PVCT 10-Q
Provectus Biopharmaceuticals, Inc. (PVCT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission
file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
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). ☒
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 | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of May 13, 2024, was .
TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined under U.S. federal securities laws. These statements reflect management’s current knowledge, assumptions, beliefs, estimates, and expectations. These statements also express management’s current views of future performance, results, and trends and may be identified by their use of terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “strategy,” “will,” and other similar terms. Forward-looking statements are subject to a number of risks and uncertainties that could cause our actual results to materially differ from those described in the forward-looking statements. Readers should not place undue reliance on forward-looking statements. Such statements are made as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to update such statements after this date, unless otherwise required by law.
Risks and uncertainties that could cause our actual results to materially differ from those described in forward-looking statements include those discussed in our filings with the U.S. Securities and Exchange Commission (the “SEC”) (including those described in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023), and:
| ● | The uncertainty of generating (i) sales from rose bengal sodium-based drug candidates, PV-10® and PH-10®, and/or any other halogenated xanthene-based drug candidates (if and when approved), (ii) licensing, milestone, royalty, and/or other payments related to these drug candidates, and/or (iii) payments from the Company’s liquidation, dissolution, or winding up, or any sale, lease, conveyance, or other disposition of any intellectual property relating to these drug candidates and/or rose bengal sodium- and other halogenated xanthene-based active pharmaceutical ingredients; | |
| ● | The uncertainty of raising additional capital through the proceeds of private placement transactions of debt and/or equity securities, the exercise of existing warrants and outstanding stock options, and/or public offerings of debt and/or equity securities; | |
| ● | The disruptions from the widespread outbreak of an illness or communicable/infectious disease, such as severe acute respiratory syndrome coronavirus 2, or another public health crisis to our business that could adversely affect our operations and financial condition; and |
| 1 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PROVECTUS BIOPHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Short-term receivables | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Equipment and furnishings, less accumulated depreciation of $ | ||||||||
| Operating lease right-of-use asset | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Unearned grant revenue | ||||||||
| Other accrued expenses | ||||||||
| Accrued interest | ||||||||
| Accrued interest - related parties | ||||||||
| Notes payable | ||||||||
| Convertible notes payable | ||||||||
| Convertible notes payable - related parties | ||||||||
| Operating lease liability, current portion | ||||||||
| Total Current Liabilities | ||||||||
| Operating lease liability, non-current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments, contingencies, and litigations (Note 12) | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock; par value $ per share; shares authorized; Series D Convertible Preferred Stock; shares designated; shares issued and outstanding at March 31, 2024 and December 31, 2023; aggregate liquidation preference of $ | ||||||||
| Series D-1 Convertible Preferred Stock; shares designated; and shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively; aggregate liquidation preference of $ | ||||||||
| Common stock; par value $ per share; shares authorized; shares issued and outstanding at March 31, 2024 and December 31, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 2 |
PROVECTUS BIOPHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Grant Revenue | $ | $ | ||||||
| Operating Expenses: | ||||||||
| Research and development | ||||||||
| General and administrative | ||||||||
| Total Operating Expenses | ||||||||
| Total Operating Loss | ( | ) | ( | ) | ||||
| Other Expense: | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total Other Expense | ( | ) | ( | ) | ||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Basic and Diluted Loss Per Common Share | $ | ) | $ | ) | ||||
| Weighted Average Number of Common Shares Outstanding - Basic and Diluted | ||||||||
See accompanying notes to condensed consolidated financial statements.
| 3 |
PROVECTUS BIOPHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Other Comprehensive (Loss)/Income: | ||||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Total Comprehensive Loss | $ | ( | ) | $ | ( | ) | ||
See accompanying notes to condensed consolidated financial statements.
| 4 |
PROVECTUS BIOPHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2024
| Preferred Stock Series D | Preferred Stock Series D-1 | Common Stock | Additional Paid-In | Accumulated Other Comprehensive | Accumulated | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Total | |||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Conversion of 2022 Note to Series D-1 Preferred Stock | - | - | ||||||||||||||||||||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2023
| Preferred Stock Series D | Preferred Stock Series D-1 | Common Stock | Additional Paid-In | Accumulated Other Comprehensive | Accumulated | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Total | |||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Conversion of 2021 Note to Series D-1 Preferred Stock | - | - | ||||||||||||||||||||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | |||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 5 |
PROVECTUS BIOPHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Non-cash lease expense | ||||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Short term receivables | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Unearned grant revenue | ( | ) | ( | ) | ||||
| Other accrued expenses | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Accrued interest | ||||||||
| Net Cash Used In Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from issuance of convertible notes payable | ||||||||
| Proceeds from issuance of convertible notes payable - related parties | ||||||||
| Repayment of short-term note payable | ( | ) | ( | ) | ||||
| Repayment of 2021 convertible note payable - related party | ( | ) | ||||||
| Net Cash Provided By Financing Activities | ||||||||
| Effect of exchange rates on cash and restricted cash | ( | ) | ( | ) | ||||
| Net Decrease In Cash and Restricted Cash | ( | ) | ( | ) | ||||
| Cash and Restricted Cash, Beginning of Period | ||||||||
| Cash and Restricted Cash, End of Period | $ | $ | ||||||
| Cash and restricted cash consisted of the following: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| $ | $ | |||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Conversion of 2021 Notes and related accrued interest to Series D-1 Preferred Stock | $ | $ | ||||||
| Conversion of 2022 Notes and related accrued interest to Series D-1 Preferred Stock | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 6 |
PROVECTUS BIOPHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business Organization, Nature of Operations and Basis of Presentation
Provectus Biopharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, “Provectus” or “the Company”), is a clinical-stage biotechnology company developing immunotherapy medicines for different diseases that are based on a class of synthetic small molecule immuno-catalysts called halogenated xanthenes (“HXs”). Our lead HX molecule is named rose bengal sodium (“RBS”).
