As filed with the Securities and Exchange Commission on June 14, 2005
Registration No. 333-124951
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-2/A
AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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PROVECTUS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Nevada 2834 90-0233011
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Identification Number)
organization) Classification Code Number)
7327 Oak Ridge Highway, Suite A, Knoxville, Tennessee 37931, (865) 769-4011
(Address, including zip code, and telephone number, including area code of
registrant's principal executive offices)
Timothy C. Scott, Ph.D.
President
Provectus Pharmaceuticals, Inc.
7327 Oak Ridge Highway, Suite A
Knoxville, Tennessee 37931
(865) 769-4011
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copy to:
Linda Crouch-McCreadie, Esq.
Baker Donelson Bearman Caldwell & Berkowitz
207 Mockingbird Lane
Suite 300
Johnson City, Tennessee 37904
(423) 928-0181
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of the registration statement until such time
that all of the shares of common stock registered hereunder have been sold.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box: [X]
1
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of each class of maximum maximum Amount of
securities Amount to be registered offering price aggregate registration
to be registered (1) per share offering price fee
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Common Stock, $.001 par value 18,845,213 (2) $0.60 (3) $11,307,127 $ 1,330.85
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18,845,213 $11,307,127 $ 1,330.85
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(1) Pursuant to Rule 416 under the Securities Act, this registration
statement also registers such additional number of shares of the registrant's
common stock, $0.001 par value, as may be offered or issued as result of any
stock splits, stock dividends or similar transactions.
(2) Represents (a) up to 2,000,000 shares of common stock, issuable upon
conversion of $1,000,000 in the aggregate principal amount of secured
convertible debentures held by DCOFI Master, LDC at a per share conversion price
of $0.75, (b) up to 1,333,333 shares of common stock issuable upon the exercise
of a warrant held by DCOFI at per share exercise price equal to $0.935, and (c)
up to 933,333 shares of common stock issuable upon the exercise of a warrant
held by DCOFI at a per share exercise price of $0.8925. Also represents (a) up
to 2,000,000 shares of common stock, issuable upon conversion of $1,000,000 in
the aggregate principal amount of secured convertible debentures held by Asset
Managers International Ltd. at a per share conversion price of $0.75, (b) up to
1,000,000 shares of common stock issuable upon the exercise of a warrant held by
Asset Managers at per share exercise price equal to $0.935, and (c) up to
700,000 shares of common stock issuable upon the exercise of a warrant held by
Asset Managers at a per share exercise price of $0.8925. Also represents (a) up
to 333,333 shares of common stock issuable upon the exercise of a warrant held
by DC Asset Management, LLC, at a per share exercise price of $0.935, and (b) up
to 233,333 shares of common stock issuable upon the exercise of a warrant held
by DC Asset, at a per share exercise price of $0.8925. Also represents (a) up to
1,000,000 shares of stock, issuable upon conversion of $500,000 in the aggregate
principal amount of secured convertible debentures held by Alpha Capital
Aktiengesellschaft at a per share conversion price of $0.75, (b) up to 666,667
shares of common stock issuable upon the exercise of a warrant held by Alpha
Capital per share exercise price equal to $0.935, and (c) up to 466,667 shares
of Common Stock issuable upon the exercise of a warrant held by Alpha Capital at
2
a per share exercise price of $0.8925. Also represents (a) up to 300,000 shares
of common stock, issuable upon conversion of $150,000 in the aggregate principal
amount of secured convertible debentures held by Whalehaven Capital Fund Limited
at a per share conversion price of $0.75, (b) up to 200,000 shares of common
stock issuable upon the exercise of a warrant held by Whalehaven at per share
exercise price equal to $0.935, and (c) up to 140,000 shares of common stock
issuable upon the exercise of a warrant held by Whalehaven at a per share
exercise price of $0.8925. Also represents (a) up to 800,000 shares of common
stock, issuable upon conversion of $450,000 in the aggregate principal amount of
secured convertible debentures held by Donald Adams at a per share conversion
price of $0.75, (b) up to 533,333 shares of common stock issuable upon the
exercise of a warrant held by Donald Adams at per share exercise price equal to
$0.935, and (c) up to 373,333 shares of common stock issuable upon the exercise
of a warrant held by Donald Adams at a per share exercise price of $0.8925. Also
represents (a) up to 100,000 shares of common stock, issuable upon conversion of
$50,000 in the aggregate principal amount of secured convertible debentures held
by Peter K. Sivaslian at a per share conversion price of $0.75, (b) up to 66,667
shares of common stock issuable upon the exercise of a warrant held by Peter K.
Sivaslian at per share exercise price equal to $0.935, and (c) up to 46,667
shares of common stock issuable upon the exercise of a warrant held by Peter K.
Sivaslian at a per share exercise price of $0.8925. Also represents (a) up to
100,000 shares of common stock, issuable upon conversion of $50,000 in the
aggregate principal amount of secured convertible debentures held by Stephen
Ross at a per share conversion price of $0.75, (b) up to 66,667 shares of common
stock issuable upon the exercise of a warrant held by Stephen Ross at per share
exercise price equal to $0.935, and (c) up to 46,667 shares of common stock
issuable upon the exercise of a warrant held by Stephen Ross at a per share
exercise price of $0.8925. Also represents up to 1,625,942 shares of common
stock issuable upon conversion of $1,185,959 in the aggregate principal amount
of a secured convertible debenture held by Gryffindor Capital Partners I, L.L.C.
at a per share conversion price of $0.737 for principal converted and $0.55 for
interest converted. Also represents (a) up to 15,000 shares of common stock
issuable upon the exercise of a warrant held by the Irrevocable Trust dated
December 28, 2004 f/b/o Olivia Skriloff at a per share exercise price of $0.98,
and (b) up to 15,000 shares of common stock issuable upon the exercise of a
warrant held by the Irrevocable Trust dated December 28, 2004 f/b/o Olivia
Skriloff at per share exercise price of $1.23. Also represents (a) up to 15,000
shares of common stock issuable upon the exercise of a warrant held by the
Irrevocable Trust dated December 28, 2004 f/b/o Samuel Skriloff at a per share
exercise price of $0.98, and (b) up to 15,000 shares of common stock issuable
upon the exercise of a warrant held by the Irrevocable Trust dated December 28,
2004 f/b/o Samuel Skriloff at a per share exercise price of $1.23. Also
represents (a) up to 38,750 shares of common stock issuable upon the exercise of
a warrant held by David Skriloff at a per share exercise price of $.98, and (b)
up to 38,750 shares of common stock issuable upon the exercise of a warrant held
by David Skriloff at a per share exercise price of $1.23. Also represents (a) up
to 56,250 shares of common stock issuable upon the exercise of a warrant held by
Richard Smithline at a per share exercise price of $.98, and (b) up to 56,250
shares of common stock issuable upon the exercise of a warrant held by Richard
Smithline at a per share exercise price of $1.23. Also represents (a) up to
150,000 shares of common stock issuable upon the exercise of a warrant held by
M.W. Crow Family Trust L.P. at a per share exercise price of $.98, and (b) up to
150,000 shares of common stock issuable upon the exercise of a warrant held by
M.W. Crow Family Trust, L.P. at a per share exercise price of $1.23. Also
represents (a) up to 360,000 shares of common stock issuable upon the exercise
of a warrant held by Damon D. Testaverde at a per share exercise price of $.98,
and (b) up to the 280,000 shares of common stock issuable upon the exercise of a
warrant held by Damon D. Testaverde at a per share exercise price of $1.00. Also
represents (a) up to 40,000 shares of common stock issuable upon the exercise of
a warrant held by Network 1 Financial Securities, Inc. at a per share exercise
price of $.98, and (b) up to 70,000 shares of common stock issuable upon the
exercise of a warrant held by Network 1 Financial Securities, Inc. at a per
share exercise price of $1.00. Also represents up to 75,000 shares of common
stock issuable upon the exercise of a warrant held by Martin Stern at a per
share exercise price of $1.00. Also represents (a) up to 75,000 shares of common
stock issuable upon the exercise of a warrant held by Kenneth J. Spadaford of at
per share exercise price of $1.00. Also represents up to 75,000 shares of common
stock issuable upon the exercise of a warrant held by William J. Crusoe of at a
per share exercise price of $1.00. Also represents(a) up to 57,848 shares of
common stock issuable upon the exercise of a warrant held by Venture Catalyst,
LLC at a per share exercise price of $0.75, (b) up to 86,768 shares of common
stock issuable upon the exercise of a warrant held by Venture Catalyst at a per
share exercise price of $1.00, (c) up to 42,411 shares of common stock issuable
upon the exercise of a warrant held by Venture Catalyst at a per share exercise
price of $0.75, and (d) up to 63,612 shares of common stock issuable upon the
exercise of a warrant held by Venture Catalyst at a per share exercise price of
$1.00, and (e) up to 149,000 shares of common stock issuable upon the exercise
of a warrant held by Venture Catalyst at a per share exercise price of $1.00.
3
Also represents (a) up to 21,677 shares of common stock issuable upon the
exercise of a warrant held by Trek Properties, LLC at a per share exercise price
of $0.75, (b) up to 32,519 shares of common stock issuable upon the exercise of
a warrant held by Trek Properties at a per share exercise price of $1.00, (c) up
to 22,339 shares of common stock issuable upon the exercise of a warrant held by
Trek Properties at a per share exercise price of $0.75, and (d) up to 33,513
shares of common stock issuable upon the exercise of a warrant held by Trek
Properties at a per share exercise price of $1.00, and (e) up to 140,000 shares
of common stock issuable upon the exercise of a warrant held by Trek Properties
at a per share exercise price of $1.00. Also represents up to 25,000 shares of
common stock issuable upon the exercise of a warrant held by Kevin Richardson at
a per share exercise price of $1.00. Also represents (a) 631,833 shares of
common stock held by certain selling shareholders and (b) 947,750 shares of
common stock issuable upon the exercise of a warrant held by certain selling
shareholders.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based upon
the average of the high and low sale price of the registrant's common stock as
reported on the OTC Electronic Bulletin Board on May 6, 2005.
(4) A total of $1,412.00 was previously paid by Provectus Pharmaceuticals,
Inc. in connection with the filing of its Registration Statement on Form S-2
(Registration No. 333-124951) on May 16, 2005.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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4
SUBJECT TO COMPLETION, DATED JUNE 14, 2005
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PROSPECTUS
PROVECTUS PHARMACEUTICALS, INC.
