus supplement includes our attached Quarterly
Report on Form 10-Q for the quarter ended September 30, 2009 dated and filed
with the Securities and Exchange Commission on November 16, 2009.
This
prospectus supplement should be read in conjunction with the Prospectus, which
is to be delivered with this prospectus supplement. This prospectus
supplement is qualified by reference to the Prospectus, as supplemented to date,
except to the extent that the information in this prospectus supplement updates
or supersedes the information contained in the Prospectus, including any
supplements and amendments thereto.
This
prospectus supplement is not complete without, and may not be delivered or
utilized except in connection with, the Prospectus, including any supplements
and amendments thereto.
AS
YOU REVIEW THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT, YOU SHOULD CAREFULLY
CONSIDER THE MATTERS DESCRIBED IN “RISK FACTORS,” BEGINNING ON PAGE 3 OF THE
PROSPECTUS.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION, NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus supplement is November 17, 2009.
United
States
Securities
And Exchange Commission
Washington,
DC 20549
FORM
10-Q
(Mark
One)
x Quarterly
Report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarterly period ended
September 30, 2009
OR
o Transition Report
under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from
__________ to _______________
Commission
file number: 0-9410
Provectus Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified
in its Charter)
|
Nevada
|
90-0031917
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification Number)
|
7327
Oak Ridge Highway Suite A, Knoxville, TN 37931
(Address
of Principal Executive Offices)
866/594-5999
(Issuer's
Telephone Number, Including Area Code)
N/A
(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the
registrant: (1) filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x No o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. (Check one):
Large Accelerated
Filer o Accelerated
Filer o
Non-Accelerated
Filer o Smaller
reporting company x
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.
Yes o No x
The number of shares outstanding of the issuer's stock, $0.001 par value
per share, as of September 30, 2009 was 64,909,452.
Transitional Small Business Disclosure
Format (check one): Yes o No x
Item
1. Financial Statements
PROVECTUS
PHARMACEUTICALS, INC.
(A
Development-Stage Company)
CONSOLIDATED
BALANCE SHEETS
|
September 30, 2009
|
December 31, 2008
|
|||||||
|
(Unaudited)
|
(Audited)
|
|||||||
|
Assets
|
||||||||
|
Current Assets
|
||||||||
|
Cash and cash
equivalents
|
$ | 3,780,460 | $ | 2,796,020 | ||||
|
Prepaid
expenses and other current assets
|
18,637 | 50,691 | ||||||
|
Total Current Assets
|
3,799,097 | 2,846,711 | ||||||
|
Equipment and Furnishings, less accumulated depreciation
of and $398,175 and
$391,233,
respectively
|
26,748 | 33,690 | ||||||
|
Patents, net of amortization of $4,608,357 and $4,105,017,
respectively
|
7,107,088 | 7,610,428 | ||||||
|
Other assets
|
27,000 | 27,000 | ||||||
| $ | 10,959,933 | $ | 10,517,829 | |||||
|
Liabilities and Stockholders' Equity
|
||||||||
|
Current Liabilities
|
||||||||
|
Accounts
payable – trade
|
$ | 110,784 | $ | 267,093 | ||||
|
Accrued
compensation and payroll taxes
|
352,384 | 79,955 | ||||||
|
Accrued
consulting expense
|
65,624 | 66,250 | ||||||
|
Other accrued
expenses
|
305,000 | 48,995 | ||||||
|
Total Current Liabilities
|
833,792 | 462,293 | ||||||
|
Stockholders' Equity
Preferred
stock; par value $.001 per share; 25,000,000 shares authorized; no
shares
issued and
outstanding
|
-- | -- | ||||||
|
Common stock; par value $.001 per share; 100,000,000 shares
authorized;
64,909,452 and 53,017,076 shares issued and
outstanding,
respectively
|
64,909 | 53,017 | ||||||
|
Paid-in
capital
|
74,745,355 | 65,478,126 | ||||||
|
Deficit
accumulated during the development stage
|
(64,684,123 | ) | (55,475,607 | ) | ||||
|
Total
Stockholders' Equity
|
10,126,141 | 10,055,536 | ||||||
| $ | 10,959,933 | $ | 10,517,829 | |||||
See accompanying notes to consolidated financial
statements.
1
PROVECTUS
PHARMACEUTICALS, INC.
(A
Development-Stage Company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
Three
Months Ended
September 30, 2009
|
Three
Months
Ended
September
30, 2008
|
Nine
Months Ended
September 30, 2009
|
Nine
Months Ended
September 30, 2008
|
Cumulative Amounts from January 17, 2002 (Inception) Through
September 30, 2009
|
||||||||||||||||
|
Revenues
|
||||||||||||||||||||
|
OTC product
revenue
|
$ | -- | $ | -- | $ | -- | $ | -- | $ | 25,648 | ||||||||||
|
Medical device
revenue
|
-- | -- | -- | -- | 14,109 | |||||||||||||||
|
Total revenues
|
-- | -- | -- | -- | 39,757 | |||||||||||||||
|
Cost of sales
|
-- | -- | -- | -- | 15,216 | |||||||||||||||
|
Gross profit
|
-- | -- | -- | -- | 24,541 | |||||||||||||||
|
Operating expenses
|
||||||||||||||||||||
|
Research and development
|
1,210,145 | 1,092,005 | 3,691,471 | 3,403,789 | 19,650,252 | |||||||||||||||
|
General and administrative
|
1,445,275 | 1,166,588 | 5,017,442 | 3,630,028 | 32,230,320 | |||||||||||||||
|
Amortization
|
167,780 | 167,780 | 503,340 | 503,340 | 4,608,357 | |||||||||||||||
|
Total operating loss
|
(2,823,200 | ) | (2,426,373 | ) | (9,212,253 | ) | (7,537,157 | ) | (56,464,388 | ) | ||||||||||
|
Gain on sale of fixed assets
|
-- | -- | -- | -- | 55,075 | |||||||||||||||
|
Loss on extinguishment of debt
|
-- | -- | -- | -- | (825,867 | ) | ||||||||||||||
|
Investment income
|
2,459 | 12,849 | 3,737 | 71,759 | 649,061 | |||||||||||||||
|
Interest expense
|
-- | -- | -- | -- | (8,098,004 | ) | ||||||||||||||
|
Net loss
|
$ | (2,820,741 | ) | $ | (2,413,524 | ) | $ | (9,208,516 | ) | $ | (7,465,398 | ) | $ | (64,684,123 | ) | |||||
|
Basic and diluted loss per
common share
|
$ | (0.05 | ) | $ | (0.05 | ) | $ | (0.16 | ) | $ | (0.15 | ) | ||||||||
|
Weighted average number of
common shares outstanding –
basic and diluted
|
62,398,519 | 51,576,330 | 57,655,864 | 50,817,198 | ||||||||||||||||
See accompanying notes to consolidated financial
statements.
2
PROVECTUS
PHARMACEUTICALS, INC.
