Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 02, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | PROVECTUS BIOPHARMACEUTICALS, INC. | |
Entity Central Index Key | 315,545 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | false | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 384,614,528 | |
Trading Symbol | PVCT | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 231,920 | $ 105,504 |
Short-term receivables - settlement and other | 2,005 | 452,376 |
Prepaid expenses | 207,773 | 400,416 |
Total Current Assets | 441,698 | 958,296 |
Equipment and furnishings, less accumulated depreciation of $47,015 and $36,445, respectively | 75,999 | 86,569 |
Patents, net of accumulated amortization of $10,648,438 and $10,145,098, respectively | 1,067,007 | 1,570,347 |
Long-term receivable – reimbursable legal fees, net of reserve for uncollectibility of $455,500 | 455,500 | 455,500 |
Long-term receivable – settlement, net of discount and reserve for uncollectibility of $1,549,043 | 382,016 | 365,685 |
Total Assets | 2,422,220 | 3,436,397 |
Current Liabilities: | ||
Accounts payable - trade | 2,460,469 | 3,270,505 |
Other accrued expenses | 789,552 | 327,143 |
Total Current Liabilities | 3,250,021 | 3,597,648 |
Accrued interest | 518,495 | 172,925 |
Accrued interest - related parties | 580,311 | 228,667 |
Convertible notes payable | 7,012,000 | 4,456,000 |
Convertible notes payable - related parties | 6,350,000 | 5,000,000 |
Total Liabilities | 17,710,827 | 13,455,240 |
Commitments and contingencies | ||
Stockholders' Deficiency: | ||
Preferred stock; par value $0.001 per share; 25,000,000 shares authorized; Series B Convertible Preferred Stock; 240,000 shares designated; 100 shares issued and outstanding at September 30, 2018 and December 31, 2017; aggregate liquidation preference of $3,500 at September 30, 2018 and December 31, 2017 | ||
Common stock; par value $0.001 per share; 1,000,000,000 shares authorized; 383,501,028 and 370,961,451 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively | 383,502 | 370,962 |
Additional paid-in capital | 209,033,950 | 208,351,431 |
Accumulated deficit | (224,706,059) | (218,741,236) |
Total Stockholder's Deficiency | (15,288,607) | (10,018,843) |
Total Liabilities and Stockholders' Deficiency | $ 2,422,220 | $ 3,436,397 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Accumulated depreciation on equipment and furnishings | $ 47,015 | $ 36,445 |
Accumulated amortization on patents | 10,648,438 | 10,145,098 |
Reimbursable legal fees, reserve for uncollectibility | 455,500 | 455,500 |
Settlement, discount and reserve for uncollectibility | $ 1,549,043 | $ 1,549,043 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Preferred stock, shares issued | 100 | 100 |
Preferred stock, shares outstanding | 100 | 100 |
Aggregate liquidation preference | $ 3,500 | $ 3,500 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 383,501,028 | 370,961,451 |
Common stock, shares outstanding | 383,501,028 | 370,961,451 |
Series B Convertible Preferred Stock [Member] | ||
Preferred stock, shares designated | 240,000 | 240,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Operating Expenses: | ||||
Research and development | $ 528,355 | $ 2,261,060 | $ 3,458,657 | $ 6,267,598 |
General and administrative | 829,406 | 732,688 | 2,693,293 | 4,325,851 |
Total Operating Loss | (1,357,761) | (2,993,748) | (6,151,950) | (10,593,449) |
Other Income/(Expense): | ||||
Gain on settlement of lawsuit | 825,000 | |||
Research and development tax credit | 42,685 | |||
Investment income | 4,932 | 7,511 | 16,657 | 24,261 |
Interest expense | (256,173) | (125,256) | (697,214) | (226,622) |
Net Loss | (1,609,003) | (3,111,493) | (5,964,823) | (10,795,810) |
Dividend paid-in kind to preferred shareholders | (50) | (14,107) | ||
Net Loss Applicable to Common Shareholders | $ (1,609,003) | $ (3,111,543) | $ (5,964,823) | $ (10,809,917) |
Basic and Diluted Loss Per Common Share | $ 0 | $ (0.01) | $ (0.02) | $ (0.03) |
Weighted Average Number of Common Shares Outstanding - Basic and Diluted | 383,256,742 | 370,546,735 | 380,754,529 | 368,722,485 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash Flows From Operating Activities | ||
Net loss | $ (5,964,823) | $ (10,795,810) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 10,570 | 12,500 |
Amortization of patents | 503,340 | 503,340 |
Issuance of stock for services | 80,000 | |
Changes in operating assets and liabilities | ||
Settlement receivable | 434,040 | 275,941 |
Prepaid Expense | 192,643 | 35,139 |
Accounts payable - trade | (810,036) | 1,799,409 |
Other accrued expenses | 462,409 | (114,462) |
Accrued interest expense | 697,214 | 401,592 |
Net Cash Used In Operating Activities | (4,394,643) | (7,882,351) |
Cash Flows From Investing Activities | ||
Purchase of fixed assets | 0 | (25,639) |
Net Cash Used In Investing Activities | 0 | (25,639) |