18,845,213 Shares of Common Stock
This prospectus relates to the sale by the selling shareholders of
18,845,213 shares of our common stock, par value $0.001.
The selling shareholders may sell the shares from time to time at the
prevailing market price or in negotiated transactions. We will not receive any
of the proceeds from the sale of the shares by the selling shareholders. We have
agreed to pay the expenses in connection with the registration of these shares.
The selling shareholders may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, which we refer to as the "Securities
Act."
Our common stock is quoted on the OTC Electronic Bulletin Board of the
National Association of Securities Dealers under the trading symbol "PVCT".
AS YOU REVIEW THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE MATTERS
DESCRIBED IN "RISK FACTORS" BEGINNING ON PAGE 4.
Neither the Securities and Exchange Commission, which we refer to as the
"SEC," nor any state securities commission has approved or disapproved of these
securities or passed on the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is ________________ ___, 2005.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
5
TABLE OF CONTENTS
Prospectus Summary.............................................................7
The Offering................................................................9-11
Risk Factors..................................................................12
Forward Looking Statements....................................................18
Use Of Proceeds...............................................................18
Agreements With Purchasers of Secured Convertible Debentures..................18
Agreements With Gryffindor Capital Partner I, L.L.C...........................19
Agreement With Financial Consultants..........................................20
Description Of Other Transactions.............................................21
Selling Shareholders..........................................................21
Description Of Securities.....................................................23
Plan Of Distribution..........................................................24
Indemnification Of Officers And Directors..................................26-27
Where You Can Find More Information About Us..................................27
Incorporation Of Certain Information By Reference..........................27-28
Experts.......................................................................28
Legal Matters.................................................................28
Exhibit "A" - Form 10-KSB for year ended December 31, 2004...................A-1
Exhibit "B" - Form 10-QSB for quarter ended March 31, 2005...................B-1
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Prospectus Summary
You should read the following summary together with the more detailed
information and consolidated financial statements and related notes thereto
appearing elsewhere in this prospectus and in the documents incorporated by
reference in this prospectus. You should read the entire prospectus, including
the documents incorporated by reference in this prospectus, before you invest in
our common stock. This prospectus contains forward-looking statements. The
outcome of the events described in these forward-looking statements is subject
to risks, and actual results could differ materially. Read this entire
prospectus carefully, especially the risks described under "Risk Factors."
Unless otherwise indicated, "we," "us," "our" and similar terms, as well as
references to the "Company" and "Provectus," refer to Provectus Pharmaceuticals,
Inc. and its subsidiaries and not to the selling shareholders.
Our Company
Provectus Pharmaceuticals, Inc., a Nevada corporation, and its five wholly
owned subsidiaries, Xantech Pharmaceuticals, Inc., Provectus Biotech, Inc.,
Provectus Devicetech, Inc., Provectus Pharmatech, Inc., and Pure-ific
Corporation, develop, license and market and plan to sell products in three
sectors of the healthcare industry:
o Over-the-counter products, which we refer to as "OTC products;"
o Prescription drugs; and
o Medical device systems.
We manage Provectus and the subsidiaries on an integrated basis, and when
we refer to "we" or "us" or "the Company" in this registration statement on Form
S-2, we refer to all six corporations considered as a single unit.
Through discovery and use of state-of-the-art scientific and medical
technologies, the founders of our pharmaceutical business have developed a
portfolio of patented, patentable, and proprietary technologies that support
multiple products in the prescription drug, medical device and OTC products
categories (including patented technologies for: (a) treatment of cancer; (b)
novel therapeutic medical devices; (c) enhancing contrast in medical imaging;
(d) improving signal processing during biomedical imaging; and (e) enhancing
production of biotechnology products). Our prescription drug products encompass
the areas of dermatology and oncology and involve several types of small
molecule-based drugs. Our medical device systems include therapeutic and
cosmetic lasers, while our OTC products address markets primarily involving
skincare applications. None of our prescription drug products are currently
being sold as their development is not yet complete. At December 31, 2004, we
reported medical device sales of $13,125 and as of March 31, 2005 we have
reported medical device sales of $984. We have also initiated sales and
distribution of our OTC product Pure-ific via our website www.pureific.com, and
we reported sales of $18,728 at December 31, 2004 and $2,394 at March 31, 2005.
We are not currently selling our other OTC products.
Our company faces significant risks. And our ongoing operations continue to
be dependent upon our ability to raise capital. We only have four employees and
our future success depends significantly on these employees. Please see the
section of this prospectus entitled "Risk Factors" for more information about
the risks faced by us.
This prospectus is accompanied by our Annual Report on Form 10-KSB for the
year ended December 31, 2004, and our Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2005.
Our principal executive office is located at 7327 Oak Ridge Highway, Suite
A, Knoxville, Tennessee 37931, telephone (865) 769-4011.
7
Risk Factors
Investing in shares of our common stock involves significant risk. You
should consider the information under the caption "Risk Factors" beginning on
page 4 of this prospectus in deciding whether to purchase the common stock
offered under this prospectus.
Our History
Provectus Pharmaceuticals, Inc., formerly known as "Provectus
Pharmaceutical, Inc." and "SPM Group, Inc.," was incorporated under Colorado law
on May 1, 1978. SPM Group ceased operations in 1991, and became a
development-stage company effective January 1, 1992, with the new corporate
purpose of seeking out acquisitions of properties, businesses, or merger
candidates, without limitation as to the nature of the business operations or
geographic location of the acquisition candidate.
On April 1, 2002, SPM Group changed its name to "Provectus Pharmaceutical,
Inc." and reincorporated in Nevada in preparation for a transaction with
Provectus Pharmaceuticals, Inc., a privately-held Tennessee corporation, which
we refer to as "PPI." On April 23, 2002, an Agreement and Plan of Reorganization
between Provectus Pharmaceutical and PPI was approved by the written consent of
a majority of the outstanding shares of Provectus Pharmaceutical. As a result,
holders of 6,680,000 shares of common stock of Provectus Pharmaceutical
exchanged their shares for all of the issued and outstanding shares of PPI. As
part of the acquisition, Provectus Pharmaceutical changed its name to "Provectus
Pharmaceuticals, Inc." and PPI became a wholly owned subsidiary of Provectus.
For accounting purposes, we treat this transaction as a recapitalization of PPI.
On November 19, 2002, we acquired Valley Pharmaceuticals, Inc., a
privately-held Tennessee corporation formerly known as Photogen, Inc., by
merging our subsidiary PPI with and into Valley and naming the surviving
corporation "Xantech Pharmaceuticals, Inc." Valley has minimal operations and
had no revenues prior to the transaction with us. By acquiring Valley, we
acquired our most important intellectual property, including issued U.S. patents
and patentable inventions, with which we intend to develop:
o prescription drugs, medical and other devices (including laser
devices) and over-the-counter pharmaceutical products in the fields of
dermatology and oncology; and
o technologies for the preparation of human and animal vaccines,
diagnosis of infectious diseases and enhanced production of
genetically engineered drugs.
Prior to the acquisition of Valley, we were considered to be, and continue
to be, in the development stage and have not generated any revenues from the
assets we acquired.
On December 5, 2002, we acquired the assets of Pure-ific L.L.C., a Utah
limited liability company, and created a wholly owned subsidiary, Pure-ific
Corporation, to operate that business. We acquired the product formulations for
Pure-ific personal sanitizing sprays, along with the "Pure-ific" trademarks. We
intend to continue product development and begin to market a line of personal
sanitizing sprays and related products to be sold over the counter under the
"Pure-ific" brand name.
On June 3, 2004, we formed the remaining three subsidiaries, Provectus
Biotech, Inc., Provectus Devicetech, Inc. and Provectus Pharmatech, Inc.
We reported sales of $18,728 at December 31, 2004 of our product,
Pure-ific. and $2,394 at March 31, 2005.
8
The Offering
Securities offered 18,845,213 shares of common stock. (1)
Use of proceeds We will not receive any proceeds from the sale of the
common stock by the selling shareholders. Please see the
section of this prospectus entitled "Use of Proceeds"
for more information.
-------------------------------
(1) Includes:
o up to 2,000,000 shares of common stock issuable upon conversion of
$1,000,000 in the aggregate principal amount of secured convertible
debentures held by DCOFI Master LDC at a per share conversion price of
$0.75,
o up to 1,333,333 shares of common stock issuable upon exercise of a warrant
held by DCOFI Master LDC at a per share exercise price of $0.935,
o up to 933,333 shares of common stock issuable upon exercise of a warrant
held by DCOFI Master LDC at a per share exercise price of $0.8925,
o up to 2,000,000 shares of common stock issuable upon conversion of
$1,000,000 in the aggregate principal amount of secured convertible
debentures held by Asset Managers International Ltd. at a per share
conversion price of $0.75,
o up to 1,000,000 shares of common stock issuable upon exercise of a warrant
held by Asset Managers International Ltd. at a per share exercise price of
$0.935,
o up to 700,000 shares of common stock issuable upon exercise of a warrant
held by Asset Managers International Ltd. at a per share exercise price of
$0.8925,
o up to 333,333 shares of common stock issuable upon exercise of a warrant
held by DC Asset Management, LLC at a per share exercise price of $0.935,
o up to 233,333 shares of common stock issuable upon exercise of a warrant
held by DC Asset Management, LLC at a per share exercise price of $0.8925,
o up to 1,000,000 shares of common stock issuable upon conversion of $500,000
in the aggregate principal amount of secured convertible debentures held by
Alpha Capital Aktiengesellschaft at a per share conversion price of $0.75,
o up to 666,667 shares of common stock issuable upon exercise of a warrant
held by Alpha Capital Aktiengesellschaft at a per share exercise price of
$0.935,
o up to 466,667 shares of common stock issuable upon exercise of a warrant
held by Alpha Capital Aktiengesellschaft at a per share exercise price of
$0.8925,
o up to 300,000 shares of common stock issuable upon conversion of $150,000
in the aggregate principal amount of secured convertible debentures held by
Whalehaven Capital Fund Limited at a per share conversion price of $0.75,
o up to 200,000 shares of common stock issuable upon exercise of a warrant
held by Whalehaven Capital Fund Limited at a per share exercise price of
$0.935,
o up to 140,000 shares of common stock issuable upon exercise of a warrant
held by Whalehaven Capital Fund Limited at a per share exercise price of
$0.8925,
o up to 800,000 shares of common stock issuable upon conversion of $450,000
in the aggregate principal amount of secured convertible debentures held by
Donald Adams at a per share conversion price of $0.75,
9
o up to 533,333 shares of common stock issuable upon exercise of a warrant
held by Donald Adams at a per share exercise price of $0.935,
o up to 373,333 shares of common stock issuable upon exercise of a warrant
held by Donald Adams at a per share exercise price of $0.8925,
o up to 100,000 shares of common stock issuable upon conversion of $50,000 in
the aggregate principal amount of secured convertible debentures held by
Peter K. Sivaslian at a per share conversion price of $0.75,
o up to 66,667 shares of common stock issuable upon exercise of a warrant
held by Peter K. Sivaslian at a per share exercise price of $0.935,
o up to 46,667 shares of common stock issuable upon exercise of a warrant
held by Peter K. Sivaslian at a per share exercise price of $0.8925,
o up to 100,000 shares of common stock issuable upon conversion of $50,000 in
the aggregate principal amount of secured convertible debentures held by
Stephen Ross at a per share conversion price of $0.75,
o up to 66,667 shares of common stock issuable upon exercise of a warrant
held by Stephen Ross at a per share exercise price of $0.935,
o up to 46,667 shares of common stock issuable upon exercise of a warrant
held by Stephen Ross at a per share exercise price of $0.8925,
o up to 1,625,942 shares of common stock issuable on the conversion of a
secured convertible debenture held by Gryffindor Capital Partners I, L.L.C.
