UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
--------------------------------------------------------------------------------
                                   FORM 10-KSB
(Mark One)

[X]  Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934

     For the fiscal year ended December 31, 2003;

[ ]  Transition  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

     For the transition period from           to
                                   -----------  -----------

                         Commission file number: 0-9410

                         Provectus Pharmaceuticals, Inc.
                 (Name of Small Business Issuer in Its Charter)

     Nevada                                                     90-0031917
------------------------------------------------------   -----------------------
 (State or other jurisdiction of                          (I.R.S. Employer
  incorporation or organization)                          Identification Number)

7327 Oak Ridge Highway, Suite A, Knoxville, Tennessee            37931
------------------------------------------------------   -----------------------
    (Address of Principal Executive Offices)                   (Zip Code)

                                  865/769-4011
                (Issuer's Telephone Number, Including Area Code)


Securities registered under Section 12(b) of the Exchange Act:
                                      None
--------------------------------------------------------------------------------
                                (Title of Class)

Securities registered under Section 12(g) of the Exchange Act:
                    Common shares, par value $.001 per share
--------------------------------------------------------------------------------
                                (Title of Class)

     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

     The issuer's revenues for the most recent fiscal year were $0.

     The aggregate market value of the voting and non-voting  common equity held
by  non-affiliates  of the  registrant  as of March  15,  2004,  was  $9,694,102
(computed on the basis of $1.20 per share).

     The number of shares  outstanding of the issuer's  stock,  $0.001 par value
per share, as of March 15, 2004 was 12,793,064.

     Documents incorporated by reference in Part III hereof: Proxy Statement for
2004 Annual Meeting of Stockholders

     Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]



<PAGE>


                         Provectus Pharmaceuticals, Inc.
                          Annual Report on Form 10-KSB

                                Table of Contents
                                                                           Page
                                                                           ----
Part I  .......................................................................1

     Item 1.    Description of Business........................................1
                History........................................................1
                Description Of Business........................................1
                Intellectual Property..........................................7
                Competition....................................................8
                Federal Regulation of Therapeutic Products.....................8
                Personnel.....................................................11
                Available Information.........................................12

     Item 2.    Description of Property.......................................12

     Item 3.    Legal Proceedings.............................................12

     Item 4.    Submission of Matters to a Vote of Security Holders...........12

Part II.......................................................................13

     Item 5.    Market for Common Equity and Related Stockholder Matters......13

     Item 6.    Management's Discussion and Analysis or Plan of Operation.....15
                Going Concern.................................................15
                Plan of Operation.............................................16

     Item 7.    Financial Statements..........................................19
                Forward-Looking Statements....................................19
                Risk Factors..................................................19

     Item 8.    Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure...........................26

     Item 8A.   Controls and Procedures.......................................26

Part III......................................................................27

     Item 9.    Directors, Executive Officers, Promoters and
                Control Persons; Compliance with Section 16(a)
                of the Exchange Act...........................................27

     Item 10.   Executive Compensation........................................27

     Item 11.   Security Ownership of Certain Beneficial Owners
                and Management and Related Stockholder Matters................27

     Item 12.   Certain Relationships and Related Transactions................27

     Item 13.   Exhibits, List and Reports on Form 8-K........................27

     Item 14.   Principal Accountant Fees and Services........................28

Signatures....................................................................29

                                       i

<PAGE>


                                     Part I

     Item 1. Description of Business.


     History

     Provectus    Pharmaceuticals,    Inc.,   formerly   known   as   "Provectus
Pharmaceutical, Inc." and "SPM Group, Inc.," was incorporated under Colorado law
on  May  1,  1978.   SPM  Group  ceased   operations  in  1991,   and  became  a
development-stage  company  effective  January 1, 1992,  with the new  corporate
purpose  of  seeking  out  acquisitions  of  properties,  businesses,  or merger
candidates,  without  limitation as to the nature of the business  operations or
geographic location of the acquisition candidate.

     On April 1, 2002, SPM Group changed its name to "Provectus  Pharmaceutical,
Inc." and  reincorporated  in  Nevada  in  preparation  for a  transaction  with
Provectus Pharmaceuticals,  Inc., a privately-held Tennessee corporation,  which
we refer to as "PPI." On April 23, 2002, an Agreement and Plan of Reorganization
between Provectus  Pharmaceutical and PPI was approved by the written consent of
a majority of the outstanding shares of Provectus  Pharmaceutical.  As a result,
holders  of  6,680,000  shares  of  common  stock  of  Provectus  Pharmaceutical
exchanged their shares for all of the issued and  outstanding  shares of PPI. As
part of the acquisition, Provectus Pharmaceutical changed its name to "Provectus
Pharmaceuticals,  Inc." and PPI became a wholly owned  subsidiary  of Provectus.
For accounting purposes, we treat this transaction as a recapitalization of PPI.

     On  November  19,  2002,  we  acquired  Valley  Pharmaceuticals,   Inc.,  a
privately-held  Tennessee  corporation  formerly  known as  Photogen,  Inc.,  by
merging  our  subsidiary  PPI with and into  Valley  and  naming  the  surviving
corporation "Xantech  Pharmaceuticals,  Inc." Photogen,  Inc. was separated from
Photogen  Technologies,   Inc.  in  a  non-prorata  split-off  to  some  of  its
shareholders.  The assets of Photogen, Inc. consisted primarily of the equipment
and intangibles related to its therapeutic  activity.  The majority shareholders
of Valley  were also the  majority  shareholders  of  Provectus.  Valley  had no
revenues prior to the transaction with us. By acquiring  Valley, we acquired our
most  important  intellectual  property,   including  issued  U.S.  patents  and
patentable inventions, with which we intend to develop:

     o    prescription  drugs,   medical  and  other  devices  (including  laser
          devices) and over-the-counter pharmaceutical products in the fields of
          dermatology and oncology; and

     o    technologies  for  the  preparation  of  human  and  animal  vaccines,
          diagnosis  of   infectious   diseases  and  enhanced   production   of
          genetically engineered drugs.

     Prior to the acquisition of Valley,  we were considered to be, and continue
to be, in the  development  stage and had not  generated  any revenues  from the
assets we acquired.

     On December 5, 2002,  we acquired  the assets of Pure-ific  L.L.C.,  a Utah
limited  liability  company,  and created a wholly owned  subsidiary,  Pure-ific
Corporation,  to operate that business. We acquired the product formulations for
Pure-ific personal sanitizing sprays, along with the "Pure-ific" trademarks.  We
intend to continue  product  development  and begin to market a line of personal
sanitizing  sprays and related  products  to be sold over the counter  under the
"Pure-ific" brand name.

     We sold  small  amounts of two of our  products,  GloveAid  and  Pure-ific,
during 2003. We did not recognize the revenue from these sales because we do not
consider these sales to be material as total sales of these products in 2003 was
less than $1,000.

Description Of Business

Overview

     Provectus, and its two wholly owned subsidiaries,  Xantech Pharmaceuticals,
Inc. and  Pure-ific  Corporation,  develop,  license and market and plan to sell
products in three sectors of the healthcare industry:

     o    Over-the-counter  products,  which we refer to in this  report as "OTC
          products;"

     o    Prescription drugs; and

     o    Medical device systems

     We manage Provectus, Xantech and Pure-ific on an integrated basis, and when
we refer to "we" or "us" or "the  Company" in this Annual Report on Form 10-KSB,
we refer to all three  corporations  considered as a single

                                       1


<PAGE>

unit.  Our principal  executive  offices are located at 7327 Oak Ridge  Highway,
Suite A, Knoxville, Tennessee 37931, telephone 865/769-4011.

     Through  discovery  and  use of  state-of-the-art  scientific  and  medical
technologies,  the  founders of our  pharmaceutical  business  have  developed a
portfolio of patented,  patentable,  and proprietary  technologies  that support
multiple  products in the  prescription  drug,  medical  device and OTC products
categories  (including  patented  technologies for: (a) treatment of cancer; (b)
novel therapeutic  medical devices;  (c) enhancing  contrast in medical imaging;
(d) improving signal  processing during  biomedical  imaging;  and (e) enhancing
production of biotechnology  products). Our prescription drug products encompass
the  areas of  dermatology  and  oncology  and  involve  several  types of small
molecule-based  drugs.  Our  medical  device  systems  include  therapeutic  and
cosmetic  lasers,  while our OTC products  address markets  primarily  involving
skincare applications.

     Our first commercially available products are directed into the OTC market,
as these  products pose minimal or no regulatory  compliance  barriers to market
introduction.  (For more information on these barriers,  see "Federal Regulation
of  Therapeutic  Products"  below.)  In this  fashion,  we  believe  that we can
diminish   the  risk  of   regulatory   bars  to  the   introduction   of  safe,
consumer-friendly  products and minimize the time  required to begin  generating
revenues  from  product  sales.  At  the  same  time,  we  continue  to  develop
higher-margin  prescription  pharmaceuticals  and  medical  devices,  which have
longer development and regulatory approval cycles.

Over-the-Counter Pharmaceuticals

     Our OTC products are designed to be safer and more specific than  competing
products. Our technologies offer practical solutions for a number of intractable
maladies,  using  ingredients that have limited or no side effects compared with
existing products.  To develop our OTC products, we typically use compounds with
potent  antibacterial  and  antifungal  activity as building  blocks and combine
these building  blocks with  anti-inflammatory  and  moisture-absorbing  agents.
Products  with these  properties  can be used for treatment of a large number of
skin afflictions, including:

     o    hand irritation associated with use of disposable gloves

     o    eczema

     o    mild to moderate acne

     Where appropriate,  we have filed or will file patent applications and will
seek other intellectual  property  protection to protect our unique formulations
for relevant applications.

     GloveAid

     Personnel in many  occupations  and industries  now use  disposable  gloves
daily in the performance of their jobs, including:

     o    Airport security personnel;

     o    Food handling and preparation personnel;

     o    Sanitation workers;

     o    Postal and package delivery handlers and sorters;

     o    Laboratory researchers;

     o    Health care workers such as hospital and blood bank personnel; and

     o    Police,fire and emergency response personnel.

     Accompanying the increased use of disposable gloves is a mounting incidence
of chronic skin irritation.  To address this market, we have developed GloveAid,
a hand cream with both antiperspirant and antibacterial  properties, to increase
the comfort of users' hands during and after the wearing of  disposable  gloves.
We had immaterial revenue from sales of GloveAid during 2003.


                                       2

<PAGE>

     The  chronic  skin  irritation  that   accompanies  the  long-term  use  of
disposable  gloves has been  characterized as an  allergic-like  reaction to the
glove  materials.  Currently,  physicians treat the condition using steroids and
other  immunosuppressive  therapies.  To avoid possible  regulatory bars, we are
marketing  GloveAid as a means to increase  users'  comfort,  not as a long-term
therapy for  treatment of chronic skin  irritation.  However,  as we obtain data
regarding  people  who  have  existing  chronic  skin  irritation,  we may  seek
regulatory  approval  of  GloveAid  to permit  us to market it as a therapy  for
chronic skin problems associated with wearing of disposable gloves. If we decide
to obtain this  regulatory  approval,  we anticipate that our projected sales of
GloveAid would increase significantly. Obtaining this approval would require the
completion of glove  viability tests required by the United States Food and Drug
Administration,  which we refer to as the  "FDA,"  and  responding  to the FDA's
comments  relating to these tests.  We estimate  regulatory  approval would cost
approximately $300,000 and would take from two to three years to obtain.

     Pure-ific

     Our Pure-ific line of products includes two quick-drying sprays,  Pure-ific
and  Pure-ific  Kids,  that  immediately  kill up to  99.9% of germs on skin and
prevent regrowth for 6 hours. We have determined the effectiveness of Pure-rific
based on our  internal  testing and testing  performed  by Paratus  Laboratories
H.B., an independent research lab. Pure-ific products help prevent the spread of
germs and thus  complement  our other OTC products  designed to treat  irritated
skin or skin conditions such as acne,  eczema,  dandruff and fungal  infections.
Our  Pure-ific  sprays  have  been  designed  with  convenience  in mind and are
targeted  towards mothers,  travelers,  and anyone concerned about the spread of
sickness-causing germs. We had immaterial revenue from sales of Pure-ific during
2003.  We intend to  continue  developing  our  distribution  network  for these
products and expect to expand the Pure-ific  product line to include  additional
applications.

     Dermatology

     A number of dermatological  conditions,  including  psoriasis,  eczema, and
acne, result from a superficial  infection which triggers an overwhelming immune
response. We anticipate developing OTC products similar to the GloveAid line for
the treatment of mild to moderate cases of psoriasis, eczema, and acne. Wherever
possible, we intend to formulate these products to minimize or avoid significant
regulatory bars that might adversely impact time to market.

Prescription Drugs

     We are  developing  a number of  prescription  drugs  which we expect  will
provide minimally  invasive treatment of chronic severe skin afflictions such as
psoriasis,  eczema, and acne; and several life-threatening cancers such as those
of the liver,  breast and  prostate.  We believe that our products will be safer
and more  specific than  currently  existing  products.  Use of topical or other
direct delivery formulations allows these potent products to be conveniently and
effectively  delivered only to diseased  tissues,  thereby enhancing both safety
and  effectiveness.  The ease of use and superior  performance of these products
may eventually  lead to extension into OTC  applications  currently  serviced by
less  safe,  more  expensive  alternatives.  All of  these  products  are in the
pre-clinical or clinical trial stage.

     Dermatology

     Our most  advanced  prescription  drug  candidate  for treatment of topical
diseases on the skin is Xantryl,  a topical gel. PV-10, the active ingredient in
Xantryl, is "photoactive": it reacts to light of certain wavelengths, increasing
its therapeutic  effects.  PV-10 also concentrates in diseased or damaged tissue
but quickly  dissipates  from healthy  tissue.  By  developing a  "photodynamic"
treatment regimen (one which combines a photoactive substance with activation by
a source emitting a particular  wavelength of light) around these two properties
of PV-10, we can deliver a higher  therapeutic effect at lower dosages of active
ingredient,  thus minimizing  potential side effects  including damage to nearby
healthy  tissues.  PV-10  is  especially  responsive  to green  light,  which is
strongly  absorbed by the skin and thus only  penetrates  the body to a depth of
about three to five  millimeters.  For this reason,  we have  developed  Xantryl
combined with  green-light  activation  for topical use in surface  applications
where serious  damage could result if medicinal  effects were to occur in deeper
tissues.

                                       3

<PAGE>


     Acute  psoriasis.  Psoriasis  is a  common  chronic  disorder  of the  skin
characterized  by dry  scaling  patches,  called  "plaques,"  for which  current
treatments  are few and those that are available have  potentially  serious side
effects.  According to Roenigk and Maibach  (Psoriasis,  Third  Edition,  1998),
there are approximately five million people in the United States who suffer from
psoriasis,  with an estimated  160,000 to 250,000 new psoriasis cases each year.
There is no known cure for the disease at this time.  According  to the National
Psoriasis  Foundation,  the majority of psoriasis sufferers,  those with mild to
moderate cases,  are treated with topical steroids that can have unpleasant side
effects;  none of the other  treatments  for moderate  cases of  psoriasis  have
proven completely  effective.  The 25-30% of psoriasis  patients who suffer from
more severe cases  generally are treated with more  intensive  drug therapies or
PUVA, a  light-based  therapy that  combines the drug  Psoralen with exposure to
ultraviolet  A light.  While PUVA is one of the more  effective  treatments,  it
increases a patient's risk of skin cancer.

     We  believe  that  Xantryl  activated  with green  light  offers a superior
treatment for acute psoriasis because it selectively treats diseased tissue with
negligible potential for side effects in healthy tissue;  moreover,  the therapy
has shown promise in comprehensive  Phase 1 clinical trials.  The objective of a
Phase 1 clinical  trial is to  determine if there are safety  concerns  with the
therapy.  In these studies,  involving  more than 50 test subjects,  Xantryl was
applied topically to psoriatic plaques and then illuminated with green light. In
our first study, a single-dose  treatment yielded an average reduction in plaque
thickness  of 59%  after 30  days,  with  further  response  noted at the  final
follow-up examination 90 days later. Further, no pain, significant side effects,
or evidence of  "rebound"  (increased  severity of a psoriatic  plaque after the
initial  reduction in thickness) were observed in any treated areas. This degree
of positive  therapeutic  response is  comparable  to that  achieved with potent
steroids  and other  anti-inflammatory  agents,  but without  the  serious  side
effects associated with such agents. We expect to conduct Phase 2 studies in the
near future,  in which we expect to assess the  potential  for  remission of the
disease using a regimen of weekly treatments similar to those used for PUVA.

     Actinic   Keratosis.   According  to  Schwartz  and  Stoll   (Fitzpatrick's
Dermatology in General Medicine,  1999), actinic keratosis, or "AK" (also called
solar  keratosis or senile  keratosis),  is the most common  pre-cancerous  skin
lesion  among  fair-skinned  people  and is  estimated  to  occur in over 50% of
elderly fair-skinned  persons living in sunny climates.  These experts note that
nearly half of the  approximately  five million cases of skin cancer in the U.S.
may have begun as AK.  The  standard  treatments  for AK  (primarily  comprising
excision,  cryotherapy,  and  ablation  with topical  5-fluorouracil)  are often
painful and frequently  yield  unacceptable  cosmetic  outcomes due to scarring.
Building on our experience with psoriasis,  we are assessing use of Xantryl with
green-light  activation as a possible improvement in treatment of early and more
advanced  stages of AK. We  completed an initial  Phase 1 clinical  trial of the
therapy  for this  indication  in 2001  with the  predecessor  company  that was
acquired in 2002. This study, involving 24 subjects, examined the safety profile
of a single treatment using topical Xantryl with green light photoactivation; no
significant safety concerns were identified.  We are assessing the data from the
study as a possible basis for further clinical development of Xantryl for AK.

     Severe  Acne.  According to Berson et al.  (Cutis.  72 (2003)  5-13),  acne
vulgaris affects approximately 17 million individuals in the U.S., causing pain,
disfigurement,  and social  isolation.  Moderate to severe  forms of the disease
have proven responsive to several photodynamic  regimens, and we anticipate that
Xantryl  can be used as an advanced  treatment  for this  disease.  Pre-clinical
studies  show that the active  ingredient  in  Xantryl  readily  kills  bacteria
associated  with acne.  This  finding,  coupled with our clinical  experience in
psoriasis and actinic keratosis, suggests that therapy with Xantryl will exhibit
no significant  side effects and will afford  improved  performance  relative to
other therapeutic  alternatives.  If correct, this would be a major advance over
currently available products for severe acne.

     As  noted  above,  we  are  researching  multiple  uses  for  Xantryl  with
green-light activation. Multiple-indication use by a common pool of physicians -
dermatologists,  in this  case - should  reduce  market  resistance  to this new
therapy.

     Oncology

     Oncology is another  major  market  where our planned  products  may afford
competitive advantage compared to currently available options. We are developing
Provecta,  a sterile injectible form of PV-10, for direct injection into tumors.
Because PV-10 is retained in diseased or damaged  tissue but quickly  dissipates
from healthy

                                       4

<PAGE>

tissue,  we believe we can develop therapies that confine treatment to cancerous
tissue and reduce collateral impact on healthy tissue.

     Liver  Cancer.  The current  standard of care for liver  cancer is ablative
therapy  (which  seeks to reduce a tumor by  poisoning,  freezing,  heating,  or
irradiating  it)  using  either a  localized  injection  of  ethanol  (alcohol),
cryosurgery,  radiofrequency  ablation,  or ionizing  radiation  such as X-rays.
Where  effective,  these therapies have many side effects;  selecting  therapies
with  fewer  side  effects  tends to  reduce  overall  effectiveness.  Combined,
ablative therapies have a five-year survival rate of 33% - meaning that only 33%
of those liver cancer  patients whose cancers are treated using these  therapies
survive for five years after their initial diagnoses. In pre-clinical studies we
have found that direct  injection of Provecta into liver tumors quickly  ablates
treated  tumors,  and can  trigger  an  anti-tumor  immune  response  leading to
eradication of residual tumor tissue and distant tumors.  Because of the natural
regenerative  properties  of the liver and the  highly  localized  nature of the
treatment,  this approach appears to produce no significant side effects.  Based
on these  encouraging  preclinical  results,  we are  assessing  strategies  for
initiation of clinical trials of Provecta for treatment of liver cancer.