Cash Flows From Financing Activities | ||
Proceeds from issuance of convertible notes payable | 2,556,000 | 2,950,000 |
Proceeds from issuance of convertible notes payable - related party | 1,350,000 | 4,000,000 |
Proceeds from exercise of warrants | 615,059 | 533 |
Net Cash Provided By Financing Activities | 4,521,059 | 6,950,533 |
Net Change In Cash and Cash Equivalents | 126,416 | (957,457) |
Cash and Cash Equivalents, Beginning of Period | 105,504 | 1,165,738 |
Cash and Cash Equivalents, End of Period | 231,920 | 208,281 |
Non-cash investing and financing activities: | ||
Conversion of preferred stock into common stock | 3,987 | |
Dividend paid-in kind to preferred shareholders | 1,595 | |
Issuance in-kind of preferred stock dividends | 14,107 | |
Reclassification of warrant liability | ||
Common stock issued in satisfaction of trade debt | 17,300 | |
Notes payable issued in satisfaction of trade debt | $ 150,000 |
Business Organization, Nature o
Business Organization, Nature of Operations and Basis of Presentation | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Organization, Nature of Operations and Basis of Presentation | 1. Business Organization, Nature of Operations and Basis of Presentation Provectus Biopharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, “Provectus” or the “Company”), is a clinical-stage biotechnology company developing a new class of drugs for oncology and dermatology based on halogenated xanthenes. Intralesional PV-10 is undergoing clinical study for adult solid tumor cancers, like melanoma and gastrointestinal cancers, and preclinical study for pediatric cancers. Topical PH-10 is undergoing clinical study for inflammatory dermatoses, like psoriasis and atopic dermatitis. To date, the Company has not generated any revenues from planned principal operations. The Company’s activities are subject to significant risks and uncertainties, including failing to successfully develop and license or commercialize the Company’s prescription drug candidates. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information pursuant to Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be reviewed in conjunction with the Company’s audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2017 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 23, 2018. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. |
Liquidity and Going Concern
Liquidity and Going Concern | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Liquidity and Going Concern | 2. Liquidity and Going Concern The Company’s cash and cash equivalents were $231,920 at September 30, 2018, compared with $105,504 at December 31, 2017. The Company continues to incur significant operating losses. Management expects that significant on-going operating expenditures will be necessary to successfully implement the Company’s business plan and develop and market its products. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued. Implementation of the Company’s plans and its ability to continue as a going concern will depend upon the Company’s ability to develop PV-10 and PH-10 and to raise additional capital. The Company plans to access capital resources through possible public or private equity offerings, including the 2017 Financing (as defined in Note 4), exchange offers, debt financings, corporate collaborations or other means. In addition, the Company continues to explore opportunities to strategically monetize its lead drug candidates, PV-10 and PH-10, through potential co-development and licensing transactions, although there can be no assurance that the Company will be successful with such plans. The Company has historically been able to raise capital through equity offerings, but no assurance can be provided that it will continue to be successful in the future. If the Company is unable to raise sufficient capital through the 2017 Financing or otherwise, it will not be able to pay its obligations as they become due. Subsequent to September 30, 2018, the Company received aggregate loans of $100,000 in connection with the 2017 Financing. See Note 7 – Subsequent Events. The primary business objective of management is to build the Company into a fully integrated global biotechnology company. The Company, however, cannot assure you that it will be successful in co-developing or licensing PV-10, PH-10, or any other halogenated xanthene-based drug candidate developed by the Company, or entering into any financial transaction. Moreover, even if the Company is successful in improving its current cash flow position, the Company nonetheless plans to seek additional funds to meet its long-term requirements in 2018 and beyond. The Company anticipates that these funds will otherwise come from the proceeds of private placement transactions, including the 2017 Financing, the exercise of existing warrants and outstanding stock options, or public offerings of debt or equity securities. While the Company believes that it has a reasonable basis for its expectation that it will be able to raise additional funds, the Company cannot provide assurance that it will be able to complete additional financing in a timely manner. In addition, any such financing may result in significant dilution to stockholders. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | 3. Significant Accounting Policies The Company’s significant accounting policies are disclosed in Note 3 – Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Since the date of the Annual Report, there have been no material changes to the Company’s significant accounting policies, except as disclosed below. Recent Accounting Pronouncements In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarity on the accounting for modifications of stock-based awards. ASU 2017-09 requires adoption on a prospective basis in the annual and interim periods beginning after December 15, 2017 for share-based payment awards modified on or after the adoption date. The adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements. In March 2018, the FASB issued ASU No. 2018-05, “Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118” (“ASU 2018-05”). ASU 2018-05 adds various “SEC” paragraphs pursuant to the issuance of the December 2017 SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which was effective immediately. The SEC issued SAB 118 to address concerns about reporting entities’ ability to timely comply with the accounting requirements to recognize all of the effects of the Tax Cuts and Jobs Act in the period of enactment. SAB 118 allows disclosure that timely determination of some or all of the income tax effects from the Tax Cuts and Jobs Act are incomplete by the due date of the financial statements and if possible to provide a reasonable estimate. The Company has accounted for the tax effects of the Tax Cuts and Jobs Act under the guidance of SAB 118 and does not believe that the adoption of ASU 2018-05 will have a material impact on the Company’s condensed consolidated financial statements or disclosures. In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. Currently, the accounting requirements for nonemployee and employee share-based payment transactions are significantly different. ASU 2018-07 expands the scope of Topic 718, Compensation — Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity — Equity-Based Payments to Nonemployees. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company is currently evaluating ASU 2018-07 and its impact on the Company’s condensed consolidated financial statements. In July 2018, the FASB issued Accounting Standards Update No. 2018-10, “Codification Improvements to Topic 842, Leases,” (“ASU 2018-10”). The amendments in ASU 2018-10 are to address stakeholders’ questions about how to apply certain aspects of the new guidance in ASC 842. The clarifications address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. The amendments in ASC Topic 842 are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently in the process of evaluating its lease assets and lease liabilities to be recorded as of January 1, 2019. The Company continues to evaluate other provisions of the updated guidance and expects to complete its analysis by December 31, 2018. In July 2018, the FASB issued Accounting Standards Update No. 2018-11, “Leases (Topic 842): Targeted Improvements,” (“ASU 2018-11”). The amendments in ASU 2018-11 related to transition relief on comparative reporting at adoption affect all entities with lease contracts that choose the additional transition method and the amendments in ASU 2018-11 related to separating components of a contract affect only lessors whose lease contracts qualify for the practical expedient. The amendments in ASC Topic 842 are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently in the process of evaluating its lease assets and lease liabilities to be recorded as of January 1, 2019. The company continues to evaluate other provisions of the updated guidance and expects to complete its analysis by December 31, 2018. In August 2018, the FASB issued Accounting Standards Update No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating ASU 2018-13 and its impact on its condensed consolidated financial statements. Reclassifications Certain accounts in the prior year’s condensed consolidated financial statements have been reclassified for comparative purposes to conform to the presentation in the current year’s condensed consolidated financial statements. These reclassifications have no effect on the previously reported net loss. |
Convertible Notes Payable
