Annual Statements Open main menu

PRESSURE BIOSCIENCES INC - Quarter Report: 2021 June (Form 10-Q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2021

 

or

 

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 001-38185

 

PRESSURE BIOSCIENCES, INC.

(Exact name of registrant as specified in its charter)

 

Massachusetts   04-2652826
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

14 Norfolk Avenue    
South Easton, Massachusetts   02375
(Address of principal executive offices)   (Zip Code)

 

(508) 230-1828

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

Indicate by check mark whether the registrant (1) has 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 ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

  Large accelerated filer Accelerated filer
  Non-accelerated Filer Smaller Reporting Company
  Emerging Growth Company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).

 

☐ Yes ☒ No

 

The number of shares outstanding of the Issuer’s common stock as of August 11, 2021 was 6,371,190.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
PART I - FINANCIAL INFORMATION 3
   
Item 1. Unaudited Financial Statements 3
   
Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 3
   
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 4
   
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 5
   
Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Six Months Ended June 30, 2021 and 2020 6
   
Notes to Unaudited Consolidated Financial Statements 8
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27
   
Item 3. Quantitative and Qualitative Disclosure About Market Risk 32
   
Item 4. Controls and Procedures 32
   
PART II - OTHER INFORMATION 33
   
Item 1. Legal Proceedings 33
   
Item 1A. Risk Factors 33
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 34
   
Item 3. Defaults Upon Senior Securities 34
   
Item 4. Mine Safety Disclosures 34
   
Item 5. Other Information 34
   
Item 6. Exhibits 35
   
SIGNATURES 36

 

2

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

   June 30, 2021   December 31, 2020 
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $46,625   $18,540 
Accounts receivable   629,766    131,228 
Inventories, net of $342,496 reserve at June 30, 2021 and December 31, 2020   492,095    592,767 
Prepaid expenses and other current assets   219,161    314,936 
Total current assets   1,387,647    1,057,471 
Investment in equity securities   274,621    517,001 
Property and equipment, net   7,431    16,490 
Right of use asset leases   189,808    221,432 
Intangible assets, net   447,115    490,385 
TOTAL ASSETS  $2,306,622   $2,302,779 
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
CURRENT LIABILITIES          
Accounts payable  $628,835   $771,945 
Accrued employee compensation   420,510    417,578 
Accrued professional fees and other   2,163,563    2,037,806 
Other current liabilities   8,165,281    6,330,722 
Deferred revenue   49,189    47,328 
Convertible debt, net of unamortized discounts of $2,353,152 and $3,948,167, respectively   10,909,314    7,545,670 
Other debt, net of unamortized discounts of $5,495 and $0, respectively   1,363,931    1,135,469 
Operating lease liability   69,204    65,193 
Other related party debt   184,600    166,000 
Total current liabilities   23,954,427    18,517,711 
LONG TERM LIABILITIES          
Long term debt   527,038    527,039 
Operating lease liability – long term   120,604    156,239 
Deferred revenue   7,446    19,382 
TOTAL LIABILITIES   24,609,515    19,220,371 
COMMITMENTS AND CONTINGENCIES (Note 4)          
STOCKHOLDERS’ DEFICIT          
Series D Convertible Preferred Stock, $.01 par value; 850 shares authorized; 300 shares issued and outstanding on June 30, 2021 and December 31, 2020, respectively (Liquidation value of $300,000)   3    3 
Series G Convertible Preferred Stock, $.01 par value; 240,000 shares authorized; 80,570 shares issued and outstanding on June 30, 2021 and December 31, 2020, respectively   806    806 
Series H Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 10,000 shares issued and outstanding on June 30, 2021 and December 31, 2020, respectively   100    100 
Series H2 Convertible Preferred Stock, $.01 par value; 21 shares authorized; 21 shares issued and outstanding on June 30, 2021 and December 31, 2020, respectively   -    - 
Series J Convertible Preferred Stock, $.01 par value; 6,250 shares authorized; 3,458 shares issued and outstanding on June 30, 2021 and December 31, 2020, respectively   35    35 
Series K Convertible Preferred Stock, $.01 par value; 15,000 shares authorized; 6,880 shares issued and outstanding on June 30, 2021 and December 31, 2020, respectively   68    68 
Series AA Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 8,083 and 8,043 shares issued and outstanding on June 30, 2021 and December 31, 2020, respectively   81    81 
Common stock, $.01 par value; 100,000,000 shares authorized; 6,260,884 and 4,168,324 shares issued and outstanding on June 30, 2021 and December 31, 2020 respectively   62,608    41,683 
Warrants to acquire common stock   30,911,495    29,192,471 
Additional paid-in capital   55,317,862    50,312,968 
Accumulated deficit   (108,595,951)   (96,465,807)
Total stockholders’ deficit   (22,302,893)   (16,917,592)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $2,306,622   $2,302,779 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

3

 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   2021   2020   2021   2020 
  

For the Three Months Ended

June 30,

   For the Six Months Ended
June 30,
 
   2021   2020   2021   2020 
Revenue:                    
Products, services, other  $608,927   $268,154   $1,168,801   $522,027 
Total revenue   608,927    268,154    1,168,801    522,027 
                     
Costs and expenses:                    
Cost of products and services   286,660    134,882    512,935    310,028 
Research and development   256,507    294,602    556,450    560,292 
Selling and marketing   92,813    162,098    186,141    351,214 
General and administrative   619,286    1,007,215    1,634,716    2,026,225 
Total operating costs and expenses   1,255,266    1,598,797    2,890,242    3,247,759 
                     
Operating loss   (646,339)   (1,330,643)   (1,721,441)   (2,725,732)
                    
Other (expense) income:                    
Interest expense, net   (3,526,141)   (1,724,879)   (8,194,205)   (3,296,679)
Unrealized (loss) gain on investment in equity securities   (134,477)   196,891    (242,380)   346,262 
Loss on extinguishment of liabilities   (498,226)   (1,710,151)   (1,223,385)   (2,846,518)
Other income   60,012    -    58,653    - 
Total other expense   (4,098,832)   (3,238,139)   (9,601,317)   (5,796,935)
                     
Net loss   (4,745,171)   (4,568,782)   (11,322,758)   (8,522,667)
Deemed dividends on beneficial conversion feature   -    -   (57,884)   - 
Preferred stock dividends   (404,171)   (396,970)   (807,386)   (721,556)
Net loss attributable to common stockholders  $(5,149,342)  $(4,965,752)  $(12,188,028)  $(9,244,223)
Basic and diluted net loss per share attributable to common stockholders  $(0.90)  $(1.70)  $(2.29)  $(3.34)
                     
Weighted average common stock shares outstanding used in the basic and diluted net loss per share calculation   5,748,711    2,914,659    5,312,172    2,765,132 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

4

 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   2021   2020 
   For the Six Months Ended 
   June 30, 
   2021   2020 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(11,322,758)  $(8,522,667)
Adjustments to reconcile net loss to net cash used in operating activities:          
Gain on loan forgiveness   (367,039)   - 
Non-cash lease expense   31,624    35,927 
Common stock and warrants issued for interest and extension fees   4,054,749    159,784 
Depreciation and amortization   56,291    74,247 
Accretion of interest and amortization of debt discount   3,909,024    1,750,911 
Loss on extinguishment of accrued liabilities and debt   -    977,622 
Stock-based compensation expense   124,695    307,110 
Loss (Gain) on investment in equity securities   242,380    (346,262)
Common stock issued for services   238,512    87,963 
Changes in operating assets and liabilities:          
Accounts receivable   (498,538)   108,096 
Inventories   100,672    2,853 
Prepaid expenses and other assets   95,775    20,944 
Accounts payable   (143,110)   (5,927)
Accrued employee compensation   2,932    (58,775)
Operating lease liability   (31,624)   (35,927)
Deferred revenue and other accrued expenses   1,415,688    2,643,607 
Net cash used in operating activities   (2,090,727)   (2,800,494)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Advance on loan receivable   -    (531,250)
Purchases of property plant and equipment   (3,962)   (1,663)
Net cash used in investing activities   (3,962)   (532,913)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Net proceeds from Series AA Convertible Preferred Stock   100,000    - 
Proceeds from stock option exercises   14,773    - 
Net proceeds from convertible debt   2,598,250    4,422,600 
Net proceeds from non-convertible debt – third party   1,183,188    990,539 
Net proceeds from non-convertible debt – related party   171,600    8,500 
Payments on convertible debt   (1,200,996)   (1,257,250)
Payments on non-convertible debt – related party   (153,000)   - 
Payments on non-convertible debt   (591,041)   (819,149)
Net cash provided by financing activities   2,122,774    3,345,240 
           
NET INCREASE IN CASH AND CASH EQUIVALENTS   28,085    11,833 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR   18,540    29,625 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $46,625   $41,458 
           
SUPPLEMENTAL INFORMATION          
Interest paid in cash  $383,403   $419,817 
NON CASH TRANSACTIONS:          
Interest added to principal   -    152,552 
Common stock issued to settle accrued liabilities   -    127,855 
Common stock issued with debt   112,877    - 
Discount from warrants issued with debt   1,068,842    2,958,693 
Common stock issued in lieu of cash for dividend   114,298    176,748 
Preferred stock dividends   807,386    721,556 
Conversion of debt and interest into common stock   349,250    1,317,649 
Discount due to beneficial conversion feature   566,847    982,097 
Deemed dividend - beneficial conversion feature   57,884    - 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

5

 

 

PRESSURE BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(UNAUDITED)

 