     Breast Cancer.  Breast cancer afflicts over 200,000 U.S. citizens annually,
leading to over  40,000  deaths.  Surgical  resection,  chemotherapy,  radiation
therapy, and immunotherapy  comprise the standard treatments for the majority of
cases,  resulting  in serious  side  effects  that in many cases are  permanent.
Moreover,  current  treatments are relatively  ineffective  against  metastases,
which in many cases are the eventual  cause of patient  mortality.  Pre-clinical
studies  using  human  breast  tumors  implanted  in mice have shown that direct
injection of Provecta into these tumors ablates the tumors,  and, as in the case
of liver  tumors,  may elicit an  anti-tumor  immune  response  that  eradicates
distant  metastases.  Since  fine-needle  biopsy  is  a  routine  procedure  for
diagnosis of breast cancer, and since the needle used to conduct the biopsy also
could be used to direct an  injection  of  Provecta  into the  tumor,  localized
destruction of suspected tumors through direct injection of Provecta clearly has
the potential of becoming a primary  treatment.  We are  evaluating  options for
initiating  clinical studies of direct injection of Provecta into breast tumors,
and expect to formulate  final plans based on results from  clinical  studies of
our indication for Provecta in liver cancer.

     Prostate Cancer. Cancer of the prostate afflicts approximately 190,000 U.S.
men annually,  leading to over 30,000 deaths.  As with breast  cancer,  surgical
resection,  chemotherapy,  radiation  therapy,  and  immunotherapy  comprise the
standard  treatments  for the  majority  of cases,  and can  result in  serious,
permanent  side  effects.  We believe  that direct  injection  of Provecta  into
prostate tumors may selectively ablate such tumors, and, as in the case of liver
and breast  tumors,  may also elicit an anti-tumor  immune  response  capable of
eradicating  distant  metastases.   Since  trans-urethral   ultrasound,   guided
fine-needle biopsy and immunotherapy, along with brachytherapy implantation, are
becoming  routine  procedures for diagnosis and treatment of these  cancers,  we
believe that localized  destruction of suspected tumors through direct injection
of  Provecta  can become a primary  treatment.  We are  evaluating  options  for
initiating  clinical  studies of direct  injection  of  Provecta  into  prostate
tumors,  and expect to  formulate  final  plans based on results  from  clinical
studies of our  indications  for  Provecta in the  treatment of liver and breast
cancer.

     Medical Devices

     We are developing medical devices to address two major markets:

     o    cosmetic treatments,  such as reduction of wrinkles and elimination of
          spider veins and other cosmetic blemishes; and

     o    therapeutic   uses,   including   photoactivation   of  Xantryl  other
          prescription  drugs  and  non-surgical  destruction  of  certain  skin
          cancers.

     We expect to develop medical devices through  partnerships with third-party
device manufacturers or, if appropriate opportunities arise, through acquisition
of one or more device manufacturers.

     Photoactivation.  Our clinical tests of Xantryl for dermatology have, up to
the present,  utilized a number of commercially  available lasers for activation
of the drug. This approach has several  advantages,  including the leveraging of
an extensive base of installed devices present  throughout the pool of potential
physician-adopters  for  Xantryl;  access to such a base could play an  integral
role in early market capture.  However, since the use of such

                                       5

<PAGE>

lasers,  which were designed for occasional  use in other types of  dermatologic
treatment, is potentially too cumbersome and costly for routine treatment of the
large  population  of  patients  with  psoriasis,  we have  begun  investigating
potential use of other types of photoactivation  hardware, such as light booths.
The  use of such  booths  is  consistent  with  current  care  standards  in the
dermatology  field,  and may provide a  cost-effective  means for addressing the
needs of patients and physicians alike. We anticipates that such photoactivation
hardware would be developed, manufactured, and supported in conjunction with one
or more third-party device manufacturer.

     Melanoma.  A high priority in our medical  devices field is the development
of a  laser-based  product for  treatment  of melanoma.  We initially  conducted
extensive research on ocular melanoma at the Massachusetts Eye and Ear Infirmary
(a teaching  affiliate of Harvard  Medical  School) using a new laser  treatment
that may offer significant  advantage over current treatment  options.  A single
quick  non-invasive  treatment  of  ocular  melanoma  tumors  in a rabbit  model
resulted  in  elimination  of over 90% of  tumors,  and may  afford  significant
advantage over invasive alternatives, such as surgical excision, enucleation, or
radiotherapy implantation. Ocular melanoma is rare, with approximately 2,000 new
cases annually in the U.S.  However,  we believed that our extremely  successful
results  could be  extrapolated  to treatment of primary  melanomas of the skin,
which have an incidence of over 52,000 new cases  annually in the U.S. and a 13%
five-year survival rate after metastasis of the tumor. We have performed similar
laser  treatments  on  large  (averaging   approximately  3  millimeters  thick)
cutaneous  melanoma  tumors  implanted in mice,  and have been able to eradicate
over 90% of these pigmented skin tumors with a single  treatment.  Moreover,  we
have shown that this treatment stimulates an anti-tumor immune response that may
lead to  improved  outcome  at both the  treatment  site and at sites of distant
metastasis.  From these results, we believe that a device for laser treatment of
primary  melanomas  of the skin and eye is nearly  ready for human  studies.  We
anticipate  partnering with a medical device  manufacturer to bring it to market
in  reliance on a 510(k)  notification.  For more  information  about the 510(k)
notification process, see "Federal Regulation of Therapeutic Products" below.

Research and Development

     We have placed research  activities for new product  initiatives on hold as
we attempt to conserve available capital and achieve full  capitalization of our
company  through equity and convertible  debt  offerings,  generation of product
revenues,  and other means. All ongoing research and development  activities are
directed  toward  supporting  our OTC  product  launches,  our  current  product
development  and  maintaining  our  intellectual  property  portfolio.   We  are
maintaining  our research  facilities  in  anticipation  of a resumption  of our
research programs for new product initiatives.

Production

     We have  determined that the most efficient use of our capital in producing
OTC products is to contract production with experienced entities having previous
success in economically  producing such products.  We have ongoing relationships
with two OTC product manufacturers,  EXAL, Inc. and 220 Laboratories,  Inc., and
several other OTC service vendors that will manufacture,  package, warehouse and
ship  our OTC  products.  We do not  have  written  agreements  with  any of our
manufacturers or vendors.

Sales

     Our first commercially available products are directed into the OTC market,
as these  products pose minimal or no regulatory  compliance  barriers to market
introduction.  In this  fashion,  we believe  that we can  diminish  the risk of
regulatory  bars to the  introduction of products and minimize the time required
to begin  generating  revenues from product sales. At the same time, we continue
to develop higher-margin prescription pharmaceuticals and medical devices, which
have longer development and regulatory approval cycles.

     We are commencing  limited sales of GloveAid and  Pure-ific.  We sold small
amounts of these  products  during 2003 but did not  recognize  the revenue from
these sales because we do not consider these sales to be material as total sales
of these  products  in 2003 was  less  than  $1,000.  We will  continue  to seek
additional  markets for our  products  through  existing  distributorships  that
market  and  distribute  medical  products,  ethical  pharmaceuticals,  and  OTC
products for the professional and consumer marketplaces.

     In  addition  to  developing  and  selling  products   ourselves,   we  are
negotiating  actively  with a number of potential  licensees  for several of our
intellectual properties, including patents and related technologies. To date, we

                                       6

<PAGE>

have not yet entered  into any  licensing  agreements;  however,  we  anticipate
consummating one or more such licenses in the future.

Intellectual Property

Patents

     We  hold a  number  of  U.S.  patents  covering  the  technologies  we have
developed  and are  continuing  to develop for the  production  of  prescription
drugs,  medical devices and OTC  pharmaceuticals,  including those identified in
the following table:
<TABLE>
<CAPTION>
        U.S. Patent No.                   Title                          Issue Date           Expiration Date
        ---------------                 --------                         ----------           ----------------
<S>     <C>               <C>                                          <C>                    <C>
        5,829,448         Method for improved selectivity in           November 3, 1998       October 30, 2016
                          photo-activation of molecular agents

        5,832,931         Method for improved selectivity in           November 10, 1998      October 30, 2016
                          photo-activation and detection of
                          molecular diagnostic agents

        5,998,597         Method for improved selectivity in           December 7, 1999       October 30, 2016
                          photo-activation of molecular agents

        6,042,603         Method for improved selectivity in           March 28, 2000         October 30, 2016
                          photo-activation of molecular agents

        6,331,286         Methods for high energy phototherapeutics    December 18, 2001      December 21, 2018

        6,451,597         Method for enhanced protein stabilization    September 17, 2002     April 6, 2020
                          and for production of cell lines useful
                          for production of such stabilized proteins

        6,468,777         Method for enhanced protein stabilization    October 22, 2002       April 6, 2020
                          and for production of cell lines useful
                          for production of such stabilized proteins

        6,493,570         Method for improved imaging and              December 10, 2002      December 10, 2019
                          photodynamic therapy

        6,495,360         Method for enhanced protein stabilization    December 17, 2002      April 6, 2020
                          and for production of cell lines useful
                          for production of such stabilized proteins

        6,519,076         Methods and apparatus for optical imaging    February 11, 2003      October 30, 2016

        6,525,862         Methods and apparatus for optical imaging    February 25, 2003      October 30, 2016

        6,541,223         Method for enhanced protein stabilization    April 1, 2003          April 6, 2020
                          and for production of cell lines useful
                          for production of such stabilized proteins
</TABLE>

     We continue to pursue patent applications on numerous other developments we
believe to be  patentable.  We consider our issued  patents,  our pending patent
applications and any patentable  inventions which we may develop to be extremely
valuable assets of our business.

Trademarks

     We own  the  following  trademarks  used  in  this  document:  Xantryl(TM),
Provecta(TM),  GloveAid(TM),  and  Pure-ific(TM)  (including  Pure-ific(TM)  and
Pure-ific(TM) Kids). We also own the registered trademark PulseView(R).

                                       7

<PAGE>

Trademark  rights are  perpetual  provided  that we continue to keep the mark in
use. We  consider  these  marks,  and the  associated  name  recognition,  to be
valuable to our business.

Material Transfer Agreement

     We have entered  into a Material  Transfer  Agreement  dated as of July 31,
2003  with  Schering-Plough  Animal  Health  Corporation,  which  we refer to as
"SPAH",  the animal-health  subsidiary of Schering-Plough  Corporation,  a major
international  pharmaceutical company. We refer to this agreement in this report
as the "Material Transfer Agreement." Under the Material Transfer Agreement,  we
will  provide SPAH with access to some of our  patented  technologies  to permit
SPAH to evaluate those  technologies for use in animal-health  applications.  If
SPAH determines that it can commercialize  our  technologies,  then the Material
Transfer  Agreement  obligates  us and SPAH to enter  into a  license  agreement
providing for us to license those  technologies to SPAH in exchange for progress
payments upon the  achievement of goals.  We can give you no assurance that SPAH
will  determine that it can  commercialize  our  technologies  or that the goals
required for us to obtain progress payments from SPAH will be achieved.

Competition

     In  general,   the  pharmaceutical   industry  is  intensely   competitive,
characterized  by rapid  advances  in  products  and  technology.  A  number  of
companies have developed and continue to develop products that address the areas
we have targeted.  Some of these  companies are major  pharmaceutical  companies
that are  international  in scope and very large in size, while others are niche
players that may be less familiar but have been  successful in one or more areas
we  are  targeting.   Existing  or  future  pharmaceutical,   device,  or  other
competitors  may develop  products  that  accomplish  similar  functions  to our
technologies  in  ways  that  are  less  expensive,  receive  faster  regulatory
approval,  or receive greater market  acceptance than our products.  Many of our
competitors  have been in existence for  considerably  longer than we have, have
greater capital resources, broader internal structure for research, development,
manufacturing  and  marketing,  and are in many  ways  further  along  in  their
respective product cycles.

     At present,  our most direct  competitors  are smaller  companies  that are
exploiting  niches similar to ours. In the field of  photodynamic  therapy,  one
competitor,  QLT,  Inc.,  has  received  FDA  approval  for  use  of  its  agent
Photofrin(R) for treatment of several niche cancer indications, and has a second
product,  Visudyne(R),  approved  for  treatment  of  certain  forms of  macular
degeneration.  Another  competitor  in this field,  Dusa  Pharmaceuticals,  Inc.
recently   received  FDA  approval  of  its  photodynamic   product   Levulan(R)
Kerastik(R)  for treatment of actinic  keratosis.  We believe that QLT and Dusa,
among  other  competitors,  have  established  a  working  commercial  model  in
dermatology  and  oncology,  and that we can benefit from this model by offering
products  that,  when compared to our  competitors'  products,  afford  superior
safety and performance,  greatly reduced side effects, improved ease of use, and
lower cost, compared to those of our competitors.

     While it is possible  that  eventually  we may compete  directly with major
pharmaceutical  companies,  we believe it is more likely that we will enter into
joint  development,   marketing,  or  other  licensure  arrangements  with  such
competitors.

     We also have a number of market areas in common with  traditional  skincare
cosmetics companies,  but in contrast to these companies, our products are based
on unique,  proprietary formulations and approaches. For example, we are unaware
of any products in our  targeted  OTC  skincare  markets that our similar to our
GloveAid and Pure-ific products. Further, proprietary protection of our products
may help limit or prevent market erosion until our patents expire.

Federal Regulation of Therapeutic Products

     All of the prescription drugs and medical devices we currently  contemplate
developing  will  require  approval by the FDA prior to sales  within the United
States and by  comparable  foreign  agencies  prior to sales  outside the United
States.   The  FDA  and  comparable   regulatory   agencies  impose  substantial
requirements on the manufacturing  and marketing of pharmaceutical  products and
medical devices.  These agencies and other entities extensively regulate,  among
other   things,   research   and   development   activities   and  the  testing,
manufacturing, quality control, safety, effectiveness, labeling, storage, record
keeping, approval,  advertising and promotion of our proposed

                                       8
<PAGE>

products.  While we attempt to minimize and avoid  significant  regulatory  bars
when  formulating our products,  some degree of regulation from these regulatory
agencies is  unavoidable.  Some of the things we do to attempt to  minimize  and
avoid significant regulatory bars include the following:

     o    Using chemicals and combinations already allowed by the FDA;

     o    Carefully  making  product  performance  claims  to avoid the need for
          regulatory approval;

     o    Using  drugs that have been  previously  approved  by the FDA and that
          have a long history of safe use;

     o    Using chemical compounds with known safety profiles; and

     o    In many cases, developing OTC products which face less regulation than
          prescription pharmaceutical products.

     The  regulatory  process  required  by the FDA,  through  which our drug or
device products must pass successfully  before they may be marketed in the U.S.,
generally involves the following:

     o    Preclinical laboratory and animal testing;

     o    Submission  of  an  application  that  must  become  effective  before
          clinical trials may begin;

     o    Adequate and  well-controlled  human clinical  trials to establish the
          safety and efficacy of the product for its intended indication; and

     o    FDA approval of the  application to market a given product for a given
          indication.

     For   pharmaceutical   products,   preclinical  tests  include   laboratory
evaluation of the product, its chemistry,  formulation and stability, as well as
animal studies to assess the potential safety and efficacy of the product. Where
appropriate  (for example,  for human disease  indications for which there exist
inadequate animal models), we will attempt to obtain preliminary data concerning
safety and efficacy of proposed  products using  carefully  designed human pilot
studies.  We will require  sponsored  work to be conducted  in  compliance  with
pertinent  local and  international  regulatory  requirements,  including  those
providing for  Institutional  Review Board approval,  national  governing agency
approval and patient informed consent,  using protocols  consistent with ethical
principles  stated in the  Declaration  of  Helsinki  and other  internationally
recognized  standards.  We expect any pilot studies to be conducted  outside the
United States;  but if any are conducted in the United States,  they will comply
with applicable FDA regulations.  Data obtained through pilot studies will allow
us  to  make  more  informed  decisions   concerning   possible  expansion  into
traditional FDA-regulated clinical trials.

     If the FDA is satisfied with the results and data from  preclinical  tests,
it will authorize human clinical  trials.  Human clinical  trials  typically are
conducted in three sequential phases which may overlap. Each of the three phases
involves   testing  and  study  of  specific  aspects  of  the  effects  of  the
pharmaceutical  on  human  subjects,   including  testing  for  safety,   dosage
tolerance, side effects,  absorption,  metabolism,  distribution,  excretion and
clinical efficacy.

     Phase  1  clinical   trials   include  the  initial   introduction   of  an
investigational  new drug into humans.  These studies are closely  monitored and
may be  conducted in patients,  but are usually  conducted in healthy  volunteer
subjects.   These   studies  are  designed  to  determine   the   metabolic  and
pharmacologic  actions of the drug in humans,  the side effects  associated with
increasing  doses,  and, if possible,  to gain early evidence on  effectiveness.
While  the FDA can  cause us to end  clinical  trials at any phase due to safety
concerns, Phase 1 clinical trials are primarily concerned with safety issues. We
also attempt to obtain sufficient information about the drug's  pharmacokinetics
and  pharmacological  effects during Phase 1 clinical trial to permit the design
of well-controlled, scientifically valid, Phase 2 studies.

     Phase  1  studies  also   evaluate  drug   metabolism,   structure-activity
relationships,  and the  mechanism  of  action in  humans.  These  studies  also
determine  which  investigational  drugs are used as  research  tools to explore
biological phenomena or disease processes. The total number of subjects included
in Phase 1 studies varies with the drug, but is generally in the range of twenty
to eighty.

                                       9

<PAGE>

     Phase 2 clinical  trials  include  the early  controlled  clinical  studies
conducted to obtain some preliminary data on the effectiveness of the drug for a
particular  indication or indications in patients with the disease or condition.
This phase of testing also helps  determine the common  short-term  side effects
and  risks   associated   with  the  drug.   Phase  2  studies   are   typically
well-controlled,  closely monitored,  and conducted in a relatively small number
of patients, usually involving several hundred people.

     Phase 3 studies are expanded  controlled and uncontrolled  trials. They are
performed after preliminary  evidence  suggesting  effectiveness of the drug has
been obtained in Phase 2, and are intended to gather the additional  information
about   effectiveness  and  safety  that  is  needed  to  evaluate  the  overall
benefit-risk  relationship of the drug. Phase 3 studies also provide an adequate
basis for extrapolating  the results to the general  population and transmitting
that  information in the physician  labeling.  Phase 3 studies  usually  include
several hundred to several thousand people.

     Applicable  medical  devices  can be cleared  for  commercial  distribution
through  a  notification  to the FDA  under  Section  510(k)  of the  applicable
statute.  The 510(k) notification must demonstrate to the FDA that the device is
as safe and effective  and  substantially  equivalent  to a legally  marketed or
classified device that is currently in interstate commerce. Such devices may not
require detailed testing. Certain high-risk devices that sustain human life, are
of  substantial  importance  in preventing  impairment of human health,  or that
present a  potential  unreasonable  risk of illness or injury,  are subject to a
more  comprehensive  FDA  approval  process  initiated  by  filing  a  premarket
approval,  also  known as a "PMA,"  application  (for  devices)  or  accelerated
approval (for drugs).

     We have established a core clinical  development team and have been working
with  outside  FDA  consultants  to  assist  us in  developing  product-specific
development and approval strategies,  preparing the required submittals, guiding
us through the regulatory  process,  and providing  input to the design and site
selection of human clinical  studies.  Historically,  obtaining FDA approval for
photodynamic  therapies has been a challenge.  Wherever  possible,  we intend to
utilize lasers or other activating systems that have been previously approved by
the FDA to mitigate the risk that our therapies will not be approved by the FDA.
The FDA has considerable experience with lasers by virtue of having reviewed and
acted upon many  510(k)  and  premarket  approval  filings  submitted  to it for
various photodynamic and non-photodynamic therapy laser applications,  including
a large number of cosmetic laser treatment systems used by dermatologists.

     The testing and approval process requires  substantial  time,  effort,  and
financial resources, and we may not obtain FDA approval on a timely basis, if at
all.  Success in  preclinical  or  early-stage  clinical  trials does not assure
success in later stage  clinical  trials.  The FDA or the  research  institution
sponsoring  the trials may suspend  clinical  trials or may not permit trials to
advance  from one phase to another at any time on various  grounds,  including a
finding  that the  subjects or  patients  are being  exposed to an  unacceptable
health risk. Once issued,  the FDA may withdraw a product  approval if we do not
comply with pertinent regulatory requirements and standards or if problems occur
after the product  reaches the market.  If the FDA grants approval of a product,
the approval may impose limitations,  including limits on the indicated uses for
which we may market a  product.  In  addition,  the FDA may  require  additional
testing and surveillance  programs to monitor the safety and/or effectiveness of
approved products that have been commercialized, and the agency has the power to
prevent or limit  further  marketing of a product  based on the results of these
post-marketing programs. Further, later discovery of previously unknown problems
with a  product  may  result  in  restrictions  on the  product,  including  its
withdrawal from the market.

