United States Securities And Exchange Commission
Washington, DC 20549
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FORM 10-QSB
(Mark One)
|X| Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 2005
OR
[ ] 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
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(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 September 30, 2005 was 19,117,655.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PROVECTUS PHARMACEUTICALS, INC.
(A Development-Stage Company)
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2005 2004
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(Unaudited)
Assets
Current Assets
Cash $ 366,683 $ 10,774
Inventory 62,043 94,142
Prepaid expenses and other current assets 12 20,582
Prepaid consulting expense - 205,427
Prepaid commitment fee, net of amortization of $269,986 and
$38,326 40,880 272,540
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Total Current Assets 469,618 603,465
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Equipment and Furnishings, less accumulated depreciation of
$367,668 and $366,571 10,751 -
Patents, net of amortization of $1,923,877 and $1,420,537 9,791,568 10,294,908
Deferred loan costs, net of amortization of $101,772 and $35,922 518,950 270,578
Other Assets 27,000 27,000
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$ 10,817,887 $ 11,195,951
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Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable - trade $ 88,305 $ 154,214
Accrued compensation 181,090 156,377
Accrued expenses 119,590 6,240
Accrued interest 131,302 43,670
Other convertible debt, net of debt discount of $994,804 317,696 -
Gryffindor convertible debt, net of debt discount of $14,868 and $95,157 1,171,091 1,090,802
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Total Current Liabilities 2,009,074 1,451,303
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Loan From Stockholder 174,000 149,000
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Cornell convertible debt, net of debt discount of $316,053 - 433,947
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Other convertible debt, net of debt discount of $710,575 226,925 -
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Stockholders' Equity
Common stock; par value $.001 per share; 100,000,000 shares
authorized; 19,117,655 and 16,133,876 shares issued and
outstanding, respectively 19,118 16,134
Paid-in capital 29,864,554 23,711,540
Deficit accumulated during the development stage (21,475,784) (14,565,973)
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Total Stockholders' Equity 8,407,888 9,161,701
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$ 10,817,887 $ 11,195,951
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See accompanying notes to financial statements.
-2-
PROVECTUS PHARMACEUTICALS, INC.
(A Development-Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
Amounts from
January 17,
2002
Three Three Nine Nine (Inception)
Months Ended Months Ended Months Ended Months Ended Through
September 30, September 30, September 30, September 30, September 30,
2005 2004 2005 2004 2005
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(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
OTC Product Revenue $ 387 $ 1,219 $ 4,453 $ 3,830 $ 23,181
Medical Device Revenue - - 984 13,125 14,109
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Total revenues 387 1,219 5,437 16,955 37,290
Cost of Sales 248 780 2,857 2,450 13,638
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Gross Profit 139 439 2,580 14,505 23,652
Operating Expenses
Research and development $ 467,202 $ 379,113 $ 1,765,839 $ 813,252 $ 3,833,294
General and administrative 576,910 537,417 1,718,452 1,353,635 11,914,489
Amortization 167,780 167,780 503,340 503,340 1,923,877
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Total operating loss (1,211,753) (1,083,871) (3,985,051) (2,655,722) (17,648,008)
Gain on sale of fixed assets - - - - 55,000
Loss on extinguishment of debt - - (413,455) (100,519) (514,867)
Net interest expense (1,251,130) (64,651) (2,511,305) (754,166) (3,367,909)
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Net Loss Applicable to Common
Stockholders $ (2,462,883) $ (1,148,522) $ (6,909,811) $ (3,510,407) $ (21,475,784)
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Basic and Diluted Loss Per
Common Share $ (0.14) $ (0.08) $ (0.41) $ (0.26)
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Weighted Average Number of
Common Shares
Outstanding -
Basic and Diluted 17,772,238 15,080,661 16,954,430 13,606,164
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See accompanying notes to financial statements.
-3-
PROVECTUS PHARMACEUTICALS, INC.