at a per share conversion price of $0.737 for principal converted and $0.55
for interest converted,
o up to 15,000 shares of common stock issuable on the exercise of a warrant
held by the Irrevocable Trust dated December 28, 2004 f/b/o Olivia Skriloff
at a per share exercise price of $0.98,
o up to 15,000 shares of common stock issuable upon the exercise of warrant
held by the Irrevocable Trust dated December 28, 2004 f/b/o Olivia Skriloff
at a per share exercise price of $1.23,
o up to 15,000 shares of common stock issuable upon the exercise of a warrant
held by the Irrevocable Trust dated December 28, 2004 f/b/o Samuel Skriloff
at a per share exercise price of $0.98,
o up to 15,000 shares of common stock issuable upon the exercise of a warrant
held by the Irrevocable Trust dated December 28, 2004 f/b/o Samuel Skriloff
at a per share exercise price of $1.23,
o up to 38,750 shares of common stock issuable upon the exercise of a warrant
held by David Skriloff at a per share exercise price of $0.98,
o up to 38,750 shares of common stock issuable upon the exercise of a warrant
held by David Skriloff at a per share exercise price of $1.23,
o up to 56,250 shares of common stock issuable upon the exercise of a warrant
held by Richard Smithline at a per share exercise price of $0.98,
o up to 56,250 shares of common stock issuable upon the exercise of a warrant
held by Richard Smithline at a per share exercise price of $1.23,
o up to 150,000 shares of common stock issuable upon the exercise of a
warrant held by the M.W. Crow Family Trust, LP at a per share exercise
price of $0.98,
o up to 150,000 shares of common stock issuable upon the exercise of a
warrant held by the M.W. Crow Family Trust, LP at a per share exercise
price of $1.23,
o up to 360,000 shares of common stock issuable upon the exercise of a
warrant held by Damon D. Testaverde at a per share exercise price of $0.98,
10
o up to 280,000 shares of common stock issuable upon the exercise of a
warrant held by Damon D. Testaverde at a per share exercise price of $1.00,
o up to 40,000 shares of common stock issuable upon the exercise of a warrant
held by Network 1 Financial Securities, Inc. at a per share exercise price
of $0.98,
o up to 70,000 shares of common stock issuable upon the exercise of a warrant
held by Network 1 Financial Securities, Inc. at a per share exercise price
of $1.00,
o up to 75,000 shares of common stock issuable upon the exercise of a warrant
held by Martin Stern at a per share exercise price of $1.00,
o up to 75,000 shares of common stock issuable upon the exercise of a warrant
held by Kenneth J. Spadaford of at per share exercise price of $1.00,
o up to 75,000 shares of common stock issuable upon the exercise of a warrant
held by William J. Crusoe of at a per share exercise price of $1.00,
o up to 57,848 shares of common stock issuable upon the exercise of a warrant
held by Venture Catalyst, LLC at a per share exercise price of $0.75,
o up to 86,768 shares of common stock issuable upon the exercise of a warrant
held by Venture Catalyst, LLC at a per share exercise price of $1.00,
o up to 42,411 shares of common stock issuable upon the exercise of a warrant
held by Venture Catalyst, LLC at a per share exercise price of $0.75,
o up to 63,612 shares of common stock issuable upon the exercise of a warrant
held by Venture Catalyst, LLC at a per share exercise price of $1.00,
o up to 149,000 shares of common stock issuable upon the exercise of a
warrant held by Venture Catalyst, LLC at a per share exercise price of
$1.00,
o up to 21,677 shares of common stock issuable upon the exercise of a warrant
held by Trek Properties, LLC at a per share exercise price of $0.75,
o up to 32,519 shares of common stock issuable upon the exercise of a warrant
held by Trek Properties, LLC at a per share exercise price of $1.00,
o up to 22,339 shares of common stock issuable upon the exercise of a warrant
held by Trek Properties, LLC at a per share exercise price of $0.75,
o up to 33,513 shares of common stock issuable upon the exercise of a warrant
held by Trek Properties, LLC at a per share exercise price of $1.00,
o up to 140,000 shares of common stock issuable upon the exercise of a
warrant held by Trek Properties, LLC at a per share exercise price of
$1.00,
o up to 25,000 shares of common stock issuable upon the exercise of a warrant
held by Kevin Richardson at a per share exercise price of $1.00, and
o 631,833 shares of common stock held by certain selling shareholders, and up
to 947,750 shares of common stock issuable upon the exercise of certain
warrants held by certain selling shareholders.
11
Risk Factors
Before you purchase our securities, you should carefully consider the risks
described below and the other information contained in this prospectus,
including our financial statements and related notes. The risks described below
are not the only ones facing our company. Additional risks not presently known
to us or that we currently deem immaterial may also impair our business
operations. If any of the adverse events described in this "Risk Factors"
section actually occurs, our business, results of operations and financial
condition could be materially adversely affected and you might lose all or part
of your investment.
Because of our limited operations and the fact that we are currently generating
limited revenue, we may be unable to pay our debts when they become due.
As of March 31, 2005 we had $2,484,959 in debt, net of a debt discount of
$743,218, and $83,290 of accrued interest on our balance sheet, consisting of
$1,185,959 in principal and $2,943 in accrued but unpaid interest owed to
Gryffindor; $1,100,000 in principal and $32,572 in accrued interest owed to the
holders of our convertible debentures and $199,000 in principal and $17,775 in
accrued interest owed to Dr. Wachter. The amounts due to Gryffindor are due in
November 2005, the amounts due to the holders of the Senior Convertible
Debentures are due in March 2007, and the amounts due to Dr. Wachter are due in
2009. Because of the convertible nature of the debt owed to Gryffindor and to
the holders of the convertible debentures, we may not have to repay this debt if
the debt is converted into shares of our common stock. However, we can not
assure you that this debt will be converted into common stock and we may have to
repay this indebtedness. Our ability to satisfy our current debt service
obligations and any additional obligations we might incur will depend upon our
future financial and operating performance, which, in turn, is subject to
prevailing economic conditions and financial, business, competitive, legislative
and regulatory factors, many of which are beyond our control. If our cash flow
and capital resources are insufficient to fund our debt service obligations, we
may be forced to reduce or delay planned acquisitions, expansion and capital
expenditures, sell assets, obtain additional equity capital or restructure our
debt. Additionally, our creditors could accelerate our payment obligations,
commence foreclosure proceedings against our assets or force us into bankruptcy
or liquidation. In such events, any proceeds may not be sufficient to pay off
our creditors. We cannot assure you that our operating results, cash flow and
capital resources will be sufficient for payment of our debt service and other
obligations in the future.
We will need additional capital to conduct our operations and develop our
products, and our ability to obtain the necessary funding is uncertain.
Our ongoing operations continue to be dependent upon our ability to raise
capital. Ultimately, we must achieve profitable operations if we are to be a
viable entity. We intend to proceed as rapidly as possible with the development
of OTC products that can be sold with a minimum of regulatory compliance and
with the development of revenue sources through licensing of our existing
intellectual property portfolio. Our technologies are in early stages of
development. We do not expect to generate sufficient revenues to enable us to be
profitable for several calendar quarters. We require additional funding to
continue initial production and distribution of OTC products in order to achieve
meaningful sales volumes. In addition, we need to raise additional funds in
order to fully implement our integrated business plan, including execution of
the next phases in clinical development of our pharmaceutical products and
resumption of research programs currently suspended.
We will require substantial capital resources in order to conduct our
operations and develop our products.
We estimate that our existing capital resources will be sufficient to fund
our current and planned operations. We have based this estimate on assumptions
that may prove to be wrong, and we cannot assure you that estimates and
assumptions will remain unchanged. For example, we are currently assuming that
we will continue to operate without any significant staff or other resources
expansion. We intend to acquire additional funding through public or private
equity financings or other financing sources that may be available. Additional
financing may not be available on acceptable terms, or at all. As discussed in
more detail below, additional equity financing could result in significant
dilution to shareholders. Further, in the event that additional funds are
obtained through licensing or other arrangements, these arrangements may require
us to relinquish rights to some of our technologies, product candidates or
products that we would otherwise seek to develop and commercialize ourselves. If
sufficient capital is not available, we may be required to delay, reduce the
scope of or eliminate one or more of our product development programs, any of
which could have a material adverse effect on our business and may impair the
value of our patents and other intangible assets. We cannot assure you that we
will be able to raise sufficient capital to sustain operations before we reach
an acceptable level of revenue generation or that we will be able to achieve, or
maintain, a level of profitability sufficient to meet our operating expenses and
continue as a going concern.
12
Existing shareholders may face dilution from our financing efforts.