The Company’s proprietary, patented, pharmaceutical-grade RBS is the active pharmaceutical ingredient in the drug candidates of our current clinical development programs and the preclinical formulations of our current non-clinical early discovery programs. Importantly, our pharmaceutical-grade RBS displays different therapeutic effects at different concentrations and can be formulated for delivery by different routes of administration.
The Company believes that RBS targets disease in a bifunctional manner. First, direct contact may lead to cell death or repair, depending on the disease being treated and the concentration of the RBS utilized in the treatment. Second, multivariate immune signaling, activation, and response may follow that may manifest as stimulatory, inhibitory, or both.
The Company believes that it is the first entity to advance an RBS formulation into clinical trials for the treatment of a disease, such as those trials reported on the clinical trials registry at ClinicalTrials.gov.
The Company believes that it is the first and only entity to date to make pharmaceutical-grade RBS successfully, reproducibly, and consistently at a purity of nearly 100%.
The Company’s small molecule HX medical science platform comprises several different drug candidates and preclinical targets using different concentrations delivered by different routes of administration specific to each disease area and/or disease indication. The Company’s HX medical science platform includes clinical development programs in oncology (intratumoral administration), dermatology (topical), and ophthalmology (topical); in vivo proof-of-concept programs in oncology (oral), hematology (oral), wound healing (topical), and canine cancers (intratumoral); and in vitro drug discovery programs in infectious diseases and tissue regeneration and repair.
Risks and Uncertainties
The Company’s activities are subject to significant risks and uncertainties, including failing to successfully develop and license or commercialize the Company’s prescription drug candidates.
| 7 |
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 (“GAAP”) for interim financial information pursuant to Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be reviewed in conjunction with the Company’s audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2023 filed with the SEC on March 28, 2024. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
2. Liquidity and Going Concern
To date, the Company has not generated any revenues or profits from planned principal operations.
The
Company’s cash and restricted cash were $
The Company plans to access capital resources through possible public or private equity offerings, including the 2022 financing (see Note 5), exchange offers, debt financings, corporate collaborations, or other means. In addition, the Company continues to explore opportunities to strategically monetize its lead drug candidates, PV-10 and PH-10, through potential co-development and licensing transactions, although there can be no assurance that the Company will be successful with such plans. The Company has historically been able to raise capital through equity offerings, although there can be no assurance that it will continue to be successful in the future. If the Company is unable to raise sufficient capital, it will not be able to pay its obligations as they become due.
The primary business objective of management is to build the Company into a commercial-stage biotechnology company; however, there can be no assurance 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 2024 and beyond. The Company anticipates that these funds will otherwise come from the proceeds of private placement transactions, the exercise of existing warrants and outstanding stock options, or public offerings of debt or equity securities. While the Company believes that it has a reasonable basis for its expectation that it will be able to raise additional funds, there can be no assurance that it will be able to obtain funds on commercially acceptable terms, or complete additional financing in a timely manner. Any such financing may result in significant dilution to stockholders.
These factors raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of liabilities that may be necessary should we be unable to continue as a going concern.
Our consolidated financial statements included elsewhere in this Annual Report on Form 10-K have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate our continuation as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values.
| 8 |
3. Significant Accounting Policies
Since the date the Company’s December 31, 2023 consolidated financial statements were issued in its 2023 Annual Report on March 28, 2024, there have been no material changes to the Company’s 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 recoverability and useful lives of long-lived assets, accrued liabilities, and the valuation allowance related to the Company’s deferred tax assets.
Restricted Cash
Restricted
cash consists of a grant award received from the State of Tennessee. Restricted cash available as of March 31, 2024 is $
Cash Concentrations
Cash
and restricted cash are maintained at financial institutions and, at times, balances may exceed federally insured limits of $
| 9 |
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:
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Warrants | ||||||||
| Options | ||||||||
| Convertible preferred stock | ||||||||
| 2021 unsecured convertible notes | ||||||||
| 2022 unsecured convertible notes | ||||||||
| Total potentially dilutive shares | ||||||||
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” These amendments require a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Public entities with a single reporting segment are required to provide both the new disclosures and all of the existing disclosures required under ASC 280. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-09 are effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted. Since this new ASU addresses only disclosures, the Company does not expect the adoption to have any material effects on its financial condition, results of operation or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-09.