     Marketing our products abroad will require similar regulatory  approvals by
equivalent  national  authorities  and is subject to similar risks.  To expedite
development,  we may pursue  some or all of our  initial  clinical  testing  and
approval  activities  outside  the United  States,  and in  particular  in those
nations  where  our  products  may  have  substantial   medical  and  commercial
relevance.  In some such cases any resulting products may be brought to the U.S.
after  substantial  offshore  experience  is gained.  Accordingly,  we intend to
pursue any such development in a manner  consistent with U.S.  standards so that
the  resultant  development  data is  maximally  applicable  for  potential  FDA
approval.

     OTC products are subject to  regulation  by the FDA and similar  regulatory
agencies but the regulations  relating to these products are much less stringent
than those relating to prescription drugs and medical devices.  The types of OTC
products  developed  and sold by us only require that we follow  cosmetic  rules
relating to labeling and the claims that we make about our product.  The process
for obtaining  approval of prescription drugs with the FDA

                                       10

<PAGE>

does not apply to the OTC products which we sell. The FDA can, however,  require
us to stop selling our product if we fail to comply with the rules applicable to
our OTC products.

Personnel

Executive Officers

     As of March 25, 2004, our executive officers are:

     H. Craig Dees, Ph.D., 52, Chief Executive  Officer.  Dr. Dees has served as
our Chief  Executive  Officer and as a member of our Board of Directors since we
acquired PPI on April 23, 2002.  Before  joining us, from 1997 to 2002 he served
as  senior  member  of the  management  team  of  Photogen  Technologies,  Inc.,
including serving as a member of the Board of Directors of Photogen from 1997 to
2000.  Prior to joining  Photogen,  Dr. Dees served as a Group Leader at the Oak
Ridge National Laboratory (ORNL), and as a senior member of the management teams
of LipoGen Inc., a medical  diagnostic  company  which used genetic  engineering
technologies to manufacture and distribute diagnostic assay kits for auto-immune
diseases,  and  TechAmerica  Group  Inc.,  now a part  of  Boehringer  Ingelheim
Vetmedica,  Inc., the U.S. animal health subsidiary of Boehringer Ingelhem GmbH,
an international  chemical and pharmaceutical  company headquartered in Germany.
He has developed numerous products in a broad range of areas,  including ethical
vaccines,  human  diagnostics,  cosmetics and OTC  pharmaceuticals,  and has set
several regulatory precedents in licensing and developing  biotechnology-derived
products.  For example,  Dr. Dees developed and commercialized the world's first
live viral vaccine  produced by recombinant  DNA  technologies  and licensed the
first recombinant antigen human diagnostic assay using a FDA Class II licensure.
While at  TechAmerica  he developed  and obtained USDA approval for the first in
vitro assay for releasing  "killed" viral  vaccines.  Dr. Dees also has licensed
successfully a number of proprietary  cosmetic products and formulated strategic
planning  for  developing  cosmetic  companies.  He earned a Ph.D.  in Molecular
Virology from the University of Wisconsin - Madison in 1984.

     Timothy  C.  Scott,  Ph.D.,  46,  President.  Dr.  Scott has  served as our
President  and as a member of our Board of  Directors  since we acquired  PPI on
April 23,  2002.  Prior to joining us, Dr.  Scott was as a senior  member of the
Photogen  management  team from 1997 to 2002,  including  serving as  Photogen's
Chief  Operating  Officer from 1999 to 2002, as a director of Photogen from 1997
to 2000, and as interim CEO for a period in 2000.  Before joining  Photogen,  he
served as senior  management  of Genase LLC, a  developer  of enzymes for fabric
treatment,  and held senior research and management positions at ORNL. Dr. Scott
has been involved in developing numerous high-tech  innovations in a broad range
of areas, including separations science, biotechnology, biomedical, and advanced
materials.  He has licensed  several of his  innovations  to the oil and gas and
biotechnology  industries.  As Director of the Bioprocessing R&D Center at ORNL,
Dr.  Scott  achieved  a  national  presence  in the  area  of  use  of  advanced
biotechnology  for the production of energy,  fuels, and chemicals.  He earned a
Ph.D.  in Chemical  Engineering  from the  University  of Wisconsin - Madison in
1985.

     Eric A. Wachter,  Ph.D., 41, Vice President - Pharmaceuticals.  Dr. Wachter
has served as our Vice President - Pharmaceuticals  and as a member of our Board
of Directors since we acquired PPI on April 23, 2002.  Prior to joining us, from
1997  to  2002 he was a  senior  member  of the  management  team  of  Photogen,
including serving as Secretary and a director of Photogen since 1997 and as Vice
President and Secretary and a director of Photogen since 1999.  Prior to joining
Photogen,  Dr.  Wachter  served as a senior  research  staff  member  with ORNL.
Starting during his affiliation with Photogen,  Dr. Wachter has been extensively
involved in pre-clinical development and clinical testing of pharmaceuticals and
medical device systems,  as well as with coordination and filing of patents.  He
earned a Ph.D. in Chemistry from the University of Wisconsin - Madison in 1988.

     Peter R. Culpepper,  CPA, MBA, 44, Chief Financial  Officer.  Mr. Culpepper
was  appointed  to  serve as our  Chief  Financial  Officer  in  February  2004.
Previously,  Mr. Culpepper served as Chief Financial Officer for Felix Culpepper
International,  Inc. from 2001 to 2004; was a Registered Representative with AXA
Advisors,  LLC from 2002 to 2003;  has served as Chief  Accounting  Officer  and
Corporate  Controller for Neptec,  Inc. from 2000 to 2001; has served in various
Senior  Director  positions with  Metromedia  Affiliated  Companies from 1998 to
2000; has served in various Senior Director and other  financial  positions with
Paging Network, Inc. from 1993 to 1998; and has served in a variety of financial
roles in public accounting and industry from 1982 to 1993.

                               11

<PAGE>

He earned an MBA in Finance  from the  University  of Maryland - College Park in
1992. He earned an  undergraduate  degree from the College of William and Mary -
Williamsburg,  Virginia in 1982. He is a licensed Certified Public Accountant in
both  Tennessee  and Maryland  and is a faculty  member with the  University  of
Phoenix.

Employees

     We currently employ four persons, all of whom are full-time employees.

Available Information

     Provectus Pharmaceuticals, Inc. is a "public company," and therefore we are
subject to the  informational  requirements  of the  Securities  Exchange Act of
1934, as amended,  which we refer to as the "Exchange Act." To comply with those
requirements,  we file annual reports,  quarterly reports,  periodic reports and
other reports and statements with the Securities and Exchange Commission,  which
we refer to as the "SEC." You may read and copy any materials  that we file with
the  SEC at  the  SEC's  Public  Reference  Room,  at 450  Fifth  Street,  N.W.,
Washington,  D.C.  20549.  You can obtain  information  on the  operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains  an  Internet  site at  http://www.sec.gov,  from which you can access
electronic copies of materials we file with the SEC.

     Our  Internet  address  is  http://www.pvct.com.  We have  made  available,
through a link to the SEC's Web site, electronic copies of the materials we file
with the SEC (including our annual reports on Form 10-KSB, our quarterly reports
on Form 10-QSB, our current reports on Form 8-K, the Section 16 reports filed by
our executive  officers,  directors and 10% shareholders and amendments to those
reports).  To receive paper copies of our SEC  materials,  please  contact us by
U.S. mail, telephone, facsimile or electronic mail at the following address:

                           Provectus Pharmaceuticals, Inc.
                           Attention: President
                           7327 Oak Ridge Highway, Suite A
                           Knoxville, TN 37931
                           Telephone: 865/769-4011
                           Facsimile: 865/769-4013
                           Electronic mail: info@pvct.com

Item 2. Description of Property.

     We currently  lease  approximately  4,000  square feet of space  outside of
Knoxville, Tennessee for our corporate office and operations. Our monthly rental
charge for these  offices is  approximately  $2,800 per month,  and the lease is
renewed on a month-to-month  basis. We believe that these offices  generally are
adequate for our needs currently and in the immediate future.

Item 3. Legal Proceedings.

     From time to time, we are party to  litigation  or other legal  proceedings
that we  consider  to be a part  of the  ordinary  course  of our  business.  At
present,  we are not involved in any legal  proceedings  nor are we party to any
pending  claims that we believe could  reasonably be expected to have a material
adverse effect on our business, financial condition, or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders.

     During the  three months ended  December  31,  2003,  we did not submit any
matters to a vote of our stockholders.

                                       12

<PAGE>

                                     Part II

Item 5. Market for Common Equity and Related Stockholder Matters.


Market Information and Holders

     Quotations  for our common  stock are  reported on the OTC  Bulletin  Board
under the symbol  "PVCT." The  following  table sets forth the range of high and
low bid information for the periods indicated since January 1, 2002:

         2002                                         High                 Low
         ----                                        -----                -----
         First Quarter (January 1 to March 31)       $ 2.60               $0.02
         Second Quarter (April 1 to June 30)         $10.01               $0.30
         Third Quarter (July 1 to September 30)      $ 1.05               $0.12
         Fourth Quarter (October 1 to December 31)   $ 0.55               $0.07

         2003
         ----
         First Quarter (January 1 to March 31)       $ 0.60               $0.26
         Second Quarter (April 1 to June 30)         $ 1.01               $0.21
         Third Quarter (July 1 to September 30)      $ 0.60               $0.20
         Fourth Quarter (October 1 to December 31)   $ 2.00               $0.22

     The closing  price for our common  stock on March 25, 2004 was $1.69.  High
and low quotation  information  was obtained  from data provided by Yahoo!  Inc.
Quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission, and may not reflect actual transactions.

     As of March 15,  2004,  we had 1,899  shareholders  of record of our common
stock.

Dividend Policy

     We have never declared or paid any cash dividends on our capital 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.

Recent Sales of Unregistered Securities

     During the year ended  December  31, 2003,  we did not sell any  securities
which were not registered under the Securities Act of 1933, as amended, which we
refer to as the "Securities Act," except as follows:

1.   Pursuant  to a letter  agreement  dated  January  8,  2003  between  us and
     Investor-Gate.com,  we retained Investor-Gate to provide investor relations
     services.  For these services, we agreed to pay Investor-Gate a monthly fee
     of $7,250 for the first three months of the  agreement and a monthly fee of
     $6,000 per month thereafter. The monthly fee for the first three months was
     paid by the issuance and delivery to  Investor-Gate of 29,000 shares of our
     common stock at an agreed-upon  value of $0.75 per share.  In addition,  we
     agreed to grant  Investor-Gate  warrants  for the  purchase  of  additional
     shares of our common stock. As of the close of business on January 8, 2003,
     the value of our common stock was $0.40 per share.

     On February 28, 2003, we terminated the agreement with  Investor-Gate  as a
     result of Investor-Gate's  failure to perform the  contracted-for  investor
     relations  services.  Investor-Gate  retained the 29,000  shares  initially
     issued to it, as well as a warrant  exercisable  for the purchase of 25,000
     shares of our common  stock at an  exercise  price of $0.75 per  share.  In
     addition,   we  remained   obligated  to  issue   additional   warrants  to
     Investor-Gate on the following terms:

                                       13

<PAGE>

 Number of Shares       Exercise Price       Issue Date       Termination Date
-----------------       --------------   ---------------      -----------------

  25,000 shares             $2.00          April 8, 2003      September 8, 2004

  25,000 shares             $5.00        January 8, 2004      July 8, 2005

     We relied on an exemption from registration pursuant to Section 4(2) of the
     Securities  Act,  based on the sale of the  shares  and  warrants,  and the
     issuance  of the  shares of common  stock  issuable  upon  exercise  of the
     warrants,  to a single purchaser in a transaction not involving any general
     solicitation or general advertising.

2.   Pursuant  to a letter  agreement  dated  January  31,  2003  between us and
     Gryffindor,  we issued  Gryffindor an Amended and Restated  Senior  Secured
     Convertible Note dated January 31, 2003 in the original principal amount of
     $1,025,959.  The  amended  note bears  interest  at 8% per  annum,  payable
     quarterly in arrears,  is due and payable in full on November 26, 2004, and
     amends and restated the original note in its entirety. As with the original
     note,  our  obligations  under  the  amended  note are  secured  by a first
     priority security interest in all of our assets,  including the assets held
     by our Xantech and Pure-ific  subsidiaries.  Subject to certain exceptions,
     the amended note is convertible  into shares of our common stock  beginning
     on the November 26, 2003;  the principal  amount of the note is convertible
     at the rate of one share of common stock for each  $0.73655655 of principal
     converted,  while accrued but unpaid interest on the note is convertible at
     the rate of one share of common  stock for each $0.55 of accrued but unpaid
     interest converted. We relied on an exemption from registration pursuant to
     Section 4(2) of the  Securities  Act,  based on the issuance of the amended
     note,  and the  issuance  of the  shares  of  common  stock  issuable  upon
     conversion  of the amended  note,  to a limited  number of  purchasers in a
     transaction not involving any general solicitation or general advertising.

3.   Pursuant to a letter  agreement  dated  February  20,  2003  between us and
     Strategic  Growth  International,  Inc.,  which we refer  to as  "SGI,"  we
     retained SGI as our investor relations consultant.  For services under this
     agreement, we issued SGI warrants on the following terms:

Number of Shares      Exercise Price         Issue Date        Termination Date
----------------      --------------     -----------------    ------------------

 120,000 shares            $0.25         February 20, 2003    February 20, 2008

 120,000 shares            $0.35         February 20, 2003    February 20, 2008

 120,000 shares            $0.50         February 20, 2003    February 20, 2008

     In addition,  at our option, during the first three months of the agreement
     we may elect to issue SGI  30,000  shares  per month in lieu of  payment of
     $3,000 of the monthly cash fee payable under the agreement. As of the close
     of  business  on  February  18,  2003,  the last  day on which a trade  was
     reported prior to the execution of the agreement with SGI, the value of our
     common stock was $0.26 per share.  During the quarter ended March 31, 2003,
     we did not  exercise our option to issue shares in lieu of payment of fees.
     We relied on an exemption from registration pursuant to Section 4(2) of the
     Securities  Act,  based on the sale of the  shares  and  warrants,  and the
     issuance  of the  shares of common  stock  issuable  upon  exercise  of the
     warrants,  to a single purchaser in a transaction not involving any general
     solicitation or general advertising.

4.   Pursuant  to a  letter  agreement  dated  March  27,  2003  between  us and
     Josephberg  Grosz & Co.,  Inc.,  which we refer to as  "JGC,"  we issued JG
     Capital,  Inc.,  an  affiliate  of JGC,  35,000  shares of common  stock as
     consideration  for JGC's  agreement  to assist us in  obtaining  additional
     capital.  As of the close of  business on March 21,  2003,  the last day on
     which a trade was reported  prior to the  execution of the  agreement  with
     JGC,  the value of our common  stock was $0.32 per  share.  We relied on an
     exemption from registration pursuant to Section 4(2) of the Securities Act,
     based on the sale of these shares to a single  purchaser  in a  transaction
     not involving any general solicitation or general advertising.

5.   Pursuant to Consulting  Agreements dated September 2, 2003 between us, Phil
     Baker, George Matin and Bruce Cosgrove,  we issued 200,000 shares of common
     stock and 100,000 warrants to each of Mssrs.  Matin and Cosgrove and issued
     100,000 warrants to Messr.  Baker as  consideration  for their agreement to
     provide consulting services to us. The warrants


                                       14

<PAGE>

     provide  for the  purchase  of our  common  shares  at any  time  prior  to
     September  2,  2008 at a price  of  $0.75  per  share.  As of the  close of
     business  on August 29,  2003,  the last day on which a trade was  reported
     prior to the execution of the  agreements  with Mssrs.  Matin and Cosgrove,
     the  value of our  common  stock  was  $0.31  per  share.  We  relied on an
     exemption from registration pursuant to Section 4(2) of the Securities Act,
     based on the sale of these shares to a single  purchaser  in a  transaction
     not involving any general solicitation or general advertising.

6.   In November 2003, we completed a short-term unsecured debt financing in the
     aggregate  gross amount of $500,000.  On November 19, 2003,  we issued in a
     private  placement to  "accredited  investors"  under the Securities Act of
     1933, as amended,  (i) $500,000 in the aggregate principal amount of our 8%
     unsecured convertible  debentures;  (ii) warrants to purchase up to 500,000
     shares of our common  stock at an  exercise  price of $1.00 per share;  and
     (iii)  warrants to purchase up to 100,000  shares of our common stock at an
     exercise price of $1.25 per share.  We used the proceeds of the offering to
     provide short-term working capital.

7.   In December 2003, we commenced an offering for sale up to  approximately $1
     million of our restricted  common stock.  Net proceeds to us were initially
     expected to be approximately  $400,000 to $600,000. We have since increased
     this offering  amount to $2 million and have received  proceeds of $967,750
     as of March 15,  2004,  and have sold a total of  2,228,769  shares in this
     offering.  We  engaged a  placement  agent to  assist  us in the  offering.
     Placement agent fees and related  expenses  totaled  $1,446,607 as of March
     15, 2004. If we are successful in selling the remaining  shares,  total net
     proceeds are expected to be approximately $1.0 million to $1.6 million. The
     transaction  is a Regulation S offering to foreign  investors as defined by
     Regulation S of the Securities Act. The restricted  shares cannot be traded
     for 12 months.  After the first 12 months,  sales of the shares are subject
     to restrictions under rule 144 for an additional year.

Item 6. Management's Discussion and Analysis or Plan of Operation.

     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 consolidated  financial  statements and notes thereto included  elsewhere in
this  Annual  Report  on  Form  10-KSB.   Historical   results  and   percentage
relationships  set forth in the statement of operations,  including trends which
might appear, are not necessarily indicative of future operations.

Going Concern

     In  connection  with  their  audit  report  on our  consolidated  financial
statements as of December 31, 2003, BDO Seidman LLP, our  independent  certified
public accountants, expressed substantial doubt about our ability to continue as
a going concern because such  continuance is dependent upon our ability to raise
capital.

     Our technologies are in early stages of development.  We have not generated
material  revenues  from sales or  operations  and we do not expect to  generate
sufficient revenues to enable us to be profitable for several calendar quarters.
At critical  junctures  during 2003 we obtained  $40,000 in  additional  funding
through  loans from Eric A. Wachter,  our Vice  President -  Pharmaceuticals,  a
member of our Board of Directors,  and a major shareholder.  These funds allowed
us to complete our planned corporate  reorganization and acquisitions,  complete
initial  production  runs for  several of our OTC  products,  and  maintain  our
facilities and intellectual property portfolio. We require additional funding to
continue initial production and distribution of OTC products in order to achieve
meaningful  sales volumes.  In addition,  we must raise  substantial  additional
funds in order  to fully  implement  our  integrated  business  plan,  including
execution  of the next  phases in  clinical  development  of our  pharmaceutical
products and full resumption of research  programs for new research  initiatives
that are currently delayed.

     Ultimately,  we must achieve profitable operations if we are to be a viable
entity.  We intend to proceed as rapidly as possible with the development of OTC
products that can be sold with a minimum of regulatory  compliance  and with the
development of revenue  sources through  licensing of our existing  intellectual
property portfolio. Although we believe that there is a reasonable basis for our
expectation that we will  successfully  raise the needed funds, we cannot assure
you that we will be able to  raise  sufficient  capital  to  sustain  operations
before we

                                       15

<PAGE>



can commence revenue generation or that we will be able to achieve, or maintain,
a level of profitability sufficient to meet our operating expenses.

     Our current  plans include  continuing  to operate with our four  employees
during the immediate future,  but we anticipate adding some part-time  employees
during the next year.  Our current plans also include  minimal  purchases of new
property,  plant  and  equipment,  and  limited  research  and  development.  We
determined  research  and  development  expense  incurred  during  2003  through
specific  identification  of  expenses,  as well as an  allocation  of  salaries
expense attributed to research and development.

Plan of Operation

     With  the  reorganization  of  Provectus  and PPI and the  acquisition  and
integration  into the  company  of Valley  and  Pure-ific,  we  believe  we have
obtained a unique combination of OTC products and core intellectual  properties.
This combination  represents the foundation for a successful  operating  company
that we believe will provide both short-term profitability and long-term growth.
In 2004,  through  careful  control  of  expenditures,  escalating  sales of OTC
products,  and issuance of debt and equity,  we plan to build on that foundation
to increase shareholder value.

     In the  short  term,  we intend  to  develop  our  business  by  marketing,
manufacturing,  and distributing our existing OTC products, principally GloveAid
and  Pure-ific.  In the  longer  term,  we expect to  continue  the  process  of
developing, testing and obtaining FDA approval of prescription drugs and medical
devices.  Additionally,  we intend to restart our  research  programs  that will
identify additional  conditions that our intellectual  properties may be used to
treat and additional treatments for those and other conditions.