We must raise additional capital from external sources to execute our
business plan. We plan to issue debt securities, capital stock, or a combination
of these securities. We may not be able to sell these securities, particularly
under current market conditions. Even if we are successful in finding buyers for
our securities, the buyers could demand high interest rates or require us to
agree to onerous operating covenants, which could in turn harm our ability to
operate our business by reducing our cash flow and restricting our operating
activities. If we were to sell our capital stock, we might be forced to sell
shares at a depressed market price, which could result in substantial dilution
to our existing shareholders. In addition, any shares of capital stock we may
issue may have rights, privileges, and preferences superior to those of our
common shareholders.
The prescription drug and medical device products in our internal pipeline are
at an early stage of development, and they may fail in subsequent development or
commercialization.
We are continuing to pursue clinical development of our most advanced
pharmaceutical drug products, Xantryl and Provecta, for use as treatments for
specific conditions. These products and other pharmaceutical drug and medical
device products that we are currently developing will require significant
additional research, formulation and manufacturing development, and pre-clinical
and extensive clinical testing prior to regulatory licensure and
commercialization. Pre-clinical and clinical studies of our pharmaceutical drug
and medical device products under development may not demonstrate the safety and
efficacy necessary to obtain regulatory approvals. Pharmaceutical and
biotechnology companies have suffered significant setbacks in advanced clinical
trials, even after experiencing promising results in earlier trials.
Pharmaceutical drug and medical device products that appear to be promising at
early stages of development may not reach the market or be marketed successfully
for a number of reasons, including the following:
o a product may be found to be ineffective or have harmful side effects
during subsequent pre-clinical testing or clinical trials,
o a product may fail to receive necessary regulatory clearance,
o a product may be too difficult to manufacture on a large scale,
o a product may be too expensive to manufacture or market,
o a product may not achieve broad market acceptance,
o others may hold proprietary rights that will prevent a product from being
marketed, or
o others may market equivalent or superior products.
We do not expect any pharmaceutical drug products or medical device
products that we are developing to be commercially available for at least
several years, if at all. Our research and product development efforts may not
be successfully completed and may not result in any successfully commercialized
products. Further, after commercial introduction of a new product, discovery of
problems through adverse event reporting could result in restrictions on the
product, including withdrawal from the market and, in certain cases, civil or
criminal penalties.
Our OTC products are at an early stage of introduction, and we cannot be sure
that they will be widely accepted in the marketplace or that we will have
adequate capital to market and distribute these products which are an important
factor in the future success of our business.
We recently have begun marketing Pure-ific, our first OTC product, on a
limited basis. We did not recognize any revenue from this product in 2003, as
the sales of this product was not material. We recognized $18,728 of revenue
from sales of this product during the 2004 and $2,394 during the first quarter
of 2005. In order for our products to become commercially successful, we must
increase significantly our distribution of them. Increasing distribution of our
products requires, in turn, that we or distributors representing us increase
marketing of these products. In view of our limited financial resources, we may
be unable to afford increases in our marketing of our OTC products sufficient to
improve our distribution of our products. Even if we can and do increase our
marketing of our OTC products, we cannot give you any assurances that we can
successfully increase our distribution of our products.
If we do begin increasing our distribution of our OTC products, we must
increase our production of these products in order to fill our distribution
channels. Increased production will require additional financial resources that
we do not have at present. Additionally, we may succeed in increasing production
without succeeding in increasing sales, which could leave us with excess,
possibly unsaleable, inventory.
13
If we are unable to successfully introduce, market and distribute these
products, our business, financial condition, results of operations and cash
flows could be materially adversely affected.
Competition in the prescription drug, medical device and OTC pharmaceuticals
markets is intense, and we may be unable to succeed if our competitors have more
funding or better marketing.
The pharmaceutical and biotechnology industries are intensely competitive.
Other pharmaceutical and biotechnology companies and research organizations
currently engage in or have in the past engaged in research efforts related to
treatment of dermatological conditions or cancers of the skin, liver and breast,
which could lead to the development of products or therapies that could compete
directly with the prescription drug, medical device and OTC products that we are
seeking to develop and market. Many companies are also developing alternative
therapies to treat cancer and dermatological conditions and, in this regard, are
our competitors. Many of the pharmaceutical companies developing and marketing
these competing products have significantly greater financial resources and
expertise than we do in: o research and development, o manufacturing, o
preclinical and clinical testing, o obtaining regulatory approvals, and o
marketing.
Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established
companies. Academic institutions, government agencies and other public and
private research organizations also may conduct research, seek patent protection
and establish collaborative arrangements for research, clinical development and
marketing of products similar to ours. These companies and institutions compete
with us in recruiting and retaining qualified scientific and management
personnel as well as in acquiring technologies complementary to our programs.
In addition to the above factors, we expect to face competition in the
following areas:
o product efficacy and safety;
o the timing and scope of regulatory consents;
o availability of resources;
o reimbursement coverage;
o price; and
o patent position, including the potentially dominant patent positions of
others.
As a result of the foregoing, our competitors may develop more effective or
more affordable products or achieve earlier product commercialization than we
do.
Product Competition. Additionally, since our currently marketed products are
generally established and commonly sold, they are subject to competition from
products with similar qualities.
Our OTC product Pure-ific competes in the market with other hand sanitizing
products, including in particular, the following hand sanitizers:
o Purell (manufactured by GOJO Industries),
o Avagard D (manufactured by 3M) and
o a large number of generic and private-label equivalents to these market
leaders.
Our OTC product GloveAid represents a new product category that has no
direct competitors; however, other types of products, such as AloeTouch(R)
disposable gloves (manufactured by Medline Industries) target the same market
niche.
14
Since our prescription products Provecta and Xantryl have not yet been
approved by the FDA or introduced to the marketplace, we cannot estimate what
competition these products might face when they are finally introduced, if at
all. We cannot assure you that these products will not face significant
competition for other prescription drugs and generic equivalents.
If we are unable to secure or enforce patent rights, trademarks, trade secrets
or other intellectual property our business could be harmed.
We may not be successful in securing or maintaining proprietary patent
protection for our products or products and technologies we develop or license.
In addition, our competitors may develop products similar to ours using methods
and technologies that are beyond the scope of our intellectual property
protection, which could reduce our anticipated sales. While some of our products
have proprietary patent protection, a challenge to these patents can be subject
to expensive litigation. Litigation concerning patents, other forms of
intellectual property and proprietary technology is becoming more widespread and
can be protracted and expensive and can distract management and other personnel
from performing their duties for us. We are not currently aware of any of our
intellectual property that is being infringed upon.
We also rely upon trade secrets, unpatented proprietary know-how and
continuing technological innovation in order to develop a competitive position.
We cannot assure you that others will not independently develop substantially
equivalent proprietary technology and techniques or otherwise gain access to our
trade secrets and technology, or that we can adequately protect our trade
secrets and technology.
If we are unable to secure or enforce patent rights, trademarks, trade
secrets or other intellectual property, our business, financial condition,
results of operations and cash flows could be materially adversely affected.
If we infringe on the intellectual property of others, our business could be
harmed.
We could be sued for infringing patents or other intellectual property that
purportedly cover products and/or methods of using such products held by persons
other than us. Litigation arising from an alleged infringement could result in
removal from the market, or a substantial delay in, or prevention of, the
introduction of our products, any of which could have a material adverse effect
on our business, financial condition, or results of operations and cash flows.
We have not been notified of any third party's belief that we are infringing
upon their intellectual property.
If we do not update and enhance our technologies, they will become obsolete.
The pharmaceutical market is characterized by rapid technological change,
and our future success will depend on our ability to conduct successful research
in our fields of expertise, to discover new technologies as a result of that
research, to develop products based on our technologies, and to commercialize
those products. While we believe that our current technology is adequate for our
present needs, if we fail to stay at the forefront of technological development,
we will be unable to compete effectively. Our competitors are using substantial
resources to develop new pharmaceutical technologies and to commercialize
products based on those technologies. Accordingly, our technologies may be
rendered obsolete by advances in existing technologies or the development of
different technologies by one or more of our current or future competitors.
If we lose any of our key personnel, we may be unable to successfully execute
our business plan.
Our business is presently managed by four key employees:
o H. Craig Dees, Ph.D., our Chief Executive Officer;
o Timothy C. Scott, Ph.D., our President;
o Eric A. Wachter, Ph.D., our Vice President-Pharmaceuticals; and
o Peter R. Culpepper, CPA, our Chief Financial Officer.
In addition to their responsibilities for management of our overall
business strategy, Drs. Dees, Scott and Wachter are our chief researchers in the
fields in which we are developing and planning to develop prescription drug,
medical device and OTC products. Also, as of March 31, 2005, we owed $238,078 in
accrued but unpaid compensation to our employees. The loss of any of these key
employees could have a material adverse effect on our operations, and our
ability to execute our business plan might be negatively impacted. Any of these
key employees may leave their employment with us if they choose to do so, and we
cannot assure you that we would be able to hire similarly qualified executives
if any of our key employees should choose to leave.
15
Because we have only four employees, our management may be unable to
successfully manage our business.
In order to successfully execute our business plan, our management must
succeed in all of the following critical areas:
o Researching diseases and possible therapies in the areas of dermatology and
skin care, oncology, and biotechnology;
o Developing prescription drug, medical device and OTC products based on our
research;
o Marketing and selling developed products;
o Obtaining additional capital to finance research, development, production
and marketing of our products; and
o Managing our business as it grows.
As discussed above, we currently have only four employees, all of whom are
full-time employees. Focusing on any one of these areas may divert their
attention from our other areas of concern and could affect our ability to manage
other aspects of our business. We cannot assure you that our management will be
able to succeed in all of these areas or, even if we do so succeed, that our
business will be successful as a result. We anticipate adding a part-time
regulatory affairs officer, a part-time lab technician and a part-time office
manager within the next year. While we have not historically had difficulty in
attracting employees, our small size and limited operating history may make it
difficult for us to attract and retain employees in the future which could
further divert managements attention from the operation of our business.
Our common stock price can be volatile because of several factors, including a
limited public float.
During the three month period ended March 31, 2005, the sale price of our
common stock fluctuated from $1.21 to $0.64 per share. We believe that our
common stock is subject to wide price fluctuations because of several factors,
including:
o absence of meaningful earnings and external financing;
o a relatively thin trading market for our common stock, which causes trades
of small blocks of stock to have a significant impact on our stock price;
o general volatility of the stock markets and the market prices of other
publicly traded companies; and
o investor sentiment regarding equity markets generally, including public
perception of corporate ethics and governance and the accuracy and
transparency of financial reporting.
