0001493152-23-017552.txt : 20230515 0001493152-23-017552.hdr.sgml : 20230515 20230515172523 ACCESSION NUMBER: 0001493152-23-017552 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 60 CONFORMED PERIOD OF REPORT: 20230331 FILED AS OF DATE: 20230515 DATE AS OF CHANGE: 20230515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRESSURE BIOSCIENCES INC CENTRAL INDEX KEY: 0000830656 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 042652826 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38185 FILM NUMBER: 23924504 BUSINESS ADDRESS: STREET 1: 14 NORFOLK AVENUE CITY: SOUTH EASTON STATE: MA ZIP: 02375 BUSINESS PHONE: 5082301828 MAIL ADDRESS: STREET 1: 14 NORFOLK AVENUE CITY: SOUTH EASTON STATE: MA ZIP: 02375 FORMER COMPANY: FORMER CONFORMED NAME: BOSTON BIOMEDICA INC DATE OF NAME CHANGE: 19960812 10-Q 1 form10-q.htm
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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 March 31, 2023

 

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 May 10, 2023 was 16,772,761.

 

 

 

 
 

 

TABLE OF CONTENTS

 

  Page
   
PART I - FINANCIAL INFORMATION 3
   
Item 1. Unaudited Financial Statements 3
   
Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 3
   
Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 4
   
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 5
   
Consolidated Statements of Changes in Stockholders’ Deficit for the Three Months Ended March 31, 2023 and 2022 6
   
Notes to Unaudited Consolidated Financial Statements 7
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
   
Item 3. Quantitative and Qualitative Disclosure About Market Risk 25
 
Item 4. Controls and Procedures 25
   
PART II - OTHER INFORMATION 26
   
Item 1. Legal Proceedings 26
   
Item 1A. Risk Factors 26
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
   
Item 3. Defaults Upon Senior Securities 27
   
Item 4. Mine Safety Disclosures 27
   
Item 5. Other Information 27
   
Item 6. Exhibits 27
   
SIGNATURES 28

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report2
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

   March 31, 2023   December 31, 2022 
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $239,023   $3,865 
Accounts receivable   392,154    295,374 
Inventories, net of $982,973 and $982,973 reserve, respectively   666,045    686,383 
Prepaid expenses and other current assets   257,552    257,527 
Total current assets   1,554,774    1,243,149 
Investment in equity securities   71,699    63,638 
Property and equipment, net   99,872    103,351 
Right of use asset operating leases   191,816    282,095 
Intangible assets, net   295,673    317,308 
TOTAL ASSETS  $2,213,834   $2,009,541 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
CURRENT LIABILITIES          
Accounts payable  $768,967   $637,238 
Accrued employee compensation   268,546    167,247 
Accrued professional fees and other   2,453,995    2,497,762 
Accrued interest and dividends payable   10,811,069    10,803,983 
Deferred revenue   475,987    58,242 
Convertible debt, net of unamortized debt discounts of $1,673,288 and $455,517, respectively   17,741,416    17,823,669 
Other debt, net of unamortized discounts of $485,672 and $0, respectively   1,185,028    1,638,969 
Related party, net of unamortized debt discount of $4,715 and $7,915, respectively   632,085    634,885 
Right of use operating lease liability   65,029    142,171 
Total current liabilities   34,402,122    34,404,166 
LONG TERM LIABILITIES          
Long term debt   163,838    150,000 
Right of use operating lease liability long term   90,052    139,924 
Deferred revenue   7,143    1,822 
TOTAL LIABILITIES   34,663,155    34,695,912 
COMMITMENTS AND CONTINGENCIES (Note 4)   -    - 
STOCKHOLDERS’ DEFICIT          
Series D, G, H, H2, J, K, AA Convertible Preferred Stock, $.01 par value (Note 6)   86    1,098 
Common stock, $.01 par value; 100,000,000 shares authorized; 18,064,240 and 13,682,910 shares issued and outstanding on March 31, 2023 and December 31, 2022, respectively   180,643    136,829 
Warrants to acquire common stock   32,057,371    31,995,762 
Additional paid-in capital   76,428,425    69,006,145 
Accumulated deficit   (141,115,846)   (133,826,205)
TOTAL STOCKHOLDERS’ DEFICIT   (32,449,321)   (32,686,371)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $2,213,834   $2,009,541 

 

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

 


Pressure BioSciences, Inc.March 31, 2023 10Q Report3
 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   2023   2022 
   For the Three Months Ended March 31, 
   2023   2022 
Revenue:          
Products, services, other  $740,600   $480,000 
Total revenue   740,600    480,000 
           
Costs and expenses:          
Cost of products and services   358,628    314,363 
Research and development   435,646    281,589 
Selling and marketing   226,015    66,462 
General and administrative   3,358,056    903,885 
Total operating costs   4,378,345    1,566,299 
Operating loss   (3,637,745)   (1,086,299)
           
Other (expense) income:          
Interest expense, net   (3,893,686)   (2,579,161)
Unrealized gain on investment in equity securities   8,061    19,138 
Gain (loss) on extinguishment of liabilities   659,277    (589,850)
Other income (expense)   6,259    (3,513)
Total other expense   (3,220,089)   (3,153,386)
Net loss   (6,857,834)   (4,239,685)
Preferred stock dividends   (431,807)   (432,149)
Net loss attributable to common shareholders  $(7,289,641)  $(4,671,834)
Basic and diluted net loss per share attributable to common shareholders  $(0.46)  $(0.48)
Weighted average common shares outstanding used in the basic and diluted net loss per share calculation   15,839,373    9,695,189 

 

