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, 2020
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)
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 and posted 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 and post 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” and “smaller reporting 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 | [ ] |
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 |
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
The number of shares outstanding of the Issuer’s common stock as of August 11, 2020 was 3,575,469.
TABLE OF CONTENTS
2 |
PART I - FINANCIAL INFORMATION
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 2020 | December 31, 2019 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 41,458 | $ | 29,625 | ||||
Accounts receivable | 121,306 | 229,402 | ||||||
Inventories, net of $342,496 reserve at June 30, 2020 and December 31, 2019 | 614,863 | 617,716 | ||||||
Loan receivable | 531,250 | - | ||||||
Prepaid expenses and other current assets | 192,605 | 213,549 | ||||||
Total current assets | 1,501,482 | 1,090,292 | ||||||
Investment in equity securities | 362,905 | 16,643 | ||||||
Property and equipment, net | 26,275 | 55,590 | ||||||
Right of use asset leases | 40,659 | 76,586 | ||||||
Intangible assets, net | 533,654 | 576,923 | ||||||
TOTAL ASSETS | $ | 2,464,975 | $ | 1,816,034 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 809,837 | $ | 815,764 | ||||
Accrued employee compensation | 392,425 | 451,200 | ||||||
Accrued professional fees and other | 1,866,083 | 1,658,452 | ||||||
Accrued interest | 5,076,790 | 2,949,621 | ||||||
Deferred revenue | 36,888 | 23,248 | ||||||
Operating lease liability | 40,659 | 76,586 | ||||||
Convertible debt, net of unamortized discounts of $3,923,549 and $619,227, respectively | 6,224,450 | 6,121,338 | ||||||
Other debt, net of unamortized discounts of $0 and $1,769, respectively | 1,577,328 | 1,675,667 | ||||||
Other related party debt | 90,000 | 81,500 | ||||||
Total current liabilities | 16,114,460 | 13,853,376 | ||||||
LONG TERM LIABILITIES | ||||||||
Long term debt | 527,039 | - | ||||||
Deferred revenue | 35,462 | 18,065 | ||||||
TOTAL LIABILITIES | 16,676,961 | 13,871,441 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 4) | ||||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Series D Convertible Preferred Stock, $.01 par value; 850 shares authorized; 300 shares issued and outstanding on June 30, 2020 and December 31, 2019, 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, 2020 and December 31, 2019, respectively | 806 | 806 | ||||||
Series H Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 10,000 shares issued and outstanding on June 30, 2020 and December 31, 2019, respectively | 100 | 100 | ||||||
Series H2 Convertible Preferred Stock, $.01 par value; 21 shares authorized; 21 shares issued and outstanding on June 30, 2020 and December 31, 2019, respectively | - | - | ||||||
Series J Convertible Preferred Stock, $.01 par value; 6,250 shares authorized; 3,458 shares issued and outstanding on June 30, 2020 and December 31, 2019, respectively | 35 | 35 | ||||||
Series K Convertible Preferred Stock, $.01 par value; 15,000 shares authorized; 6,880 shares issued and outstanding on June 30, 2020 and December 31, 2019, respectively | 68 | 68 | ||||||
Series AA Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 7,939 shares issued and outstanding on June 30, 2020 and December 31, 2019, respectively | 80 | 80 | ||||||
Common stock, $.01 par value; 100,000,000 shares authorized; 3,207,285 and 2,549,620 shares issued and outstanding on June 30, 2020 and December 31, 2019 respectively | 32,072 | 25,496 | ||||||
Warrants to acquire common stock | 26,527,615 | 22,599,177 | ||||||
Additional paid-in capital | 47,413,735 | 44,261,105 | ||||||
Accumulated deficit | (88,186,500 | ) | (78,942,277 | ) | ||||
Total stockholders’ deficit | (14,211,986 | ) | (12,055,407 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 2,464,975 | $ | 1,816,034 |
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, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenue: | ||||||||||||||||
Products, services, other | $ | 268,154 | $ | 518,663 | $ | 522,027 | $ | 1,028,903 | ||||||||
Total revenue | 268,154 | 518,663 | 522,027 | 1,028,903 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of products and services | 134,882 | 304,172 | 310,028 | 613,884 | ||||||||||||
Research and development | 294,602 | 291,538 | 560,292 | 556,242 | ||||||||||||
Selling and marketing | 162,098 | 186,609 | 351,214 | 374,824 | ||||||||||||
General and administrative | 1,007,215 | 1,136,768 | 2,026,225 | 2,281,189 | ||||||||||||
Total operating costs and expenses | 1,598,797 | 1,919,087 | 3,247,759 | 3,826,139 | ||||||||||||
Operating loss | (1,330,643 | ) | (1,400,424 | ) | (2,725,732 | ) | (2,797,236 | ) | ||||||||
Other (expense) income: | ||||||||||||||||
Interest expense, net | (1,724,879 | ) | (1,074,488 | ) | (3,296,679 | ) | (1,587,194 | ) | ||||||||
Unrealized gain on investment in equity securities | 196,891 | - | 346,262 | - | ||||||||||||
Loss on extinguishment of liabilities | (1,710,151 | ) | (106,461 | ) | (2,846,518 | ) | (147,271 | ) | ||||||||
Other expense | - | (185,469 | ) | - | (290,314 | ) | ||||||||||
Total other expense | (3,238,139 | ) | (1,366,418 | ) | (5,796,935 | ) | (2,024,779 | ) | ||||||||
Net loss | (4,568,782 | ) | (2,766,842 | ) | (8,522,667 | ) | (4,822,015 | ) | ||||||||
Deemed dividend on beneficial conversion feature | - | (889,532 | ) | - | (1,949,731 | ) | ||||||||||
Preferred stock dividends | (396,970 | ) | (420,489 | ) | (721,556 | ) | (776,099 | ) | ||||||||