(A Development-Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
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Common Stock
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Number Paid-in Accumulated
of Shares Par Value Capital Deficit Total
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Balance, at January 17, 2002 - $ - $ - $ - $ -
Issuance to founding shareholders 6,000,000 6,000 (6,000) - -
Sale of stock 50,000 50 24,950 - 25,000
Issuance of stock to employees 510,000 510 931,490 - 932,000
Issuance of stock for services 120,000 120 359,880 - 360,000
Net loss for the period from January 17,
2002 (inception) to April 23, 2002
(date of reverse merger) - - - (1,316,198) (1,316,198)
------------- ------------- -------------- ------------- ------------
Balance, at April 23, 2002 6,680,000 6,680 1,310,320 (1,316,198) 802
Shares issued in reverse merger 265,763 266 (3,911) - (3,645)
Issuance of stock for services 1,900,000 1,900 5,142,100 - 5,144,000
Purchase and retirement of stock (400,000) (400) (47,600) - (48,000)
Stock issued for acquisition of Valley
Pharmaceuticals 500,007 500 12,225,820 - 12,226,320
Exercise of warrants 452,919 453 - - 453
Warrants issued in connection with
convertible debt - - 126,587 - 126,587
Stock and warrants issued for acquisition
of Pure-ific 25,000 25 26,975 - 27,000
Net loss for the period from April 23, 2002
(date of reverse merger) to December
31, 2002 - - - (5,749,937) (5,749,937)
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Balance, at December 31, 2002 9,423,689 9,424 18,780,291 (7,066,135) 11,723,580
Issuance of stock for services 764,000 764 239,036 - 239,800
Issuance of warrants for services - - 145,479 - 145,479
Stock to be issued for services - - 281,500 - 281,500
Employee compensation from stock options - - 34,659 - 34,659
Issuance of stock pursuant to Regulation S 679,820 680 379,667 - 380,347
Beneficial conversion related to
convertible debt - - 601,000 - 601,000
Net loss for the year ended
December 31, 2003 - - - (3,155,313) (3,155,313)
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Balance, at December 31, 2003 10,867,509 $ 10,868 $ 20,461,632 $(10,221,448) $ 10,251,052
Issuance of stock for services 733,872 734 449,190 - 449,923
Issuance of warrants for services - - 495,480 - 495,480
Exercise of warrants 132,608 133 4,867 - 5,000
Employee compensation from stock options - - 15,612 - 15,612
Issuance of stock pursuant to Regulation S 2,469,723 2,469 790,668 - 793,137
Issuance of stock pursuant to Regulation D 1,930,164 1,930 1,286,930 - 1,288,861
Beneficial conversion related to
convertible debt - - 360,256 - 360,256
Issuance of convertible debt with warrants - - 105,250 - 105,250
Repurchase of beneficial conversion feature - - (258,345) - (258,345)
Net loss for the year ended
December 31, 2004 - - - (4,344,525) (4,344,525)
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Balance, at December 31, 2004 16,133,876 $ 16,134 $ 23,711,540 $(14,565,973) $ 9,161,701
Issuance of stock for services 226,733 227 152,058 - 152,285
Issuance of stock for interest payable 226,447 227 167,521 - 167,748
Issuance of warrants for services - - 720,834 - 720,834
Issuance of warrants for contractual
obligations - - 620,818 - 620,818
Exercise of warrants and stock options 25,152 25 26,642 - 26,667
Employee compensation from stock options - - 11,814 - 11,814
Issuance of stock pursuant to Regulation D 1,235,004 1,235 816,872 - 818,107
Debt conversion to common stock 1,270,443 1,270 951,563 - 952,833
Issuance of convertible debt with warrants - - 1,574,900 - 1,574,900
Beneficial conversion related to
convertible debt - - 1,228,244 - 1,228,244
Beneficial conversion related to interest
expense - - 25,876 - 25,876
Repurchase of beneficial conversion feature - - (144,128) - (144,128)
Net loss for the six months ended June 30,
2005 - - - (6,909,811) (6,909,811)
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Balance, at September 30, 2005 19,117,655 $ 19,118 $ 29,864,554 $(21,475,784) $ 8,407,888
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See accompanying notes to financial statements.
-4-
PROVECTUS PHARMACEUTICALS, INC.
(A Development-Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Cumulative
Amounts from
January 17, 2002
Nine Months Nine Months (Inception)
Ended Ended through
September 30, September 30, September 30,
2005 2004 2005
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Cash Flows From Operating Activities
Net loss $ (6,909,811) $ (3,510,407) $ (21,475,784)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation 1,097 117,107 390,669
Amortization of patents 503,340 503,340 1,923,877
Amortization of original issue discount 1,232,967 504,706 1,720,542
Amortization of commitment fee 231,660 - 269,986
Amortization of prepaid consultant expense 274,337 491,773 1,127,187
Amortization of deferred loan costs 339,385 156,139 479,907
Loss on extinguishment of debt 413,455 - 514,867
Beneficial conversion of convertible interest and
conversion of interest 196,456 - 196,456
Compensation through issuance of stock options 11,814 11,709 62,085
Compensation through issuance of stock - - 932,000
Issuance of stock for services 152,286 48,368 5,732,844
Issuance of warrants for services 225,224 18,800 247,705
Issuance of warrants for contractual obligations 620,818 - 620,818
Gain on sale of equipment - - (55,000)
(Increase) decrease in assets
Prepaid expenses 20,570 5,857 (12)
Inventory 32,099 4,123 (62,043)
Increase (decrease) in liabilities
Accounts payable (65,909) 57,430 84,660
Accrued expenses 155,612 (169,067) 521,899
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Net cash used in operating activities (2,564,600) (1,760,122) (6,767,337)
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Cash Flows From Investing Activities
Proceeds from sale of fixed asset - - 180,000
Capital expenditures (11,848) (395) (15,545)
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Net cash (used in) provided by investing activities (11,848) (395) 164,455
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Cash Flows From Financing Activities
Net proceeds from loans from stockholder 25,000 - 174,000
Proceeds from convertible debt 3,150,000 375,000 5,425,959
Proceeds from sale of common stock 888,190 1,812,012 3,375,535
Proceeds from exercise of warrants and stock options 26,667 5,000 32,120
Cash paid to retire convertible debt (700,000) (500,000) (1,200,000)
Cash paid for deferred loan costs (387,500) (90,000) (619,530)
Premium paid on extinguishments of debt (70,000) - (170,519)
Purchase and retirement of common stock - - (48,000)
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Net cash provided by financing activities 2,932,357 1,602,012 6,969,565
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-5-
PROVECTUS PHARMACEUTICALS, INC.
