ITEM 1A. RISK FACTORS.
Our
business and its future performance may be affected by various factors, the most significant of which are discussed below.
Risks
Related to Our Business
We
are a clinical-stage drug company, have no prescription drug products approved for commercial sale, have incurred substantial losses,
and expect to incur substantial losses and negative operating cash flow for the foreseeable future.
We
are a clinical-stage drug company that has no prescription drug products approved for commercial sale. We have never generated any substantial
revenues and may never achieve substantial revenues or profitability. As of December 31, 2022, we have incurred net losses of approximately
$250 million in the aggregate since inception in January 2002. We may never achieve or maintain profitability, even if we succeed in
developing and commercializing one or more of our prescription drug candidates. We also expect to continue to incur significant operating
expenditures and anticipate that our operating and capital expenses may increase substantially in the foreseeable future as we continue
to develop and seek regulatory approval for our prescription drug candidates, develop our prescription drug formulation candidates, implement
additional internal systems and infrastructure, and hire additional personnel.
We
also expect to experience negative operating cash flow for the foreseeable future as we fund our operating losses and any future capital
expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be
able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively
impact the value of our common stock.
We
need additional capital to conduct our operations and commercialize and/or further develop our prescription drug candidates and prescription
drug formulation candidates in 2023 and beyond, and our ability to obtain the necessary funding is uncertain.
We
need additional capital in 2023 and beyond to continue developing and seeking to commercialize our drug product candidates. We intend
to continue with the development of our prescription drug candidates and prescription drug formulation candidates on the basis of historical,
ongoing, and prospective clinical and preclinical study results.
We
have based our estimate of capital needs on assumptions that may prove to be wrong, and we cannot assure you that estimates and assumptions
will remain unchanged. On August 13, 2021, the Board approved a Financing Term Sheet (the “2021 Term Sheet”), which sets
forth the terms under which the Company will use its best efforts to arrange for financing of a maximum of $5,000,000 (the “2021
Financing”), which amounts will be obtained in several tranches and evidenced by convertible promissory notes (collectively, the
“2021 Notes”). As of December 31, 2021, the Company had received 2021 Notes proceeds of $1,460,000, of which $200,000 is
from a related party investor.
On
September 20, 2022, the Board approved the closure of the 2021 Financing. As of December 31, 2022, the Company had received 2021 Notes
proceeds of $2,335,000, of which $525,000 is from a related party investor (a Company officer and Company director), however $1,260,000
of these notes were converted to Series D-1 Preferred Shares during the 4th quarter 2022. The remaining 2021 notes is $1,075,000.
On
September 20, 2022, the Board approved a Financing Term Sheet (the “2022 Term Sheet”), which set forth the terms under which
the Company will use its best efforts to arrange for financing of a maximum of $5,000,000 (the “2022 Financing”), which amounts
will be obtained in several tranches. As of December 31, 2022, the Company had received 2022 Notes proceeds of $752,500, as defined below,
of which $677,500 is from a related party investor (a Company director) in connection with the 2022 Financing.
Such
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 stockholders. 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 products, product candidates, and technologies 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 programs, any of which could have a material adverse effect on our business.
There
is substantial doubt as to our ability to continue as a going concern.
The
Company’s cash balance was $1,431,707 at December 31, 2022, which includes $1,410,102 of restricted cash resulting from a grant
received from the State of Tennessee. The Company’s working capital deficiency was $6,293,198 and $4,258,679 as of December 31,
2022 and December 31, 2021, respectively. The Company continues to incur significant operating losses and management expects that significant
on-going operating expenditures will be necessary to successfully implement our business plan and develop and market our products. These
circumstances raise substantial doubt about our ability to continue as a going concern for a period of one year from the date that the
consolidated financial statements included elsewhere in this Annual Report on Form 10-K are issued. Implementation of our plans and our
ability to continue as a going concern will depend upon our ability to develop our prescription drug candidates and prescription drug
formulation candidates, and to raise additional capital.
Management
believes that we may have access to capital resources through possible public or private equity offerings, including the 2022 Financing,
exchange offers, debt financings, corporate collaborations or other means. If we are unable to raise sufficient capital, we will not
be able to pay our obligations as they become due.
Our
prescription drug product candidates are at early- to mid-stages of development and may never obtain U.S. or international regulatory
approvals required for us to commercialize our investigational drug product candidates.
We
will need approval of the FDA to commercialize our prescription drug product candidates in the U.S. and approvals from FDA-equivalent
regulatory authorities in international jurisdictions to commercialize our investigational drug product candidates there.