Net loss attributable to common stockholders | $ | (4,965,752 | ) | $ | (4,076,863 | ) | $ | (9,244,223 | ) | $ | (7,547,845 | ) | ||||
Basic and diluted net loss per share attributable to common stockholders | $ | (1.70 | ) | $ | (2.22 | ) | $ | (3.34 | ) | $ | (4.24 | ) | ||||
Weighted average common stock shares outstanding used in the basic and diluted net loss per share calculation | 2,914,659 | 1,837,913 | 2,765,132 | 1,780,881 |
The accompanying notes are an integral part of these unaudited consolidated financial statements
4 |
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended | ||||||||
June 30, | ||||||||
2020 | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (8,522,667 | ) | $ | (4,822,015 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Non-cash lease expense | 35,927 | 28,053 | ||||||
Common stock issued for interest and extension fees | 159,784 | - | ||||||
Depreciation and amortization | 74,247 | 47,180 | ||||||
Accretion of interest and amortization of debt discount | 1,750,911 | 290,040 | ||||||
Issuance of incentive shares and common stock warrants | - | 168,000 | ||||||
Loss on extinguishment of accrued liabilities and debt | 977,622 | 147,271 | ||||||
Stock-based compensation expense | 307,110 | 607,574 | ||||||
Gain on investment in equity securities | (346,262 | ) | - | |||||
Common stock issued for services | 87,963 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 108,096 | 64,217 | ||||||
Inventories | 2,853 | 20,673 | ||||||
Prepaid expenses and other assets | 20,944 | 43,077 | ||||||
Accounts payable | (5,927 | ) | 152,275 | |||||
Accrued employee compensation | (58,775 | ) | (18,323 | ) | ||||
Operating lease liability | (35,927 | ) | (28,053 | ) | ||||
Deferred revenue and other accrued expenses | 2,643,607 | (172 | ) | |||||
Net cash used in operating activities | (2,800,494 | ) | (3,300,203 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Advance on loan receivable | (531,250 | ) | - | |||||
Purchases of property plant and equipment | (1,663 | ) | (28,915 | ) | ||||
Net cash used in investing activities | (532,913 | ) | (28,915 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net proceeds from Series AA Convertible Preferred Stock | - | 2,292,300 | ||||||
Net proceeds from convertible debt | 4,422,600 | 3,339,050 | ||||||
Net proceeds from non-convertible debt – third party | 990,539 | 1,211,500 | ||||||
Net proceeds from non-convertible debt – related party | 8,500 | 125,000 | ||||||
Payments on convertible debt | (1,257,250 | ) | (2,533,985 | ) | ||||
Payments on non-convertible debt – related party | - | (125,000 | ) | |||||
Payments on non-convertible debt | (819,149 | ) | (964,932 | ) | ||||
Net cash provided by financing activities | 3,345,240 | 3,343,933 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 11,833 | 14,815 | ||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 29,625 | 103,118 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 41,458 | $ | 117,933 | ||||
SUPPLEMENTAL INFORMATION | ||||||||
Interest paid in cash | $ | 419,817 | $ | 1,162,557 | ||||
NON CASH TRANSACTIONS: | ||||||||
Interest added to principal | 152,552 | - | ||||||
Common stock issued to settle accrued liabilities | 127,855 | - | ||||||
Common stock issued with debt | - | 167,359 | ||||||
Discount from warrants issued with debt | 2,958,693 | - | ||||||
Common stock issued in lieu of cash for dividend | 176,748 | 151,993 | ||||||
Preferred stock dividends | 721,556 | 776,099 | ||||||
Conversion of debt and interest into common stock | 1,317,649 | - | ||||||
Discount due to beneficial conversion feature | 982,097 | - | ||||||
Deemed dividend-beneficial conversion feature | - | 1,949,731 |
The accompanying notes are an integral part of these unaudited consolidated financial statements
5 |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(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, 2018 | 300 | $ | 3 | 80,570 | $ | 806 | 10,000 | $ | 100 | 21 | $ | - | 3,458 | $ | 35 | 6,880 | 68 | 6,499 | 65 | 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 | ) |
6 |
Series D Preferred Stock | Series G Preferred Stock | Series H Preferred Stock | Series H(2) Preferred Stock | Series J Preferred Stock | Series K Preferred Stock | Series AA Preferred Stock | Common Stock | Stock | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Warrants | Capital | Deficit | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE, December 31, 2019 | 300 | $ | 3 | 80,570 | $ | 806 | 10,000 | $ | 100 | 21 | $ | - | 3,458 | $ | 35 | 6,880 | $ | 68 | 7,939 | $ | 80 | 2,549,620 | $ | 25,496 | $ | 22,599,177 | $ | 44,261,105 | $ | (78,942,277 | ) | $ | (12,055,407 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 241,769 | - | 241,769 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series AA Preferred Stock dividend | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (324,586 | ) | (324,586 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock to settle accrued liabilities | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 66,500 | 665 | - | 127,190 | - | 127,855 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued for debt settlement | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 10,000 | 100 | - | 24,900 | - | 25,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for debt extension and interest paid in kind | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 38,521 | 385 | - | 60,175 | - | 60,560 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beneficial conversion feature on debt | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 