PROVECTUS BIOPHARMACEUTICALS INC

1. Business Organization, Nature of Operations and Basis of Presentation

Provectus Biopharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, “Provectus” or “the Company”), is a clinical-stage biotechnology company developing immunotherapy medicines for different diseases that are based on a class of synthetic small molecule immuno-catalysts called halogenated xanthenes (“HXs”). Our lead HX molecule is named rose bengal sodium (“RBS”).

The Company’s proprietary, patented, pharmaceutical-grade RBS is the active pharmaceutical ingredient in the drug candidates of our current clinical development programs and the preclinical formulations of our current non-clinical early discovery programs. Importantly, our pharmaceutical-grade RBS displays different therapeutic effects at different concentrations and can be formulated for delivery by different routes of administration.

The Company believes that RBS targets disease in a bifunctional manner. First, direct contact may lead to cell death or repair, depending on the disease being treated and the concentration of the RBS utilized in the treatment. Second, multivariate immune signaling, activation, and response may follow that may manifest as stimulatory, inhibitory, or both.

The Company believes that it is the first entity to advance an RBS formulation into clinical trials for the treatment of a disease, such as those trials reported on the clinical trials registry at ClinicalTrials.gov.

The Company believes that it is the first and only entity to date to make pharmaceutical-grade RBS successfully, reproducibly, and consistently at a purity of nearly 100%.

The Company’s small molecule HX medical science platform comprises several different drug candidates and preclinical targets using different concentrations delivered by different routes of administration specific to each disease area and/or disease indication. The Company’s HX medical science platform includes clinical development programs in oncology (intratumoral administration), dermatology (topical), and ophthalmology (topical);in vivo proof-of-concept programs in oncology (oral), hematology (oral), wound healing (topical), and canine cancers (intratumoral); andin vitro drug discovery programs in infectious diseases and tissue regeneration and repair.

Risks and Uncertainties

The Company’s activities are subject to significant risks and uncertainties, including failing to successfully develop and license or commercialize the Company’s prescription drug candidates.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information pursuant to Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be reviewed in conjunction with the Company’s audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2023 filed with the SEC on March 28, 2024. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

2. Liquidity and Going Concern

To date, the Company has not generated any revenues or profits from planned principal operations.

The Company’s cash and restricted cash were $762,752 at March 31, 2024 which includes $744,717 of restricted cash resulting from a grant received from the State of Tennessee. The Company’s working capital deficit was $7,507,105 and $7,652,098 as of March 31, 2024 and December 31, 2023, respectively, net loss for the three months ended March 31, 2024 and 2023 was $504,042 and $827,454, respectively, and cash used in operations was $1,044,495 and $624,110 for the three months ended March 31, 2024 and March 31, 2023, respectively. The Company continues to incur significant operating losses. Management expects that significant on-going operating expenditures will be necessary to successfully implement the Company’s business plan and develop and market its products. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these unaudited condensed consolidated financial statements are issued. Implementation of the Company’s plans and its ability to continue as a going concern will depend upon the Company’s ability to develop PV-10, PH-10, and/or any other halogenated xanthene-based drug products, and to raise additional capital.

The Company plans to access capital resources through possible public or private equity offerings, including the 2022 financing (see Note 5), exchange offers, debt financings, corporate collaborations, or other means. In addition, the Company continues to explore opportunities to strategically monetize its lead drug candidates, PV-10 and PH-10, through potential co-development and licensing transactions, although there can be no assurance that the Company will be successful with such plans. The Company has historically been able to raise capital through equity offerings, although there can be no assurance that it will continue to be successful in the future. If the Company is unable to raise sufficient capital, it will not be able to pay its obligations as they become due.

The primary business objective of management is to build the Company into a commercial-stage biotechnology company; however, there can be no assurance that it will be successful in co-developing, licensing, and/or commercializing PV-10, PH-10, and/or any other halogenated xanthene-based drug candidate developed by the Company or entering into any financial transaction. Moreover, even if the Company is successful in improving its current cash flow position, the Company nonetheless plans to seek additional funds to meet its long-term requirements in 2024 and beyond. The Company anticipates that these funds will otherwise come from the proceeds of private placement transactions, the exercise of existing warrants and outstanding stock options, or public offerings of debt or equity securities. While the Company believes that it has a reasonable basis for its expectation that it will be able to raise additional funds, there can be no assurance that it will be able to obtain funds on commercially acceptable terms, or complete additional financing in a timely manner. Any such financing may result in significant dilution to stockholders.

