United States Securities And Exchange Commission
Washington, DC 20549
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FORM 10-QSB
Amendment No. 1
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended March 31, 2004
[ ] 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 Small Business Issuer as Specified in Its Charter)
Nevada 90-0031917
----------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7327 Oak Ridge Highway Suite A, Knoxville, TN 37931
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(Address of Principal Executive Offices) (Zip Code)
865/769-4011
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(Issuer's Telephone Number, Including Area Code)
N/A
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (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 [_]
The number of shares outstanding of the issuer's stock, $0.001 par value
per share, as of April 20, 2004 was 13,507,030.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PROVECTUS PHARMACEUTICALS, INC.
(A Development-Stage Company)
CONSOLIDATED BALANCE SHEETS
Restated Restated
(Note 8) (Note 8)
March 31, December 31,
2004 2003
(Unaudited) (Audited)
------------------------------------------------------------------------------------------------------------------
Assets
Current Assets
Cash $ 452,229 $ 164,145
Stock subscription receivable 41,192 87,875
Deferred Loan Costs, net of amortization of $62,202 and $19,569 108,328 150,961
Inventory 69,060 72,578
Prepaid expenses and other current assets 28,757 26,227
Prepaid consulting expense 346,141 420,817
------------------------------------------------------------------------------------------------------------------
Total Current Assets 1,045,707 922,603
Equipment and furnishings, less accumulated
depreciation of $298,401 and $244,760 68,169 121,415
Patents, net of amortization of $917,197 and $749,417 10,798,248 10,966,028
Other Assets 27,000 27,000
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$11,939,124 $12,037,046
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Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable - trade $ 142,466 $ 100,640
Accrued compensation 240,000 352,500
Accrued expenses 73,707 57,549
Accrued interest 131,975 100,021
Short-term convertible debt, net of debt discount of
$318,306 and $442,623 181,694 57,377
Current maturities of long-term convertible debt, net of
debt discount of $41,229 and $57,052 984,730 968,907
------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 1,754,572 1,636,994
Loan From Stockholder 149,000 149,000
Stockholders' Equity
Common stock; par value $.001 per share; 100,000,000 shares authorized;
13,096,605 and 10,867,509 shares issued and
outstanding, respectively 13,097 10,868
Paid-in capital 21,284,276 20,461,632
Deficit accumulated during the development stage (11,261,821) (10,221,448)
------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 10,035,552 10,251,052
$11,939,124 $12,037,046
------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
2
PROVECTUS PHARMACEUTICALS, INC.
(A Development-Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Restated Restated Restated
(Note 8) (Note 8) (Note 8)
Three Three Cumulative
Months Ended Months Ended Through
March 31, 2004 March 31, 2003 March 31,2004
(Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------------------------------
Operating Income
Net OTC product revenue $ 640 $ - $ 640
Net medical device revenue 13,125 - 13,125
Operating Expenses
Research and development 187,954 155,783 963,592
General and administrative 483,678 511,917 8,988,874
Amortization 167,780 167,780 917,197
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Total operating loss (825,647) (835,480) (10,855,898)
Gain on sale of fixed assets - - 55,000
Interest expense (214,726) (38,021) (460,923)
--------------------------------------------------------------------------------------------------
Net Loss Applicable to Common
Stockholders $(1,040,373) $ (873,501) $(11,261,821)
--------------------------------------------------------------------------------------------------
Basic and Diluted Loss Per Common
Share (0.08) (0.09)
--------------------------------------------------------------------------------
Weighted Average Number of Common
Shares Outstanding - Basic and Diluted 12,241,172 9,451,667
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
3
PROVECTUS PHARMACEUTICALS, INC.