404,608 | - | 404,608 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants issued with debt | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 1,205,010 | - | - | 1,205,010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants issued for debt extension | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 609,143 | - | 609,143 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (3,953,885 | ) | (3,953,885 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE, March 31, 2020 | 300 | $ | 3 | 80,570 | $ | 806 | 10,000 | $ | 100 | 21 | - | 3,458 | $ | 35 | 6,880 | $ | 68 | 7,939 | $ | 80 | 2,664,641 | $ | 26,646 | $ | 24,413,330 | $ | 45,119,747 | $ | (83,220,748 | ) | $ | (13,659,933 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 65,341 | - | 65,341 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series AA Preferred Stock dividend | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (396,970 | ) | (396,970 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for services | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 25,000 | $ | 250 | - | 87,713 | - | 87,963 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for interest paid-in-kind | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 42,510 | $ | 425 | - | 98,799 | - | 99,224 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beneficial conversion feature on debt | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 577,489 | - | 577,489 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants issued with debt | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 1,753,683 | - | - | 1,753,683 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants issued for debt extension | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 360,602 | - | - | 360,602 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for dividends paid-in-kind | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 64,388 | 644 | - | 176,104 | - | 176,748 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of debt and interest for common stock | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 410,746 | $ | 4,107 | - | 1,288,542 | - | 1,292,649 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (4,568,782 | ) | (4,568,782 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE, June 30, 2020 | 300 | $ | 3 | 80,570 | $ | 806 | 10,000 | $ | 100 | 21 | $ | - | 3,458 | $ | 35 | 6,880 | $ | 68 | 7,939 | $ | 80 | 3,207,285 | $ | 32,072 | $ | 26,527,615 | $ | 47,413,735 | $ | (88,186,500 | ) | $ | (14,211,986 | ) |
The accompanying notes are an integral part of these unaudited consolidated financial statements
7 |
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
1) | Business Overview, Liquidity and Management Plans |
Pressure Biosciences, Inc. (“we”, “our”, “the Company”) develops and sells innovative, broadly enabling, pressure-based platform solutions for the worldwide life sciences industry. Our solutions are based on the unique properties of both constant (i.e., static) and alternating (i.e., pressure cycling technology, or “PCT”) hydrostatic pressure. PCT is a patented enabling technology platform that uses alternating cycles of hydrostatic pressure between ambient and ultra-high levels to safely and reproducibly control bio-molecular interactions (e.g., cell lysis, biomolecule extraction). Our primary focus is in the development of PCT-based products for biomarker and target discovery, drug design and development, biotherapeutics characterization and quality control, soil & plant biology, forensics, and counter-bioterror applications. Additionally, major new market opportunities have emerged in the use of our pressure-based technologies in the following areas: (1) the use of our recently acquired, patented technology from BaroFold, Inc. (the “BaroFold” technology) to allow entry into the bio-pharma contract services sector, and (2) the use of our recently-patented, scalable, high-efficiency, pressure-based Ultra Shear Technology (“UST”) platform to (i) create stable nanoemulsions of otherwise immiscible fluids (e.g., oils and water) and to (ii) prepare higher quality, homogenized, extended shelf-life or room temperature stable low-acid liquid foods that cannot be effectively preserved using existing non-thermal technologies.
2) | Going Concern |
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. However, we have experienced negative cash flows from operations with respect to our pressure cycling technology business since our inception. As of June 30, 2020, 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 6 and 7. In addition we raised debt and equity capital after June 30, 2020 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.
8 |
3) | Summary of Significant Accounting Policies |
Basis of Presentation
The unaudited interim financial statements of Pressure BioSciences, Inc. and its consolidated subsidiaries (collectively, the “Company”) included herein have been prepared by the Company in accordance with the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission. Under these rules and regulations, some information and footnote disclosures normally included in financial statements prepared under accounting principles generally accepted in the United States of America have been shortened or omitted. Management believes that all adjustments necessary for a fair statement of the financial position and the results of operations for the periods shown have been made. All adjustments are normal and recurring. These financial statements should be read together with the Company’s audited financial statements included in its Form 10-K for the fiscal year ended December 31, 2019.
