Provectus' Balance Sheet Should Be Flush With Cash

Provectus reported about $8.3 million on its balance sheet as at 9/30/13. I assume a fourth quarter cash burn of about $2.1 million or less (consistent with at least the prior two quarters). Management may have raised an additional $1.5 million in early-October (my guess, which may be entirely wrong). 12/31/13 cash on hand then should be $7.7 million.

The warrant "picture" as of 12/31/13 should look something like the below:

Click on the table to enlarge it.

There should be about 70 million warrants outstanding (or less), ranging in exercise price from $0.68 per share to $2.00 (a weighted average exercise price of $1.02). The supermajority of them (about 78%) have an exercise price of $1. It's believed the longer and higher the share price is above $1.25-1.50 (the "Threshold"), the more warrants would be exercised for subsequent sale of the underlying common stock. The Threshold is somewhat arbitrary; the essence here is that warrant holders contemplating exercise (to then sell the common shares) must feel the share price is sufficiently higher than their exercise price for a sufficiently long enough time to exercise & sell.

16 million warrants at exercise prices above or below $1 represent total cash to Provectus of $17 million if exercised on a cash basis. 55 million warrants at a $1 exercise price represent cash of $55 million if similarly exercised. Not all warrants would be exercised for cash; many, particularly the $1 kind issued recently, should be exercised on a cashless basis, where the holder receives a fraction of a share per one warrant depending on the exercise price and where the share price is at exercise.

Warrant holders in situations such as these (i.e., biotech companies like Provectus raising money via placements at below market prices with greater than one times warrant coverage), if they are inclined to exercise their securities in the first place, are more likely to exercise (with significant remaining time to expiration) and sell the resulting common stock. Finance theory would indicate exercising warrants just before expiry; however, a good number of Provectus warrant holders are more inclined to sell for quick (50 cents to 1-2 dollars per warrant or share) than for end-game (e.g., $20 per warrant or share) profit.

Through today the share price has been above the Threshold for 16 days, totaling (per Yahoo! Finance) nearly 43 million shares traded. Some people believe OTC volume prints are not accurate, perhaps by as much as 50%; so, perhaps somewhere between 21.5 and 43 million shares may have traded. This situation should have provided an opportunity for desirous warrant holders to exercise & sell.

How many warrants, converted only on a cash basis, have been exercised? Thus, what amount of money has Provectus taken onto its balance sheet in recent weeks from these exercises? Until or unless management issues a press release describing the cash position that must surely have materially increased as a result of warrant exercises, all we can do is speculate for now. I'm going to suggest (based on several diligence items) the cash balance "today" (e.g., now, this week, etc.) should be at least $20 million. If true, this would have resulted from the exercise of about 12 million warrants, or just 17% of the total number of warrants outstanding.

With $20 million or possibly much more on the balance sheet, and with no consideration given to additional cash that may accrue from China and/or India regional transaction upfront payments, Provectus should have more than enough cash on hand for whatever trial work is necessary going forward, whether melanoma (if at all) or liver.

We should know soon enough what the FDA will tell management about the pathway to PV-10 approval and commercialization for melanoma. I doubt any further trial work (if necessary or required) would be significant in terms of cost compared to the contemplated 180-patient special protocol assessment-designed Phase 3 trial once considered (and management costed at $12-15 million). Rather, the company likely would use some of its new capital to complete the expanded Phase 1 liver trial, where three additional trial sites may have been added to enroll patients.

Additional cash of this magnitude, with the potential of some more cash from some more warrants exercised for cash in the near-term, should mean a healthy balance sheet and no further or future punitive fund raising going forward.