We have raised substantial amounts of capital in private placements from time to
time, and if we have failed to comply with applicable laws and regulations
applicable to these private placements, we could be required to repay this
capital to investors and could be subject to legal action by the investors and
by state and federal securities regulators.
We have offered and sold securities in private placements in reliance upon
exemptions from the registration requirements of the SEC and state agencies.
These exemptions are highly technical in nature and if we inadvertently failed
to comply with the requirements of any of the exemptive provisions, investors
might have the right to rescind their purchase of our securities or sue for
damages. If one or more investors were to successfully seek rescission or
prevail in any suit, we could face severe financial demands that could
materially and adversely affect our financial position. Further, the SEC and
state agencies could take action against us that could divert management's
attention from the operation of our business, cause us to pay fines and
penalties and cause us to have to repay investors their original investment,
among other things.
Financings that may be available to us under current market conditions
frequently involve sales at prices below the prices at which our common stock
trades on the Over the Counter Electronic Bulletin Board, as well as the
issuance of warrants or convertible debt that require exercise or conversion
prices that are calculated in the future at a discount to the then market price
of our common stock.
Any agreement to sell, or convert debt or equity securities into common
stock at a future date and at a price based on the then current market price
will provide an incentive to the investor or third parties to sell the common
stock short to decrease the price and increase the number of shares they may
receive in a future purchase, whether directly from us or in the market. If we
issue or are deemed to have issued shares of our common stock for consideration
which is less than $0.75 per share, the anti-dilutive provisions contained in
the secured convertible debentures will become operative and we will have to
issue more
16
shares to the holders of Senior Convertible Debentures upon conversion. As a
result, the anti-dilutive provisions contained in our agreements with Gryffindor
will become operative. If these anti-dilutive provisions become operative, we
may be required to issue a significant number of shares of common stock to
Gryffindor. We will not receive any additional proceeds from Gryffindor for the
issuance of these shares of common stock. Other financings that we may obtain
may contain similar provisions, and the existence of anti-dilutive provisions in
some of our existing financings may make it more difficult for us to obtain
financing in the future. These types of transactions which cause the issuance of
our common stock in connection with the exercise or conversion of securities may
result in substantial dilution to the remaining holders of our common stock
Financings that may be available to us frequently involve high selling costs.
Because of our limited operating history, low market capitalization, thin
trading volume and other factors, we have historically had to pay high costs to
obtain financing and expect to continue to be required to pay high costs for any
future financings in which we may participate. For example, our past sales of
shares and our sale of the convertible debentures have involved the payment of
finder's fees or placement agent's fees. These types of fees are typically
higher for small companies like us. Payment of fees of this type reduces the
amount of cash that we receive from a financing transaction and makes it more
difficult for us to obtain the amount of financing that we need to maintain and
expand our operations.
Future sales by our stockholders may adversely affect our stock price and our
ability to raise funds in new stock offerings.
Sales of our common stock in the public market following this offering
could lower the market price of our common stock. Sales may also make it more
difficult for us to sell equity securities or equity-related securities in the
future at a time and price that our management deems acceptable or at all.
We have not had earnings, but if earnings were available, it is our general
policy to retain any earnings for use in our operation.
We have never declared or paid cash dividends on our common stock. We
currently intend to retain all of our future earnings, if any, for use in our
business and therefore do not anticipate paying any cash dividends on our common
stock in the foreseeable future.
Our stock price is below $5.00 per share and is treated as a "Penny Stock" which
places restrictions on broker-dealers recommending the stock for purchase.
Our common stock is defined as "penny stock" under the Securities Exchange
Act of 1934, which we refer to as the "Exchange Act," and its rules. The SEC has
adopted regulations that define "penny stock" to include common stock that has a
market price of less than $5.00 per share, subject to certain exceptions. These
rules include the following requirements:
o broker-dealers must deliver, prior to the transaction, a disclosure
schedule prepared by the SEC relating to the penny stock market;
o broker-dealers must disclose the commissions payable to the broker-dealer
and its registered representative;
o broker-dealers must disclose current quotations for the securities;
o if a broker-dealer is the sole market-maker, the broker-dealer must
disclose this fact and the broker-dealers presumed control over the market;
and
o a broker-dealer must furnish its customers with monthly statements
disclosing recent price information for all penny stocks held in the
customer's account and information on the limited market in penny stocks.
Additional sales practice requirements are imposed on broker-dealers who
sell penny stocks to persons other than established customers and accredited
investors. For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and must have received the
purchaser's written consent to the transaction prior to sale. If our common
stock remains subject to these penny stock rules these disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for our common stock. As a result, fewer broker-dealers may be willing to
make a market in our stock, which could affect your ability to re-sell your
shares.
17
Forward-Looking Statements
Some of the information contained in this prospectus and the documents
incorporated by reference into this prospectus include forward-looking
statements (as defined in Section 27A of the Securities Act and Section 21E of
the Exchange Act), which mean that they relate to events or transactions that
have not yet occurred, our expectations or estimates for our future operations,
our growth strategies or business plans or other facts that have not yet
occurred. These statements can be identified by the use of forward-looking
terminology such as "might," "may," "will," "could," "expect," "anticipate,"
"estimate," "likely," "believe," or "continue" or the negative thereof or other
variations thereon or comparable terminology. The above risk factors contain
discussions of important factors that should be considered by prospective
investors for their potential impact on forward-looking statements included in
this prospectus and in the documents incorporated by reference into this
prospectus. These important factors, among others, may cause actual results to
differ materially and adversely from the results expressed or implied by the
forward-looking statements.
Use Of Proceeds
The selling shareholders will receive the net proceeds from the sale of
shares. We will not receive any of the proceeds from any sale of the shares by
the selling shareholders. However, we will receive the proceeds from any cash
exercise of warrants to purchase some of the shares offered by this prospectus.
If all warrants are exercised for cash, we would receive proceeds of $9,712,068.
Any proceeds we receive will be used for working capital purposes. Please see
the section of this prospectus entitled "Agreements With Purchasers of Secured
Convertible Debentures", "Agreements With Gryffindor Capital Partners I,
L.L.C.", "Agreements with Financial Advisors and Consultants", and "Description
of Other Transactions" for more information about the warrants.
Agreements With Purchasers Of Secured Convertible Debentures
We are registering a portion of the shares in order to satisfy our
obligations to DCOFI Master LDC, Asset Managers International Ltd., DC Asset
Management, LLC, Alpha Capital Aktiengesellschaft, Whalehaven Capital Fund
Limited, Donald Adams, Peter K. Sivaslian and Stephen Ross (collectively, the
"Purchasers"). Under a Securities Purchase Agreement dated as of March 30, 2005,
between us and the Purchasers, the Purchasers purchased secured convertible
debentures and warrants from us for an aggregate of $3,150,000. We refer to this
agreement in this prospectus as the Securities Purchase Agreement. We have
received all of the proceeds from the sale of the secured convertible debentures
and warrants.
The Senior Convertible Debentures have a maturity date of March 30, 2007
and are convertible into shares of our common stock at a per share conversion
price of $0.75. Interest at the greater of (i) the prime rate (adjust monthly),
plus 4% and (ii) 8% is due on a quarterly basis with the first installment due
June 30, 2005. At the time the interest is payable, upon certain conditions, we
have the option to pay all or any portion of accrued interest in either cash or
shares of our common stock valued at 85% multiplied by the market price as of
the third trading date immediately preceding the interest payment date. Under
the Senior Convertible Debentures, for purposes of determining market price as
of any date, market price means: (i) the average of the last reported sale
prices for the shares on the National Association of Securities Dealers Inc.'s
Over-the-Counter Bulletin Board, for the five days immediately preceding such
date; (ii) if the OTCBB is not the principal trading market for the shares, the
average of the last reported sale prices on the principal trading market for the
common stock during the same period as reported by Bloomberg, L.P., or (iii) if
unable to calculate on any of the foregoing bases, as reasonable determined in
good faith by the Board or an independent investment back of nationally
recognized standing in the valuation businesses similar to the business of the
Company.
We may prepay the Senior Convertible Debentures in full by paying the
holders the greater of (i) 125% multiplied by the sum of the total outstanding
principal, plus accrued and unpaid interest, plus default interest, if any or
(ii) the highest number of shares of common stock issuable upon conversion of
the total amount calculated pursuant to (i) multiplied by the highest market
price for the common stock during the period beginning on the date until
prepayment.
On or after any event or series of events which constitutes a fundamental
change, the holder may, in its sole discretion, require us to purchase the
debentures, from time to time, in whole or in part, at a purchase price equal to
110% multiplied by the sum of the total outstanding principal, plus accrued and
unpaid interest, plus any other obligations otherwise due under the debenture.
Under the Senior Convertible Debentures, fundamental change means
(i) any person becomes a beneficial owner of securities representing 50% or
more of the (a) outstanding shares of common stock or (b) the combined voting
power of the then outstanding securities;
18
(ii) a merger or consolidation whereby the voting securities outstanding
immediately prior thereto fail to continue to represent at least 50% of the
combined voting power of the voting securities immediately after such merger or
consolidation;
(iii) the sale or other disposition of all or substantially all or the
Company's assets;
(iv) a change in the composition of the Board within two years which
results in fewer than a majority of directors are directors as of the date of
the debenture;
(v) the dissolution or liquidation of the Company; or
(vi) any transaction or series of transactions that has the substantial
effect of any of the foregoing.
The Purchasers also purchased Class A Warrants and Class B Warrants under
the Securities Purchase Agreement. Class A and Class B Warrants are exercisable
at any time between March 30, 2005 through and including March 30, 2010. The per
share exercise price of a Class A Warrant is $0.935 and the per share exercise
price of the Class B Warrant is $0.8925.
Pursuant to the Securities Purchase Agreement and a Registration Rights
Agreement, we are obligated to register under the Securities Act (i) 150%
multiplied by the number of shares issuable on conversion of the full aggregate
principal amount of the convertible debentures plus interest thereon accrued
through the maturity date thereof which, at our option may be paid either in
cash or shares of common stock; and (ii) 100% multiplied by the number of shares
issuable upon the exercise of the Warrants.