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

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report4
 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   2023   2022 
   For the Three Months Ended 
   March 31, 
   2023   2022 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(6,857,834)  $(4,239,685)
Adjustments to reconcile net loss to net cash used in operating activities:          
Gain on extinguishment of debt and interest   (659,277)   (10,000)
Non-cash lease expense   90,279    26,559 
Common stock and warrants issued for interest   1,705,234    1,173,458 
Depreciation and amortization   28,114    35,096 
Accretion of interest and amortization of debt discount   615,007    817,877 
Loss on extinguishment of accrued liabilities and debt   -    589,570 
Common stock issued for debt extension   1,029,939    - 
Stock-based compensation expense   1,430,244    64,483 
Gain on investment in equity securities   (8,061)   (19,138)
Common stock and warrants issued for services   1,480,944    117,461 
Changes in operating assets and liabilities:          
Accounts receivable   (96,780)   (137,100)
Inventories   20,338    (212,985)
Prepaid expenses and other assets   (25)   237,681 
Accounts payable   131,729    137,304 
Accrued employee compensation   101,299    52,532 
Operating lease liability   (127,014)   (26,559)
Deferred revenue and other accrued expenses   693,653    637,164 
Net cash used in operating activities   (422,211)   (756,282)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of property plant and equipment   (3,000)   (1,135)
Net cash used in investing activities   (3,000)   (1,135)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Sale of common stock   100,000    - 
Proceeds from stock option exercises   81,111    - 
Net proceeds from convertible debt   2,520,000    806,000 
Net proceeds from non-convertible debt - third party   654,681    351,150 
Net proceeds from debt - related party   88,200    195,250 
Payments on convertible debt   (1,628,474)   (324,350)
Payments on debt - related party   (99,000)   - 
Payments on non-convertible debt   (1,056,149)   (284,141)
Net cash provided by financing activities   660,369    743,909 
           
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   235,158    (13,508)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR   3,865    132,311 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $239,023   $118,803 
           
CASH FLOWS SUPPLEMENTAL INFORMATION          
Interest paid in cash  $534,872   $120,436 
NON CASH TRANSACTIONS:          
Early adoption of ASU 2020-06 adoption   -    473,027 
Common stock issued with debt   1,087,751    142,480 
Discount from warrants issued with debt   -    87,436 
Common stock issued in lieu of cash for dividend   102,435    64,256 
Preferred stock dividends   431,807    432,149 
Conversion of preferred stock for common stock   4,935    - 
Conversion of debt and interest into common stock   509,033    350,500 

 

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

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report5
 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(UNAUDITED)

 

   Shares   Amount   Shares   Amount   Warrants   Capital   Deficit   Deficit 
   Combined Preferred Stock   Common Stock   Stock   Additional Paid In   Accumulated   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Warrants   Capital   Deficit   Deficit 
BALANCE, December 31, 2021   109,878   $1,099    9,120,526   $91,206   $31,715,154   $64,261,048   $(118,277,468)  $(22,208,961)
Early adoption of ASU 2020-06   -    -    -    -    -    (2,728,243)   2,255,216    (473,027)
Stock-based compensation   -    -    -    -    -    64,483    -    64,483 
Series AA Preferred Stock dividend   -    -    -    -    -    -    (432,149)   (432,149)
Issuance of common stock for services   -    -    37,000    370    -    77,330    -    77,700 
Issuance of common stock warrants for services   -    -    -    -    39,761    -    -    39,761 
Warrants issued for debt extension   -    -    -    -    132,537    -    -    132,537 
Common stock issued for debt extension   -    -    214,500    2,145    -    470,755    -    472,900 
Conversion of debt and interest for common stock   -    -    140,200    1,402    -    349,098    -    350,500 
Issuance of common stock for dividends paid-in-kind   -    -    31,810    318    -    63,938    -    64,256 
Issuance of common stock for interest paid-in-kind   -    -    558,100    5,581    -    1,167,877    -    1,173,458 
Stock issued with debt   -    -    92,000    920    -    141,560    -    142,480 
Warrants issued with debt   -    -    -    -    87,436    -    -    87,436 
Net loss   -    -    -    -    -    -    (4,239,685)   (4,239,685)
BALANCE, March 31, 2022   109,878   $  1,099    10,194,136   $  101,942   $  31,974,888   $  63,867,846   $  (120,694,086)  $  (24,748,311)

 

   Combined Preferred Stock   Common Stock   Stock    Additional Paid In    Accumulated   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Warrants   Capital   Deficit   Deficit 
BALANCE, December 31, 2022   109,874   $1,098    13,682,910   $136,829   $31,995,762   $69,006,145   $(133,826,205)  $(32,686,371)
Stock option exercise   -    -    117,552    1,176    -    79,935    -    81,111 
Stock-based compensation   -    -    -    -    -    1,430,244    -    1,430,244 
Series AA Preferred Stock dividend   -    -    -    -    -    -    (431,807)   (431,807)
Issuance of common stock for services   -    -    990,500    9,905    -    1,409,430    -    1,419,335 
Issuance of common stock warrants for services   -    -    -    -    61,609    -    -    61,609 
Conversion of debt and interest for common stock   -    -    203,613    2,036    -    506,997    -    509,033 
Issuance of common stock for dividends paid-in-kind   -    -    73,694    737    -    101,698    -    102,435 
Issuance of common stock for interest paid-in-kind   -    -    1,111,081    11,111    -    1,694,123    -    1,705,234 
Common stock issued for debt extension   -    -    568,200    5,682    -    1,024,257    -    1,029,939 
Stock issued with debt   -    -    783,150    7,832    -    1,079,919    -    1,087,751 
Conversion of preferred stock for common stock   (101,154)   (1,012)   493,540    4,935    -    (3,923)   -    - 
Sale of common stock for cash   -    -    40,000    400    -    99,600    -    100,000 
Net loss   -    -    -    -    -    -    (6,857,834)   (6,857,834)
Balance, March 31, 2023   8,720   $86      18,064,240   $  180,643   $  32,057,371   $  76,428,425   $  (141,115,846)  $  (32,449,321)

 

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

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report6
 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(UNAUDITED)

 

1) Business Overview, Liquidity and Management Plans

 

Pressure BioSciences, Inc. (OTCQB: PBIO) (the “Company”) is a leader in the development & sale of innovative, enabling, high pressure technology-based instruments, consumables, and services for the life sciences and other industries worldwide. Our products/services are based on three patented, high-pressure platforms: (i) Pressure Cycling Technology (“PCT”), (ii) BaroFold Technology (“BaroFold”), and (iii) Ultra Shear Technology (“UST”).