   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Warrants   Capital   Deficit   Deficit 
   Series D Preferred Stock   Series G Preferred Stock   Series H Preferred Stock   Series H(2) Preferred Stock   Series J Preferred Stock   Series K Preferred Stock   Series AA Preferred Stock   Common Stock   Stock   Additional Paid-In   Accumulated   Total Stockholders' 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Warrants   Capital   Deficit   Deficit 
BALANCE, December 31, 2019   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    7,939   $80    2,549,620   $25,496   $22,599,177   $44,261,105   $(78,942,277)  $(12,055,407)
Stock-based compensation   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    241,769    -    241,769 
Stock option exercise                                                                                                    
Stock option exercise, shares                                                                                                    
Series AA Preferred Stock dividend   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (324,586)   (324,586)
Issuance of common stock to settle accrued liabilities   -    -    -    -    -    -    -    -    -    -    -    -    -    -    66,500    665    -    127,190    -    127,855 
Common stock issued for debt settlement   -    -    -    -    -    -    -    -    -    -    -    -    -    -    10,000    100    -    24,900    -    25,000 
Issuance of common stock for debt extension and interest paid in kind   -    -    -    -    -    -    -    -    -    -    -    -    -    -    38,521    385    -    60,175    -    60,560 
Issuance of common stock for services                                                                                                    
Issuance of common stock for services, shares                                                                                                    
Issuance of common stock warrants for interest paid-in-kind                                                                                                    
Issuance of common stock warrants for interest paid-in-kind, shares                                                                                                    
Beneficial conversion feature on debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    404,608    -    404,608 
Warrants issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    1,205,010    -    -    1,205,010 
Warrants issued for debt extension   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    609,143    -    -    609,143 
Common Stock issued for extinguishment of liabilities                                                                                                    
Common Stock issued for extinguishment of liabilities, shares                                                                                                    
Series AA Preferred Stock offering                                                                                                    
Series AA Preferred Stock offering, shares                                                                                                    
Beneficial conversion option on convertible preferred stock                                                                                                    
Deemed dividend on convertible preferred stock                                                                                                    
Deemed dividend on convertible preferred stock, shares                                                                                                    
Conversion of debt and interest for common stock                                                                                                    
Conversion of debt and interest for common stock                                                                                                    
Issuance of common stock for interest paid-in-kind                                                                                                    
Issuance of common stock for interest paid-in-kind, shares                                                                                                    
Issuance of common stock for dividends paid-in-kind                                                                                                    
Issuance of common stock for dividends paid-in-kind, shares                                                                                                    
Stock issued with debt                                                                                                    
Stock issued with debt,shares                                                                                                    
Net loss   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (3,953,885)   (3,953,885)
BALANCE, March 31, 2020   300   $3    80,570   $806    10,000   $100    21    -    3,458   $35    6,880   $68    7,939   $80    2,664,641   $26,646    24,413,330    45,119,747    (83,220,748)   (13,659,933)
Stock-based compensation   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    65,341    -    65,341 
Series AA Preferred Stock dividend   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (396,970)   (396,970)
Issuance of common stock for services   -    -    -    -    -    -    -    -    -    -    -    -    -    -    25,000    250    -    87,713    -    87,963 
Issuance of common stock for interest paid-in-kind   -    -    -    -    -    -    -    -    -    -    -    -    -    -    42,510    425    -    98,799    -    99,224 
Beneficial conversion feature on debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    577,489    -    577,489 
Warrants issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    1,753,683    -    -    1,753,683 
Warrants issued for debt extension   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    360,602    -    -    360,602 
Issuance of Common Stock for Dividends Paid-in-kind   -    -    -    -    -    -    -    -    -    -    -    -    -    -    64,388    644    -    176,104    -    176,748 
Conversion of debt and interest for Common Stock   -    -    -    -    -    -    -    -    -    -    -    -    -    -    410,746    4,107    -    1,288,542    -    1,292,649 
Net loss   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (4,568,782)   (4,568,782)
BALANCE, June 30, 2020   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    7,939   $80    3,207,285   $32,072   $26,527,615   $47,413,735   $(88,186,500)  $(14,211,986)

 

6

 

 

   Series D Preferred Stock   Series G Preferred Stock   Series H Preferred Stock   Series H(2) Preferred Stock   Series J Preferred Stock   Series K Preferred Stock   Series AA Preferred Stock   Common Stock   Stock   Additional Paid-In   Accumulated   Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Warrants   Capital   Deficit   Deficit 
BALANCE, December 31, 2020   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    8,043    81    4,168,324   $41,683   $29,192,471   $50,312,968   $(96,465,807)  $(16,917,592)
Balance   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    8,043    81    4,168,324   $41,683   $29,192,471   $50,312,968   $(96,465,807)  $(16,917,592)
Stock-based compensation   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    61,237    -    61,237 
Stock option exercise   -    -    -    -    -    -    -    -    -    -    -    -    -    -    21,411    214    -    14,559    -    14,773 
Series AA Preferred Stock dividend   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (403,215)   (403,215)
Issuance of warrants for interest paid-in-kind   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    600,298    -    -    600,298 
Issuance of common stock for services   -    -    -    -    -    -    -    -    -    -    -    -    -    -    112,400    1,124    -    237,388    -    238,512 
Beneficial conversion feature on debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    53,777    -    53,777 
Series AA Preferred Stock offering   -    -    -    -    -    -    -    -    -    -    -    -    40    -    -    -    49,884    50,116    -    100,000 
Beneficial conversion option on convertible preferred stock   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    57,884    -    57,884 
Deemed dividend on convertible preferred stock   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (57,884)   -    (57,884)
Conversion of debt and interest for common stock   -    -    -    -    -    -    -    -    -    -    -    -    -    -    47,200    472    -    117,528    -    118,000 
Issuance of common stock for interest paid in kind   -    -    -    -    -    -    -    -    -    -    -    -    -    -    922,372    9,224    -    2,012,556    -    2,021,780 
Warrants issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    162,654    -    -    162,654 
Net loss   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (6,577,587)   (6,577,587)
BALANCE, March 31, 2021   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    8,083   $81    5,271,707   $52,717   $30,005,307   $52,860,129   $(103,446,609)  $(20,527,363)
Balance   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    8,083   $81    5,271,707   $52,717   $30,005,307   $52,860,129   $(103,446,609)  $(20,527,363)
Stock-based compensation   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    63,458    -    63,458 
Series AA Preferred Stock dividend   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (404,171)   (404,171)
Beneficial conversion feature on debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    513,070    -    513,070 
Issuance of common stock for interest paid in kind   -    -    -    -    -    -    -    -    -    -    -    -    -    -    720,610    7,206    -    1,425,465    -    1,432,671 
Issuance of common stock for dividends paid-in-kind   -    -    -    -    -    -    -    -    -    -    -    -    -    -    56,067    560    -    113,738    -    114,298 
Conversion of debt and interest for common stock   -    -    -    -    -    -    -    -    -    -    -    -    -    -    92,500    925    -    230,325    -    231,250 
Stock issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    120,000    1,200    -    111,677    -    112,877 
Warrants issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -     -    906,188    -    -    906,188 
Net loss   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (4,745,171)   (4,745,171)
BALANCE, June 30, 2021   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    8,083   $81    6,260,884   $62,608   $30,911,495   $55,317,862   $(108,595,951)  $(22,302,893)
Balance   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    8,083   $81    6,260,884   $62,608   $30,911,495   $55,317,862   $(108,595,951)  $(22,302,893)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

7

 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

(UNAUDITED)

 

  1) Business Overview, Liquidity and Management Plans

 

Pressure BioSciences, Inc. (“we”, “our”, “the Company”) develops and sells innovative, broadly enabling, pressure-based platform solutions for the worldwide life sciences industry. Our solutions are based on the unique properties of both constant (i.e., static) and alternating (i.e., pressure cycling technology, or “PCT”) hydrostatic pressure. PCT is a patented enabling technology platform that uses alternating cycles of hydrostatic pressure between ambient and ultra-high levels to control bio-molecular interactions (e.g., cell lysis, biomolecule extraction) safely and reproducibly. Our primary focus has historically been in the development of PCT-based products for biomarker and target discovery, drug design and development, biotherapeutics characterization and quality control, soil & plant biology, forensics, and counter-bioterror applications. Additionally, major new market opportunities have emerged in the use of our pressure-based technology expertise in two new platform technology areas: (1) the use of our recently acquired, patented technology from BaroFold, Inc. for gently controlled disaggregation and refolding of biotherapeutic proteins (the “BaroFold” technology) to allow entry into the bio-pharma contract services sector, and (2) the use of our recently-patented, scalable, high-efficiency, pressure-based Ultra Shear Technology (“UST”) platform to (i) create stable nanoemulsions of otherwise immiscible fluids (e.g., oils and water) for greatly improved cost-effectiveness, high bioavailability, safer and improved sensory experience in products spanning pharmaceuticals, nutraceuticals, cosmeceuticals, personal care products, agrochemicals, food/beverage and many industrial products and to (ii) prepare higher quality, homogenized, extended shelf-life or room temperature stable low-acid liquid foods that cannot be effectively preserved using existing non-thermal technologies.

 

  2) Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. However, we have experienced losses from operations and negative cash flows from operations with respect to our pressure cycling technology business since our inception. As of June 30, 2021, we do not have adequate working capital resources to satisfy our current liabilities and as a result, there is substantial doubt regarding our ability to continue as a going concern. We have been successful in raising debt and equity capital in the past and as described in Notes 5 and 6. In addition we raised debt and equity capital after June 30, 2021 as described in Note 7. We have financing efforts in place to continue to raise cash through debt and equity offerings. Although we have successfully completed financings and reduced expenses in the past, we cannot assure you that our plans to address these matters in the future will be successful. These financial statements do not include any adjustments that might result from this uncertainty.

