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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2022

 

or

 

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

 

For the transition period from _____________ to _____________

 

Commission File Number 001-38185

 

PRESSURE BIOSCIENCES, INC.

(Exact name of registrant as specified in its charter)

 

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

 

14 Norfolk Avenue

South Easton, Massachusetts

  02375
(Address of principal executive offices)   (Zip Code)

 

(508) 230-1828

(Registrant’s telephone number, including area code)

 

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

 

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☐ No

 

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

 

Yes ☐ No

 

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

 

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

 

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

 

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

 

☐ Yes ☒ No

 

The number of shares outstanding of the Issuer’s common stock as of May 13, 2022 was 8,788,098.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
PART I - FINANCIAL INFORMATION 3
   
Item 1. Unaudited Financial Statements 3
   
Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 3
   
Consolidated Statements of Operations for the Three months Ended March 31, 2022 and 2021 4
   
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 5
   
Consolidated Statements of Changes in Stockholders’ Deficit for the Three Months Ended March 31, 2022 and 2021 6
   
Notes to Unaudited Consolidated Financial Statements 8
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
   
Item 3. Quantitative and Qualitative Disclosure About Market Risk 30
   
Item 4. Controls and Procedures 30
   
PART II - OTHER INFORMATION 31
   
Item 1. Legal Proceedings 31
   
Item 1A. Risk Factors 31
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 32
   
Item 3. Defaults Upon Senior Securities 32
   
Item 4. Mine Safety Disclosures 32
   
Item 5. Other Information 32
   
Item 6. Exhibits 33
   
SIGNATURES 34

 

2

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

  

March 31,

2022

  

December 31,

2021

 
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $118,803   $132,311 
Accounts receivable   291,846    154,746 
Inventories, net of $342,496 reserve at March 31, 2022 and December 31, 2021   1,360,539    1,147,554 
Prepaid expenses and other current assets   184,936    422,617 
Total current assets   1,956,124    1,857,228 
Investment in equity securities   79,114    59,976 
Property and equipment, net   103,520    115,846 
Right of use asset leases   369,006    395,565 
Intangible assets, net   382,211    403,846 
TOTAL ASSETS  $2,889,975   $2,832,461 
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
CURRENT LIABILITIES          
Accounts payable  $665,228   $527,924 
Accrued employee compensation   170,212    117,680 
Accrued professional fees and other   2,133,392    1,955,672 
Other current liabilities   8,304,648    7,757,217 
Deferred revenue   45,806    37,124 
Convertible debt, net of unamortized discounts of $813,478 and $1,536,649, respectively   14,290,657    12,839,813 
Other debt, net of unamortized discounts of $11,670 and $0, respectively   1,311,495    1,256,840 
Operating lease liability   135,810    132,996 
Other related party debt   195,250    - 
Total current liabilities   27,252,498    24,625,266 
LONG TERM LIABILITIES          
Long term debt   150,000    150,000 
Operating lease liability – long term   233,196    262,569 
Deferred revenue   2,592    3,587 
TOTAL LIABILITIES   27,638,286    25,041,422 
COMMITMENTS AND CONTINGENCIES (Note 4)   -    - 
STOCKHOLDERS’ DEFICIT          
Series D Convertible Preferred Stock, $.01 par value; 850 shares authorized; 300 shares issued and outstanding on March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021, respectively   806    806 
Series H Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 10,000 shares issued and outstanding on March 31, 2022 and December 31, 2021, respectively   100    100 
Series H2 Convertible Preferred Stock, $.01 par value; 21 shares authorized; 21 shares issued and outstanding on March 31, 2022 and December 31, 2021, respectively   -    - 
Series J Convertible Preferred Stock, $.01 par value; 6,250 shares authorized; 3,458 shares issued and outstanding on March 31, 2022 and December 31, 2021, respectively   35    35 
Series K Convertible Preferred Stock, $.01 par value; 15,000 shares authorized; 6,880 shares issued and outstanding on March 31, 2022 and December 31, 2021, respectively   68    68 
Series AA Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 8,649 shares issued and outstanding on March 31, 2022 and December 31, 2021, respectively   87    87 
Common stock, $.01 par value; 100,000,000 shares authorized; 10,194,136 and 9,120,526 shares issued and outstanding on March 31, 2022 and December 31, 2021 respectively   101,942    91,206 
Warrants to acquire common stock   31,974,888    31,715,154 
Additional paid-in capital   63,867,846    64,261,048 
Accumulated deficit   (120,694,086)   (118,277,468)
Total stockholders’ deficit   (24,748,311)   (22,208,961)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $2,889,975   $2,832,461 

 

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

 

3

 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   2022   2021 
  

For the Three Months Ended

March 31,

 
   2022   2021 
Revenue:          
Products, services, other  $480,000   $559,874 
Total revenue   480,000    559,874 
           
Costs and expenses:          
Cost of products and services   314,363    226,275 
Research and development   281,589    299,943 
Selling and marketing   66,462    93,328 
General and administrative   903,885    1,015,430 
Total operating costs and expenses   1,566,299    1,634,976 
           
Operating loss   (1,086,299)   (1,075,102)
           
Other (expense) income:          
Interest expense, net   (2,579,161)   (4,668,064)
Unrealized (loss) gain on investment in equity securities   19,138    (107,903)
Loss on extinguishment of liabilities   (589,850)   (725,159)
Other income (expense)   (3,513)   (1,359)
Total other expense   (3,153,386)   (5,502,485)
           
Net loss   (4,239,685)   (6,577,587)
Deemed dividends on beneficial conversion feature   -    (57,884)
Preferred stock dividends   (432,149)   (403,215)
Net loss attributable to common stockholders  $(4,671,834)  $(7,038,686)
Basic and diluted net loss per share attributable to common stockholders  $(0.48)  $(1.45)
           
Weighted average common stock shares outstanding used in the basic and diluted net loss per share calculation   9,695,189    4,865,826 

 

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

 