(A Development-Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
Common Stock
Number Accumulated
of Shares Par Value APIC 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) (5,805,556)
--------- -------- ---------- ----------- -----------
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
Issuance of convertible debt with warrants - - 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 351,606 352 11,148 11,500
Exercise of warrants 10,000 10 4,990 5,000
Stock to be issued for services - - 62,500 - 62,500
Employee compensation from stock options - - 3,903 - 3,903
Issuance of stock pursuant to Regulation S 1,867,490 1,867 740,103 741,970
Net loss for the three months ended
March 31, 2004 - - - (1,040,373) (1,040,373)
---------- -------- ------------ ----------- -------------
Balance, at March 31, 2004 13,096,605 $ 13,097 $21,284,276 $(11,261,821) $10,035,552
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See accompanying notes to financial statements.
4
PROVECTUS PHARMACEUTICALS, INC.
(A Development-Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Restated Restated Restated
(Note 8) (Note 8) (Note 8)
Cumulative
Three Months Three Months Amounts From
Ended Ended January 17, 2002
March 31, 2004 March 31, 2003 (Inception)
(Unaudited) (Unaudited) (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net loss $ (1,040,373) (873,501) (11,261,821)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 53,641 83,881 321,402
Amortization of patents 167,780 167,780 917,197
Amortization of original issue discount 140,140 15,570 267,052
Amortization of prepaid consultant expense 137,176 - 137,176
Amortization of deferred loan costs 42,633 - 62,202
Compensation through issuance of stock options 3,903 - 38,562
Compensation through issuance of stock - - 932,000
Issuance of stock for services 11,500 22,800 5,660,150
Issuance of warrants for services - 19,574 101,312
(Gain)loss on sale of fixed asset - - (55,000)
(Increase) decrease in assets
Prepaid expenses (2,530) 2,499 (28,757)
Inventory 3,518 - (69,060)
Increase (decrease) in liabilities
Accounts payable 41,826 (46,302) 138,821
Accrued expenses (64,388) 7,469 445,682
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Net cash used in operating activities (505,174) (600,230) (2,393,082)
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Cash Flows From Investing Activities
Proceeds from sale of fixed asset - - 180,000
Capital expenditures (395) (3,301) (3,696)
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Net cash (used in) provided by investing activities (395) (3,301) 176,304
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Cash Flows From Financing Activities
Proceeds from loans from stockholder - - 149,000
Proceeds from convertible debt - 25,959 1,525,959
Proceeds from sale of common stock 788,653 - 1,106,125
Proceeds from exercise of warrants 5,000 - 5,453
Cash paid for deferred loan costs - - (69,530)
Purchase and retirement of common stock - - (48,000)
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Net cash provided by financing activities 793,653 25,959 2,669,007
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Net Change in Cash 288,084 (577,572) 452,229
Cash, at beginning of period 164,145 717,833 -
------------------------------------------------------------------------------------------------------------------------------------
Cash, at end of period 452,229 140,261 452,229
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Supplemental Disclosure of Noncash Investing and Financing Activities
March 31, 2004
Issuance of stock for services of $11,500
and commitment to issue stock for
prepaid services of $62,500
Stock subscription receivable recorded of $41,192
March 31, 2003
Issuance of stock and warrants for services of $117,291
See accompanying notes to financial statements.
5
PROVECTUS PHARMACEUTICALS, INC.
(A Development-Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information pursuant to Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles 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
three months ended March 31, 2004 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2004.
2. GOING CONCERN
The Company will continue to require additional capital to develop its
products and develop sales and distribution channels for its products.
Management believes there are a number of potential alternatives available to
meet the Company's continuing capital requirements, including proceeding as
rapidly as possible with the development of over-the-counter products that can
be sold with a minimum of regulatory compliance and developing revenue sources
through licensing of our existing intellectual property portfolio. In addition,
the Company is pursuing actively additional debt and/or equity capital in order
to support ongoing operations. There can be no assurance that the Company will
be able to obtain sufficient additional working capital on commercially
reasonable terms or conditions, or at all.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. Continuing as a going concern is
dependent upon successfully obtaining additional working capital as described
above. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets and
amounts and classifications of liabilities that might result from the outcome of
this uncertainty.
3. 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 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-prorata 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.
6
PROVECTUS PHARMACEUTICALS, INC.