(A Development-Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
Amounts from
Nine Months Nine Months January 17, 2002
Ended Ended (Inception) through
September 30, 2005 September 30, 2004 September 30, 2005
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Net Change in Cash $ 355,909 $ (158,505) $ 366,683
Cash, at beginning of period $ 10,774 $ 164,145 $ -
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Cash, at end of period $ 366,683 $ 5,640 $ 366,683
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Supplemental Disclosure of Cash Flow Information
September 30, 2005
Interest paid of $32,567
Supplemental Disclosure of Noncash Investing and
Financing Activities
September 30, 2005
Issuance of warrants in exchange for prepaid services of $68,910
Debt converted to common stock of $950,000
Beneficial conversion on convertible debt of $1,228,244
Discount on convertible debt with warrants of $1,574,900
Warrants issued for deferred loan costs of $426,700
Accrual of $70,083 for stock issuance costs off-set against proceeds from
sale of common stock
September 30, 2004
Issuance of stock in exchange for standby equity commitment of $310,866
Issuance of warrants in exchange for prepaid services of $329,000
Issuance of stock in exchange for prepaid services of $62,500
Discounts on convertible debt of $254,006
Accrual of $86,666 for stock issuance costs off-set against gross
proceeds from sale of common stock
See accompanying notes to financial statements.
-6-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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 and nine months ended September 30, 2005 are not necessarily indicative of
the results that may be expected for the year ended December 31, 2005.
2. RECAPITALIZATION AND MERGER
Provectus Pharmaceuticals, Inc., formerly known as "Provectus
Pharmaceutical, Inc." and "SPM Group, Inc.," was incorporated under Colorado law
on May 1, 1978. SPM Group ceased operations in 1991, and became a
development-stage company effective January 1, 1992, with the new corporate
purpose of seeking out acquisitions of properties, businesses, or merger
candidates, without limitation as to the nature of the business operations or
geographic location of the acquisition candidate.
On April 1, 2002, SPM Group changed its name to "Provectus Pharmaceutical,
Inc." and reincorporated in Nevada in preparation for a transaction with
Provectus Pharmaceuticals, Inc., a privately-held Tennessee corporation ("PPI").
On April 23, 2002, an Agreement and Plan or reorganization between Provectus
Pharmaceutical and PPI was approved by the written consent of a majority of the
outstanding shares of Provectus Pharmaceutical. As a result, Provectus
Pharmaceuticals, Inc. issued 6,680,000 shares of common stock in exchange for
all of the issued and outstanding shares of PPI. As part of the acquisition,
Provectus Pharmaceutical changed its name to "Provectus Pharmaceuticals, Inc."
and PPI became a wholly owned subsidiary of Provectus. This transaction was
recorded as a recapitalization of PPI.
On November 19, 2002, the Company acquired Valley Pharmaceuticals, Inc., a
privately-held Tennessee corporation formerly known as Photogen, Inc., by
merging PPI with and into Valley and naming the surviving corporation "Xantech
Pharmaceuticals, Inc." Photogen, Inc. was separated from Photogen Technologies,
Inc. in a non-pro rata split-off to some of its shareholders. The assets of
Photogen, Inc. consisted primarily of the equipment and intangibles related to
its therapeutic activity and were recorded at their fair value. The majority
shareholders of Valley were also the majority shareholders of Provectus. Valley
had no revenues prior to the transaction with the Company. By acquiring Valley,
the Company acquired its intellectual property, including issued U.S. patents
and patentable inventions.
3. BASIC AND DILUTED LOSS PER COMMON SHARE
Basic and diluted loss per common share is computed based on the weighted
average number of common shares outstanding. Loss per share excludes the impact
of outstanding options, warrants, and convertible debt as they are antidilutive.
Potential common shares excluded from the calculation at September 30, 2005 are
16,089,935 warrants, 4,209,848 options and 4,755,319 shares issuable upon
conversion of convertible debt and interest. Additionally, the Company is
committed to issue 10,000 warrants and 188,333 shares of common stock.
-7-
4. EQUITY AND DEBT TRANSACTIONS
(a) In January 2005, the Company issued 7,500 shares to consultants in
exchange for services rendered. Consulting costs charged to operations were
$4,950. In February 2005, the Company issued 7,500 shares to consultants in
exchange for services. Consulting costs charged to operations were $7,574. In
April 2005, the Company issued 190,733 shares to consultants in exchange for
services. Consulting costs charged to operations were $127,791. In May 2005, the
Company issued 21,000 shares to consultants in exchange for services. Consulting
costs charged to operations were $11,970.
(b) In January 2005, the Company issued 16,000 warrants to consultants in
exchange for services rendered. Consulting costs charged to operations were
$6,944. In February 2005, the Company issued 13,000 warrants to consultants in
exchange for services rendered. Consulting costs charged to operations were
$13,130. In March 2005, the Company issued 100,000 warrants to consultants in
exchange for services rendered. Consulting costs charged to operations were
$68,910. In April 2005, the Company issued 410,000 warrants to consultants in
exchange for services rendered. Consulting costs charged to operations were
$195,900. In April 2005, the Company issued 980,000 warrants to consultants in
exchange for services rendered relating to the April 2005 Senior Convertible
Debentures (see 4(f) below). Deferred loan costs of $426,700 were recorded which
will be amortized over the life of the debentures. At September 30, 2005,
$129,608 has been amortized and charged to interest expense. In May 2005, the
Company issued 25,000 warrants to consultants in exchange for services rendered.
Consulting costs charged to operations were $9,250.