4

 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   2022   2021 
   For the Three Months Ended 
   March 31, 
   2022   2021 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(4,239,685)  $(6,577,587)
Adjustments to reconcile net loss to net cash used in operating activities:          
Gain on loan forgiveness   (10,000)   (367,039)
Non-cash lease expense   26,559    15,576 
Common stock and warrants issued for interest and extension fees   1,173,458    2,622,078 
Depreciation and amortization   35,096    27,190 
Accretion of interest and amortization of debt discount   817,877    2,165,780 
Loss on extinguishment of accrued liabilities and debt   589,570    - 
Stock-based compensation expense   64,483    61,237 
(Gain) loss on investment in equity securities   (19,138)   107,903 
Common stock and warrants issued for services   117,461    238,512 
Changes in operating assets and liabilities:          
Accounts receivable   (137,100)   (373,268)
Inventories   (212,985)   33,402 
Prepaid expenses and other assets   237,681    43,291 
Accounts payable   137,304    (60,613)
Accrued employee compensation   52,532    42,702 
Operating lease liability   (26,559)   (15,576)
Deferred revenue and other accrued expenses   637,164    799,397 
Net cash used in operating activities   (756,282)   (1,237,015)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of property plant and equipment   (1,135)   (3,962)
Net cash used in investing activities   (1,135)   (3,962)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Net proceeds from Series AA Convertible Preferred Stock   -    100,000 
Proceeds from stock option exercises   -    14,773 
Net proceeds from convertible debt   806,000    730,000 
Net proceeds from non-convertible debt – third party   351,150    854,538 
Net proceeds from non-convertible debt – related party   195,250    85,000 
Payments on convertible debt   (324,350)   (191,250)
Payments on non-convertible debt – related party   -    (70,000)
Payments on non-convertible debt   (284,141)   (250,094)
Net cash provided by financing activities   743,909    1,272,967 
           
NET INCREASE IN CASH AND CASH EQUIVALENTS   (13,508)   31,990 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR   132,311    18,540 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $118,803   $50,530 
           
SUPPLEMENTAL INFORMATION          
Interest paid in cash  $120,436   $37,375 
NON CASH TRANSACTIONS:          
Common stock issued with debt   142,480    - 
Discount from warrants issued with debt   87,436    162,654 
Common stock issued in lieu of cash for dividend   64,256    - 
Early adoption of ASU 2020-06   473,027    - 
Preferred stock dividends   432,149    403,215 
Conversion of debt and interest into common stock   350,500    118,000 
Discount due to beneficial conversion feature   -    53,777 
Deemed dividend - beneficial conversion feature   -    57,884 

 

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

 

5

 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(UNAUDITED)

 

    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Warrants     Capital     Deficit     Deficit  
    Series D
Preferred Stock
    Series G
Preferred Stock
    Series H
Preferred Stock
    Series H(2)
Preferred Stock
    Series J
Preferred Stock
    Series K
Preferred Stock
    Series AA
Preferred Stock
    Common Stock     Stock     Additional Paid-In     Accumulated     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Warrants     Capital     Deficit     Deficit  
BALANCE, December 31, 2021   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    8,649   $87    9,120,526   $91,206   $31,715,154   $64,261,048   $(118,277,468)  $(22,208,961)
Early adoption of ASU 2020-06   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (2,728,243)   2,255,216    (473,027)
Stock-based compensation   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    64,483    -    64,483 
Series AA Preferred Stock dividend   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (432,149)   (432,149)
Issuance of common stock for services   -    -    -    -    -    -    -    -    -    -    -    -    -    -    37,000    370    -    77,330    -    77,700 
Issuance of common stock warrants for services   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    39,761    -    -    39,761 
Warrants issued for debt extension   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    132,537    -    -    132,537 
Common stock issued for debt extension   -    -    -    -    -    -    -    -    -    -    -    -    -    -    214,500    2,145    -    470,755    -    472,900 
Conversion of debt and interest for common stock   -    -    -    -    -    -    -    -    -    -    -    -    -    -    140,200    1,402    -    349,098    -    350,500 
Issuance of common stock for dividends paid-in-kind   -    -    -    -    -    -    -    -    -    -    -    -    -    -    31,810    318    -    63,938    -    64,256 
Issuance of common stock for interest paid-in-kind   -    -    -    -    -    -    -    -    -    -    -    -    -    -    558,100    5,581    -    1,167,877    -    1,173,458 
Stock issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    92,000    920    -    141,560    -    142,480 
Warrants issued with debt   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    87,436    -    -    87,436 
Net loss   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (4,239,685)   (4,239,685)
BALANCE, March 31, 2022   300   $3    80,570   $806    10,000   $100    21   $-    3,458   $35    6,880   $68    8,649   $87    10,194,136   $101,942   $31,974,888   $63,867,846   $(120,694,086)  $(24,748,311)

 

6

 

 

    Series D
Preferred Stock
    Series G
Preferred Stock
    Series H
Preferred Stock
    Series H(2)
Preferred Stock
    Series J
Preferred Stock
    Series K
Preferred Stock
    Series AA
Preferred Stock
    Common Stock     Stock     Additional Paid-In     Accumulated     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Warrants     Capital     Deficit     Deficit  
                                                                                                                                                                 
BALANCE, December 31, 2020     300     $ 3       80,570     $ 806       10,000     $ 100       21     $ -       3,458     $ 35       6,880     $ 68       8,043       81       4,168,324     $ 41,683     $ 29,192,471     $ 50,312,968     $ (96,465,807 )   $ (16,917,592 )
Stock-based compensation     -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       61,237       -       61,237  
Stock option exercise     -       -       -       -       -       -       -       -       -       -       -       -       -       -       21,411       214       -       14,559       -       14,773  
Series AA Preferred Stock dividend     -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       (403,215 )     (403,215 )
Issuance of warrants for interest paid-in-kind     -       -       -       -       -     -       -       -       -       -       -       -       -       -       -       -       600,298       -       -       600,298  
Issuance of common stock for services     -       -       -       -       -       -       -       -       -       -       -       -       -       -       112,400       1,124               237,388       -       238,512  
Beneficial conversion feature on debt     -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       53,777       -       53,777  
Series AA Preferred Stock offering     -        -        -        -        -        -        -        -        -        -        -        -        40       -       -       -       49,884       50,116       -       100,000  
Beneficial conversion option on convertible preferred stock     -        -        -        -        -        -        -        -        -        -        -        -        -        -        -       -       -       57,884       -       57,884  
Deemed dividend on convertible preferred stock     -        -        -        -        -        -        -        -        -        -        -        -        -        -        -       -       -       (57,884 )     -       (57,884 )
Conversion of debt and interest for common stock     -        -        -        -        -        -        -        -        -        -        -        -        -        -        47,200       472       -       117,528       -       118,000  
Issuance of common stock for interest paid in kind     -        -        -        -        -        -        -        -        -        -        -        -        -        -        922,372       9,224       -       2,012,556       -       2,021,780  
Warrants issued with debt     -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       162,654       -       -       162,654  
Net loss     -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       -       (6,577,587 )     (6,577,587 )
BALANCE, March 31, 2021     300     $ 3       80,570     $ 806       10,000     $ 100       21     $ -       3,458     $ 35       6,880     $ 68       8,083     $ 81       5,271,707     $ 52,717     $ 30,005,307     $ 52,860,129     $ (103,446,609 )   $ (20,527,363 )

  

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

 

7

 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

 

  1) Business Overview, Liquidity and Management Plans

 

Pressure Biosciences, Inc. (“we”, “our”, “the Company”) develops and sells innovative, broadly enabling, high pressure-based platform technologies and related consumables for the worldwide life sciences, agriculture, food and beverage, and other key industries. 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). Historically, our primary focus has been in the development of PCT-based products for biomarker and target discovery, drug design and development, biotherapeutics characterization and quality control, soil & plant biology, forensics, and counter-bioterror applications. In more recent years, 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.