 

8

 

 

  3) Summary of Significant Accounting Policies

 

Basis of Presentation

 

The unaudited interim financial statements of Pressure BioSciences, Inc. and its consolidated subsidiaries (collectively, the “Company”) included herein have been prepared by the Company in accordance with the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission. Under these rules and regulations, some information and footnote disclosures normally included in financial statements prepared under accounting principles generally accepted in the United States of America have been shortened or omitted. Management believes that all adjustments necessary for a fair statement of the financial position and the results of operations for the periods shown have been made. All adjustments are normal and recurring. These financial statements should be read together with the Company’s audited financial statements included in its Form 10-K for the fiscal year ended December 31, 2020.

 

Use of Estimates

 

The Company’s consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates, judgements and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Global concerns about the COVID-19 pandemic have adversely affected, and we expect will continue to adversely affect, our business, financial condition and results of operations including the estimates and assumptions made by management. Significant estimates and assumptions include valuations of share-based awards, investments in equity securities and intangible asset impairment. Actual results could differ from the estimates, and such differences may be material to the Company’s consolidated financial statements.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Pressure BioSciences, Inc., and its wholly owned subsidiary PBI BioSeq, Inc. All intercompany accounts and transactions have been eliminated in consolidation.

 

9

 

 

Revenue Recognition

 

We recognize revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers, and ASC 340-40, Other Assets and Deferred Costs—Contracts with Customers. Revenue is measured based on a consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. We enter into sales contracts that may consist of multiple distinct performance obligations where certain performance obligations of the sales contract are not delivered in one reporting period. We measure and allocate revenue according to ASC 606-10.

 

We identify a performance obligation as distinct if both the following criteria are true: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Determining the standalone selling price (“SSP”) and allocation of consideration from a contract to the individual performance obligations, and the appropriate timing of revenue recognition, is the result of significant qualitative and quantitative judgments. Management considers a variety of factors such as historical sales, usage rates, costs, and expected margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation in making these estimates. While changes in the allocation of the SSP between performance obligations will not affect the amount of total revenue recognized for a particular contract, any material changes could impact the timing of revenue recognition, which would have a material effect on our financial position and result of operations. This is because the contract consideration is allocated to each performance obligation, delivered or undelivered, at the inception of the contract based on the SSP of each distinct performance obligation.

 

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

 

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are in included in cost of revenues as consistent with treatment in prior periods.

 

Our current Barocycler® instruments require a basic level of instrumentation expertise to set-up for initial operation. To support a favorable first experience for our customers, upon customer request, and for an additional fee, we will send a highly trained technical representative to the customer site to install Barocyclers® that we sell, lease, or rent through our domestic sales force. The installation process includes uncrating and setting up the instrument, followed by introductory user training. Our sales arrangements do not provide our customers with a right of return. Any shipping costs billed to customers are recognized as revenue.

 

The majority of our instrument and consumable contracts contain pricing that is based on the market price for the product at the time of delivery. Our obligations to deliver product volumes are typically satisfied and revenue is recognized when control of the product transfers to our customers. Concurrent with the transfer of control, we typically receive the right to payment for the shipped product and the customer has significant risks and rewards of ownership of the product. Payment terms require customers to pay shortly after delivery and do not contain significant financing components.

 

Revenue from scientific services customers is recognized upon completion of each stage of service as defined in service agreements.

 

We apply ASC 845, “Accounting for Non-Monetary Transactions”, to account for products and services sold through non-cash transactions based on the fair values of the products and services involved, where such values can be determined. Non-cash exchanges would require revenue to be recognized at recorded cost or carrying value of the assets or services sold if any of the following conditions apply:

 

  a) The fair value of the asset or service involved is not determinable.
     
  b) The transaction is an exchange of a product or property held for sale in the ordinary course of business for a product or property to be sold in the same line of business to facilitate sales to customers other than the parties to the exchange.
     
  c) The transaction lacks commercial substance.

 

We recognize revenue for non-cash transactions at recorded cost or carrying value of the assets or services sold.

 

We account for lease agreements of our instruments in accordance with ASC 842, Leases. We record revenue over the life of the lease term, and we record depreciation expense on a straight-line basis over the thirty-six-month estimated useful life of the Barocycler® instrument. The depreciation expense associated with assets under lease agreement is included in the “Cost of PCT products and services” line item in our accompanying consolidated statements of operations. Many of our lease and rental agreements allow the lessee to purchase the instrument at any point during the term of the agreement with partial or full credit for payments previously made. We pay all maintenance costs associated with the instrument during the term of the leases.

 

Deferred revenue represents amounts received from service contracts for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met. Revenue from service contracts is recorded ratably over the length of the contract.

 

10

 

 

Disaggregation of revenue

 

In the following table, revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.

 

In thousands of US dollars ($)  Three Months Ended
June 30,
   Six Months Ended
June 30,
 
Primary geographical markets  2021   2020   2021   2020 
North America  $477   $162   $685   $307 
Europe   103    3    187    4 
Asia   29    103    297    211 
Revenue  $609   $268   $1,169   $522 

 

   Three Months Ended
June 30,
   Six Months Ended
June 30,
 
Major products/services lines   2021    2020    2021    2020 
Hardware  $336   $122   $713   $217 
Consumables   44    51    146    107 
Contract research services   136    34    142    44 
Sample preparation accessories   40    33    69    58 
Technical support/extended service contracts   34    17    58    36 
Shipping and handling   16    6    35    15 
Other   3    5    6    45 
Revenue  $609   $268   $1,169   $522 

 

11

 

 

   Three Months Ended
June 30,
   Six Months Ended
June 30,
 
Timing of revenue recognition   2021    2020    2021    2020 
Products transferred at a point in time  $440   $217   $969   $442 
Services transferred over time   169    51    200    80 
Revenue  $609   $268   $1,169   $522 

 

Contract balances

 

In thousands of US dollars ($)  June 30, 2021   December 31, 2020 
Receivables, which are included in ‘Accounts Receivable’  $630   $131 
Contract liabilities (deferred revenue)   57    67 

 

Transaction price allocated to the remaining performance obligations.

 

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.

 Schedule of Future Related to Performance Obligations

In thousands of US dollars ($)  2021   2022   Total 
Extended warranty service  $49    8   $57 

 

All consideration from contracts with customers is included in the amounts presented above.

 

Contract Costs

 

The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in selling, general, and administrative expenses. The costs to obtain a contract are recorded immediately in the period when the revenue is recognized either upon shipment or installation. The costs to obtain a service contract are considered immaterial when spread over the life of the contract so the Company records the costs immediately upon billing.

 

12

 

 

Concentrations

 

Credit Risk

 

Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, and trade receivables. We have cash investment policies which, among other things, limit investments to investment-grade securities. We perform ongoing credit evaluations of our customers, and the risk with respect to trade receivables is further mitigated by the fact that many of our customers are government institutions, large pharmaceutical and biotechnology companies, and academic laboratories.

 

The following table illustrates the level of concentration as a percentage of total revenues during the three and six months ended June 30, 2021 and 2020.

 

   For the Three Months Ended 
   June 30, 
   2021   2020 
Top Five Customers   50%   71%
Federal Agencies   14%   2%

 

   For the Six Months Ended 
   June 30, 
   2021   2020 
Top Five Customers   50%   70%
Federal Agencies   8%   4%

 

The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of June 30, 2021 and December 31, 2020. The Top Five Customers category may include federal agency receivable balances if applicable.

 

   June 30, 2021   December 31, 2020 
Top Five Customers   56%   89%
Federal Agencies   11%   10%

 

Product Supply

 

We utilize a contract assembler for our Barocycler® 2320EXT. They provide us with precision manufacturing services that include management support services to meet our specific application and operational requirements. Among the services provided to us are:

 

  CNC Machining
     
  Contract Assembly & Kitting
     
  Component and Subassembly Design
     
  Inventory Management
     
  ISO certification

 

At this time, we believe that outsourcing contract assembly of our Barocycler® 2320EXT is the most cost-effective method for us to obtain ISO Certified, CE and CSA Marked instruments. The Company also continues to evaluate the potential economic benefits of bringing instrument assembly in-house.

 

We currently manufacture and assemble the Barocycler®, HUB440, HUB880, the SHREDDER SG3, and most of our consumables at our South Easton, MA facility. We will regularly reassess the tradeoffs between in-house assembly versus the benefits of outsourced relationships for of the entire Barocycler® product line, and future instruments.

 

13

 

 

Investment in Equity Securities

 

As of June 30, 2021, we held 100,250 shares of common stock of Nexity Global SA, (a Polish publicly traded company).

 

We account for this investment in accordance with ASC 320 “Investments — Debt and Equity Securities”. ASC 320 requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income.

 

As of June 30, 2021, our consolidated balance sheet reflected the fair value, determined on a recurring basis based on Level 1 inputs of our investment in Nexity, to be $274,621. We recorded $242,380 as an unrealized loss during the six months ended June 30, 2021 for changes in market value.

 

Computation of Loss per Share

 

Basic loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding. Diluted loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been issued. For purposes of this calculation, convertible preferred stock, common stock dividends, and warrants and options to acquire common stock, are all considered common stock equivalents in periods in which they have a dilutive effect and are excluded from this calculation in periods in which these are anti-dilutive to our net loss.