(A Development-Stage Company)
Prior to the acquisition of Valley, the Company was considered to be, and
continues to be, in the development stage and has not generated any revenues
from the assets acquired.
4. 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, warrants, and convertible debt as they are antidilutive.
Potential common shares excluded from the calculation at March 31, 2004 are
955,000 warrants, 1,525,000 options and 2,274,558 shares issuable upon
conversion of convertible debt and interest. Additionally, the Company is
committed to issue 20,000 warrants. Included in the weighted average number of
common shares outstanding are 111,765 shares committed to be issued but not
outstanding at March 31, 2004.
5. EQUITY TRANSACTIONS
(a) At December 31, 2003, the Company was committed to issue 341,606 shares
to consultants in exchange for services rendered. In January 2004, all of these
shares were issued. In January 2004, the Company also issued 10,000 shares to a
consultant in exchange for services rendered. Consulting costs charged to
operations were $11,500. In March 2004, the Company committed to issue 36,764
shares to consultants in exchange for services. At March 31, 2004 the full value
of these shares of $62,500 has been classified as prepaid consulting expense as
it represents payments for services to be provided in the future. The shares are
fully vested and non-forfeitable.
(b) In December 2003, the Company commenced an offering for sale of
restricted common stock. In the first quarter 2004, the Company sold 1,867,490
shares of restricted common stock under this offering at an average gross price
of $1.18 per share and received net proceeds of $788,653. The Company has also
recorded a stock subscription receivable of $41,192 for stock subscriptions
prior to March 31, 2004 for which payment was received subsequent to March 31,
2004. The Company has engaged a placement agent to assist in the offering. Costs
related to the placement agent for proceeds received in the first quarter 2004
of $1,410,256 have been off-set against the gross proceeds of $2,198,909 and
therefore are reflected as a direct reduction of equity at March 31, 2004. The
transaction is a Regulation S offering to foreign investors as defined by
Regulation S of the Securities Act. The restricted shares cannot be traded for
12 months. After the first 12 months, sales of the shares are subject to
restriction under rule 144 for an additional year.
6. Stock-based Compensation
On March 1, 2004, the Company issued 1,200,000 stock options to employees.
The options vest over three years with 225,000 options vesting on the date of
grant. The exercise price is the fair market price on the date of issuance, and
all options were outstanding at March 31, 2004.
For stock options granted to employees during the first quarter of 2004,
the Company has estimated the fair value of each option granted using the
Black-Scholes option pricing model with the following assumptions:
2004
------------------------------------------------------------------------
Weighted average fair value per options granted $ 1.10
Significant assumptions (weighted average)
Risk-free interest rate at grant date 2.0%
Expected stock price volatility 150%
Expected option life (years) 10
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" (SFAS No. 123), but applies the intrinsic value method where
compensation expense, if any, is recorded as the difference between the exercise
7
price and the market price, as set forth in Accounting Principles Board Opinion
No. 25 for stock options granted to employees and directors. In 2003, the
Company issued stock options to employees in which the exercise price was less
than the market price on the date of grant. These options vest over three years
and accordingly, $3,903 of expense was recorded for the three months ended March
31, 2004. If the Company had elected to recognize compensation expense based on
the fair value at the grant dates, consistent with the method prescribed by SFAS
No. 123, net loss per share would have been changed to the pro forma amount
indicated below:
Three Months Three Months
Ended Ended
March 31, March 31,
2004 2003
--------------------------------------------------------------------------------
Net loss, as reported $ (1,040,373) $ (873,501)
Add stock based employee compensation
expense included in reported net loss 3,903 -
Less total stock-based employee (283,438)
compensation expense determined under
the fair value based method for all
awards
-------------------------------------------------------------------------------
Pro forma net loss $ (1,319,908) $ (873,501)
--------------------------------------------------------------------------------
Basic and diluted loss per common
share, as reported (0.08) $ (0.09)
Basic and diluted loss per common
share, pro forma (0.11) $ (0.09)
The following table summarizes the options granted, exercised and outstanding as
of March 31, 2004.