Under the Registration Rights Agreement, we may be obligated to pay
penalties if the registration statement is not filed by May 9, 2005, if the
registration statement is not declared effective by June 8, 2005, or if sales
cannot be made pursuant to the registration statement (for failure to maintain
effectiveness of registration statement, failure to register sufficient number
of common stock, failure to maintain listing or otherwise). The amount we would
have to pay the Purchasers, as partial relief for the damages by reason of any
delay in or limitation of their ability to sell underlying shares of common
stock equals 2% of the liquidated value of debentures and warrants. This amount
is payable the first day of the month after the payment accrues and on the first
day of each month thereafter.
We refer you to the Securities Purchase Agreement, the Registration Rights
Agreement, the form of Secured Convertible Debentures, the form of Class A
Warrants and the form of Class B Warrants that are filed as exhibits to this
registration statement for a more complete description of the complex provisions
that are summarized under this caption.
Agreements With Gryffindor Capital Partners I, L.L.C.
We are registering a portion of shares in order to satisfy our obligations
to Gryffindor Capital Partners I, L.L.C. Under the Amendment No. 1 to
Transaction Documents dated November 26, 2004 between us and Gryffindor, we
issued Gryffindor a Second Amended and Restated Senior Secured Convertible Note
dated November 26, 2004 in the principal amount of $1,185,959 in substitution of
the Senior Secured Convertible Note previously issued to Gryffindor. The Second
Amended Note has a maturity date of November 26, 2005 and principal is
convertible into shares of common stock at a rate to one share of common stock
for each $0.73655655 of principal converted. Interest is converted at a rate
equal to one share os common stock for each $0.55 accrued but unpaid interest
converted.
The Second Amended Note provides that in the case of a reclassification of
the common stock, recapitalization, merger, consolidation, or other capital
adjustment affecting the common stock prior to the exercise of the warrant, then
Gryffindor is entitled to receive the number of shares of common stock, other
securities or property of the company, or successor resulting from such
consolidation or merger as the case may be, to which the shares of common stock
deliverable upon the exercise of the warrant would have been entitled if the
warrant had been exercised immediately prior to such reorganization,
reclassification of capital stock, consolidation, merger, sale or other
disposition.
Pursuant to a registration rights agreement, we are obligated to register
under the Securities Act the number of shares issuable upon the full conversion
of the Second Amended Note. We are also obligated to keep the registration
statement of which this prospectus forms a part effective until the earliest of
the date from which the holders may sell all shares registered on their behalf
under Rule 144 promulgated under the Securities Act, or the date on which the
holders no longer own any of those shares. We refer you to Amendment No. 1 to
the Transaction Documents, the Second Amended and Restated Senior Secured
Convertible Note and the form of common stock purchase warrant that are filed as
exhibits to this registration statement for a more complete description of the
complex provisions that are summarized under this caption.
19
Agreements With Financial Advisors And Consultants
Pursuant to an Advisory Agreement with us dated March 1, 2005, Duncan
Capital Group, LLC served as financial advisor and consultant for the Company in
connection with transactions described above. Duncan received warrants to
purchase up to 550,000 shares of common stock of the Company as partial
compensation for its services. Half of the warrants have a per share exercise
price of $0.98 and half of the warrants have a per share exercise price of
$1.23. It is Duncan's policy to immediately allocate its warrants and Duncan has
allocated its warrants to the Irrevocable Trust dated December 28, 2004 f/b/o
Olivia Skriloff, the Irrevocable Trust dated December 28, 2004 f/b/o Samuel
Skriloff, David Skriloff, Richard Smithline, and the M.W. Crow Family Trust,
L.P. in such amounts as set forth under the section of this prospectus entitled
"Offering".
Pursuant to a Financial Advisory and Investment Agreement dated August 15,
2004 with Network 1 Financial Solutions, Inc., Damon D. Testaverde and Network 1
received warrants to purchase up to 280,000 and 70,000 shares of common stock,
respectively, at a per share exercise price of $1.00. Testaverde and Network 1
also served as brokers in connection with the Securities Purchase Agreement.
Pursuant to an agreement with Testaverde and Network 1, the Company issued
Testaverde and Network 1 warrants to purchase up to 360,000 and 40,000 shares of
common stock, respectively, at a per share exercise price of $0.98 as
compensation for service rendered.
As compensation for its services as placement agent of the Company's common
stock and warrants, Venture Catalyst, LLC received warrants to purchase (a) up
to 57,848 shares of common stock at a per share exercise price of $0.75, (b) up
to 86,768 shares of common stock at a per share exercise price of $1.00, (c) up
to 42,411 shares of common stock at a per share exercise price of $0.75, and (d)
up to 63,612 shares of common stock at a per share exercise price of $1.00.
Pursuant to a Consulting Agreement dated April 1, 2005, Venture received a
warrant to purchase up to 149,000 shares of common stock at a per share exercise
price of $1.00.
As compensation for its services as placement agent of the Company's common
stock and warrants, Trek Properties, LLC received warrants to purchase (a) up to
21,677 shares of common stock at a per share exercise price of $0.75, (b) up to
32,519 shares of common stock at a per share exercise price of $1.00, (c) up to
22,339 shares of common stock at a per share exercise price of $0.75, and (d) up
to 33,513 shares of common stock at a per share exercise price of $1.00.
Pursuant to an agreement entered into May 24, 2005, between us and Kevin
Richardson, as compensation for Richardson's services as a Company spokesperson,
we issued a common stock purchase warrant to Richardson to purchase up to 25,000
shares of common stock at a per share exercise price of $1.00.
Pursuant to a Finders Fee Agreement between us and the Centre Capital
Advisors, LLC, we issued warrants to purchase up to 75,000 shares of common
stock at a per share exercise price of $1.00 to William J. Crusoe and Kenneth J.
Spadaford.
20
Description Of Other Transactions
We are also registering 631,833 shares held by other selling shareholders
and 947,750 shares issuable upon exercise of warrants held by other selling
shareholders other than the Purchasers, Gryffindor, the persons described in the
section of this prospectus entitled "Agreements with Financial Advisors and
Consultants" or affiliates thereof. These selling shareholders acquired their
beneficial interest in the common stock through various private placements of
securities.
Certain of these selling shareholders are permitted to have their shares
registered for resale in the registration statement as a result of so-called
"piggy-back" registration rights, which means that, because we are required by
the Investor Registration Rights Agreement and the Registration Rights Agreement
to file the registration statement, holders of "piggy-back" registration rights
must also be given the opportunity to have their shares registered in the
registration statement. Other selling shareholders are permitted to have their
shares registered for resale in the registration statement pursuant to a
registration rights agreement.
We refer you to the registration rights agreements relating to some of
these shares that are filed as exhibits to this registration statement for more
complete description of the provisions of those registration rights agreements.
Selling Shareholders
The following table sets forth the shares beneficially owned, as of March
31, 2005, by the selling shareholders prior to the offering contemplated by this
prospectus, the number of shares each selling shareholder is offering by this
prospectus and the number of shares which each would own beneficially if all the
offered shares are sold. The selling shareholders acquired their beneficial
interests in the shares being offered hereby in the transactions described under
the headings "Agreements with Purchasers of Secured Convertible Debentures",
"Agreements with Gryffindor Capital Partners I, L.L.C.", "Agreements with
Financial Advisors and Consultants" and in private placements described under
the heading "Description of Other Transactions."
Beneficial ownership is determined in accordance with SEC rules and
includes voting or investment power with respect to the securities. However,
each of the selling shareholders is subject to limitations on the conversion of
their secured convertible debentures and the exercise of their warrants, if any.
The most significant of these limitations is that the selling shareholder may
not convert its debentures or exercise its warrants, if the conversion or
exercise would cause such holder's beneficial ownership of our common stock
(excluding shares underlying any of their unconverted to debentures or
unexercised warrants) to exceed 4.99% of the outstanding shares of common stock.
Also, the table below includes the number of shares which would be issued upon
conversion of a secured convertible debenture in payment of all accrued interest
through its maturity date, which is more than 60 days from the date of this
prospectus and shares which might be issuable on the occurrence of events which
have not yet occurred and may not occur. Therefore, although they are included
in the table below, the number of shares of common stock for some listed persons
may include shares that may not be purchased during the 60-day period.
21
Beneficial
Names Ownership Shares Registered Post-Offering %
------ ---------- ----------------- ------------- ---
DCOFI Master LDC (1) 1,825,112 4,266,666 (3) 0 0
Asset Managers International Ltd. (1) 1,825,112 3,700,000 (3) 0 0
DC Asset Management, LLC (Class A) (1) 566,666 566,666 (3) 0 0
Alpha Capital Aktiengesellschaft (1) 1,825,112 2,133,334 (3) 0 0
Whalehaven Capital Fund Limited (1) 640,000 640,000 (3) 0 0
Donald Adams 1,706,666 1,706,666 (3) 0 0
Peter K. Sivaslian 213,334 213,334 (3) 0 0
Stephen Ross 213,334 213,334 (3) 0 0
Gryffindor Capital Partners I, L.L.C. (1) 1,825,112 1,625,942 (3) 199,170 1.08%
Irrevocable Trust dated December 28, 2004 f/b/o 30,000 30,000 (4) 0 0
Olivia Skriloff
Irrevocable Trust dated December 28, 2004 f/b/o 30,000 30,000 (4) 0 0
Samuel Skriloff
David Skriloff 77,500 77,500 (4) 0 0
Richard Smithline 112,500 112,500 (4) 0 0
M.W. Crow Family Trust LP 300,000 300,000 (4) 0 0
Damon D. Testaverde (2) 640,000 640,000 (4) 0 0
Network 1 Financial Securities, Inc. (2) 110,000 110,000 (4) 0 0
Kenneth J. Spadaford (2) 75,000 75,000 (4) 0 0
William J. Crusoe (2) 75,000 75,000 (4) 0 0
Martin Stern 75,000 75,000 (4) 0 0
Ben F. House 75,000 75,000 (4) 0 0
Robert Johnsen 66,668 66,668 (4) 0 0
Roy L. Paget 83,333 83,333 (4) 0 0
Tom J. Gardiner 83,333 83,333 (4) 0 0
Gene V. Dupreau 200,000 200,000 (4) 0 0
Carmine J. Esposito 87,500 87,500 (4) 0 0
Leon Hertzson 175,000 175,000 (4) 0 0
Samuel Gault 125,000 125,000 (4) 0 0
Edward C. Hacker 25,000 25,000 (4) 0 0
W. Allen Everette 75,000 75,000 (4) 0 0
Gordon Scott Hirsch 62,500 62,500 (4) 0 0
Dale and Margaret Cox 33,750 33,750 (4) 0 0
Belz Broadcasting Company 337,500 337,500 (4) 0 0
B. J. Kennedy 150,000 150,000 (4) 0 0
Venture Catalyst, LLC (2) 399,639 399,639 (4) 0 0
Trek Properties, LLC (2) 250,048 250,048 (4) 0 0
Kevin Richardson 25,000 25,000 (4) 0 0
--------------
22
(1) The selling shareholder advised us that it is not a broker-dealer and is not
affiliated with any broker-dealer and no natural person beneficially owns shares
of common stock or the shares of common stock issuable upon conversion of the
warrants.