 

The following table illustrates our computation of loss per share for the three and six months ended June 30, 2021 and 2020:

 

   2021   2020   2021   2020 
   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2021   2020   2021   2020 
Numerator:                    
Net loss attributable to common stockholders  $(5,149,342)  $(4,965,752)  $(12,188,028)  $(9,244,223)
                     
Denominator for basic and diluted loss per share:                    
Weighted average common stock shares outstanding   5,748,711    2,914,659    5,312,172    2,765,132 
                     
Loss per common share – basic and diluted  $(0.90)  $(1.70)  $(2.29)  $(3.34)

 

14
 

 

The following table presents securities that could potentially dilute basic loss per share in the future. For all periods presented, the potentially dilutive securities were not included in the computation of diluted loss per share because these securities would have been anti-dilutive to our net loss. The Series D Convertible Preferred Stock, Series G Convertible Preferred Stock, Series H and H2 Convertible Preferred Stock, Series J Convertible Preferred Stock, Series K Convertible Preferred Stock, and Series AA Convertible Preferred Stock are presented below as if they were converted into common shares according to the conversion terms.

 

   As of June 30, 
   2021   2020 
Stock options   1,350,046    1,392,370 
Convertible debt   5,083,187    3,905,867 
Common stock warrants   15,703,807    12,761,126 
Convertible preferred stock:          
Series D Convertible Preferred Stock   25,000    25,000 
Series G Convertible Preferred Stock   26,857    26,857 
Series H Convertible Preferred Stock   33,334    33,334 
Series H2 Convertible Preferred Stock   70,000    70,000 
Series J Convertible Preferred Stock   115,267    115,267 
Series K Convertible Preferred Stock   229,334    229,334 
Series AA Convertible Preferred Stock   8,083,000    7,939,000 
    30,719,832    26,498,155 

 

Accounting for Stock-Based Compensation Expense

 

We maintain equity compensation plans under which incentive stock options and non-qualified stock options are granted to employees, independent members of our Board of Directors and outside consultants. We recognize stock-based compensation expense over the requisite service period using the Black-Scholes formula to estimate the fair value of the stock options on the date of grant.

 

Determining Fair Value of Stock Option Grants

 

Valuation and Amortization Method - The fair value of each option award is estimated on the date of grant using the Black-Scholes pricing model based on certain assumptions. The estimated fair value of employee stock options is amortized to expense using the straight-line method over the vesting period.

 

Expected Term - The Company uses the simplified calculation of expected life, as the Company does not currently have sufficient historical exercise data on which to base an estimate of expected term. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted.

 

Expected Volatility - Expected volatility is based on the Company’s historical stock volatility data over the expected term of the award.

 

Risk-Free Interest Rate - The Company bases the risk-free interest rate used in the Black-Scholes valuation method on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term.

 

Forfeitures - The Company records stock-based compensation expense only for those awards that are expected to vest. The Company estimated a forfeiture rate of 5% for awards granted based on historical experience and future expectations of options vesting. The Company used this historical rate as our assumption in calculating future stock-based compensation expense.

 

15
 

 

The Company recognized stock-based compensation expense of $63,458 and $65,341 for the three months ended June 30, 2021 and 2020, respectively. The Company recognized stock-based compensation expense of $124,695 and $307,110 for the six months ended June 30, 2021 and 2020, respectively. The following table summarizes the effect of this stock-based compensation expense within each of the line items of our costs and expenses within our Consolidated Statements of Operations:

 

   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2021   2020   2021   2020 
Cost of sales  $5,107   $5,107   $10,160   $13,063 
Research and development   26,491    26,137    52,353    64,963 
Selling and marketing   5,887    6,358    10,482    20,294 
General and administrative   25,973    27,739    51,700    208,790 
Total stock-based compensation expense  $63,458   $65,341   $124,695   $307,110 

 

Fair Value of Financial Instruments

 

Due to their short maturities, the carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and debt approximate their fair value. Long-term liabilities include debt and deferred revenue with a carrying value that approximates fair value.

 

Fair Value Measurements

 

The Company follows the guidance of FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) as it related to all financial assets and financial liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis.

 

The Company generally defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values. These tiers include: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring the Company to develop its own assumptions. A slight change in an unobservable input like volatility could have a significant impact on fair value measurement.

 

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company has determined that its financial assets are classified within Level 1 in the fair value hierarchy. The development of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.

 

16
 

 

The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2021:

 

      

Fair value measurements at

June 30, 2021 using:

 
   June 30, 2021  

Quoted

prices in

active

markets

(Level 1)

  

Significant

other

observable

inputs

(Level 2)

  

Significant

unobservable

inputs

(Level 3)

 
Equity Securities  $274,621   $274,621    -    - 
Total Financial Assets  $274,621   $274,621   $-   $- 

 

The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2020:

 

      

Fair value measurements at

December 31, 2020 using:

 
   December 31, 2020  

Quoted

prices in

active

markets

(Level 1)

  

Significant

other

observable

inputs

(Level 2)

  

Significant

unobservable

inputs

(Level 3)

 
Equity Securities   517,001    517,001    -    - 
Total Financial Assets  $517,001   $517,001   $-   $- 

 

17
 

 

  4) Commitments and Contingencies

 

Operating Leases

 

The Company accounts for its leases under ASC 842. The Company has elected to apply the short-term lease exception to leases of one year or less.

 

Our corporate office is currently located at 14 Norfolk Avenue, South Easton, Massachusetts 02375. We are currently paying $6,950 per month, on a lease extension, signed on December 30, 2020, that expires December 31, 2021, for our corporate office. We expanded our space to include offices, warehouse, and a loading dock on the first floor starting May 1, 2017 with a monthly rent increase already reflected in the current payments.

 

We extended our lease for our space in Medford, MA (the “Medford Lease”) from December 30, 2020 to December 30, 2023. The lease requires monthly payments of $7,282 subject to annual cost of living increases. The lease shall be automatically extended for additional three years unless either party terminates at least six months prior to the expiration of the current lease term.

 

The Company accounted for the lease extension of our Medford Lease as a lease modification under ASC 842. At the effective date of modification, the Company recorded an adjustment to the right-of-use asset and lease liability in the amount of $221,432 based on the net present value of lease payments discounted using an estimated borrowing rate of 12%.

 

Following is a schedule by years of future minimum rental payments required under operating leases with initial or remaining non-cancelable lease terms as of June 30, 2021:

 

       
2021   $85,391 
2022    87,383 
2023    87,383 
Total minimum payments required   $260,157 

  

Target Discovery, Inc.

 

In the six months ended June 30, 2021, the Company incurred $34,400 in fees with Target Discovery, Inc. for the use of their facilities and other services.

 

  5) Convertible Debt and Other Debt

 

Convertible Debt

 

On various dates during the six months ended June 30, 2021, the Company issued convertible notes for a total of $3,104,625 which contained varied terms and conditions as follows: a) 6-12 month maturity date; b) interest rates of 10-18%; c) convertible to the Company’s common stock at issuance at a fixed rate of $2.50 or at variable conversion rates upon an event of default. These notes were issued with either shares of common stock or warrants to purchase common stock that were fair valued at issuance date. The aggregate relative fair value of the shares of common stock and warrants issued with the notes of $1,181,719 was recorded as a debt discount to be amortized over the term of the notes. We then computed the effective conversion price of the notes, and recorded a $566,847 beneficial conversion feature as a debt discount to be amortized over the term of the notes. We also evaluated the convertible notes for derivative liability treatment and determined that the notes did not qualify for derivative accounting treatment at June 30, 2021.

 

18
 

 

The specific terms of the convertible notes and outstanding balances as of June 30, 2021 are listed in the tables below.

 

Inception

Date

  Term   Loan Amount  

Outstanding balance

with OID

   Original Issue Discount (OID)   Interest Rate   Conversion Price   Deferred Finance Fees   Discount for conversion feature and warrants/shares 
                                 