Weighted
Exercise Average
Price Per Exercise
Shares Share Price
---------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2003 356,250 $0.26 - $0.60 $0.40
Granted 1,200,000 $1.10 $1.10
Exercised - - -
Forfeited (31,250) $0.26 - $0.32 $0.30
---------------------------------------------------------------------------------------------------------------
Outstanding at March 31, 2004 1,525,000 $0.32 - $1.10 $0.95
---------------------------------------------------------------------------------------------------------------
Options exercisable at
March 31, 2004 381,250 $0.32 - $1.10 $0.85
---------------------------------------------------------------------------------------------------------------
7. REVENUE RECOGNITION
The Company recognizes revenue when product is shipped. When advance payments
are received, these payments are recorded as deferred revenue and recognized
when the product is shipped.
8. RESTATEMENT
During 2004, the Company restated its historical financial statements to revise
the value of its patents acquired from Valley Pharmaceuticals, Inc. on November
19, 2002. During a detailed review of the accounting literature applicable to
the valuation of the patents upon acquisition, the Company determined that the
guidance under Accounting Principles Board Opinion No. 29, "Accounting for
Nonmonetary Transactions" ("APB 29") was more appropriate than the guidance
under Statement of Financial Accounting Standard No. 141, "Business
Combinations"("SFAS 141"), which had originally been used by the Company. Under
SFAS 141, the Company used the date that the transaction was entered into to
value the shares given up in exchange for the assets acquired compared to using
the date the transaction was completed as required under APB 29. Under APB 29,
the restated value of the patents upon acquisition is $11,715,445
8
compared to the $20,037,560 value initially used by the Company. The
accompanying financial statements and notes reflect the restated amounts. The
following tables detail the effects of the restatement:
For The Three Months Ended, Cumulative Through
March 31, 2004 March 31, 2003 March 31, 2004
As As As
Previously As Previously As Previously As
Reported Restated Reported Restated Reported Restated
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Income Statement Data:
Amortization $ 286,963 $ 167,780 $ 286,963 $ 167,780 $ 1,568,732 $ 917,197
Total Operating Loss (944,830) (825,647) (954,663) (835,480) (11,507,433) (10,855,898)
Net Loss (1,159,556) (1,040,373) (992,684) (873,501) (11,913,356) (11,261,821)
Basic and Diluted Loss
Per Common Share (0.09) (0.08) (0.11) (0.09)
At At
March 31, 2004 December 31, 2003
As As
Previously As Previously As
Reported Restated Reported Restated
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Balance Sheet Data:
Patents, net of amortization 18,468,828 10,798,248 18,755,791 10,966,028
Total Assets 19,609,704 11,939,124 19,826,809 12,037,046
Stockholders' Equity 17,706,132 10,035,552 18,040,815 10,251,052
Item 2. Management's Discussion and Analysis or Plan of Operation.
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-QSB. Historical results and percentage
relationships set forth in the statement of operations, including trends which
might appear, are not necessarily indicative of future operations.
GOING CONCERN
In connection with their audit report on our consolidated financial
statements as of December 31, 2003, BDO Seidman LLP, our independent registered
public accountants, expressed substantial doubt about our ability to continue as
a going concern because such continuance is dependent upon our ability to raise
capital.
Our technologies are in early stages of development. We have not generated
material revenues from sales or operations and we do not expect to generate
sufficient revenues to enable us to be profitable for several calendar quarters.
At critical junctures during 2003 we obtained $40,000 in additional funding,
amounting to $149,000 in total, through loans from Eric A. Wachter, our Vice
President - Pharmaceuticals, a member of our Board of Directors, and a major
shareholder. These funds allowed us to complete our planned corporate
reorganization and acquisitions, complete initial production runs for several of
our OTC products, and maintain our facilities and intellectual property
portfolio. We require additional funding to continue initial production and
distribution of OTC products in order to achieve meaningful sales volumes. In
addition, we must raise substantial additional funds in order to fully implement
our integrated business plan, including execution of the next phases in clinical
development of our pharmaceutical products and full resumption of research
programs for new research initiatives that are currently delayed.