Convertible Notes Payable | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable | 4. Convertible Notes Payable On March 23, 2017, the Company entered into an exclusive Definitive Financing Commitment Term Sheet with a group of the Company’s stockholders (the “PRH Group”), which was amended and restated effective as of March 19, 2017 (the “Term Sheet”) that set forth the terms on which the PRH Group would use their best efforts to arrange for a financing of a minimum of $10,000,000 and maximum of $20,000,000 (the “2017 Financing”). The 2017 Financing is in the form of secured convertible loans (the “Loans”) from the PRH Group or other investors in the 2017 Financing (the “Investors”). The Loans are evidenced by secured convertible promissory notes (individually a “PRH Note” and collectively, the “PRH Notes”) from the Company to the PRH Group or the investors. The principal amounts of the PRH Notes and the interest payable under the Loan would automatically convert into shares of the Company’s Series D Preferred Stock at a price per share equal to $0.2862 effective on the 18-month anniversary of the funding of the final tranche of the 2017 Financing subject to certain exceptions if the Company’s Board of Directors (the “Board”) designates such series of preferred stock in the future. As of September 30, 2018, and through the date of filing, the Series D Preferred Stock had not been designated by the Board and, accordingly, the PRH Notes are not convertible into shares of Series D Preferred Stock. As a result, the Company did not analyze the Loan for a potential beneficial conversion feature as the definition of a firm commitment has not been met since the PRH Notes were not convertible as of their respective dates of issuance or as of September 30, 2018. As of September 30, 2018, the Company had received aggregate Loans of $13,362,000 in connection with the 2017 Financing from both non-related and related parties. For further details on the terms of the PRH Notes, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the SEC on March 23, 2018. Convertible Notes Payable – Related Parties On February 21, 2017, the Company issued a promissory note in favor of Eric A. Wachter, Ph.D., the Company’s Chief Technology Officer (“Wachter”), evidencing an unsecured loan from Wachter to the Company in the original principal amount of up to $2,500,000 (the “Wachter Note”). Interest accrues on the outstanding balance of the Wachter Note at six percent (6%) per annum calculated on a 360-day basis. As of September 30, 2018, the Company had borrowed the entire $2,500,000 under this note. On April 3, 2017, the Company entered into a PRH Note with Cal Enterprises LLC, a Nevada limited liability company, an affiliate of Dominic Rodrigues, a director of the Company, in the principal amount of up to $2,500,000. As of September 30, 2018, the Company had borrowed the entire $2,500,000 under this note. During the nine months ended September 30, 2018, the Company amended the above notes to modify the maturity date from 24 months to 18 months in order to be consistent with the other outstanding PRH Notes. The actual maturity dates will be determined after the completion of the 2017 Financing. During the nine months ended September 30, 2018, the Company entered into additional PRH Notes with related parties in the aggregate principal amount of $1,350,000. As of September 30, 2018, the Company had drawn down the entire $1,350,000 under these notes. Convertible Notes Payable – Non-Related Parties During the nine months ended September 30, 2018, the Company entered into additional PRH Notes with accredited investors in the aggregate principal amount of $2,556,000. As of September 30, 2018, the Company had drawn down the entire $2,556,000 under these notes. Included in these notes is one PRH Note totaling $500,000 with terms of principal and interest due twenty-four (24) months from date of signing. This note will mature in June 2020. |
Stockholders' Deficiency
Stockholders' Deficiency | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Stockholders' Deficiency | 5. Stockholders’ Deficiency Exercise of Warrants During the nine months ended September 30, 2018, warrant holders exercised warrants to purchase an aggregate of 11,539,577 shares of common stock at a price of $0.0533 per share. In connection with these exercises, the Company received aggregate cash proceeds of $615,059 and issued 11,539,577 shares of common stock to the warrant holders. Other Common Stock Issuances During the nine months ended September 30, 2018, the Company issued 1,000,000 shares of common stock in payment of services with a grant date fair value of $80,000. As the fair market value of the service was not readily determinable, the service was valued based on the fair market value of the stock at grant date. |
Commitments, Contingencies and