 

On February 8, 2021, PBI announced plans to acquire the assets of a global eco-friendly agrochemical supplier. On April 14, 2021, PBI finalized terms and executed a new letter of intent to purchase the assets of the agrochemical supplier. This opportunity is attractive as it has the potential of readily producing significant revenue, as well as the potential to apply the UST technology to improve some of the product line. In July 2021, a newly-formed subsidiary of PBI, PBI Agrochem, leased a warehouse in Carson City, NV, and hired a warehouse manager.

 

  2) Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. However, we have experienced losses from operations and negative cash flows from operations with respect to our pressure cycling technology business since our inception. As of March 31, 2022, we do not have adequate working capital resources to satisfy our current liabilities and as a result, there is substantial doubt regarding our ability to continue as a going concern. We have been successful in raising debt and equity capital in the past and as described in Notes 5 and 6. In addition we raised debt and equity capital after March 31, 2022 as described in Note 7. We have financing efforts in place to continue to raise cash through debt and equity offerings. Although we have successfully completed financings and reduced expenses in the past, we cannot assure you that our plans to address these matters in the future will be successful. These financial statements do not include any adjustments that might result from this uncertainty.

 

8

 

 

  3) Summary of Significant Accounting Policies

 

Basis of Presentation

 

The unaudited interim financial statements of Pressure BioSciences, Inc. and its consolidated subsidiaries (collectively, the “Company”) included herein have been prepared by the Company in accordance with the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission. Under these rules and regulations, some information and footnote disclosures normally included in financial statements prepared under accounting principles generally accepted in the United States of America have been shortened or omitted. Management believes that all adjustments necessary for a fair statement of the financial position and the results of operations for the periods shown have been made. All adjustments are normal and recurring. These financial statements should be read together with the Company’s audited financial statements included in its Form 10-K for the fiscal year ended December 31, 2021. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the final results that may be expected for the year ending December 31, 2022.

 

Use of Estimates

 

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

 

Recent Accounting Pronouncements

 

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

 

Principles of Consolidation

 

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

 

9

 

 

Revenue Recognition

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

 

Disaggregation of revenue

 

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

 

In thousands of US dollars ($) 

Three Months Ended

March 31,

 
Primary geographical markets  2022   2021 
North America  $318   $208 
Europe   46    84 
Asia   116    268 
   $480  $560 

 

  

Three Months Ended

March 31,

 
Major products/services lines  2022   2021 
Hardware  $284   $377 
Consumables   40    102 
Contract research services   15    6 
Sample preparation accessories   31    29 
Agrochem products   83    - 
Technical support/extended service contracts   17    24 
Shipping and handling   10    19 
Other   -    3 
   $480   $560 

 

11

 

 

  

Three Months Ended

March 31,

 
Timing of revenue recognition  2022   2021 
Products transferred at a point in time  $448   $538 
Services transferred over time   32    22 
   $480  $560 

 

Contract balances

 

In thousands of US dollars ($) 

March 31,

2022

  

December 31,

2021

 
Receivables, which are included in ‘Accounts Receivable’  $292   $155 
Contract liabilities (deferred revenue)   48    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 ($)  2022   2023   Total 
Extended warranty service  $46   $3   $49 

 

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 ended March 31, 2022 and 2021.

 

   For the Three Months Ended 
   March 31, 
   2022   2021 
Top Five Customers   73%   88%
Federal Agencies   0%   1%

 

The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of March 31, 2022 and December 31, 2021. The Top Five Customers category may include federal agency receivable balances if applicable.

 

   March 31,
2022
   December 31,
2021
 
Top Five Customers   88%   82%
Federal Agencies   3%   5%

 

Product Supply

 

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

 

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

 

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

 

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

 

13

 

 

Investment in Equity Securities

 

As of March 31, 2022, we held 100,250 shares of common stock of Nexity Global SA, (a Polish publicly traded company).

 

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

 

As of March 31, 2022, our consolidated balance sheet reflected the fair value, determined on a recurring basis based on Level 1 inputs of our investment in Nexity, to be $79,114. We recorded $19,138 as an unrealized gain during the three months ended March 31, 2022 for changes in market value.

 

Computation of Loss per Share

 

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

 

The following table illustrates our computation of loss per share for the three months ended March 31, 2022 and 2021:

 

   2022   2021 
   For the Three Months Ended 
   March 31, 
   2022   2021 
Numerator:        
Net loss attributable to common stockholders  $(4,671,834)  $(7,038,686)
           
Denominator for basic and diluted loss per share:          
Weighted average common stock shares outstanding   9,695,189    4,865,826 
           
Loss per common share – basic and diluted  $(0.48)  $(1.45)

 

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 March 31, 
   2022   2021 
Stock options   1,307,822    1,358,490 
Convertible debt   5,668,816    4,757,701 
Common stock warrants   16,350,438    14,901,211 
Convertible preferred stock:          
Series D Convertible Preferred Stock   25,000    25,000 
Series G Convertible Preferred Stock   26,857    26,857 
Series H Convertible Preferred Stock   33,334    33,334 
Series H2 Convertible Preferred Stock   70,000    70,000 
Series J Convertible Preferred Stock   115,267    115,267 
Series K Convertible Preferred Stock   229,334    229,334 
Series AA Convertible Preferred Stock   8,649,000    8,083,000 
    32,475,868    29,600,194 

 

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 $64,483 and $61,237 for the three months ended March 31, 2022 and 2021, respectively. The following table summarizes the effect of this stock-based compensation expense within each of the line items of our costs and expenses within our Consolidated Statements of Operations:

 

   For the Three Months Ended 
   March 31, 
   2022   2021 
Cost of sales  $4,349   $5,053 
Research and development   18,909    25,862 
Selling and marketing   9,050    4,595 
General and administrative   32,175    25,727 
Total stock-based compensation expense  $64,483   $61,237 

 

Fair Value of Financial Instruments

 

Due to their short maturities, the carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and debt approximate their fair value. The carrying amount of long-term debt approximates fair value due to interest rates that approximate prevailing market rates.