(A
Development-Stage Company)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
|
Common
Stock
|
||||||||||||||||||||
|
Number
of shares
|
Par
value
|
Paid-in
capital
|
Accumulated
deficit
|
Total
|
||||||||||||||||
|
Balance,
at January 17, 2002
|
-- | $ | -- | $ | -- | $ | -- | $ | -- | |||||||||||
|
Issuance
to founding shareholders
|
6,000,000 | 6,000 | (6,000 | ) | -- | -- | ||||||||||||||
|
Sale
of stock
|
50,000 | 50 | 24,950 | -- | 25,000 | |||||||||||||||
|
Issuance
of stock to employees
|
510,000 | 510 | 931,490 | -- | 932,000 | |||||||||||||||
|
Issuance
of stock for services
|
120,000 | 120 | 359,880 | -- | 360,000 | |||||||||||||||
|
Net
loss for the period from January 17, 2002 (inception) to April 23,
2002 (date of reverse merger)
|
-- | -- | -- | (1,316,198 | ) | (1,316,198 | ) | |||||||||||||
|
Balance,
at April 23, 2002
|
6,680,000 | $ | 6,680 | $ | 1,310,320 | $ | (1,316,198 | ) | $ | 802 | ||||||||||
|
Shares
issued in reverse merger
|
265,763 | 266 | (3,911 | ) | -- | (3,645 | ) | |||||||||||||
|
Issuance
of stock for services
|
1,900,000 | 1,900 | 5,142,100 | -- | 5,144,000 | |||||||||||||||
|
Purchase
and retirement of stock
|
(400,000 | ) | (400 | ) | (47,600 | ) | -- | (48,000 | ) | |||||||||||
|
Stock
issued for acquisition of Valley Pharmaceuticals
|
500,007 | 500 | 12,225,820 | -- | 12,226,320 | |||||||||||||||
|
Exercise
of warrants
|
452,919 | 453 | -- | -- | 453 | |||||||||||||||
|
Warrants
issued in connection with convertible debt
|
-- | -- | 126,587 | -- | 126,587 | |||||||||||||||
|
Stock
and warrants issued for acquisition of Pure-ific
|
25,000 | 25 | 26,975 | -- | 27,000 | |||||||||||||||
|
Net
loss for the period from April 23, 2002 (date of reverse merger) to
December 31, 2002
|
-- | -- | -- | (5,749,937 | ) | (5,749,937 | ) | |||||||||||||
|
Balance,
at December 31, 2002
|
9,423,689 | $ | 9,424 | $ | 18,780,291 | $ | (7,066,135 | ) | $ | 11,723,580 | ||||||||||
|
Issuance
of stock for services
|
764,000 | 764 | 239,036 | -- | 239,800 | |||||||||||||||
|
Issuance
of warrants for services
|
-- | -- | 145,479 | -- | 145,479 | |||||||||||||||
|
Stock
to be issued for services
|
-- | -- | 281,500 | -- | 281,500 | |||||||||||||||
|
Employee
compensation from stock options
|
-- | -- | 34,659 | -- | 34,659 | |||||||||||||||
|
Issuance
of stock pursuant to Regulation S
|
679,820 | 680 | 379,667 | -- | 380,347 | |||||||||||||||
|
Beneficial
conversion related to convertible debt
|
-- | -- | 601,000 | -- | 601,000 | |||||||||||||||
|
Net
loss for the year ended December 31, 2003
|
-- | -- | -- | (3,155,313 | ) | (3,155,313 | ) | |||||||||||||
|
Balance,
at December 31, 2003
|
10,867,509 | $ | 10,868 | $ | 20,461,632 | $ | (10,221,448 | ) | $ | 10,251,052 | ||||||||||
|
Issuance
of stock for services
|
733,872 | 734 | 449,190 | -- | 449,923 | |||||||||||||||
|
Issuance
of warrants for services
|
-- | -- | 495,480 | -- | 495,480 | |||||||||||||||
|
Exercise
of warrants
|
132,608 | 133 | 4,867 | -- | 5,000 | |||||||||||||||
|
Employee
compensation from stock options
|
-- | -- | 15,612 | -- | 15,612 | |||||||||||||||
|
Issuance
of stock pursuant to Regulation S
|
2,469,723 | 2,469 | 790,668 | -- | 793,137 | |||||||||||||||
|
Issuance
of stock pursuant to Regulation D
|
1,930,164 | 1,930 | 1,286,930 | -- | 1,288,861 | |||||||||||||||
|
Beneficial
conversion related to convertible debt
|
-- | -- | 360,256 | -- | 360,256 | |||||||||||||||
|
Issuance
of convertible debt with warrants
|
-- | -- | 105,250 | -- | 105,250 | |||||||||||||||
|
Repurchase
of beneficial conversion feature
|
-- | -- | (258,345 | ) | -- | (258,345 | ) | |||||||||||||
|
Net
loss for the year ended December 31, 2004
|
-- | -- | -- | (4,344,525 | ) | (4,344,525 | ) | |||||||||||||
|
Balance,
at December 31, 2004
|
16,133,876 | $ | 16,134 | $ | 23,711,540 | $ | (14,565,973 | ) | $ | 9,161,701 | ||||||||||
|
Issuance
of stock for services
|
226,733 | 227 | 152,058 | -- | 152,285 | |||||||||||||||
|
Issuance
of stock for interest payable
|
263,721 | 264 | 195,767 | -- | 196,031 | |||||||||||||||
|
Issuance
of warrants for services
|
-- | -- | 1,534,405 | -- | 1,534,405 | |||||||||||||||
|
Issuance
of warrants for contractual obligations
|
-- | -- | 985,010 | -- | 985,010 | |||||||||||||||
|
Exercise
of warrants and stock options
|
1,571,849 | 1,572 | 1,438,223 | -- | 1,439,795 | |||||||||||||||
|
Employee
compensation from stock options
|
-- | -- | 15,752 | -- | 15,752 | |||||||||||||||
|
Issuance
of stock pursuant to Regulation D
|
6,221,257 | 6,221 | 6,506,955 | -- | 6,513,176 | |||||||||||||||
|
Debt
conversion to common stock
|
3,405,541 | 3,405 | 3,045,957 | -- | 3,049,795 | |||||||||||||||
|
Issuance
of warrants with convertible debt
|
-- | -- | 1,574,900 | -- | 1,574,900 | |||||||||||||||
|
Beneficial
conversion related to convertible debt
|
-- | -- | 1,633,176 | -- | 1,633,176 | |||||||||||||||
|
Beneficial
conversion related to interest expense
|
-- | -- | 39,259 | -- | 39,529 | |||||||||||||||
|
Repurchase
of beneficial conversion feature
|
-- | -- | (144,128 | ) | -- | (144,128 | ) | |||||||||||||
|
Net
loss for the year ended 2005
|
-- | -- | -- | (11,763,853 | ) | (11,763,853 | ) | |||||||||||||
|
Balance,
at December 31, 2005
|
27,822,977 | $ | 27,823 | $ | 40,689,144 | $ | (26,329,826 | ) | $ | 14,387,141 | ||||||||||
|
Issuance
of stock for services
|
719,246 | 719 | 676,024 | -- | 676,743 | |||||||||||||||
|
Issuance
of stock for interest payable
|
194,327 | 195 | 183,401 | -- | 183,596 | |||||||||||||||
|
Issuance
of warrants for services
|
-- | -- | 370,023 | -- | 370,023 | |||||||||||||||
|
Exercise
of warrants and stock options
|
1,245,809 | 1,246 | 1,188,570 | -- | 1,189,816 | |||||||||||||||
|
Employee
compensation from stock options
|
-- | -- | 1,862,456 | -- | 1,862,456 | |||||||||||||||
|
Issuance
of stock pursuant to Regulation D
|
10,092,495 | 10,092 | 4,120,329 | -- | 4,130,421 | |||||||||||||||
|
Debt
conversion to common stock
|
2,377,512 | 2,377 | 1,573,959 | -- | 1,576,336 | |||||||||||||||
|
Beneficial
conversion related to interest expense
|
-- | -- | 16,447 | -- | 16,447 | |||||||||||||||
|
Net
loss for the year ended 2006
|
-- | -- | -- | (8,870,579 | ) | (8,870,579 | ) | |||||||||||||
3
|
Balance,
at December 31, 2006
|
42,452,366 | $ | 42,452 | $ | 50,680,353 | $ | (35,200,405 | ) | $ | 15,522,400 | ||||||||||
|
Issuance
of stock for services
|
150,000 | 150 | 298,800 | -- | 298,950 | |||||||||||||||
|
Issuance