We
are continuing to pursue clinical development of our most advanced drug product candidates, PV-10 and PH-10, for use as treatments for
specific disease indications. The continued and further development of these drug product candidates will require significant additional
research, formulation and manufacturing development, and pre-clinical and extensive clinical testing prior to their regulatory approval
and commercialization. Pre-clinical and clinical studies of our drug product candidates 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 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 a product may be found to be ineffective or have
harmful side effects during subsequent pre-clinical testing or clinical trials, a product may fail to receive necessary regulatory clearance,
a product may be too difficult to manufacture on a large scale, a product may be too expensive to manufacture or market, a product may
not achieve broad market acceptance, others may hold proprietary rights that will prevent a product from being marketed, and others may
market equivalent or superior products.
Satisfaction
of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product candidate
and requires substantial resources for research, development, and testing. We cannot predict whether our research and clinical approaches
will result in drugs that the FDA considers safe for humans and effective for indicated uses. The FDA has substantial discretion in the
drug approval process and may require us to conduct additional nonclinical and clinical testing or to perform post-marketing studies.
The approval process may also be delayed by changes in government regulation, future legislation or administrative action or changes
in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals may delay commercialization
of, and our ability to derive revenues from, our prescription drug candidates, impose costly procedures on us, and diminish any competitive
advantages that we may otherwise enjoy.
Our
research and product development efforts may not be successfully completed and may not result in any successfully commercialized drug
products. Further, after commercial introduction of a new drug 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.
Even
if we comply with all FDA requests, we cannot be sure that we will ever obtain regulatory clearance for any of our drug product candidates.
Failure to obtain FDA approval of any of our prescription drug candidates will severely undermine our business by reducing our number
of salable drug products and, therefore, corresponding revenues.
In
international jurisdictions, we must receive approval from the appropriate regulatory authorities before we can commercialize our prescription
drug candidates. International regulatory approval processes generally include all of the risks associated with the FDA approval procedures
described above.
Before
obtaining regulatory approval for the sale of our drug product candidates, including PV-10 and PH-10, we must conduct additional clinical
trials to demonstrate the safety and efficacy of our drug product candidates. Clinical testing is expensive, difficult to design and
implement, can take many years to complete and is uncertain as to timing and outcome. Competition in clinical development has made it
difficult to enroll patients at an acceptable rate in some of our clinical trials. Advances in medical technology could make our prescription
drug candidates obsolete prior to completion of clinical testing. A failure of one or more of our clinical trials may occur at any stage
of testing. The outcome of pre-clinical testing and early clinical trials may not be predictive of the success of later clinical trials,
and interim results of a clinical trial do not necessarily predict final results. Moreover, pre-clinical and clinical data are often
susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily
in pre-clinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products. Product candidates
in later stages of clinical trials may fail to show the desired safety and efficacy characteristics despite having progressed satisfactorily
through pre-clinical studies and initial clinical testing. A number of companies in the pharmaceutical and biotechnology industries,
including those with greater resources and experience, have suffered significant setbacks in Phase 3 clinical development, even after
seeing promising results in earlier clinical trials.
Our
research and development expenses may increase in connection with expanding clinical trials of our product candidates in existing indications
and undertaking clinical trials of our product candidates in new indications. Because successful development of our drug product candidates
is uncertain, we are unable to estimate the actual funds required to complete research and development and commercialize our products
under development.
Negative
or inconclusive results of our future clinical trials of PV-10 and PH-10, or any other clinical trial we conduct, could cause the FDA
to require that we repeat or conduct additional clinical studies. Despite the results reported in earlier clinical trials for PV-10 and
PH-10, we do not know whether any clinical trials we may conduct will demonstrate adequate efficacy and safety to result in regulatory
approval to market our product candidates. If later stage clinical trials do not produce favorable results, our ability to obtain regulatory
approval for our product candidates, may be adversely impacted.
Delays
in clinical trials are common and have many causes, and any delay could result in increased costs to us and jeopardize or delay our ability
to obtain regulatory approval.
Our
planned or ongoing clinical trials may not begin on time, have an effective design, enroll a sufficient number of subjects, or be completed
on schedule, if at all. Events which may result in delays or unsuccessful completion of clinical trials, including our future clinical
trials, include inability to raise funding, initiate or continue a trial, delays in obtaining regulatory approval to commence a trial,
delays in reaching agreement with the FDA or other regulatory authorities on final trial design, imposition of a clinical hold following
an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities, delays in reaching agreement
on acceptable terms with prospective contract research organizations and clinical trial sites, delays in obtaining required institutional
review board approval at each site, delays in recruiting suitable patients to participate in a trial, delays in having subjects complete
participation in a trial or return for post-treatment follow-up, delays caused by subjects dropping out of a trial, delays caused by
clinical sites dropping out of a trial, time required to add new clinical sites or to obtain regulatory approval and open sites in geographic
regions beyond the sites initially planned, and delays by our contract manufacturers to produce and deliver sufficient supply of clinical
trial materials.