Use of Estimates
The Company’s consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates, judgements and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Global concerns about the COVID-19 pandemic have adversely affected, and we expect will continue to adversely affect, our business, financial condition and results of operations including the estimates and assumptions made by management. Significant estimates and assumptions include valuations of share-based awards, investments in equity securities and intangible asset impairment. Actual results could differ from the estimates, and such differences may be material to the Company’s consolidated financial statements.
Principles of Consolidation
The consolidated financial statements include the accounts of Pressure BioSciences, Inc., and its wholly-owned subsidiary PBI BioSeq, Inc. All intercompany accounts and transactions have been eliminated in consolidation.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The standard is effective for the Company for interim and annual periods beginning after December 15, 2022. The Company is evaluating the impact of this standard on its Consolidated Financial Statements.
In December 2019, the FASB, issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The standard is effective for the Company for interim and annual periods beginning after December 15, 2020 for the Company and for annual periods beginning after December 15, 2021 and interim periods beginning after December 15, 2022. The Company is evaluating the impact of this standard on its Consolidated Financial Statements.
9 |
Revenue Recognition
We recognize revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers, and ASC 340-40, Other Assets and Deferred Costs—Contracts with Customers. Revenue is measured based on a consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. We enter into sales contracts that may consist of multiple distinct performance obligations where certain performance obligations of the sales contract are not delivered in one reporting period. We measure and allocate revenue according to ASC 606-10.
We identify a performance obligation as distinct if both the following criteria are true: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Determining the standalone selling price (“SSP”) and allocation of consideration from a contract to the individual performance obligations, and the appropriate timing of revenue recognition, is the result of significant qualitative and quantitative judgments. Management considers a variety of factors such as historical sales, usage rates, costs, and expected margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation in making these estimates. While changes in the allocation of the SSP between performance obligations will not affect the amount of total revenue recognized for a particular contract, any material changes could impact the timing of revenue recognition, which would have a material effect on our financial position and result of operations. This is because the contract consideration is allocated to each performance obligation, delivered or undelivered, at the inception of the contract based on the SSP of each distinct performance obligation.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are in included in cost of revenues as consistent with treatment in prior periods.
Our current Barocycler® instruments require a basic level of instrumentation expertise to set-up for initial operation. To support a favorable first experience for our customers, upon customer request, and for an additional fee, 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.
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 lease agreements 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.
10 |
Disaggregation of revenue
In the following table, revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.
In thousands of US dollars ($) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Primary geographical markets | 2020 | 2019 | 2020 | 2019 | ||||||||||||
North America | $ | 162 | $ | 368 | $ | 307 | $ | 592 | ||||||||
Europe | 3 | 54 | 4 | 94 | ||||||||||||
Asia | 103 | 97 | 211 | 343 | ||||||||||||
$ | 268 | $ | 519 | $ | 522 | $ | 1,029 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
Major products/services lines | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Hardware | $ | 122 | $ | 212 | $ | 217 | $ | 352 | ||||||||
Consumables | 51 | 91 | 107 | 153 | ||||||||||||
Contract research services | 34 | 111 | 44 | 349 | ||||||||||||
Sample preparation accessories | 33 | 35 | 58 | 35 | ||||||||||||
Technical support/extended service contracts | 17 | 28 | 36 | 67 | ||||||||||||
Shipping and handling | 6 | 14 | 15 | 19 | ||||||||||||
Other | 5 | 28 | 45 | 54 | ||||||||||||
$ | 268 | $ | 519 | $ | 522 | $ | 1,029 |
11 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
Timing of revenue recognition | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Products transferred at a point in time | $ | 217 | $ | 506 | $ | 442 | $ | 1,007 | ||||||||
Services transferred over time | 51 | 13 | 80 | 22 | ||||||||||||
$ | 268 | $ | 519 | $ | 522 | $ | 1,029 |
Contract balances
In thousands of US dollars ($) | June 30, 2020 | December 31, 2019 | ||||||
Receivables, which are included in ‘Accounts Receivable’ | $ | 121 | $ | 229 | ||||
Contract liabilities (deferred revenue) | 72 | 41 |
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 ($) | 2020 | 2021 | 2022 | Total | ||||||||||||
Extended warranty service | $ | 37 | 35 | - | $ | 72 |
All consideration from contracts with customers is included in the amounts presented above.
Contract Costs
The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in selling, general, and administrative expenses. The costs to obtain a contract are recorded immediately in the period when the revenue is recognized either upon shipment or installation. The costs to obtain a service contract are considered immaterial when spread over the life of the contract so the Company records the costs immediately upon billing.