 

Fair Value Measurements

 

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

 

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

 

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

 

16

 

 

The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2022:

 

      

Fair value measurements at

March 31, 2022 using:

 
  

March 31,

2022

  

Quoted

prices in

active

markets

(Level 1)

  

Significant

other

observable

inputs

(Level 2)

  

Significant

unobservable

inputs

(Level 3)

 
Equity Securities  $79,114   $79,114    -    - 
Total Financial Assets  $79,114   $79,114   $-   $- 

 

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, 2021:

 

      

Fair value measurements at

December 31, 2021 using:

 
  

December 31,

2021

  

Quoted

prices in

active

markets

(Level 1)

  

Significant

other

observable

inputs

(Level 2)

  

Significant

unobservable

inputs

(Level 3)

 
Equity Securities   59,976    59,976    -    - 
Total Financial Assets  $59,976   $59,976   $-   $- 

 

17

 

 

  4) Commitments and Contingencies

 

Operating Leases

 

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

 

Our corporate office is currently located at 14 Norfolk Avenue, South Easton, Massachusetts 02375. We are currently paying $6,950 per month, on a lease extension, signed on December 31, 2021, that expires December 31, 2022, for our corporate office. We expanded our space to include offices, warehouse and a loading dock on the first floor starting May 1, 2017 with a monthly rent increase already reflected in the current payments.

 

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

 

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

 

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

 

The Company accounted for the Sparks Lease as an operating lease under ASC 842. Upon the commencement of the lease, the Company recorded a right-of-use asset and lease liability in the amount of $239,327 based on the net present value of lease payments discounted using an estimated borrowing rate of 12%.

 

Following is a schedule by years of future minimum rental payments required under operating leases with initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2022:

 

      
2022  $188,210 
2023   149,299 
2024   64,393 
2025   66,969 
2026   51,778 
Thereafter   - 
Total  $520,649 

 

Battelle Memorial Institute

 

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

 

Target Discovery Inc.

 

In March 2010, we signed a strategic product licensing, manufacturing, co-marketing, and collaborative research and development agreement with Target Discovery Inc. (“TDI”), a related party. Under the terms of the agreement, we have been licensed by TDI to manufacture and sell a highly innovative line of chemicals used in the preparation of tissues for scientific analysis (“TDI reagents”). The TDI reagents were designed for use in combination with our pressure cycling technology. The companies believe that the combination of PCT and the TDI reagents can fill an existing need in life science research for an automated method for rapid extraction and recovery of intact, functional proteins associated with cell membranes in tissue samples. We did not incur any royalty obligation under this agreement in 2021 or 2020.

 

In April 2012, we signed a non-exclusive license agreement with TDI to grant the non-exclusive use of our pressure cycling technology. We executed an amendment to this agreement on October 1, 2016 wherein we agreed to pay a monthly fee of $1,400 for the use of a lab bench, shared space and other utilities, and $2,000 per day for technical support services as needed. The agreement requires TDI to pay the Company a minimum royalty fee of $60,000 in 2021 and $60,000 in 2022. For the three months ended March 31, 2022 and March 31, 2021, the Company reported $17,700 and $28,200, respectively in TDI fees.

 

Severance and Change of Control Agreements

 

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

 

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

 

  5) Convertible Debt and Other Debt

 

Convertible Debt

 

On various dates during the three months ended March 31, 2022, the Company issued convertible notes for a total of $1,114,738 which contained varied terms and conditions as follows: a) 5-12 month maturity date; b) interest rates of 12%; c) convertible to the Company’s common stock at issuance at a fixed rate of $2.50 or at variable conversion rates upon the Company’s up-listing to NASDAQ or NYSE or an event of default. These notes were issued with either shares of common stock or warrants to purchase common stock that were fair valued at issuance date. The aggregate relative fair value of the shares of common stock and warrants issued with the notes of $229,916 was recorded as a debt discount to be amortized over the term of the notes. We also evaluated the convertible notes for derivative liability treatment and determined that the notes did not qualify for derivative accounting treatment at March 31, 2022.

 

18

 

 

 

The specific terms of the convertible notes and outstanding balances as of March 31, 2022 are listed in the tables below.

Inception Date  Term  Loan Amount   Outstanding balance with OID   Original Issue Discount (OID)   Interest Rate   Conversion Price   Deferred Finance Fees  

Discount for conversion

feature and warrants/shares

 
                                