(2) The selling shareholder has acted as a consultant within the last three
years.
(3) The numbers on the table reflect an estimate of the number of shares issued
or issuable to the selling shareholder. We are registering the shares underlying
the senior convertible debentures held by the selling shareholder and a portion
of our common stock which might be issuable to the selling shareholder under the
terms of the agreements and the selling shareholder. We are also registering
shares the warrants held by the selling shareholder. See the section of this
prospectus entitled "Agreements with Purchasers of Secured Convertible
Debentures" for more information regarding our senior convertible debentures and
warrants.
(4) The numbers on the table reflect the actual number of shares issued or
issuable to the selling shareholder. See the section of this prospectus entitled
"Description of Other Transactions."
Relationship Between Provectus and the Selling Shareholders
None of the selling shareholders are affiliates or controlled by our
affiliates. None of the selling shareholders are now or were at any time in the
past an officer or director of ours or any of any of our predecessors or
affiliates. We have separate contractual obligations to file this registration
with each of the selling shareholders.
Description Of Securities
Common Stock
We are authorized to issue 100,000,000 shares of common stock, $.001 par
value per share, of which 16,882,275 shares were outstanding and held of record
as of May 31, 2005, by approximately 1,824 shareholders of record. A significant
portion of our common stock is held in either nominee name or street name
brokerage accounts. All outstanding shares of common stock are fully paid and
non-assessable. Holders of shares of our common stock are entitled to one vote
for each share held of record on all matters to be voted on by shareholders.
Holders of shares of common stock are entitled to receive dividends when, as and
if declared by our board of directors from funds legally available therefor and
to share ratably in our assets available upon liquidation, dissolution or
winding up. The holders of shares of the common stock do not have cumulative
voting rights for the election of directors and, accordingly, the holders of
more than 50% of the shares of common stock are able to elect all directors. Our
Restated Articles of Incorporation do not grant preemptive rights. The common
stock may not be redeemed except upon our consent and the consent of the
shareholders and the common stock is not subject to liability for further calls
or to assessments by Provectus. This summary does not purport to be complete and
is qualified in its entirety by reference to our Restated Articles of
Incorporation and to Nevada law.
Preferred Stock
We are authorized to issue 25,000,000 shares of preferred stock, $.001 par
value per share, of which no shares are issued and outstanding. The shares of
preferred stock may be issued from time to time in one or more series, in any
manner permitted by law, as determined from time to time by our board of
directors, and stated in the resolution or resolutions providing for the
issuance of such shares adopted by our board of directors pursuant to authority
vested in it. Without limiting the generality of the foregoing, shares in such
series shall have voting powers, full or limited, or no voting powers, and shall
have such designations, preferences and relative, participating, optional, or
other special rights, and qualifications, limitations, or restrictions thereof,
permitted by law, as shall be stated in the resolution or resolutions providing
for the issuance of such shares adopted by our board of directors. The number of
shares of any such series so set forth in the resolution or resolutions may be
increased (but not above the total number of authorized shares of preferred
stock) or decreased (but not below the number of shares thereof then
outstanding) by further resolution or resolutions adopted by the board of
directors.
23
Governing Law and Organizational Documents
Shareholders' rights and related matters are governed by the laws of the
State of Nevada and our Restated Articles of Incorporation and our Bylaws. Our
Restated Articles of Incorporation may not be amended without the affirmative
vote of at least a majority of the shares entitled to vote generally in the
election of directors, voting as a single voting group. Our Bylaws may be
amended by either the affirmative vote of 75% of all shares outstanding and
entitled to vote generally in the election of directors, or by an affirmative
vote of a majority of our directors then holding office.
Stock Option Plans
The 2002 Stock Option Plan, as amended, provides for the grant of four
types of incentive awards: stock options, stock appreciation rights, rights to
purchase restricted stock, and long-term performance awards.
Our employees and consultants, including officers and directors who also
are employees or consultants, and our directors who are not employees whose
present and potential contributions are important to our continued success are
eligible to receive awards under the plan. The purpose of a long-term incentive
plan is to direct the attention and efforts of participating employees to our
long-term performance by relating incentive compensation to the achievement of
long-term corporate economic objectives. The plan also is designed to retain,
reward and motivate participating employees by providing an opportunity for
investment in the company and the advantages inherent in ownership of our common
stock.
A total of 5,000,000 shares of our common stock may be subject to, or
issued pursuant to, awards granted under the plan. If an award under the plan is
forfeited or terminated for any reason, the shares of common stock that were
subject to the award again become available for distribution in connection with
awards under the plan. In addition, shares subject to stock appreciation rights
that are exercised for cash again become available for distribution in
connection with awards under the plan.
The plan may be administered by one or more administrators if the board of
directors deems division of administration necessary or desirable in order to
comply with applicable law. Because the board of directors has not appointed any
committees and because we have so few employees, the entire board of directors
currently is acting as the administrator of the plan.
The administrator has the exclusive discretion to select the employees,
consultants and non-employee directors who receive awards under the plan and to
determine the type, size, and terms of each award, to modify the terms of
awards, to determine when awards will be granted and paid, and to make all other
determinations which it deems necessary or desirable in the interpretation and
administration of the plan. The plan will remain in effect until all awards
under the plan either have been satisfied by the issuance of shares of our
common stock or the payment of cash or have expired or otherwise terminated or
the plan is otherwise terminated by our board of directors. However, no awards
may be granted more than ten years after the date of the shareholder's approval
of the plan. Generally, a participant's rights and interest under the plan will
not be transferable except by will or by the laws of descent and distribution.
Transfer Agent
We have retained Atlas Stock Transfer Corporation, 5899 South State Street,
Salt Lake City, UT 84107, as the transfer agent for our common stock. Atlas
Stock Transfer Corporation's telephone number is (801) 266-7151.
Plan Of Distribution
The selling shareholders and any of their pledgees, donees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded. These sales may be at fixed or negotiated prices. The selling
shareholders may use any one or more of the following methods when selling
shares:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
24
o privately negotiated transactions;
o short sales, but, if at all, only after the effectiveness of the
registration statement of the shares of common stock offered hereby;
o broker-dealers may agree with the selling shareholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling shareholders may also engage in short sales against the box,
puts and calls and other transactions in our securities or derivatives of our
securities and may sell or deliver shares in connection with these trades. The
selling shareholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling shareholder defaults on a margin
loan, the broker may, from time to time, offer and sell the pledged shares. We
believe that the selling shareholders have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their shares other than ordinary course brokerage arrangements, nor
is there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling shareholders.
Broker-dealers engaged by the selling shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
Selling shareholders may be, and any broker-dealers or agents that are
involved in selling the shares are, deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. If the selling shareholders
are deemed to be underwriters, the selling shareholders may be subject to
statutory and regulatory liabilities, including liabilities imposed pursuant to
Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
Act.
We are required to pay all fees and expenses incident to the registration
of the shares. Otherwise, all discounts, commissions or fees incurred in
connection with the sale of the common stock offered hereby will be paid by the
selling shareholders.
Upon our being notified by a selling shareholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing
o the name of each such selling shareholder and of the participating
broker-dealer(s);
o the number of shares involved;
o the price at which such shares were sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus; and
o other facts material to the transaction.
To comply with the securities laws of some states, the shares will be sold
in those jurisdictions, if required, only through registered or licensed brokers
or dealers. In addition, in some states the shares may not be sold unless the
shares have been registered or qualified for sale in the state or an exemption
from registration or qualification is available and complied with.
25
We advised the selling shareholders that the anti-manipulative provisions
of Regulation M promulgated under the Exchange Act may apply to their sales of
the shares offered hereby.
Indemnification Of Officers And Directors
Nevada law provides that a Nevada corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, other than an action by or in the right of the corporation
(i.e., a "non-derivative proceeding"), by reason of the fact that he or she is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he or she:
o Is not liable under Section 78.138 of the Nevada Revised Statutes for
breach of his or her fiduciary duties to the corporation; or
o Acted in good faith and in a manner which he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
In addition, a Nevada corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor (i.e., a "derivative proceeding"), by reason of the fact
that he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him or her in
connection with the defense or settlement of the action or suit if he:
o Is not liable under Section 78.138 of the Nevada Revised Statute for breach
of his or her fiduciary duties to the corporation; or
o Acted in good faith and in a manner which he or she reasonably believed to
be in or not opposed to the best interests of the corporation.
Under Nevada law, indemnification may not be made for any claim, issue or
matter as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any non-derivative
proceeding or any derivative proceeding, or in defense of any claim, issue or
matter therein, the corporation is obligated to indemnify him or her against
expenses, including attorneys' fees, actually and reasonably incurred in
connection with the defense.
Further, Nevada law permits a Nevada corporation to purchase and
maintain insurance or to make other financial arrangements on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise for any liability asserted against him or her and liability and
expenses incurred by him or her in his or her capacity as a director, officer,
employee or agent, or arising out of his or her status as such, whether or not
the corporation has the authority to indemnify him or her against such liability
and expenses.