In
addition, we may experience a number of unforeseen events during clinical trials for our prescription drug candidates, including PV-10
and PH-10, that could delay or prevent the commencement and/or completion of our clinical trials, including regulators or institutional
review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial
site, the clinical study protocol may require one or more amendments delaying study completion, clinical trials of our product candidates
may produce negative or inconclusive results, and we may decide, or regulators may require us to conduct additional clinical trials or
abandon product development programs, the number of subjects required for clinical trials of our product candidates may be larger than
we anticipate, subjects may drop out of these clinical trials at a higher rate than we anticipate and enrollment in these clinical trials
may be significantly slower than we anticipated requiring us to expand the geographic scope of enrollment of patients, clinical investigators
or study subjects may fail to comply with clinical study protocols, trial conduct and data analysis errors may occur, including, but
not limited to, data entry and/or processing errors, our third-party contractors may fail to comply with regulatory requirements or meet
their contractual obligations to us in a timely manner, or at all, we might have to suspend or terminate clinical trials of our prescription
drug candidates for various reasons, including a finding that the subjects are being exposed to unacceptable health risks, regulators
or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including
noncompliance with regulatory requirements, the cost of clinical trials of our prescription drug candidates may be greater than we anticipate,
the supply or quality of our clinical trial materials or other materials necessary to conduct clinical trials of our prescription drug
candidates may be insufficient or inadequate, and our prescription drug candidates may have undesirable side effects or other unexpected
characteristics, causing us or our investigators to suspend or terminate the trials.
Moreover,
we or the FDA may suspend our clinical trials at any time if it appears we are exposing participants to unacceptable health risks or
if the FDA finds deficiencies in our submissions or the conduct of these trials. If initiation or completion of any of our clinical trials
for our product candidates, are delayed for any of the above reasons or other reasons, our development costs may increase, the approval
process could be delayed, any periods during which we may have the exclusive right to commercialize our prescription drug candidates
may be reduced and our competitors may bring drug products to market before us. Any of these events could impair our ability to generate
revenues from drug product sales and impair our ability to generate regulatory and commercialization milestones and royalties, all of
which could have a material adverse effect on our business.
The
results of our clinical trials may not support acceptable label claims concerning our prescription drug candidates.
Even
if our clinical trials are completed as planned, we cannot be certain that their results will support acceptable label claims concerning
our drug product candidates. Success in pre-clinical testing and early clinical trials does not ensure that later clinical trials will
be successful, and we cannot be sure that the results of later clinical trials will replicate the results of prior clinical trials and
pre-clinical testing. The clinical trial process may fail to demonstrate that our prescription drug candidates are safe for humans or
effective for indicated uses.
This
failure could cause us to abandon a prescription drug candidate and may delay development of other prescription drug candidates. Any
delay in, or termination of, our clinical trials will delay our ability to commercialize our prescription drug candidates and generate
product revenues. In addition, we anticipate that our clinical trials will involve only a small patient population. Accordingly, the
results of such trials may not be indicative of future results over a larger patient population.
Physicians
and patients may not accept and use our prescription drug candidates.
Even
if the FDA approves our drug product candidates, physicians and patients may not accept and use them. Acceptance and use of our drug
products will depend upon a number of factors including perceptions by members of the healthcare community, including physicians, about
the safety and effectiveness of our drug products, availability of reimbursement for our drug products from government or other healthcare
payers, and effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.
Because
we expect sales or licensure of our prescription drug candidates, if approved, to generate substantially all of our revenues if they
are approved, the failure of any of these drugs to find market acceptance would harm our business and could require us to seek additional
financing.
We
have no sales, marketing or distribution capabilities for our prescription drug candidates.
We
currently have no sales, marketing or distribution capabilities. Our future success depends, in part, on our ability to enter into and
maintain collaborative relationships, the collaborator’s strategic interest in the prescription drug products under development
and such collaborator’s ability to successfully market and sell any such drug products. There can be no assurance that we will
be able to establish or maintain relationships with third party collaborators or develop in-house sales and distribution capabilities.
To the extent that we depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of
such third parties, and there can be no assurance that such efforts will be successful. In addition, there can also be no assurance that
we will be able to market and sell our prescription drug candidates in the U.S. or internationally.
