UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2019

 

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
None   None   None

 

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.

 

[X] 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).

 

[X] 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 [X]

  Smaller reporting company [X]   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 [X] No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 7, 2019.

 

Class   Number of Shares  
Common Stock, par value $.01 per share     1,938,046  

 

 

 

   
 

 

TABLE OF CONTENTS

 

  Page
   
PART I - FINANCIAL INFORMATION 3
   
Item 1. Unaudited Financial Statements 3
   
Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018 3
   
Consolidated Statements of Operations for the Three- and Six-Months Ended June 30, 2019 and 2018 4
   
Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 2019 and 2018 5
   
Consolidated Statements of Statements of Equity for the Six Months Ended June 30, 2019 and 2018 6
   
Notes to Unaudited Consolidated Financial Statements 7
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29
   
Item 3. Quantitative and Qualitative Disclosure About Market Risk 35
   
Item 4. Controls and Procedures 35
   
PART II - OTHER INFORMATION 36
   
Item 1. Legal Proceedings 36
   
Item 1A. Risk Factors 36
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 36
   
Item 3. Defaults Upon Senior Securities 36
   
Item 4. Mine Safety Disclosures 36
   
Item 5. Other Information 36
   
Item 6. Exhibits 37
   
SIGNATURES 39

 

2
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

    June 30, 2019     December 31, 2018  
ASSETS                
CURRENT ASSETS                
Cash and cash equivalents   $ 117,933     $ 103,118  
Accounts receivable, net of $0 reserve at June 30, 2019 and December 31, 2018     410,613       474,830  
Inventories, net of $273,547 reserve at June 30, 2019 and December 31, 2018     744,806       765,478  
Prepaid expenses and other current assets     127,657       170,734  
Total current assets     1,401,009       1,514,160  
Investment in equity securities     16,643       16,643  
Property and equipment, net     94,277       69,272  
Right of use asset leases     108,332       136,385  
Intangible assets, net     620,192       663,462  
TOTAL ASSETS   $ 2,240,453     $ 2,399,922  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
CURRENT LIABILITIES                
Accounts payable   $ 514,948     $ 658,856  
Accrued employee compensation     438,608       456,932  
Accrued professional fees and other    

1,435,210

      1,112,995  
Other current liabilities     1,909,514       1,233,325  
Deferred revenue     25,702       20,623  
Operating lease liability     67,674       59,799  
Convertible debt, net of unamortized discounts of $360,297 and $156,180, respectively     4,835,066       4,000,805  
Other debt, net of unamortized discounts of $13,833 and $9,118, respectively     1,107,667       852,315  
Other related party debt     15,000       15,000  
Total current liabilities     10,349,389       8,410,650  
LONG TERM LIABILITIES                
Operating lease liability, net of current portion     40,658       76,586  
Deferred revenue     32,506       37,757  
TOTAL LIABILITIES    

10,422,553

      8,524,993  
COMMITMENTS AND CONTINGENCIES (Note 5)                
STOCKHOLDERS’ DEFICIT                
Series D Convertible Preferred Stock, $.01 par value; 850 shares authorized; 300 shares issued and outstanding on June 30, 2019 and December 31, 2018, 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, 2019 and December 31, 2018, respectively     806       806  
Series H Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 10,000 shares issued and outstanding on June 30, 2019 and December 31, 2018, respectively     100       100  
Series H2 Convertible Preferred Stock, $.01 par value; 21 shares authorized; 21 shares issued and outstanding on June 30, 2019 and December 31, 2018, respectively     -       -  
Series J Convertible Preferred Stock, $.01 par value; 6,250 shares authorized; 3,458 shares issued and outstanding on June 30, 2019 and December 31, 2018, respectively     35       35  
Series K Convertible Preferred Stock, $.01 par value; 15,000 shares authorized; 6,880 shares issued and outstanding on June 30, 2019 and December 31, 2018, respectively     68       68  
Series AA Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 7,518 and 6,499 shares issued and outstanding on June 30, 2019 and December 31, 2018, respectively     76       65  
Common stock, $.01 par value; 100,000,000 shares authorized; 1,889,616 and 1,684,182 shares issued and outstanding on June 30, 2019 and December 31, 2018 respectively    