of stock for interest payable
|
1,141 | 1 | 1,257 | -- | 1,258 | |||||||||||||||
|
Issuance
of warrants for services
|
-- | -- | 472,635 | -- | 472,635 | |||||||||||||||
|
Exercise
of warrants and stock options
|
3,928,957 | 3,929 | 3,981,712 | -- | 3,985,641 | |||||||||||||||
|
Employee
compensation from stock options
|
-- | -- | 2,340,619 | -- | 2,340,619 | |||||||||||||||
|
Issuance
of stock pursuant to Regulation D
|
2,376,817 | 2,377 | 1,845,761 | -- | 1,848,138 | |||||||||||||||
|
Debt
conversion to common stock
|
490,000 | 490 | 367,010 | -- | 367,500 | |||||||||||||||
|
Net
loss for the year ended 2007
|
-- | -- | -- | (10,005,631 | ) | (10,005,631 | ) | |||||||||||||
|
Balance,
at December 31, 2007
|
49,399,281 | $ | 49,399 | $ | 59,988,147 | $ | (45,206,036 | ) | $ | 14,831,510 | ||||||||||
|
Issuance
of stock for services
|
350,000 | 350 | 389,650 | -- | 390,000 | |||||||||||||||
|
Issuance
of warrants for services
|
-- | -- | 517,820 | -- | 517,820 | |||||||||||||||
|
Exercise
of warrants and stock options
|
3,267,795 | 3,268 | 2,636,443 | -- | 2,639,711 | |||||||||||||||
|
Employee
compensation from stock options
|
-- | -- | 1,946,066 | -- | 1,946,066 | |||||||||||||||
|
Net
loss for the year ended 2008
|
-- | -- | -- | (10,269,571 | ) | (10,269,571 | ) | |||||||||||||
|
Balance, at December 31, 2008
|
53,017,076 | $ | 53,017 | $ | 65,478,126 | $ | (55,475,607 | ) | $ | 10,055,536 | ||||||||||
|
Issuance of stock for services
|
621,012 | 621 | 532,879 | -- | 533,500 | |||||||||||||||
|
Issuance of warrants for services
|
-- | -- | 474,783 | -- | 474,783 | |||||||||||||||
|
Exercise of warrants and stock options
|
3,044,151 | 3,044 | 2,174,275 | -- | 2,177,319 | |||||||||||||||
|
Employee compensation from stock options
|
-- | -- | 870,937 | -- | 870,937 | |||||||||||||||
|
Issuance of stock pursuant to Regulation D
|
8,227,213 | 8,227 | 5,214,355 | -- | 5,222,582 | |||||||||||||||
|
Net loss for the nine months ended September 30, 2009
|
-- | -- | -- | (9,208,516 | ) | (9,208,516 | ) | |||||||||||||
|
Balance, at September 30, 2009
|
64,909,452 | $ | 64,909 | $ | 74,745,355 | $ | (64,684,123 | ) | $ | 10,126,141 |
See
accompanying notes to consolidated financial statements.
4
PROVECTUS
PHARMACEUTICALS, INC.
(A
Development-Stage Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
Nine
Months Ended
September 30, 2009
|
Nine
Months Ended
September 30, 2008
|
Cumulative
Amounts from January 17, 2002 (Inception) through
September 30, 2009
|
||||||||||
|
Cash
Flows From Operating Activities
|
||||||||||||
|
Net loss
|
$ | (9,208,516 | ) | $ | (7,465,398 | ) | $ | (64,684,123 | ) | |||
|
Adjustments to
reconcile net loss to net cash used in operating
activities
|
||||||||||||
|
Depreciation
|
6,942 | 6,942 | 421,176 | |||||||||
|
Amortization of
patents
|
503,340 | 503,340 | 4,608,357 | |||||||||
|
Amortization of
original issue discount
|
-- | -- | 3,845,721 | |||||||||
|
Amortization of
commitment fee
|
-- | -- | 310,866 | |||||||||
|
Amortization of
prepaid consultant expense
|
-- | -- | 1,295,226 | |||||||||
|
Amortization of
deferred loan costs
|
-- | -- | 2,261,584 | |||||||||
|
Accretion
of United States Treasury Notes
|
-- | (16,451 | ) | (373,295 | ) | |||||||
|
Loss on
extinguishment of debt
|
-- | -- | 825,867 | |||||||||
|
Loss on
exercise of warrants
|
-- | -- | 236,146 | |||||||||
|
Beneficial
conversion of convertible interest
|
-- | -- | 55,976 | |||||||||
|
Convertible
interest
|
-- | -- | 389,950 | |||||||||
|
Compensation through
issuance of stock options
|
870,937 | 1,580,316 | 7,086,101 | |||||||||
|
Compensation through
issuance of stock
|
-- | -- | 932,000 | |||||||||
|
Issuance
of stock for services
|
533,500 | 205,750 | 7,246,148 | |||||||||
|
Issuance
of warrants for services
|
474,783 | 133,356 | 2,008,407 | |||||||||
|
Issuance
of warrants for contractual obligations
|
-- | -- | 985,010 | |||||||||
|
Gain on
sale of equipment
|
-- | -- | (55,075 | ) | ||||||||
|
(Increase) decrease
in assets
|
||||||||||||
|
Prepaid
expenses and other current assets
|
32,054 | 35,159 | (18,637 | ) | ||||||||
|
Increase
(decrease) in liabilities
|
||||||||||||
|
Accounts
payable
|
(156,309 | ) | (331,783 | ) | 107,139 | |||||||
|
Accrued
expenses
|
527,808 | 118,686 | 872,638 | |||||||||
|
Net cash
used in operating activities
|
(6,415,461 | ) | (5,230,083 | ) | (31,642,818 | ) | ||||||
|
Cash
Flows from Investing Activities
|
||||||||||||
|
Proceeds
from sale of fixed assets
|
-- | -- | 180,075 | |||||||||
|
Capital
expenditures
|
-- | -- | (62,049 | ) | ||||||||
|
Increase
in cash in escrow
|
-- | (2,000,000 | ) | -- | ||||||||
|
Proceeds
from investments
|
-- | 14,043,000 | 37,010,481 | |||||||||
|
Purchases
of investments
|
-- | (9,121,544 | ) | (36,637,186 | ) | |||||||
|
Net cash
provided by investing activities
|
-- | 2,921,456 | 491,321 | |||||||||
|
Cash
Flows from Financing Activities
|
||||||||||||
|
Net
proceeds from loans from stockholder
|
-- | -- | 174,000 | |||||||||
|
Proceeds
from convertible debt
|
-- | -- | 6,706,795 | |||||||||
|
Net
proceeds from sales of common stock
|
5,222,582 | -- | 20,201,663 | |||||||||
|
Net
proceeds from exercises of warrants and stock options
|
2,177,319 | 2,405,045 | 11,201,589 | |||||||||
|
Cash paid
to retire convertible debt
|
-- | -- | (2,385,959 | ) | ||||||||
|
Cash paid
for deferred loan costs
|
-- | -- | (747,612 | ) | ||||||||
|
Premium
paid on extinguishments of debt
|
-- | -- | (170,519 | ) | ||||||||
|
Purchase
and retirement of common stock
|
-- | -- | (48,000 | ) | ||||||||
|
Net cash
provided by financing activities
|
7,399,901 | 2,405,045 | 34,931,957 | |||||||||
|
Net
change in cash and cash equivalents
|
$ | 984,440 | $ | 96,418 | $ | 3,780,460 | ||||||
|
Cash and
cash equivalents, at beginning of period
|
$ | 2,796,020 | $ | 352,389 | $ | -- | ||||||
|
Cash and
cash equivalents, at end of period
|
$ | 3,780,460 | $ | 448,807 | $ | 3,780,460 | ||||||
See
accompanying notes to consolidated financial statements.
5
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of
Presentation
The accompanying
unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information pursuant to Regulation
S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been
included. Operating results for the nine months ended September 30,
2009 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2009. The Company has evaluated subsequent
events through November 13, 2009, the date the financial statements were
issued.