Commitments, Contingencies and Litigation | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments, Contingencies and Litigation | 6. Commitments, Contingencies and Litigation Agreement with Clinical Operations Vendor On April 18, 2018, the Company reached a settlement with a former clinical operations vendor whereby the Company received a credit of approximately $1.7 million to be applied against amounts previously owed by the Company for services rendered. Such credit has been included as a reduction in research and development expenses on the Company’s condensed consolidated statements of operations. Culpepper Travel Expenses and Related Collection Efforts On December 27, 2016, the Board unanimously voted to terminate Peter R. Culpepper (“Culpepper”), effective immediately, from all positions he held with the Company and each of its subsidiaries, including interim Chief Executive Officer and Chief Operating Officer of the Company, “for cause”, in accordance with the terms of the Amended and Restated Executive Employment Agreement entered into by Culpepper and the Company on April 28, 2014 (the “Culpepper Employment Agreement”) based on the results of the investigation conducted by the Audit Committee of the Board regarding improper expense reimbursements to Culpepper. The Audit Committee retained independent counsel and an advisory firm with forensic accounting expertise to assist the Audit Committee in conducting the investigation. The Audit Committee found that Culpepper received $294,255 in expense reimbursements that were unsubstantiated or otherwise improper. The Company seeks to recover from Culpepper the entire $294,255 in expense reimbursements, as well as all attorney’s fees and auditors’/experts’ fees incurred by the Company in connection with the examination of his expense reimbursements. On December 12, 2017, Culpepper agreed to an order by the SEC to pay disgorgement of $140,115, and prejudgment interest of $12,261, for a total of $152,376, to the Company within 30 days. The Company received the payment of $152,376 in January 2018. The Company took the position that under the terms of the Culpepper Employment Agreement, Culpepper is owed no severance payments as a result of his termination “for cause” as that term is defined in the Culpepper Employment Agreement. Furthermore, Culpepper is no longer entitled to the 2:1 credit under the Stipulated Settlement Agreement and Mutual Release in the Kleba shareholder derivative lawsuit (the “Derivative Lawsuit Settlement”) such that the total $2,240,000 owed by Culpepper pursuant to the Derivative Lawsuit Settlement plus Culpepper’s proportionate share of the litigation cost in the amount of $227,750, less the amount that he repaid as of December 31, 2016, is immediately due and payable. The Company sent Culpepper a notice of default in January 2017 for the total amount he owes the Company and is in the process of pursuing these claims in accordance with the alternative dispute resolution provision of the Culpepper Employment Agreement. The Company has established a reserve of $2,051,083 as of September 30, 2018 and December 31, 2017, which amount represents the amount the Company currently believes Culpepper owes to the Company under the Derivative Lawsuit Settlement (excluding the amount of attorneys’ fees incurred in enforcing the terms of the Derivative Lawsuit Settlement), while the Company pursues collection of this amount. Culpepper disputed that he was terminated “for cause” under the Culpepper Employment Agreement. Pursuant to the alternative dispute resolution provisions of that agreement, the Company and Culpepper participated in a mediation of their dispute on June 28, 2017. Having reached no resolution during the mediation, the parties participated in arbitration under the commercial rules of the American Arbitration Association, arbitrating both Culpepper’s claim for severance against the Company and the Company’s claims against Culpepper for improper expense reimbursements and amounts Culpepper owes the Company under the Derivative Lawsuit Settlement (the “Culpepper Arbitration”). The Culpepper Arbitration hearing was held from May 15, 2018 through May 18, 2018. On July 12, 2018, the arbitrator issued an interim award in favor of the Company, the terms of which are confidential pursuant to the terms of the Culpepper Employment Agreement and instructed the parties that a final award was forthcoming. On September 12, 2018, the arbitrator issued its final award in favor of the Company. On October 4, 2018, the Company filed a petition with the Chancery Court for Davidson County, Tennessee to confirm the arbitration award. On November 7, 2018, the Company received Culpepper’s answer to the petition filed on October 4, 2018. The Company is reviewing the response. The Bible Harris Smith Lawsuit On November 17, 2016, the Company filed a lawsuit in the Circuit Court for Knox County, Tennessee (the “Tennessee Circuit Court”) against Bible Harris Smith PC (“BHS”) for professional negligence, common law negligence and breach of fiduciary duty arising from accounting services provided by BHS to the Company. The Company