May 17, 2018 (1)(2)  12 months  $380,000   $98,544   $15,200    8%  $2.50   $15,200   $332,407 
January 3, 2019 (1)(4)  6 months  $50,000   $50,000   $2,500    24%  $7.50   $2,500   $- 
June 4, 2019 (1)(2)  9 months  $500,000   $302,484   $-    8%  $2.50   $40,500   $70,631 
July 19, 2019 (1) (2)  12 months  $115,000   $115,000   $-    4%  $2.50   $5,750   $15,460 
September 27,2019 (1) (2)  12 months  $78,750   $78,750   $-    4%  $2.50   $3,750   $13,759 
October 24, 2019 (1) (2)  12 months  $78,750   $78,750   $-    4%  $2.50   $3,750   $- 
November 15,2019 (1)  12 months  $385,000   $320,000   $35,000    10%  $2.50   $35,000   $90,917 
January 2,2020 (1)  12 months  $330,000   $330,000   $30,000    10%  $2.50   $30,000   $91,606 
January 24,2020 (1)  12 months  $247,500   $247,500   $22,500    10%  $2.50   $22,500   $89,707 
January 29, 2020 (1)  12 months  $363,000   $363,000   $33,000    10%  $2.50   $33,000   $297,000 
February 12, 2020 (1)  12 months  $275,000   $275,000   $25,000    10%  $2.50   $25,000   $225,000 
February 19,2020 (1)  12 months  $165,000   $165,000   $15,000    10%  $2.50   $15,000   $135,000 
March 11,2020 (1)  12 months  $330,000   $330,000   $30,000    10%  $2.50   $30,000   $232,810 
March 13, 2020 (1)  12 months  $165,000   $165,000   $15,000    10%  $2.50   $15,000   $60,705 
March 26, 2020 (1)  12 months  $111,100   $111,100   $10,100    10%  $2.50   $10,100   $90,900 
April 8, 2020 (1)  12 months  $276,100   $276,100   $25,100    10%  $2.50   $25,000   $221,654 
April 17,2020 (1)  12 months  $143,750   $143,750   $18,750    10%  $2.50   $-   $96,208 
April 30,2020 (1)  12 months  $546,250   $546,250   $71,250    10%  $2.50   $47,500   $427,500 
May 6, 2020 (1)  12 months  $460,000   $460,000   $60,000    10%  $2.50   $40,000   $360,000 
May 18,2020 (1)  12 months  $546,250   $221,250   $46,250    10%  $2.50   $35,500   $439,500 
June 2, 2020 (1)  12 months  $902,750   $652,750   $92,750    10%  $2.50   $58,900   $708,500 
June 12,2020 (1)  12 months  $57,500   $57,500   $7,500    10%  $2.50   $5,000   $45,000 
June 22, 2020 (1)  12 months  $138,000   $138,000   $18,000    10%  $2.50   $12,000   $108,000 
July 7, 2020 (1)  12 months  $586,500   $586,500   $76,500    10%  $2.50   $51,000   $400,234 
July 17, 2020 (1)  12 months  $362,250   $362,250   $47,250    10%  $2.50   $31,500   $185,698 
July 29, 2020 (1)  12 months  $345,000   $345,000   $45,000    10%  $2.50   $30,000   $241,245 
July 21, 2020 (1) (5)  12 months  $115,000   $115,000   $15,000    10%  $2.50   $10,000   $24,875 
August 14, 2020 (1)  12 months  $762,450   $462,450   $69,450    10%  $2.50   $66,300   $580,124 
September 10, 2020 (1)  12 months  $391,000   $391,000   $51,000    10%  $2.50   $34,000   $231,043 
September 21, 2020 (1) (5)  12 months  $345,000   $345,000   $45,000    10%  $2.50   $30,000   $66,375 
September 23, 2020 (1)  12 months  $115,000   $15,000   $15,000    10%  $2.50   $10,000   $20,500 
December 3, 2020 (1)  12 months  $299,000   $299,000   $39,000    10%  $2.50   $26,000   $197,882 
October 22, 2020 (1) (5)  12 months  $115,000   $115,000   $15,000    10%  $2.50   $10,000   $18,875 
February 17, 2021 (1)  12 months  $230,000   $230,000   $30,000    10%  $2.50   $20,000   $180,000 
March 23, 2021 (1)  12 months  $55,000   $55,000   $5,000    10%  $2.50   $-   $36,431 
May 6, 2021 (1)  12 months  $402,500   $402,500   $52,500    10%  $2.50   $35,000   $312,551 
June 17, 2021  12 months  $230,000   $230,000   $30,000    10%  $2.50   $20,000   $144,760 
June 25, 2021  12 months  $977,500   $977,500   $127,500    10%  $2.50   $-   $773,802 
June 3, 2021 (1)  6 months  $50,000   $50,000   $1,500    12%  $2.50   $-   $7,948 
March 1, 2022 (13)  6 months  $700,000   $700,000   $84,000    12%   (6)  $-   $- 
July 3, 2021  12 months  $115,000   $115,000   $15,000    10%  $2.50   $10,000   $90,000 
February 1, 2022 (14)  6 months  $260,000   $210,000   $10,000    12%  $(7)  $2,000   $- 
February 4, 2022 (13)  8 months  $500,000   $500,000   $30,000    12%  $(11 )  $-   $- 
July 6, 2021 (1)   6 months  $130,000   $130,000   $10,000    12%  $2.50   $-   $- 
July 15, 2021 (1)  6 months  $100,000   $45,000   $5,000    12%   (7)  $-   $57,716 
January 19, 2022 (14)  6 months  $52,000   $52,000   $2,000    12%  $2.50   $2,000   $- 
January 20, 2022 (3) (14)  6 months  $352,188   $352,188   $45,938    (3)   (8)  $-   $- 
January 20, 2022 (3) (14)  6 months  $352,188   $352,188   $45,938    (3)   (8)  $-   $- 
January 20, 2022 (3) (14)  6 months  $140,875   $140,875   $18,375    (3)   (8)  $-   $- 
August 31, 2021   12 months  $189,750   $189,750   $24,750    10%   (9)  $16,500   $148,500 
Sept. 8, 2021 (1)  8 months  $78,000   $78,000   $3,000    12%   (7)  $-   $40,449 
Sept. 10, 2021 (1)  8 months  $100,000   $100,000   $4,000    12%   (7)  $-   $43,520 
Sept. 15, 2021 (1)  6 months  $250,000   $250,000   $12,500    12%   (7)  $-   $108,801 
Sept. 16, 2021 (1)  6 months  $250,000   $250,000   $12,500    12%   (7)  $-   $112,337 
Sept. 24, 2021  8 months  $125,000   $125,000   $6,250    12%   (7)  $-   $61,876 
Sept. 15, 2021 (1)  6 months  $250,000   $250,000   $37,500    12%   (7)  $30,000   $- 
October 21, 2021 (5)  12 months  $189,750   $189,750   $24,750    12%  $2.50   $16,500   $87,332 
November 1, 2021 (5)  12 months  $189,750   $189,750   $24,750    12%  $2.50   $-   $96,991 
December 7, 2021  12 months  $169,500   $118,650   $19,500    12%   (10)  $3,750   $- 
March 23,2022  8 months  $56,500   $56,500   $6,500    12%   (12)  $-   $- 
March 29, 2022  8 months  $112,000   $112,000   $13,000    12%   (12)  $-   $- 
February 9,2022  12 months  $88,987   $80,112   $10,237    12%   (10)  $-   $- 
March 30, 2022  12 months  $10,000   $10,000   $-    12%   2.50  $-   $38,400 
                                       
           $15,103,691   $1,703,088             $965,500   $8,460,529 

 

  (1) The Note is past due. The Company and the lender are negotiating in good faith to extend the loan.
  (2) The Company and lenders have entered into Standstill and Forbearance Agreements (as described below).
  (3) Note is secured by the assets of the Company’s subsidiary, PBI Agrochem, Inc. and interest rate is 40.9% OID.
  (4) During the year ended December 31, 2020, the Company entered into a Rate Modification Agreement with this lender. In this agreement the lender agreed to reduce their interest rate and were granted the right to convert loans using a variable conversion price if more than one other variable rate lender converted at a variable rate.
  (5) The Company has agreed to issue shares of its common stock to lenders if their notes are not repaid by a defined date.
  (6) Loan is not convertible until 180 days from the date of issuance of the Note and following an Event of Default will be convertible at the lowest trading price of the 20 days prior to conversion. The loan is guaranteed by the Company’s Chief Executive Officer, but the lender may only enforce this guarantee after certain conditions have been met, specifically after (i) the occurrence of an Event of Default (as defined in the Note), (ii) the failure of the Company to cure the Default in 10 business days, and (iii) a failure by the Company to issue, or cause to be issued, shares of its common stock upon submission by the lender of a notice of conversion.
  (7) Notes are convertible before maturity at $2.50 per share or mandatorily convertible when the Company up-lists to the NASDAQ at the lower of $2.50 or the up-list price.
  (8) Notes can be converted at the lesser of $2.50 per share or 25% discount to the opening price of the Company’s first day of trading on either Nasdaq or NYSE. In addition, if the Company fails to pay the Note in cash on maturity date, the conversion price will be adjusted to the lesser of original conversion price or the product of the VWAP of the common stock for the 5 trading dates immediately prior to the maturity date multiplied by 0.75.
  (9) Conversion price of this note is $2.50 and will be adjusted to, upon an Event of Default, the lower of (i) the conversion price or (ii) a 25% discount to the 5-day average VWAP of the stock prior to default. Additionally, if an up-list to a national exchange occurs while this note is outstanding, the conversion price shall be changed to the lower of (i) the conversion price or (ii) a 25% discount to the up-list price.
  (10) Notes are convertible upon an Event of Default at 75% multiplied by the lowest trading price for the common stock during the five days prior to the conversion.
  (11) Loans can be voluntarily converted before maturity at $2.50 per share. Lender retains the option upon an Up-list to convert at the lower of $2.50 or the 10% off Up-list price.
  (12) Notes are convertible at $2.50 per share except that following an Event of Default the conversion price will be adjusted to 75% multiplied by the lowest trading price for the common stock during the five days prior to the conversion.
  (13) During the three months ended March 31, 2022, the Company extended two loans totaling $475,000 and increased the principal to $1,200,000. The Company issued 60,000 shares of common stock for these extensions and added principal.
  (14) During the three months ended March 31, 2022, the Company extended five loans totaling $1,045,000 and increased the principal to 1,107,251 and issued 149,500 shares of common stock for the extensions.