18,896

      16,842  
Warrants to acquire common stock     21,446,642       19,807,247  
Additional paid-in capital    

41,676,926

      39,777,301  
Accumulated deficit     (71,325,652 )     (65,727,538 )
Total stockholders’ deficit    

(8,182,100

)     (6,125,071 )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $ 2,240,453     $ 2,399,922  

 

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

 

3
 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   

For the Three Months Ended

June 30,

    For the Six Months Ended
June 30,
 
    2019     2018     2019     2018  
Revenue:                                
Products, services, other   $ 518,663     $ 618,418     $ 1,028,903     $ 1,203,662  
Grant revenue     -       20,355       -       45,885  
Total revenue     518,663       638,773       1,028,903       1,249,547  
                                 
Costs and expenses:                                
Cost of products and services     304,172       270,046       613,884       594,835  
Research and development     291,538       323,832       556,242       648,808  
Selling and marketing     186,609       224,942       374,824       499,410  
General and administrative    

1,136,768

      740,843       2,281,189       1,535,448  
Total operating costs and expenses     1,919,087       1,559,663       3,826,139       3,278,501  
                                 
Operating loss     (1,400,424 )     (920,890 )     (2,797,236 )     (2,028,954 )
                                 
Other expense:                                
Interest expense     (1,074,488 )     (1,159,242 )     (1,587,194 )     (2,282,387 )
Other expense     (185,469 )     (9,582 )     (290,314 )     (14,312 )
(Loss) Gain on extinguishment of debt     (106,461 )     471,612       (147,271 )     475,897  
Incentive shares/warrants     -       (663,130 )     -       (663,130 )
Total other (expense) income     (1,366,418 )     (1,360,342 )     (2,024,779 )     (2,483,932 )
                                 
Net loss     (2,766,842 )     (2,281,232 )     (4,822,015 )     (4,512,886 )
Deemed dividend on down round feature     -       (213,012 )     -       (213,012 )
Deemed dividend on beneficial conversion feature     (889,532 )     (10,532,291 )     (1,949,731 )     (10,532,291 )
Preferred stock dividends     (420,489 )     (95,879 )     (776,099 )     (95,879 )
Net loss attributable to common stockholders   $ (4,076,863 )   $ (13,122,414 )   $ (7,547,845 )   $ (15,354,068 )
Basic and diluted net loss per share attributable to common stockholders   $ (2.22 )   $ (9.20 )   $ (4.24 )   $ (11.01 )
                                 
Weighted average common stock shares outstanding used in the basic and diluted net loss per share calculation     1,837,913       1,426,698      

1,780,881

      1,395,187  

 

The accompanying notes are an integral part of these unaudited consolidated

 

4
 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

    For the Six Months Ended  
    June 30,  
    2019     2018  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (4,822,015 )   $ (4,512,886 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Right of use asset     28,053       -  
Common stock issued for debt extension     -       28,490  
Depreciation and amortization     47,180       45,874  
Accretion of interest and amortization of debt discount     290,040       986,155  
Issuance of incentive shares and common stock warrants     168,000       663,130  
Inventory reserve recovery     -       (39,900 )
Loss(Gain) on extinguishment of debt     147,271     (475,897 )
Stock-based compensation expense     607,574       148,270  
Shares issued with debt     -       7,800  
Impairment loss on investment     -       1,834  
Changes in operating assets and liabilities:                
Accounts receivable     64,217       (319,242 )
Inventories     20,673       (2,501 )
Prepaid expenses and other assets     43,077       19,422  
Accounts payable     152,275     108,698  
Accrued employee compensation    