4. Other Accrued Expenses
The following table summarizes the other accrued expenses at March 31, 2024 and December 31, 2023:
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Accrued payroll and taxes | $ | $ | ||||||
| Accrued vacation | ||||||||
| Accrued directors’ fees | ||||||||
| Accrued other expenses | ||||||||
| Total other accrued expenses | $ | $ | ||||||
| 10 |
5. Convertible Notes Payable
The following summarizes convertible notes payable activity during the three months ended March 31, 2024:
2021 Financing
| Non-Related Party Face Amount | Related Party Face Amount | Total | ||||||||||
| Balance as of January 1, 2024 | $ | $ | $ | |||||||||
| Repayment | ( | ) | ( | ) | ||||||||
| Balance as of March 31, 2024 | $ | $ | $ | |||||||||
2022 Financing
| Non-Related Party Face Amount | Related Party Face Amount | Total | ||||||||||
| Balance as of January 1, 2024 | $ | $ | $ | |||||||||
| Issued | ||||||||||||
| Conversion | ( | ) | ( | ) | ||||||||
| Balance as of March 31, 2024 | $ | $ | $ | |||||||||
For further details on the terms of the 2021 and 2022 Notes, refer to our Form 10-K as filed with the SEC on March 28, 2024.
| 11 |
2024 Repayment of 2021 Notes
During the three months ended March 31, 2024, the
Company repaid $
2024 Conversions of 2022 Notes into Preferred Stock
During
the three months ended March 31, 2024, principal and interest in the aggregate amount of $
6. Notes Payable
The
Company obtained short-term financing from AFCO Insurance Premium Finance for our commercial insurance policies. As of March 31, 2024
and December 31, 2023, the balance of the note payable was $
7. Related Party Transactions
During
each of the three months ended March 31, 2024 and 2023, the Company had consulting fees of $
See Note 5 for details of other related party transactions.
Director
fees incurred during each of the three months ended March 31, 2024 and 2023 were $
8. Stockholders’ Deficit
Preferred Stock
During
the three months ended March 31, 2024, the Company issued shares of Series D-1 Convertible Preferred Stock upon the conversion
of $
Options
During the three months ended March 31, 2024 and 2023, the Company did not have any issuances, grants, or exercises of options.
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Life in Years | Aggregate Intrinsic Value | |||||||||||||
| Outstanding and exercisable at January 1, 2024 | $ | $ | ||||||||||||||
| Forfeited | ||||||||||||||||
| Outstanding and exercisable at March 31, 2024 | $ | $ | ||||||||||||||
| 12 |
| Exercise Price | Outstanding and Exercisable | Weighted Average Remaining Contractual Life | Intrinsic Value | |||||||||||
| $ | $ | |||||||||||||
| $ | $ | |||||||||||||
| $ | $ | |||||||||||||
| $ | $ | |||||||||||||
| $ | ||||||||||||||
Warrants
During the three months ended March 31, 2024 and 2023, the Company did not have any issuances, grants, or exercises of warrants.
The following table summarizes warrant activities during the nine months ended March 31, 2024:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Life in Years | Aggregate Intrinsic Value | |||||||||||||
| Outstanding and exercisable at January 1, 2024 | $ | |||||||||||||||
| Forfeited | ||||||||||||||||
| Outstanding and exercisable at March 31, 2024 | $ | $ | ||||||||||||||
The following table summarizes information about warrants outstanding and exercisable at March 31, 2024:
| Exercise Price | Outstanding and Exercisable | Weighted Average Remaining Contractual Life | Intrinsic Value | |||||||||||
| $ | $ | |||||||||||||
| $ | $ | |||||||||||||
| $ | $ | |||||||||||||
| $ | $ | |||||||||||||
| $ | ||||||||||||||
Holders of the outstanding warrants are not entitled to vote and the exercise prices of such warrants are subject to customary anti-dilution provisions.
| 13 |
9. Leases
On
June 18, 2022, the Company leased
Total
operating lease expense for the three months ended March 31, 2024 was $
A summary of the Company’s right-of-use assets and liabilities is as follows:
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows used in operating leases | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||||
| Operating leases | $ | $ | ||||||
| Weighted Average Remaining Lease Term | ||||||||
| Operating leases | ||||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases | % | % | ||||||
Future minimum payments under the Company’s non-cancellable lease obligations as of March 31, 2024 were as follows:
Future Minimum Payments
| Years | Amount | |||
| 2024 | $ | |||
| 2025 | ||||
| Total lease payments | ||||
| Less: amount representing imputed interest | ( | ) | ||
| Present value of lease liability | ||||
| Less: current portion | ( | ) | ||
| Lease liability, non-current portion | $ | |||
| 14 |
10. Grants
On
October 25, 2021, the Company received a grant award of $
As
of March 31, 2024 and December 31, 2023, $
11. License Transactions
In
the third quarter of 2019, the Company entered into a dialog with Bascom Palmer Eye Institute (“BPEI”) regarding collaboration
on BPEI’s ophthalmic photodynamic antimicrobial therapy (“PDAT”) using the Company’s pharmaceutical-grade RBS.
On February 16, 2022, and later amended on May 11, 2022, the Company entered into an option agreement with the University of Miami (“UM”)
for an exclusive worldwide license of intellectual property (“IP”) developed by the Ophthalmic Biophysics Center (“OBC”)
of BPEI that included the use of OBC’s PDAT medical device in combination with formulations of the Company’s pharmaceutical-grade
RBS for the treatment of bacterial, fungal, and viral infections of the eye.
On March 21, 2024, the Company entered into an exclusive worldwide license for the IP. Details of the license agreement are reported in the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on March 27, 2024.