(c) In March 2005 the Company issued 175,000 warrants to Gryffindor Capital
Partners I, L.L.C. pursuant to the terms of the Second Amended and Restated Note
dated November 26, 2004. Interest costs charged to operations were $117,568. In
April, May and June 2005 the Company issued 175,000 warrants each month to
Gryffindor Capital Partners I, L.L.C. pursuant to the terms of the Second
Amended and Restated Note dated November 26, 2004. Total interest costs charged
to operations were $200,250. In July, August and September 2005 the Company
issued 175,000 warrants each month to Gryffindor Capital Partners I, L.L.C.
pursuant to the terms of the Second Amended and Restated Note dated November 26,
2004. Total interest costs charged to operations were $303,000.
(d) In February 2005, the Company entered into a redemption agreement with
Cornell Capital Partners to pay $50,000 of the Cornell convertible debt. As a
result, the unamortized portion of the debt discount of $27,715 and deferred
loan costs of $20,702, which related to this amount at the date of
extinguishments, were recorded as a loss on extinguishment of debt. The Company
also paid a $5,000 prepayment penalty which has been recorded as loss on
extinguishment of debt. As part of this redemption, the Company has repurchased
the beneficial conversion feature related to the redeemed amount of $16,449.
In March 2005, the Company entered into a debt conversion agreement with
Cornell Capital Partners for $50,000 of its convertible debt which was converted
into 66,667 shares of common stock at $0.75 per share. As a result of this
conversion, the unamortized portion of the debt discount of $24,890 and deferred
loan costs of $18,779, which related to this amount at the date of conversion,
have been recorded as additional interest expense.
In April 2005, the Company entered into a redemption agreement with Cornell
Capital Partners to pay $650,000 of the Cornell convertible debt. As a result,
the unamortized portion of the debt discount of $233,425 and deferred loan costs
of $205,741, which related to this amount at the date of extinguishments, were
recorded as a loss on extinguishment of debt. The Company also paid a $65,000
prepayment penalty which has been recorded as loss on extinguishment of debt. As
part of this redemption, the Company has repurchased the beneficial conversion
feature related to the redeemed amount of $127,679.
At September 30, 2005, there was no amount outstanding related to the
Cornell debt.
(e) During the three months ended March 31, 2005, the Company completed a
private placement transaction with 8 accredited investors, which were registered
effective June 20, 2005, pursuant to which the Company sold 214,666 shares of
common stock at a purchase price of $0.75 per share, for an aggregate purchase
price of $161,000. In connection with the sale of common stock, the Company also
issued warrants to the investors to purchase up to 322,000 shares of common
stock at an exercise price of $1.00 per share. The Company paid $16,100 and
issued 80,500 warrants to Venture Catalyst, LLC as placement agent for this
transaction. The cash costs have been off-set against the proceeds received.
During the three months ended June 30, 2005, the Company completed a private
placement transaction with 4 accredited investors, which were registered
effective June 20, 2005, pursuant to which the Company sold 230,333 shares of
common stock at a purchase price of $0.75 per share, for an aggregate purchase
price of $172,750. In connection with the sale of common stock, the Company also
issued warrants to the investors to purchase up to 345,500 shares of common
stock at an exercise price of $1.00 per share. The Company paid $16,275 and
issued 81,375 warrants to Venture Catalyst, LLC as placement agent for this
transaction. The cash costs have been off-set against the proceeds received.
-8-
During the three months ended September 30, 2005, the Company completed a
private placement transaction with 12 accredited investors pursuant to which the
Company sold 899,338 shares of common stock at a purchase price of $0.75 per
share of which 109,333 are committed to be issued at September 30, 2005, for an
aggregate purchase price of $674,500. In connection with the sale of common
stock, the Company also issued warrants to the investors to purchase up to
1,124,167 shares of common stock at an exercise price of $0.935 per share. The
Company paid $87,685 and committed to issue 79,000 shares of common stock at a
fair market value of $70,083 to Network 1 Financial Securities, Inc. as
placement agent for this transaction which is accrued at September 30, 2005. The
cash and common stock costs have been off-set against the proceeds received.
(f) In March 2005, the Company entered into agreements to issue Senior
Convertible Debentures to 2 accredited investors with Network 1 Financial
Securities, Inc. in the aggregate amount of $450,000. This debt has a security
interest in the assets of the Company, a maturity date of March 30, 2007, and is
convertible into shares of the Company's common stock at a per share conversion
price of $0.75. In addition, the Company incurred deferred loan costs of $80,000
which were payable in cash. These costs were recorded as an asset and amortized
over the term of the debt. In April 2005, the Company entered into agreements to
issue Senior Convertible Debentures to 5 accredited investors in the aggregate
amount of $2,700,000. This debt has a security interest in the assets of the
Company, a maturity date of March 30, 2007, and is convertible into shares of
the Company's common stock at a per share conversion price of $0.75. In
addition, the Company incurred deferred loan costs of $307,500 which were
payable in cash and $426,700 from the issuance of warrants (see 4(b) above).
These costs were recorded as an asset and amortized over the term of the debt.
The Company shall be obligated to pay the principal of the Senior
Convertible Debentures in installments as follows: Twelve (12) equal monthly
payments of principal (the "Monthly Amount") plus, to the extent not otherwise
paid, accrued but unpaid interest plus any other obligations of the Company to
the Investor under this Debenture, the Purchase Agreement, or the Registration
Rights Agreement, or otherwise. The first such installment payment shall be due
and payable on March 30, 2006, and subsequent installments shall be due and
payable on the thirtieth (30th) day of each succeeding month thereafter (each a
"Payment Date") until the Company's obligations under this Debenture is
satisfied in full. The Company shall have the option to pay all or any portion
of any Monthly Amount in newly issued, fully paid and nonassessable shares of
Common Stock, with each share of Common Stock having a value equal to (i)
eighty-five percent (85%) multiplied by (ii) the Market Price as of the third
(3rd) Trading Day immediately preceding the Payment Date (the "Payment
Calculation Date").
