The following discussion is intended to assist in the understanding and
assessment of significant changes and trends related to our results of
operations and our financial condition together with our consolidated
subsidiaries. This discussion and analysis should be read in conjunction with
the accompanying unaudited financial statements and our Annual Report on Form
10-K for the year ended December 31, 2018 filed with the Securities and Exchange
Commission ("SEC) on March 7, 2019 ("2018 Form 10-K"), which includes additional
information about our critical accounting policies and practices and risk
factors. Historical results and percentage relationships set forth in the
statement of operations, including trends which might appear, are not
necessarily indicative of future operations.
Overview of Core Technologies
Provectus is a clinical-stage biotechnology company developing a new class of
drugs for oncology and dermatology based on halogenated xanthenes, such as Rose
Bengal (4,5,6,7-tetrachloro-2',4',5',7'-tetraiodofluorescein). Intralesional
PV-10, the first small molecule oncolytic immunotherapy, which can induce
immunogenic cell death, is undergoing clinical study for adult solid tumor
cancers, like melanoma and gastrointestinal cancers, and preclinical study for
pediatric cancers. Topical PH-10 is undergoing clinical study for inflammatory
dermatoses, like psoriasis and atopic dermatitis. For psoriasis, pathways
significantly improved include published psoriasis transcriptomes and cellular
responses mediated by IL-17, IL-22, and interferons.
Our approach to drug development comprises two related, complementary, clinical
development program paths based on the features of our investigational drugs and
their clinically rational applicability to different patient populations. In
solid tumor cancers for adults, for example, we believe PV-10 has important
implications as a single agent for earlier states of disease (i.e., locally
advanced disease, or Stage III or earlier), while the combination of PV-10 with
other classes of therapy or therapeutic agent (e.g., chemotherapy,
immunotherapy, radiotherapy, targeted therapy) is more appropriate for more
advanced disease states (i.e., widely metastatic disease, or Stage IV).
Results of Operations
Comparison of the Three Months Ended March 31, 2019 and March 31, 2018
Research and Development
Research and development expenses decreased by $905,732 from $1,943,063 for the
three months ended March 31, 2018 to $1,037,331 for the three months ended March
31, 2019, a decrease of approximately 47% year-over-year. The decrease was due
primarily to lower contractor costs of $896,205, insurance costs of $11,190,
travel cost of $18,191, offset by an increase in payroll of $4,272, conference
costs of $12,233, and other costs totaling $3,349.
Research and development costs of $1,037,331 for the three months ended March
31, 2019 included amortization of patents of $167,780, payroll of $149,475,
conferences of $22,233, consulting and contract labor of $560,468, insurance of
$64,529, lab supplies and pharmaceutical preparations of $17,232, travel cost of
$23,379, rent and utilities of $24,415, depreciation expense of $2,162, and
other costs of $5,658.
Research and development costs of $1,943,063 for the three months ended March
31, 2018 included patent amortization expense of $167,780, payroll of $139,423,
conferences of $10,000, consulting and contract labor of $1,456,673, insurance
of $75,719, lab supplies and pharmaceutical preparations of $21,285, travel of
$41,570, rent and utilities of $17,859, depreciation expense of $2,162, and
other costs of $10,592.
General and Administrative
General and administrative expenses increased by $3,101, from $756,151 for the
three months ended March 31, 2018 to $759,252 for the three months ended March
31, 2019, an increase of approximately .4% year-over-year. The increase was due
primarily to (i) a $40,000 increase in directors' fees, which were accrued, (ii)
an increase in accounting fees of $88,806, (iii) an increase in investor
relations of $132,599 due to credits received in 2018 totaling $144,747, and
other cost increases of $9,609, partially offset by (iv) decreased legal
expenses of $179,813 due to wind down of lawsuits, (v) a decrease of $42,176 in
finance expenses, (vi) decreased payroll expense of $20,122, and (vii) decreased
travel cost of $25,802.
Other income increased by $627,152 from $(200,398) for the three months ended
March 31, 2018 to $426,754 for the three months ended March 31, 2019. In the
quarter ended March 31, 2019, the matters with BHS and RSM were resolved
pursuant to a settlement between these parties and the Company, the terms of
which are confidential.
Interest expense increased by $128,006 from $206,567 for the three months ended
March 31, 2018 to $334,573 for the three months ended March 31, 2019. The
increase was due to the increased number of convertible notes payable relating
to the PRH Notes.
Liquidity and Capital Resources
Our cash and cash equivalents were $1,767,900 at March 31, 2019, compared to
$50,986 at December 31, 2018. The condensed consolidated financial statements
and notes thereto included in this Quarterly Report on Form 10-Q have been
prepared on a basis that contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business. We
have continuing net losses and negative cash flows from operating activities. In
addition, we have an accumulated deficit of $228,264,121 as of March 31, 2019.
These conditions raise substantial doubt about our ability to continue as a
going concern for a period within one year from the date that the financial
statements included elsewhere in this Quarterly Report on Form 10-Q are issued.
Our financial statements do not include any adjustments to the amounts and
classification of assets and liabilities that may be necessary should we be
unable to continue as a going concern. Our ability to continue as a going
concern depends on our ability to obtain additional financing as may be required
to fund current operations.
Management's plans include selling our equity securities and obtaining other
financing to fund our capital requirement and on-going operations, including the
2017 Financing; however, there can be no assurance we will be successful in
these efforts. The financial statements do not include any adjustment that might
be necessary if we are unable to continue as a going concern. Significant funds
will be needed to continue and complete our ongoing and planned clinical trials.
Access to Capital
Management plans to access capital resources through possible public or private
equity offerings, including the 2017 Financing, exchange offers, debt
financings, corporate collaborations or other means. If we are unable to raise
sufficient capital through the 2017 Financing or otherwise, we will not be able
to pay our obligations as they become due.
The primary business objective of management is to build the Company into a
commercial-stage biotechnology company; however, we cannot assure you that
management will be successful in implementing the Company's business plan of
developing, licensing, and/or commercializing our prescription drug candidates.
Moreover, even if we are successful in improving our current cash flow position,
we nonetheless plan to seek additional funds to meet our current and long-term
requirements in 2019 and beyond. We anticipate that these funds will otherwise
come from the proceeds of private placement transactions, including the 2017
Financing, the exercise of existing warrants and outstanding stock options, or
public offerings of debt or equity securities. While we believe that we have a
reasonable basis for our expectation that we will be able to raise additional
funds, we cannot assure you that we will be able to complete additional
financing in a timely manner. In addition, any such financing may result in
significant dilution to stockholders.
Critical Accounting Policies
For a description of our critical accounting policies, see Note 3 - Significant
Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financings, or other
relationships with unconsolidated entities or other persons, also known as
special purpose entities ("SPEs").
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