12 |
Concentrations
Credit Risk
Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, and trade receivables. We have cash investment policies which, among other things, limit investments to investment-grade securities. We perform ongoing credit evaluations of our customers, and the risk with respect to trade receivables is further mitigated by the fact that many of our customers are government institutions, large pharmaceutical and biotechnology companies, and academic laboratories.
The following table illustrates the level of concentration as a percentage of total revenues during the three months and six months ended June 30, 2020 and 2019.
For the Three Months Ended | ||||||||
June 30, | ||||||||
2020 | 2019 | |||||||
Top Five Customers | 71 | % | 47 | % | ||||
Federal Agencies | 2 | % | 9 | % |
For the Six Months Ended | ||||||||
June 30, | ||||||||
2020 | 2019 | |||||||
Top Five Customers | 70 | % | 55 | % | ||||
Federal Agencies | 4 | % | 14 | % |
The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of June 30, 2020 and December 31, 2019. The Top Five Customers category may include federal agency receivable balances if applicable.
June 30, 2020 | December, 31, 2019 | |||||||
Top Five Customers | 82 | % | 83 | % | ||||
Federal Agencies | 5 | % | 17 | % |
Product Supply
CBM Industries (Taunton, MA) has recently become the manufacturer of the Barocycler® 2320EXT. CBM is ISO 13485:2003 and 9001:2008 Certified. CBM provides us with precision manufacturing services that include management support services to meet our specific application and operational requirements. Among the services provided by CBM to us are:
● | CNC Machining | |
● | Contract Assembly & Kitting | |
● | Component and Subassembly Design | |
● | Inventory Management | |
● | ISO certification |
At this time, we believe that outsourcing the manufacturing of our new Barocycler® 2320EXT to CBM is the most cost-effective method for us to obtain and maintain ISO Certified, CE and CSA Marked instruments. CBM’s close proximity to our South Easton, MA facility is a significant asset enabling interactions between our Engineering, R&D, and Manufacturing groups and their counterparts at CBM. CBM was instrumental in helping PBI achieve CE Marking on our Barocycler 2320EXT, as announced on February 2, 2017.
Although we currently manufacture and assemble the Barozyme HT48, Barocycler® HUB440, the SHREDDER SG3, and most of our consumables at our South Easton, MA facility, we plan to take advantage of outsourced manufacturing relationships such as that with CBM and outsource manufacturing of the entire Barocycler® product line, future instruments, and other products to CBM.
13 |
Investment in Equity Securities
As of June 30, 2020, we held 100,250 shares of common stock of Everest Investments Holdings S.A. (“Everest”), a Polish publicly traded company listed on the Warsaw Stock Exchange. We account for this investment in accordance with ASC 321 “Investments —Equity Securities.” ASC 321 requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. As of June 30, 2020, our consolidated balance sheet reflected the fair value of our investment in Everest to be approximately $362,905. We recorded $346,262 as an unrealized gain during the six months ended June 30, 2020 for changes in Everest 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 and six months ended June 30, 2020 and 2019:
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Numerator: | ||||||||||||||||
Net loss | $ | (4,568,782 | ) | $ | (2,766,842 | ) | $ | (8,522,667 | ) | $ | (4,822,015 | ) | ||||
Deemed dividend on beneficial conversion feature | - | (889,532 | ) | - | (1,949,731 | ) | ||||||||||
Preferred stock dividends | (396,970 | ) | (420,489 | ) | (721,556 | ) | (776,099 | ) | ||||||||
Net loss applicable to common shareholders | $ | (4,965,752 | ) | $ | (4,076,863 | ) | $ | (9,244,223 | ) | $ | (7,547,845 | ) | ||||
Denominator for basic and diluted loss per share: | ||||||||||||||||
Weighted average common stock shares outstanding | 2,914,659 | 1,837,913 | 2,765,132 | 1,780,881 | ||||||||||||
Loss per common share – basic and diluted | $ | (1.70 | ) | $ | (2.22 | ) | $ | (3.34 | ) | $ | (4.24 | ) |
14 |
The following table presents securities that could potentially dilute basic loss per share in the future. For all periods presented, the potentially dilutive securities were not included in the computation of diluted loss per share because these securities would have been anti-dilutive to our net loss. The Series D Convertible Preferred Stock, Series G Convertible Preferred Stock, Series H and H2 Convertible Preferred Stock, Series J Convertible Preferred Stock, Series K Convertible Preferred Stock and Series AA Convertible Preferred Stock are presented below as if they were converted into common shares according to the conversion terms.