     We are in the  planning  phase  for  the  major  research  and  development
projects, and therefore do not have estimated completion dates, completion costs
and  capital  requirements  for these  projects.  The reason we do not have this
information  available is because we have not  completed  our planning  process.
Since there is no defined  schedule for completing these  development  projects,
there are no defined consequences if they are not completed timely.

Cash Flow

     As of March  15,  2004,  we held  approximately  $500,000  in cash.  At our
current cash expenditure  rate, this amount will be sufficient to meet our needs
until the end of August 2004.  We already  have begun to reduce our  expenditure
rate by delaying some of our research programs for new research initiatives;  in
addition,  we are  seeking to improve our cash flow by  increasing  sales of OTC
products.  However,  we  cannot  assure  that we will be  successful  either  in
increasing sales of OTC products or in reducing expenditures.  Moreover, even if
we are  successful in improving our current cash flow  position,  we nonetheless
will require  additional  funds to meet our short-term and long-term  needs.  We
anticipate  these  funds will come from the  proceeds of private  placements  or
public offerings of debt or equity securities,  but we cannot assure you that we
will be able to obtain such funds.

Capital Resources

     As  noted  above,  our  present  cash  flow is not  sufficient  to meet our
short-term  operating  needs for  initial  production  and  distribution  of OTC
products in order to achieve  meaningful  sales  volumes,  much less to meet our
longer-term  needs for investment in our business through  execution of the next
phases in clinical development of our pharmaceutical  products and resumption of
our currently  suspended research  programs.  We anticipate that the majority of
the funds for our  operating  and  development  needs in 2004 will come from the
proceeds of private placements or public offerings of debt or equity securities.
We are currently in discussions with multiple funding sources and feel confident
adequate operating funding and development funding will result. While we believe
that we have reasonable  basis for our expectation that we will be able to raise
additional funds, we cannot give you an assurances that we will be able to do so
on commercially  reasonable terms. In addition, any such financing may result in
significant dilution to shareholders.


                                       16
<PAGE>
Market Outlook

     Our products are divided into three classes:

o    OTC products addressing the skincare markets;

o    Prescription   pharmaceuticals  addressing  the  dermatology  and  oncology
     markets; and

o    Medical devices

     Our  estimates  of the size of the markets for each of these three  product
classes are set forth in the following table:



                                                      Approximate Annual Value
  Product Area                                        of Sales in U.S. Market(1)
  -------------                                       --------------------------
                                                              (millions)
 OTC Products

      Personal hygiene..................................     $    100

      Disposable glove care.............................          100

      Acne (all grades).................................        1,000

 Prescription Pharmaceuticals

      Psoriasis.........................................        1,500

      Liver, breast and prostate cancer.................        1,000

 Medical Devices

      Medical device systems............................          250
--------------------

     (1) Our  estimates  of market  size are  based on  relevant  technical  and
scientific   literature,    published   market   analyses,   and   analysis   of
publicly-available sales data for products currently directed at these markets.

     Skincare

     We are developing OTC products for three areas in the skincare market:

1.   personal hygiene products;

2.   hand care products for workers who use disposable gloves; and

3.   products for treatment of acne.

     In the future,  we expect to develop  products for additional  areas in the
skincare market, including treatments for psoriasis,  eczema, and various fungal
infections such as dandruff and athlete's foot.

     Personal Hygiene.  Our Pure-ific brand of OTC products includes a number of
topical  antibacterial  products  that  address  the  personal  hygiene  market,
including a hand  sanitizer  that  immediately  kills germs on skin and prevents
regrowth for six hours. We believe that annual retail sales in the United States
of hand sanitizers are approximately $100 million; this figure excludes sales of
antibacterial  sprays  such as  Lysol(R),  which we  estimate  at more than $1.2
billion in annual U.S.  sales.  We anticipate  extending our Pure-ific  brand to
include  additional  products that leverage  technologies  utilized in our other
skincare products.

     Disposable   Glove  Care.  We  estimate  that  annual  wholesale  sales  of
disposable  gloves in the U.S. are over $1.2 billion,  including $530 million in
sales to the acute care or hospital market, $560 million in sales to the medical
laboratory  and  non-hospital  market,  and $100  million in sales to the dental
market. Use of gloves for protection in other areas, including airport security,
food preparation,  sanitation,  blood banks, research facilities, mail handling,
police and fire personnel, is rapidly growing as concerns over possible exposure
to biological or other hazards  increase.  We further  anticipate that consumers
will spend comparable amounts on hand care products as on the gloves themselves.

     Acne.  Acne affects an estimated 17 million people in the U.S. at any given
time. 85% of all people aged 12 to 25 will experience  acne problems,  while 59%
of women aged 25 to 39 suffer  from this  affliction.  70% percent of adult acne
sufferers,  and an even a higher fraction of teenagers,  rely on self-medication
to treat their acne. OTC products for treatment of mild- to moderate-grade  acne
generally are sold through  department  stores,  supermarkets,  and drug stores;
combined  sales of these  products  are believed to have  exceeded  $800 million
in the year

                                       17
<PAGE>



2000 and were expected to increase by approximately 10% per year. In addition to
these OTC products,  Frost & Sullivan have estimated the U.S.  prescription acne
care market at $1.3 billion,  with over 7.7 million visits to physicians in 2001
for treatment of severe acne.

     Other Skincare. We anticipate that the formulations of our OTC products and
prescription drugs can be used to treat other conditions of the skin,  including
psoriasis,  eczema,  and fungal  infections such as dandruff and athlete's foot.
There are approximately 7 million  psoriasis  patients in the U.S., with between
160,000 and 250,000 new cases  diagnosed every year. In the U.S., the total cost
of psoriasis  treatment  was $2.9  billion in 1995.  The numbers are similar for
eczema and fungal infections.  We believe these represent extremely large future
opportunities for our skincare products.

     Prescription Pharmaceuticals

     We are  developing  prescription  drugs for the treatment of certain severe
dermatologic  conditions  such as  psoriasis,  and for the  treatment of serious
cancers, including those of the liver, breast, and prostate.

     Acute   Psoriasis.   Psoriasis  is  a  chronic   skin   disease   affecting
approximately  5 million  Americans,  with  over  150,000  new  cases  diagnosed
annually. The cause of psoriasis is unknown and there is no cure. Thus, patients
typically   undergo   prolonged   care  over  a  period  of  years  to  decades.
Approximately  2.5  million  psoriasis  patients  are  treated  annually by U.S.
physicians   (primarily   dermatologists),   comprising   an  estimated   annual
expenditure  of  $1.5  billion  for  treatment  in the  mid-1990s.  More  recent
estimates  project a $1-2 billion market  opportunity for new therapies  divided
among several multi-hundred-million dollar products.

     Liver Cancer.  Hepatocellular carcinoma, or HCC, accounts for approximately
90% of all liver  tumors and is the most  common  solid-organ  tumor  worldwide,
causing over 1 million  deaths  annually.  HCC is associated  with chronic liver
injury  from viral  hepatitis  (hepatitis  B and C), and has  attained  epidemic
proportions  among  men aged 25 to 34 in  eastern  Asia,  tropical  Africa,  and
southern Italy.  Although  currently of relatively low incidence in the U.S. and
Europe,  the rapid rise in hepatitis  infection in these regions  signifies that
this may soon change. In contrast,  the primary form of liver cancer in the U.S.
currently  is  metastatic  colorectal  carcinoma  (155,000  new cases and 60,000
deaths  annually,  with a 6% five-year  survival rate).  The current standard of
care for these forms of liver cancer is ablative therapy (via localized  ethanol
injection,  cryosurgery,  or  radiofrequency  ablation).  A  combined  five-year
survival rate of 33% for these therapies  demonstrates the pressing need for new
therapeutic approaches in a worldwide market estimated at over $500 million.

     Breast Cancer.  The American  Cancer Society  estimates that  approximately
205,000 new cases of  invasive  breast  cancer,  and over 54,000 new cases of in
situ breast  cancer,  will occur in the U.S. in 2002,  leading to  approximately
40,000 deaths. Current treatments (lumpectomy,  mastectomy,  removal of regional
lymph nodes, radiation therapy, chemotherapy, and hormone therapy) are expensive
and associated with  unacceptable side effects.  While five-year  survival rates
are excellent for  localized  tumors (96%),  this rate drops to 21% once distant
metastasis has occurred.  This illustrates  that surgical  excision and standard
adjuvant  treatments  (such as  chemotherapy  and radiation) are  ineffective at
eliminating metastatic cells that have migrated from the primary treatment site.
New, minimally  invasive  treatment  modalities for breast cancer may have broad
applicability to this therapeutic market estimated at well over $1 billion.

     Prostate Cancer.  The American Cancer Society estimates that  approximately
190,000 U.S. men are afflicted annually with cancer of the prostate,  leading to
over 30,000 deaths.  As with breast cancer,  surgical  resection,  chemotherapy,
radiation therapy,  and immunotherapy  comprise the standard  treatments for the
majority of cases, and can result in serious, permanent side effects. We believe
that  new,  minimally-invasive  modalities  - such as  direct  injection  of our
prescription  drug Provecta into prostate tumors - may have broad  applicability
to this therapeutic market as an adjuvant or primary form of therapy,  providing
an entry into a therapeutic market estimated at well over $500 million.

     Medical Device Systems

     This  market area  comprises  two  sectors:  cosmetic  treatments,  such as
non-ablative  wrinkle reduction,  elimination of spider veins and other cosmetic
blemishes,  and laser hair reduction; and therapeutic uses, including activation
of certain of our light-activated  drugs.  Additional areas include non-surgical
destruction of skin cancers

                                       18

<PAGE>

and  removal  of  unwanted  moles and other  hyperpigmented  features.  The U.S.
medical laser market exceeded $1.6 billion in 2000, while the market for wrinkle
reduction  and hair  reduction  systems  alone is  currently  in  excess of $100
million annually.  We believe that we can develop new markets for laser devices,
significantly  in addition to the current market for these devices,  as a result
of the  development  of  therapies  consisting  of  photoactivation  of the  our
prescription drug products.

Item 7. Financial Statements.

     Our consolidated financial statements,  together with the report thereon of
BDO Seidman  LLP,  independent  accountants,  are set forth on the pages of this
Annual  Report on Form 10-KSB  indicated  below.

                                                                           Page
                                                                           ----

     Report of Independent Certified Public Accountants                    F-1

     Consolidated  Balance  Sheets as of December 31, 2003
     and December 31, 2002                                                 F-2

     Consolidated Statements of Operations for the year
     ended December 31, 2003 and for the period from
     January 17, 2002 (inception) to December 31, 2002                     F-3

     Consolidated Statements of Shareholders' Equity for
     the year ended December 31, 2003 and for the period
     from January 17, 2002 (inception) to December 31, 2002                F-4

     Consolidated Statements of Cash Flows for the year
     ended December 31, 2003 and for the period from
     January 17, 2002 (inception) to December 31, 2002                     F-6

     Notes to Consolidated Financial Statements                            F-7

Forward-Looking Statements

     This  Annual  Report on Form  10-KSB  contains  forward-looking  statements
regarding,  among other things, our anticipated financial and operating results.
Forward-looking   statements  reflect  our  management's   current  assumptions,
beliefs,  and expectations.  Words such as "anticipate,"  "believe,  "estimate,"
"expect,"  "intend,"  "plan," and similar  expressions  are intended to identify
forward-looking statements.  While we believe that the expectations reflected in
our  forward-looking  statements are  reasonable,  we can give no assurance that
such expectations will prove correct.  Forward-looking statements are subject to
risks and uncertainties that could cause our actual results to differ materially
from the future results, performance, or achievements expressed in or implied by
any  forward-looking   statement  we  make.  Some  of  the  relevant  risks  and
uncertainties  that could cause our actual performance to differ materially from
the  forward-looking  statements  contained in this report are  discussed  below
under the heading  "Risk  Factors" and  elsewhere in this Annual  Report on Form
10-KSB.  We caution  investors  that these  discussions  of important  risks and
uncertainties are not exclusive,  and our business may be subject to other risks
and uncertainties which are not detailed there.

     Investors are cautioned not to place undue reliance on our  forward-looking
statements.  We make  forward-looking  statements  as of the date on which  this
Annual  Report on Form 10-KSB is filed with the SEC, and we assume no obligation
to update the  forward-looking  statements  after the date  hereof  whether as a
result of new information or events, changed circumstances, or otherwise, except
as required by law.

Risk Factors

     Our business is subject to various risks, including those described
below. You should carefully consider these risk factors, together with all of
the other information included in this Annual Report on Form 10-KSB. Any of
these risks could materially adversely affect our business, operating results
and financial condition:

Our independent  auditors have expressed  substantial doubt about our ability to
continue as a going concern.

     Our independent public  accountants have expressed  substantial doubt about
our ability to continue as a going  concern in their  report on our December 31,
2003  financial  statements.  Currently,  our  continuance as a going

                                       19

<PAGE>


concern is  dependent  upon our ability to raise  capital or achieve  profitable
operations.  Our  technologies  are in  early  stages  of  development.  We have
generated  minimal initial  revenues from sales and operations thus far in 2004,
but  we do not  expect  to  generate  sufficient  revenues  to  enable  us to be
profitable  for several  calendar  quarters.  We require  additional  funding to
continue initial production and distribution of OTC products in order to achieve
meaningful  sales volumes.  In addition,  we must raise  substantial  additional
funds in order  to fully  implement  our  integrated  business  plan,  including
execution  of the next  phases in  clinical  development  of our  pharmaceutical
products and resumption of research programs currently suspended.

     Ultimately,  we must achieve profitable operations if we are to be a viable
entity.  We intend to proceed as rapidly as possible with the development of OTC
products that can be sold with a minimum of regulatory  compliance  and with the
development of revenue  sources through  licensing of our existing  intellectual
property  portfolio.  We  cannot  assure  you  that we  will  be  able to  raise
sufficient  capital  to  sustain  operations  before  we  can  commence  revenue
generation  or  that  we  will be able  to  achieve,  or  maintain,  a level  of
profitability  sufficient to meet our operating expenses and continue as a going
concern.

Because of our limited operations and the fact that we are currently  generating
limited revenue, we may be unable to pay our debts when they become due.

     We currently  have  $1,674,959 in debt,  net of a debt discount of $499,675
and $100,021 of accrued interest on our balance sheet,  consisting of $1,025,959
in  principal  and $88,000 in accrued  but unpaid  interest  owed to  Gryffindor
pursuant to the Note;  $500,000 in principal and $4,590 in accrued interest owed
to the holders of our debentures and $149,000 in principal and $7,431 in accrued
interest owed to Dr.  Wachter.  The amounts due to Gryffindor and to the holders
of our  debentures  are due in November 2004 and the amounts due to Dr.  Wachter
are  due in  2009.  Because  of the  convertible  nature  of the  debt  owed  to
Gryffindor and to the holders of the convertible debentures,  we may not have to
repay  this  debt if the debt is  converted  into  shares of our  common  stock.
However,  we can not assure  you that this debt will be  converted  into  common
stock  and we may have to repay  this  indebtedness.  We are  trying  to  secure
additional  financing,  but have not yet  succeeded  in doing so. Our ability to
satisfy our current debt service  obligations and any additional  obligations we
might incur will depend upon our future  financial  and  operating  performance,
which,  in turn, is subject to prevailing  economic  conditions  and  financial,
business,  competitive,  legislative and regulatory  factors,  many of which are
beyond  our  control.  If our cash flow and  capital  resources  continue  to be
insufficient to fund our debt service obligations, we may be forced to reduce or
delay planned  acquisitions,  expansion and capital  expenditures,  sell assets,
obtain  additional  equity capital or restructure  our debt.  Additionally,  our
creditors  could  accelerate  our  payment  obligations,   commence  foreclosure
proceedings  against our assets or force us into bankruptcy or  liquidation.  In
such events,  any proceeds may not be  sufficient to pay off our  creditors.  We
cannot assure you that our operating  results,  cash flow and capital  resources
will be sufficient for payment of our debt service and other  obligations in the
future.

We will need  additional  capital to conduct  our  operations  and  develop  our
products, and our ability to obtain the necessary funding is uncertain.

     We will  require  substantial  capital  resources  in order to conduct  our
operations  and develop our  products.  We estimate  that our  existing  capital
resources  will be  sufficient to fund our current and planned  operations  only
through August 31, 2004, and we may need additional  capital at an earlier date.
We have based this estimate on  assumptions  that may prove to be wrong,  and we
cannot assure that estimates and assumptions will remain unchanged. For example,
we are  currently  assuming  that  we  will  continue  to  operate  without  any
significant staff or other resources expansion.  We intend to acquire additional
funding through public or private equity  financings or other financing  sources
that may be available.  Additional  financing may not be available on acceptable
terms, or at all and our independent  auditors' going concern  qualification may
make  it  more  difficult  for us to  obtain  additional  funding  to  meet  our
objectives. As discussed in more detail below, additional equity financing could
result in  significant  dilution  to  shareholders.  Further,  in the event that
additional funds are obtained  through  licensing or other  arrangements,  these
arrangements  may require us to relinquish  rights to some of our  technologies,
product  candidates  or  products  that we would  otherwise  seek to develop and
commercialize  ourselves.  If  sufficient  capital is not  available,  we may be
required to delay, reduce the scope of or eliminate one or more of our programs,
any of which  could  have a material  adverse  effect on our  business,  and may
impair the value of our patents and other intangible assets.

                                       20

<PAGE>


Existing shareholders may face dilution from our financing efforts

     We must raise  additional  capital  from  external  sources to execute  our
business plan. We plan to issue debt securities, capital stock, or a combination
of these securities.  We may not be able to sell these securities,  particularly
under current market conditions. Even if we are successful in finding buyers for
our  securities,  the buyers could demand high  interest  rates or require us to
agree to onerous  operating  covenants,  which could in turn harm our ability to
operate our business by reducing  our cash flow and  restricting  our  operating
activities.  If we were to sell our  capital  stock,  we might be forced to sell
shares at a depressed market price,  which could result in substantial  dilution
to our existing  shareholders.  In addition,  any shares of capital stock we may
issue may have  rights,  privileges,  and  preferences  superior to those of our
common shareholders.

The prescription  drug and medical device products in our internal  pipeline are
at an early stage of development, and they may fail in subsequent development or
commercialization.

     We are  continuing  to pursue  clinical  development  of our most  advanced
pharmaceutical  drug products,  Xantryl and Provecta,  for use as treatments for
specific  conditions.  These products and other  pharmaceutical drug and medical
device  products  that we are  currently  developing  will  require  significant
additional research,  formulation and manufacture development,  and pre-clinical
and   extensive   clinical   testing   prior   to   regulatory   licensure   and
commercialization.  Pre-clinical and clinical studies of our pharmaceutical drug
and medical device products under development may not demonstrate the safety and
efficacy   necessary  to  obtain  regulatory   approvals.   Pharmaceutical   and
biotechnology  companies have suffered significant setbacks in advanced clinical
trials,   even  after   experiencing   promising   results  in  earlier  trials.
Pharmaceutical  drug and medical device  products that appear to be promising at
early stages of development may not reach the market or be marketed successfully
for a number of reasons, including the following:

     o    a product may be found to be  ineffective or have harmful side effects
          during subsequent pre-clinical testing or clinical trials;

     o    a product may fail to receive necessary regulatory clearance;

     o    a product may be too difficult to manufacture on a large scale;

     o    a product may be too expensive to manufacture or market;

     o    a product may not achieve broad market acceptance;

     o    others may hold  proprietary  rights that will  prevent a product from
          being marketed; or

     o    others may market equivalent or superior products.

     We do not  expect  any  pharmaceutical  drug  products  or  medical  device
products we are  developing  to be  commercially  available for at least several
years,  if at all.  Our  research  and  product  development  efforts may not be
successfully  completed  and may not result in any  successfully  commercialized
products.  Further, after commercial introduction of a new product, discovery of
problems  through  adverse event  reporting  could result in restrictions on the
product,  including  withdrawal from the market and, in certain cases,  civil or
criminal penalties.

     Our OTC  products are at an early stage of  introduction,  and we cannot be
sure that they will be widely  accepted in the  marketplace or that we will have
adequate  capital to market and distribute these products which are an important
factor in the future success of our business.