 

The Company was founded on the belief that its PCT Platform had the potential to significantly increase the quality of sample preparation in both research and clinical settings. Although this premise has been proven true, and although PBI has been successful in installing its PCT Platform in the laboratories of key opinion leaders worldwide, the Company now believes – based on market feedback – that the commercial potential for its UST Platform far exceeds the potential of the PCT Platform. Consequently, in January 2022, PBI made the critical decision to immediately shift its primary business focus from PCT to its innovative UST Platform.

 

The UST Platform (7 issued patents) is based on the use of intense shear forces from ultra-high pressure discharge (greater than 20,000 psi) through a dynamically-controlled nano-gap valve under precisely controlled temperatures. UST has been shown to turn hydrophobic (water-repelling) oil-based supplements (e.g., CBD, curcumin), therapeutics (e.g., prednisone), and other active ingredients (e.g., retinol, astaxanthin) into long-term stable, effectively water-soluble, highly bioavailable, oil-in-water nanoemulsion formulations. The Company began commercialization of the UST Platform in May 2022, and executed agreements have subsequently been announced with three CBD companies and one cosmeceutical/skincare company for commercialization in Q4 2022.

 

The BaroFold Platform (8 issued patents) can be used to significantly improve the quality and production costs of protein biotherapeutics. It employs high pressure manipulations for the disaggregation, unfolding and controlled refolding of proteins to their desired native structures at yields and efficiencies not achievable using existing technologies. The BaroFold Platform has been shown to remove protein aggregates in biotherapeutic drug manufacturing, thereby improving product efficacy, safety, and cost for both new-drug entities and biosimilar (follow-on biologic) products. It is scalable and practical for standard manufacturing processes.

 

The PCT Platform (15 issued patents) uses alternating cycles of hydrostatic pressure between ambient and ultra-high pressures to control bio-molecular interactions safely and reproducibly in sample preparation (e.g., the critical steps performed by tens of thousands of scientists worldwide prior to analytical measurements, such as cell lysis and biomolecule extraction from tissue samples). Our primary focus is on making our recently released, GMP-compliant, next generation PCT-based Barocycler EXTREME system available globally to biopharmaceutical drug manufacturers for use in the design, development, characterization, and quality control of biotherapeutic drugs. We currently have over 350 PCT Systems placed in approximately 225 academic, government, pharmaceutical, and biotech research laboratories worldwide. There are currently over 200 independent publications highlighting the advantages of using the PCT Platform in scientific research & clinical laboratories.

 

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 March 31, 2023, 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 March 31, 2023 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.

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report7
 

 

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, 2022. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the final results that may be expected for the year ending December 31, 2023.

 

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.

 

Recent Accounting Pronouncements

 

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes the beneficial conversion separation model for convertible debt. As a result, after adopting the guidance, entities will no longer account for beneficial conversion features in equity. The guidance is effective for public business entities, other than small reporting company’s financial statements starting January 1, 2022, with early adoption permitted. The Company is a small reporting company and early adopted the new guidance on January 1, 2022 using the modified retrospective approach and recorded a cumulative effect of adoption equal to a $2,728,243 decrease in additional paid in capital and a $2,255,216 decrease in accumulated deficit. There is no material impact to the Company’s statements of operations or cash flows as the result of the adoption of ASU 2020-06.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which requires measurement and recognition of expected credit losses for financial assets held. We adopted this new accounting guidance effective January 1, 2023. The adoption did not have a material impact on our consolidated financial statements and disclosures and did not significantly impact the Company’s accounting policies or estimation methods related to the allowance for doubtful accounts. The Company does not have any reserve for doubtful accounts due to its customers being distributors, universities, research organizations and government agencies. In the past several years, all its customers have paid in full without any need for a write-down.

 

Principles of Consolidation

 

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

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report8
 

 

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.

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report9
 

 

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.

 

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

March 31,

 
Primary geographical markets  2023   2022 
North America  $556   $318 
Europe   36    46 
Asia   149    116 
   $741   $480 

 

  

Three Months Ended

March 31,

 
Major products/services lines  2023   2022 
Hardware  $428   $284 
Consumables   66    40 
Contract research services   5    15 
Sample preparation accessories   45    31 
Agrochem products   131    83 
Technical support/extended service contracts   43    17 
Shipping and handling   19    10 
Other   4    - 
   $741   $480 

 

  

Three Months Ended

March 31,

 
Timing of revenue recognition  2023   2022 
Products transferred at a point in time  $693   $448 
Services transferred over time   48    32 
   $741   $480 

 

Contract balances

 

In thousands of US dollars ($) 

March 31, 2023

  

December 31, 2022

 
Receivables, which are included in ‘Accounts Receivable’  $392   $295 
Contract liabilities (deferred revenue)   483    60 

 

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.

 

In thousands of US dollars ($)  2023   2024   Total 
Extended warranty service  $58   $7   $65 

 

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

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report10
 

 

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.

 

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 months ended March 31, 2023 and 2022.

 

   For the Three Months Ended 
   March 31, 
   2023   2022 
Top Five Customers   64%   73%
Federal Agencies   1%   0%

 

The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of March 31, 2023 and December 31, 2022. The Top Five Customers category may include federal agency receivable balances if applicable.

 

   March 31, 2023   December 31, 2022 
Top Five Customers   92%   93%
Federal Agencies   0%   0%

 

Product Supply

 

In recent years we utilized a contract assembler for our Barocycler® 2320EXT. They provided us with precision manufacturing services that included management support services to meet our specific application and operational requirements. Among the services provided to us were:

 

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

 

Beginning in July 2021, we brought the assembly of our Barocycler 2320EXT instruments in-house. This became necessary when our independent contract assembler (CBM Industries) informed us that they were about to need 100% of their assembly space for one of their customers, who was in fact one of the largest life science instrument manufacturers in the U.S. We worked with our notified body to gain approval to use both the CE and CSA marks on the instrument, which we received during Q3 2021. Until further notice, we expect to continue to assemble our Barocycler 2320EXT instrument at our South Easton, MA location.