alleges that between 2013 and 2015, H. Craig Dees, Ph. D (“Dees”), the Company’s former Chairman and Chief Executive Officer, received approximately $2.4 million in advanced or reimbursed travel and entertainment expenses from the Company and that Dees did not submit back-up documentation in support of substantially all of the advances he received purportedly for future travel and entertainment expenses. The Company further alleges that had BHS provided competent accounting and tax preparation services, it would have discovered Dees’ failure to submit back-up documentation supporting the advanced travel funds at the inception of Dees’ conduct, and prevented the misuse of these and future funds. The Company has made a claim for damages against BHS in an amount in excess of $3 million. The complaint against BHS has been filed and served, an answer has been received, and the parties are in the midst of discovery. BHS filed a Motion for Summary Judgment, which was denied in full by the Tennessee Circuit Court June 21, 2018. Depositions for the BHS lawsuit were taken on August 16 and August 17, 2018. The Company and BHS participated in a mediation of their dispute on October 23, 2018. Having reached no resolution during the mediation, the parties may work towards a resolution. If a settlement between the parties cannot be reached, the Company will continue with the lawsuit. The RSM Lawsuit On June 9, 2017, the Company filed a lawsuit in the Circuit Court for Mecklenburg County, North Carolina (the “North Carolina Circuit Court”) against RSM USA LLP (“RSM”) for professional negligence, common law negligence, gross negligence, intentional misrepresentation, negligent misrepresentation and breach of fiduciary duty arising from accounting, internal auditing and consulting services provided by RSM to the Company. The Company alleges that between 2013 and 2015, Dees received approximately $2.4 million in advanced or reimbursed travel and entertainment expenses from the Company and that Dees did not submit back-up documentation in support of substantially all of the advances he received purportedly for future travel and entertainment expenses. The Company similarly alleges that Culpepper received $294,255 in travel expense reimbursements and advances that were unsubstantiated. The Company further alleges that had RSM provided competent accounting, internal audit and consulting services, it would have discovered Dees’ and Culpepper’s conduct at its inception and prevented the misuse of these and future funds. The Company has made a claim for damages against RSM in an amount in excess of $10 million. The Complaint against RSM was filed by the Company and RSM moved to dismiss the Complaint. On September 28, 2018, RSM’s motion to dismiss was granted in part for breach of fiduciary duty and denied in part for negligence, professional malpractice, negligent misrepresentation, gross negligence, intentional misrepresentation, and fraudulent concealment. The Company was not precluded from seeking consequential or punitive damages on its claims for gross negligence, intentional misrepresentation, and fraudulent concealment at this stage of the litigation. The Company also was not precluded, at this time, from seeking consequential or punitive damages on its claims for breach of contract, negligence, negligent misrepresentation, or professional malpractice to the extent those claims are premised on the outsourcing engagement between the Company and RSM or the engagement between the Company and RSM under which RSM was to review the Company’s financial statements. The North Carolina Circuit Court has recently entered a Case Management Order and the Parties are in the process of beginning discovery in the case. The BDO Matter On November 16, 2017, the Company filed a demand for arbitration with the American Arbitration Association that alleged professional negligence, common law negligence, gross negligence, intentional misrepresentation, negligent misrepresentation, and breach of fiduciary duty by the Company’s former external audit firm, BDO USA LLP (“BDO”), arising from accounting, external auditing, and consulting services provided by BDO related to travel and expense advances and reimbursements received by Dees and former Company executive Culpepper. During the quarter ended June 30, 2018, this matter was resolved pursuant to a settlement between the parties, the terms of which are confidential. The proceeds from the settlement were received and recorded during the third quarter of 2018. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | 7. Subsequent Events Convertible Notes Payable Subsequent to September 30, 2018, the Company entered into a PRH Note with a related party in the principal amount of $175,000. The Company has received the proceeds of $175,000 relating to the note. Exercise of Warrants Subsequent to September 30, 2018, warrant holders exercised warrants to purchase an aggregate of 1,113,500 shares of common stock at $0.0533 per share. In connection with these exercises, the Company received aggregate cash proceeds of $59,350 and issued 1,113,500 shares of common stock to the warrant holders. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarity on the accounting for modifications of stock-based awards. ASU 2017-09 requires adoption on a prospective basis in the annual and interim periods beginning after December 15, 2017 for share-based payment awards modified on or after the adoption date. The adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements. In March 2018, the FASB issued ASU No. 2018-05, “Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118” (“ASU 2018-05”). ASU 2018-05 adds various “SEC” paragraphs pursuant to the issuance of the December 2017 SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which was effective immediately. The SEC issued SAB 118 to address concerns about reporting entities’ ability to timely comply with the accounting requirements to recognize all of the effects of the Tax Cuts and Jobs Act in the period of enactment. SAB 118 allows disclosure that timely determination of some or all of the income tax effects from the Tax Cuts and Jobs Act are incomplete by the due date of the financial statements and if possible to provide a reasonable estimate. The Company has accounted for the tax effects of the Tax Cuts and Jobs Act under the guidance of SAB 118 and does not believe that the adoption of ASU 2018-05 will have a material impact on the Company’s condensed consolidated financial statements or disclosures. In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. Currently, the accounting requirements for nonemployee and employee share-based payment transactions are significantly different. ASU 2018-07 expands the scope of Topic 718, Compensation — Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity — Equity-Based Payments to Nonemployees. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company is currently evaluating ASU 2018-07 and its impact on the Company’s condensed consolidated financial statements. In July 2018, the FASB issued Accounting Standards Update No. 2018-10, “Codification Improvements to Topic 842, Leases,” (“ASU 2018-10”). The amendments in ASU 2018-10 are to address stakeholders’ questions about how to apply certain aspects of the new guidance in ASC 842. The clarifications address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. The amendments in ASC Topic 842 are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently in the process of evaluating its lease assets and lease liabilities to be recorded as of January 1, 2019. The Company continues to evaluate other provisions of the updated guidance and expects to complete its analysis by December 31, 2018. In July 2018, the FASB issued Accounting Standards Update No. 2018-11, “Leases (Topic 842): Targeted Improvements,” (“ASU 2018-11”). The amendments in ASU 2018-11 related to transition relief on comparative reporting at adoption affect all entities with lease contracts that choose the additional transition method and the amendments in ASU 2018-11 related to separating components of a contract affect only lessors whose lease contracts qualify for the practical expedient. The amendments in ASC Topic 842 are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently in the process of evaluating its lease assets and lease liabilities to be recorded as of January 1, 2019. The company continues to evaluate other provisions of the updated guidance and expects to complete its analysis by December 31, 2018. In August 2018, the FASB issued Accounting Standards Update No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating ASU 2018-13 and its impact on its condensed consolidated financial statements. |
Reclassifications | Reclassifications Certain accounts in the prior year’s condensed consolidated financial statements have been reclassified for comparative purposes to conform to the presentation in the current year’s condensed consolidated financial statements. These reclassifications have no effect on the previously reported net loss. |
Liquidity and Going Concern (De
Liquidity and Going Concern (Details Narrative) - USD ($) | 9 Months Ended | |||
Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Cash and cash equivalents | $ 231,920 | $ 105,504 | $ 208,281 | $ 1,165,738 |
Loans received in connection with financing | $ 100,000 |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details Narrative) - USD ($) | Feb. 21, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | Apr. 03, 2017 | Mar. 23, 2017 |
Related Party Transaction [Line Items] | |||||
Preferred stock, par or stated value per share | $ 0.001 | $ 0.001 | |||
Loans received in connection with financing | $ 100,000 | ||||
Chief Technology Officer [Member] | |||||