Ultimately, we must achieve profitable operations if we are to be a viable
entity. We intend to proceed as rapidly as possible with the development of OTC
products that can be sold with a minimum of regulatory compliance and with the
development of revenue sources through licensing of our existing intellectual
property portfolio. Although we believe that there is a reasonable basis for our
expectation that we will successfully raise the needed funds, we cannot assure
you that we will be able to raise sufficient capital to sustain operations
before we can commence revenue generation or 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 anticipate adding some part-time employees
during the next year. Our current plans also include minimal purchases of new
9
property, plant and equipment, and limited research and development.
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 OTC products and core intellectual properties.
This combination represents the foundation for an operating company that we
believe will provide both short-term profitability and long-term growth. In
2004, through careful control of expenditures, increasing sales of OTC products,
and issuance of debt and equity, we plan to build on that foundation to increase
shareholder value.
In the short term, we intend to develop our business by marketing,
manufacturing, and distributing our existing OTC products, principally GloveAid
and Pure-ific. 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 of prescription drugs and medical devices. Additionally, we
intend to restart our research programs that will identify additional conditions
that our intellectual properties may be used to treat and additional treatments
for those and other conditions.
We are in the planning phase for the major research and development
projects, and therefore do not have estimated completion dates, completion costs
and capital requirements for these projects. The reason we do not have this
information available is because we have not completed our planning process.
Since there is no defined schedule for completing these development projects,
there are no defined consequences if they are not completed timely. Research and
development costs comprising the total of $187,954 for the three months ending
March 31, 2004 include consulting of $26,843, lab expense of $2,500, insurance
of $20,138, legal of $29,048, payroll of $103,825, and rent and utilities of
$5,600. Research and development costs comprising the total of $155,783 for the
three months ending March 31, 2003 include depreciation expense $83,841,
consulting of $14,888, office and other expense of $455, payroll of $47,011,
rent and utilities of $8,400, and taxes and fees of $1,188.
Cash Flow
As of March 31, 2004, we held $452,229 in cash. At our current cash
expenditure rate, this amount will be sufficient to meet our needs until the end
of August 2004. We already have begun to reduce our expenditure rate by delaying
some of our research programs for new research initiatives; in addition, we are
seeking to improve our cash flow by increasing sales of OTC products. However,
we cannot assure you that we will be successful either in increasing sales of
OTC products or in reducing expenditures. Moreover, even if we are successful in
improving our current cash flow position, we nonetheless will require additional
funds to meet our short-term and long-term needs. We anticipate these funds will
come from the proceeds of private placements or public offerings of debt or
equity securities, but we cannot assure you that we will be able to obtain such
funds.
Capital Resources
As noted above, our present cash flow is not sufficient to meet our
short-term operating needs for initial production and distribution of OTC
products in order to achieve meaningful sales volumes, much less to meet our
longer-term needs for investment in our business through execution of the next
phases in clinical development of our pharmaceutical products and resumption of
our currently suspended research programs. We anticipate that the majority of
the funds for our operating and development needs in 2004 will come from the
proceeds of private placements or public offerings of debt or equity securities.
We are currently in discussions with multiple funding sources and feel confident
adequate operating funding and development funding will result. While we believe
that we have reasonable basis for our expectation that we will be able to raise
additional funds, we cannot give you any assurance that we will be able to do so
on commercially reasonable terms. In addition, any such financing may result in
significant dilution to shareholders.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB 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
10
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 under the
heading "Risk Factors" and elsewhere in our Annual Report on Form 10-KSB for the
year ended December 31, 2004. 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-QSB 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. 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-14(c) under the Exchange Act) as of March 31,
2004, the end of the fiscal quarter covered by this Quarterly Report on
Form 10-QSB. 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-QSB 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-QSB that has materially
affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The Company was not involved in any legal proceedings during the fiscal
quarter covered by this Quarterly Report of Form 10-QSB.