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report11
 

 

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.

 

Investment in Equity Securities

 

As of March 31, 2023, 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 March 31, 2023, 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 $71,699. We recorded $8,061 as an unrealized gain during the three months ended March 31, 2023 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 months ended March 31, 2023 and 2022:

  

   2023   2022 
   For the Three Months Ended 
   March 31, 
   2023   2022 
Numerator:        
Net loss attributable to common stockholders  $(7,289,641)  $(4,671,834)
           
Denominator for basic and diluted loss per share:          
Weighted average common stock shares outstanding   15,839,373    9,695,189 
           
Loss per common share – basic and diluted  $(0.46)  $(0.48)

 

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 March 31, 
   2023   2022 
Stock options   3,420,754    1,307,822 
Convertible debt   7,620,701    5,668,816 
Common stock warrants   16,217,101    16,350,438 
Convertible preferred stock:          
Series D Convertible Preferred Stock   6,250    25,000 
Series G Convertible Preferred Stock   -    26,857 
Series H Convertible Preferred Stock   -    33,334 
Series H2 Convertible Preferred Stock   -    70,000 
Series J Convertible Preferred Stock   -    115,267 
Series K Convertible Preferred Stock   -    229,334 
Series AA Convertible Preferred Stock   8,645,000    8,649,000 
    35,909,806    32,475,868 

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report12
 

 

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

 

The following table summarizes the assumptions we utilized for grants of stock options to the three sub-groups of our stock option recipients during the three months ended March 31, 2023:

Summary of Assumptions for Grants of Stock Options

Assumptions   CEO, other Officers and Employees  
Expected life     6.0(yrs)  
Expected volatility     130.5 %
Risk-free interest rate     3.90 %
Forfeiture rate     0 to 5.00 %
Expected dividend yield     0.0 %

 

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.

 

All of the outstanding non-qualified options had an exercise price that was at or above the Company’s common stock share price at time of issuance.

 

The Company recognized stock-based compensation expense of $1,430,244 and $64,483 for the three months ended March 31, 2023 and 2022, 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 
   March 31, 
   2023   2022 
Cost of sales  $53,481   $4,349 
Research and development   170,620    18,909 
Selling and marketing   72,099    9,050 
General and administrative   1,134,044    32,175 
Total stock-based compensation expense  $1,430,244   $64,483 

 

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. The carrying amount of long-term debt approximates fair value due to interest rates that approximate prevailing market rates.

 

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.

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report13
 

 

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.

 

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 March 31, 2023:

 

      

Fair value measurements at

March 31, 2023 using:

 
  

March 31, 2023

  

Quoted

prices in

active

markets

(Level 1)

  

Significant

other

observable

inputs

(Level 2)

  

Significant

unobservable

inputs

(Level 3)

 
Equity Securities  $71,699   $71,699           -             - 
Total Financial Assets  $71,699   $71,699   $-   $- 

 

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, 2022:

 

      

Fair value measurements at

December 31, 2022 using:

 
  

December 31, 2022

  

Quoted

prices in

active

markets

(Level 1)

  

Significant

other

observable

inputs

(Level 2)

  

Significant

unobservable

inputs

(Level 3)

 
Equity Securities   63,638    63,638           -            - 
Total Financial Assets  $63,638   $63,638   $-   $- 

 

 

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 $7,650 per month, on a lease extension, signed on December 5, 2022, that expires December 31, 2023, 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 required 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.

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report14
 

 

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%.

 

On August 9, 2021, we entered into an operating lease agreement for our warehouse space in Sparks, NV (the “Sparks Lease”) for the period from September 1, 2021 through September 30, 2026. The lease contains escalating payments during the lease period. The lease can be extended for an additional three years if the Company provides notice at least six months prior to the expiration of the current lease term.

 

The Company accounted for the Sparks Lease as an operating lease under ASC 842. Upon the commencement of the lease, the Company recorded a right-of-use asset and lease liability in the amount of $239,327 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 in excess of one year as of March 31, 2023:

 

Year  Total 
April 1 - December 31, 2023  $149,300 
2024   64,393 
2025   66,969 
2026   51,777 
2027   - 
Total future undiscounted lease payments   332,439 
Less imputed interest   (177,358)
Present value of lease liabilities  $155,081 

 

The operating cash flows from the operating leases were $90,279 for the three months ended March 31, 2023 and $26,559 for the three months ended March 31, 2022. The weighted-average remaining lease term (years) of the above leases is 2.84 year as of March 31, 2023.

 

Below is a table for the right of use asset and the corresponding lease liability in the consolidated balance sheets:

 

Operating Leases  March 31, 2023   December 31, 2022 
Right of use asset  $191,816   $282,095 
Right of use liability, current  $65,029   $142,171 
Right of use liability, long term  $90,052   $139,924 
Total lease liability  $155,081   $282,095 

 

The weighted-average discount rate is 12%.

 

The Company had no financing lease during the three months ended March 31, 2023 and 2022.

 

The components of lease cost for operating leases for the three months ended March 31, 2023 and 2022 are as follows:

 

   March 31, 2023   March 31, 2022 
Operating lease cost  $37,810   $37,810 
Short-term lease cost   20,850    20,850 
Total lease cost  $58,660   $58,660 

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report15
 

 

Battelle Memorial Institute

 

In December 2008, we entered into an exclusive patent license agreement with the Battelle Memorial Institute (“Battelle”). The licensed technology is the subject of a patent application filed by Battelle in 2008 and relates to a method and a system for improving the analysis of protein samples, including through an automated system utilizing pressure and a pre-selected agent to obtain a digested sample in a significantly shorter period of time than current methods, while maintaining the integrity of the sample throughout the preparatory process. In addition to royalty payments on net sales on “licensed products,” we are obligated to make minimum royalty payments for each year that we retain the rights outlined in the patent license agreement and we are required to have our first commercial sale of the licensed products within one year following the issuance of the patent covered by the licensed technology. After re-negotiating the terms of the contract in 2013, the minimum annual royalty was $1,200 in 2014 and $2,000 in 2015; the minimum royalties were $3,000 in 2016, $4,000 in 2017 and $5,000 in 2018 and each calendar year thereafter during the term of the agreement.