(18,323

)     58,925  
Operating lease liability     (28,053 )     -  
Deferred revenue and other accrued expenses     (172 )     678,789  
Net cash used in operating activities     (3,300,203 )     (2,603,039 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchases of property plant and equipment     (28,915 )     -  
Net cash used in investing activities     (28,915 )     -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Net proceeds from revolving note payable     -       460,000  
Net proceeds from warrant exercises     -       -  
Net proceeds from Series AA Convertible Preferred Stock     2,292,300       226,091  
Net proceeds from convertible debt     3,339,050       3,242,950  
Net proceeds from non-convertible debt – third party     1,211,500       952,501  
Net proceeds from non-convertible debt – related party    

125,000

      102,100  
Payments on convertible debt     (2,533,985 )     (1,518,500 )
Payments on non-convertible debt – related party    

(125,000

)     (52,100 )
Payments on non-convertible debt     (964,932 )     (872,545 )
Net cash provided by financing activities     3,343,933       2,540,497  
                 
NET INCREASE (DECREASE) IN CASH     14,815       (62,542 )
CASH AT BEGINNING OF YEAR     103,118       81,033  
CASH AT END OF PERIOD   $ 117,933     $ 18,491  
                 
SUPPLEMENTAL INFORMATION                
Interest paid in cash   $ 1,162,557     $ 525,979  
Income taxes paid     -       -  
NON CASH TRANSACTIONS:                
Common stock issued in lieu of cash for interest     -       90,023  
Common stock issued with debt     167,359       170,745  
Discount from warrants issued with convertible debt     -       162,023  
Discount from one-time interest     -       154,500  

Common stock issued in lieu of cash for dividend

    151,993       -  
Preferred stock dividends     776,099       95,879  
Conversion of debt into preferred stock     -       12,688,634  
Contingent beneficial conversion feature on convertible note     -       253,000  
Deemed dividend-triggered down round feature     -       213,012  
Deemed dividend-beneficial conversion feature     1,949,731       10,532,291  
Derivative liability released upon warrant exercise     -       -  

 

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

 

5
 

 

PRESSURE BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

 

   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 other comprehensive   Accumulated   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Warrants   Capital   loss   Deficit   Deficit 
BALANCE, December 31, 2017   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880    68.00    -    -    1,342,858   $13,429   $9,878,513   $30,833,549   $-   $(55,349,299)  $(14,622,796)
Stock-based compensation   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    86,020    -    -    86,020 
Issuance of common stock for dividends paid-in-kind   -    -    -    -    -    -    -    -    -    -    -    -    -    -    22,606    226    -    80,529    -    -    80,755 
Common Stock issued for debt extension                                                                         7,000    70    -    28,420              28,490 
Stock issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    15,750    158    -    59,106    -    -    59,263 
Warrants issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    118,416    -    -    -    118,416 
Net loss   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (2,231,654)   (2,231,654)
BALANCE, March 31, 2018   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    -   $-    1,388,214   $13,883   $9,996,929   $31,087,624   $-   $(57,580,953)  $(16,481,506)
Stock-based compensation   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    62,249    -    -    62,249 
Down round feature triggered   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -         10,532,291        -    10,532,291
Down round feature triggered on warrants   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -         -         213,012   213,012 
Incentive Shares/Warrants   -    -    -    -    -    -    -    -    -    -    -    -    -    -    110,833    1,108    312,637    339,149    -    -    652,894 
Series AA Preferred Stock dividend   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (95,879)   (95,879)
Contingent beneficial feature on convertible notes   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    253,000    -    -    253,000 
Conversion of debt and interest for preferred stock   -    -    -    -    -    -    -    -    -    -    -    -    -    51    -    -    6,826,710    5,861,874    -    -    12,688,635 
Issuance of common stock for dividends paid-in-kind   -    -    -    -    -    -    -    -    -    -    -    -    -    -    2,637    26    -    9,242    -    -    9,268 
Deemed dividend-beneficial conversion feature   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (10,532,291)   -    -    (10,532,291)
Deemed dividend-beneficial conversion feature on warrants and debentures   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (213,012)   (213,012)
Warrant modification   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    60,120    -    -    -    60,120 
Preferred Stock offering   -    -    -    -    -    -    -    -    -    -    -    -    120    1    -    -    172,932    127,067    -    -    300,000 
Offering costs for issuance of preferred stock   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    37,782    (111,691)   -    -    (73,909)
Stock issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    35,410    354    -    118,927    -    -    119,281 
Warrants issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    43,607    -    -    -    43,607 
Net loss   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -         -    (2,281,232)   (2,281,232)
BALANCE, June 30, 2018   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    120   $52    1,537,094   $15,371   $17,450,717   $37,747,441   $-   $(59,958,064)  $(4,743,472)