May 17, 2018 (1) (2)   12 months   $380,000   $166,703   $15,200    8%  $2.50   $15,200   $332,407 
June 8, 2018 (1) (4) (1)  6 months   $50,000   $50,000   $2,500    2%  $7.50   $2,500   $3,271 
October 19, 2018 (1)   6 months   $100,000   $100,000   $-    5%  $7.50   $-   $- 
November 13, 2018 (1) (3) (4)   6 months   $200,000   $78,508   $-    5%  $2.50   $-   $168,634 
January 3, 2019 (1) (4)   6 months   $50,000   $50,000   $2,500    24%  $7.50   $2,500   $- 
February 21, 2019 (1) (2)   12 months   $215,000   $215,000   $-    4%  $2.50   $15,000   $107,709 
March 18, 2019 (1)   6 months   $100,000   $100,000   $-    4%  $7.50   $-   $10,762 
June 4, 2019 (1) (2)   9 months   $500,000   $302,484   $-    8%  $2.50   $40,500   $70,631 
June 19, 2019 (1) (2)   12 months   $105,000   $105,000   $-    4%  $2.50   $5,000   $2,646 
June 7, 2019 (1) (4)   6 months   $125,000   $6,746   $-    5%  $7.50   $-   $18,254 
July 1, 2019 (1) (2)   12 months   $107,500   $107,500   $-    4%  $2.50   $7,500   $85,791 
July 19, 2019 (1) (2)   12 months   $115,000   $115,000   $-    4%  $2.50   $5,750   $15,460 
July 19, 2019 (1) (2)   12 months   $130,000   $130,000   $-    6%  $2.50   $6,500   $- 
September 27, 2019 (1) (2)   12 months   $78,750   $78,750   $-    4%  $2.50   $3,750   $13,759 
October 24, 2019 (1) (2)   12 months   $78,750   $78,750   $-    4%  $2.50   $3,750   $- 
November 1, 2019 (1) (2)   12 months   $270,000   $270,000   $-    6%  $2.50   $13,500   $- 
November 15, 2019 (1)   12 months   $385,000   $320,000   $35,000    10%  $2.50   $35,000   $90,917 
January 2, 2020 (1)   12 months   $330,000   $330,000   $30,000    10%  $2.50   $30,000   $91,606 
January 24, 2020 (1)   12 months   $247,500   $247,500   $22,500    10%  $2.50   $22,500   $89,707 
January 29, 2020 (1)   12 months   $363,000   $363,000   $33,000    10%  $2.50   $33,000   $297,000 
February 12, 2020 (1)   12 months   $275,000   $275,000   $25,000    10%  $2.50   $25,000   $225,000 
February 19, 2020 (1)   12 months   $165,000   $165,000   $15,000    10%  $2.50   $15,000   $135,000 
March 11, 2020 (1)   12 months   $330,000   $330,000   $30,000    10%  $2.50   $30,000   $232,810 
March 13, 2020 (1)   12 months   $165,000   $165,000   $15,000    10%  $2.50   $15,000   $60,705 
March 26, 2020 (1)   12 months   $111,100   $111,100   $10,100    10%  $2.50   $10,100   $90,900 
April 8, 2020 (1)   12 months   $276,100   $276,100   $25,100    10%  $2.50   $25,000   $221,654 
April 17, 2020 (1)   12 months   $143,750   $143,750   $18,750    10%  $2.50   $-   $96,208 
April 30, 2020 (1)   12 months   $546,250   $546,250   $71,250    10%  $2.50   $47,500   $427,500 
May 6, 2020 (1)   12 months   $460,000   $460,000   $60,000    10%  $2.50   $40,000   $360,000 
May 18, 2020 (1)   12 months   $546,250   $221,250   $46,250    10%  $2.50   $35,500   $439,500 
June 2, 2020 (1)   12 months   $902,750   $652,750   $92,750    10%  $2.50   $58,900   $708,500 
June 12, 2020 (1)   12 months   $57,500   $57,500   $7,500    10%  $2.50   $5,000   $45,000 
June 22, 2020 (1)   12 months   $138,000   $138,000   $18,000    10%  $2.50   $12,000   $108,000 
July 7, 2020 (1)   12 months   $586,500   $586,500   $76,500    10%  $2.50   $51,000   $400,234 
July 17, 2020 (1)   12 months   $362,250   $362,250   $47,250    10%  $2.50   $31,500   $185,698 
July 29, 2020 (1)   12 months   $345,000   $345,000   $45,000    10%  $2.50   $30,000   $241,245 
July 21, 2020 (1) (5)   12 months   $115,000   $115,000   $15,000    10%  $2.50   $10,000   $24,875 
August 14, 2020 (1)   12 months   $762,450   $462,450   $69,450    10%  $2.50   $66,300   $580,124 
September 10, 2020   12 months   $391,000   $391,000   $51,000    10%  $2.50   $34,000   $231,043 
September 21, 2020 (5)   12 months   $345,000   $345,000   $45,000    10%  $2.50   $30,000   $66,375 
September 23, 2020 (5)   12 months   $115,000   $115,000   $15,000    10%  $2.50   $10,000   $20,500 
September 25, 2020 (5)   12 months   $115,000   $115,000   $15,000    10%  $2.50   $-   $19,125 
December 3, 2020   12 months   $299,000   $299,000   $39,000    10%  $2.50   $26,000   $197,882 
October 22, 2020 (5)   12 months   $115,000   $115,000   $15,000    10%  $2.50   $10,000   $18,875 
December 23, 2020 (1) (5)   6 months   $1,000,000   $150,000   $100,000    10%  $2.50   $-   $833,536 
January 5, 2021 (1)   6 months   $575,000   $575,000   $75,000    18%  $2.50   $-   $- 
February 17, 2021   12 months   $230,000   $230,000   $30,000    10%  $2.50   $20,000   $180,000 
March 23, 2021   12 months   $55,000   $55,000   $5,000    10%  $2.50   $-   $36,431 
May 24, 2021   6 months   $54,625   $54,625   $7,125    12%  $2.50   $-   $- 
May 6, 2021   12 months   $402,500   $402,500   $52,500    10%  $2.50   $35,000   $312,551 
June 17, 2021   12 months   $230,000   $230,000   $30,000    10%  $2.50   $20,000   $144,760 
June 25, 2021   12 months   $977,500   $977,500   $127,500    10%  $2.50   $-   $773,802 
May 20, 2021   12 months   $180,000   $180,000   $30,000    10%  $2.50   $15,000   $25,824 
June 3, 2021   12 months   $50,000   $50,000   $1,500    12%  $2.50   $-   $7,948 
June 28, 2021   12 months   $350,000   $350,000   $35,000    12%   (6)   $22,750   $267,250 
                                         
             $13,262,466   $1,502,225              $972,500   $9,117,409 

 

  (1) The Note is past due. The Company and the lender are negotiating in good faith to extend the loan.
  (2) The Company and lender have agreed to the extension of the Standstill and Forbearance agreements (as described below).
  (3) Interest was capitalized and added to outstanding principal.
  (4) During the year ended December 31, 2020 the Company entered into Rate Modification Agreements with these lenders. In these agreements five lenders agreed to reduce their interest rate and were granted the right to convert loans using a variable conversion price if more than one other variable rate lender converted at a variable rate.
  (5) The Company has agreed to issue shares of its common stock to lenders if their notes are not repaid by a defined date.
  (6) Loan is not convertible until 180 days from the date of issuance of the Note and following an Event of Default will be convertible at the lesser of $2.50 per share or 90% of the lowest trading price over the previous 20 days. The loan is guaranteed by the Company’s Chief Executive Officer, but the lender may only enforce this guarantee after certain conditions have been met, specifically after (i) the occurrence of an Event of Default (as defined in the Note), (ii) the failure of the Company to cure the Default in 10 business days, and (iii) a failure by the Company to issue, or cause to be issued, shares of its common stock upon submission by the lender of a notice of conversion.

 

As of June 30, 2021 one lender holds approximately $9.1 million of the $13.3 million convertible notes outstanding.

 

For the six months ended June 30, 2021, the Company recognized amortization expense related to the debt discounts indicated above of $3,864,956. The unamortized debt discounts as of June 30, 2021 related to the convertible debentures and other convertible notes amounted to $2,353,152.

 

19
 

 

Standstill and Forbearance Agreements

 

The Company has entered into Standstill and Forbearance Agreements with lenders who hold convertible notes with a total principal as of June 30, 2021 of $1.57 million. Pursuant to the Standstill and Forbearance Agreements, the lenders agreed to not convert any portion of their notes into shares of common stock at a variable rate until March 31, 2021 for convertible notes with a principal balance of $469 thousand and until April 16, 2021 for convertible notes with a principal balance of $1.1 million. For the six months ended June 30, 2021, the Company incurred fees of approximately $1.0 million in connection with these agreements. After June 30, 2021 the Company settled $827,500 of these loans (see Note 7).

 

Convertible Loan Modifications and Extinguishments

 

We refinanced certain convertible loans during the three months ended June 30, 2021 at substantially the same terms for extensions ranging over a period of three to six months. We amortized any remaining unamortized debt discount as of the modification date over the remaining, extended term of the new loans. We applied ASC 470 of modification accounting to the debt instruments which were modified during the quarter or those settled with new notes issued concurrently for the same amounts but different maturity dates. The terms such as the interest rate, prepayment penalties, and default rates will be the same over the new extensions. According to ASC 470, an exchange of debt instruments between or a modification of a debt instrument by a debtor and a creditor in a nontroubled debt situation is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. If the terms of a debt instrument are changed or modified and the cash flow effect on a present value basis is less than 10 percent, the debt instruments are not considered to be substantially different and will be accounted for as modifications.

 

The cash flows of new debt exceeded 10% of the remaining cash flows of the original debt on several loans. During the six months ended June 30, 2021 we recorded losses on extinguishment of liabilities of approximately $1.6 million by calculating the difference of the fair value of the new debt and the carrying value of the old debt.

 

20
 

 

The following table provides a summary of the changes in convertible debt, net of unamortized discounts, during 2021:

 

   2021 
Balance at January 1,  $7,545,670 
Issuance of convertible debt, face value   3,104,625 
Deferred financing cost   (506,375)
Beneficial conversion feature on convertible note   (566,847)
Debt discount from shares and warrants issued with debt   (1,181,719)
Payments   (1,200,996)
Conversion of debt into equity   (150,000)
Accretion of interest and amortization of debt discount to interest expense   3,864,956 
Balance at June 30,   10,909,314 
Less: current portion   10,909,314 
Convertible debt, long-term portion  $ 

 

Other Notes

 

On September 9, 2019 and February 28, 2020 we received a total of $966,500 unsecured non-convertible loans from a private investor with a one-month term. During the year ended December 31, 2020, the Company received net proceeds of $463,500, issued 150,000 warrants to purchase common stock (five-year term and $3.50 exercise price) and repaid $275,000. The relative fair value of $185,660 of the warrants issued with the note was recorded as a debt discount to be amortized over the term of the notes. As of June 30, 2021, the Company owes $691,500 on these notes which are past due. The Company and the investor are negotiating in good faith to extend the loans.

 

On October 1, 2019, the Company and the holder of the $170,000 non-convertible loan issued in May 2017 agreed to extend the term of the loan to December 31, 2019. The Company agreed to issue 1,200 shares of its common stock per month while the note remains outstanding. The note will continue to earn 10% annual interest. The loan is currently past due, and the Company and the investor are negotiating in good faith to extend the loan.

 

On October 11, 2019 we received a non-convertible loan with a one-month term and a 2% interest charge for $25,000 from a private investor. The loan is past due, and the Company and the investor are negotiating in good faith to extend the loan.