As of June 30, | ||||||||
2020 | 2019 | |||||||
Stock options | 1,392,370 | 347,070 | ||||||
Convertible debt | 3,905,867 | 692,715 | ||||||
Common stock warrants | 12,761,126 | 8,880,554 | ||||||
Convertible preferred stock: | ||||||||
Series D Convertible Preferred Stock | 25,000 | 25,000 | ||||||
Series G Convertible Preferred Stock | 26,857 | 26,857 | ||||||
Series H Convertible Preferred Stock | 33,334 | 33,334 | ||||||
Series H2 Convertible Preferred Stock | 70,000 | 70,000 | ||||||
Series J Convertible Preferred Stock | 115,267 | 115,267 | ||||||
Series K Convertible Preferred Stock | 229,334 | 229,334 | ||||||
Series AA Convertible Preferred Stock | 7,939,000 | 7,518,622 | ||||||
26,498,155 | 17,938,753 |
Accounting for Stock-Based Compensation Expense
We maintain equity compensation plans under which incentive stock options and non-qualified stock options are granted to employees, independent members of our Board of Directors and outside consultants. We recognize stock-based compensation expense over the requisite service period using the Black-Scholes formula to estimate the fair value of the stock options on the date of grant.
Determining Fair Value of Stock Option Grants
Valuation and Amortization Method - The fair value of each option award is estimated on the date of grant using the Black-Scholes pricing model based on certain assumptions. The estimated fair value of employee stock options is amortized to expense using the straight-line method over the vesting period.
Expected Term - The Company uses the simplified calculation of expected life, as the Company does not currently have sufficient historical exercise data on which to base an estimate of expected term. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted.
Expected Volatility - Expected volatility is based on the Company’s historical stock volatility data over the expected term of the award.
Risk-Free Interest Rate - The Company bases the risk-free interest rate used in the Black-Scholes valuation method on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term.
Forfeitures - The Company records stock-based compensation expense only for those awards that are expected to vest. The Company estimated a forfeiture rate of 5% for awards granted based on historical experience and future expectations of options vesting. The Company used this historical rate as our assumption in calculating future stock-based compensation expense.
15 |
The Company recognized stock-based compensation expense of $65,341 and $362,182 for the three months ended June 30, 2020 and 2019, respectively. The Company recognized stock-based compensation expense of $307,110 and $607,574 for the six months ended June 30, 2020 and 2019, respectively. The following table summarizes the effect of this stock-based compensation expense within each of the line items of our costs and expenses within our Consolidated Statements of Operations:
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Cost of sales | $ | 5,107 | $ | 12,082 | $ | 13,063 | $ | 20,398 | ||||||||
Research and development | 26,137 | 49,948 | 64,963 | 84,573 | ||||||||||||
Selling and marketing | 6,358 | 28,959 | 20,294 | 51,078 | ||||||||||||
General and administrative | 27,739 | 271,193 | 208,790 | 451,525 | ||||||||||||
Total stock-based compensation expense | $ | 65,341 | $ | 362,182 | $ | 307,110 | $ | 607,574 |
Fair Value of Financial Instruments
Due to their short maturities, the carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and debt approximate their fair value. Long-term liabilities include only deferred revenue with a carrying value that approximates fair value.
Fair Value Measurements
The Company follows the guidance of FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) as it related to all financial assets and financial liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis.
The Company generally defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values. These tiers include: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring the Company to develop its own assumptions. A slight change in an unobservable input like volatility could have a significant impact on fair value measurement.
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company has determined that its financial assets are classified within Level 1 in the fair value hierarchy. The development of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.
The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2020:
16 |
Fair value measurements at June 30, 2020 using: | ||||||||||||||||
June 30, 2020 | Quoted prices in active markets (Level 1) | Significant (Level 2) | Significant (Level 3) | |||||||||||||
Equity Securities | 362,905 | 362,905 | - | - | ||||||||||||
Total Financial Assets | $ | 362,905 | $ | 362,905 | $ | - | $ | - |
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, 2019:
Fair value measurements at December 31, 2019 using: | ||||||||||||||||
December 31, 2019 | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||
Equity Securities | 16,643 | 16,643 | - | - | ||||||||||||
Total Financial Assets | $ | 16,643 | $ | 16,643 | $ | - | $ | - |
17 |
4) | Commitments and Contingencies |
Operating Leases
The Company accounts for its leases under ASC 842. The Company has elected to apply the short-term lease exception to leases of one year or less. Consequently, as a result of adoption of ASC 842, we recognized an operating liability of $136,385 on our Medford lease with a corresponding Right-Of-Use (“ROU”) asset of the same amount based on present value of the minimum rental payments of the lease. As of June 30, 2020 the Company carries a ROU asset and operating lease liability of $40,659.
Our corporate office is currently located at 14 Norfolk Avenue, South Easton, Massachusetts 02375. We are currently paying $6,950 per month, on a lease extension, signed on December 31, 2019, that expires December 31, 2020, 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 to December 30, 2020. The lease requires monthly payments of $7,130 subject to annual cost of living increases. The lease shall be automatically extended for an additional three years unless either party terminates at least six months prior to the expiration of the current lease term.
Following is a schedule by years of future minimum rental payments required under operating leases with initial or remaining non-cancelable lease terms as of June 30, 2020:
2020 | $ | 84,480 | ||
Thereafter | - | |||
Total Minimum Payments Required | $ | 84,480 |
5) | Loan Receivable |
In the six months ended June 30, 2020, the Company issued two loans for $575,000 to its pending merger partner, Cannaworx who agreed to repay the loans directly to the lender, on the Company’s behalf. The Cannaworx loans have one-year terms and interest (12% for a $325,000 note and 18% for a $250,000 note) is only payable upon an event of default. Cannaworx loans receivable are carried on the Company’s balance sheet net of a $43,750 debt discount.