 

   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 other comprehensive   Accumulated    Total Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Warrants   Capital   loss   Deficit   Deficit 
BALANCE, December 31, 2018   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880    68.00    6,499    65.00    1,684,184   $16,842   $19,807,247   $39,777,301   $-   $(65,727,538)  $(6,125,071)
Stock-based compensation   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    245,392    -    -    245,392 
Series AA Preferred Stock dividend   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -              -    (355,610)   (355,610)
Issuance of shares for services   -    -    -    -    -    -    -    -    -    -    -    -    -    -    50,000    500         167,500    -    -    168,000 
Beneficial conversion feature on Series AA convertible preferred stock   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    1,060,199   -    -    1,060,199
Deemed dividend-beneficial conversion feature   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (1,060,199)   -    -    (1,060,199
Preferred Stock offering   -    -    -    -    -    -    -    -    -    -    -    -    560    6    -    -    738,528    661,466    -    -    1,400,000 
Offering costs for issuance of preferred stock   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    160,764    (300,764)   -    -    (140,000)
Common Stock issued for debt extension                                                                         16,350    163    -    38,824              38,988 
Stock issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    17,958    180    -    50,553    -    -    50,733 
Net loss   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (2,055,173)   (2,055,173)
BALANCE, March 31, 2019   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    7,059   $71    1,768,492   $17,685   $20,706,539   $40,640,273   $-   $(68,138,321)  $(6,772,741)
Stock-based compensation   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    362,182    -    -    362,182 
Series AA Convertible Preferred Stock dividend   -    -    -    -    -    -    -    -    -    -    -    -         -                        -    (420,489)   (420,489)
Beneficial conversion feature on Series AA Convertible Preferred Stock   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    889,532    -    -    889,532 
Deemed dividend-beneficial conversion feature   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (889,532)   -    -    (889,532)
Issuance of common stock for dividends paid-in-kind   -    -    -    -    -    -    -    -    -    -    -    -              42,456    425         151,568    -    -    151,993 
Preferred Stock offering   -    -    -    -    -    -    -    -    -    -    -    -    459    5              608,852    538,062    -    -    1,146,919 
Offering costs for issuance of preferred stock   -    -    -    -    -    -    -    -    -    -    -    -         -              131,251    (245,870)   -    -    (114,619)
Stock issued with debt   -    -    -    -    -    -    -    -    -    -    -    -         -    29,641    296         105,293    -    -    105,589 
Common Stock issued for debt extension   -    -    -    -    -    -    -    -    -    -    -    -    -    -    49,027    490         125,418    -    -    125,908 
Net loss   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -         -    (2,766,842)   (2,766,842)
BALANCE, June 30, 2019   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    7,518   $76    1,889,616   $18,896   $21,446,642   $41,676,926   $-   $(71,325,652)  $(8,182,100)

 

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

 

6
 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2019

(UNAUDITED)

 

  1) Business Overview, Liquidity and Management Plans

 

Pressure BioSciences, Inc. (“we”, “our”, the “Company”) is focused on solving the challenging problems inherent in biological sample preparation, a crucial laboratory step performed by scientists worldwide working in biological life sciences research. Sample preparation is a term that refers to a wide range of activities that precede most forms of scientific analysis. Sample preparation is often complex, time-consuming, and in our belief, one of the most error-prone steps of scientific research. It is a widely used laboratory undertaking, the requirements of which drive what we believe is a large and growing worldwide market. We have developed and patented a novel, enabling technology platform that can control the sample preparation process. It is based on harnessing the unique properties of high hydrostatic pressure. This process, called pressure cycling technology, or PCT, uses alternating cycles of hydrostatic pressure between ambient and ultra-high levels (45,000 psi or greater) to safely, conveniently and reproducibly control the actions of molecules in biological samples, such as cells and tissues from human, animal, plant, and microbial sources.