12. Commitments, Contingencies and Litigation
The Company may, from time to time, be involved in litigation arising from the ordinary course of business. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s condensed consolidated financial position, results of operations or cash flows.
13. Subsequent Events
The Company has evaluated events that have occurred after the balance sheet and through the date the financial statements were issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed below.
Convertible Notes Payable
Subsequent
to March 31, 2024, the Company entered into 2022 Notes with a related party investor (Executive Officer) in the aggregate principal amount
of $
Subsequent to March 31, 2024, the Company entered into 2022 Notes with a non-related party investor in the aggregate principal amount of $.
Series D-1 Preferred Stock
Subsequent
to March 31, 2024, principal and interest in the aggregate amount of $
| 15 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion is intended to assist in the understanding and assessment of significant changes and trends related to our results of operations and our financial condition together with our consolidated subsidiaries. This discussion and analysis should be read in conjunction with the accompanying unaudited condensed financial statements and our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 28, 2024 (“2023 Form 10-K”), which includes additional information about our critical accounting policies and practices and risk factors. Historical results and percentage relationships set forth in the consolidated statement of operations, including trends which might appear, are not necessarily indicative of future operations.
Clinical Development and Drug Discovery
The Company’s small molecule HX medical science platform, which comprises several different drug candidates and preclinical formulations made from pharmaceutical-grade RBS using different concentrations and delivered by different routes of administration specific to each disease area and/or indication, includes:
Clinical Development Programs
| ● | Oncology: Intratumoral (“ITU”) formulation PV-10® (“ITU PV-10”) has undergone and is undergoing multiple, monotherapy and combination therapy, early- to late-stage clinical trials, expanded access programs (“EAPs”) for groups of and individual patients, and/or quality of life (“QOL”) study at multiple clinical sites in Australia, Europe, and the U.S. for the treatments of Stage III and IV melanoma and different types of liver cancers. ITU PV-10 has undergone clinical monotherapy and combination therapy mechanism of action and mechanism of immune response study for melanoma, metastatic uveal melanoma, and metastatic neuroendocrine tumors at Moffitt Cancer Center (“Moffitt”) in Tampa, Florida, The Queen Elizabeth Hospital in Adelaide, Australia, and MD Anderson Cancer Center in Houston, Texas. | |
| ● | Dermatology: Topical (“TOP”) formulation PH-10® (“TOP PH-10”) has undergone multiple mid-stage, monotherapy clinical trials for the treatments of psoriasis and atopic dermatitis at different clinical sites in the U.S. TOP PH-10 has undergone clinical monotherapy mechanism of action and mechanism of immune response study for psoriasis at The Rockefeller University in New York, New York (“TRU”).
Different formulations have undergone preclinical combination therapy study for psoriasis and are undergoing preclinical monotherapy study for skin inflammation at TRU. | |
| ● | Ophthalmology: The Company believes that clinical monotherapy proof-of-concept (“POC”) of TOP administration of non-pharmaceutical grade rose bengal for the treatment of infectious keratitis has been shown by clinicians and researchers at the University of Miami’s Bascom Palmer Eye Institute (“BPEI”) in Miami, Florida, who are now collaborating with the Company to evaluate the potential use of our pharmaceutical-grade RBS. | |
| TOP PV-305 has undergone preclinical monotherapy study for diseases and disorders of the eye, such as infectious keratitis, at BPEI. |
| 16 |
Preclinical In Vivo Proof-of-Concept Programs
| ● | Oncology: ITU PV-10 has undergone preclinical monotherapy and combination therapy study for the treatment of pancreatic cancer and human papillomavirus-positive and negative head and neck squamous cell carcinoma at Moffitt. ITU PV-10 has undergone preclinical monotherapy study for the treatment of penile squamous cell carcinoma at an academic medical center. ITU PV-10 has undergone preclinical monotherapy and combination therapy study for the treatment of relapsed and refractory pediatric solid tumor cancers at the University of Calgary’s Cumming School of Medicine in Calgary, Canada (“UCal”). The Company believes that the UCal researchers have achieved in vivo monotherapy POC of ITU administration. | |
| Oral (“PO”) formulations are undergoing preclinical monotherapy study for high-risk and refractory adult solid tumor cancers at UCal. The Company believes that the UCal researchers and the Company have both achieved in vivo monotherapy POC of PO administration, that the Company has achieved in vivo monotherapy POC of PO administration in both prophylactic and therapeutic settings, and that the Company has achieved in vivo monotherapy POC of intravenous (“IV”) administration. | ||
| ● | Hematology: PO formulations have undergone preclinical monotherapy study for the treatment of refractory and relapsed pediatric and other blood cancers, including leukemias, at UCal. The Company believes that the UCal researchers have achieved in vivo monotherapy POC of PO administration. | |
| ● | Wound Healing: Different formulations are undergoing preclinical monotherapy study for the healing of full-thickness cutaneous wounds. The Company believes that in vivo monotherapy POC of TOP administration of non-pharmaceutical grade rose bengal for the treatment of this indication has been shown by researchers at the University of Texas Medical Branch in Galveston, Texas, who are now collaborating with the Company to use our pharmaceutical-grade RBS. | |
| ● | Animal Health: Different formulations are undergoing preclinical monotherapy study for the treatment of canine soft tissue sarcomas at the University of Tennessee’s College of Veterinary Medicine in Knoxville, Tennessee. The Company believes that it has achieved monotherapy POC of ITU administration in canines. |
Preclinical In Vitro Drug Discovery Programs
| ● | Immune vaccine adjuvant: Different formulations have undergone and are undergoing preclinical study as a vaccine adjuvant to enhance T cell responses for anti-viral and anti-cancer vaccines. | |
| ● | Infectious Diseases: PO and intranasal (“IN”) formulations have undergone and are undergoing preclinical monotherapy study for the treatment of SARS-CoV-2 at UCal, another Canadian academic research center, the University of Tennessee Health Science Center (“UTHSC”) in Memphis, Tennessee, and a U.S. contract research organization.