Interest at the greater of (i) the prime rate (adjust monthly), plus 4% and
(ii) 8% is due on a quarterly basis. At the time the interest is payable, upon
certain conditions, the Company has the option to pay all or any portion of
accrued interest in either cash or shares of the Company's common stock valued
at 85% multiplied by the market price as of the third trading date immediately
preceding the interest payment date. Under the senior convertible debentures,
for purposes of determining market price as of any date, market price means: (i)
the average of the last reported sale prices for the shares on the National
Association of Securities Dealers Inc.'s Over-the-Counter Bulletin Board, for
the five days immediately preceding such date; (ii) if the OTCBB is not the
principal trading market for the shares, the average of the last reported sale
prices on the principal trading market for the common stock during the same
period as reported by Bloomberg, L.P., or (iii) if unable to calculate on any of
the foregoing bases, as reasonable determined in good faith by the Board or an
independent investment back of nationally recognized standing in the valuation
businesses similar to the business of the Company.
The Company may prepay the Senior Convertible Debentures in full by paying
the holders the greater of (i) 125% multiplied by the sum of the total
outstanding principal, plus accrued and unpaid interest, plus default interest,
if any or (ii) the highest number of shares of common stock issuable upon
conversion of the total amount calculated pursuant to (i) multiplied by the
highest market price for the common stock during the period beginning on the
date until prepayment.
On or after any event or series of events which constitutes a fundamental
change, the holder may, in its sole discretion, require the Company to purchase
the debentures, from time to time, in whole or in part, at a purchase price
equal to 110% multiplied by the sum of the total outstanding principal, plus
accrued and unpaid interest, plus any other obligations otherwise due under the
debenture. Under the senior convertible debentures, fundamental change means (i)
any person becomes a beneficial owner of securities representing 50% or more of
the (a) outstanding shares of common stock or (b) the combined voting power of
the then outstanding securities; (ii) a merger or consolidation whereby the
voting securities outstanding immediately prior thereto fail to continue to
represent at least 50% of the combined voting power of the voting securities
immediately after such merger or consolidation; (iii) the sale or other
disposition of all or substantially all or the Company's assets; (iv) a change
-9-
in the composition of the Board within two years which results in fewer than a
majority of directors are directors as of the date of the debenture; (v) the
dissolution or liquidation of the Company; or (vi) any transaction or series of
transactions that has the substantial effect of any of the foregoing.
The Purchaser of the $400,000 Senior Convertible Debenture also purchased
Class A Warrants and Class B Warrants under the Securities Purchase Agreement.
Class A Warrants are exercisable at any time between March 10, 2005 through and
including March 10, 2010. Class B Warrants are exercisable for a period through
and including 175 days after an effective registration of the common stock
underlying the warrants. The per share exercise price of a Class A Warrant is
$0.99 and the per share exercise price of the Class B Warrant is $0.945.
The Purchaser of the $50,000 Senior Convertible Debenture and the
Purchasers of the Senior Convertible Debentures totaling $2,700,000 also
purchased Class A Warrants and Class B Warrants under the Securities Purchase
Agreement. Class A Warrants are exercisable at any time between March 30, 2005
through and including March 30, 2010. Class B Warrants are exercisable for a
period through and including 175 days after an effective registration of the
common stock underlying the warrants. The per share exercise price of a Class A
Warrant is $0.935 and the per share exercise price of the Class B Warrant is
$0.8925.
The Purchasers of the Senior Convertible Debentures received a total of
4,200,000 Class A Warrants and a total of 2,940,000 Class B Warrants.
The $450,000 proceeds received in March 2005 was allocated between the debt
and the warrants on a pro-rata basis. The value of the warrants was determined
using a Black-Scholes option-pricing model. The allocated fair value of these
warrants was $254,328 and was recorded as a discount to the related debt. In
addition, the conversion prices were lower than the market value of the
Company's common stock on the date of issue. As a result, an additional discount
of $195,672 was recorded for this beneficial conversion feature. The combined
debt discount of $450,000 is being amortized over the life of the debt using the
effective interest method. The $2,700,000 proceeds received in April 2005 was
allocated between the debt and the warrants on a pro-rata basis. The value of
the warrants was determined using a Black-Scholes option-pricing model. The
allocated fair value of these warrants was $1,320,572 and was recorded as a
discount to the related debt. A beneficial conversion amount of $1,032,572 was
also recorded as the value of the debt, if converted, is greater than the
pro-rata value allocated to the debt. The combined debt discount of $2,353,144
is being amortized over the life of the debt using the effective interest
method.
In June 2005, the Company entered into a debt conversion agreement with one
of the April accredited investors for $150,000 of its convertible debt which was
converted into 200,000 shares of common stock at $0.75 per share, and $2,833 of
accrued interest was converted into 3,777 shares of common stock at $0.75 per
share. In July 2005, the Company entered into a debt conversion agreement with
two of the April accredited investors for an aggregate of $350,000 of
convertible debt which was converted into 466,666 shares of common stock at
$0.75 per share. In September 2005, the Company entered into a debt conversion
agreement with one of the March accredited investors for $400,000 of its
convertible debt which was converted into 533,333 shares of common stock at
$0.75 per share.