These factors raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of liabilities that may be necessary should we be unable to continue as a going concern.

Our consolidated financial statements included elsewhere in this Annual Report on Form 10-K have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate our continuation as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values.

3. Significant Accounting Policies

Since the date the Company’s December 31, 2023 consolidated financial statements were issued in its 2023 Annual Report on March 28, 2024, there have been no material changes to the Company’s significant accounting policies.

Principles of Consolidation

Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant estimates and assumptions include the recoverability and useful lives of long-lived assets, accrued liabilities, and the valuation allowance related to the Company’s deferred tax assets.

Restricted Cash

Restricted cash consists of a grant award received from the State of Tennessee. Restricted cash available as of March 31, 2024 is $744,717. See Note 10, Grants.

Cash Concentrations

Cash and restricted cash are maintained at financial institutions and, at times, balances may exceed federally insured limits of $250,000, although the Company seeks to minimize this through treasury management. The Company has never experienced any losses related to these balances although there can be no assurance that it will not experience any losses in the future. As of March 31, 2024 and December 31, 2023, the Company had cash and restricted cash balances in excess of FDIC insurance limits of $512,752 and $776,799, respectively.

Basic and Diluted Loss Per Common Share

Basic loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock. The following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” These amendments require a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Public entities with a single reporting segment are required to provide both the new disclosures and all of the existing disclosures required under ASC 280. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-09 are effective for the Companyfor annual periods beginning after December 15, 2024, with early adoption permitted. Since this new ASU addresses only disclosures, the Company does not expect the adoption to have any material effects on its financial condition, results of operation or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-09.

4. Other Accrued Expenses

The following table summarizes the other accrued expenses at March 31, 2024 and December 31, 2023:

5. Convertible Notes Payable

The following summarizes convertible notes payable activity during the three months ended March 31, 2024:

2021 Financing

2022 Financing

For further details on the terms of the 2021 and 2022 Notes, refer to our Form 10-K as filed with the SEC on March 28, 2024.

2024 Repayment of 2021 Notes

During the three months ended March 31, 2024, the Company repaid $100,000 principal owed on the 2021 Note. As of March 31, 2024, principal and interest in the amount of $100,000 and $41,394, respectively, remains outstanding on the 2021 Note.

2024 Conversions of 2022 Notes into Preferred Stock

During the three months ended March 31, 2024, principal and interest in the aggregate amount of$648,161, owed in connection with the 2022 Notes were converted into 226,474 shares of Series D-1 Preferred Stock at the Conversion Price of $2.862. Any fractional shares issuable pursuant to the formula were rounded up to the next whole share of Series D-1 Preferred Stock. See Note 8, Stockholders’ Deficit for additional information on the Series D-1 Preferred Stock.

6. Notes Payable

The Company obtained short-term financing from AFCO Insurance Premium Finance for our commercial insurance policies. As of March 31, 2024 and December 31, 2023, the balance of the note payable was$190,910 and$277,815, respectively.

7. Related Party Transactions

During each of the three months ended March 31, 2024 and 2023, the Company had consulting fees of $63,600 to Mr. Bruce Horowitz (Capital Strategists) for services rendered. As of March 25, 2024, Mr. Horowitz resigned as COO and member of the Board. On March 26, 2024, the Company paid Mr. Horowitz $250,000 with a balance of $258,000 due on or before June 30, 2024 , after which the amount of the second payment would be increased to $500,000. Mr. Horowitz waived the amount of$469,000 due him in director fees.

See Note 5 for details of other related party transactions.

Director fees incurred during each of the three months ended March 31, 2024 and 2023 were $96,250. Accrued directors’ fees as of March 31, 2024 and December 31, 2023 were $1,976,839 and $2,330,589, respectively.

8. Stockholders’ Deficit

Preferred Stock

During the three months ended March 31, 2024, the Company issued 226,474 shares of Series D-1 Convertible Preferred Stock upon the conversion of$600,000 of principal and $48,161 accrued interest outstanding on the 2022 Notes.

Options

During the three months ended March 31, 2024 and 2023, the Company did not have any issuances, grants, or exercises of options.

The following table summarizes option activities during the three months ended March 31, 2024:

The following table summarizes information about options outstanding and exercisable at March 31, 2024:

Warrants

During the three months ended March 31, 2024 and 2023, the Company did not have any issuances, grants, or exercises of warrants.