2. Recapitalization and
Merger
Provectus Pharmaceuticals, Inc.,
formerly known as "Provectus Pharmaceutical, Inc." and "SPM Group, Inc.," was
incorporated under Colorado law on May 1, 1978. SPM Group ceased
operations in 1991, and became a development-stage company effective January 1,
1992, with the new corporate purpose of seeking out acquisitions of properties,
businesses, or merger candidates, without limitation as to the nature of the
business operations or geographic location of the acquisition
candidate.
On April 1, 2002, SPM Group changed its
name to "Provectus Pharmaceutical, Inc." and reincorporated in Nevada in
preparation for a transaction with Provectus Pharmaceuticals, Inc., a
privately-held Tennessee corporation ("PPI"). On April 23, 2002, an Agreement
and Plan of Reorganization between Provectus Pharmaceutical and PPI was approved
by the written consent of a majority of the outstanding shares of Provectus
Pharmaceutical. As a result, Provectus Pharmaceuticals, Inc. issued
6,680,000 shares of common stock in exchange for all of the issued and
outstanding shares of PPI. As part of the acquisition, Provectus
Pharmaceutical changed its name to "Provectus Pharmaceuticals, Inc." and PPI
became a wholly-owned subsidiary of Provectus. This transaction was
recorded as a recapitalization of PPI.
On November 19, 2002, the Company
acquired Valley Pharmaceuticals, Inc., a privately-held Tennessee corporation
formerly known as Photogen, Inc., by merging PPI with and into Valley and naming
the surviving corporation "Xantech Pharmaceuticals, Inc." Photogen, Inc. was
separated from Photogen Technologies, Inc. in a non-pro-rata split-off to some
of its shareholders. The assets of Photogen, Inc. consisted primarily
of the equipment and intangibles related to its therapeutic activity and were
recorded at their fair value. The majority shareholders of Valley
were also the majority shareholders of Provectus. Valley had no
revenues prior to the transaction with the Company. By acquiring
Valley, the Company acquired its intellectual property, including issued U.S.
patents and patentable inventions.
3. Basic and Diluted Loss Per Common
Share
Basic and diluted
loss per common share is computed based on the weighted average number of common
shares outstanding. Loss per share excludes the impact of outstanding
options and warrants as they are antidilutive. Potential common shares excluded
from the calculation at September 30, 2009 and 2008 relate to 21,114,703 and
20,520,617 from warrants, and 8,722,177 and 8,915,093 from
options. Included in the weighted average number of shares
outstanding are 169,673 common shares committed to be issued but not outstanding
at September 30, 2009.
4. Equity and Debt
Transactions
(a) During the
three months ended March 31, 2009, the Company issued 75,000 shares of common
stock to consultants in exchange for services. Consulting costs
charged to operations were $70,250. During the three months ended
June 30, 2009, the Company issued 275,000 shares of common stock to consultants
in exchange for services. Consulting costs charged to operations were
$317,500. During the three months ended September 30, 2009, the Company issued
145,000 shares of common stock to consultants in exchange for
services. Consulting costs charged to operations were $145,750.
(b) During the
three months ended March 31, 2009, the Company issued 243,612 warrants to
consultants in exchange for services. Consulting costs charged to
operations were $131,476. During the three months ended March 31,
2009, 292,112 warrants were exercised for $219,084 resulting in 292,112 shares
being issued. 292,112 of the warrants exercised had an exercise price
of $0.935 that was reduced to $0.75. Additional consulting costs of
$17,961 were charged to operations as a result of the reduction of the exercise
price of the 292,112 warrants. During the three months ended June 30,
2009, the Company issued 101,500 warrants to consultants in exchange for
services. Consulting costs charged to operations were
$49,684. During the three months ended June 30, 2009, 1,830,164
warrants were exercised for $1,380,124 resulting in 1,830,164 shares being
issued. 1,800,164 of the warrants exercised had an exercise price of
$0.935 that was reduced to $0.75. Additional consulting costs of
$118,833 were charged to operations as a result of the reduction of the exercise
price of the 1,800,164 warrants. Also, the Company paid $94,508 and
issued 126,012 shares of common stock at a fair market value of $151,214 to
Chicago Investment Group of Illinois, L.L.C. as a placement agent for this
transaction. The cash costs have been off-set against the proceeds
received and the shares of common stock are classified as stock for
services. During the three months ended June 30, 2009, 1,283,508
warrants were forfeited. During the three months ended September 30, 2009, the
Company issued 167,833 warrants to consultants in exchange for
services. Consulting costs charged to operations were
$110,941. During the three months ended September 30, 2009, 545,625
warrants were exercised for $409,219 resulting in 545,625 shares being
issued. 400,000 of the warrants exercised had an exercise price of
$0.98 that was reduced to $0.75. 145,625 of the warrants exercised had an
exercise price of $0.935 that was reduced to $0.75. Additional
consulting costs of $45,888 were charged to operations as a result of the
reduction of the exercise price of the 545,625 warrants. During the three months
ended September 30, 2009, 150,000 warrants were
forfeited.
6
(c) In May and
June 2009 the Company completed a private placement transaction with accredited
investors pursuant to which the Company sold a total of 1,750,000 shares of
common stock at a purchase price of $0.90 per share, for an aggregate purchase
price of $1,575,000. In connection with the sale of common stock, the
Company also issued warrants to the investors to purchase up to 875,000 shares
of common stock at an exercise price of $1.00 per share. The Company paid
$227,250 and issued 175,000 shares of common stock at a fair market value of
$197,750 to Maxim Group, LLC as a placement agent for this
transaction. The cash costs have been off-set against the proceeds
received, which are for general corporate purposes. During the three
months ended June 30, 2009, the Company completed a private placement
transaction with accredited investors pursuant to which the Company sold a total
of 2,868,994 shares of common stock at a purchase price of $0.75 per share, for
an aggregate purchase price of $2,151,749. 186,667 common shares are
committed to be issued but not outstanding at June 30, 2009, which were issued
in July 2009. In connection with the sale of common stock, the
Company also issued warrants to the investors to purchase up to 1,434,510 shares
of common stock at an exercise price of $1.50 per share. The Company paid
$255,323, has accrued $24,404 to be paid as of June 30, 2009, which was paid in
July 2009, and is committed to issue 286,900 shares of common stock at June 30,
2009 at a fair market value of $295,507 to Network 1 Financial Securities, Inc.
as placement agent for this transaction, which were issued in August
2009. The cash costs have been off-set against the proceeds received,
which are for general corporate purposes. In July 2009 the Company
completed a private placement transaction with accredited investors pursuant to
which the Company sold a total of 1,040,570 shares of common stock at a purchase
price of $0.75 per share, for an aggregate purchase price of
$780,427. In connection with the sale of common stock, the Company
also issued warrants to the investors to purchase up to 520,120 shares of common
stock at an exercise price of $1.50 per share. The Company paid
$101,485 and issued 100,016 shares of common stock in August 2009 at a fair
market value of $95,015 to Network 1 Financial Securities, Inc. as placement
agent for this transaction. The cash costs have been off-set against
the proceeds received, which are for general corporate purposes. In July and
September 2009 the Company completed a private placement transaction with a
total of two accredited investors pursuant to which the Company sold a total of
309,000 shares of common stock at a purchase price of $0.75 per share, for an
aggregate purchase price of $231,750. The proceeds received are for
general corporate purposes. In September 2009 the Company completed a
private placement transaction with accredited investors pursuant to which the
Company sold a total of 1,696,733 shares of common stock at a purchase price of
$0.75 per share, for an aggregate purchase price of $1,272,550. In
connection with the sale of common stock, the Company also issued warrants to
the investors to purchase up to 848,366 shares of common stock at an exercise
price of $1.00 per share. The Company paid $180,432 and is committed to issue
169,673 shares of common stock at a fair market value of $169,673 to Maxim
Group, LLC as a placement agent for this transaction. The cash costs
have been off-set against the proceeds received, which are for general corporate
purposes.