Related Party Transaction [Line Items] | |||||
Promissory note issuance date | Feb. 21, 2017 | ||||
Interest rate | 6.00% | ||||
Interest payments | Calculated on a 360-day basis | ||||
Borrowed under note | 2,500,000 | ||||
Cal Enterprises LLC [Member] | PRH Note [Member] | |||||
Related Party Transaction [Line Items] | |||||
Borrowed under note | 2,500,000 | ||||
Related Party [Member] | PRH Note [Member] | |||||
Related Party Transaction [Line Items] | |||||
Principal amount borrowed | 1,350,000 | ||||
Drawn down under the notes value | 1,350,000 | ||||
Non-Related Parties [Member] | PRH Note [Member] | |||||
Related Party Transaction [Line Items] | |||||
Principal amount borrowed | 2,556,000 | ||||
Drawn down under the notes value | $ 2,556,000 | ||||
Debt maturity date | Jun. 30, 2020 | ||||
Non-Related Parties [Member] | PRH Note [Member] | Notes Due in Twenty Four Months [Member] | |||||
Related Party Transaction [Line Items] | |||||
Principal amount borrowed | $ 500,000 | ||||
Maximum [Member] | Chief Technology Officer [Member] | Unsecured Promissory Note [Member] | |||||
Related Party Transaction [Line Items] | |||||
Principal amount borrowed | $ 2,500,000 | ||||
Maximum [Member] | Cal Enterprises LLC [Member] | PRH Note [Member] | |||||
Related Party Transaction [Line Items] | |||||
Principal amount borrowed | $ 2,500,000 | ||||
2017 Financing [Member] | |||||
Related Party Transaction [Line Items] | |||||
Loans received in connection with financing | $ 13,362,000 | ||||
2017 Financing [Member] | Series D Preferred Stock [Member] | Final Tranche [Member] | |||||
Related Party Transaction [Line Items] | |||||
Preferred stock, par or stated value per share | $ 0.2862 | ||||
2017 Financing [Member] | Minimum [Member] | |||||
Related Party Transaction [Line Items] | |||||
Financing arrangement amount | $ 10,000,000 | ||||
2017 Financing [Member] | Maximum [Member] | |||||
Related Party Transaction [Line Items] | |||||
Financing arrangement amount | $ 20,000,000 |
Stockholders' Deficiency (Detai
Stockholders' Deficiency (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Class of Stock [Line Items] | ||
Proceeds from warrant exercises | $ 615,059 | $ 533 |
Number of common stock shares issued for service, grant date fair value | $ 80,000 | |
Warrant [Member] | ||
Class of Stock [Line Items] | ||
Warrant to purchase shares of common stock | 11,539,577 | |
Exercise price of warrant | $ 0.0533 | |
Proceeds from warrant exercises | $ 615,059 | |
Number of shares issued upon warrant exercise | 11,539,777 | |
Other Common Stock [Member] | ||
Class of Stock [Line Items] | ||
Number of common stock shares issued for service | 1,000,000 | |
Number of common stock shares issued for service, grant date fair value | $ 80,000 |
Commitments, Contingencies an_2
Commitments, Contingencies and Litigation (Details Narrative) - USD ($) | Apr. 18, 2018 | Dec. 12, 2017 | Jun. 09, 2017 | Dec. 27, 2016 | Nov. 17, 2016 | Jan. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Loss Contingencies [Line Items] | ||||||||
Company received the payment | $ 1,700,000 | |||||||
Bible Harris Smith Lawsuit [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Loss contingency amount advanced or reimbursed | $ 2,400,000 | |||||||
Amount of damages awarded | $ 3,000,000 | |||||||
RSM Lawsuit [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Loss contingency amount of remaining obligation | $ 10,000,000 | |||||||
Executive Officer [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Company received the payment | $ 152,376 | |||||||
Travel expense reimbursements and advances without receipt | $ 294,255 | |||||||
Expense reimbursements, description | The Company seeks to recover from Culpepper the entire $294,255 in expense reimbursements | |||||||
Pay disgorgement amount | $ 140,115 | |||||||
Prejudgment interest amount | 12,261 | |||||||
Aggregate value of legal settlements | $ 152,376 | |||||||
Damages sought to be receivable | $ 2,240,000 | |||||||
Litigation cost | 227,750 | |||||||
Reserve for litigation | $ 2,051,083 | $ 2,051,083 | ||||||
Executive Officer [Member] | RSM Lawsuit [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Loss contingency amount advanced or reimbursed | 2,400,000 | |||||||
Executive Officer One [Member] | RSM Lawsuit [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Loss contingency amount advanced or reimbursed | $ 294,255 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Proceeds from warrant exercises | $ 615,059 | $ 533 |
Warrant Holders [Member] | ||
Warrant to purchase shares of common stock | 1,113,500 | |
Exercise price of warrant | $ 0.0533 | |
Proceeds from warrant exercises | $ 59,350 | |
Number of shares issued upon warrant exercise | 1,113,500 | |
Convertible Notes Payable [Member] | ||
Proceeds from related party notes | $ 175,000 | |
PRH Note with Third Party [Member] | ||
Principal amount | $ 175,000 |