Competition
in the prescription pharmaceutical and biotechnology industries is intense.
Other
pharmaceutical and biotechnology companies and research organizations currently engage in or have in the past engaged in research efforts
related to treatment of cancer and dermatological conditions, which may compete with our clinical trials for patients and investigator
resources, cause lower enrollment than anticipated, and could lead to the development of drug products or treatment therapies that could
compete directly with our drug product candidates that we are seeking to develop and market.
Many
companies are also developing novel 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 greater financial resources and expertise
than we do in research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals, and marketing.
Smaller
companies may also prove to be competitors, particularly through collaborative arrangements with larger and more established companies
that may compete with our efforts to establish similar collaborative arrangements. Academic institutions, government agencies, and other
public and private research organizations may also conduct research, seek patent protection, and establish collaborative arrangements
for research, clinical development, and marketing of prescription drug candidates 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 drug development programs.
In
addition to the above factors, we expect to face competition in product efficacy and safety, the timing and scope of regulatory consents,
availability of resources, reimbursement coverage, price, and patent position, including potentially dominant patent positions of others.
Since
our prescription drug candidates PV-10 and PH-10 have not yet been approved by the FDA or introduced to the marketplace, we cannot estimate
what competition these prescription drug candidates might face when they are finally introduced, if at all. We cannot assure you that
these prescription drug candidates will not face significant competition for other approved drug products, investigational drug products,
and generic equivalents.
If
we lose any of our key personnel, we may be unable to successfully execute our business plan.
Our
business is presently managed by key Board members, employees, and independent contractors: (i) Ed Pershing, who is chairman of the Board,
(ii) Dominic Rodrigues, who is vice chairman of the Board, (iii) Bruce Horowitz, our COO, who is an independent contractor, (iv) Eric
Wachter, Ph.D., our Chief Technology Officer (“CTO”), who is an employee, and (v) Heather Raines, CPA, our CFO, who is an
employee.
In
order to successfully execute our business plan, our management and Board must succeed in all of the following critical areas: researching
diseases and possible therapies in the areas of oncology and dermatology, developing our prescription drugs candidates, marketing and
selling developed prescription drug candidates, obtaining additional capital to finance research and development production, and marketing
of our drug products, and managing our business as it grows.
Disruption
resulting from management transition may have a detrimental impact on our ability to implement our strategy. The reduction in role and/or
loss of key employees, contractors, and/or Board members could have a material adverse effect on our operations, and limit or constrain
our ability to execute our business plan.
Our
business and operations are subject to risks related to climate change.
The
long-term effects of global climate change present risks to our business. Extreme weather or other conditions caused by climate change
could adversely impact our supply chain and the operation of our business. Such conditions could also result in physical damage to our
leased property, clinical trial materials, clinical sites, or the facilities of our contract manufacturers. These events could adversely
affect our operations and our financial performance.
Our
business and operations are vulnerable to computer system failures, cyber-attacks or deficiencies in our cyber-security, which could
increase our expenses, divert the attention of our management and key personnel away from our business operations and adversely affect
our results of operations.
Despite
the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to
damage from: computer viruses; malware; natural disasters; terrorism; war; telecommunication and electrical failures; cyber-attacks or
cyber-intrusions over the Internet; attachments to emails; persons inside our organization; or persons with access to systems inside
our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer
hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted
attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations,
it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed
or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs
to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data
or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims and liability,
and damage to our reputation, and the further development of our product candidates could be delayed. We could be forced to expend significant
resources in response to a cyber security breach, including repairing system damage, increasing cyber security protection costs by deploying
additional personnel and protection technologies, paying regulatory fines and resolving legal claims and regulatory actions, all of which
would increase our expenses, divert the attention of our management and key personnel away from our business operations and adversely
affect our results of operations.
Risks
Related to Our Intellectual Property (“IP”)
If
we are unable to secure or enforce patent rights, trademarks, trade secrets or other IP, our business could be harmed.
We
may not be successful in securing or maintaining proprietary patent protection for our prescription drug candidates and technologies
we develop or license. In addition, our competitors may develop prescription drug candidates similar to ours using methods and technologies
that are beyond the scope of our IP protection, which could reduce our anticipated sales. While some of our drug product candidates have
proprietary patent protection, a challenge to these patents can subject us to expensive litigation. Litigation concerning patents, other
forms of IP, and proprietary technology is becoming more widespread and can be protracted and expensive and can distract management and
other personnel from performing product development duties.