5. Stock-Based Compensation
One employee of the
Company exercised a total of 156,250 options during the three months ended June
30, 2009 at an exercise price of $0.64 per share of common stock for
$100,000. Another employee of the Company exercised a total of
150,000 options during the three months ended June 30, 2008 at an exercise price
of $0.64 per share of common stock for $96,000. On June 19, 2009, the
Company issued 250,000 stock options to its re-elected Members of the
Board. The options vested on the date of grant. The
exercise price is the fair market price on the date of issuance, and all options
were outstanding at June 30, 2009. One employee of the Company exercised options
during the three months ended September 30, 2009 at an exercise price of $1.02
per share of common stock for $20,400 for 20,000 options and an exercise price
of $0.94 per share of common stock for $47,000 for 50,000 options.
The compensation cost
relating to share-based payment transactions is measured based on the fair value
of the equity or liability instruments issued. For purposes of estimating the
fair value of each stock option on the date of grant, the Company utilized the
Black-Scholes option-pricing model. The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options, which have no
vesting restrictions and are fully transferable. In addition, 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 (as
determined by reviewing its historical public market closing prices). Because
the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. Included in the results
for the three and nine months ended September 30, 2009, is $0 and $870,937,
respectively, of stock-based compensation expense which relates to the fair
value of stock options. Included in the results for the three and
nine months ended September 30, 2008, is $425,085 and $1,580,316, respectively,
of stock-based compensation expense which relates to the fair value of stock
options.
6. Related Party
Transaction
The Company paid a
non-employee member of the Board $60,000 for consulting services performed and
issued 70,000 shares of common stock at a fair market alue of $70,000 as of
September 30, 2009.
7. Subsequent Events
The Company has
evaluated subsequent events through November 13, 2009, the date the financial
statements were issued. The Company has entered into a private
placement transaction with Network 1 Financial Securities, Inc. as placement
agent dated October 20, 2009, which allows for the sale of shares of common
stock at a purchase price of $0.75 per share and fifty percent warrant coverage
to purchase shares of common stock at an exercise price of $0.95 per
share.
7
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.
The following discussion is intended to
assist in the understanding and assessment of significant changes and trends
related to our results of operations and our financial condition together with
our consolidated subsidiaries. This discussion and analysis should be
read in conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Quarterly Report on Form 10-Q. Historical
results and percentage relationships set forth in the statement of operations,
including trends which might appear, are not necessarily indicative of future
operations.
Capital
Structure
Our ability to
continue as a going concern is reasonably assured due to our financing completed
thus far in 2009. Our existing funds are sufficient to meet minimal
necessary expenses during 2009 and throughout 2010.
We
have implemented our integrated business plan, including execution of the
current and next phases in clinical development of our pharmaceutical products
and continued execution of research programs for new research initiatives.
We
intend to proceed as rapidly as possible with a licensure of our dermatology
drug product candidate (PH-10) on the basis of our Phase 2 atopic dermatitis and
psoriasis results, which are in process of being completed. We intend
to also proceed as rapidly as possible with a majority stake asset sale and
subsequent licensure of our OTC products that can be sold with a minimum of
regulatory compliance and with the further development of revenue sources
through a majority stake asset sale and subsequent licensing of our existing
medical device, imaging, and biotech intellectual property portfolio. Although
we believe that there is a reasonable basis for our expectation that we will
become profitable due to both the licensure of PH-10 and the asset sale of a
majority stake via a spin-out transaction of the wholly-owned subsidiaries that
contain the non-core assets and subsequent licensure of our non-core products,
we cannot assure you that we will be able to achieve, or maintain, a level of
profitability sufficient to meet our operating expenses.
Our current plans
include continuing to operate with our four employees during the immediate
future, but we have added two additional consultants and anticipate adding two
more consultants in the next 12 months. Our current plans also include minimal
purchases of new property, plant and equipment, and maintenance research and
development for existing clinical trials.
Plan
of Operation
With the
reorganization of Provectus and PPI and the acquisition and integration into the
Company of Valley and Pure-ific, we believe we have obtained a unique
combination of core intellectual properties and OTC and other non-core products.
This combination represents the foundation for an operating company that we
believe will provide both profitability and long-term growth. In 2008
and thus far in 2009, we continued to carefully control expenditures in
preparation for both the licensure of PH-10 and the asset sale and licensure or
spin out of our OTC products, medical device, imaging, and biotech technologies,
and we will issue equity only when it makes sense and primarily for purposes of
attracting strategic investors. In the longer term, we expect to
continue the process of developing, testing and obtaining the approval of the U.
S. Food and Drug Administration for prescription drugs in particular.
We
have continued to make significant progress with the major research and
development projects, which we expect to complete in the next 9 months or
less. The Phase 2 trial in metastatic melanoma has been significantly
completed which is expected to cost approximately $92,000 during the remainder
of 2009 and has cost approximately $2,908,000 through September 30,
2009. Additionally, we planned $675,000 of expenditures in 2007 and
2008 to substantially advance our work with other oncology indications which
included the third group of our expanded Phase 1 breast carcinoma clinical
trial. The third group of our expanded Phase 1 breast carcinoma
clinical trial was completed in September 2008. Our Phase 2 psoriasis
trial commenced in November 2007 and is expected to cost approximately
$1,725,000, of which approximately $1,593,000 has been expended thus
far. Our Phase 2 atopic dermatitis trial commenced in May 2008 and
the cost is included in the psoriasis trial budget and actual
figures. Our Phase 1 liver cancer trial commenced in October 2009 and
is expected to cost approximately $600,000, of which approximately $505,000 has
been expended thus far. We anticipate expending $319,000 during the
remainder of 2009 for direct clinical trial expense. This includes
the remaining 2009 expenditures for all projects currently
planned. The table below summarizes our projects, the actual costs
expended to date and costs expected after September 30, 2009.
8
| Projects | Planned Project Cost |
Expenditures
through
September 30, 2009
|
Expected after
September 30, 2009
|
|||||||||
| Melanoma | $ | 3,000,000 | $ | 2,908,000 | $ | 92,000 | ||||||
| Breast/Other | $ | 675,000 | $ | 675,000 | $ | -0- | ||||||
| Psoriasis/AD | $ | 1,725,000 | $ | 1,593,000 | $ | 132,000 | ||||||
| Liver | $ | 600,000 | $ | 505,000 | $ | 95,000 | ||||||
Comparison
of Three and Nine Months Ended September 30, 2009 and September 30,
2008
Revenues
OTC Product Revenue
was $-0- in both the three and nine months ended September 30, 2009 and
2008. We discontinued our proof-of-concept program in November 2006
and have therefore ceased selling our OTC products. There was no
medical device revenue in both the three and nine months ended September 30,
2009 and 2008. The lack of medical device revenue resulted due to no
emphasis on selling. The Company has designated the OTC and medical
device products as non-core and is considering the sale of the underlying assets
in conjunction with the planned spin-out of the respective wholly-owned
subsidiaries.
Research and
development
Research and
development costs of $1,210,145 for the three months ended September 30, 2009
included payroll of $618,509, consulting and contract labor of $281,649, legal
of $83,206, insurance of $46,397, lab supplies and pharmaceutical preparations
of $165,157, rent and utilities of $12,913, and depreciation expense of
$2,314. Research and development costs of $1,092,005 for the three
months ended September 30, 2008 included payroll of $547,769, consulting and
contract labor of $369,567, legal of $79,733, insurance of $39,758, lab supplies
and pharmaceutical preparations of $34,622, rent and utilities of $18,242, and
depreciation expense of $2,314. The increase in payroll is the result
of an increase in salaries and bonuses as well as higher pension expense due to
quarterly versus annual allocation offset partially by lower stock-based
compensation expense. The decrease in consulting and contract labor
is primarily the result of less expense necessary to manage the Phase 2
metastatic melanoma clinical trial since enrollment was completed mid-second
quarter. The increase in lab supplies and pharmaceutical preparations
is primarily the result of preparing to meet requirements for any definitive
clinical studies necessary and for filing the eventual New Drug Approval
application of PV-10 to treat metastatic melanoma.