Item 2. Changes in Securities and Use of Proceeds.
Recent Sales of Unregistered Securities
During the three months ended March 31, 2004, we did not sell any
securities which were not registered under the Securities Act of 1933, as
amended (the "Securities Act"), other than the following.
In the first quarter of 2004, the Company issued 1,867,490 shares of our
restricted common stock for net proceeds of $788,653. In December 2003, we
commenced an offering for sale up to approximately $1 million of this restricted
common stock. Net proceeds to us were initially expected to be approximately
$400,000 to $600,000. We have since increased this offering amount to $3 million
and have received proceeds of $1,122,317 as of March 31, 2004. If we are
successful in selling the remaining shares, total net proceeds are expected to
be approximately $1.2 million to $1.8 million. The transaction is a Regulation S
offering to foreign investors as defined by Regulation S of the Securities Act.
The restricted shares cannot be traded for 12 months. After the first 12 months,
sales of the shares are subject to restrictions under rule 144 for an additional
year. We have engaged a placement agent to assist us in the offering.
11
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. Exhibits required by Item 601 of Regulation S-B are incorporated
herein by reference and are listed on the attached Exhibit Index, which
begins on page X-1 of this Quarterly Report on Form 10-QSB.
(b) Reports on Form 8-K.
None.
12
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, INC.
By: /s/ H. Craig Dees
------------------------------------------
H. Craig Dees, Ph.D.
Chief Executive Officer
Date: October 7, 2004
13
EXHIBIT INDEX
Exhibit No. Description
------------ -----------
31.1 Certification Pursuant to Rule 13a-14(a) (Section 302
Certification), dated October 7, 2004, 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 October 7, 2004, 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 October 7, 2004, executed by H. Craig
Dees, Ph.D., Chief Executive Officer of the Company, and Peter R.
Culpepper, Chief Financial Officer of the Company.
14
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-QSB 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 quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the small business issuer as of, and for, the periods
presented in this quarterly report;
4. The small business issuer's other certifying officers 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))
for the small business issuer 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
small business issuer, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly
during the period in which this quarterly report is being
prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this
quarterly 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; and
(c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that occurred
during the small business issuer's most recent fiscal quarter
(the small business issuer's fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably
likely to materially affect, the small business issuer's internal
control over financial reporting; and.
5. The small business issuer's other certifying officers and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the small business issuer's auditors and
the audit committee of small business issuer's board of directors (or
persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to
record, process, summarize and report financial data and have
identified for the small business issuer's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal controls.
Date: October 7, 2004
/s/ H. Craig Dees
----------------------------------
H. Craig Dees, Ph.D.
Chief Executive Officer
15
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-QSB 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 quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the small business issuer as of, and for, the periods
presented in this quarterly report;
4. The small business issuer's other certifying officers 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))
for the small business issuer 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
small business issuer, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly
during the period in which this quarterly report is being
prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this
quarterly 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; and
(c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that occurred
during the small business issuer's most recent fiscal quarter
(the small business issuer's fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably
likely to materially affect, the small business issuer's internal
control over financial reporting; and.
5. The small business issuer's other certifying officers and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the small business issuer's auditors and
the audit committee of small business issuer's board of directors (or
persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to
record, process, summarize and report financial data and have
identified for the small business issuer's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal controls.
Date: October 7, 2004
/s/ Peter R. Culpepper
------------------------------------
Peter R. Culpepper
Chief Financial Officer
16
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-QSB for the quarter ended March
31, 2004, 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 October 7, 2004.
/s/ H. Craig Dees
-------------------------------------
H. Craig Dees, Ph.D.
Chief Executive Officer
Provectus Pharmaceuticals, Inc.
/s/ Peter R. Culpepper
-------------------------------------
Peter R. Culpepper
Chief Financial Officer
Provectus Pharmaceuticals, Inc.
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.
17