The following table summarizes warrant activities during the nine months ended March 31, 2024:

The following table summarizes information about warrants outstanding and exercisable at March 31, 2024:

Holders of the outstanding warrants are not entitled to vote and the exercise prices of such warrants are subject to customary anti-dilution provisions.

9. Leases

On June 18, 2022, the Company leased 2,700 square feet of corporate office space in Knoxville, Tennessee through an operating lease agreement for a term ofthree years ending on June 30, 2025. The monthly base rent ranges from$4,053 to$4,278 over the term of the lease.

Total operating lease expense for the three months ended March 31, 2024 was $12,842, of which $8,561 was included within research and development and $4,281 was included within general and administrative expenses on the condensed consolidated statements of operations. Total operating lease expense for the three months ended March 31, 2023 was$13,507 of which$9,005 was included within research and development and $4,502 was included within general and administrative expenses on the condensed consolidated statements of operations.

A summary of the Company’s right-of-use assets and liabilities is as follows:

Future minimum payments under the Company’s non-cancellable lease obligations as of March 31, 2024 were as follows:

Future Minimum Payments

10. Grants

On October 25, 2021, the Company received a grant award of$2,500,000 from the State of Tennessee for the study of animal cancers and dermatological disorders for the period October 15, 2021 to June 30, 2022 (the “Tennessee Grant” or “Grant”). The Tennessee Grant was pre-funded; therefore, the funds do not need to be used in full by June 30, 2022. The Tennessee Grant was provided as reimbursement of research and development expenses related to the development of animal health drug products. The Company has elected gross presentation of the Tennessee Grant income whereby grant revenue is recognized as qualifying costs are incurred and there is reasonable assurance that the conditions of the grant have been met. Qualifying costs are presented as research and development expenses included in the Company’s statement of operations, in the period that such costs are incurred.

As of March 31, 2024 and December 31, 2023,$715,176 and$953,248 has been recorded as unearned grant revenue liability on the accompanying condensed consolidated balance sheets, respectively. The Company recorded grant revenue of$238,072 during the three months ended March 31, 2024, and$205,025 during the three months ended March 31, 2023.

11. License Transactions

In the third quarter of 2019, the Company entered into a dialog with Bascom Palmer Eye Institute (“BPEI”) regarding collaboration on BPEI’s ophthalmic photodynamic antimicrobial therapy (“PDAT”) using the Company’s pharmaceutical-grade RBS. On February 16, 2022, and later amended on May 11, 2022, the Company entered into an option agreement with the University of Miami (“UM”) for an exclusive worldwide license of intellectual property (“IP”) developed by the Ophthalmic Biophysics Center (“OBC”) of BPEI that included the use of OBC’s PDAT medical device in combination with formulations of the Company’s pharmaceutical-grade RBS for the treatment of bacterial, fungal, and viral infections of the eye. The Company completed the arrangements of this collaboration during the third quarter of 2022, whereby the Company paid $5,000 for the option that expires on May 31, 2023; agreed to pay up to $10,000 of new UM patent expenses for this IP during the period of the option and up to $25,000 of past UM patent expenses for this IP; and entered into a sponsored research agreement with UM on September 16, 2022 to study the combination of OBC’s PDAT and TOP PV-305, a formulation of the Company’s pharmaceutical-grade RBS, for the treatment of infectious keratitis.

On March 21, 2024, the Company entered into an exclusive worldwide license for the IP. Details of the license agreement are reported in the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on March 27, 2024.

12. Commitments, Contingencies and Litigation

The Company may, from time to time, be involved in litigation arising from the ordinary course of business. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s condensed consolidated financial position, results of operations or cash flows.

13. Subsequent Events

The Company has evaluated events that have occurred after the balance sheet and through the date the financial statements were issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed below.

Convertible Notes Payable

Subsequent to March 31, 2024, the Company entered into 2022 Notes with a related party investor (Executive Officer) in the aggregate principal amount of $95,000.

Subsequent to March 31, 2024, the Company entered into 2022 Notes with a non-related party investor in the aggregate principal amount of $200,000.

Series D-1 Preferred Stock

Subsequent to March 31, 2024, principal and interest in the aggregate amount of$459,189, owed in connection with 2022 Notes was converted into 160,445 shares of Series D-1 Preferred Stock at the Conversion Price of$2.862. Any fractional shares issuable pursuant to the formula were rounded up to the next whole share of Series D-1 Preferred Stock.