We
also rely upon trade secrets, unpatented proprietary knowledge and continuing technological innovation 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 IP, our business, financial condition, results
of operations and cash flows could be materially adversely affected. If we infringe on the IP of others, our business could be harmed.
We
could be sued for infringing patents and other IP that purportedly cover prescription drug candidates and/or methods of using such prescription
drug candidates 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 prescription drug candidates, any of which could have a material
adverse effect on our business, financial condition, results of operations, and cash flows.
If
we do not update and enhance our technologies, they will become obsolete.
The
pharmaceutical market is characterized by technological change, and our future success will depend on our ability to conduct successful
research in our fields of expertise, discover new technologies as a result of that research, develop products based on our technologies,
and 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 may use greater 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.
Risks
Related to Our Governing Documents and Securities
Anti-takeover
provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would
be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or
remove our current management.
Our
certificate of incorporation, as amended, and bylaws contain provisions that could delay or prevent a change of control of our company or changes
in our board of directors that our stockholders might consider favorable. Among other things, these provisions will (i) permit our Board
to issue up to 25,000,000 shares of preferred stock which can be created and issued by the Board without prior stockholder approval,
with rights senior to those of the common stock, (ii) provide that all vacancies on our Board, including as a result of newly created
directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office,
even if less than a quorum, (iii) require that any action to be taken by our stockholders must be affected at a duly called annual or
special meeting of stockholders and not be taken by written consent, (iv) provide that stockholders seeking to present proposals before
a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice
in writing, and also specify requirements as to the form and content of a stockholder’s notice, (v) not provide for cumulative
voting rights, and (vi) provide that special meetings of our stockholders may be called only by the Board or by such person or persons
requested by a majority of the Board to call such meetings.
These
and other provisions in our certificate of incorporation, as amended, and bylaws and Delaware law could make it more difficult for
stockholders or potential acquirers to obtain control of our Board or initiate actions that are opposed by our then-current Board,
including delaying or impeding a merger, tender offer, or proxy contest involving our company. Any delay or prevention of a change
of control transaction or changes in our Board could cause the market price of our common stock to decline.
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 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: (i) broker-dealers must deliver, prior to the transaction, a disclosure schedule prepared
by the SEC relating to the penny stock market, (ii) broker-dealers must disclose the commissions payable to the broker-dealer and its
registered representative, (iii) broker-dealers must disclose current quotations for the securities, and (iv) 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 a shareholder’s
ability to sell their shares.
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 any prospective 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.
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.
In
the event of the liquidation, winding-up or dissolution of the Company or certain mergers, corporate reorganizations or sales of our
assets, holders of Series D and Series D-1 Preferred Stock will be entitled to a preference of a multiple of their investment amount,
which will reduce the proceeds to be received by holders of our common stock.
In
connection with the 2022, 2021, 2020 and 2017 Financings, we have issued convertible notes that converted or are convertible into shares
of Series D and Series D-1 Preferred Stock. The Series D and Series D-1 Preferred Stock will have a first priority right to receive proceeds
from the liquidation, winding-up or dissolution of us or certain mergers, corporate reorganizations or sales of our assets (each, a “Company
Event”). If a Company Event occurs within two (2) years of the date of issuance of the Series D and Series D-1 Preferred Stock
(the “Date of Issuance”), the holders of Series D and Series D-1 Preferred Stock will receive a preference of four times
(4x) their respective investment amount. If a Company Event occurs after the second (2nd) anniversary of the Date of Issuance, the holders
of the Series D and Series D-1 Preferred Stock will receive a preference of six times (6x) their respective investment amount. As a result,
upon the occurrence of a Company Event, the holders of Series D and Series D-1 Preferred Stock would have the right to receive proceeds
from any such transaction before our common stockholders. The payment of this preference could result in our common stockholders not
receiving any consideration in connection with a Company Event.
Risks
Related to SARS-CoV-2
We
are subject to risks associated with a pandemic, epidemic or outbreak of a contagious disease, such as the ongoing SARS-CoV-2 pandemic,
which may affect our future access to liquidity and materially adversely affect our business operations, results of operations and financial
condition.
SARS-CoV-2
was reportedly first identified in late-2019 and subsequently declared a global pandemic by the World Health Organization on March 11,
2020. As a result of the SARS-CoV-2 pandemic, many companies have experienced disruptions of their operations and the markets they serve.
The Company has taken several temporary precautionary measures intended to help ensure the well-being of its employees and contractors
and to minimize business disruption. The Company considered the impact of SARS-CoV-2 pandemic on its business and operational assumptions
and estimates, and determined there were no material adverse impacts on the Company’s results of operations and financial position
at December 31, 2022.