 

Target Discovery Inc.

 

In March 2010, we signed a strategic product licensing, manufacturing, co-marketing, and collaborative research and development agreement with Target Discovery Inc. (“TDI”), a related party. Under the terms of the agreement, we have been licensed by TDI to manufacture and sell an innovative line of chemicals used in the preparation of tissues for scientific analysis (“TDI reagents”). The TDI reagents were designed for use in combination with our pressure cycling technology. The companies believe that the combination of PCT and the TDI reagents can fill an existing need in life science research for an automated method for rapid extraction and recovery of intact, functional proteins associated with cell membranes in tissue samples. We did not incur any royalty obligation under this agreement in 2023 or 2022.

 

In April 2012, we signed a non-exclusive license agreement with TDI to grant the non-exclusive use of our pressure cycling technology. We executed an amendment to this agreement on October 1, 2016 wherein we agreed to pay a monthly fee of $1,400 for the use of a lab bench, shared space, and other utilities, and $2,000 per day for technical support services as needed. The agreement requires TDI to pay the Company a minimum royalty fee of $60,000 in 2022 and $60,000 in 2023. For the three months ended March 31, 2023 and March 31, 2022, the Company reported $15,450 and $17,700, respectively in TDI fees.

 

Severance and Change of Control Agreements

 

Each of Mr. Schumacher, and Drs. Ting, and Lazarev, executive officers of the Company, are entitled to receive a severance payment if terminated by the Company without cause. The severance benefits would include a payment in an amount equal to one year of such executive officer’s annualized base salary compensation plus accrued paid time off. Additionally, the officer will be entitled to receive medical and dental insurance coverage for one year following the date of termination.

 

Each of these executive officers, other than Mr. Schumacher, is entitled to receive a change of control payment in an amount equal to one year of such executive officer’s annualized base salary compensation, accrued paid time off, and medical and dental coverage, in the event of their termination upon a change of control of the Company. In the case of Mr. Schumacher, this payment would be equal to two years of annualized base salary compensation, accrued paid time off, and two years of medical and dental coverage. The severance payment is meant to induce the aforementioned executives to remain in the employ of the Company, in general, and particularly in the occurrence of a change in control, as a disincentive to the control change.

 

5) Debt

 

Convertible Debt

 

On various dates during the three months ended March 31, 2023, the Company issued convertible notes for net proceeds of approximate total of $2.5 million which contained varied terms and conditions as follows: a) 4-12 month maturity date; b) interest rates of 0-120%; c) convertible to the Company’s common stock at issuance at a fixed rate of $2.50 or at variable conversion rates upon the Company’s up-listing to NASDAQ or NYSE or an event of default. These notes were issued with shares of common stock that were fair valued at issuance date. The aggregate relative fair value of the shares of common stock issued with the notes of $1,087,751 was recorded 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 on March 31, 2023.

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report16
 

 

For the three months ended March 31, 2023, deferred financing costs and OID issued with the debt are $535,250 and the Company repaid $1,628,474.

 

The summary of specific terms of the convertible notes and outstanding balances as of March 31, 2023 and December 31, 2022 are listed in the tables below. The convertible notes are from numerous parties and with original issue dates from July, 2019 to March, 2023, and maturity dates from July, 2020 to March, 2024. There are approximately $14 million of notes that are past due as of March 31, 2023.

 

   March 31, 2023   December 31, 2022 
Holders  Interest Rate   Conversion Price   Principal   Interest Rate   Conversion Price   Principal 
Main Investor   10%   $2.50 (1)   $9,393,150    10%   $2.50 (1)   $9,393,150 
Others   0 to 24%   $2.50 (2) or $7.50    10,021,554    0 to 24%   $2.50 or $7.50 (2)    8,886,036 
Totals             19,414,704              18,279,186 
Discount             1,673,288              455,517 
Net            $  17,741,416             $  17,823,669 

 

Notes:

 

(1)Conversion price of these note is $2.50 except for a note for $189,750, which will be adjusted to, upon an Event of Default, the lower of (i) the conversion price or (ii) a 25% discount to the 5-day average VWAP of the stock prior to default.
   
(2)Conversion price of these notes is $2.50 but also varies with one or more of these notes having the following conversion adjustment:

 