Research and
development costs of $3,691,471 for the nine months ended September 30, 2009
included payroll of $2,339,699, consulting and contract labor of $832,341, legal
of $168,549, insurance of $110,043, lab supplies and pharmaceutical preparations
of $191,981, rent and utilities of $41,916, and depreciation expense of
$6,942. Research and development costs of $3,403,789 for the nine
months ended September 30, 2008 included payroll of $2,039,578, consulting and
contract labor of $900,661, legal of $222,299, insurance of $76,737, lab
supplies and pharmaceutical preparations of $100,003, rent and utilities of
$57,569, and depreciation expense of $6,942. The increase in payroll
is the result of an increase in salaries and bonuses offset partially by lower
stock-based compensation expense as well as lower pension expense due to
quarterly versus annual allocation. The increase in lab supplies and
pharmaceutical preparations is primarily the result of preparing to meet
requirements for any definitive clinical studies necessary and for filing the
eventual New Drug Approval application of PV-10 to treat metastatic
melanoma.
General and administrative
General and
administrative expenses increased by $278,687 in the three months ended
September 30, 2009 to $1,445,275 from $1,166,588 for the three months ended
September 30, 2008. The increase resulted primarily from
approximately $220,000 of additional investor relation expenses, other
consulting and conference expenses. This increase was also a result
of approximately $75,000 in total payroll expenses from higher salaries and
bonuses as well as higher pension expense due to quarterly versus annual
allocation offset partially by no stock-based compensation.
General and
administrative expenses increased by $1,387,414 in the nine months ended
September 30, 2009 to $5,017,442 from $3,630,028 for the nine months ended
September 30, 2008. The increase resulted primarily from
approximately $1,000,000 of additional investor relation expenses, other
consulting and conference expenses. This increase was also a result
of approximately $400,000 in total payroll expenses from higher salaries and
bonuses offset partially by lower stock-based compensation expense as well as
lower pension expense due to quarterly versus annual allocation.
9
Investment
income
Investment income
decreased by $10,390 in the three months ended September 30, 2009 to $2,459 from
$12,849 in the three months ended September 30, 2008. The decrease
resulted due to lower interest rates on cash and cash equivalents as well as
lower balances in 2009 versus 2008.
Investment income
decreased by $68,022 in the nine months ended September 30, 2009 to $3,737 from
$71,759 in the nine months ended September 30, 2008. The decrease
resulted due to lower interest rates on cash and cash equivalents as well as
lower balances in 2009 versus 2008.
Cash Flow
Our cash and cash
equivalents were $3,780,460 at September 30, 2009, compared with $2,796,020 at
December 31, 2008. The increase of approximately $1,000,000 was due
primarily to cash provided of $7,399,901 from sales of equity securities and the
exercises of warrants and stock options during the nine months ended September
30, 2009 which was greater than cash used in operating activities. We
have maintained our expenditure rate in 2009 primarily with our clinical trial
projects and our investor relations efforts to communicate the progress of the
Company.
At
our current cash expenditure rate, our cash and cash equivalents will be
sufficient to meet our current and planned needs in 2009 and 2010 since we
expect additional cash inflows from the exercise of existing warrants and sales
of equity securities. If we do not have sufficient cash inflows from
the exercise of existing warrants and sales of equity securities, then we will
reduce administrative expenses including management salaries which will enable
us to meet minimum expenditures planned during the remainder of 2009 and
2010. Since we plan for $319,000 of direct clinical trial expense and
$150,000 of fixed expenses to operate during the remainder of 2009, we have
enough cash on hand to fund the remainder of 2009 operations with the cash on
hand at September 30, 2009.
We
are seeking to improve our cash flow through both the licensure of PH-10 on the
basis of our Phase 2 atopic dermatitis and psoriasis results, and the majority
stake asset sale and licensure of our OTC products as well as other non-core
assets. However, we cannot assure you that we will be successful in
either licensing PH-10 or selling a majority stake of the OTC and other non-core
assets via a spin-out transaction and licensing our existing non-core
products. Moreover, even if we are successful in improving our
current cash flow position, we nonetheless plan to seek additional funds to meet
our long-term requirements in 2010 and beyond. We anticipate that
these funds will otherwise come from the proceeds of private placements, the
exercise of existing warrants outstanding, or public offerings of debt or equity
securities.
Capital Resources
As
noted above, our present cash flow is currently sufficient to meet our
short-term operating needs. Excess cash will be used to finance the
next phases in clinical development of our pharmaceutical
products. We anticipate that any required funds for our operating and
development needs beyond 2009 and 2010 will come from the proceeds of private
placements, the exercise of existing warrants outstanding, or public offerings
of debt or equity securities, unless we are successful with our plans for our
dermatology drug product candidate portfolio and/or our non-core assets, and
then we will likely have sufficient cash inflows. 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 shareholders.
Critical
Accounting Policies
Long-Lived
Assets
We
review the carrying values of our 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.
Patent Costs
Internal patent costs
are expensed in the period incurred. Patents purchased are capitalized and
amortized over their remaining lives, which range from 8-13
years. Annual amortization of the patents is expected to be
approximately $671,000 for the next year.
10
Stock-Based Compensation
We adopted Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718
“Compensation – Stock Based Compensation” (formerly FAS 123R), effective January
1, 2006 under the modified prospective method, which recognizes compensation
cost beginning with the effective date (a) based on the requirements of ASC 718
for all share-based payments granted after the effective date and to awards
modified, repurchased, or cancelled after that date and (b) based on the
requirements of accounting standards previously issued as FASB 123 for all
awards granted to employees prior to the effective date of ASC 718 that remain
unvested on the effective date.
The compensation cost relating to
share-based payment transactions is measured based on the fair value of the
equity or liability instruments issued and is expensed on a straight-line basis.
For purposes of estimating the fair value of each stock option, on the date of
grant, we utilized the Black-Scholes option-pricing model. The Black-Scholes
option valuation model was developed for use in estimating the fair value of
traded options, which have no vesting restrictions and are fully transferable.
In addition, 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 (as determined by reviewing its historical public market
closing prices). Because our employee stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management’s opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
The Company records
the fair value of warrants granted to non-employees in exchange for services in
accordance with ASC 505-50 “Equity-Based Payments to
Non-Employees”. Warrants to non-employees are generally vested and
nonforfeitable upon the date of the grant. Accordingly fair value is
determined on the grant date.
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: consulting
- IT, depreciation, lab equipment repair, lab supplies and pharmaceutical
preparations, insurance, legal - patents, office supplies, payroll expenses,
rental - building, repairs, software, taxes and fees, and utilities.
New
Accounting Pronouncements
In
April 2008, the FASB issued modifications to ASC 350 (“ASC 350”) “Intangibles – Goodwill and
Other”. The modifications to ASC 350 amended the factors an
entity should consider in developing renewal or extension assumptions used in
determining the useful life of recognized intangible assets. This new guidance applies
prospectively to intangible assets that are acquired individually or with a
group of other assets in business combinations and asset acquisitions. On
January 1, 2009, the Company adopted the modifications to ASC 350. The
adoption of this standard did not have a material impact on the Company’s
financial condition, results of operations or cash flows.
In
May 2009, the FASB issued ASC 855 (“ASC 855”), “Subsequent
Events”. ASC 855 establishes general standards for accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are available to be issued (“subsequent events”). More
specifically, ASC 855 sets forth the period after the balance sheet date during
which management of a reporting entity should evaluate events or transactions
that may occur for potential recognition in the financial statements, identifies
the circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements and the
disclosures that should be made about events or transactions that occur after
the balance sheet date. ASC 855 provides largely the same guidance on subsequent
events, which previously existed only in auditing literature. The disclosure is
required in financial statements for interim and annual periods ending after
June 15, 2009. The Company has performed an evaluation of subsequent events
through November 13, 2009, which is the day the financial statements were
issued.