6) | Convertible Debt and Other Debt |
Convertible Debt
On various dates during the six months ended June 30, 2020, the Company issued convertible notes for net proceeds of approximately $4.4 million which contained varied terms and conditions as follows: a) 12 month maturity date; b) interest rate of 10%; c) convertible to the Company’s common stock at issuance at a fixed rate of $2.50. These notes were issued with warrants to purchase common stock that were fair valued at issuance date. The aggregate relative fair value of the warrants issued with the notes $2,705,996 was recorded as a debt discount to be amortized over the term of the notes. We then computed the effective conversion price of the notes, and recorded a $982,097 beneficial conversion feature as a debt discount to be amortized over the term of the notes. We also evaluated the convertible notes for derivative liability treatment and determined that the notes did not quality for derivative accounting treatment at June 30, 2020.
18 |
The specific terms of the convertible notes and outstanding balances as of June 30, 2020 are listed in the tables below.
Inception Date | Term | Loan Amount | Outstanding balance with OID | Original Issue Discount (OID) | Interest Rate | Conversion Price | Deferred Finance Fees | Discount for conversion feature and warrants/shares | ||||||||||||||||||||||
February 15, 2018 (2)(3)(4) | 6 months | $ | 100,000 | $ | 115,000 | $ | - | 5 | % | 2.50 | $ | 9,000 | $ | 17,738 | ||||||||||||||||
May 17, 2018 (2) | 12 months | $ | 380,000 | $ | 166,703 | $ | 15,200 | 8 | % | 2.50 | $ | 15,200 | $ | 332,407 | ||||||||||||||||
June 8, 2018 (1)(4) | 6 months | $ | 50,000 | $ | 50,000 | $ | 2,500 | 2 | % | 7.50 | $ | 2,500 | $ | 3,271 | ||||||||||||||||
June 16, 2018 (2) | 9 months | $ | 130,000 | $ | 79,000 | $ | - | 5 | % | 2.50 | $ | - | $ | - | ||||||||||||||||
June 16, 2018 (2) | 6 months | $ | 110,000 | $ | 79,000 | $ | - | 5 | % | 2.50 | $ | - | $ | - | ||||||||||||||||
June 26, 2018 (1)(2)(3)(4) | 3 months | $ | 150,000 | $ | 86,250 | $ | - | 5 | % | 2.50 | $ | - | $ | 30,862 | ||||||||||||||||
July 17, 2018 (1) (2)(3)(4) | 3 months | $ | 100,000 | $ | 105,000 | $ | 15,000 | 5 | % | 2.50 | $ | - | $ | 52,897 | ||||||||||||||||
July 19, 2018 (2) | 12 months | $ | 184,685 | $ | 150,000 | $ | 34,685 | 10 | % | 2.50 | $ | - | $ | - | ||||||||||||||||
October 19, 2018 (1) | 6 months | $ | 100,000 | $ | 100,000 | $ | - | 5 | % | 7.50 | $ | - | $ | - | ||||||||||||||||
November 13, 2018 (1) (2)(3)(4) | 6 months | $ | 200,000 | $ | 220,000 | $ | - | 5 | % | 2.50 | $ | - | $ | 168,634 | ||||||||||||||||
January 3, 2019 (4) | 6 months | $ | 50,000 | $ | 50,000 | $ | 2,500 | 24 | % | 7.50 | $ | 2,500 | $ | - | ||||||||||||||||
February 21, 2019 (2) | 12 months | $ | 215,000 | $ | 215,000 | $ | - | 4 | % | 2.50 | $ | 15,000 | $ | 107,709 | ||||||||||||||||
February 22, 2019 (2) | 9 months | $ | 115,563 | $ | 115,562 | $ | 8,063 | 7 | % | 2.50 | $ | 2,500 | $ | - | ||||||||||||||||
March 18, 2019 (1) | 6 months | $ | 100,000 | $ | 100,000 | $ | - | 4 | % | 7.50 | $ | - | $ | 10,762 | ||||||||||||||||
June 4, 2019 (2) | 9 months | $ | 500,000 | $ | 302,484 | $ | - | 8 | % | 2.50 | $ | 40,500 | $ | 70,631 | ||||||||||||||||
April 30, 2019 (2) | 12 months | $ | 105,000 | $ | 80,000 | $ | - | 4 | % | 2.50 | $ | 5,000 | $ | 3,286 | ||||||||||||||||