a.Notes are convertible before maturity at $2.50 per share or mandatorily convertible when the Company up-lists to the NASDAQ at the lower of $2.50 or the up-list price.
b.Notes are convertible upon an Event of Default at 75% multiplied by the lowest trading price for the common stock during the five days prior to the conversion.
c.Notes are convertible at $2.50 per share except that following an Event of Default the conversion price will be adjusted to 75% multiplied by the lowest trading price for the common stock during the five days prior to the conversion.
d.Notes can be voluntary converted at lower of 1) $2.50/share; or 2) purchase price of stock sold by PBI at a price lower than $2.50/share. In the event of default, these notes can be converted at lower of 1) $2.50/share; 2) 30% discount to 5-day VWAP prior to date of default.
e.Notes can be voluntary converted at lower of 1) $2.50/share; or 2) purchase price of stock sold by PBI at a price lower than $2.50/share. In the event of default, these notes can be converted at lower of 1) $2.50/share; 2) 25% discount to 5-day VWAP prior to date of default.
f.Conversion price is lower of (i) $2.50 or (ii) the price per share that the Company last sold Common Stock after the execution of an anti-dilution protection agreement.
g.Note can be converted at a Voluntary Conversion Price which is the lower of 1) $2.50/share; or 2) purchase price of stock sold by the Company at a price lower than $2.50 except that following an Event of Default, the Holder shall have the right, with no further consent from the Borrower, to convert notes which can be the lower of 1) the Voluntary Conversion Price, or 2) 70% of the 5-day VWAP prior to conversion.
h.Conversion price is $2.50. If note is in default, it is $1.
i.Notes can be voluntarily converted before maturity at $2.50 per share. Lender retains the option upon an Up-list to convert at the lower of $2.50 or the 10% off Up-list price.
j.Notes can be converted at the lesser of $2.5 per share or 25% discount to the opening price of the Company’s first day of trading on either Nasdaq or NYSE. In addition, if the Company fails to pay the Note in cash on maturity date, the conversion price will be adjusted to the lesser of (i) original conversion price or (ii) a 35% discount to the VWAP prior to each conversion date.
k.Some notes are not convertible until 180 days from the date of issuance of the Note and following an Event of Default will be convertible at the lowest trading price of the 20 days prior to conversion. The loan with a principal balance of $850,000 as of March 31, 2023 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.
l.Some notes can be converted at the lesser of $2.50 per share or 25% discount to the opening price of the Company’s first day of trading on either Nasdaq or NYSE. In addition, if the Company fails to pay the Note in cash on maturity date, the conversion price will be adjusted to the lesser of original conversion price or the product of the VWAP of the common stock for the 5 trading dates immediately prior to the maturity date multiplied by 0.75.

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report17
 

 

For the three months ended March 31, 2023, the Company recognized amortization expense related to the debt discounts indicated above of $512,781. The unamortized debt discounts as of March 31, 2023 related to the convertible notes amounted to $1,673,288.

 

As of March 31, 2023, the principal balance that are secured by the assets of the Company’s subsidiary, PBI Agrochem, Inc. is $352,188.

 

Standstill and Forbearance Agreements

 

In recent years, the Company entered into Standstill and Forbearance Agreements with lenders who hold variable-rate convertible notes. Pursuant to these agreements the lenders agreed to not convert any portion of their notes into shares of common stock at a variable rate. During the three months ended March 31, 2023, the Company settled one note with total principal of $302,484, leaving one final lender (three notes) with total principal of $272,500 outstanding and incurred interest, penalties and fees of approximately $142,247 in connection with the Standstill and Forbearance Agreements.

 

Convertible Loan Modifications and Extinguishments

 

We refinanced certain convertible loans during the three months ended March 31, 2023 at substantially the same terms for extensions ranging over a period of two 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 three months ended March 31, 2023 we recorded gains on extinguishment of liabilities of approximately $0.7 million by calculating the difference of the fair value of the new debt and the carrying value of the old debt. During the three months ended March 31, 2023, the Company extended 5 loans totaling $1,354,438 and increased the principal to$1,363,438. The Company issued 568,200 shares of common stock for these extensions and added principal.

 

Other Debt

 

No notes in Other Debt are past due as of March 31, 2023.

 

   March 31, 2023   December 31, 2022 
Holders  Interest Rate   Principal   Interest Rate   Principal 
Non-Convertible   -(1)  $866,308    -(1)  $878,809 
Merchant debt (3)        804,392         760,160 
SBA (2)   3.75%   163,838    3.75%   150,000 
Totals        1,834,538        $1,788,969 
Discount        485,672         - 
Long Term        163,838         150,000 
Short Term       $1,185,028        $1,638,969 

 

Notes:

 

(1)Interest varies from 1% to 10%. The maturity is between being past due and May 2, 2023. As of March 31, 2023, $866,308 of the non-convertible debt is past due.
(2)The Company entered a COVID-19 government loan in 2020, the Economic Injury Disaster Loan (or “EIDL”). The Company’s EIDL loan, $150,000, accrues interest at 3.75% and requires monthly payments of $731 for principal and interest beginning in December 2022. 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. During the three months ended March 31, 2023, $14,719 interest was deferred and added to principal on EIDL loan and the Company repaid $880 principal on this loan. During the year ended December 31, 2020, the Company borrowed $367,039 (two-year term and 1% interest rate per annum) under the Payroll Protection program (or “2020 PPP”). During the year ended December 31, 2021, the Company borrowed $367,039 through a second Payroll Protection program (or “2021 PPP”) and extended the monthly payment date on the EIDL to December 2022. In year 2021, both 2020 PPP and 2021 PPP was forgiven by the United States and SBA.

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report18
 

 

(3)During the three months ended March 31, 2023 and the year ended December 31, 2022 we 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 4.1% - 30.2% per month. 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 Daily Payment Rate. We 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. The Company’s Chief Executive Officer guarantees the Company’s performance of all representations, warranties, and covenants made by the Company in the Agreement. For loans outstanding on March 31, 2023, the maturity dates ranged from May 31, 2023 to September 17, 2023. For loan outstanding on December 31, 2022, the maturity dates ranged from April 4 to June 6, 2023.

 

Related Party Notes

 

   March 31, 2023   December 31, 2022 
Holders  Interest Rate   Principal   Interest Rate   Principal   Security 
Officers & Directors   -(1)  $    510,750    -(1)  $    521,950    Unsecured 
Other Related Parties   12%   126,050    12%   120,850    Unsecured 
Totals        636,800         642,800      
Discount        4,715         7,915      
Net       $632,085        $634,885      

 

Notes:

 

(1)Interest varies from 12% to 120%.

 

During the three months ended March 31, 2023, we received short-term convertible loans of $93,200 with $5,000 OID from related parties and repaid $99,000 of related party loans. These notes bear interest of 12% to 120% and are due upon demand. All related party notes are convertible at $2.50 share.

 

We amortized $102,226 of debt discounts during the three months ended March 31, 2023 for all non-convertible and related party notes. The total unamortized discount for all non-convertible and related party convertible notes as of March 31, 2023, and December 31, 2022 was $490,387 and $7,915, respectively.