Different formulations have undergone preclinical monotherapy and combination therapy study for the treatment of gram-positive and gram-negative bacterial infections (including multi-drug resistant strains) and have undergone preclinical monotherapy study for the treatment of oral bacterial infections at UTHSC.
Different formulations have undergone preclinical monotherapy study for the treatment of fungal infections at UTHSC. | |
| ● | Tissue Regeneration and Repair: Different formulations have undergone preclinical monotherapy study for vertebrate development, wound healing, and tissue regrowth at the University of Nevada, Las Vegas in Las Vegas, Nevada. | |
| ● | Proprietary: Different formulations are undergoing preclinical study for a proprietary disease at an academic medical center. |
| 17 |
Business Strategy
The Company is selectively continuing ongoing and planning to initiate new monotherapy and combination therapy ITU PV-10 clinical trials in melanoma and liver cancer indications to generate more and/or new clinical data and appropriately utilizing clinical data from historical ITU PV-10 trials, EAPs, and/or QOL study of these oncology indications. Our goals are to pursue drug approval pathways and/or co-development relationships with commercial pharmaceutical companies for ITU PV-10 based on these indications and data.
The Company is developing a systemically administered formulation of pharmaceutical-grade RBS for the treatment of cancer. Our goals, when this work is complete, are to file an investigational new drug application (“IND”) with the U.S. Food and Drug Administration (“FDA”), take an initial systemic drug candidate into an early-stage clinic trial for an initial oncology or hematology indication, and/or pursue a co-development collaboration or out-license arrangement for this route of administration and disease area.
The Company is developing different formulations of pharmaceutical-grade RBS using different concentrations and different routes of administration (e.g., PO, IV, IN) for other disease areas by endeavoring to show preclinical activity and lack of toxicity. Our goals, when each task of this work is completed, are to file an IND with the FDA, take an initial drug candidate into an early-stage clinic trial for an initial indication, and/or pursue a co-development collaboration or out-license arrangement for the respective disease area and route of administration.
The Company is endeavoring to fully elucidate the traits and characteristics of the RBS molecule using different academic medical centers under sponsored research and testing agreements. Our goal is to gain and communicate additional knowledge of the RBS molecule’s targeting, mechanism, signaling, immune response, and other features that are common to and/or different from each disease area and indication under research.
The Company is doing rigorous, chemical analytical comparisons of non-pharmaceutical grades of rose bengal from specialty chemical suppliers against the Company’s pharmaceutical-grade RBS. Our goal is to demonstrate the proprietary nature of the Company’s pharmaceutical-grade RBS and that our pharmaceutical-grade RBS meets the necessary uniformity and purity requirements for commercial pharmaceutical use.
| 18 |
RBS API and Drug Candidate Manufacturing
Our pharmaceutical-grade RBS resulted from the Company’s innovation of a proprietary, patented, commercial-scale process to synthesize and utilize the RBS molecule into a viable active pharmaceutical ingredient (“API”) for commercial pharmaceutical use; the development of unique chemistry, manufacturing, and control (“CMC”) specifications for API and drug candidate manufacturing processes; the production and multi-year stability testing of multiple API and drug candidate lots; the comprehensive documentation of lot composition and reproducibility; and the review and acceptance of CMC data from these lots by seven different national drug regulatory agencies for use in a prior, multi-country, multi-center Phase 3 randomized control trial of the Company.
The Company’s API and drug candidate manufacturing processes employ Quality-by-Design principles, current good manufacturing practice (“cGMP”) regulations, and the guidelines of The International Council for Harmonization (ICH) of Technical Requirements for Pharmaceuticals for Human Use. These processes utilize controls that eliminate the formation of historical impurities and avoid the introduction of potentially hazardous impurities that the Company believes may have been and could be present in uncontrolled and unreported amounts in non-pharmaceutical grades of rose bengal.
The Company’s processes of synthesizing the RBS molecule into pharmaceutical-grade RBS and manufacturing RBS API and ITU PV-10 drug candidate, the processes’ CMC specifications, and the CMC data from the production of stability lots of API and drug candidate have been reviewed by multiple national drug regulatory agencies prior to granting clinical trial authorizations for the Company to commence a historical Phase 3 study of ITU PV-10 for the treatment of locally advanced cutaneous melanoma, including the U.S. FDA, Germany’s Bundesinstitut für Arzneimittel und Medizinprodukte (BfArM), Australia’s Therapeutic Goods Administration (TGA) under a clinical trial notification, France’s Agence Nationale de Sécurité du Médicament et des Produits de Santé (ANSM), Italy’s Agenzia Italiana del Farmaco (AIFA), Mexico’s Comisión Federal para la Protección contra Riesgos Sanitarios (COFEPRIS), and Argentina’s Administración Nacional de Medicamentos, Alimentos y Tecnología Médica (ANMAT).