At September 30, 2005, $1,097,765 of the total debt discount has been
amortized which includes $771,295 of the unamortized portion of the debt
discount related to the converted debt at the time of the debt conversions. At
September 30, 2005, $295,250 of the deferred loan costs have been amortized
which includes $168,184 of the unamortized portion of the deferred loan costs
related to the converted debt at the time of the debt conversions.
At September 30, 2005, the Senior Convertible Debentures totaled $544,621,
net of debt discount of $1,705,379. Of this total, $317,696 was recorded as a
current liability, net of debt discount of $994,804 and $226,925 was recorded as
a long-term liability, net of debt discount of $710,575.
The Company chose to pay the quarterly interest due at June 30, 2005 and
September 30, 2005 in common stock instead of cash. As a result, accrued
interest at June 30, 2005 of $78,904 was paid in 159,780 shares of common stock
resulting in additional interest expense of $28,843. The shares were issued July
11, 2005. The accrued interest due September 30, 2005 of $72,985 was converted
into 97,573 shares of common stock resulting in additional interest expense of
$15,301. 66,667 of these shares were issued on September 30, 2005 and the
remaining shares, valued at $28,285 are accrued at September 30, 2005.
(g) At September 30, 2005, the Company recorded additional interest expense
of $25,876 related to the beneficial conversion feature of the interest on the
Gryffindor convertible debt.
-10-
5. STOCK-BASED COMPENSATION
On January 7, 2005, the Company issued 1,200,000 stock options to
employees. The options vest over four years with no 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 September 30, 2005. On May 25, 2005, the
Company issued 1,200,000 stock options to employees. The options vest over three
years with no options vesting on the date of grant. The exercise price is $0.75
which is greater than the fair market price on the date of issuance, and all
options were outstanding at September 30, 2005. An employee of the Company
exercised 15,152 options during the three months ended September 30, 2005 at an
exercise price of $1.10 per share of common stock for $16,667.
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
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, $11,814 of expense was recorded for the nine months ended
September 30, 2005. 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 Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
-----------------------------------------------------------------------------------------------------------------------------------
Net loss, as reported $ (2,462,883 ) $ (1,148,522 ) $ (6,909,811) $ (3,510,407 )
Add stock-based employee
compensation expense included in
reported net loss 3,938 3,903 11,814 11,709
Less total stock-based employee
Compensation expense determined
under the fair value based method
for all awards (187,500 ) (90,938 ) (490,833) (591,563 )
-----------------------------------------------------------------------------------------------------------------------------------
Pro forma net loss $ (2,646,445 ) $ (1,235,557 ) $ (7,388,830) $ (4,090,261 )
-----------------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per common
share, as reported $ (0.14 ) $ (0.08 ) $ (0.41) $ (0.26 )
Basic and diluted loss per common
share, pro forma $ (0.15 ) $ (0.08 ) $ (0.44) $ (0.30 )
-11-
6. Loan From Shareholder
During 2002, a shareholder who is also an employee and member of the
Company's board of directors, loaned the Company $109,000. During 2003, the same
shareholder loaned the Company an additional $40,000. During 2005, the same
shareholder loaned the Company an additional $25,000. Interest on the loan is
5%, compounded monthly. Principal is due on December 31, 2009 and interest is
payable quarterly in arrears beginning on June 30, 2003. Accrued interest was
$22,637 and $13,385 at September 30, 2005 and 2004, respectively. Interest
expense was $7,203 and $5,954 at September 30, 2005 and 2004, respectively.
7. SUBSEQUENT EVENTS
In October 2005, the Company entered into debt conversion agreements with
one of its March and one of its April accredited investors for an aggregate of
$100,000 of convertible debt which was converted into 133,334 shares of common
stock at $0.75 per share.
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.
CAPITAL STRUCTURE
Our ability to continue as a going concern continues to be reasonably
assured due to our financing in March, April, August and September 2005.
However, our long-term ongoing operations continue to be dependent upon our
ability to raise capital.
We plan to implement our integrated business plan, including execution of
the current and next phases in clinical development of our pharmaceutical
products and continued execution of research programs for new research
initiatives.
We intend to proceed as rapidly as possible with the asset sale and
licensure of our OTC products that can be sold with a minimum of regulatory
compliance and with the further development of revenue sources through licensing
of our existing medical device and biotech intellectual property portfolio.
Although we believe that there is a reasonable basis for our expectation that we
will become profitable due to the asset sale and licensure of our OTC products,
we cannot assure you that we will be able to achieve, or maintain, a level of
profitability sufficient to meet our operating expenses.
Our current plans include continuing to operate with our four employees
during the immediate future, but we have added additional consultants and
anticipate adding employees in the next 12 months. Our current plans also
include minimal purchases of new property, plant and equipment, and increased
research and development for additional clinical trials.
-12-
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 profitability and long-term growth. In 2005, through
careful control of expenditures, preparation for the asset sale and licensure of
our 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 selling the OTC
assets and licensing our existing OTC products, principally Pure-Stick, 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 have
restarted 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.
Comparison of Three and Nine Months Ended September 30, 2005 and September 30,
2004.
