February 28, 2013

$PVCT Fundraising

From the company's 8-K filing today, management raised $2,550,000 of Series A 8% convertible preferred stock last week (February 22) at 75 cents per share. The closing price of the stock on February 21 and 22 was 65 and 67 cents, respectively. This equity security appears to be similar to the security issued to institutional investors in March 2010. Warrant coverage for the February raise was 1.25 ($1.00 strike). For the October 2012 raise in which Eric and Peter participated, the share price of the common stock issued was 75 cents, and warrant coverage was 1 ($1.00 strike).

I estimated management's cash balance as at the end of February to be $1.3-2.3MM ($300-500K burn rate per month). The February raise should boost cash near or above $4MM, an amount that satisfies the company's auditors. I think the specific threshold is at least 12 months operating runway, which I also think is a $4MM figure (~$333K per month).

Peter said the February raise was driven completely by external audit requirements, which plays to form like the October raise before it and like the March raise before that: $2MM+ slugs designed to meet the auditors' going concern threshold. The timing of the fund raising might suggest, however, that the probability of Peter bringing home a check is near or at zero.

Generally speaking, management has protected the overall economics of PV-10 and PH-10's respective market opportunities. This assumes of course the eventual exit meets or exceeds management's full monetization threshold (as well as mine).

How long this protection lasts and how effective it is clearly is a function of what, if anything, Peter brings back from China.

Rumor du jour: Peter met with executives from Indian pharmaceutical companies this week to discuss terms and conditions of a regional license deal for PV-10 in India.

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