RBS Nonproprietary Name
The RBS name for the Company’s pharmaceutical-grade API was selected by and passed the review of the World Health Organization (“WHO”) Expert Advisory Panel on the International Pharmacopoeia and Pharmaceutical Preparations after the Company applied for the non-proprietary name in the third quarter of 2020 and reached the status of recommended International Nonproprietary Names (“INN”). INN Recommended List 88, which includes the RBS name, was published with the No. 3 issue of the WHO Drug Information, Volume 36 in the fourth quarter of 2022.
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Non-Pharmaceutical Grades of Rose Bengal
Commercial-Grade
This material may be purchased from specialty chemical suppliers in the U.S. and from other parts of the world; however, the Company believes that the material itself is almost exclusively made in China and India under non-cGMP conditions. Commercial grade rose bengal appears to have reported purity that may vary between approximately 80% and 95%, and that may contain substantial amounts of unreported impurities and/or gross contaminants. Commercial grade rose bengal is typically used by researchers unaffiliated with the Company for preclinical study of the rose bengal molecule for potential biomedical therapeutic applications.
We believe that commercial grade rose bengal is still manufactured using the historical process (or a variant thereof) that was developed by the synthetic molecule’s original Swiss creator Rudolph Gnehm in 1881. Some manufacturers may, however, apply purification techniques that the Company believes still result in materials that may possess questionable purity and contaminants and may also be subject to substantial lot-to-lot manufacturing variability.
Diagnostic-Grade
The Company coined this phrase to describe non-approved rose bengal that is used as an ingredient in historical or current ophthalmic solutions and strips, has been historically or is presently compounded by pharmacists for ophthalmic use, and has been or is in other non-ophthalmic diagnostic tests such as the rose bengal test in human brucellosis.
We presume, but have not yet confirmed, that diagnostic-grade rose bengal is derived from commercial-grade rose bengal that may have undergone a form of purification and/or may have been compounded under cGMP regulations by a pharmacist, academic medical researcher, or commercial entity. Here too, the Company believes that purification may not sufficiently improve the amounts and accuracy of rose bengal purity and lot contents and may not adequately reduce or eliminate lot-to-lot manufacturing variability.
Chemical Analytical Comparison
In the first quarter of 2022, the Company began work with a U.S. contract development and manufacturing organization to assess rigorously and methodically three lots of commercial-grade rose bengal, one each from three different specialty chemical suppliers, and compare these non-pharmaceutical grade materials with the Company’s pharmaceutical-grade RBS. This chemical analytical work was substantially completed by the end of the third quarter of 2022. The Company believes that the preliminary results of these analyses indicate that all three lots of commercial grade rose bengal had rose bengal purity that was drastically different from what was represented on their respective certificates of analysis (“CofAs”), and that one of the three lots contained gross contaminants that were not represented on its CofA.
Potential Barriers to Entry
The Company believes that the Company’s proprietary, patented, pharmaceutical-grade RBS possesses several competitive advantages over non-pharmaceutical-grades of rose bengal that researchers, clinicians, and academic, business, and/or governmental competitors have used, are using, and/or may attempt to use for potential biomedical applications. The Company believes that non-pharmaceutical-grades of rose bengal may suffer from the uncontrolled presence of substance-related impurities and/or gross contaminants, substantial lot-to-lot manufacturing variability, inaccurately reported and/or misrepresented purity and contents, and the lack of reproducible, consistent, and fulsome CMC specifications and documentation.
The Company believes that historical and potentially hazardous impurities and other manufacturing and handling issues facing non-pharmaceutical grades of rose bengal may pose significant scientific, technological, and economic challenges to overcome and validate for compliance with modern drug regulatory standards.
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Components of Operating Results
Grant Revenue
Grant revenue is recognized when qualifying costs are incurred and there is reasonable assurance that the conditions of the grant have been met. Cash received from grants in advance of incurring qualifying costs is recorded as unearned grant revenue and recognized as grant revenue when qualifying costs are incurred.
Research and Development Expenses
A large component of our total operating expenses is the Company’s investment in research and development activities, including the clinical development of our product candidates. Research and development expenses represent costs incurred to conduct research and undertake clinical trials to develop our drug candidates. These expenses consist primarily of:
| ● | Costs of conducting clinical trials, including amounts paid to clinical centers, clinical research organizations and consultants, among others; | |
| ● | Salaries and related expenses for personnel, including stock-based compensation expense; | |
| ● | Other outside service costs including cost of contract manufacturing; | |
| ● | The costs of supplies and reagents; and, | |
| ● | Occupancy and depreciation charges. |
We expense research and development costs as incurred.