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report19
 

 

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, the following is outstanding:

 

   March 31, 2023   December 31, 2022 
Series D Convertible Preferred Stock, $.01 par value; 850 shares authorized; 75 shares issued and outstanding on March 31, 2023, and 300 shares issued and outstanding on December 31, 2022 (Liquidation value of $300,000)  $-   $3 
Series G Convertible Preferred Stock, $.01 par value; 240,000 shares authorized; no shares issued and outstanding on March 31, 2023 and 80,570 shares issued and outstanding on December 31, 2022   -    806 
Series H Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; no shares issued and outstanding on March 31, 2023 and 10,000 shares issued and outstanding on December 31, 2022   -    100 
Series J Convertible Preferred Stock, $.01 par value; 6,250 shares authorized; no shares issued and outstanding on March 31, 2023 and 3,458 shares issued and outstanding on December 31, 2022   -    35 
Series K Convertible Preferred Stock, $.01 par value; 15,000 shares authorized; no shares issued and outstanding on March 31, 2023 and 6,880 shares issued and outstanding on December 31, 2022   -    68 
Series AA Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 8,645 shares issued and outstanding on March 31, 2023 and December 31, 2022, respectively   86    86 
Series H2 Convertible Preferred Stock, $.01 par value; 21 shares authorized; no shares issued and outstanding on March 31, 2023 and 21 shares issued and outstanding on December 31, 2022   -    - 
Series A Junior Participating Preferred Stock, $.01 par value, 20,000 shares authorized, no shares outstanding   -    - 
Series A Convertible Preferred Stock, $.01 par value, 313,960 shares authorized, no shares outstanding   -    - 
Series B Convertible Preferred Stock, $.01 par value, 279,256 shares authorized, no shares outstanding   -    - 
Series C Convertible Preferred Stock, $.01 par value, 88,098 shares authorized, no shares outstanding   -    - 
Series E Convertible Preferred Stock, $.01 par value, 500 shares authorized, no shares outstanding   -    - 
Total Convertible Preferred Shares  $86   $1,098 

 

Stock Options and Warrants

 

At the Company’s December 30, 2021 Special Meeting, the shareholder’s approved the 2021 Equity Incentive Plan (the “2021 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. Consistent with the Company’s existing 2013 Equity Incentive plan (the “2013 plan”), under the 2021 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 March 31, 2023, options to acquire 3,420,754 shares were outstanding under these Plans.

 

As of March 31, 2023, total unrecognized compensation cost related to the unvested stock-based awards was $1,243,037, which is expected to be recognized over weighted average period of 2.61 years. The aggregate intrinsic value associated with the options outstanding and exercisable as of March 31, 2023, based on the March 31, 2023 closing stock price of $1.25, was $863,040.

 

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

 

   Stock Options   Warrants         
   Weighted Average   Weighted Average   Total 
   Shares   price per share   Shares   price per share   Shares   Exercisable 
Balance outstanding, December 31, 2022   1,307,822   $0.72      16,278,769   $3.50      17,586,591    17,570,591 
Granted     2,230,484    1.50    100,000    3.50    2,330,484      
Exercised   (117,552)   0.69    -    -    (117,552)     
Expired   -    -    (161,668)   3.50    (161,668)     
Forfeited   -    -    -    -    -      
Balance outstanding, March 31, 2023   3,420,754   $1.23    16,217,101   $3.50    19,637,855    18,538,573 

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report20
 

 

As of March 31, 2023, the 3,420,754 options outstanding have a $1.23 weighted average exercise price and 8.64 years of weighted average remaining life for outstanding options and 8.1 years of weighted average remaining life for exercisable options. Of these options, 2,321,472 are currently exercisable.

 

As of March 31, 2023, the warrants outstanding have a $3.50 weighted average exercise price.

 

Common Stock and Warrant Issuances

 

During the three months ended March 31, 2023, the Company accrued approximately $1,705,234 in interest expense for these obligations to issue common stock. During the three months ended March 31, 2022, the Company accrued $1,173,458 million in interest expense for these obligations to issue common stock.

 

During the three months ended March 31, 2023 the Company issued a total of 4,381,330 shares of restricted common stock to accredited investors and consultants, with the following detail:

 

  1,111,081 shares of common stock with a fair value of $1,705,234 to lenders for interest paid-in-kind;
  990,500 shares with a fair value of $1,419,335 for services rendered;
  203,613 shares with a fair value of $509,033 for conversions of debt principal and interest;
  117,552 shares for stock option exercises (at an exercise price of $0.69 per share);
  73,694 shares with a fair value of $102,435 for dividends paid-in-kind;
  783,150 shares with a fair value of $1,087,751 for new convertible debt issuances;
  568,200 shares with a fair value of $1,029,939 for convertible debt extensions;
  40,000 shares with a fair value of $100,000 for sale of common, and
  493,540 shares for the conversion of preferred stock to common stock.

 

During the three months ended March 31, 2023, the Company issued 100,000 warrants (five-year term at a $3.50 exercise price) to acquire common stock at a fair value of $61,609 to a consultant for professional services.

 

On various dates in the three months ended March 31, 2022 the Company issued a total of 1,073,610 shares of restricted common stock to accredited investors and consultants. 140,200 of the shares with a fair value of $350,500 were issued for the conversion of debt and interest for common stock, 558,100 of the shares with a fair value of $1,173,458 were issued for interest paid-in-kind, 37,000 of the shares with a fair value of $77,700 were issued for services rendered, 31,810 shares with a fair value of $64,256 for dividends paid-in-kind, 92,000 shares with a fair value of $142,480 for new convertible debt issuances and 214,500 shares with a fair value of $472,900 for debt extension.

 

During the three months ended March 31, 2022, we issued 100,000 warrants (three-year term at a $3.50 exercise price) to acquire common stock at a fair value of $87,436 to a lender in conjunction with signing of new convertible loans. We also issued 30,000 warrants (three-year term at a $3.50 exercise price) with a fair value of $39,761 for services rendered and 100,000 warrants (three-year term at a $3.50 exercise price) with a fair value of $132,537 for debt extension.