     We recently have begun marketing GloveAid and Pure-ific,  our first two OTC
products,  on a limited  basis.  We have not  recognized  any revenue from these
products,  as the sales of these products have not been  material.  In order for
these products to become commercially successful, we must increase significantly
our distribution of them. Increasing distribution of these products requires, in
turn,  that we or  distributors  representing  us  increase  marketing  of these
products. In view of our limited financial resources, we may be unable to afford
increases  in our  marketing  of our OTC  products  sufficient  to  improve  our
distribution  of our  products.  Even if we can and do increase our marketing of
our OTC products,  we cannot give you any  assurances  that we can  successfully
increase our distribution of our products.


                                       21

<PAGE>

     If we do begin  increasing our  distribution  of our OTC products,  we must
increase  our  production  of these  products in order to fill our  distribution
channels.  Increased production will require additional financial resources that
we do not have at present. Additionally, we may succeed in increasing production
without  succeeding  in  increasing  sales,  which could  leave us with  excess,
possibly unsaleable, inventory.

     If we are unable to  successfully  introduce,  market and distribute  these
products,  our business,  financial  condition,  results of operations  and cash
flows could be materially adversely affected.

Competition in the  prescription  drug,  medical device and OTC  pharmaceuticals
markets is intense, and we may be unable to succeed if our competitors have more
funding or better marketing.

     The pharmaceutical and biotechnology  industries are intensely competitive.
Other  pharmaceutical  and  biotechnology  companies and research  organizations
currently  engage in or have in the past engaged in research  efforts related to
treatment of dermatological conditions or cancers of the skin, liver and breast,
which could lead to the  development of products or therapies that could compete
directly with the prescription drug, medical device and OTC products that we are
seeking to develop and market.

     Many companies are also  developing  alternative  therapies to treat cancer
and dermatological conditions and, in this regard, are out competitors.  Many of
the pharmaceutical  companies  developing and marketing these competing products
have significantly greater financial resources and expertise than we do in:

     o    research and development;

     o    manufacturing;

     o    preclinical and clinical testing;

     o    obtaining regulatory approvals; and

     o    marketing.

     Smaller   companies   may  also  prove  to  be   significant   competitors,
particularly  through  collaborative  arrangements  with  large and  established
companies.  Academic  institutions,  government  agencies  and other  public and
private research organizations also may conduct research, seek patent protection
and establish collaborative arrangements for research,  clinical development and
marketing of products similar to ours. These companies and institutions  compete
with  us  in  recruiting  and  retaining  qualified  scientific  and  management
personnel as well as in acquiring technologies complementary to our programs.

     In  addition to the above  factors,  we expect to face  competition  in the
following areas:

     o    product efficacy and safety;

     o    the timing and scope of regulatory consents;

     o    availability of resources;

     o    reimbursement coverage;

     o    price; and

     o    patent position,  including  potentially  dominant patent positions of
          others.

     As a result of the foregoing, our competitors may develop more effective or
more affordable  products or achieve earlier product  commercialization  than we
do.

Product  Competition.  Additionally,  since our currently  marketed products are
generally  established and commonly sold,  they are subject to competition  from
products with similar qualities.

                                       22

<PAGE>

     Our OTC product Pure-ific competes in the market with other hand sanitizing
products, including in particular, the following hand sanitizers:

     o    Purell (manufactured by GOJO Industries),

     o    Avagard D (manufactured by 3M) and

     o    a large  number of  generic  and  private-label  equivalents  to these
          market leaders.

     Our OTC product  GloveAid  represents  a new product  category  that has no
direct  competitors;  however,  other types of  products,  such as  AloeTouch(R)
disposable gloves  (manufactured by Medline  Industries)  target the same market
niche.

     Since our  prescription  products  Provecta  and Xantryl  have not yet been
approved by the FDA or introduced to the  marketplace,  we cannot  estimate what
competition  these products might face when they are finally  introduced,  if at
all.  We  cannot  assure  you that  these  products  will  not face  significant
competition for other prescription drugs and generic equivalents.

If we are unable to secure or enforce patent rights,  trademarks,  trade secrets
or other intellectual property our business could be harmed.

     We may not be  successful  in securing or  maintaining  proprietary  patent
protection for our products or products and  technologies we develop or license.
In addition,  our competitors may develop products similar to ours using methods
and  technologies  that  are  beyond  the  scope  of our  intellectual  property
protection, which could reduce our anticipated sales. While some of our products
have proprietary patent protection,  a challenge to these patents can be subject
to  expensive  litigation.   Litigation  concerning  patents,   other  forms  of
intellectual property and proprietary technology is becoming more widespread and
can be protracted and expensive and can distract  management and other personnel
from performing their duties for us.

     We also  rely upon  trade  secrets,  unpatented  proprietary  know-how  and
continuing  technological innovation in order to develop a competitive position.
We cannot assure you that others will not  independently  develop  substantially
equivalent proprietary technology and techniques or otherwise gain access to our
trade  secrets  and  technology,  or that we can  adequately  protect  our trade
secrets and technology.

     If we are  unable to secure or enforce  patent  rights,  trademarks,  trade
secrets or other  intellectual  property,  our  business,  financial  condition,
results of operations and cash flows could be materially adversely affected.

If we infringe on the  intellectual  property of others,  our business  could be
harmed.

     We could be sued for infringing patents or other intellectual property that
purportedly cover products and/or methods of using such products held by persons
other than us. Litigation  arising from an alleged  infringement could result in
removal  from the  market,  or a  substantial  delay in, or  prevention  of, the
introduction of our products,  any of which could have a material adverse effect
on our business, financial condition, or results of operations and cash flows.

If we do not update and enhance our technologies, they will become obsolete.

     The pharmaceutical  market is characterized by rapid technological  change,
and our future success will depend on our ability to conduct successful research
in our fields of  expertise,  to discover new  technologies  as a result of that
research,  to develop products based on our  technologies,  and to commercialize
those products. While we believe that are current technology is adequate for our
present needs, if we fail to stay at the forefront of technological development,
we will be unable to compete effectively.  Our competitors are using substantial
resources  to  develop  new  pharmaceutical  technologies  and to  commercialize
products  based on those  technologies.  Accordingly,  our  technologies  may be
rendered  obsolete by advances in existing  technologies  or the  development of
different technologies by one or more of our current or future competitors.

                                       23

<PAGE>


If we lose any of our key personnel,  we may be unable to  successfully  execute
our business plan.

     Our business is presently managed by four key employees:

     o    H. Craig Dees, Ph.D., our Chief Executive Officer;

     o    Timothy C. Scott, Ph.D., our President;

     o    Eric A. Wachter, Ph.D. our Vice President - Pharmaceuticals; and

     o    Peter R. Culpepper, CPA, our Chief Financial Officer.

     In  addition  to  their  responsibilities  for  management  of our  overall
business strategy, Drs. Dees, Scott and Wachter are our chief researchers in the
fields in which we are  developing  and planning to develop  prescription  drug,
medical device and OTC products.  Also, as of December 31, 2003, we owe $352,500
in accrued but unpaid  compensation  to our employees,  most of which is owed to
Drs. Dees, Scott and Wachter.  The loss of any of these key employees could have
a material  adverse  effect on our  operations,  and our  ability to execute our
business plan might be negatively impacted. Any of these key employees may leave
their  employment with us if they choose to do so, and we cannot assure you that
we  would  be able  to hire  similarly  qualified  executives  if any of our key
employees should choose to leave.

Because  we  have  only  four  employees,   our  management  may  be  unable  to
successfully manage our business.

     In order to  successfully  execute our business plan,  our management  must
succeed in all of the following critical areas:

     o    Researching   diseases  and   possible   therapies  in  the  areas  of
          dermatology and skin care, oncology, and biotechnology;

     o    Developing prescription drug, medical device and OTC products based on
          our research;

     o    Marketing and selling developed products;

     o    Obtaining   additional  capital  to  finance  research,   development,
          production and marketing of our products;  and o Managing our business
          as it grows.

     As discussed above, we currently have only four employees,  all of whom are
full-time  employees.  The  greatest  burden of  succeeding  in the above  areas
therefore falls on Drs. Dees, Scott, Wachter, and Culpepper. Focusing on any one
of these areas may divert  their  attention  from our other areas of concern and
could  affect our ability to manage  other  aspects of our  business.  We cannot
assure you that our management will be able to succeed in all of these areas or,
even if we do so succeed,  that our business will be successful as a result.  We
anticipate  adding a part-time  regulatory  affairs  officer,  a  part-time  lab
technician and a part-time  office  manager within the next year.  While we have
not  historically  had  difficulty in attracting  employees,  our small size and
limited  operating  history may make it  difficult  for us to attract and retain
employees in the future which could further  divert  managements  attention from
the operation of our business.

Our common stock price can be volatile because of several  factors,  including a
limited public float.

     During the  twelve-month  period ended December 31, 2003, the sale price of
our common stock  fluctuated  from $2.00 to $0.20 per share. We believe that our
common stock is subject to wide price  fluctuations  because of several factors,
including:

     o    absence meaningful earnings and external financing,

     o    a relatively  thin trading  market for our common stock,  which causes
          trades of small  blocks of stock to have a  significant  impact on our
          stock price,

                                       24

<PAGE>

     o    general volatility of the stock markets and the market prices of other
          publicly traded companies, and

     o    investor  sentiment  regarding  equity  markets  generally,  including
          public  perception of corporate ethics and governance and the accuracy
          and transparency of financial reporting.

     We have raised  substantial  amounts of capital in private  placements from
time  to  time  and if we  have  failed  to  comply  with  applicable  laws  and
regulations  applicable  to these  private  placements,  we could be required to
repay this  capital  to  investors  and could be subject to legal  action by the
investors and by state and federal securities regulators .

     We have offered and sold securities in private  placements in reliance upon
exemptions  from the  registration  requirements  of the SEC and state agencies.
These exemptions are highly  technical in nature and if we inadvertently  failed
to comply with the  requirements of any of the exemptive  provisions,  investors
might have the right to rescind  their  purchase  of our  securities  or sue for
damages.  If one or more  investors  were to  successfully  seek  rescission  or
prevail  in any  suit,  we  could  face  severe  financial  demands  that  could
materially and adversely  affect our financial  position.  Further,  the SEC and
state  agencies  could take  action  against us that could  divert  management's
attention  from  the  operation  of our  business,  cause  us to pay  fines  and
penalties and cause us to have to repay  investors  their  original  investment,
among other things.

     Financings  that may be available  to us under  current  market  conditions
frequently  involve  sales at prices  below the prices at which our common stock
trades  on the  Over  the  Counter  Electronic  Bulletin  Board,  as well as the
issuance of warrants or  convertible  debt that require  exercise or  conversion
prices that are  calculated in the future at a discount to the then market price
of our common stock.

     Any agreement to sell, or convert debt or equity  securities  into,  common
stock at a future date and at a price  based on the then  current  market  price
will provide an  incentive  to the investor or third  parties to sell the common
stock short to  decrease  the price and  increase  the number of shares they may
receive in a future  purchase,  whether  directly from us or in the market.  For
example,  the initial conversion rate of the debentures issued during the fourth
quarter of 2003 is equal to the lower of (i) 75% of the average  market price of
our common  stock for the  twenty  (20)  trading  days  ending on the  twentieth
trading day  subsequent to the effective date of the  registration  statement or
(ii) $0.75 per share.  If the average market price of our common stock is so low
that it causes the conversion rate on the debentures to fall below approximately
$0.73, and if the debenture holders enforce this provision of our agreement with
them, we will have to issue more shares to the debenture holders upon conversion
of the debentures and the anti-dilutive  provisions  contained in our agreements
with Gryffindor will become operative. If these anti-dilutive  provisions become
operative,  we may be required to issue a significant number of shares of common
stock to Gryffindor. We will not receive any additional proceeds from Gryffindor
for the issuance of these shares of common stock.  Other  financings that we may
obtain may  contain  similar  provisions,  and the  existence  of  anti-dilutive
provisions in some of our existing  financings may make it more difficult for us
to obtain financing in the future.  These types of transactions  which cause the
issuance of our common stock in  connection  with the exercise or  conversion of
securities  may result in substantial  dilution to the remaining  holders of our
common stock.

Financings that may be available to us frequently involve high selling costs.

     Because of our limited operating history, low market  capitalization,  thin
trading volume and other factors,  we have historically had to pay high costs to
obtain financing and expect to continue to be required to pay high costs for any
future  financings in which we may participate.  For example,  our past sales of
shares and our sale of the debentures have involved the payment of finder's fees
or placement  agent's fees.  These types of fees are typically  higher for small
companies  like us. Payment of fees of this type reduces the amount of cash that
we receive from a financing  transaction  and makes it more  difficult for us to
obtain the amount of financing that need to maintain and expand our operations.

                                       25

<PAGE>


We have not had  earnings,  but if earnings  were  available,  it is our general
policy to retain any earnings for use in our operation.

     We have never  declared  or paid cash  dividends  on our common  stock.  We
currently  intend to retain all of our future  earnings,  if any, for use in our
business and therefore do not anticipate paying any cash dividends on our common
stock in the foreseeable future.

Our stock price is below $5.00 per share and is treated as a "Penny Stock" which
places restrictions on broker-dealers recommending the stock for purchase.

     Our common stock is defined as "penny stock" under the Exchange Act and its
rules.  The SEC has adopted  regulations  that define  "penny  stock" to include
common  stock that has a market  price of less than $5.00 per share,  subject to
certain exceptions. These rules include the following requirements:

     o    broker-dealers  must  deliver,  prior to the  transaction a disclosure
          schedule prepared by the SEC relating to the penny stock market;

     o    broker-dealers   must   disclose  the   commissions   payable  to  the
          broker-dealer and its registered representative;

     o    broker-dealers must disclose current quotations for the securities;

     o    if a broker-dealer is the sole  market-maker,  the broker-dealer  must
          disclose this fact and the  broker-dealers  presumed  control over the
          market; and

     o    a  broker-dealer  must furnish its customers  with monthly  statements
          disclosing  recent price  information for all penny stocks held in the
          customer's  account and  information  on the  limited  market in penny
          stocks.

     Additional sales practice  requirements are imposed on  broker-dealers  who
sell penny stocks to persons other than  established  customers  and  accredited
investors.  For  these  types of  transactions,  the  broker-dealer  must make a
special  suitability  determination for the purchaser and must have received the
purchaser's  written  consent to the  transaction  prior to sale.  If our common
stock remains subject to these penny stock rules these  disclosure  requirements
may have the effect of reducing the level of trading  activity in the  secondary
market for our common stock. As a result, fewer broker-dealers may be willing to
make a market in our stock,  which could affect a shareholder's  ability to sell
their shares.

Item 8.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.

     The information called for by this item is incorporated by reference to our
Current  Report on Form 8-K which was filed with the SEC on January 3, 2003,  as
amended on January 9, 2003 and March 25, 2004.


Item 8A. Controls and Procedures

(a)  Evaluation  of  Disclosure  Controls and  Procedures.  Our chief  executive
     officer and chief financial officer have evaluated the effectiveness of the
     design and operation of our  "disclosure  controls and procedures" (as that
     term is defined in Rule  13a-14(c)  under the Exchange  Act) as of the last
     day of the period  covered by this Annual  Report on Form 10-KSB.  Based on
     that evaluation,  the chief executive  officer and chief financial  officer
     have concluded that our disclosure controls and procedures are effective to
     ensure  that  material  information  relating  to us and  our  consolidated
     subsidiaries  is made  known  to  such  officers  by  others  within  these
     entities,  particularly during the period this Annual Report on Form 10-KSB
     was  prepared,  in order  to  allow  timely  decisions  regarding  required
     disclosure.

(b)  Changes in Internal  Controls.  There was no change in our internal control
     over  financial  reporting  identified  in connection  with the  evaluation
     during our fourth fiscal quarter that materially affected, or is reasonably
     likely to materially affect, our internal control over financial reporting.

                                       26

<PAGE>


                                    Part III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act.

Audit Committee Financial Expert

     We do not currently have an "audit committee  financial expert," as defined
under the rules of the SEC. Because the board of directors consists of only four
members and our operations  remain  amenable to oversight by a limited number of
directors,  the board has not delegated any of its functions to committees.  The
entire board of directors acts as our audit committee as permitted under Section
3(a)(58)(B) of the Exchange Act. We believe that all of the members of the Audit
Committee are qualified to serve on the  committee and have the  experience  and
knowledge to perform the duties  required of the  committee.  We do not have any
independent  directors who would qualify as an audit committee financial expert,
as defined.  We believe that it has been, and may continue to be, impractical to
recruit such a director unless and until we are significantly larger.

Code of Ethics

     We have not  adopted a formal Code of Ethics.  Since our  company  only has
four employees,  we expect those employees to adhere to high standards of ethics
without the need for a formal policy.

     The  remainder of the  information  called for by this item with respect to
our  executive  officers  as of March 25,  2004 is  furnished  in Part I of this
report under the heading Personnel--Executive  Officers." The information called
for by this item, to the extent it relates to our directors or to certain filing
obligations of our directors and executive officers under the federal securities
laws, is incorporated  herein by reference to the Proxy Statement for our Annual
Meeting of Stockholders to be held on May 27, 2004, which will be filed with the
SEC pursuant to Regulation 14A under the Exchange Act.

Item 10. Executive Compensation.

     The information called for by this item is incorporated herein by reference
to the Proxy  Statement for our Annual Meeting of Stockholders to be held on May
27, 2004,  which will be filed with the SEC pursuant to Regulation 14A under the
Exchange Act.

Item 11.  Security  Ownership of Certain  Beneficial  Owners and  Management and
          Related Stockholder Matters.

     The information called for by this item is incorporated herein by reference
to the Proxy  Statement for our Annual Meeting of Stockholders to be held on May
27, 2004,  which will be filed with the SEC pursuant to Regulation 14A under the
Exchange Act.

Item 12. Certain Relationships and Related Transactions.

     The information called for by this item is incorporated herein by reference
to the Proxy  Statement for our Annual Meeting of Stockholders to be held on May
27, 2004,  which will be filed with the SEC pursuant to Regulation 14A under the
Exchange Act.

Item 13. Exhibits, List and Reports on Form 8-K.

(a)  Exhibits.  Exhibits required by Item 601 of Regulation S-B are incorporated
     herein by reference  and are listed on the attached  Exhibit  Index,  which
     begins on page X-1 of this Annual Report on Form 10-KSB.

(b)  Reports on Form 8-K.  During the fiscal quarter ended December 31, 2003, we
     filed the following Current Reports on Form 8-K:

                                       27

<PAGE>

1.   On December 2, 2003, we filed a Current  Report on Form 8-K reporting  that
     we had completed a short-term unsecured debt financing.

2.   On December 15, 2003,  we filed a Current  Report on Form 8-K  reporting an
     offering of up to $1 million of restricted common stock.

Item 14. Principal Accountant Fees and Services.

     The information called for by this item is incorporated herein by reference
to the Proxy  Statement for our Annual Meeting of Stockholders to be held on May
27, 2004,  which will be filed with the SEC pursuant to Regulation 14A under the
Exchange Act.























                                       28

<PAGE>


                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                   PROVECTUS PHARMACEUTICALS, INC.


                                   By: /s/  H. Craig Dees
                                      ------------------------------------------
                                      H. Craig Dees, Ph.D.
                                      Chief Executive Officer



Date:    March 25, 2004


         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.


<TABLE>
<CAPTION>
                   Signature                                        Title                           Date
                   ---------                                        -----                           -----
<S>                                              <C>                                           <C>


/s/  H. Craig Dees
--------------------------------------------     Chief Executive Officer (principal            March 25, 2004
H. Craig Dees, Ph.D.                             executive officer) and Chairman of the
                                                 Board

/s/  Peter R. Culpepper
--------------------------------------------     Chief Financial Officer (principal financial  March 25, 2004
Peter R. Culpepper, CPA                          officer and principal accounting officer)


/s/  Timothy C. Scott
--------------------------------------------
Timothy C. Scott, Ph.D.                          President and Director                        March 25, 2004


/s/  Eric A. Wachter
--------------------------------------------     Vice President - Pharmaceuticals and          March 25, 2004
Eric A. Wachter, Ph.D.                           Director


/s/  Stuart Fuchs
--------------------------------------------     Director                                      March 25, 2004
Stuart Fuchs


</TABLE>
                                       29

<PAGE>
               Report of Independent Certified Public Accountant


Board of Directors
Provectus Pharmaceuticals, Inc.
Knoxville, Tennessee

We have  audited  the  accompanying  consolidated  balance  sheets of  Provectus
Pharmaceuticals,  Inc. a development stage company,  as of December 31, 2003 and
2002,  and the related  consolidated  statements  of  operations,  shareholders'
equity and cash flows for the year ended  December  31,  2003 and for the period
from  January 17,  2002  (inception)  to  December  31,  2002.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial  position  of  Provectus
Pharmaceuticals,  Inc.  at  December  31,  2003 and 2002 and the  results of its
operations  and its cash flows for the year ended  December 31, 2003 and for the
period from January 17, 2002  (inception)  to December 31, 2002,  in  conformity
with accounting principles generally accepted in the United States.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial   statements,   the  Company  has  reported   accumulated   losses  of
$10,753,800,  which raises  substantial doubt about its ability to continue as a
going  concern.  Management's  plans in regard to these matters are described in
Note 1. The  financial  statements  do not  include any  adjustments  that might
result from the outcome of this uncertainty.