Research and development activities are central to our business model. We expect our research and development expenses to increase in the future as we advance our existing product candidates through clinical trials and pursue their regulatory approval. Undertaking clinical development and pursuing regulatory approval are both costly and time-consuming activities. As a result of known and unknown uncertainties, we are unable to determine the duration and completion costs of our research and development activities, or if, when, and to what extent we will generate revenue from any subsequent commercialization and sale of our drug 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.
| 21 |
Results of Operations
Comparison of the Three Months Ended March 31, 2024 and March 31, 2023
Overview
Grant revenue was $238,072 for the three months ended March 31, 2024, an increase of $33,047 or 16.1% compared to the three months ended March 31, 2023. Total operating expenses were $685,337 for the three months ended March 31, 2024, a decrease of $301,901 or 30.6% compared to the three months ended March 31, 2023. The decrease was driven primarily by (i) reduced professional fees, (ii) decrease in director fees due to write-off of Bruce Horowitz accrued fees, partially offset by (iii) higher clinical trial costs related to study closure, (iv) increased payroll and taxes, (v) higher legal costs related to patents and general corporate counsel, and (vi) higher other general and administrative cost. Net loss for the three months ended March 31, 2024 was $504,042, a decrease of $323,412 or 39.1% compared to the three months ended March 31, 2023.
| For the Three Months Ended | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2024 | 2023 | Increase/(Decrease) | % Change | |||||||||||||
| Grant Revenue | $ | 238,072 | $ | 205,025 | $ | 33,047 | 16.1 | % | ||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development | 555,535 | 548,393 | 7,142 | 1.3 | % | |||||||||||
| General and administrative | 129,802 | 438,845 | (309,043 | ) | -70.4 | % | ||||||||||
| Total Operating Expenses | 685,337 | 987,238 | (301,901 | ) | -30.6 | % | ||||||||||
| Total Operating Loss | (447,265 | ) | (782,213 | ) | 334,948 | 42.8 | % | |||||||||
| Other Expense: | ||||||||||||||||
| Interest expense, net | (56,777 | ) | (45,241 | ) | (11,536 | ) | -25.5 | % | ||||||||
| Total Other Expense, Net | (56,777 | ) | (45,241 | ) | (11,536 | ) | -25.5 | % | ||||||||
| Net Loss | $ | (504,042 | ) | $ | (827,454 | ) | $ | 323,412 | 39.1 | % | ||||||
Grant Revenue
For the three months ended March 31, 2024 and March 31, 2023, there was $238,072 and $205,025, respectively, of grant revenue recognized related to qualifying expenses that were incurred and included within research and development expenses on the condensed consolidated statements of operations.
Research and Development Expenses
Research and development expenses were $555,535 for the three months ended March 31, 2024, a decrease of $7,142 or 1.3% compared to $548,393 for the three months ended March 31, 2023. The decrease was primarily due to (i) lower insurance costs, partially offset by (ii) higher clinical trial costs associated with study closure, and (iii) higher payroll and taxes.
The following table summarizes research and development expenses for the three months ended March 31, 2024 and 2023.
| For the Three Months Ended | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2024 | 2023 | Increase/(Decrease) | % Change | |||||||||||||
| Research and development: | ||||||||||||||||
| Clinical trial and research expenses | 419,380 | 406,595 | $ | 12,785 | 3.1 | % | ||||||||||
| Depreciation/amortization | 1,765 | 1,487 | 278 | 18.7 | % | |||||||||||
| Insurance | 57,547 | 65,300 | (7,753 | ) | -11.9 | % | ||||||||||
| Payroll and taxes | 68,282 | 66,006 | 2,276 | 3.4 | % | |||||||||||
| Rent and utilities | 8,561 | 9,005 | (444 | ) | -4.9 | % | ||||||||||
| Total research and development | $ | 555,535 | $ | 548,393 | $ | 7,142 | 1.3 | % | ||||||||
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General and Administrative Expenses
General and administrative expenses were $129,802 for the three months ended March 31, 2024, a decrease of $309,043 or 70.4% compared to $438,845 for the three months ended March 31, 2023. The decrease was primarily due to (i) lower professional fees, (ii) reversal of director fees for Mr. Horowitz upon his resignation on March 25, 2024, partially offset by (iii) higher legal fees related to patents and corporate matters pertaining to the 2024 proxy statement and officer’s resignation, and (iv) higher other general and administrative costs.
The following table summarizes general and administrative expenses for the three months ended March 31, 2024 and 2023.
| For the Three Months Ended | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2024 | 2023 | Increase/(Decrease) | % Change | |||||||||||||
| General and administrative: | ||||||||||||||||
| Depreciation | $ | 466 | $ | 743 | $ | (277 | ) | -37.3 | % | |||||||
| Directors fees | (353,750 | ) | 96,250 | (450,000 | ) | -467.5 | % | |||||||||
| Insurance | 45,579 | 36,623 | 8,956 | 24.5 | % | |||||||||||
| Legal and litigation | 176,820 | 60,072 | 116,748 | 194.3 | % | |||||||||||
| Other general and administrative cost | 14,711 | (11,080 | ) | 25,791 | 232.8 | % | ||||||||||
| Payroll and taxes | 64,849 | 64,839 | 10 | 0.0 | % | |||||||||||
| Professional fees | 176,130 | 186,527 | (10,397 | ) | -5.6 | % | ||||||||||
| Rent and utilities | 4,851 | 4,871 | (20 | ) | -0.4 | % | ||||||||||
| Foreign currency translation | 146 | - | 146 | 100.0 | % | |||||||||||
| Total general and administrative | $ | 129,802 | $ | 438,845 | $ | (309,043 | ) | -70.4 | % | |||||||
Other Expense
Net interest expense increased by $11,536 or 25.5% from $45,241 for the three months ended March 31, 2023 to $56,777 for the three months ended March 31, 2024. The increase was mainly due to the interest expense costs incurred in connection with the higher notes payable balances.