Revenues. OTC Product Revenue decreased by $832 in the three months ended
September 30, 2005 to $387 from $1,219 in the three months ended September 30,
2004. The decrease in OTC Product Revenue resulted primarily from lower sales of
Pure-ific in retail stores. OTC Product Revenue increased by $623 in the nine
months ended September 30, 2005 to $4,453 from $3,830 in the nine months ended
September 30, 2004. The increase in OTC Product Revenue resulted primarily from
sales of Pure-ific in retail stores. Medical Device Revenue was unchanged in the
three months ended September 30, 2005 from the three months ended September 30,
2004. Medical Device Revenue decreased by $12,141 in the nine months ended
September 30, 2005 to $984 from $13,125 in the nine months ended September 30,
2004. The decrease in Medical Device Revenue resulted primarily due to a large
beta unit sale in the nine months ended September 30, 2004 that was not repeated
in the nine months ended September 30, 2005, partially offset by sales of three
smaller devices in the nine months ended September 30, 2005.
Research and development. The Company has completed the planning phase for
the major research and development projects anticipated in the next 12 months.
The Company's Phase 1 metastatic melanoma and breast carcinoma clinical trials
are expected to be completed in early 2006 for less than $1,000,000 in the
aggregate. At that time the planning phase for the expected Phase 2 trials will
be completed. The Company's Phase 2 psoriasis trial is expected to commence in
early 2006 and will cost approximately $1,500,000 over 12 to 24 months. The
Company's Phase 1 liver cancer trial does not have an expected completion cost
at this time. Research and development costs comprising the total of $467,202
for the three months ending September 30, 2005 include depreciation expense of
$573, consulting of $176,612, lab supplies of $33,573, insurance of $14,302,
legal of $59,885, payroll of $174,047, and rent and utilities of $8,210. The
research and development costs are higher for the three months ending September
30, 2005 because the Company has initiated clinical trials under the aegis of
the Food & Drug Administration (FDA). Research and development costs comprising
the total of $1,765,839 for the nine months ending September 30, 2005 included
depreciation expense of $1,097, consulting of $878,617, lab supplies of
$108,988, insurance of $96,629, legal of $165,939, payroll of $492,759, and rent
and utilities of $21,810. The research and development costs are higher for the
nine months ending September 30, 2005 because the Company has initiated clinical
trials under the aegis of the Food & Drug Administration (FDA). Research and
development costs comprising the total of $379,113 for the three months ending
September 30, 2004 include consulting of $147,711, insurance of $30,416, legal
of $44,113, payroll of $151,271, and rent and utilities of $5,602. R&D costs
comprising the total of $813,252 for the nine months ending September 30, 2004
include consulting of $289,079, lab expense of $10,958, insurance of $66,591,
legal of $91,047, office and other expense of $3,751, payroll of $326,895, rent
and utilities of $14,935, and taxes and fees of $9,996.
General and administrative. General and administrative expenses increased
by $39,493 in the three months ended September 30, 2005 to $576,910 from
$537,417 in the three months ended September 30, 2004. The increase resulted
primarily from higher consulting expenses for general corporate purposes.
General and administrative expenses increased by $364,817 in the nine months
ended September 30, 2005 to $1,718,452 from $1,353,635 in the nine months ended
September 30, 2004. The increase resulted primarily from higher consulting and
payroll expenses for general corporate purposes.
-13-
CASH FLOW
As of October 31, 2005, we held approximately $600,000 in cash. At our
current cash expenditure rate, this amount will be sufficient to meet our needs.
We have been increasing our expenditure rate by accelerating some of our
research programs for new research initiatives; in addition, we are seeking to
improve our cash flow through the asset sale and licensure of our OTC products.
However, we cannot assure you that we will be successful in selling the OTC
assets and licensing our existing OTC products. Moreover, even if we are
successful in improving our current cash flow position, we nonetheless plan to
require additional funds to meet our long-term needs. We anticipate these funds
will come from the proceeds of private placements or public offerings of debt or
equity securities.
CAPITAL RESOURCES
As noted above, our present cash flow is currently sufficient to meet our
short-term operating needs. Excess cash will be used to finance the current and
next phases in clinical development of our pharmaceutical products. We
anticipate that any required funds for our operating and development needs
beyond 2005 will come from the proceeds of private placements or public
offerings of debt or equity securities. While we believe that we have a
reasonable basis for our expectation that we will be able to raise additional
funds, we cannot assure you that we will be able to complete additional
financing in a timely manner. In addition, any such financing may result in
significant dilution to shareholders. For further information on funding
sources, please see Note 4 of the notes to our financial statements included in
this report.
RECENT ACCOUNTING PRONOUNCEMENTS
In November 2004, the FASB issued Statement of Financial Accounting
Standards No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4. The
purpose of this statement is to clarify the accounting of abnormal amounts of
idle facility expense, freight, handling costs and waste material. ARB No. 43
stated that under some circumstances these costs may be so abnormal that they
are required to be treated as current period costs. SFAS 151 requires that these
costs be treated, as current period costs regardless if they meet the criteria
of "so abnormal." In addition, the statement requires that allocation of fixed
production overheads to the costs of conversion be based on the normal capacity
of the production facilities. The provision of this Statement shall be effective
for inventory costs incurred during fiscal years beginning after June 15, 2005.
The adoption of SFAS 151 is not expected to have a material impact on the
Company's results of operations or financial position.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets, an amendment of APB Opinion No. 29. SFAS 153 is effective for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005, with earlier application permitted. The adoption of SFAS 153 is not
expected to have a material impact on the Company's results of operations or
financial position.