In
June 2009, the FASB issued ASC 105 (“ASC 105”) “Generally Accepted Accounting
Principles”. ASC
105 states that the FASB Accounting Standards Codification (“Codification”) will
become the single source of authoritative U.S. generally accepted accounting
principles (“GAAP”) recognized by the FASB. The Codification and all of its
contents, which changes the referencing of financial standards, will carry the
same level of authority. In other words, the GAAP hierarchy will be modified to
include only two levels of GAAP, authoritative and nonauthoritative. ASC 105 is
effective for financial statements issued for interim and annual periods ending
after September 15, 2009, and was adopted July 1, 2009. Therefore, all
references to GAAP use the new Codification numbering system prescribed by the
FASB. As the Codification is not intended to change or alter existing GAAP, it
did not have an impact on the Company’s financial condition, results of
operations and cash flows.
11
In
August 2009, the FASB issued Accounting Standards Update
(ASU) No. 2009-05 (“ASU 2009-05”), “Measuring Liabilities at Fair
Value”, which provides clarification for the fair value measurement of
liabilities in circumstances in which a quoted price in an active market for an
identical liability is not available. ASU 2009-05 is effective for the first
interim period ending after December 15, 2009, and was adopted on
October 1, 2009. This standard did not have a material impact on
the Company’s financial condition, results of operations or cash
flows.
September 2009,
the FASB issued ASU No. 2009-12 (“ASU 2009-12”), “Investments in Certain Entities
That Calculate Net Asset Value per Share (or Its Equivalent)”, which
provides guidance on measuring the fair value of certain alternative
investments. ASU 2009-12 amends ASC 820 to offer investors a practical expedient
for measuring the fair value of investments in certain entities that calculate
net asset value per share. ASU 2009-12 is effective for interim and annual
periods ending after December 15, 2009. The Company is currently
evaluating the impact of adopting this standard on its financial condition,
results of operations and cash flows and does not expect it to have a material
impact since it is not yet effective.
In
October 2009, the FASB issued ASU No. 2009-13 (“ASU 2009-13”), “Multiple-Deliverable Revenue
Arrangements”, which amends ASC 605, “Revenue Recognition”. ASU
2009-13 provides guidance related to the determination of when the individual
deliverables included in a multiple-element arrangement may be treated as
separate units of accounting and modifies the manner in which the transaction
consideration is allocated across the individual deliverables. Also, the
standard expands the disclosure requirements for revenue arrangements with
multiple deliverables. ASU 2009-13 is effective for fiscal years beginning on or
after June 15, 2010. This standard is not expected to have
a material impact on the Company’s financial condition, results of operations or
cash flows since it is not yet effective.
Contractual
Obligations - Leases
We lease
office and laboratory space in Knoxville, Tennessee, on an annual basis,
renewable for one year at our option.
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q contains forward-looking statements regarding,
among other things, our anticipated financial and operating results.
Forward-looking statements reflect our management’s current assumptions,
beliefs, and expectations. Words such as "anticipate," "believe, “estimate,"
"expect," "intend," "plan," and similar expressions are intended to identify
forward-looking statements. 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 Quarterly Report on Form
10-Q. 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 Quarterly Report on Form
10-Q is filed with 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.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk.
None.
Item
4T. Controls and Procedures.
(a) Evaluation of
Disclosure Controls and Procedures. Our chief executive officer and
chief financial officer have evaluated the effectiveness of the design and
operation of our "disclosure controls and procedures" (as that term is defined
in Rule 13a-15(e) under the Exchange Act) as of September 30, 2009, the end of
the fiscal quarter covered by this Quarterly Report on Form
10-Q. Based on that evaluation, the chief executive officer and chief
financial officer have concluded that our disclosure controls and procedures are
effective to ensure that material information relating to the Company and the
Company's consolidated subsidiaries is made known to such officers by others
within these entities, particularly during the period this Quarterly Report on
Form 10-Q was prepared, in order to allow timely decisions regarding required
disclosure.
(b) Changes in Internal
Controls. There has been no change in our internal control over financial
reporting that occurred during the fiscal quarter covered by this Quarterly
Report on Form 10-Q that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
12
PART
II. OTHER INFORMATION
Item
1. Legal Proceedings.
The Company was not involved in any
legal proceedings during the fiscal quarter covered by this Quarterly Report of
Form 10-Q.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds.
In
May and June 2009 the Company completed a private placement transaction with
accredited investors pursuant to which the Company sold a total of 1,750,000
shares of common stock at a purchase price of $0.90 per share, for an aggregate
purchase price of $1,575,000. In connection with the sale of common
stock, the Company also issued warrants to the investors to purchase up to
875,000 shares of common stock at an exercise price of $1.00 per share. The
Company paid $227,250 and issued 175,000 shares of common stock at a fair market
value of $197,750 to Maxim Group, LLC as a placement agent for this
transaction. The cash costs have been off-set against the proceeds
received, which are for general corporate purposes.
During the three
months ended June 30, 2009, the Company completed a private placement
transaction with accredited investors pursuant to which the Company sold a total
of 2,868,994 shares of common stock at a purchase price of $0.75 per share, for
an aggregate purchase price of $2,151,749. 186,667 common shares are
committed to be issued but not outstanding at June 30, 2009, which were issued
in July 2009. In connection with the sale of common stock, the
Company also issued warrants to the investors to purchase up to 1,434,508 shares
of common stock at an exercise price of $1.50 per share. The Company paid
$255,323, has accrued $24,404 to be paid as of June 30, 2009, which was paid in
July, 2009, and is committed to issue 286,900 shares of common stock at June 30,
2009 at a fair market value of $295,507 to Network 1 Financial Securities, Inc.
as placement agent for this transaction, which were issued in August,
2009. The cash costs have been off-set against the proceeds received,
which are for general corporate purposes.
In
July 2009 the Company completed a private placement transaction with accredited
investors pursuant to which the Company sold a total of 1,040,570 shares of
common stock at a purchase price of $0.75 per share, for an aggregate purchase
price of $780,427. In connection with the sale of common stock, the
Company also issued warrants to the investors to purchase up to 1,434,510 shares
of common stock at an exercise price of $1.50 per share. The Company
paid $101,485 and issued 100,016 shares of common stock in August 2009 at a fair
market value of $95,015 to Network 1 Financial Securities, Inc. as placement
agent for this transaction. The cash costs have been off-set against
the proceeds received, which are for general corporate purposes.
In
July and September 2009 the Company completed a private placement transaction
with a total of two accredited investors pursuant to which the Company sold a
total of 309,000 shares of common stock at a purchase price of $0.75 per share,
for an aggregate purchase price of $231,750. The proceeds received
are for general corporate purposes.
In
September 2009 the Company completed a private placement transaction with
accredited investors pursuant to which the Company sold a total of 1,696,733
shares of common stock at a purchase price of $0.75 per share, for an aggregate
purchase price of $1,272,550. In connection with the sale of common
stock, the Company also issued warrants to the investors to purchase up to
848,366 shares of common stock at an exercise price of $1.00 per share. The
Company paid $180,432 and is committed to issue 169,673 shares of common stock
at a fair market value of $169,673 to Maxim Group, LLC as a placement agent for
this transaction. The cash costs have been off-set against the
proceeds received, which are for general corporate purposes.
Item
3. Defaults Upon Senior Securities.
None.
Item
4. Submission of Matters to a Vote of Security Holders.
None.