June 19, 2019 (2) | 12 months | $ | 105,000 | $ | 105,000 | $ | - | 4 | % | 2.50 | $ | 5,000 | $ | 2,646 | ||||||||||||||||
April 9, 2019 (2) | 12 months | $ | 118,800 | $ | 88,800 | $ | 8,800 | 4 | % | 2.50 | $ | 3,000 | $ | - | ||||||||||||||||
May 20, 2019 (1) (2)(4) | 3 months | $ | 100,000 | $ | 100,000 | $ | - | 5 | % | 2.50 | $ | - | $ | 13,439 | ||||||||||||||||
June 7, 2019 (1) (2)(4) | 6 months | $ | 125,000 | $ | 125,000 | $ | - | 5 | % | 7.50 | $ | - | $ | 18,254 | ||||||||||||||||
July 1, 2019 (2) | 12 months | $ | 107,500 | $ | 107,500 | $ | - | 4 | % | 2.50 | $ | 7,500 | $ | 85,791 | ||||||||||||||||
July 29, 2019 (2) | 6 months | $ | 250,000 | $ | 250,000 | $ | - | 4 | % | 2.50 | $ | - | $ | 36,835 | ||||||||||||||||
July 19, 2019 (2) | 12 months | $ | 115,000 | $ | 115,000 | $ | - | 4 | % | 2.50 | $ | 5,750 | $ | 15,460 | ||||||||||||||||
July 19, 2019 (2) | 12 months | $ | 130,000 | $ | 130,000 | $ | - | 6 | % | 2.50 | $ | 6,500 | $ | - | ||||||||||||||||
August 6, 2019 (2) | 12 months | $ | 108,000 | $ | 108,000 | $ | - | 4 | % | 2.50 | $ | 11,000 | $ | - | ||||||||||||||||
August 14, 2019 (1)(4) | 6 months | $ | 50,000 | $ | 50,000 | $ | - | 2 | % | 7.50 | $ | - | $ | - | ||||||||||||||||
September 27, 2019 (2) | 12 months | $ | 78,750 | $ | 78,750 | $ | - | 4 | % | 2.50 | $ | 3,750 | $ | 13,759 | ||||||||||||||||
October 24, 2019 (2) | 12 months | $ | 78,750 | $ | 78,750 | $ | - | 4 | % | 2.50 | $ | 3,750 | $ | - | ||||||||||||||||
October 25, 2019 | 12 months | $ | 105,000 | $ | 105,000 | $ | - | 8 | % | 2.50 | $ | 5,000 | $ | - | ||||||||||||||||
November 1, 2019 (2) | 12 months | $ | 270,000 | $ | 270,000 | $ | - | 6 | % | 2.50 | $ | 13,500 | $ | - | ||||||||||||||||
October 8, 2019 | 6 months | $ | 100,000 | $ | 100,000 | $ | - | 4 | % | 7.50 | $ | - | $ | 5,725 | ||||||||||||||||
November 15, 2019 | 12 months | $ | 385,000 | $ | 385,000 | $ | 35,000 | 10 | % | 2.50 | $ | 35,000 | $ | 90,917 | ||||||||||||||||
December 4, 2019 | 12 months | $ | 495,000 | $ | 495,000 | $ | 45,000 | 10 | % | 2.50 | $ | 45,000 | $ | 56,387 | ||||||||||||||||
December 20, 2019 | 12 months | $ | 275,000 | $ | 275,000 | $ | 25,000 | 10 | % | 2.50 | $ | 25,000 | $ | 40,601 | ||||||||||||||||
January 2, 2020 | 12 months | $ | 330,000 | $ | 330,000 | $ | 30,000 | 10 | % | 2.50 | $ | 30,000 | $ | 91,606 | ||||||||||||||||
January 24, 2020 | 12 months | $ | 247,500 | $ | 247,500 | $ | 22,500 | 10 | % | 2.50 | $ | 22,500 | $ | 89,707 | ||||||||||||||||
January 29, 2020 | 12 months | $ | 363,000 | $ | 363,000 | $ | 33,000 | 10 | % | 2.50 | $ | 33,000 | $ | 297,000 | ||||||||||||||||
February 12, 2020 | 12 months | $ | 275,000 | $ | 275,000 | $ | 25,000 | 10 | % | 2.50 | $ | 25,000 | $ | 225,000 | ||||||||||||||||
February 19, 2020 | 12 months | $ | 165,000 | $ | 165,000 | $ | 15,000 | 10 | % | 2.50 | $ | 15,000 | $ | 135,000 | ||||||||||||||||
March 11, 2020 | 12 months | $ | 330,000 | $ | 330,000 | $ | 30,000 | 10 | % | 2.50 | $ | 30,000 | $ | 232,810 | ||||||||||||||||
March 13, 2020 | 12 months | $ | 165,000 | $ | 165,000 | $ | 15,000 | 10 | % | 2.50 | $ | 15,000 | $ | 60,705 | ||||||||||||||||
March 26, 2020 | 12 months | $ | 111,100 | $ | 111,100 | $ | 10,100 | 10 | % | 2.50 | $ | 10,100 | $ | 90,900 | ||||||||||||||||
April 8, 2020 | 12 months | $ | 276,100 | $ | 276,100 |