/s/ BDO Seidman, LLP


Chicago, Illinois
March 12, 2004


















                                      F-1

<PAGE>
                         Provectus Pharmaceuticals, Inc.
                          (A Development Stage Company)
<TABLE>
<CAPTION>

                           Consolidated Balance Sheets

December 31,                                                                               2003            2002
-------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                <C>
Assets

Current Assets
     Cash                                                                       $         164,145  $      717,833
     Prepaid expenses                                                                      26,227          35,481
     Inventory                                                                             72,578               -
     Stock subscription receivable (Note 4)                                                87,875               -
     Deferred loan costs (net of amortization of $19,569 (Note 6))                        150,961               -
     Prepaid consulting expense (Note 4)                                                  420,817               -

                                                                                ---------------------------------

Total Current Assets                                                                      922,603         753,314

Equipment and Furnishings, less accumulated depreciation of $244,760 and
     $39,446 (Note 1)                                                                     121,415         471,429

Patents, net of amortization of $1,281,769 and $133,916 (Notes 1 and 2)                18,755,791      19,903,644

Other Assets                                                                               27,000          27,000
                                                                                ---------------------------------

                                                                                $      19,826,809  $   21,155,387
                                                                                =================================

Liabilities and Shareholders' Equity

Current Liabilities
     Accounts payable - trade                                                   $         100,640  $       98,874
     Accrued compensation                                                                 352,500          19,781
     Accrued expenses                                                                      57,549          50,000
     Accrued interest                                                                     100,021           8,000
     Short-term convertible debt (net of debt discount of $442,623 (Note 6))               57,377               -
     Current maturities of long-term convertible debt (net of debt discount
         of $57,052 (Note 6))                                                             968,907               -

                                                                                ---------------------------------

Total Current Liabilities                                                               1,636,994         176,655

Loan From Shareholder (Note 7)                                                            149,000         109,000

Convertible Debt (net of debt discount of $120,344 (Note 6))                                    -         879,656

Shareholders' Equity (Notes 2, 4, 5, and 6)
     Common stock; par value $.001 per share; 100,000,000 shares authorized;
         10,867,509 and 9,423,689 shares issued and outstanding, respectively              10,868           9,424
     Paid-in capital                                                                   28,783,747      27,102,406
     Deficit accumulated during the development stage                                 (10,753,800)     (7,121,754)
                                                                                ---------------------------------
Total Shareholders' Equity                                                             18,040,815      19,990,076

                                                                                ---------------------------------

                                                                                $      19,826,809  $   21,155,387
                                                                                =================================
</TABLE>



                                 See accompanying notes to financial statements.

                                      F-2
<PAGE>


                         Provectus Pharmaceuticals, Inc.
                          (A Development Stage Company)


                      Consolidated Statements of Operations


<TABLE>
<CAPTION>


                                                                                                                    Cumulative
                                                                                             For the Period        Amounts from
                                                                                            January 17, 2002     January 17, 2002
                                                                           Year Ended        (inception) to      (inception) to
                                                                          December 31,        December 31,         December 31,
                                                                             2003               2002                  2003
----------------------------------------------------------             ---------------      ---------------     -----------------
<S>                                                                    <C>                  <C>                 <C>

Operating Expenses
     Research and development                                          $      724,924       $       50,714      $        775,638
     General and administrative (including noncash stock
         and warrant compensation of $280,621 in 2003 and
         $6,436,000 in 2002)                                                1,582,250            6,922,946             8,505,196
     Amortization of patents                                                1,147,853              133,916             1,281,769
                                                                       ---------------      ---------------     -----------------

Total operating loss                                                       (3,455,027)          (7,107,576)          (10,562,603)

Gain on sale of fixed assets                                                   55,000                    -                55,000

Interest expense                                                             (232,019)             (14,178)             (246,197)
                                                                       ---------------      ---------------     -----------------

Net Loss Applicable to Common Shareholders                             $   (3,632,046)      $   (7,121,754)     $    (10,753,800)
                                                                       ===============      ===============     =================

Basic and Diluted Loss Per Common Share                                $        (0.37)      $        (0.89)
                                                                       ===============      ===============
Weighted Average Number of Common Shares
     Outstanding - Basis and Diluted                                        9,706,064            7,981,876
                                                                       ===============      ===============

</TABLE>


                                 See accompanying notes to financial statements.




                                      F-3
<PAGE>


                         Provectus Pharmaceuticals, Inc.
                          (A Development Stage Company)


                 Consolidated Statements of Shareholders' Equity



<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                        Common Stock
                                                                 ------------------------
                                                                  Number of                   Paid-in     Accumulated
                                                                   Shares       Par Value     Capital       Deficit         Total
                                                                 ----------    ----------   -----------   ----------    ------------
<S>                                                              <C>           <C>          <C>           <C>           <C>
Balance, at January 17, 2002                                             -     $      -     $         -   $        -    $         -

     Issuance to founding shareholders                           6,000,000        6,000          (6,000)           -              -
     Sale of stock                                                  50,000           50          24,950            -         25,000
     Issuance of stock to employees                                510,000          510         931,490            -        932,000
     Issuance of stock for services                                120,000          120         359,880            -        360,000
     Net loss for the period from January 17, 2002 (inception)
         to April 23, 2002 (date of reverse merger)                      -            -               -   (1,316,198)    (1,316,198)

                                                                 ---------     ---------    -----------   -----------     ----------
Balance, at April 23, 2002                                       6,680,000        6,680       1,310,320   (1,316,198)           802

     Shares issued in reverse merger                               265,763          266          (3,911)           -         (3,645)
     Issuance of stock for services                              1,900,000        1,900       5,142,100            -      5,144,000
     Purchase and retirement of stock                             (400,000)        (400)        (47,600)           -        (48,000)
     Stock issued for acquisition of Valley Pharmaceuticals        500,007          500      20,547,935            -     20,548,435
     Exercise of warrants                                          452,919          453               -            -            453
     Warrants issued in connection with convertible debt                 -            -         126,587            -        126,587
     Stock and warrants issued for acquisition of Pure-ific         25,000           25          26,975            -         27,000
     Net loss for the period from April 23, 2002 (date of reverse
         merger) to December 31, 2002                                    -            -               -   (5,805,556)    (5,805,556)
                                                                 ---------     --------      ----------   -----------    -----------
Balance, at December 31, 2002                                    9,423,689        9,424      27,102,406   (7,121,754)    19,990,076
</TABLE>















                                      F-4

<PAGE>

<TABLE>
<CAPTION>

                                                                        Common Stock
                                                                 --------------------------
                                                                  Number of                   Paid-in     Accumulated
                                                                    Shares     Par Value      Capital       Deficit         Total
                                                                 ---------     ---------    -----------  ------------ --------------
<S>                                                              <C>           <C>          <C>          <C>          <C>
Balance, at December 31, 2002                                    9,423,689     $  9,424     $27,102,406  $(7,121,754) $  19,990,076

     Issuance of stock for services                                764,000          764         239,036            -        239,800
     Issuance of warrants for services                                   -            -         145,479            -        145,479
     Stock to be issued for services                                     -            -         281,500            -        281,500
     Employee compensation from stock options                            -            -          34,659            -         34,659
     Issuance of stock pursuant to Regulation S                    679,820          680         379,667            -        380,347
     Issuance of convertible debt with warrants                          -            -         601,000            -        601,000
     Net loss for the year ended December 31, 2003                       -            -               -   (3,632,046)    (3,632,046)

                                                                ----------     ---------    -----------  ------------  -------------

Balance, at December 31, 2003                                   10,867,509     $ 10,868     $28,783,747  ($10,753,800) $ 18,040,815
                                                                ==========     =========    ===========  ============  =============
</TABLE>


                                 See accompanying notes to financial statements.













                                      F-5



<PAGE>


                         Provectus Pharmaceuticals, Inc.
                          (A Development Stage Company)


                      Consolidated Statements of Cash Flows




<TABLE>
<CAPTION>
                                                                                                                   Cumulative
                                                                                           For the Period         Amounts from
                                                                                          January 17, 2002      January 17, 2002
                                                                    Year Ended             (inception) to        (inception) to
                                                                December 31, 2003        December 31, 2002     December 31, 2003
                                                                -----------------        -----------------     -----------------
<S>                                                             <C>                      <C>                   <C>
Cash Flows From Operating Activities
     Net loss                                                   $ (3,632,046)            $ (7,121,754)         $(10,753,800)
     Adjustments to reconcile net loss to net cash used in
         operating activities
         Depreciation                                                228,315                   39,446               267,761
         Amortization of patents                                   1,147,853                  133,916             1,281,769
         Amortization of original issue discount                     120,669                    6,243               126,912
         Amortization of deferred loan costs                          19,569                        -                19,569
         Compensation through issuance of stock                            -                  932,000               932,000
         Compensation through issuance of stock options               34,659                        -                34,659
         Issuance of stock for services                              144,650                5,504,000             5,648,650
         Issuances of warrants for services                          101,312                        -               101,312
         Gain on sale of fixed assets                                (55,000)                       -               (55,000)
         (Increase) decrease in assets net of acquisitions
            Prepaid expenses                                           9,254                  (35,481)              (26,227)
            Inventory                                                (72,578)                       -               (72,578)
         Increase (decrease) in liabilities
            Accounts payable                                           1,766                   95,229                96,995
            Accrued expenses                                         432,289                   77,781               510,070
                                                                  -----------            -------------           -----------
Net cash used in operating activities                             (1,519,288)                (368,620)           (1,887,908)
                                                                  -----------            -------------           -----------
Cash Flows From Investing Activities
     Proceeds from sale of fixed asset                               180,000                        -               180,000
     Capital expenditures                                             (3,301)                       -                (3,301)

                                                                  -----------           --------------           -----------
Net cash provided by investing activities                            176,699                        -               176,699
                                                                  -----------           --------------           -----------
Cash Flows From Financing Activities
     Proceeds from loans from shareholder                             40,000                  109,000               149,000
     Proceeds from convertible debt                                  525,959                1,000,000             1,525,959
     Proceeds from sale of common stock                              292,472                   25,000               317,472
     Proceeds from exercise of warrants                                    -                      453                   453
     Cash paid for deferred loan costs                               (69,530)                       -               (69,530)
     Purchase and retirement of common stock                               -                  (48,000)              (48,000)
                                                                  -----------          ---------------           -----------
Net cash provided by financing activities                            788,901                1,086,453             1,875,354
                                                                  -----------          ---------------           -----------
</TABLE>

                                    (Cont'd)
                                      F-6

<PAGE>

                         Provectus Pharmaceuticals, Inc.
                          (A Development Stage Company)


                      Consolidated Statements of Cash Flows



<TABLE>
<CAPTION>
                                                                                                                        Cumulative
                                                                                               For the Period         Amounts from
                                                                                              January 17, 2002      January 17, 2002
                                                                          Year Ended            (inception) to       (inception) to
                                                                   December 31, 2003         December 31, 2002     December 31, 2003
                                                                   ------------------        -----------------    ------------------
<S>                                                                 <C>                      <C>                  <C>

Net Change in Cash                                                  $       (553,688)        $         717,833    $          164,145

Cash, at beginning of period                                                 717,833                         -                     -
                                                                    -----------------        -----------------    ------------------
Cash, at end of period                                              $        164,145         $         717,833    $          164,145
                                                                    =================        =================    ==================
</TABLE>

Supplemental Schedule of Noncash Investing and Financing
     Activities
     2003
         Issuance or commitment to issue stock and warrants
              for prepaid services of $666,779.
         Stock subscription receivable recorded of $87,875.
         Discount on convertible debt with warrants of
              $500,000.
         Deferred loan costs through the issuance of warrants
              of $101,000.
     2002
         Acquisition of Valley Pharmaceuticals, Inc. through
              the issuance of 500,007 shares of the
              Company's common stock.  The value of the
              assets purchased was $20,548,435.

         Acquisition of Pure-ific through the issuance of
              common stock valued at $12,500 and warrants
              valued at $14,500. Assets valued at $27,000
              were acquired.

         Discount recorded on convertible debt with warrants
              of $126,587.




                                 See accompanying notes to financial statements.








                                      F-7
<PAGE>


                         Provectus Pharmaceuticals, Inc.
                          (A Development Stage Company)


                   Notes to Consolidated Financial Statements





1.   Organization and Significant Accounting Policies

     Nature of Operations

     Provectus  Pharmaceuticals,   Inc.(together  with  its  subsidiaries,   the
     "Company")is a development-stage biopharmaceutical company that is focusing
     on developing  minimally  invasive  products for the treatment of psoriasis
     and other topical diseases,  cancer,  and certain laser device  technology.
     Through a previous  acquisition,  the  Company  also  intends  to  develop,
     manufacture, and distribute over-the-counter  pharmaceuticals.  To date the
     Company has no material revenues.

     Liquidity and Basis of Presentation

     The  Company  will  continue to require  additional  capital to develop its
     products and develop  sales and  distribution  channels  for its  products.
     However, the Company believes it may not have sufficient working capital to
     fund  operations  for the entire  fiscal year  ending  December  31,  2004.
     Management believes there are a number of potential  alternatives available
     to meet the Company's continuing capital requirements, including proceeding
     as rapidly as possible with the  development of  over-the-counter  products
     that can be sold with a minimum of  regulatory  compliance  and  developing
     revenue sources  through  licensing of the existing  intellectual  property
     portfolio.  In addition,  the Company is pursuing actively  additional debt
     and/or equity capital in order to support ongoing operations.  There can be
     no assurance that the Company will be able to obtain sufficient  additional
     working capital on commercially reasonable terms or conditions, or at all.

     The  accompanying  financial  statements  have been  prepared  assuming the
     Company will continue as a going concern.  Continuing as a going concern is
     dependent  upon  successfully   obtaining  additional  working  capital  as
     described above. The financial statements do not include any adjustments to
     reflect   the   possible   future   effects  on  the   recoverability   and
     classification  of assets and amounts and  classifications  of  liabilities
     that might result from the outcome of this uncertainty.

     Principles of Consolidation

     Intercompany   balances   and   transactions   have  been   eliminated   in
     consolidation.




                                      F-8


<PAGE>

     Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.

     Inventory

     Inventory, consisting principally of finished goods, is stated at the lower
     of cost or market. Cost is determined using a first-in, first-out method.

     Deferred Loan Costs

     The costs related to the issuance of the convertible debt, including lender
     fees, legal fees, due diligence  costs,  escrow agent fees and commissions,
     have been recorded as deferred loan costs and are being  amortized over the
     term of the loan using the effective  interest  method.  Additionally,  the
     Company  recorded  debt  discounts   related  to  warrants  and  beneficial
     conversion features issued in connection with the debt.

     Equipment and Furnishings

     Equipment  and  furnishings  acquired  through  the  acquisition  of Valley
     Pharmaceuticals,  Inc. (Note 2) have been stated at carry over basis. Other
     equipment and furnishings are stated at cost.  Depreciation of equipment is
     provided for using the straight-line method over the estimated useful lives
     of the assets.  Computers and  laboratory  equipment are being  depreciated
     over five years,  furniture and fixtures are being  depreciated  over seven
     years. Depreciation expense was $228,315 in 2003 and $39,446 in 2002.

     Long-Lived Assets

     The  Company  reviews  the  carrying  values of its  long-lived  assets for
     possible impairment whenever an event or change in circumstances  indicates
     that  the  carrying  amount  of the  assets  may  not be  recoverable.  Any
     long-lived  assets  held for  disposal  are  reported at the lower of their
     carrying amounts or fair value less cost to sell.

     Patent Costs

     Internal  patent  costs  are  expensed  in  the  period  incurred.  Patents
     purchased  are  capitalized  and amortized  over the remaining  life of the
     patent.

     Patents at December  31, 2003 were  acquired as a result of the merger with
     Valley Pharmaceuticals, Inc. ("Valley") (Note 2). The majority shareholders
     of  Provectus  also  owned all of the shares of Valley  and  therefore  the
     assets  acquired from Valley were  recorded at their carry over basis.  The
     patents are being amortized over the remaining lives of the patents,  which
     range from 12-16 years.  Annual  amortization of the patents is expected to
     be approximately $1,148,000 per year for the next five years.

     Research and Development

     Research and  development  costs are charged to expense when  incurred.  An
     allocation of payroll  expenses was made based on a percentage  estimate of
     time spent.  The  research and  development  costs  include the  following:
     consulting  -  IT,  depreciation,   lab  equipment  repair,  lab  supplies,
     insurance,  legal - patents,  office supplies,  payroll expenses,  rental -
     building,  repairs,  software,  taxes and fees,  and  utilities.  The total
     research and development expenses incurred in 2003 are $724,924.  The total
     research and development expenses incurred in 2002 are $50,714.

     Income Taxes

     The Company recognizes deferred tax assets and liabilities for the




                                      F-9


<PAGE>
     expected future tax consequences of temporary  differences  between the tax
     basis and financial reporting basis of certain assets and liabilities based
     upon currently enacted tax rates expected to be in effect when such amounts
     are realized or settled.

     Since  inception  of the  Company on January  17,  2002,  the  Company  has
     generated tax net operating losses of approximately $2.7 million,  expiring
     in 2022 and 2023.  The Company  has not  recorded an income tax benefit for
     the net  operating  losses as the Company is in the  development  stage and
     realization of the losses is not considered more likely than not. An income
     tax valuation  allowance has been provided for the losses realized to date.
     The  amortization  of  patents  and  noncash  stock   compensation  is  not
     deductible  for tax  purposes.  In addition,  the Company may have acquired
     certain net operating losses in its acquisition of Valley  Pharmaceuticals,
     Inc. (Note 2).  However,  the amount of these net operating  losses has not
     been determined and even if recorded the amount would be fully reserved.

     Basis and Diluted Loss Per Common Share

     Basic and diluted  loss per common  share and diluted loss per common share
     is computed based on the weighted Per Common Share average number of common
     shares  outstanding.  Loss per share  excludes  the  impact of  outstanding
     options, warrants, and convertible debt as they are antidilutive. Potential
     common  shares  excluded  from the  calculation  at  December  31, 2003 are
     356,250  options,  905,000  warrants and 2,218,741 shares issuable upon the
     conversion of  convertible  debt and accrued  interest.  Additionally,  the
     Company is  committed to issue  80,000  warrants.  Included in the weighted
     average number of common shares outstanding are 416,606 shares committed to
     be issued but not outstanding at December 31, 2003.

     Financial Instruments

     The carrying amounts reported in the consolidated  balance sheets for cash,
     accounts payable and accrued expenses approximate fair value because of the
     short-term nature of these amounts.  The Company believes the fair value of
     its fixed-rate borrowings approximates the market value.

     Stock Options

     The Company has adopted the  disclosure-only  provisions  of  Statement  of
     Financial  Accounting  Standards  No.  123,  "Accounting  for  Stock  Based
     Compensation"  (SFAS No. 123), but applies the intrinsic value method where
     compensation  expense,  if any, is recorded as the  difference  between the
     exercise price and the market price, as set forth in Accounting  Principles
     Board Opinion No. 25 for stock options  granted to employees and directors.
     Options granted to  non-employees  are accounted for under SAS 123. SAS 123
     requires options to be accounted for based on their fair value.

     On May 29, 2003,  the Company issued 452,000 stock options to employees and
     directors.  The options vest over three years with 188,000  options vesting
     on the date of grant.  The exercise  prices range from $0.26 to $0.60.  The
     exercise price for 352,000  options  granted was less than the market price
     on the date of grant. Accordingly, compensation






                                      F-10

<PAGE>


     expense of $34,659 has been recorded in 2003.

     For stock  options  granted to  employees  during  2003,  the  Company  has
     estimated  the fair value of each option  granted  using the  Black-Scholes
     option pricing model with the following assumptions:


                                                                          2003
                                                                        --------

         Weighted average fair value per options granted *              $ 0.60

         Significant assumptions (weighted average)
             Risk-free interest rate at grant date                         2.0%
             Expected stock price volatility                               150%
             Expected option life (years)                                   10

          * The  weighted  average  fair  value for both the  options  less than
          market  price at date of grant and  options  equal to market  price at
          date of grant was $0.60.