The
full extent of the SARS-CoV-2 pandemic impacts on the Company’s operations and financial condition is still uncertain. The Company
has experienced slower than normal enrollment and treatment of patients, and a prolonged SARS-CoV-2 pandemic could have a material adverse
impact on the Company’s business and financial results, including the timing and ability of the Company to raise capital, initiate
and/or complete current and/or future preclinical studies and/or clinical trials; disrupt the Company’s regulatory activities;
and/or have other adverse effects on the Company’s clinical development.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
We
leased 4,500 square feet of corporate office space in Knoxville, Tennessee through an operating lease agreement for a term of five years
ending on June 30, 2022. Payments were approximately $6,100 per month due to the Company negotiating a continued reduced rent from January
1, 2022 through June 30, 2022.
On
June 30, 2022, the lease expired and was not renewed. On June 18, 2022, the Company moved into 2,700 square feet of leased corporate
office space in Knoxville, Tennessee through an operating lease agreement for a term of three years ending June 30, 2025. The monthly
base rent ranges from $4,053 to $4,278 over the term on the lease.
Item 3. Legal Proceedings.
The
information required by this item is incorporated by reference from Part II, Item 8. Financial Statements and Supplementary Data, Notes
to Consolidated Financial Statements, Note 16 – Commitments, contingencies, and litigation.
ITEM 4. MINE SAFETY DISCLOSURES.
Not
applicable.
PART
II
Market
Information and Holders
Our
common stock trades on the OTCQB Marketplace under the symbol “PVCT”.
As
of March 28, 2023, we had 821 active stockholders of record of our common stock.
Dividend
Policy
We
have never declared or paid any cash dividends on our common stock. We currently plan to retain future earnings, if any, to finance the
growth and development of our business and do not anticipate paying any cash dividends in the foreseeable future. We may incur indebtedness
in the future which may prohibit or effectively restrict the payment of dividends, although we have no current plans to do so. Any future
determination to pay cash dividends will be at the discretion of our Board of Directors. The holders of our Series D and Series D-1 Preferred
Stock are entitled to receive dividends, if any, that are declared and paid to common stockholders.
Recent
Issuances of Unregistered Securities
During
the year ended December 31, 2022, the Company issued 50,000 shares of common stock as incentive compensation with a value of $3,025.
During
the year ended December 31, 2022, the Company did not issue any warrants.
During
the year ended December 31, 2021, the Company issued an aggregate of 300,000 shares of immediately vested restricted common stock with
a grant date value of $23,199 for services.
During
the year ended December 31, 2021, the Company issued three-year immediately vested warrants to a board member to purchase an aggregate
of 25,000 shares of common stock with an exercise price of $0.28620 per share.
The
issuances of the securities were exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(a)(2)
and Rule 506 promulgated under Regulation D thereunder as transactions not involving a public offering.
Securities
Authorized for Issuance under Equity Compensation Plans
Information
about the securities authorized for issuance under our equity compensation plans will be set forth under the heading “Equity Compensation
Plan Information” in the definitive Proxy Statement for our 2023 Annual Meeting of Stockholders, which will be filed with the SEC
pursuant to Regulation 14A under the Exchange Act, incorporated by reference in Part III, Item 12 of this Annual Report on Form 10-K.
ITEM 6. [RESERVED].
Not
applicable.
The
following discussion is intended to assist in the understanding and assessment of significant changes and trends related to our results
of operations and our financial condition together with our consolidated subsidiaries. This discussion and analysis should be read in
conjunction with the accompanying consolidated financial statements and notes thereto included in the Annual Report on Form 10-K. Historical
results and percentage relationships set forth in the statements of operations, including trends which might appear, are not necessarily
indicative of future operations.
Business
Strategy
The
Company is selectively continuing ongoing and planning to initiate new monotherapy and combination therapy ITU PV-10 clinical trials
in melanoma and liver cancer indications to generate more and/or new clinical data and appropriately utilizing clinical data from historical
ITU PV-10 trials, EAPs, and/or QOL study of these oncology indications. Our goals are to pursue drug approval pathways and/or co-development
relationships with commercial pharmaceutical companies for ITU PV-10 based on these indications and data.
The
Company is developing a systemically-administered formulation of pharmaceutical-grade RBS for the treatment of cancer. Our goals, when
this work is complete, are to file an investigational new drug application (“IND”) with the FDA, take an initial systemic
drug product candidate into an early-stage clinical trial for an initial oncology or hematology indication, and/or pursue a co-development
collaboration or out-license arrangement for this route of administration and disease area.
