$PVCT: Some Additional Analysis Regarding Today's 8K (Fund raising)

I went through the recent calendar year 2012-related 10-Q & 10-K, and produced the table below:

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The output (last line) is the company's cash monthly burn rate, per quarter, for 2012. Provectus issues stock and warrants for services rendered, and there also are additional non-cash items. I think I'm on the mark, but I am open to being corrected.

According to Peter, the raise announced in the 8-K filing today was related to ensuring BDO continues to provide the company with a going concern opinion, which is reviewed every quarter-end. For purposes of how BDO assesses Provectus' ongoing operations, the company requires ~$4 million at any given time of assessment.

Hence, prior to year-end, as you read the 2012 10-K, the company raised net proceeds of $2.28 million (not reflected on the 2012 year-end balance sheet in the K) to near this rough or soft $4 million threshold.

You can see this in the table below, under Q4-12: Cash and cash equivalents, at end of period.

Using recent historical quarterly cash burn amounts, I constructed the table below. This table assumes an approximate $930K burn per month.

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And below. This table assumes a $750K burn per month:

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The takeaway here is management probably won't fall sufficiently below the necessary threshold (again, I think it is a soft or rough one) through the end of Q2 (the end of June), assuming expenses don't shoot up for some expected or unreasonable reason, to endanger BDO's going concern opinion.

$PVCT Dilution: 2009 to 2013YTD

$PVCT Files 8-K. Raises $3.3MM.

Provectus made an 8-K filing to announce it raised $3.3 million through today. Not adjusted for exercises, there appears to be about 190 million fully diluted shares outstanding (after consideration for preferred and common stock, options and warrants).

$PVCT's 2012 10K

Filed today here. Of note (but not exhaustive):

A. Fund raising. The company raised cash proceeds of $5.2 million in 2013 (see Subsequent Events of page F-33):

• $2.6MM at year-end 2012 placed by Network 1, common stock priced at 75 cents (the share around the time may have been in the $0.50s), 1-for-1 5-year warrants struck at $1.00, and
• $2.6MM in February 2013 also placed by Network 1, convertible preferred stock at 75 cents, 1.25-for-1 warrants struck at $1.00.

Raising more than $5MM was necessary, according to Peter, because BDO (Provectus' accounting firm) was more conservative regarding requirements of cash on hand.

B. Preferred Stock. The figure at 12/31/12 was 2.5MM shares. At 9/30/12 it was 2.9MM. I think this security, aside from what was issued in February, could be near or at zero at 3/31/13, as these holdings have been or are being converted this quarter (trading volume has been very heavy).

C. Lawsuit. There is a [presumably] shareholder lawsuit (see Legal Proceedings on page 21): "The Shareholder Derivative Complaint alleges (i) breach of fiduciary duties, (ii) waste of corporate assets, and (iii) unjust enrichment, all three claims based on the Plaintiff’s allegations that the defendants authorized and/or accepted stock option awards in violation of the terms of the Company’s 2002 Stock Plan (the “Plan”) by issuing stock options in excess of the amounts authorized under the Plan and delegated to defendant H. Craig Dees the sole authority to grant himself and other executive officers of the Company cash bonuses that the Plaintiff alleges to be excessive."

D. Warrants. A warrant reset related to the where the share price was in relation to the strike prices of certain warrants resulted in the issuance of 3.8MM 3-year warrants struck at $0.68 (see page F-26).

E. Regional licenses. In the last 10Q, the company wrote: "We are seeking to improve our cash flow through both the licensure of PH-10 on the basis of our Phase 2 atopic dermatitis and psoriasis results, and the geographic licensure of PV-10 on the basis of our Phase 2 metastatic melanoma and Phase 1 liver results in certain areas of the world, as well as pursuing a strategic investment strategy, including equity sales to potential pharmaceutical and or biotech partners, and continuing with the majority stake asset sale and licensure of our OTC products as well as other non-core assets."

In the 10K, Provectus wrote: "We are seeking to improve our cash flow through both the licensure of PH-10 on the basis of our Phase 2 atopic dermatitis and psoriasis results, and the geographic licensure of PV-10 on the basis of our Phase 2 metastatic melanoma and Phase 1 liver results in certain areas of the world, as well as pursuing a strategic investment strategy, including equity sales to potential pharmaceutical and or biotech partners, and continuing with the majority stake asset sale and licensure of our OTC products as well as other non-core assets. The geographic areas of interest for PV-10 principally include China, India, Japan and Middle East and North Africa (MENA)."

I will watch closely for information and/or PRs related to this item next week.

F. Placement Agreements. Also in Subsequent Events:  "The Company entered into a Placement Agent’s Agreement dated March 11, 2013, with Network 1 Financial Securities, Inc. (“Network 1”) as placement agent, which allows for the sale of the Company’s common stock at a purchase price of $0.75 per share and 100% warrant coverage to purchase shares of common stock at an exercise price of $1.00 per share."

According to Peter, it was necessary to have an "open placement agent agreement" as a placeholder for BDO's going concern opinion. The placement agreement with Network 1 appears to be viewed by BDO much like it views the Lincoln Park equity line of credit agreement.

G. Global license. In the 10K, in addition to expanded and more specific language on regional PV-10 licenses, the company also added language on global PV-10 licensure: "We are also considering the global licensure of PV-10 as well since it has come to our attention that this is of interest to potential partners."

I do not think this refers to Pfizer, but rather several other competitors (at least 2 American and 2 European Big Pharma companies) including one in particular that continues to do clinical due diligence, but may well have wrapped up its business diligence.

$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.

$PVCT: Form D Filing

Provectus filed a Form D today noting it had raised $2.0MM, which previously had been mentioned in the 10-Q earlier this month.