 

As of March 31, 2022, one lender holds approximately $9.4 million of the $15.1 million convertible notes outstanding.

 

For the three months ended March 31, 2022, the Company recognized amortization expense related to the debt discounts indicated above of $794,242. The unamortized debt discounts as of March 31, 2022 related to the convertible debentures and other convertible notes amounted to $813,478.

 

19

 

 

Standstill and Forbearance Agreements

 

In recent years, the Company entered into Standstill and Forbearance Agreements with lenders who hold variable-rate convertible notes. Pursuant to these agreements the lenders agreed to not convert any portion of their notes into shares of common stock at a variable rate. The Company and two lenders ($673,528 outstanding principal at March 31, 2022) are negotiating in good faith to resolve the remaining loans.

 

In connection to these agreements, the Company incurred interest, penalties, and fees of approximately $202,050 in the three months ended March 31, 2022.

 

Convertible Loan Modifications and Extinguishments

 

We refinanced certain convertible loans during the three months ended March 31, 2022 at substantially the same terms for extensions ranging over a period of three to six months. We amortized any remaining unamortized debt discount as of the modification date over the remaining, extended term of the new loans. We applied ASC 470 of modification accounting to the debt instruments which were modified during the quarter or those settled with new notes issued concurrently for the same amounts but different maturity dates. The terms such as the interest rate, prepayment penalties, and default rates will be the same over the new extensions. According to ASC 470, an exchange of debt instruments between or a modification of a debt instrument by a debtor and a creditor in a nontroubled debt situation is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. If the terms of a debt instrument are changed or modified and the cash flow effect on a present value basis is less than 10 percent, the debt instruments are not considered to be substantially different and will be accounted for as modifications.

 

The cash flows of new debt exceeded 10% of the remaining cash flows of the original debt on several loans. During the three months ended March 31, 2022 we recorded losses on extinguishment of liabilities of approximately $0.6 million by calculating the difference of the fair value of the new debt and the carrying value of the old debt.

 

20

 

 

The following table provides a summary of the changes in convertible debt, net of unamortized discounts, during 2022:

 

   2022 
Balance at January 1,  $12,839,813 
Early adoption of ASU 2020-06   473,027 
Issuance of convertible debt, face value   1,114,738 
Deferred financing cost   (308,738)
Debt discount from shares and warrants issued with debt   (229,916)
Payments   (324,350)
Conversion of debt into equity   (68,159)
Accretion of interest and amortization of debt discount to interest expense   794,242 
Balance at March 31,   14,290,657 
Less: current portion   14,290,657 
Convertible debt, long-term portion  $ 

 

Other Notes

 

As of March 31, 2022 the Company owes $691,500 on two notes to a private investor. During the three months ended March 31, 2022, the Company issued 100,000 warrants (3 year term, $3.50 strike price) to the lender. The Company and the lender are negotiating in good faith to extend these loans.

 

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

 

Merchant Agreements

 

We have signed various Merchant Agreements which are secured by second position rights to all customer receipts until the loan has been repaid in full and subject to interest rates of 10.8% per month. As illustrated in the following table, under the terms of these agreements, we received the disclosed Purchase Price and agreed to repay the disclosed Purchase Amount, which is collected by the Merchant lenders at the disclosed Daily Payment Rate. The Company’s Chief Executive Officer (“Guarantor”) is guaranteeing that the Company will perform its obligations under the Agreement.  In no circumstance will Guarantor be asked or obligated to repay or be liable for the payment of any amount paid by Buyer to Seller, including, but not limited to, the Purchase Price.

 

The following table shows our Merchant Agreements as of March 31, 2022:

 

Inception Date  Purchase Price   Purchased Amount   Outstanding Balance   Payment frequency  Payment
Rate
   Deferred Finance Fees 
February 10, 2022  $120,000   $157,560   $67,285   Weekly   7,878.00   $1,200 
January 11, 2022  $240,000   $300,000   $125,140   Weekly   11,112.00   $- 
December 21, 2021  $400,000   $520,000   $268,775   Weekly   11,305.00   $6,000 
   $760,000   $977,560   $461,200           $7,200 

 

The following table shows our Merchant Agreements as of December 31, 2021:

 

Inception Date 

Purchase

Price

   Purchased Amount   Outstanding Balance  

Payment

frequency

 

Payment

Rate

  

Deferred
Finance

Fees

 
December 21, 2021  $400,000   $520,000   $390,120   Weekly   11,305.00   $6,000 
July 6, 2021   125,000    166,250    8,790   Daily   1,279.00    2,500 
   $525,000   $686,250   $398,910           $8,500 

 

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

 

21

 

 

Related Party Notes

 

During the three months ended March 31, 2022, we received short-term non-convertible loans of $195,250 from related parties, which bear interest rates of 12% and are due upon demand.

 

Long term debt

 

The Company entered into a COVID-19 government loan in 2020, the Economic Injury Disaster Loan (or “EIDL”). The Company’s EIDL loan, $150,000, accrues interest at 3.75% and requires monthly payments of $731 for principal and interest beginning in December 2022. The balance of the principal will be due in 30 years. In connection with the EIDL loan the Company entered into a security agreement with the SBA, whereby the Company granted the SBA a security interest in all of the Company’s right, title and interest in all of the Company’s assets.

 

22

 

 

  6) Stockholders’ Deficit

 

Preferred Stock

 

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

 

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

 

As of March 31, 2022, there were no shares of Junior A, and Series A, B, C and E issued and outstanding. See our Annual Report on Form 10-K for the year ended December 31, 2021 for the pertinent disclosures of preferred stock.