 

Merchant Agreements

 

We have signed various Merchant Agreements which are secured by second position rights to all customer receipts until the loan has been repaid in full and subject to interest rates of 9.3% - 11.5% per month. As illustrated in the following table, under the terms of these agreements, we received the disclosed Purchase Price and agreed to repay the disclosed Purchase Amount, which is collected by the Merchant lenders at the disclosed Daily Payment Rate. The Company’s Chief Executive Officer is personally guaranteeing the performance of the merchant loans.

 

The following table shows our Merchant Agreements as of June 30, 2021:

 

Inception Date 

Purchase

Price

  

Purchased

Amount

  

Outstanding

Balance

  

Daily

Payment

Rate

  

Deferred

Finance

Fees

 
February 4, 2021   125,000    165,000    55,281    1,032    - 
March 11, 2021   125,000    167,500    40,559    1,396    2,500 
March 26, 2021   240,000    330,960    129,952    2,364    - 
May 3, 2021   200,000    275,800    141,458    1,970    5,000 
June 2, 2021   135,000    186,165    115,677    1,400    1,350 
   $825,000   $1,125,425   $482,927   $8,162   $8,850 

 

The following table shows our Merchant Agreements as of December 31, 2020:

 

Inception Date 

Purchase

Price

  

Purchased

Amount

  

Outstanding

Balance

  

Daily

Payment

Rate

  

Deferred

Finance

Fees

 
November 5, 2020  $200,000   $275,800   $163,955    1,724   $- 
November 19, 2020   100,000    137,900    85,013    985    - 
   $300,000   $413,700   $248,968   $2,709   $- 

 

We have accounted for the Merchant Agreements as loans under ASC 860 because while we provided rights to current and future receipts, we still had control over the receipts. The difference between the Purchase Amount and the Purchase Price is imputed interest that is recorded as interest expense when paid each day.

 

21
 

 

Related Party Notes

 

In June 2018, we received a non-convertible loan of $15,000 from a private investor. The loan includes a one-year term and 15% guaranteed interest. This loan remains outstanding at June 30, 2021 and is currently past due.

 

During the six months ended June 30, 2021, we received short-term non-convertible loans of $171,600 from related parties and repaid $153,000 of related party loans. These notes bear interest ranging from 10% to 15% and are due upon demand.

 

Long term debt

 

During the six months ended June 30, 2021, the Company borrowed $367,038 through a COVID-19 program that was sponsored by the United States and administered by the Small Business Administration (the “SBA”). The most notable programs were the Payroll Protection Program (or “PPP”) and the Economic Injury Disaster Loan program (or “EIDL”). PPP loan has a 1% interest rate and a five-year term. During this period, the Company’s first PPP loan borrowed in 2020 ($367,039) was forgiven by the SBA. This gain was reported in losses on extinguishment of liabilities on the consolidated statements of operations.

 

The Company’s EIDL loan, $150,000, accrues interest at 3.75% and requires monthly payments of $731 for principal and interest beginning in June 2021. The balance of the principal will be due in 30 years. In connection with the EIDL loan the Company entered into a security agreement with the SBA, whereby the Company granted the SBA a security interest in all of the Company’s right, title and interest in all of the Company’s assets.

 

22
 

 

  6) Stockholders’ Deficit

 

Preferred Stock

 

We are authorized to issue 1,000,000 shares of preferred stock with a par value of $0.01. Of the 1,000,000 shares of preferred stock:

 

  1) 20,000 shares have been designated as Series A Junior Participating Preferred Stock (“Junior A”)
     
  2) 313,960 shares have been designated as Series A Convertible Preferred Stock (“Series A”)
     
  3) 279,256 shares have been designated as Series B Convertible Preferred Stock (“Series B”)
     
  4) 88,098 shares have been designated as Series C Convertible Preferred Stock (“Series C”)
     
  5) 850 shares have been designated as Series D Convertible Preferred Stock (“Series D”)
     
  6) 500 shares have been designated as Series E Convertible Preferred Stock (“Series E”)
     
  7) 240,000 shares have been designated as Series G Convertible Preferred Stock (“Series G”)
     
  8) 10,000 shares have been designated as Series H Convertible Preferred Stock (“Series H”)
     
  9) 21 shares have been designated as Series H2 Convertible Preferred Stock (“Series H2”)
     
  10) 6,250 shares have been designated as Series J Convertible Preferred Stock (“Series J”)
     
  11) 15,000 shares have been designated as Series K Convertible Preferred Stock (“Series K”)
     
  12) 10,000 shares have been designated as Series AA Convertible Preferred Stock (“Series AA”)

 

As of June 30, 2021, there were no shares of Junior A, and Series A, B, C and E issued and outstanding. See our Annual Report on Form 10-K for the year ended December 31, 2020 for the pertinent disclosures of preferred stock.

 

During the six months ended June 30, 2021, the Company entered into Securities Purchase Agreements with accredited investors pursuant to which the Company sold an aggregate of 40 shares of Series AA Convertible Preferred Stock, each preferred share convertible into 1,000 shares of the Company’s common stock, par value $0.01 per share, for an aggregate Purchase price of $100,000. We issued to the investors warrants to purchase an aggregate 40,000 shares of common stock with an exercise price of $3.50 per share. The Company did not incur any placement agent fees for this transaction.

 

23
 

 

Stock Options and Warrants

 

At the Company’s December 12, 2013 Special Meeting, the shareholders approved the 2013 Equity Incentive Plan (the “2013 Plan”) pursuant to which 3,000,000 shares of our common stock were reserved for issuance upon exercise of stock options or other equity awards. Under the 2013 Plan, we may award stock options, shares of common stock, and other equity interests in the Company to employees, officers, directors, consultants, and advisors, and to any other persons the Board of Directors deems appropriate. As of June 30, 2021, options to acquire 1,350,046 shares were outstanding under the Plan.

 

24
 

 

As of June 30, 2021, total unrecognized compensation cost related to the unvested stock-based awards was $218,339, which is expected to be recognized over weighted average period of 1.62 years. The aggregate intrinsic value associated with the options outstanding and exercisable, and the aggregate intrinsic value associated with the warrants outstanding and exercisable as of June 30, 2021, based on the June 30, 2021 closing stock price of $2.17, was $1,472,943.

 

The following table summarizes information concerning options and warrants outstanding and exercisable:

 

    Stock Options   Warrants         
    Weighted   Weighted         
    Average   Average         
    Shares  

price

per

share

   Shares  

price

per

share

   Shares  

Total

Exercisable

 
Balance outstanding, December 31, 2020    1,355,901   $0.69    14,434,702   $3.50    15,790,603    15,302,830 
Granted    24,000    2.17    1,374,600    3.61    1,398,600    - 
Exercised    (21,411)   0.69    -    -    (21,411)   - 
Expired/forfeited    (8,444)   0.69    (105,495)  $3.50    (113,939)   - 
Balance outstanding, June 30, 2021    1,350,046   $0.72    15,703,807   $3.50    17,053,853    16,699,039 

 

In the six months ended June 30, 2021 the Company issued 24,000 stock options to an employee ($49,135 fair value, $2.17 exercise price, three-year vesting term and ten-year expiration term). As of June 30, 2021, the 1,350,046 stock options outstanding have a $0.72 weighted average exercise price and 8.22 years weighted average remaining term. Of these options, 995,232 are currently exercisable.

 

25
 

 

Common Stock and Warrant Issuances

 

As profiled in the following table, for five loans we are obligated to issue common stock if not paid by defined dates.

 

    Loan Issuance  Loan   Shares   Defined   Defined 
Loan   Date  Principal   Issuable   Date   Frequency 
                     
Loan 1   July 21, 2020  $115,000    5,000    September 30, 2020    Monthly 
Loan 2   September 21, 2020  $345,000    12,500    November 16, 2020    Weekly 
Loan 3   September 23, 2020  $115,000    12,500    December 1, 2020    Weekly 
Loan 4   September 25, 2020  $115,000    12,500    December 1, 2020    Weekly 
Loan 5   October 22, 2020  $115,000    12,500    December 1, 2020    Weekly 

 

For our loan dated December 23, 2020, we are obligated to issue 100,000 warrants if the loan is not repaid before January 23, 2021 and an additional 10,000 shares of common stock and 100,000 warrants if the loan is not repaid before February 23, 2021. We are also obligated to issue 10,000 shares of common stock and 200,000 warrants if the loan is not repaid before March 23, 2021. During the six months ended June 30, 2021 the Company issued 400,000 warrants to this lender ($3.50 exercise price and five-year term) with a fair value of $600,298. The Company is also obligated to issue 10,000 shares of common stock to this lender every 31 days up to the loan’s maturity date on June 23, 2021.

 

During the six months ended June 30, 2021, we issued 1,642,982 shares of common stock with a fair value of approximately $3.5 million to lenders for interest paid-in-kind, 112,400 shares with a fair value of $238,512 for services rendered, 139,700 shares with a fair value of $349,250 for conversions of debt principal and interest, 21,411 shares for stock option exercises (at an exercise price of $0.69 per share), 56,067 shares with a fair value of $114,298 for dividends paid-in-kind and 120,000 shares with a fair value of $112,877 for Common Stock issued with debt. During this period, we also issued 1,374,600 warrants (three to five-year term at a $3.50 to $5.00 exercise price) to acquire common stock at a fair value of $1.7 million to lenders in conjunction with signing of new convertible loans and interest paid-in-kind.

 

During the six months ended June 30, 2020, we issued to Series AA holders 64,388 shares of common stock for dividends totaling of $176,748 issued in stock in lieu of cash. During this period the Company also issued 593,277 shares of restricted common stock at a fair value of $1,693,251 to accredited investors and consultants. 420,746 of the shares with a fair value of $1,317,649 were issued for conversions of debt principal and interest; 81,031 of the shares with a fair value of $159,784 were issued for debt extensions and interest payments; 66,500 shares with a fair value of $127,855 were issued to settle an accrued liability; and 25,000 shares with a fair value of $87,963 were issued for services rendered.