Under our Restated Articles of Incorporation, we are obligated to
indemnify, to the fullest extent permitted by Nevada law, any director or
officer who was or is a party or is threatened to be made a party to, or is
involved in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "proceeding"), by
reason of the fact that the director or officer, or a person of whom he or she
is the legal representative, is or was a director or officer of Provectus, or a
member of any committee of our board of directors, or is or was serving at our
request as a director, officer, partner, trustee, employee or agent of another
corporation, limited liability company, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether the basis of the proceeding is alleged action in an official capacity as
a director, officer, partner, trustee, employee or agent or in any other
capacity while serving as a director officer, partner, trustee, employee or
agent; against all expense, liability and loss (including attorneys' fees,
judgments,
26
fines, excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by the director or officer in connection with
the proceeding. In addition, indemnification is required to continue as to a
person who has ceased to be a director, officer, partner, trustee, employee or
agent and inures to the benefit of his or her heirs, executors and
administrators. However, subject to the exceptions detailed below, we may
indemnify a person seeking indemnification in connection with a proceeding (or
part thereof) initiated by the person seeking indemnification only if the
proceeding (or part thereof) was authorized by our board of directors. We may
indemnify any employee or agent of Provectus to an extent greater than required
by law only if and to the extent that our directors, in their discretion, may
determine.
If we do not pay a claim for indemnification under the our Restated
Articles of Incorporation in full within 30 days after a written claim has been
received by us, the claimant may at any time thereafter bring suit against us to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant also will be entitled to be paid the expense of prosecuting such
claim. With some exceptions, we may defend against an action brought for this
purpose that the claimant has not met the standards of conduct which make it
permissible under Chapter 78 of the Nevada Revised Statutes for us to indemnify
the claimant for the amount claimed, but the burden of proving such defense is
on us. Neither our failure (including the failure of our board of directors,
independent legal counsel or our shareholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in Chapter 78 of the Nevada Revised Statutes, nor an actual
determination by us (including our board of directors, independent legal counsel
or our shareholders) that the claimant has not met such applicable standard of
conduct is a defense to the action or creates a presumption that the claimant
has not met the applicable standard of conduct.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Provectus
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC this indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Where You Can Find More Information About Us
We file reports, proxy statements, information statements and other
information with the SEC. You may read and copy this information, for a copying
fee, at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information on its
public reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services, and at the web site maintained by the
SEC at http://www.sec.gov.
Our Internet address is http://www.pvct.com. We have made available,
through a link to the SEC's Web site, electronic copies of the materials we file
with the SEC (including our annual reports on Form 10-KSB, our quarterly reports
on Form 10-QSB, our current reports on Form 8-K, the Section 16 reports filed by
our executive officers, directors and 10% shareholders and amendments to those
reports). To receive paper copies of our SEC materials, please contact us by
U.S. mail, telephone, facsimile or electronic mail at the following address:
Provectus Pharmaceuticals, Inc.
Attention: President
7327 Oak Ridge Highway, Suite A
Knoxville, TN 37931
Telephone: 865/769-4011
Facsimile: 865/769-4013
Electronic mail: info@pvct.com
We have filed the registration statement under the Securities Act, with
respect to the securities offered pursuant to this prospectus. This prospectus
does not contain all of the information set forth in the registration statement,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. For further information, reference is made to the registration
statement and the exhibits filed as a part thereof, which may be found at the
locations and website referred to above.
Incorporation Of Certain Information By Reference
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC, which means that we can disclose important
information to you by referring to those documents. The information incorporated
by reference is an important part of this prospectus. We incorporate by
reference the following documents we filed with the SEC:
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o Our Annual Report on Form 10-KSB for the year ended December 31, 2004, as
filed with the SEC on March 31, 2005.
o Our Quarterly Report on Form 10-QSB for the quarter ended March 31, 2005,
as filed with the SEC on May 16, 2005.
o Our Definitive Proxy Statement to Shareholders, dated April 21, 2005.
o Our Current Report on Form 8-K dated April 8, 2005
We are also incorporating by reference additional documents that we may
file with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
prior to the termination of this offering.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the SEC or us.
Documents incorporated by reference are available from us without charge, except
exhibits, unless we have specifically incorporated by reference an exhibit into
a document that this prospectus incorporates. Shareholders may obtain documents
incorporated by reference into this prospectus by requesting them in writing or
by telephone from:
Provectus Pharmaceuticals, Inc.
ATTN: Investor Relations
7327 Oak Ridge Highway, Suite A
Knoxville, Tennessee 37931
(865) 769-4011
Experts
The financial statements incorporated by reference in this prospectus have
been audited by BDO Seidman, LLP, independent registered public accounting firm,
to the extent and for the periods set forth in their report incorporated herein
by reference, and are incorporated herein in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.
Legal Matters
The validity of the shares we are offering will be passed upon for us by
Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., 207 Mockingbird Lane, P.O.
Box 3038, Johnson City, Tennessee 37602.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this offering are as set forth in
the following table. All amounts except the Securities and Exchange Commission
("SEC") registration fee are estimated.
SEC Registration Fee $1,330.85
Printing and Engraving Expenses 2,500.00
Accounting Fees and Expenses 8,000.00
Legal Fees and Expenses 50,000.00
Miscellaneous 1,500.00
----------
Total $63,330.85
Item 15. Indemnification of Officers and Directors.
See "Indemnification Of Officers And Directors" in the prospectus.
Item 16. Exhibits
The following exhibits are filed as part of this Registration Statement.
Exhibit No. Description
4.1* Form of Secured Convertible Debenture related to the Securities Purchase
Agreement (as defined below)
4.2* Form of Class A Warrant related to the Securities Purchase Agreement (as
defined below)
4.3* Form of Class B Warrant related to the Securities Purchase Agreement (as
defined below)
4.4* Registration Rights Agreement dated as of March 30, 2005 by and among the
Company and the initial investors named therein related to the Securities
Purchase Agreement (as defined below)
4.5* Second Amended and Restated Senior Secured Convertible Note dated November
26, 2004 related to Gryffindor Capital Partners I, LLC
4.6* Common Stock Purchase Warrant dated November 26, 2004 issued to Gryffindor
Capital Partners I,L.L.C.
4.7 Amended and Restated Convertible Secured Promissory Note of the Company
dated January 31, 2003, issued to Gryffindor, incorporated herein by
reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-QSB
dated March 31, 2003, as filed with the SEC on May 9, 2003
4.8* Advisory Agreement with Duncan Capital Group, LLC dated March 1, 2005
4.9* Form of Warrant issued to Duncan Capital Group, LLC designees
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4.10*Financial Advisory and Investment Agreement with Network 1 Financial
Securities, Inc. dated August 15, 2004
4.11*Form of Warrant issued to Damon D. Testaverde and Network 1 Financial
Securities, Inc.
4.12 Finders Fee Agreement with Centre Capital Advisors, LLC Incorporated herein
by reference to Exhibit 4.12 to the Company's 10-QSB for the quarter ended
March 31, 2005, as filed with the SEC on May 16, 2005
4.13 Form of Warrant issued to Centre Capital Advisors, LLC incorporated herein
by reference by Exhibit 4.13 to the Company's 10-QSB for the quarter ended
March 31, 2005, as filed with the SEC on May 16, 2005
4.14 General Fee Agreement with Venture Catalyst, LLC dated May 3, 2004
4.15 Consulting Agreement with Venture Catalyst, LLC dated December 8, 2004
4.16 Consulting Agreement with Venture Catalyst, LLC dated April 1, 2005
4.17 Form of Warrant issued to Kevin Richardson
4.18 Form of Warrant issued to Selling Securityholders other than the
Purchasers, incorporated herein by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K dated November 19, 2004, as filed with
the SEC on November 19, 2004
5.1 Opinion of Baker, Donelson, Bearman, Caldwell & Berkowitz
10.1*Securities Purchase Agreement dated as of March 30, 2005 by and among the
Company and the buyers named therein ("Securities Purchase Agreement")
10.2 Convertible Secured Promissory Note and Warrant Purchase Agreement dated as
of November 26, 2002 between the Company and Gryffindor Capital Partners I,
L.L.C. ("Gryffindor"), incorporated herein by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K dated November 26, 2002, as filed
with the SEC on December 10, 2002
10.3 Letter Agreement dated January 31, 2003 between the Company and Gryffindor,
incorporated by reference to Exhibit 4.2.2 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended March 31, 2003, as filed with
the SEC on May 9, 2003
10.4*Amendment No. 1 to Transaction Documents with Gryffindor Capital Partners
I, L.L.C. dated November 26, 2004
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10.5 Form of Securities Purchase Agreement by and between the Company and
Selling Securityholders, incorporated herein by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K dated November 19, 2004, as filed
with the SEC on November 19, 2004
13.1 Annual Report on Form 10-KSB for the year ended December 31, 2004
incorporated herein by reference to the Company's Form 10-KSB for the year
ended December 31, 2004 as filed with the SEC March 31, 2005
13.2 Quarterly Report on Form 10-QSB for the quarter ended March 31, 2005,
incorporated herein by reference to the Company's Form 10-QSB for the
quarter ended on March 31, 2005, as filed with the SEC on May 16, 2005.
23.1 Consent of Baker, Donelson, Bearman, Caldwell & Berkowitz (included in
Exhibit 5.1)
23.2 Consent of BDO Seidman, LLP
24.1*Power of Attorney
* Previously filed with the SEC
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Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act"),
(b) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
Registration Statement,
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that clauses (a) and (b) do not apply if the information
required to be included in a post-effective amendment by such clauses is
contained in periodic reports filed with or furnished to the SEC by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that
are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities, other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding, is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement on Form S-2 to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Knoxville, State of
Tennessee, on June 14, 2005.
PROVECTUS PHARMACEUTICALS, INC.
By: /s/ Timothy C. Scott
-----------------------------------
Timothy C. Scott, Ph.D.
President
By: /s/ Peter R. Culpepper
-----------------------------------
Peter R. Culpepper, C.P.A
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on June 14, 2005:
Signatures Title
/s/ H. Craig Dees Chief Executive Officer
--------------------------------------------------------------- (Principal executive officer)
Director
H. Craig Dees, Ph.D.
/s/ Peter R. Culpepper Chief Financial Officer (Principal
----------------------------------------------------------------- accounting and financial officer)
Peter R. Culpepper, C.P.A.
/s/ Timothy C. Scott President and Director
-----------------------------------------------------------------
Timothy C. Scott, Ph.D.
/s/ Eric A. Wachter* Director
-------------------=---------------------------------------------
Eric A. Wachter, Ph.D.
/s/ Stuart Fuchs* Director
-----------------------------------------------------------------
Stuart Fuchs
* By Timothy C. Scott, Attorney-In-Fact