     If the Company had elected to recognize  compensation  expense based on the
     fair value at the grant dates,  consistent  with the method  prescribed  by
     SFAS No. 123,  net loss per share would have been  changed to the pro forma
     amount indicated below:


                                                                 For the Period
                                                                January 17, 2002
                                                Year Ended          (inception)
                                               December 31,      to December 31,
                                                     2003                 2002
                                              ---------------    ---------------

  Net loss, as reported                       $    (3,632,046)   $  (7,121,754)
  Add stock-based employee compensation
      expense included in reported net loss            34,659                -
  Less total stock-based employee compensation
      expense determined under the fair
      value based method for all awards              (132,663)               -
                                              ----------------   ---------------

  Pro forma net loss                          $    (3,730,050)   $   (7,121,754)
                                              ================   ===============

  Basic and diluted loss per common share,
       as reported                           $        (0.37)    $        (0.89)


  Basic and diluted loss per common share,
       pro forma                              $       (0.38)    $        (0.89)



     Reclassifications

     Certain  2002  amounts  have been  reclassified  to  conform  with the 2003
     presentation.

     Recent Accounting Pronouncements

     In January  2003,  FASB  issued  Interpretation  No. 46,  Consolidation  of
     Variable  Interest  Entities  ("FIN 46"). In general,  a variable  interest
     entity is a corporation,  partnership,  trust or any other legal  structure
     used for business  purposes that either (a) does not have equity  investors
     with  voting  rights  or (b)  has  equity  investors  that  do not  provide
     sufficient  financial  resources for the entity to support its  activities.
     FIN 46 requires


                                      F-11

<PAGE>

     certain  variable  interest  entities  to be  consolidated  by the  primary
     beneficiary of the entity if the investors do not have the  characteristics
     of a controlling  financial  interest or do not have  sufficient  equity at
     risk  for  the  entity  to  finance  its  activities   without   additional
     subordinated  financial  support  from  other  parties.  The  consolidation
     requirements  of FIN 46 apply  immediately  to variable  interest  entities
     created after January 31, 2003.  The Company  adopted the provisions of FIN
     46  effective  February 1, 2003 and such  adoption  did not have a material
     impact on its consolidated  financial  statements since it currently has no
     variable interest entities.  In December 2003, the FASB issued FIN 46R with
     respect to variable  interest  entities  created  before  January 31, 2003,
     which among other  things,  revised  the  implementation  date to the first
     fiscal  year or  interim  period  ending  after  March 15,  2004,  with the
     exception  of  Special  Purpose   Entities   ("SPE").   The   consolidation
     requirements  apply to all SPE's in the first fiscal year or interim period
     ending after December 15, 2003.  The Company  adopted the provisions of FIN
     46R  effective  December 31, 2003 and such adoption did not have a material
     impact on its consolidated  financial  statements since it currently has no
     SPE's.

     In April 2003, FASB issued Statement of Financial  Accounting Standards No.
     149,  Amendment  of Statement  133 on  Derivative  Instruments  and Hedging
     Activities  ("SFAS  149").  SFAS 149 amends and  clarifies  accounting  for
     derivative  instruments,  including certain derivative instruments embedded
     in other contracts,  and for hedging activities under SFAS 133. SFAS 149 is
     effective for contracts and hedging  relationships entered into or modified
     after  June 30,  2003.  The  Company  adopted  the  provisions  of SFAS 149
     effective June 30, 2003 and such adoption did not have a material impact on
     its  consolidated  financial  statements  since the Company has not entered
     into any derivative or hedging transactions.

     In May 2003, FASB issued  Statement of Financial  Accounting  Standards No.
     150, Accounting for Certain Financial  Instruments with  Characteristics of
     Both  Liabilities and Equity ("SFAS 150").  SFAS 150 establishes  standards
     for how an issuer  classifies and measures  certain  financial  instruments
     with  characteristics  of both debt and  equity and  requires  an issuer to
     classify the following instruments as liabilities in its balance sheet:

     o    a  financial   instrument  issued  in  the  form  of  shares  that  is
          mandatorily  redeemable and embodies an unconditional  obligation that
          requires  the  issuer  to redeem it by  transferring  its  assets at a
          specified  or  determinable  date or upon an event  that is certain to
          occur;

     o    a financial instrument, other than an outstanding share, that embodies
          an obligation to repurchase the issuer's equity shares,  or is indexed
          to  such  an  obligation,  and  requires  the  issuer  to  settle  the
          obligation by transferring assets; and

     o    a financial instrument that embodies an unconditional  obligation that
          the issuer  must  settle by  issuing a  variable  number of its equity
          shares if the  monetary  value of the  obligation  is based  solely or
          predominantly  on (1) a  fixed  monetary  amount,  (2)  variations  in
          something other than the fair value of the issuer's equity shares,  or
          (3) variations  inversely  related to changes in the fair value of the
          issuer's equity shares.

                                      F-12

<PAGE>

     In November  2003,  FASB issued FASB Staff Position No. 150-3 ("FSS 150-3")
     which deferred the effective dates for applying certain  provisions of SFAS
     150 related to  mandatorily  redeemable  financial  instruments  of certain
     non-public  entities  and certain  mandatorily  redeemable  non-controlling
     interests for public and non-public  companies.  For public entities,  SFAS
     150 is effective for mandatorily  redeemable financial  instruments entered
     into or  modified  after  May  31,  2003  and is  effective  for all  other
     financial  instruments as of the first interim period  beginning after June
     15, 2003. For mandatorily redeemable  non-controlling  interests that would
     not  have  to be  classified  as  liabilities  by a  subsidiary  under  the
     exception  in  paragraph  9  of  SFAS  150,  but  would  be  classified  as
     liabilities by the parent, the classification and measurement provisions of
     SFAS 150 are deferred indefinitely.  The measurement provisions of SFAS 150
     are  also   deferred   indefinitely   for  other   mandatorily   redeemable
     non-controlling  interests  that were issued before  November 4, 2003.  For
     those  instruments,  the  measurement  guidance for  redeemable  shares and
     non-controlling  interests  in other  literature  shall  apply  during  the
     deferral period.  The adoption of FAS 150 did not have a material impact on
     the consolidated financial statements of the Company.

 2.  Recapitalizaiton and Merger.

     On April 23, 2002, Provectus Pharmaceutical, Inc., a Nevada corporation and
     a Merger "blank check" public company, acquired Provectus  Pharmaceuticals,
     Inc., a privately held Tennessee  corporation ("PPI"), by issuing 6,680,000
     shares of common stock of Provectus  Pharmaceutical  to the stockholders of
     PPI in exchange for all of the issued and  outstanding  shares of PPI, as a
     result of which  Provectus  Pharmaceutical  changed  its name to  Provectus
     Pharmaceuticals,  Inc.  (the  "Company")  and PPI  became  a  wholly  owned
     subsidiary of the Company. Prior to the transaction, PPI had no significant
     operations and had not generated any revenues.

     For financial reporting purposes, the transaction has been reflected in the
     accompanying  financial  statements  as a  recapitalization  of PPI and the
     financial  statements reflect the historical  financial  information of PPI
     which was  incorporated  on January 17,  2002.  Therefore,  for  accounting
     purposes,  the  shares  recorded  as issued in the  reverse  merger are the
     265,763 shares owned by Provectus Pharmaceuticals,  Inc. shareholders prior
     to the reverse merger.

     The   issuance  of   6,680,000   shares  of  common   stock  of   Provectus
     Pharmaceutical,  Inc. to the stockholders of PPI in exchange for all of the
     issued  and  outstanding  shares  of PPI was  done in  anticipation  of PPI
     acquiring  Valley  Pharmaceuticals,   Inc,  which  owned  the  intellectual
     property to be used in the Company's operations.

     On November 19, 2002, the Company  acquired  Valley  Pharmeceuticals,  Inc,
     ("Valley") a privately-held  Tennessee  corporation by merging PPI with and
     into Valley and naming the surviving company Xantech Pharmaceuticals,  Inc.
     Valley had no  significant  operations  and had not generated any revenues.
     Valley was formed to hold certain  intangible assets which were transferred
     from an entity  which was  majority  owned by the  shareholders  of Valley.
     Those  shareholders  gave up their shares of the other  company in exchange
     for the  intangible  assets in a non-pro  rata  split off.  The  intangible
     assets were valued  based on the market  price of the stock given up in the
     split-off. The shareholders of Valley also owned the majority of the shares
     of the Company at the time of the  transaction.  The Company issued 500,007
     shares of stock in exchange  for the net assets of Valley which were valued
     at  $20,548,435  and included  patents of  $20,037,560  and  equipment  and
     furnishings of $510,875.


                                      F-13

<PAGE>

3.   Commitments

     At December 31, 2003,  the Company  leases office and  laboratory  space in
     Knoxville,  Tennessee,  on a  month-by-month  basis.  The Company  also has
     equipment operating leases.

     Minimum future rental  payments under  noncancellable  equipment  operating
     leases are as follows:

  Year ending December 31,                                             Leases
  ------------------------------------------------------------------------------
        2004                                                      $     15,214
        2005                                                             1,242
                                                                  --------------
        Total                                                     $     16,456
                                                                  ==============

     Total rental  expense  charged to operations  for 2003 and 2002 was $36,400
     and $10,200, respectively.

4.   Equity Transactions

     (a)  During 2002, the Company issued  2,020,000 shares of stock in exchange
          for consulting services.  These services were valued based on the fair
          market value of the stock exchanged which resulted in consulting costs
          charged to operations of $5,504,000.

     (b)  During 2002,  the Company  issued 510,000 shares of stock to employees
          in exchange for services rendered. These services were valued based on
          the fair  market  value  of the  stock  exchanged  which  resulted  in
          compensation costs charged to operations of $932,000.

     (c)  In February 2002, the Company sold 50,000 shares of stock to a related
          party in exchange for proceeds of $25,000.

     (d)  In June 2002,  the Company  issued a warrant to a  consultant  for the
          purchase  of 100,000  shares at $2.29 per share.  The  warrant is only
          exercisable  upon the  successful  introduction  of the  Company  to a
          designated pharmaceutical company.

     (e)  In October 2002, the Company purchased 400,000  outstanding  shares of
          stock  from one  shareholder  for  $48,000.  These  shares  were  then
          retired.

     (f)  On December 5, 2002,  the Company  purchased  the assets of  Pure-ific
          L.L.C, a Utah limited  liability  company,  and created a wholly owned
          subsidiary  called  Pure-ific  Corporation,  to operate the  Pure-ific
          business which consists of product formulations for Pure-ific personal
          sanitizing sprays, along with the Pure-ific trademarks.  The assets of
          Pure-ific  were acquired  through the issuance of 25,000 shares of the
          Company's  stock with a fair market value of $0.50 and the issuance of
          various warrants.  These warrants included warrants to purchase 10,000
          shares of the Company's  stock at an exercise  price of $0.50 issuable
          on the first,  second and third  anniversary dates of the acquisition.
          Accordingly,  the fair  market  value of these  warrants  of  $14,500,
          determined using the Black-Scholes  option pricing model, was recorded
          as  additional  purchase  price for the  acquisition  of the Pure-ific
          assets. In addition, warrants to purchase 80,000 shares of stock at an
          exercise price of $0.50 will be issued upon the achievement of certain
          sales targets of the Pure-ific product.  At December 31, 2003, none of
          these  targets  have  been met and  accordingly,  no costs  have  been
          recorded.

     (g)  In 2003,  the Company issued 764,000 shares to consultants in exchange
          for services rendered,  consisting of 29,000 shares issued in January,
          35,000  shares  issued in March and 700,000  shares issued in October.
          Consulting  costs charged to operations were $95,133.  At December 31,
          2003,  $144,667 has been classified as prepaid  consulting  expense as
          this amount  represents  payments  for  services to be provided in the
          future. The shares are fully vested and non-forfeitable.

     (h)  In November and December 2003, the Company  committed to issue 341,606
          shares to  consultants in exchange for services  rendered.  Consulting
          costs  charged to  operations  were  $49,517.  At December  31,  2003,
          $231,983 has been  classified  as prepaid  consulting  expense as this
          amount represents  payments for services to be provided in the future.
          The shares are fully vested and non-forfeitable.


                                      F-14

<PAGE>


     (i)  The  Company  applies  the  recognition  provisions  of SFAS No.  123,
          "Accounting  for  Stock-Based  Compensation,"  in accounting for stock
          options and warrants  issued to  nonemployees.  In January  2003,  the
          Company issued 25,000 warrants to a consultant for services  rendered.
          In February 2003, the Company issued 360,000 warrants to a consultant,
          180,000 of which were fully vested and non-forfeitable at the issuance
          and  180,000  of  which  were  cancelled  in  August  2003  due to the
          termination of the consulting contract. In September 2003, the Company
          issued  200,000  warrants to two  consultants in exchange for services
          rendered. In November 2003, the Company issued 100,000 warrants to one
          consultant in exchange for services rendered. As the fair market value
          of these  services was not readily  determinable,  these services were
          valued  based  on  the  fair  market  value,   determined   using  the
          Black-Scholes option-pricing model. Fair market value for the warrants
          ranged from $0.20 to $0.24.  Consulting  costs  charged to  operations
          were $101,312.  At December 31, 2003,  $44,167 has been  classified as
          prepaid  consulting  expense as this amount  represents  payments  for
          services to be provided in the future.  The prepaid consulting expense
          relates to warrants which are fully vested and non-forfeitable.

     (j)  In December  2003,  the  Company  commenced  an  offering  for sale of
          restricted common stock. As of December 31, 2003, the Company had sold
          874,871  shares at an average  gross  price of $1.18 per share.  As of
          December 31,  2003,  the Company has received net proceeds of $292,472
          and has recorded a stock subscription  receivable of $87,875 for stock
          subscriptions  prior to  December  31,  2003  for  which  payment  was
          received  subsequent  to  December  31,  2003.  The  transaction  is a
          Regulation S offering to foreign  investors as defined by Regulation S
          of the Securities  Act. The restricted  shares cannot be traded for 12
          months.  After the first 12 months, sales of the shares are subject to
          restrictions  under rule 144 for an additional  year.  The Company has
          engaged a placement agent to assist the offering. Costs related to the
          placement  agent of  $651,771  have  been  off-set  against  the gross
          proceeds  of  $1,032,118  and  therefore  are  reflected  as a  direct
          reduction of equity at December 31, 2003.  Subsequent  to December 31,
          2003,  an  additional   1,353,898  shares  have  been  issued  in  the
          Regulation S offering with proceeds to the Company of $587,403.


5.  Stock Incentive Plan

The Company maintains one long-term  incentive  compensation plan, the Provectus
Pharmaceuticals,  Inc. 2002 Stock Plan, which provides for the issuance of up to
2,000,000 shares of common stock pursuant to stock options,  stock  appreciation
rights,  stock purchase rights and long-term  performance  awards granted to key
employees and directors of and consultants to the Company.

                                      F-15

<PAGE>


Options  granted  under  the 2002  Stock  Plan may be  either  "incentive  stock
options"  within the  meaning of Section  422 of the  Internal  Revenue  Code or
options which are not incentive stock options. The stock options are exercisable
over a period  determined  by the Board of Directors  (through its  Compensation
Committee),  but  generally  no  longer  than 10 years  after  the date they are
granted.

The following table summarizes the options granted, exercised and outstanding as
of December 31, 2003. There were no options issued in 2002.

<TABLE>
<CAPTION>
                                                                                    Exercise          Weighted
                                                               Shares              Price Per           Average
                                                                                       Share          Exercise
                                                                                                         Price
                                                              --------        --------------          --------
<S>                                                           <C>              <C>                       <C>

Outstanding at January 1, 2003                                      -                      -                 -

Granted *                                                     452,000          $0.26 - $0.60             $0.38
Exercised                                                           -                      -                 -
Forfeited                                                     (95,750)         $0.26 - $0.32             $0.30

                                                              -------          -------------          --------

Outstanding at December 31, 2003                              356,250          $0.26 - $0.60             $0.40
                                                              =======          =============          ========

Options exercisable at
    December 31, 2003                                         187,500          $0.26 - $0.60             $0.47
                                                              =======          =============          ========
</TABLE>


* Includes  352,000  options  granted at less than market  price with a weighted
average  exercise price of $0.31 and 100,000 options granted at a price equal to
market price with a weighted average exercise price of $0.60.


The following table summarizes  information  about stock options  outstanding at
December 31, 2003.


<TABLE>
<CAPTION>

                                  Options Outstanding                 Options Exercisable
                       ----------------------------------------  ----------------------------
                                         Weighted
                           Number         Average      Weighted        Number         Weighted
                       Outstanding at   Remaining      Average     Exercisable at     Average
                        December 31,    Contractual    Exercise      December 31,     Exercise
        Exercise Price     2003           Life          Price           2003           Price
        -------------- -------------    ----------     --------     -------------     --------
<S>            <C>           <C>        <C>               <C>           <C>             <C>

              $0.26           12,500    9.58 years        $0.26          12,500         $0.26
              $0.32          243,750    9.58 years         0.32          75,000          0.32
              $0.60          100,000    9.58 years         0.60         100,000          0.60
        -------------- -------------    ----------     --------     -------------     --------

                             356,250    9.58 years        $0.40         187,500         $0.47
                       =============    ==========     ========     =============     ========
</TABLE>







                                      F-16

<PAGE>





     The  following  table  summarizes  the  warrants  granted,   exercised  and
outstanding as of December 31, 2003.
<TABLE>
<CAPTION>
                                                                                             Weighted
                                                                            Exercise          Average
                                                                            Price Per        Exercise
                                                   Warrants                  Warrant           Price
                                                  ---------               -------------      --------
<S>                                               <C>                     <C>                   <C>

Outstanding at January 1, 2003 (Note
  4(d))                                             100,000                       $2.29         $2.29
Granted                                           1,285,000               $0.25 - $1.25         $0.78
Exercised                                          (200,000)                      $0.75         $0.75
Forfeited                                          (180,000)              $0.25 - $0.50         $0.37

                                                  ---------               -------------      --------
Outstanding at December 31, 2003                  1,005,000               $0.25 - $2.29         $1.01
                                                  =========               =============      ========
Warrants exercisable at
    December 31, 2003                               905,000               $0.25 - $1.25         $0.87
                                                  =========               =============      ========
</TABLE>

At December 31, 2003 there were 80,000 warrants committed but not issued.

The  following  table  summarizes  information  about  warrants  outstanding  at
December 31, 2003.

<TABLE>
<CAPTION>

                               Warrants Outstanding                      Warrants Exercisable
                   ---------------------------------------------    -----------------------------
                                         Weighted
                          Number          Average      Weighted         Number           Weighted
                      Outstanding at     Remaining      Average      Exercisable at       Average
                        December 31,   Contractual     Exercise      December 31,        Exercise
  Exercise Price           2003             Life        Price            2003             Price
-------------------   --------------   -----------     --------     ---------------      --------
<S>           <C>            <C>              <C>         <C>               <C>             <C>

              $0.25           60,000          4.17        $0.25              60,000         $0.25
              $0.35           60,000          4.17        $0.35              60,000         $0.35
              $0.50           60,000          4.17        $0.50              60,000         $0.50
              $0.75          125,000          4.02        $0.75             125,000         $0.75
              $1.00          500,000          1.92        $1.00             500,000         $1.00
              $1.25          100,000          2.92        $1.25             100,000         $1.25
              $2.29          100,000          0.50        $2.29                   -             -
-------------------   --------------   -----------     --------     ---------------      --------

                           1,005,000          3.29        $1.01             905,000         $0.87
                      ==============   ===========     ========     ===============      ========
</TABLE>


6.   Convertible Debt.

     (a) Pursuant to a Convertible  Secured Promissory Note and Warrant Purchase
     Agreement  dated November 26, 2002 (the "Purchase  Agreement")  between the
     Company and  Gryffindor  Capital  Partners I,  L.L.C.,  a Delaware  limited
     liability  company  ("Gryffindor"),  Gryffindor  purchased the Company's $1
     million  Convertible  Secured  Promissory Note dated November 26, 2002 (the
     "Note").  The Note bears  interest at 8% per annum,  payable  quarterly  in
     arrears, and is due and payable in



                                      F-17
<PAGE>


     full on  November  26,  2004.  Subject to certain  exceptions,  the Note is
     convertible  into shares of the Company's common stock on or after November
     26, 2003,  at which time the  principal  amount of the Note is  convertible
     into common  stock at the rate of one share for each $0.737 of principal so
     converted and any accrued but unpaid interest on the Note is convertible at
     the rate of one share for each $0.55 of  accrued  but  unpaid  interest  so
     converted.