 

Our pressure cycling technology uses internally developed instrumentation that is capable of cycling pressure between ambient and ultra-high levels - at controlled temperatures and specific time intervals - to rapidly and repeatedly control the interactions of biomolecules, such as DNA, RNA, proteins, lipids, and small molecules. Our laboratory instrument, the Barocycler®, and our internally developed consumables product line, including PULSE® (Pressure Used to Lyse Samples for Extraction) Tubes, other processing tubes, and application specific kits (which include consumable products and reagents) together make up our PCT Sample Preparation System, or PCT SPS.

 

In 2015, together with an investment bank, we formed a subsidiary called Pressure BioSciences Europe (“PBI Europe”) in Poland. We have 49% ownership interest with the investment bank retaining 51%. As of now, PBI Europe does not have any operating activities and we cannot reasonably predict when operations will commence. Therefore, we do not have control of the subsidiary and did not consolidate in our financial statements. PBI Europe did not have any operations in the six months ended June 30, 2019 or in fiscal year 2018.

 

  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 negative cash flows from operations with respect to our pressure cycling technology business since our inception. As of June 30, 2019, 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 cash through debt and equity offerings in the past and as described in Notes 6 and 7. In addition we raised cash through debt financing after June 30, 2019 as described in Note 8. 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.

 

7
 

 

  3) Interim Financial Reporting

 

The accompanying unaudited consolidated balance sheet as of December 31, 2018, which was derived from audited financial statements, and the unaudited interim consolidated financial statements of Pressure BioSciences, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all material adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K (the “Form 10-K”) for the fiscal year ended December 31, 2018 as filed with the Securities and Exchange Commission on April 16, 2019.

 

  4) Summary of Significant Accounting Policies

 

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.

 

Reclassifications

 

Certain prior year amounts have been reclassified to conform to our current year presentation.

 

Recent Accounting Standards

 

8
 

 

In July 2018, the FASB issued ASU 2018-07, Compensation- Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting as an amendment and update expanding the scope of Topic 718. The amendment specifies that Topic 718 now applies to all share-based payment transactions, even non-employee awards, in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. Under the new guidance, awards to nonemployees are measured on the grant date, rather than on the earlier of the performance commitment date or the date at which the nonemployee’s performance is complete. Also, the awards would be measured by estimating the fair value of the equity instruments to be issued, rather than the fair value of the goods or services received or the fair value of the equity instruments issued, whichever can be measured more reliably. In addition, entities may use the expected term to measure nonemployee awards or elect to use the contractual term as the expected term, on an award-by-award basis. The new guidance is effective for the Company in annual periods beginning after December 15, 2018, and interim periods within those annual periods, with early adoption permitted. Based on the new guidance, the Company will measure its nonemployee stock awards at grant date not when the stock awards are vested. This new guidance did not have a material impact on the Company’s consolidated financial statements.

 

Revenue Recognition

 

We recognize revenue in accordance with FASB ASC 606, 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, will send a highly trained technical representative to the customer site to install Barocycler®s 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.

 

9
 

 

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 currently record revenue for its non-cash transactions at recorded cost or carrying value of the assets or services sold.

 

In accordance with FASB ASC 842, Leases, we account for our Barocycler lease agreements in which the Company is the lessor under the operating method. The new standard provides a number of optional practical expedients in transition. We elected the ‘package of practical expedients’ for our instrument leases, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs.

 

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.

 

Revenue from government grants is recorded when expenses are incurred under the grant in accordance with the terms of the grant award.

 

Deferred revenue represents amounts received from grants and 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.