 

  7) Subsequent Events

 

From July 1, 2021 through August 10, 2021 the Company received seven new fixed rate convertible loans for a total of $1.5 million. The Company issued 125,000 shares of common stock and 161,000 warrants (3-year and 5-year lives and $3.50 strike price) as fees paid to lenders. These loans have fixed conversion rates of $2.50-$3.00 (one has a variable conversion rate), carry annual interest rates ranging from 10% to 12%, and terms ranging from six to twelve months. One of the loans (for $735,000) is secured by the assets of PBI Agrochem, Inc., a newly incorporated subsidiary of the Company.

 

In this time period, the Company retired loans with a principal amount of $973,408 (dated June 8, 2018, November 13, 2018, February 21, 2019, June 19, 2019, July 1, 2019, July 19, 2019, and November 1, 2019) for $167,954 and 763,420 shares of common stock (settling principal, interest and fees) and reduced the principal of another loan with a $100,000 cash payment. After this activity, the Company had $741,687 of principal outstanding with two lenders subject to the standstill and forbearance agreements, which expired March 31, 2021 (see Note 5).

 

The Company is obligated to issue 665,000 shares of common stock to certain lenders for the quarter ended June 30, 2021, but has not issued the shares. The Company and the lenders are negotiating in good faith to resolve these loans and expect to reach a settlement in the coming month.

 

During this period, the Company also received $900,000 from the sale of Series AA shares (issuing 360,000 warrants with a five-year term and strike price of $3.50), and repaid $103,600 of related party loans.

 

In this time period, the Company also entered into a Merchant Cash lender agreement (collecting $66,677) and repaid an existing Merchant Cash lender for $62,832. Under this agreement, the Company pays $1,278 each business day to the lender. During this period, the Company also borrowed and repaid a $300,000 line-of-credit from a second lender.

 

26
 

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, forward-looking statements are identified by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements. Such statements include, without limitation, statements regarding:

 

  our need for, and our ability to raise, additional equity or debt financing on acceptable terms, if at all;
  our need to take additional cost reduction measures, cease operations or sell our operating assets, if we are unable to obtain sufficient additional financing;
  our belief that we will have sufficient liquidity to finance normal operations for the foreseeable future;
  the options we may pursue in light of our financial condition;
  the potential applications for Ultra Shear Technology (UST);
  the potential applications of the BaroFold high-pressure protein refolding and disaggregation technology
  the amount of cash necessary to operate our business;
  the anticipated uses of grant revenue and the potential for increased grant revenue in future periods;
  our plans and expectations with respect to our continued operations;
  the expected increase in the number of pressure cycling technology (“PCT”) and constant pressure (“CP”) based units that we believe will be installed and the expected increase in revenues from the sale of consumable products, extended service contracts, and biopharma contract services;
  our belief that PCT has achieved initial market acceptance in the mass spectrometry and other markets;
  the expected development and success of new instrument and consumables product offerings;
  the potential applications for our instrument and consumables product offerings;
  the expected expenses of, and benefits and results from, our research and development efforts;
  the expected benefits and results from our collaboration programs, strategic alliances and joint ventures;
  our expectation of obtaining additional research grants from the government in the future;
  our expectations of the results of our development activities funded by government research grants;
  the potential size of the market for biological sample preparation, biopharma contract services and Ultra Shear Technology;
  general economic conditions;
  the anticipated future financial performance and business operations of our company;
  our reasons for focusing resources in the market for genomic, proteomic, lipidomic and small molecule sample preparation;
  the importance of mass spectrometry as a laboratory tool;
  the advantages of PCT over other current technologies as a method of biological sample preparation and protein characterization in biomarker discovery, forensics, and histology, as well as for other applications;
  the capabilities and benefits of our PCT Sample Preparation System, consumables and other products;
  our belief that laboratory scientists will achieve results comparable with those reported to date by certain research scientists who have published or presented publicly on PCT and our other products and services;
  our ability to retain our core group of scientific, administrative and sales personnel; and
  our ability to expand our customer base in sample preparation and for other applications of PCT, as well as for our other products and services in both the BaroFold and Ultra Shear Technology areas.

 

These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements, expressed or implied, by such forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations or any change in events, conditions or circumstances on which any of our forward-looking statements are based. Factors that could cause or contribute to differences in our future financial and other results include those discussed in the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 and in this Report. We qualify all of our forward-looking statements by these cautionary statements.

 

27
 

 

OVERVIEW:

 

We are a leader in the development and sale of innovative, broadly enabling, pressure-based platform solutions for the worldwide life sciences industry. Our solutions are based on the unique properties of both constant (i.e., static) and alternating (i.e., pressure cycling technology, or “PCT”) hydrostatic pressure. PCT is a patented enabling technology platform that uses alternating cycles of hydrostatic pressure between ambient and ultra-high levels to control bio-molecular interactions safely and reproducibly (e.g., cell lysis, biomolecule extraction). Our primary focus has historically been in the development of PCT-based products for biomarker and target discovery, drug design and development, biotherapeutics characterization and quality control, soil & plant biology, forensics, and counter-bioterror applications. Additionally, major new market opportunities have emerged in the use of our pressure-based technology expertise in two new platform technology areas: (1) the use of our patented technology from BaroFold, Inc. for gently controlled disaggregation and refolding of biotherapeutic proteins (the “BaroFold” technology) to allow entry into the bio-pharma contract services sector, and (2) the use of our recently-patented, scalable, high-efficiency, pressure-based Ultra Shear Technology (“UST”) platform to (i) create stable nanoemulsions of otherwise immiscible fluids (e.g., oils and water) for greatly improved cost-effectiveness, high bioavailability, safer and improved sensory experience in products spanning pharmaceuticals, nutraceuticals, cosmeceuticals, personal care products, agrochemicals, food/beverage and many industrial products and to (ii) prepare higher quality, homogenized, extended shelf-life or room temperature stable low-acid liquid foods that cannot be effectively preserved using existing non-thermal technologies.

  

28
 

 

Developments and Accomplishments:

 

We reported the following accomplishments during the first half of 2021:

 

  On May 13, 2021, PBI was awarded three additional patents for its revolutionary Ultra Shear Technology™ (UST™) platform, all entitled “System for High Pressure, High Shear Processing of Fluids”. The new patents, awarded in Japan (No. 6843063), Australia (No. 2016243553), and China (ZL201680026865.2), bring the Company’s Intellectual Property (“IP”) estate to a total of 6 issued patents for UST and 29 issued patents overall.
     
  On April 14, 2021, PBI finalized terms and executed a new letter of intent to purchase the assets of an internationally-based developer and supplier of organically natural, eco-friendly agrochemicals.
     
  On March 15, 2021, PBI discussed partnerships with Leica Microsystems (cancer diagnostics) and Ohio State University (food industry consortium) with the Stock Day Podcast.
     
  On March 4, 2021, PBI reported that the transformative impact of the food industry consortium formed by Pressure BioSciences and Ohio State University was discussed in a showcase video from Emerging Technology Insider.
     
  On February 24, 2021, PBI and Ohio State University announced the formation of a food industry consortium to advance commercialization of the Company’s Ultra Shear Technology (UST) platform.
     
  On February 8, 2021, PBI announced plans to acquire the assets of a global eco-friendly agrochemical supplier.
     
  On January 20, 2021, PBI targeted a revolution in effectiveness of therapeutics via improved drug delivery and dosing safety when the Company announced a collaboration with SinuSys Corp to improve and optimize their lead sinus health product candidate prior to Phase IIb trials.

 

29
 

 

Results of Operations

 

The following disclosure compares the results of operations for the quarter ended June 30, 2021 (“Q2 2021”) with June 30, 2020 (“Q2 2020”) and compares the six months ended June 30, 2021 with June 30, 2020.

 

Products and Services Revenue

 

We recognized total revenue of $608,927 for Q2 2021 compared to $268,154 for Q2 2020, a 127% increase. For the year-to-date periods ending on June 30, 2021 and 2020 we recognized total revenue of $1,168,801 and $522,027, respectively, a 124% increase.

 

Cost of Products and Services

 

The cost of products and services was $286,660 for Q2 2021 compared to $134,882 for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 our cost of products and services was $512,935 and $310,028, respectively. Gross profit margin on products and services increased from a larger portion of biopharma services that have higher profit margins (to 52.9% in Q2 2021 from 49.6% in Q2 2020 and to 56.1%in the year-to-date period ended June 30, 2021 from 40.6% in the year-to-date period ended June 30, 2020).

 

Research and Development

 

Research and development expenses were $256,507 for Q2 2021 compared to $294,602 for Q2 2020. The reported decrease of 13% was attributable to a decrease in outside services. For the year-to-date periods ending on June 30, 2021 and 2020 these expenses were $556,450 and $560,292, respectively. The reported decrease was 1%.

 

Selling and Marketing

 

Selling and marketing expenses were $92,813 for Q2 2021 compared to $162,098 for Q2 2020. The reported decreases were primarily attributable to reduced employees in sales and marketing. For the year-to-date periods ending on June 30, 2021 and 2020 these expenses were $186,141 and $351,214, respectively.

 

General and Administrative

 

General and administrative expenses were $619,286 for Q2 2021 compared to $1,007,215 for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 these expenses were $1,634,716 and $2,026,225 respectively. The reported decreases were attributable to lower investor relations expenses.