 

23

 

 

Stock Options and Warrants

 

At the Company’s December 30, 2021 Special Meeting, the shareholder’s approved the 2021 Equity Incentive Plan (the “2021 Plan”) pursuant to which 3,000,000 shares of our common stock were reserved for issuance upon exercise of stock options or other equity awards. Consistent with the Company’s existing 2013 Equity Incentive plan (the “2013 plan”), under the 2021 plan, we may award stock options, shares of common stock, and other equity interests in the Company to employees, officers, directors, consultants, and advisors, and to any other persons the Board of Directors deems appropriate. As of March 31, 2022, options to acquire 1,307,822 shares were outstanding under these Plans.

 

As of March 31, 2022, total unrecognized compensation cost related to the unvested stock-based awards was $108,471, which is expected to be recognized over weighted average period of 0.82 year. The aggregate intrinsic value associated with the options outstanding and exercisable, and the aggregate intrinsic value associated with the warrants outstanding and exercisable as of March 31, 2022, based on the March 31, 2022 closing stock price of $2.02, was $1,707,483.

 

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

   Stock Options   Warrants         
   Weighted
Average
   Weighted
Average
         
   Shares   price
per
share
   Shares   price
per
share
   Shares   Total
Exercisable
 
Balance outstanding, December 31, 2021   1,333,101   $0.72    16,207,108   $3.50    17,540,209    17,308,567 
Granted   -    -    230,000    3.50    230,000    - 
Exercised   -    -    -    -    -    - 
Expired/forfeited   (25,279)   0.69    (86,670)  $3.50    (111,949)   - 
Balance outstanding, March 31, 2022   1,307,822   $0.72    16,350,438   $3.50    17,658,260    17,486,529 

 

As of March 31, 2022, the 1,307,822 options outstanding have a $0.72 weighted average exercise price and 7.47 years weighted average remaining term. Of these options, 1,136,091 are currently exercisable.

 

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Common Stock and Warrant Issuances

 

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

 

   Loan Issuance  Loan   Percentage of Loan   Defined  Shares Issuable
Loan  Date  Principal   Principal Issuable   Date  Frequency
                  
Loan 1  July 21, 2020  $115,000    0.0435%  September 30, 2020  Monthly
Loan 2  September 21, 2020  $345,000    0.0362%  November 16, 2020  Weekly
Loan 3  October 22, 2020  $115,000    0.0652%  December 1, 2020  Weekly
Loan 4  October 21, 2021  $189,750    0.0435%  January 2, 2022  Weekly
Loan 5  November 1, 2021  $189,750    0.0435%  January 2, 2022  Weekly

 

For the three-month period ended March 31,2022 the Company is obligated to issue 554,500 shares of common stock for the loans listed in the above table, but has not issued the shares. The Company and the lenders are negotiating in good faith to resolve these loans and expect to reach a settlement in the coming month. During the three-month period ended March 31, 2022 the Company accrued $1,165,250 in interest expense for these obligations to issue common stock.

 

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

 

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

 

During the three months ended March 31, 2021, we issued 922,372 shares of common stock with a fair value of approximately $2.0 million to lenders for interest paid-in-kind, 112,400 shares with a fair value of $238,512 for services rendered, 47,200 shares with a fair value of $118,000 for conversions of debt principal and interest and 21,411 shares for stock option exercises at an exercise price of $0.69 per share. During this period, we also issued 521,200 warrants (five-year term at a $3.50 exercise price) to acquire common stock at a fair value of $0.8 million to lenders in conjunction with signing of new convertible loans and interest paid-in-kind.

 

  7) Subsequent Events

 

After April 1, 2022, the Company issued 22,000 shares of common stock along with issuance of two convertible loans (totaling $200,000). Each loan carries a 12% annual interest rate, a twelve-month term and is convertible at $2.50 per share.

 

In this period, the Company also borrowed $227,000 from related parties with 10% original issue discount and 12% annual interest rate, and repaid $211,000 of related party loans. The Company also entered into a new merchant cash loan arrangement (collecting $225,000 in return for contractual payments of $11,008 per week for 28 weeks).  During this period the Company also issued 40,000 shares of common stock to professional services vendors and committed to issue 20,000 shares in three months for service to be provided.

 

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

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

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

 

These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements, expressed or implied, by such forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations or any change in events, conditions or circumstances on which any of our forward-looking statements are based. Factors that could cause or contribute to differences in our future financial and other results include those discussed in the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 and in this Report. We qualify all of our forward-looking statements by these cautionary statements.

 

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OVERVIEW:

 

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

 

On February 8, 2021, PBI announced plans to acquire the assets of a global eco-friendly agrochemical supplier. On April 14, 2021, PBI finalized terms and executed a new letter of intent to purchase the assets of the agrochemical supplier. This opportunity is attractive as it has the potential of readily producing significant revenue, as well as the potential to apply the UST technology to improve some of the product line. In July 2021, a newly-formed subsidiary of PBI, PBI Agrochem, leased a warehouse in Carson City, NV, and hired a warehouse manager.

 

Developments and Accomplishments:

 

We reported the following accomplishments during 2022:

 

  On May 4, PBI announced the first nanoemulsions manufacturing agreement under recently released UST Early Access Program
     
  On April 27, PBI announced the availability of the Early Access Program for UST nanoemulsion processing platform.
     
  On April 5, PBI announces strong FY 2021 Financial and Operational Successes: FY 2021 revenue increased 64% over FY 2020, UST platform achieved critical goals – discussions ongoing with key leaders in multiple markets, and PCT/BaroFold/PBI Agrochem groups all reported important gains in FY 2022.
     
  On March 17, PBI updates stakeholders with solid progress on key 2022 goals.
     
  On March 10, Emerging Technology Insider releases TechTalks video interview featuring PBI President Ric Schumacher, discussing OSU partnership, Food Industry Consortium, and commercialization of UST Platform. The interview can be found here:  TechTalks Video
     
 

On March 3, Ohio State announced they had installed & commissioned new pilot-scale UST processing equipment from PBI for the preparation of higher quality and safer liquid foods and beverages.

     
  On January 27, PBI’s UST Platform achieves key commercialization milestone with Installation and commissioning of production-scale BaroShear UST System at Ohio State to serve the food industry.
     
  On January 19, PBI participated in FORCE Family Office’s Webinar on Innovations and Advancements in the $4.6 Billion CBD Market.  Click here to access the webinar: Innovations & Advancements in the CBD Market. 012021

 

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Results of Operations

 

The following disclosure compares the results of operations for the quarter ended March 31, 2022 (“Q1 2022”) with March 31, 2021 (“Q1 2021”).

 

Products and Services Revenue

 

We recognized total revenue of $480,000 for Q1 2022 compared to $559,874 for Q1 2021, a 14% decrease. The decline in revenue was primarily attributable to a $135,000 decrease in sales of PCT instrumentation and consumables which was offset by $83,292 of revenue from PBI Agrochem products (which were new in 2022).