| 23 |
Liquidity and Capital Resources
The Company’s cash and restricted cash were $762,752 at March 31, 2024 which includes $744,717 of restricted cash resulting from a grant received from the State of Tennessee, compared to $1,026,799 at December 31, 2023, which included $950,223 of restricted cash. The Company’s working capital deficit was $7,507,105 and $7,652,098 as of March 31, 2024 and December 31, 2023, respectively. The condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q have been prepared on a basis that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We have continuing net losses and negative cash flows from operating activities. In addition, we have an accumulated deficit of $253,194,451 as of March 31, 2024. These conditions raise substantial doubt about our ability to continue as a going concern for a period within one year from the date that the financial statements included elsewhere in this Quarterly Report on Form 10-Q are issued. Our financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. Our ability to continue as a going concern depends on our ability to obtain additional financing as may be required to fund current operations.
As of March 31, 2024, cash required for our current liabilities included approximately $4,515,249 for accounts payable and other accrued expenses (including operating lease liabilities) and a $190,910 note payable related to our short-term financing of our commercial insurance policies. Also, if not converted prior to maturity, convertible debt in the amount of $2,943,000 plus accrued interest will mature one year from the date of the notes. As of March 31, 2024, cash required for our long-term liabilities consists of $12,729 for our operating lease. The Company intends to meet these cash requirements from its current cash balance and from future financing.
Management’s plans include selling our equity securities and obtaining other financing, including the issuance of 2022 unsecured convertible notes (the “2022 Financing”), to fund our capital requirements and on-going operations; however, there can be no assurance that the Company will be successful in these efforts. Significant funds will be needed to continue and complete our ongoing and planned clinical trials.
| 24 |
Access to Capital
Management plans to access capital resources through possible public or private equity offerings, including the 2022 Financing, equity financings, debt financings, corporate collaborations, or other means. If we are unable to raise sufficient capital, we will not be able to pay our obligations as they become due.
The primary business objective of management is to build the Company into a commercial-stage biotechnology company; however, there can be no assurance 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 2024 and beyond. We anticipate that these funds will otherwise come from the proceeds of private placement transactions, the exercise of existing warrants and outstanding stock options, or public offerings of debt or equity securities. While we believe that we have a reasonable basis for our expectation that we will be able to raise additional funds, there can be no assurance that we will be able to obtain funds on commercially acceptable terms, or complete additional financing in a timely manner. In addition, any such financing may result in significant dilution to stockholders.
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with U.S. GAAP, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as special purpose entities (“SPEs”).
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 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.
The Company also intends to use press releases, the Company’s website and certain social media accounts as a means of disclosing information and observations about the Company and its business, and for complying with the Company’s disclosure obligations under Regulation FD: the Provectus Substack account (provectus.substack.com), the @ProvectusBio X account (twitter.com/provectusbio), and the Company’s LinkedIn account (linkedin.com/company/provectus-biopharmaceuticals). The information and observations that the Company posts through these social media channels may be deemed material. Accordingly, investors should monitor these social media channels in addition to following the Company’s press releases, SEC filings, and website. The social media channels that the Company intends to use as a means of disclosing the information described above may be updated from time to time.
The contents of the websites provided above are not intended to be incorporated by reference into this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K or in any other report or document we file with the SEC. Further, our references to the URLs for these websites are intended to be inactive textual references only.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Inherent Limitations on Effectiveness of Controls
Even assuming the effectiveness of our controls and procedures, our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error or all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. In general, our controls and procedures are designed to provide reasonable assurance that our control system’s objective will be met, and our principal executive officer and principal financial officer has concluded that our disclosure controls and procedures are effective at the reasonable assurance level. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls in future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 26 |
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The information required by this item is incorporated by reference from Part I, Item 1. Financial Statements, Notes to Condensed Consolidated Financial Statements, Note 12.
ITEM 1A. RISK FACTORS.
There have been no material changes to the risk factors that were disclosed in the 2023 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
2022 Financing
During the three months ended March 31, 2024, the Company received aggregate proceeds of $968,000 pursuant to certain unsecured convertible notes (the “2022 Notes”). Through March 31, 2024, the Company had drawn down $4,195,500 under the 2022 Notes.
For further details on the terms of the 2022 Notes, refer to our Form 10-K as filed with the SEC on March 28, 2024.
Preferred Convertible Stock
During the three months ended March 31, 2024, the Company issued 226,474 shares of restricted Series D-1 Convertible Preferred Stock upon the conversion of $600,000 of principal and $48,161 accrued interest outstanding on the 2022 Notes.
The Company believes that such transactions were exempt from the registration requirements of the Securities Act of 1933, as amended, (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act (or Rule 506(b) of Regulation D promulgated thereunder) as transactions by an issuer not involving a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. Mine Safety Disclosures.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
| 27 |
ITEM 6. EXHIBITS.
** Filed herewith.
*** Furnished herewith.
| 28 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PROVECTUS BIOPHARMACEUTICALS, INC. | ||
| May 14, 2024 | By: | /s/ Dominic Rodrigues |
| Dominic Rodrigues | ||
| President (Principal Executive Officer) | ||
| By: | /s/ Heather Raines | |
| Heather Raines, CPA | ||
| Chief Financial Officer (Principal Financial Officer) | ||
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