In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payments
(revised 2004). This statement eliminates the option to apply the intrinsic
value measurement provisions of APB Board Opinion No. 25, Accounting for Stock
Issued to Employees, to stock compensation awards issued to employees. Rather,
the Statement requires companies to measure the cost of employee services
received in exchange for an award of equity instruments based on the grant date
fair value of the award. That cost will be recognized over the period during
which an employee is required to provide services in exchange for the award --
the requisite service period (usually the vesting period). In March 2005, the
SEC staff expressed their views with respect to SFAS No. 123(R) in Staff
Accounting Bulletin No. 107, Share-Based Payment, (SAB 107). SAB 107 provides
guidance on valuing options. SFAS 123(R) will be effective for the Company's
fiscal year beginning January 1, 2006. The Company is currently evaluating the
impact of the adoption of this statement on its financial statements.
In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for
Conditional Asset Retirement Obligations, (FIN 47). FIN 47 is an interpretation
of SFAS No. 143, Asset Retirement Obligations, which was issued in June 2001.
FIN 47 was issued to address diverse accounting practices that have developed
with regard to the timing of liability recognition for legal obligations
associated with the retirement of a tangible long-lived asset in which the
timing and/or method of settlement are conditional on a future event that may or
may not be within the control of the entity. According to FIN 47, uncertainty
about the timing and/or method of settlement of a conditional asset retirement
obligation should be factored into the measurement of the liability when
sufficient information exists. FIN 47 also clarifies when an entity would have
sufficient information to reasonably estimate the fair value of an asset
-14-
retirement obligation. FIN 47 is effective no later than December 31, 2005 for
the Company. The adoption of FIN 47 is not expected to have a material impact on
the Company's results of operations or financial position.
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections, a replacement of APB Opinion No. 20 and Statement No. 3. SFAS 154
changes the requirements for the accounting and reporting of a change in
accounting principle. SFAS 154 applies to all voluntary changes in accounting
principle as well as to changes required by an accounting pronouncement that
does not include specific transition provisions. SFAS 154 is effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. The adoption of SFAS 154 is not expected to have a
material impact on the Company's results of operations or financial position.
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
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-15(e) under the
Exchange Act) as of September 30, 2005, 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.
-15-
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. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Securities
During the three months ended September 30, 2005, the Company completed a
private placement transaction with 12 accredited investors pursuant to which the
Company sold 899,338 shares of common stock at a purchase price of $0.75 per
share of which 109,333 are committed to be issued at September 30, 2005, for an
aggregate purchase price of $674,500. In connection with the sale of common
stock, the Company also issued warrants to the investors to purchase up to
1,124,167 shares of common stock at an exercise price of $0.935 per share. The
Company paid $87,685 and committed to issue 79,000 shares of common stock at a
fair market value of $70,083 to Network 1 Financial Securities, Inc. as
placement agent for this transaction which is accrued at September 30, 2005. The
cash and common stock costs have been off-set against the proceeds received.
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.
31.1 Certification Pursuant to Rule 13a-14(a) (Section 302 Certification),
dated November 14, 2005, executed by H. Craig Dees, Ph.D., Chief
Executive Officer of the Company.
31.2 Certification Pursuant to Rule 13a-14(a) (Section 302 Certification),
dated November 14, 2005, executed by Peter R. Culpepper, Chief
Financial Officer of the Company.
32.1 Certification Pursuant to 18 U.S.C. ss. 1350 (Section 906
Certification), dated November 14, 2005, executed by H. Craig Dees,
Ph.D., Chief Executive Officer of the Company, and Peter R. Culpepper,
Chief Financial Officer of the Company.
-16-
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, Ph.D.
--------------------------------------------
H. Craig Dees, Ph.D. Chief Executive Officer
Date: November 14, 2005
-17-
EXHIBIT INDEX
Exhibit No. Description
----------- ------------
31.1 Certification Pursuant to Rule 13a-14(a) (Section 302 Certification),
dated November 14, 2005, executed by H. Craig Dees, Ph.D., Chief
Executive Officer of the Company.
31.2 Certification Pursuant to Rule 13a-14(a) (Section 302 Certification),
dated November 14, 2005, executed by Peter R. Culpepper, Chief
Financial Officer of the Company.
32.1 Certification Pursuant to 18 U.S.C. ss. 1350 (Section 906
Certification), dated November 14, 2005, executed by H. Craig Dees,
Ph.D., Chief Executive Officer of the Company, and Peter R. Culpepper,
Chief Financial Officer of the Company.
18
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 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report.
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rule
13a-15(f) and 15d-15(f)) for the 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 report is being prepared;
b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
d) 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 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 the small business issuer's board of directors (or persons performing
the equivalent functions):
19
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: November 14, 2005
/s/ H. Craig Dees
----------------------------------
H. Craig Dees, Ph.D.
Chief Executive Officer
20
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 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report.
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rule
13a-15(f) and 15d-15(f)) for the 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 report is being prepared;
b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
d) 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 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 the small business issuer's board of directors (or persons performing
the equivalent functions):
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a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: November 14, 2005
/s/ Peter R. Culpepper
------------------------------------
Peter R. Culpepper
Chief Financial Officer
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Exhibit 32.1
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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
September 30, 2005, as filed with the U.S. Securities and Exchange
Commission on the date hereof (the "Report"), fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
This Certification is signed on November 14, 2005.
/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.
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