 

Cost of Products and Services

 

The cost of products and services was $314,363 for Q1 2022 compared to $226,275 for Q1 2021. Gross profit margin on products and services decreased to 35% in Q1 2022 from 60% in Q1 2021. The decrease in Gross profit margin was attributable to the sale of three instruments to a new foreign distribution relationship using long-term strategic pricing.

 

Research and Development

 

Research and development expenses were $281,589 for Q1 2022 compared to $299,943 for Q1 2021. The reported decrease was 6%.

 

Selling and Marketing

 

Selling and marketing expenses were $66,462 for Q1 2022 compared to $93,328 for Q1 2021. The reported decrease was primarily attributable to reduced employees in sales and marketing.

 

General and Administrative

 

General and administrative expenses were $903,885 for Q1 2022 compared to $1,015,430 for Q1 2021, a decrease of $111,545 or 11%. The decrease was primarily the result of a decrease in investor relations expenses.

 

Operating Loss

 

Operating loss was $1,086,299 for Q1 2022 compared to $1,075,102 for Q1 2021, an increase of $11,197, or 1%.

 

Interest Expense, net

 

Interest expense was $2,579,161 for Q1 2022 compared to $4,668,064 for Q1 2021. The decrease was attributable to a decrease in amortization expense on unamortized discounts, lower interest expense for the issuance of common stock for interest paid-in-kind and a reduction in the Company’s interest expense incurred on standstill loans as part of these loans were settled in 2021.

 

Unrealized (loss) gain on investment in equity securities

 

Unrealized gain on investments in equity securities was $19,138 for Q1 2022 compared to an unrealized loss of $107,903 for Q1 2022.The reported change was attributable to movement in the market price of the Company’s investment in Nexity.

 

Loss on extinguishment of liabilities

 

In connection with debt extensions and forgiveness, we recognized net losses of $589,850 for Q1 2022 compared to $725,159 of losses for Q1 2021.

 

Net loss attributable to common stockholders

 

Net loss attributable to common stockholders was $4,671,834 ($0.48 per share) for Q1 2022 compared to $7,038,686 ($1.45 per share) for Q1 2021. The decrease in loss per share was attributable to the lower net loss attributable to common stockholders and to the increase in weighted shares outstanding.

 

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Liquidity and Financial Condition

 

We have experienced negative cash flows from operations with respect to our pressure cycling technology business since our inception. As of March 31, 2022, we did not have adequate working capital resources to satisfy our current liabilities and as a result, we have substantial doubt regarding our ability to continue as a going concern. As described in Notes 5 and 6 of the accompanying consolidated financial statements, we have been successful in raising debt and equity capital. We received $1.4 million in net proceeds from loans in the three months ended March 31, 2022. We have efforts in place to continue to raise cash through debt and equity offerings. (See Note 7 to the financial statements)

 

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

 

Net cash used in operations for the three months ended March 31, 2022 was $756,282 as compared to $1,237,015 for the three months ended March 31, 2021.

 

Net cash used in investing activities for the three months ended March 31, 2022 was $1,135 compared to $3,962 in the three months ended March 31, 2021.

 

Net cash provided by financing activities for the three months ended March 31, 2022 was $743,909 as compared to $1,272,967 for the three months ended March 31, 2021. The cash flows from financing activities in the three months ended March 31, 2022 included $1.4 million loan proceeds from convertible debt and other debt. In this period, cash flow from financing was reduced by debt payments of $0.3 million on convertible debt, and $0.3 million on other debt.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

ITEM 4. CONTROLS AND PROCEDURES

 

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

 

As of March 31, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective.

 

Our conclusion that our disclosure controls and procedures were not effective as of March 31, 2022 is due to the continued presence of the material weaknesses in our internal control over financial reporting identified in our Annual Report on Form 10-K for the year ended December 31, 2021. These material weaknesses are the following:

 

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

 

During the period covered by this Report, we implemented and performed additional substantive procedures, such as supervisory review of work papers and consistent use of financial models used in equity valuations, to ensure our consolidated financial statements as of and for the three-month period ended March 31, 2022, are fairly stated in all material respects in accordance with GAAP. We have not, however, been able to fully remediate the material weaknesses due to our limited financial resources. Our remediation efforts are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

Except as described above, there have been no changes in our internal controls over financial reporting that occurred during the period ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

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

 

Item 1A. Risk Factors

 

Factors that could cause or contribute to differences in our future financial and operating results include those discussed in the risk factors set forth in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2021 and in this Item 1A. The risks described in our Form 10-K and this Report are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on the Company. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.

 

There have been no material changes to the risk factors set forth in Item 1A of our 10-K for the year ended December 31, 2021 other than the following:

 

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

 

Through March 31, 2022, we have issued Notes to the same holder such that the current gross amount owed to the holder is approximately $9.4 million. Our obligations under the Notes and the transaction documents relating to the Notes are secured by a security interest in all of our assets. As a result, if we default under our obligations under the Notes or the transaction documents, the holders of the Notes, acting through their appointed agent, could foreclose on their security interests and liquidate some or all of these assets, which could harm our business, financial condition and results of operations and could require us to reduce or cease operations. In addition, the pledge of these assets and other restrictions may limit our flexibility in raising capital for other purposes. Because all of our assets are pledged under these financing arrangements, our ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on our financial flexibility.

 

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

 

The holders of our common stock could suffer substantial dilution due to our corporate financing practices which, in the past few years has included private placements. As of March 31, 2022, we had 8,722,494 shares outstanding. As of March 31, 2022, if all of the outstanding shares of Series D Convertible Preferred Stock, Series G Convertible Preferred Stock, Series H Convertible Preferred Stock, Series H2 Convertible Preferred Stock, Series J Convertible Preferred Stock, Series K Convertible Preferred Stock and Series AA Convertible Preferred Stock were converted into shares of common stock and all outstanding options and warrants to purchase shares of common stock were exercised and all fixed rate convertible notes and debentures were converted, each as of March 31, 2022, an additional 32,475,868 shares of common stock would be issued and outstanding. The full cash exercise of the options and warrants would result in approximately $58.1 million in cash proceeds to the Company. This additional issuance of shares of common stock would cause immediate and substantial dilution to our existing stockholders and could cause a significant reduction in the market price of our common stock.

 

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

 

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

 

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

 

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

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

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Item 6. Exhibits

 

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

 

* Filed herewith.

 

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

 

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SIGNATURES

 

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

 

  PRESSURE BIOSCIENCES, INC.
     
Date: May 18, 2022 By: /s/ Richard T. Schumacher
    Richard T. Schumacher
    President & Chief Executive Officer
    (Principal Executive Officer and Principal Financial Officer)

 

34