 

Operating Loss

 

Operating loss was $646,339 for Q2 2021 compared to $1,330,643 for Q2 2020, a reduction of $684,304, or 51.4%. For the year to date periods ending of June 30, 2021 and 2020 the operating loss was $1,721,441 and $2,725,732, respectively, a $1,004,291 reduction, or 36.8%. The reported decreases were primarily attributable to revenue increases and decreases in costs and expenses in 2021.

 

Interest Expense, net

 

Interest expense was $3,526,141 for Q2 2021 compared to $1,724,879 for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 these expenses were $8,194,205 and $3,296,679, respectively. The increases were primarily attributable to the increase in convertible and other debt and the issuance of common stock for interest paid-in-kind.

 

Unrealized (loss) gain on investment in equity securities

 

Unrealized loss on investments in equity securities was $134,477 for Q2 2021 compared to an unrealized gain of $196,891 for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 the unrealized loss was $242,380 and an unrealized gain of $346,262, respectively. The reported change was attributable to movement in the market price of the Company’s investment in Nexity.

 

Loss on extinguishment of liabilities

 

In connection with debt extensions and forgiveness, we recognized net losses of $498,226 for Q2 2021 compared to $1,710,151 for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 these losses were $1,223,385 and $2,846,518, respectively. The decreases were principally related to the gain recognized on the forgiveness of our first PPP loan of $367,039.

 

Net loss attributable to common stockholders

 

Net loss attributable to common stockholders was $5,149,342 ($0.90 per share) for Q2 2021 compared to $4,965,752 ($1.70 per share) for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 the losses were $12,188,028 ($2.29 per share) and $9,244,223 ($3.34 per share), respectively. The decreases in loss per share were principally attributable to the increase in weighted shares outstanding.

 

30
 

 

Liquidity and Financial Condition

 

We have experienced negative cash flows from operations with respect to our pressure cycling technology business since our inception. As of June 30, 2021, we did not have adequate working capital resources to satisfy our current liabilities and as a result, we have substantial doubt regarding our ability to continue as a going concern. As described in Notes 5 and 6 of the accompanying consolidated financial statements, we have been successful in raising debt and equity capital. We received $4.0 million in net proceeds from loans and sales of preferred stock in the six months ended June 30, 2021. We have efforts in place to continue to raise cash through debt and equity offerings. (See Note 7 to the financial statements)

 

We will need substantial additional capital to fund our operations in future periods. If we are unable to obtain financing on acceptable terms, or at all, we will likely be required to cease our operations, pursue a plan to sell our operating assets, or otherwise modify our business strategy, which could materially harm our future business prospects.

 

Net cash used in operations for the six months ended June 30, 2021 was $2,090,727 as compared to $2,800,494 for the three months ended June 30, 2020.

 

Net cash used in investing activities for the six months ended June 30, 2021 was $3,962 compared to $532,913 in the six months ended June 30, 2020.

 

Net cash provided by financing activities for the six months ended June 30, 2021 was $2,122,774 as compared to $3,345,240 for the six months ended June 30, 2020. The cash flows from financing activities in the six months ended June 30, 2021 included $100,000 from the sale of Series AA preferred stock, $4.0 million loan proceeds from convertible debt and other debt. In this period, cash flow from financing was reduced by debt payments of $1,200,996 on convertible debt, and $744,041 on other debt.

 

31
 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

This Item 3 is not applicable to us as a smaller reporting company and has been omitted.

 

ITEM 4. CONTROLS AND PROCEDURES

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 filings are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As of June 30, 2021, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective.

 

Our conclusion that our disclosure controls and procedures were not effective as of June 30, 2021 is due to the continued presence of the material weaknesses in our internal control over financial reporting identified in our Annual Report on Form 10-K for the year ended December 31, 2020. These material weaknesses are the following:

 

  We identified a lack of sufficient segregation of duties. Specifically, this material weakness is such that the design over these areas relies primarily on detective controls and could be strengthened by adding preventative controls to properly safeguard Company assets.
     
  Management has identified a lack of sufficient personnel in the accounting function due to our limited resources with appropriate skills, training and experience to perform the review processes to ensure the complete and proper application of generally accepted accounting principles, particularly as it relates to valuation of warrants and other complex debt /equity transactions. Specifically, this material weakness resulted in audit adjustments to the annual consolidated financial statements and revisions to related disclosures, valuation of warrants and other equity transactions.
     
  Limited policies and procedures that cover recording and reporting of financial transactions.
     
  Lack of multiple levels of review over the financial reporting process
     
  We continue to plan to remediate those material weaknesses as follows:
     
  Improve the effectiveness of the accounting group by augmenting our existing resources with additional consultants or employees to assist in the analysis and recording of complex accounting transactions, and to simultaneously achieve desired organizational structuring for improved segregation of duties. We plan to mitigate this identified deficiency by hiring an independent consultant once we generate significantly more revenue or raise significant additional working capital.
     
  Improve expert review and achieve desired segregation procedures by strengthening cross approval of various functions including quarterly internal audit procedures where appropriate once we generate significantly more revenue or raise significantly more working capital.

 

During the period covered by this Report, we implemented and performed additional substantive procedures, such as supervisory review of work papers and consistent use of financial models used in equity valuations, to ensure our consolidated financial statements as of and for the three-month period ended June 30, 2021, are fairly stated in all material respects in accordance with GAAP. We have not, however, been able to fully remediate the material weaknesses due to our limited financial resources. Our remediation efforts are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

Except as described above, there have been no changes in our internal controls over financial reporting that occurred during the period ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

32
 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors

 

Factors that could cause or contribute to differences in our future financial and operating results include those discussed in the risk factors set forth in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2020 and in this Item 1A. The risks described in our Form 10-K and this Report are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on the Company. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.

 

There have been no material changes to the risk factors set forth in Item 1A of our 10-K for the year ended December 31, 2020 other than the following:

 

We owe over $9 million to one lender with such loans secured by a security interest in all of our assets. If we default under our obligations pursuant to such loans, the lender could foreclose on all of our assets which could require us to cease our operations.

 

Through June 30, 2021, we have issued Notes to the same holder such that the current gross amount owed to the holder is approximately $9.1 million. Our obligations under the Notes and the transaction documents relating to the Notes are secured by a security interest in all of our assets. As a result, if we default under our obligations under the Notes or the transaction documents, the holders of the Notes, acting through their appointed agent, could foreclose on their security interests and liquidate some or all of these assets, which could harm our business, financial condition and results of operations and could require us to reduce or cease operations. In addition, the pledge of these assets and other restrictions may limit our flexibility in raising capital for other purposes. Because all of our assets are pledged under these financing arrangements, our ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on our financial flexibility.

 

33
 

 

The holders of our Common Stock could suffer substantial dilution due to our corporate financing practices.

 

The holders of our common stock could suffer substantial dilution due to our corporate financing practices which, in the past few years has included private placements. As of June 30, 2021, we had 6,260,884 shares outstanding. As of June 30, 2021, if all of the outstanding shares of Series D Convertible Preferred Stock, Series G Convertible Preferred Stock, Series H Convertible Preferred Stock, Series H2 Convertible Preferred Stock, Series J Convertible Preferred Stock, Series K Convertible Preferred Stock and Series AA Convertible Preferred Stock were converted into shares of common stock and all outstanding options and warrants to purchase shares of common stock were exercised and all fixed rate convertible notes and debentures were converted, each as of June 30, 2021, an additional 30,719,832 shares of common stock would be issued and outstanding. The full cash exercise of the options and warrants would result in approximately $55.9 million in cash proceeds to the Company. This additional issuance of shares of common stock would cause immediate and substantial dilution to our existing stockholders and could cause a significant reduction in the market price of our common stock.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Except where noted, all the securities discussed in this Part II, Item 2 were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.

 

During the six months ended June 30, 2021, we issued 1,642,982 shares of common stock with a fair value of approximately $3.5 million to lenders for interest paid-in-kind, 112,400 shares with a fair value of $238,512 for services rendered, 139,700 shares with a fair value of $349,250 for conversions of debt principal and interest, 21,411 shares for stock option exercises (at an exercise price of $0.69 per share), 56,067 shares with a fair value of $114,298 for dividends paid-in-kind and 120,000 shares with a fair value of $112,877 for Common Stock issued with debt. During this period, we also issued 1,374,600 warrants (three to five-year term at a $3.50 to $5.00 exercise price) to acquire common stock at a fair value of $1.7 million to lenders in conjunction with signing of new convertible loans and interest paid-in-kind.

 

During the six months ended June 30, 2020, we issued to Series AA holders 64,388 shares of common stock for dividends totaling of $176,748 issued in stock in lieu of cash. During this period the Company also issued 593,277 shares of restricted common stock at a fair value of $1,693,251 to accredited investors and consultants. 420,746 of the shares with a fair value of $1,317,649 were issued for conversions of debt principal and interest; 81,031 of the shares with a fair value of $159,784 were issued for debt extensions and interest payments; 66,500 shares with a fair value of $127,855 were issued to settle an accrued liability; and 25,000 shares with a fair value of $87,963 were issued for services rendered.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

34
 

 

Item 6. Exhibits

 

Exhibits    
     
31.1*   Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))
     
31.2*   Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))
     
32.1**   Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
     
32.2**   Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
     
101.INS*   XBRL Instance Document
     
101.SCH*   XBRL Taxonomy Extension Schema Document
     
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB*   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith.

 

** In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are furnished and not filed.

 

35
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  PRESSURE BIOSCIENCES, INC.
     
Date: August 18, 2021 By: /s/ Richard T. Schumacher
    Richard T. Schumacher
    President & Chief Executive Officer
    (Principal Executive Officer and Principal Financial Officer)

 

36