 

7) Subsequent Events

 

From April 1, 2023 through May 10, 2023 the Company entered into five (5) new merchant cash loan agreements collecting approximately $1.0 million (obligating the Company to repay approximately $58,000 per week for 6 months to 18 months) and issued two (2) convertible loans with a principal balance of $309,000. The terms of the notes are 3-12 months with an interest rate of 5% to 5.77% and convertible into the Company’s common stock at a fixed rate of $2.50 per share. In this time the Company also issued 50,000 shares of common stock and 25 shares of Series BB preferred stock with the convertible loans, 300,000 shares of common stock for accrued interest paid-in-kind and repaid a $300,000 convertible note on April 4, 2023.

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report21
 

 

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 number of pressure cycling technology (“PCT”) and constant pressure (“CP”) based units that we believe will be installed and the expected 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 resources expended 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, 2022 and in this Report. We qualify all of our forward-looking statements by these cautionary statements.

 

Pressure BioSciences, Inc.March 31, 2023 10Q Report22
 

 

Pressure BioSciences, Inc. (OTCQB: PBIO) (the “Company”) is a leader in the development & sale of innovative, enabling, high pressure technology-based instruments, consumables, and services for the life sciences and other industries worldwide. Our products/services are based on three patented, high-pressure platforms: (i) Pressure Cycling Technology (“PCT”), (ii) BaroFold Technology (“BaroFold”), and (iii) Ultra Shear Technology (“UST”).

 

The Company was founded on the belief that its PCT Platform had the potential to significantly increase the quality of sample preparation in both research and clinical settings. Although this premise has been proven true, and although PBI has been successful in installing its PCT Platform in the laboratories of key opinion leaders worldwide, the Company now believes – based on market feedback – that the commercial potential for its UST Platform far exceeds the potential of the PCT Platform. Consequently, in January 2022, PBI made the critical decision to immediately shift its primary business focus from PCT to its innovative UST Platform.

 

The UST Platform (7 issued patents) is based on the use of intense shear forces from ultra-high pressure discharge (greater than 20,000 psi) through a dynamically-controlled nano-gap valve under precisely controlled temperatures. UST has been shown to turn hydrophobic (water-repelling) oil-based supplements (e.g., CBD, curcumin), therapeutics (e.g., prednisone), and other active ingredients (e.g., retinol, astaxanthin) into long-term stable, effectively water-soluble, highly bioavailable, oil-in-water nanoemulsion formulations. The Company began commercialization of the UST Platform in May 2022, and executed agreements have subsequently been announced with three CBD companies and one cosmeceutical/skincare company for commercialization in Q4 2022.

 

The BaroFold Platform (8 issued patents) can be used to significantly improve the quality and production costs of protein biotherapeutics. It employs high pressure manipulations for the disaggregation, unfolding and controlled refolding of proteins to their desired native structures at yields and efficiencies not achievable using existing technologies. The BaroFold Platform has been shown to remove protein aggregates in biotherapeutic drug manufacturing, thereby improving product efficacy, safety, and cost for both new-drug entities and biosimilar (follow-on biologic) products. It is scalable and practical for standard manufacturing processes.

 

The PCT Platform (15 issued patents) uses alternating cycles of hydrostatic pressure between ambient and ultra-high pressures to control bio-molecular interactions safely and reproducibly in the area of sample preparation (e.g., the critical steps performed by tens of thousands of scientists worldwide prior to analytical measurements, such as cell lysis and biomolecule extraction from tissue samples). Our primary focus is on making our recently released, GMP-compliant, next generation PCT-based Barocycler EXTREME system available globally to biopharmaceutical drug manufacturers for use in the design, development, characterization, and quality control of biotherapeutic drugs. We currently have over 350 PCT Systems placed in approximately 225 academic, government, pharmaceutical, and biotech research laboratories worldwide. There are currently over 200 independent publications highlighting the advantages of using the PCT Platform in scientific research & clinical laboratories.

 

2023 Key Accomplishments

 

From January 1, 2023 to May 8, 2023, we accomplished the following:

 

 April 21, 2023: PBIO unveils powerful THC market leapfrog opportunity with exclusive licensing of UltraShear nanoemulsion processing platform.
 April 18: PBIO announces expansion into strategic manufacturing facilities with premier process tech company.
 April 14: PBIO reports Q4 and FY 2022 financial results – offers guidance for a strong 2023.
April 6, 2023: PBIO and NutraLife Biosciences renew partnership for development and distribution of next generation nutraceuticals.
March 28: Company reports fresh sales momentum for PBI Agrochem.
March 22: PBIO receives $1.5 million contract for UltraShear nanoemulsified CBD.
March 1: Company announces the exchange of over $10 million of debt into equity.
February 1: Company receives record order (nearly $600,000) for 16 PCT instruments.
January 27: PBIO and One World Products partner to develop CBD-Nano sports performance/recovery drink.
January 19: Dramatic consumer testing results confirm UltraShear nanoemulsion oral spray delivers first effects and maximization in lightning speed – simple, reliable dosing delivers profoundly improved results.

  

Pressure BioSciences, Inc.March 31, 2023 10Q Report23
 

 

Results of Operations

 

The following disclosure compares the results of operations for the quarter ended March 31, 2023 (“Q1 2023”) with March 31, 2022 (“Q1 2022”).

 

Products and Services Revenue

 

We recognized total revenue of $740,600 for Q1 2023 compared to $480,000 for Q1 2022, a 54% increase. This increase in revenue was primarily attributable to a $208,350 increase in sales of PCT instrumentation and consumables and an increase of $47,388 of PBI Agrochem products.

 

Cost of Products and Services

 

The cost of products and services was $358,628 for Q1 2023 compared to $314,363 for Q1 2022. Gross profit margin on products and services increased to 52% in Q1 2023 compared to 35% in Q1 2022. The increase in gross profit margin was attributable to approximately $130,000 of Agrochem products sold in Q12023 at no cost due to 2022 inventory write-off and approximately $43,000 of freight charges in Q12022 to receive Agrochem products.