     The Company's  obligations  under the Note are secured by a first  priority
     security  interest in all of the  Company's  assets,  including the capital
     stock of the Company's  wholly owned  subsidiary  Xantech  Pharmaceuticals,
     Inc.,  a Tennessee  corporation  ("Xantech").  In addition,  the  Company's
     obligations  to  Gryffindor  are  guaranteed  by  Xantech,   and  Xantech's
     guarantee  is  secured  by a first  priority  security  interest  in all of
     Xantech's assets.

     Pursuant to the Purchase  Agreement,  the Company also issued to Gryffindor
     and to another individual Common Stock Purchase Warrants dated November 26,
     2002  (the  "Warrants"),  entitling  these  parties  to  purchase,  in  the
     aggregate,  up to 452,919  shares of common  stock at a price of $0.001 per
     share.  Simultaneously with the completion of the transactions described in
     the Purchase Agreement, the Warrants were exercised in their entirety.

     The  $1,000,000  in  proceeds  received in 2002 was  allocated  between the
     long-term  debt and the  warrants  on a  pro-rata  basis.  The value of the
     warrants was determined  using a  Black-Scholes  option pricing model.  The
     allocated  fair value of these  warrants was $126,587 and was recorded as a
     discount on the related  debt and is being  amortized  over the life of the
     debt using the  effective  interest  method.  Amortization  of $63,294  and
     $6,243 has been recorded as additional  interest expense as of December 31,
     2003 and 2002, respectively.

     In  2003,  an  additional   $25,959  was  added  to  the  convertible  debt
     outstanding.

     (b) On November 19, 2003, the Company completed a short-term unsecured debt
     financing in the aggregate  amount of $500,000.  The notes bear interest of
     8% and are due in full on November 19, 2004. The notes are convertible into
     common  shares at a  conversion  rate  equal to the lower of (i) 75% of the
     average market price for the 20 trading days ending on the 20th trading day
     subsequent to the effective  date or (ii) $0.75 per share.  Pursuant to the
     note agreements, the Company also issued warrants to purchase up to 500,000
     shares of the  Company's  common  stock at an  exercise  price of $1.00 per
     share. The warrants expire November 19, 2005.

     The  $500,000  proceeds  received  was  allocated  between the debt and the
     warrants on a pro-rata  basis.  The value of the  warrants  was  determined
     using a  Black-Scholes  option-pricing  model.  The allocated fair value of



                                      F-18


<PAGE>

     these  warrants  was $241,655 and was recorded as a discount to the related
     debt. In addition,  the conversion price was lower than the market value of
     the Company's common stock on the date of issue. As a result, an additional
     discount of $258,345 was recorded for this beneficial  conversion  feature.
     The combined debt discount of $500,000 is being  amortized over the life of
     the debt using the effective  interest method.  Amortization of $57,377 has
     been recorded as additional interest expense as of December 31, 2003.

     In conjunction  with the debt  financing,  the Company  issued  warrants to
     purchase up to 100,000 shares of the Company's  common stock at an exercise
     price of $1.25 per share in  satisfaction  of a finder's  fee. The value of
     these  warrants  was  determined  to  be  $101,000  using  a  Black-Scholes
     option-pricing model. In addition, the Company incurred debt issuance costs
     of  $69,530  which  were  payable in cash.  Total  debt  issuance  costs of
     $170,530 have been recorded as a current asset and are being amortized over
     the  life of the  debt.  Amortization  of  $19,569  has  been  recorded  as
     additional interest expense as of December 31, 2003.

7.   Loan From Shareholder

     During  2002,  a  shareholder  who is also an  employee  and  member of the
     Company's board of directors, loaned the Company $109,000. During 2003, the
     same shareholder loaned the Company an additional $40,000.  Interest on the
     loan is 5%, compounded  monthly.  Principal is due on December 31, 2009 and
     interest  is payable  quarterly  in  arrears  beginning  on June 30,  2003.
     Accrued interest and interest expense at 12/31/03 was $7,431.  There was no
     accrued interest or interest expense at 12/31/02.




                                      F-19

<PAGE>


                                  EXHIBIT INDEX

 Exhibit No.                  Description
------------                  -----------

     2.1* Agreement  and Plan of  Reorganization  dated  April 23,  2002,  among
          Provectus  Pharmaceutical,  Inc., a Nevada corporation  ("Provectus"),
          Provectus Pharmaceuticals,  Inc., a Tennessee corporation ("PPI"), and
          the  stockholders of PPI identified  therein,  incorporated  herein by
          reference to Exhibit 99 to the  Company's  Current  Report on Form 8-K
          dated April 23, 2002, as filed with the SEC on April 24, 2002.

     2.2* Agreement  and Plan of  Reorganization  dated as of November  15, 2002
          among the  Company,  PPI,  Valley  Pharmaceuticals,  Inc., a Tennessee
          corporation  formerly known as Photogen,  Inc., H. Craig Dees,  Ph.D.,
          Dees Family Foundation, Walter Fisher, Ph.D., Fisher Family Investment
          Limited  Partnership,  Walt Fisher 1998 Charitable Remainder Unitrust,
          Timothy C. Scott, Ph.D., Scott Family Investment Limited  Partnership,
          John T. Smolik, Smolik Family LLP, Eric A. Wachter, Ph.D., and Eric A.
          Wachter 1998 Charitable  Remainder  Unitrust,  incorporated  herein by
          reference to Exhibit 2.1 to the Company's  Current  Report on Form 8-K
          dated November 19, 2002, as filed with the SEC on November 27, 2002.

     2.3* Asset Purchase  Agreement dated as of December 5, 2002 among Pure-ific
          Corporation, a Nevada corporation ("Pure-ific"),  Pure-ific, L.L.C., a
          Utah  limited  liability  company,  and Avid Amiri and Daniel  Urmann,
          incorporated  herein by  reference  to  Exhibit  2.1 to the  Company's
          Current  Report on Form 8-K dated  December 5, 2002, as filed with the
          SEC on December 20, 2002.

     2.4* Stock  Purchase  Agreement  dated as of  December  5,  2002  among the
          Company,  Pure-ific,  and Avid Amiri and Daniel  Urmann,  incorporated
          herein by reference to Exhibit 2.2 to the Company's  Current Report on
          Form 8-K dated December 5, 2002, as filed with the SEC on December 20,
          2002.

     3.1  Restated Articles of Incorporation of Provectus,  incorporated  herein
          by reference to Exhibit 3.1 to the Company's  Quarterly Report on Form
          10-QSB for the fiscal  quarter  ended June 30, 2003, as filed with the
          SEC on August 14, 2003.

     3.2  Bylaws of Provectus,  incorporated  herein by reference to Exhibit 3.2
          to the  Company's  Quarterly  Report  on Form  10-QSB  for the  fiscal
          quarter ended March 31, 2003, as filed with the SEC on May 9, 2003.

     4.1  Specimen certificate for the common shares, $.001 par value per share,
          of Provectus  Pharmaceuticals,  Inc., incorporated herein by reference
          to Exhibit 4.1 to the  Company's  Annual Report on Form 10-KSB for the
          fiscal year ended  December 31,  2002,  as filed with the SEC on April
          15, 2003.

  4.2.1*  Convertible  Secured   Promissory  Note and Warrant Purchase Agreement
          dated as of  November  26, 2002  between  the  Company and  Gryffindor
          Capital  Partners I,  L.L.C.  ("Gryffindor"),  incorporated  herein by
          reference to Exhibit 4.1 to the Company's  Current  Report on Form 8-K
          dated November 26, 2002, as filed with the SEC on December 10, 2002.

  4.2.2   Letter  Agreement  dated  January  31,  2003  between  the Company and
          Gryffindor,   incorporated  by  reference  to  Exhibit  4.2.2  to  the
          Company's  Quarterly Report on Form 10-QSB for the quarter ended March
          31, 2003, as filed with the SEC on May 9, 2003.

     4.3  Amended  and  Restated  Convertible  Secured  Promissory  Note  of the
          Company dated  January 31, 2003,  issued to  Gryffindor,  incorporated
          herein by reference to Exhibit 4.3 to the Company's  Quarterly  Report
          on Form 10-QSB dated March 31,  2003,  as filed with the SEC on May 9,
          2003.

     4.4  Common Stock  Purchase  Warrant  dated  November  26, 2002,  issued to
          Gryffindor,  incorporated  herein by  reference  to Exhibit 4.3 to the
          Company's Current Report on Form 8-K dated November 26, 2002, as filed
          with the SEC on December 10, 2002.

                                      X-1

<PAGE>


     4.5  Common Stock  Purchase  Warrant  dated  November  26, 2002,  issued to
          Stuart Fuchs,  incorporated  herein by reference to Exhibit 4.4 to the
          Company's Current Report on Form 8-K dated November 26, 2002, as filed
          with the SEC on December 10, 2002.

     4.6* Stock  Pledge  Agreement  dated as of November  26,  2002  between the
          Company and  Gryffindor,  incorporated  herein by reference to Exhibit
          4.5 to the  Company's  Current  Report on Form 8-K dated  November 26,
          2002, as filed with the SEC on December 10, 2002.

     4.7  Guaranty dated November 26, 2002 from Xantech Pharmaceuticals, Inc., a
          Tennessee  corporation  and a wholly  owned  subsidiary  of  Provectus
          ("Xantech"),  to  Gryffindor,  incorporated  herein  by  reference  to
          Exhibit 4.6 to the Company's Current Report on Form 8-K dated November
          26, 2002, as filed with the SEC on December 10, 2002.

     4.8  Form  of  Security  Agreement  between  the  Company  and  Gryffindor,
          incorporated  herein by  reference  to  Exhibit  4.7 to the  Company's
          Current  Report on Form 8-K dated November 26, 2002, as filed with the
          SEC on December 10, 2002.

     4.9  Form of Patent and License Security  Agreement between the Company and
          Gryffindor,  incorporated  herein by  reference  to Exhibit 4.8 to the
          Company's Current Report on Form 8-K dated November 26, 2002, as filed
          with the SEC on December 10, 2002.

     4.10 Form of Trademark Collateral Assignment and Security Agreement between
          the  Company  and  Gryffindor,  incorporated  herein by  reference  to
          Exhibit 4.9 to the Company's Current Report on Form 8-K dated November
          26, 2002, as filed with the SEC on December 10, 2002.

     4.11 Form  of  Copyright   Security   Agreement  between  the  Company  and
          Gryffindor,  incorporated  herein by  reference to Exhibit 4.10 to the
          Company's Current Report on Form 8-K dated November 26, 2002, as filed
          with the SEC on December 10, 2002.

     4.12 Registration  Rights  Agreement  dated as of November 26, 2002 between
          the  Company  and  Gryffindor,  incorporated  herein by  reference  to
          Exhibit  4.11  to the  Company's  Current  Report  on Form  8-K  dated
          November 26, 2002, as filed with the SEC on December 10, 2002.

     4.13*Shareholders'   Agreement   dated  as  of  November   26,  2002  among
          Provectus,  Gryffindor,  H. Craig Dees, Ph.D., Dees Family Foundation,
          Walter Fisher,  Ph.D.,  Fisher Family Investment Limited  Partnership,
          Walt  Fisher 1998  Charitable  Remainder  Unitrust,  Timothy C. Scott,
          Ph.D.,  Scott Family Investment Limited  Partnership,  John T. Smolik,
          Smolik Family LLP, Eric A.  Wachter,  Ph.D.,  and Eric A. Wachter 1998
          Charitable  Remainder  Unitrust,  incorporated  herein by reference to
          Exhibit  4.12  to the  Company's  Current  Report  on Form  8-K  dated
          November 26, 2002, as filed with the SEC on December 10, 2002.

     4.14*Warrant  Agreement dated as of December 5, 2002 among Provectus,  Avid
          Amiri and Daniel Urmann,  incorporated  herein by reference to Exhibit
          4.1 to the  Company's  Current  Report on Form 8-K dated  December  5,
          2002, as filed with the SEC on December 20, 2002.

     4.15 Form  of  Warrant   issuable   pursuant  to  the  Warrant   Agreement,
          incorporated  herein by  reference  to  Exhibit  4.2 to the  Company's
          Current  Report on Form 8-K dated  December 5, 2002, as filed with the
          SEC on December 20, 2002.

     4.16*Promissory  Note of the Company  dated  December 31,  2002,  issued to
          Eric A. Wachter,  incorporated  herein by reference to Exhibit 4.16 to
          the  Company's  Annual Report on Form 10-KSB for the fiscal year ended
          December 31, 2002, as filed with the SEC on April 15, 2003.

                                      X-2

<PAGE>


     4.17*Common  Share  Purchase  Warrant  dated  January 29,  2003,  issued to
          Investor-Gate.com, incorporated herein by reference to Exhibit 4.17 to
          the Company's  Quarterly  Report on Form 10-QSB for the fiscal quarter
          ended March 31, 2003, as filed with the SEC on May 9, 2003.

     4.18 Form of 8% Convertible  Debenture  incorporated herein by reference to
          Annex I to Exhibit  10.16 to the Company's  Registration  Statement on
          Form S-2, as filed with the SEC on February 12, 2004.

     4.19 Form of  Warrant  incorporated  herein  by  reference  to  Annex IV to
          Exhibit 10.16 to the Company's  Registration Statement on Form S-2, as
          filed with the SEC on February 12, 2004.

     4.20 Registration  Rights  Agreement  dated as of November  19, 2003 by and
          among the Company and the  investors  named  therein  incorporated  by
          reference to Annex IV to Exhibit 10.16 to the  Company's  Registration
          Statement on Form S-2, as filed with the SEC on February 12, 2004.

     4.21 Registration  Rights  Agreement  dated as of  September 4, 2003 by and
          among  the  Company  and  Bruce A.  Cosgrove  and  George  F.  Martin,
          incorporated  herein by  reference  to  Exhibit  4.4 to the  Company's
          Registration  Statement on Form S-2, as filed with the SEC on February
          12, 2004.

     4.22 Form of Warrant issued to selling  shareholders  other than holders of
          8% Convertible Debentures, incorporated herein by reference to Exhibit
          4.5 to the Company's Registration Statement on Form S-2, as filed with
          the SEC on February 12, 2004.

     4.23 Registration  Rights  Agreement  dated as of December  26, 2003 by and
          between the Company and The Research Foundation of State University of
          New York,  incorporated  herein by  reference  to  Exhibit  4.6 to the
          Company's Registration Statement on Form S-2, as filed with the SEC on
          February 12, 2004.

     10.1 Consultant Compensation Agreement dated April 23, 2002 among Provectus
          and Russell Ratliff,  Justeene Blankenship,  Michael L. Labertew,  and
          Phillip Baker, incorporated herein by reference to Exhibit 99.1 to the
          Company's   Registration  Statement  on  Form  S-8  (Registration  No.
          333-86896), as filed with the SEC on April 24, 2002.

   10.2** Provectus   Pharmaceuticals,   Inc.  Amended and  Restated  2002 Stock
          Plan,  incorporated  herein  by  reference  to  Exhibit  10.2  to  the
          Company's  Quarterly Report on Form 10QSB for the fiscal quarter ended
          June 30, 2003, as filed with the SEC on August 14, 2003.

     10.3 Consulting  Agreement  dated  August 15, 2002  between  Provectus  and
          Numark  Capital   Corporation   ("Numark"),   incorporated  herein  by
          reference  to  Exhibit  10.3 to the  Company's  Annual  Report on Form
          10-KSB for the fiscal year ended  December 31, 2002, as filed with the
          SEC on April 15, 2004.

     10.4 Consulting  Agreement  dated  August 28, 2002  between  Provectus  and
          Robert S. Arndt,  incorporated  herein by  reference to Exhibit 4.1 to
          the Company's  Registration  Statement on Form S-8  (Registration  No.
          333-99639), as filed with the SEC on September 17, 2002.

     10.5 Consulting  Agreem ent dated  August 28, 2002  between  Provectus  and
          Nunzio Valerie,  Jr.,  incorporated herein by reference to Exhibit 4.2
          to the Company's  Registration Statement on Form S-8 (Registration No.
          333-99639), as filed with the SEC on September 17, 2002.

     10.6*Letter  Agreement  dated  June 7,  2002  between  Provectus  and  Nace
          Pharma, LLC.,  incorporated herein by reference to Exhibit 10.6 to the
          Company's  Annual  Report on Form  10-KSB  for the  fiscal  year ended
          December 31, 2002, as filed with the SEC on April 15, 2004.

     10.7 Letter  Agreement  dated August  29,2002  between  Provectus  and Nace
          Resources,  Inc.,  incorporated herein by reference to Exhibit 10.7 to
          the  Company's  Annual Report on Form 10-KSB for the fiscal year ended
          December 31, 2002, as filed with the SEC on April 15, 2004.

                                      X-3

<PAGE>

     10.8 Confidentiality,  Inventions and Non-competition Agreement between the
          Company and H. Craig Dees, incorporated herein by reference to Exhibit
          10.8 to the Company's Annual Report on Form 10-KSB for the fiscal year
          ended December 31, 2002, as filed with the SEC on April 15, 2004.

     10.9 Confidentiality,  Inventions and Non-competition Agreement between the
          Company and  Timothy C. Scott,  incorporated  herein by  reference  to
          Exhibit  10.9 to the  Company's  Annual  Report on Form 10-KSB for the
          fiscal year ended  December 31,  2002,  as filed with the SEC on April
          15, 2004.

    10.10 Confidentiality,  Inventions and Non-competition Agreement between the
          Company  and Eric A.  Wachter,  incorporated  herein by  reference  to
          Exhibit  10.10 to the  Company's  Annual Report on Form 10-KSB for the
          fiscal year ended  December 31,  2002,  as filed with the SEC on April
          15, 2004.

  10.11.1 Letter   Agreement  dated  January 8,  2003  between  the  Company and
          Investor  -  Gate.com,  incorporated  herein by  reference  to Exhibit
          10.11.1  to the  Company's  Quarterly  Report on Form  10-QSB  for the
          fiscal  quarter  ended March 31, 2003, as filed with the SEC on May 9,
          2003.

 10.11.2  Termination   Letter   dated   February  28, 2003  from the Company to
          Investor-Gate.com, incorporated herein by reference to Exhibit 10.11.2
          to the  Company's  Quarterly  Report  on Form  10-QSB  for the  fiscal
          quarter ended March 31, 2003, as filed with the SEC on May 9, 2003.

   10.12  Letter  Agreement dated February 20, 2003 between the Company and SGI,
          incorporated  herein by  reference to Exhibit  10.12 to the  Company's
          Quarterly Report on Form 10-QSB for the fiscal quarter ended March 31,
          2003, as filed with the SEC on May 9, 2003.

   10.13  Letter  Agreement  dated  March  27,  2003  between  the  Company  and
          Josephberg  Grosz & Co.,  Inc.,  incorporated  herein by  reference to
          Exhibit 10.13 to the Company's Quarterly Report on Form 10-QSB for the
          fiscal  quarter  ended March 31, 2003, as filed with the SEC on May 9,
          2003.

   10.14  Settlement  Agreement  dated as of June 16,  2003 among  Kelly  Adams,
          Justeene   Blankenship,   Nicholas  Julian,   and  pacific  Management
          Services,  Inc.;  and  Provectus and Xantech,  incorporated  herein by
          reference to Exhibit 10.14 to the Company's Current Report on Form 8-K
          dated June 16, 2003, as filed with the SEC on June 26, 2003.

   10.15  Material  Transfer  Agreement  dated  as  of  July  31,  2003  between
          Schering-Plough Animal Health Corporation and Provectus,  incorporated
          herein by reference to Exhibit 10.15 to the Company's Quarterly Report
          on Form 10-QSB for the fiscal  quarter  ended June 30, 2003,  as filed
          with the SEC on August 14, 2003.

   10.16  Securities  Purchase  Agreement  dated as of November  19, 2003 by and
          among the Company and the lenders named therein,  incorporated  herein
          by reference to Exhibit 10.16 to the Company's  Registration Statement
          on Form S-2, as filed with the SEC on February 12, 2004

   21.1+  List of Subsidiaries.

   23.1+  Consent of BDO Seidman, LLP.

   31.1+  Certification  of CEO pursuant to Rules 13a - 14(a) of the  Securities
          Exchange Act of 1934.

   31.2+  Certification  of CFO pursuant to Rules  13a-14(a)  of the  Securities
          Exchange Act of 1934.

     32+  Certification Pursuant to 18 U.S.C. ss. 1350.

--------------------------

     *    The  Company  agrees by this filing to  supplementally  furnish to the
          SEC, upon  request,  a copy of the exhibits  and/or  schedules to this
          agreement.
     **   Management compensation contract or plan.
     +    Filed herewith.


                                      X-4