The
Company is developing different formulations of pharmaceutical-grade RBS using different concentrations and different routes of administration
(e.g., PO, IV, IN) for other disease areas by endeavoring to show preclinical activity and lack of toxicity. Our goals, when each task
of this work is completed, are to file an IND with the FDA, take an initial drug product candidate into an early-stage clinical trial for
an initial indication, and/or pursue a co-development collaboration or out-license arrangement for the respective disease area and route
of administration.
The
Company is endeavoring to fully elucidate the traits and characteristics of the RBS molecule using different academic medical centers
under sponsored research and testing agreements. Our goal is to gain and communicate additional knowledge of the RBS molecule’s
targeting, mechanism, signaling, immune response, and other features that are common to and/or different from each disease area and indication
under research.
The
Company is doing rigorous, chemical analytical comparisons of non-pharmaceutical grades of rose bengal from specialty chemical suppliers
against the Company’s pharmaceutical-grade RBS. Our goal is to demonstrate the proprietary nature of the Company’s pharmaceutical-grade
RBS and that our pharmaceutical-grade RBS meets the necessary uniformity and purity requirements for commercial pharmaceutical use.
RBS
Drug Substance and Drug Product Candidate Manufacturing
Our
pharmaceutical-grade RBS resulted from the Company’s innovation of a proprietary, patented, commercial-scale process to synthesize
and utilize the RBS molecule into a viable API for commercial pharmaceutical use; the development of unique chemistry, manufacturing,
and control (“CMC”) specifications for drug substance and drug product candidate manufacturing processes; the production
and multi-year stability testing of multiple drug substance and drug product candidate lots; the comprehensive documentation of lot composition
and reproducibility; and the review and acceptance of CMC data from these lots by seven different national drug regulatory agencies for
use in a prior, multi-country, multi-center Phase 3 randomized control trial of the Company.
The
Company’s drug substance and drug product candidate manufacturing processes employ Quality-by-Design principles, current good manufacturing
practice (“cGMP”) regulations, and the guidelines of The International Council for Harmonization (ICH) of Technical Requirements
for Pharmaceuticals for Human Use. These processes utilize controls that eliminate the formation of historical impurities and avoid the
introduction of potentially hazardous impurities that the Company believes may have been and could be present in uncontrolled and unreported
amounts in non-pharmaceutical-grades of rose bengal.
The
Company’s processes of synthesizing the RBS molecule into pharmaceutical-grade RBS and manufacturing RBS drug substance and ITU
PV-10 drug product candidate, the processes’ CMC specifications, and the CMC data from the production of stability lots of drug
substance and drug product candidate have been reviewed by multiple national drug regulatory agencies prior to granting clinical trial
authorizations for the Company to commence a historical Phase 3 study of ITU PV-10 for the treatment of locally advanced cutaneous melanoma,
including the U.S. FDA, Germany’s Bundesinstitut für Arzneimittel und Medizinprodukte (BfArM), Australia’s Therapeutic
Goods Administration (TGA) under a clinical trial notification, France’s Agence Nationale de Sécurité du Médicament
et des Produits de Santé (ANSM), Italy’s Agenzia Italiana del Farmaco (AIFA), Mexico’s Comisión Federal para
la Protección contra Riesgos Sanitarios (COFEPRIS), and Argentina’s Administración Nacional de Medicamentos, Alimentos
y Tecnología Médica (ANMAT).
RBS
Nonproprietary Name
The
RBS name for the Company’s pharmaceutical-grade API was selected by and passed the review of the WHO Expert Advisory Panel on the
International Pharmacopoeia and Pharmaceutical Preparations after the Company applied for the non-proprietary name in the third quarter
of 2020, and reached the status of recommended INN. INN Recommended List 88, which includes the RBS name, was published with the No.
3 issue of the WHO Drug Information, Volume 36 in the fourth quarter of 2022.
The
aim of the INN system since inception has been to provide health professionals with a unique and universally available designated name
to identify each pharmaceutical substance or API, according to the WHO. The existence of an international nomenclature, in the form of
INN, is important for the accurate identification, prescribing, and dispensing of medicines to patients, and for communication and exchange
of information among health professionals and scientists worldwide.
Prior
Medical Diagnostic Use of Rose Bengal
FDA-Approved
Liver Diagnostic Use
In
1971, 131I rose bengal (Robengatope® [rose bengal sodium 131I injection USP]) was approved by the
FDA (NDA 016224) for use as a diagnostic aid to determine liver function. In 2009, manufacturer Bracco Diagnostics Inc. withdrew Robengatope
from the U.S. market because of the emergence of newer liver imaging methods, such as computed tomography.