Item
5. Other Information.
We have
entered into a “Material Transfer Agreement” dated as of July 31, 2003 with
Schering-Plough Animal Health Corporation, which we refer to as “SPAH”, the
animal-health subsidiary of Schering-Plough Corporation, a major international
pharmaceutical company which is still in effect. Under the Material
Transfer Agreement, we will provide SPAH with access to some of our patented
technologies to permit SPAH to evaluate those technologies for use in
animal-health applications. If SPAH determines that it can commercialize our
technologies, then the Material Transfer Agreement obligates us and SPAH to
enter into a license agreement providing for us to license those technologies to
SPAH in exchange for progress payments upon the achievement of goals. The
Material Transfer Agreement covers four U.S. patents that cover biological
material manufacturing technologies (i.e., biotech related). The Material
Transfer Agreement continues indefinitely, unless SPAH terminates it by giving
us notice or determines that it does not wish to secure from us a license for
our technologies. The Material Transfer Agreement can also be terminated by
either of us in the event the other party breaches the agreement and does not
cure the breach within 30 days of notice from the other party. We cannot assure
you that SPAH will determine that it can commercialize our technologies or that
the goals required for us to obtain progress payments from SPAH will be
achieved.
Progress
payments could potentially total $50,000 for the first cell line for which SPAH
uses our technology and $25,000 for each use of the same technology thereafter.
We do not know how many cell lines SPAH may have and we currently have no
indication from SPAH that it intends to use any of our technologies in the
foreseeable future.
Item
6. Exhibits.
31.1
Certification Pursuant to Rule 13a-14(a) (Section 302 Certification), dated
November 13, 2009, executed by H. Craig Dees, Ph.D., Chief Executive Officer of
the Company.
31.2
Certification Pursuant to Rule 13a-14(a) (Section 302 Certification), dated
November 13, 2009, executed by Peter R. Culpepper, Chief Financial
Officer of the Company.
32.1
Certification Pursuant to 18 U.S.C. ss. 1350 (Section 906 Certification), dated
November 13, 2009, executed by H. Craig Dees, Ph.D., Chief Executive Officer
of the Company, and Peter R. Culpepper, Chief Financial
Officer of the Company.
13
Signatures
In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
| Provectus Pharmaceuticals, | |||
|
|
By:
|
/s/ H. Craig Dees, Ph.D | |
| H. Craig Dees, Ph.D | |||
| Chief Executive Officer | |||
Date:
November 13, 2009
14
EXHIBIT
INDEX
Exhibit
No. Description
31.1 Certification Pursuant to Rule 13a-14(a) (Section 302 Certification), dated November 13, 2009, executed by H. Craig Dees, Ph.D., Chief Executive Officer of the Company.
31.2 Certification
Pursuant to Rule 13a-14(a) (Section 302 Certification), dated November 13, 2009,
executed by Peter R. Culpepper, Chief Financial Officer of the
Company.
|
32.1
|
Certification Pursuant to 18 U.S.C. ss. 1350 (Section 906
Certification), dated November 13, 2009, executed by H. Craig Dees, Ph.D.,
Chief Executive Officer of the
Company, and
Peter R. Culpepper, Chief Financial Officer of the
Company.
|
15
Exhibit
31.1
Provectus
Pharmaceuticals, Inc.
Certification
Pursuant to Rule 13a-14(a) Section 302 Certification
I, H. Craig Dees, Ph.D., the Chief
Executive Officer of Provectus Pharmaceuticals, Inc., certify that:
1. I have reviewed this quarterly
report on Form 10-Q of Provectus Pharmaceuticals, Inc.;
2. Based on
my knowledge, this quarterly report does
not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on
my knowledge, the financial statements, and other financial
information included in this report, fairly present in
all material respects the
financial condition, results of operations and cash flows
of the smaller reporting company as of, and for, the
periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the smaller reporting company
and have:
a) Designed such disclosure controls and procedures, or
caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the smaller
reporting company, including
its consolidated subsidiaries, is made known to
us by others within those entities, particularly during
the period in which this report is being prepared;
b) Designed
such internal control
over financial reporting, or caused such
internal control over financial reporting to be
designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated
the effectiveness of the smaller reporting company's disclosure
controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of
the period covered by this report based on such
evaluation;
d) Disclosed in
this report any change in the smaller reporting company 's
internal control over financial reporting that
occurred during the smaller reporting company's most recent fiscal
quarter that has materially affected, or
is reasonably likely to
materially affect, the smaller reporting company's
internal control over financial reporting; and
5. The smaller
reporting company's other certifying officers and I have disclosed, based on our
most recent evaluation of
internal control over financial reporting, to
the smaller reporting company's auditors and the audit committee of the smaller
reporting company 's board of directors (or
persons performing the equivalent functions):
a) All
significant deficiencies and material weaknesses in the design or
operation of
internal control over financial reporting which
are reasonably likely to adversely affect the
smaller reporting company's ability to record,
process, summarize and report financial information;
and
b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the smaller reporting company’s internal control over
financial reporting.
Date: November 13, 2009
/s/ H. Craig
Dees
H. Craig Dees,
Ph.D.
Chief Executive
Officer
Exhibit
31.2
Provectus
Pharmaceuticals, Inc.
Certification
Pursuant to Rule 13a-14(a) Section 302 Certification
I, Peter R. Culpepper, the Chief
Financial Officer of Provectus Pharmaceuticals, Inc., certify that:
1. I have reviewed this quarterly
report on Form 10-Q of Provectus Pharmaceuticals, Inc.;
2. Based on my knowledge,
this quarterly report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on
my knowledge, the financial statements, and other financial
information included in this report, fairly present in
all material respects the
financial condition, results of operations and cash flows
of the smaller reporting company as of, and for, the
periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the smaller reporting company
and have:
a) Designed such disclosure controls and procedures, or
caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the smaller
reporting company, including
its consolidated subsidiaries, is made known to
us by others within those entities, particularly during
the period in which this report is being prepared;
b) Designed
such internal control
over financial reporting, or caused such
internal control over financial reporting to be
designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the smaller reporting
company's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of
the period covered by this report based on such
evaluation;
d) Disclosed in
this report any change in the smaller reporting company 's
internal control over financial reporting that
occurred during the smaller reporting company's most recent fiscal
quarter that has materially affected, or
is reasonably likely to
materially affect, the smaller reporting company's
internal control over financial reporting; and
5. The smaller
reporting company's other certifying officers and I have disclosed, based on our
most recent evaluation of
internal control over financial reporting, to
the smaller reporting company's auditors and the audit committee of the smaller
reporting company 's board of directors (or
persons performing the equivalent functions):
a) All
significant deficiencies and material weaknesses in the design or
operation of
internal control over financial reporting which
are reasonably likely to adversely affect the
smaller reporting company's ability to record,
process, summarize and report financial information;
and
b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the smaller reporting company’s internal control over
financial reporting.
Date: November 13, 2009
/s/ Peter R.
Culpepper
Peter R.
Culpepper
Chief Financial
Officer
Chief Operating
Officer
Exhibit
32.1
Provectus
Pharmaceuticals, Inc.
Certification
Pursuant to 18 U.S.C. ss. 1350
Section
906 Certifications
Pursuant to 18
U.S.C. ss. 1350, as enacted by Section 906 of the
Sarbanes-Oxley Act of 2002 (Public Law 107-204), the undersigned, H. Craig Dees,
Ph.D., the Chief Executive Officer of Provectus
Pharmaceuticals, Inc., a Nevada corporation (the "Company"), and
Peter R. Culpepper, the Chief Financial Officer of the Company, hereby certify
that:
1. The
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
2009, as filed with the U.S. Securities and Exchange Commission on
the date hereof (the "Report"), fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
This Certification is
signed on November 13, 2009.
/s/ H. Craig Dees
H.
Craig Dees, Ph.D.
Chief Executive
Officer
/s/ Peter R. Culpepper
Peter R.
Culpepper
Chief Financial
Officer
Chief
Operating Officer
A signed original of
this written statement required by Section 906
has
been provided to Provectus Pharmaceuticals, Inc.,
and will be retained by
Provectus Pharmaceuticals, Inc. and furnished to
the Securities and Exchange Commission or its staff upon
request.