Historic
Ophthalmic Diagnostic Use
In
1974, Barnes-Hind Pharmaceuticals, Inc. (“Barnes-Hind”) introduced a medical device product of 1% rose bengal in an aqueous
solution for the diagnosis of corneal injury, diagnosis of keratitis, keratoconjunctivitis, and sicca, and detection of foreign bodies
in the eye. In 1981, Barnes-Hind introduced ophthalmic strips of the same concentration for the same indications. While both the solution
and strip medical device products were accepted by the FDA for marketing, the Company does not believe that the devices or their respective
claims were approved by the FDA because their introductions predated formal FDA review and approval of medical devices.
Non-Pharmaceutical
Grades of Rose Bengal
Commercial-Grade
This
material may be purchased from specialty chemical suppliers in the U.S. and from other parts of the world; however, the Company believes
that the material itself is almost exclusively made in China and India under non-cGMP conditions. Commercial-grade rose bengal appears
to have reported purity that may vary between approximately 80% and 95%, and that may contain substantial amounts of unreported impurities
and/or gross contaminants. Commercial-grade rose bengal is typically used by researchers for preclinical study of the rose bengal molecule
for potential biomedical therapeutic applications.
We
believe that commercial-grade rose bengal is still manufactured using the historical process (or a variant thereof) that was developed
by the synthetic molecule’s Swiss creator Rudolph Gnehm in 1881. Some manufacturers may, however, apply purification techniques
that the Company believes still result in material that may possess questionable purity and contaminants and may also be subject to substantial
lot-to-lot manufacturing variability.
Diagnostic-Grade
The
Company coined this phrase to describe non-approved rose bengal that is used as an ingredient in historical or current ophthalmic solutions
and strips, has been historically or is presently compounded by pharmacists for ophthalmic use, and has been or is in other non-ophthalmic
diagnostic tests such as the rose bengal test in human brucellosis.
We
presume, but have not yet confirmed, that diagnostic-grade rose bengal is derived from commercial-grade rose bengal that may have undergone
a form of purification and/or may have been compounded under cGMP regulations by a pharmacist, academic medical researcher, or commercial
entity. Here too, the Company believes that purification may not sufficiently improve the amounts and accuracy of rose bengal purity
and lot contents and may not adequately reduce or eliminate lot-to-lot manufacturing variability.
Chemical
Analytical Comparison
In
the first quarter of 2022, the Company began work with a U.S. contract development and manufacturing organization to rigorously and methodically
assess three lots of commercial-grade rose bengal, one each from three different specialty chemical suppliers, and compare and contrast
these non-pharmaceutical grade materials with the Company’s pharmaceutical-grade RBS. This chemical analytical work was substantially
completed by the end of the third quarter of 2022. The Company believes that the preliminary results of these analyses indicate that
all three lots of commercial-grade rose bengal had rose bengal purity that was drastically different from what was represented on their
respective certificates of analysis (“CofAs”), and that one of the three lots contained gross contaminants that were not
represented on its CofA.
Potential
Barriers to Entry
The
Company believes that the Company’s proprietary, patented, pharmaceutical-grade RBS possesses several competitive advantages over
non-pharmaceutical-grades of rose bengal that researchers, clinicians, and academic, business, and/or governmental competitors have used,
are using, and/or may attempt to use for potential biomedical applications. The Company believes that non-pharmaceutical-grades of rose
bengal may suffer from the uncontrolled presence of substance-related impurities and/or gross contaminants, substantial lot-to-lot manufacturing
variability, inaccurately reported and/or misrepresented purity and contents, and the lack of reproducible, consistent, and fulsome CMC
specifications and documentation.
The
Company believes that historical and potentially hazardous impurities and other manufacturing and handling issues facing non-pharmaceutical-grades
of rose bengal may pose significant scientific, technological, and economic challenges to overcome and validate for compliance with modern
drug regulatory standards.
Components
of Operating Results
Grant
Revenue
Grant
revenue is recognized when qualifying costs are incurred and there is reasonable assurance that the conditions of the grant have been met.
Cash received from grants in advance of incurring qualifying costs is recorded as unearned grant revenue and recognized as grant revenue
when qualifying costs are incurred.
Research
and Development Expenses
A
large component of our total operating expenses is the Company’s investment in research and development activities, including the
clinical development of our product candidates. Research and development expenses represent costs incurred to conduct research and undertake
clinical trials to develop our drug product candidates. These expenses consist primarily of:
● other outside service costs including cost of contract manufacturing;
● the costs of supplies and reagents; and
● occupancy and depreciation charges.