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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 September 30, 2023

 

or

 

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

 

For the transition period from _____________ to _____________

 

Commission File Number 001-38185

 

PRESSURE BIOSCIENCES, INC.

(Exact name of registrant as specified in its charter)

 

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

 

14 Norfolk Avenue

South Easton, Massachusetts

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

 

(508) 230-1828

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

Yes ☐ No

 

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

 

Yes ☐ No

 

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

 

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

 

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

 

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

 

☐ Yes ☒ No

 

The number of shares outstanding of the Issuer’s common stock as of November 10, 2023 was 21,726,433.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
PART I - FINANCIAL INFORMATION 3
   
Item 1. Unaudited Financial Statements 3
   
Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 3
   
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 4
   
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 5
   
Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2023 and 2022 7
   
Notes to Unaudited Consolidated Financial Statements 9
   
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 31
   
Item 3. Defaults Upon Senior Securities 32
   
Item 4. Mine Safety Disclosures 32
   
Item 5. Other Information 32
   
Item 6. Exhibits 32
   
SIGNATURES 33

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report2
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

   September 30, 2023   December 31, 2022 
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $5,263   $3,865 
Accounts receivable   329,263    295,374 
Inventories, net of $905,759 and $982,973 reserve, respectively   467,155    686,383 
Prepaid expenses and other current assets   219,283    257,527 
Total current assets   1,020,964    1,243,149 
Investment in equity securities   77,918    63,638 
Property and equipment, net   91,409    103,351 
Right of use asset operating leases   159,424    282,095 
Intangible assets, net   252,404    317,308 
TOTAL ASSETS  $1,602,119   $2,009,541 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
CURRENT LIABILITIES          
Accounts payable  $1,062,565   $637,238 
Accrued employee compensation   376,760    167,247 
Accrued professional fees and other   2,722,666    2,497,762 
Accrued interest and dividends payable   4,576,350    10,803,983 
Deferred revenue   253,152    58,242 
Convertible debt, net of unamortized debt discounts of $744,393 and $455,517, respectively   18,222,120    17,823,669 
Other debt, net of unamortized discounts of $0 and $0, respectively   2,030,510    1,638,969 
Related party, net of unamortized debt discount of $514 and $7,915, respectively   647,986    634,885 
Right of use operating lease liability   66,259    142,171 
Total current liabilities   29,958,368    34,404,166 
LONG TERM LIABILITIES          
Long term debt   162,522    150,000 
Right of use operating lease liability long term   71,287    139,924 
Deferred revenue   10,645    1,822 
TOTAL LONG TERM LIABILITIES   244,454    291,746 
TOTAL LIABILITIES   30,202,822    34,695,912 
COMMITMENTS AND CONTINGENCIES (Note 4)   -    - 
STOCKHOLDERS’ DEFICIT          
Series D, G, H, H2, J, K, AA, BB, CC Convertible Preferred Stock, $.01 par value (Note 6)   100    1,098 
Common stock, $.01 par value; 100,000,000 shares authorized; 23,399,945 and 13,682,910 shares issued and outstanding on September 30, 2023 and December 31, 2022, respectively   234,000    136,829 
Warrants to acquire common stock   35,684,321    31,995,762 
Additional paid-in capital   93,973,646    69,006,145 
Accumulated deficit   (158,492,770)   (133,826,205)
TOTAL STOCKHOLDERS’ DEFICIT   (28,600,703)   (32,686,371)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $1,602,119   $2,009,541 

 

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

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report3
 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   2023   2022   2023   2022 
   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
Revenue:                    
Products, services, other  $413,009   $144,032   $1,665,412   $1,122,169 
Total revenue   413,009    144,032    1,665,412    1,122,169 
Costs and expenses:                    
Cost of products and services   229,457    126,203    844,684    742,707 
Research and development   288,345    262,370    1,004,437    716,685 
Selling and marketing   157,773    226,526    537,802    422,422 
General and administrative   1,030,243    892,293    5,290,564    2,591,644 
Total operating costs   1,705,818    1,507,392    7,677,487    4,473,458 
Operating loss   (1,292,809)   (1,363,360)   (6,012,075)   (3,351,289)
                     
Other (expense) income:                    
Interest expense, net   (4,338,759)   (2,034,021)   (14,112,098)   (6,448,771)
Unrealized gain (loss) on investment in equity securities   (5,965)   (8,675)   14,280    (8,047)
Gain (loss) on extinguishment of liabilities   -    (1,054,122)   687,591    (1,809,249)
Other income (expense)   7,588    (2,059)   11,820    (904)
Total other expense   (4,337,136)   (3,098,877)   (13,398,407)   (8,266,971)
Net loss   (5,629,945)   (4,462,237)   (19,410,482)   (11,618,260)
Deemed dividends on extension of warrants   -    -    (3,626,950)   - 
Preferred stock dividends   (632,054)   (431,709)   (1,629,133)   (1,295,566)
Net loss attributable to common shareholders  $(6,261,999)  $(4,893,946)  $(24,666,565)  $(12,913,826)
Basic and diluted net loss per share attributable to common shareholders  $(0.29)  $(0.44)  $(1.21)  $(1.24)
Weighted average common shares outstanding used in the basic and diluted net loss per share calculation   21,716,950    11,131,742    20,337,229    10,429,817 

 

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

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report4
 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   2023   2022 
   For the Nine Months Ended 
   September 30, 
   2023   2022 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(19,410,482)  $(11,618,260)
Adjustments to reconcile net loss to net cash used in operating activities:          
(Gain) on extinguishment of debt   (687,591)   (10,000)
Non-cash lease expense   122,671    82,001 
Common stock and warrants issued for interest   3,715,204    2,196,278 
Depreciation and amortization   84,341    67,985 
Accretion of interest and amortization of debt discount   3,213,622    1,777,863 
Loss on extinguishment of accrued liabilities and debt   -    1,809,249 
Common stock and warrants issued for debt extension   1,671,573    - 
Preferred stock issued for debt extension   2,683,600    - 
Stock-based compensation expense   1,706,420    128,984 
(Gain)/Loss on investment in equity securities   (14,280)   8,047 
Common stock and warrants issued for services   1,978,645    367,370 
Preferred stock issued for services   617,200    - 
Changes in operating assets and liabilities:          
Accounts receivable   (33,889)   (11,568)
Inventories   219,228    (238,973)
Prepaid expenses and other assets   38,244    204,141 
Accounts payable   425,327    80,130 
Accrued employee compensation   209,513    104,258 
Operating lease liability   (144,549)   (82,001)
Deferred revenue and other accrued expenses   1,551,380    2,083,239 
Net cash used in operating activities   (2,053,823)   (3,051,257)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of property plant and equipment   (7,495)   (20,754)
Net cash used in investing activities   (7,495)   (20,754)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Sale of common stock for cash   150,000    - 
Proceeds from stock option exercises   81,111    17,443 
Net proceeds from convertible debt   4,336,665    3,428,249 
Net proceeds from non-convertible debt - third party   2,043,681    1,815,000 
Net proceeds from debt - related party   159,186    762,500 
Payments on convertible debt   (2,462,269)   (1,086,946)
Payments on debt - related party   (159,000)   (259,600)
Payments on non-convertible debt   (2,086,658)   (1,506,066)
Net cash provided by financing activities   2,062,716    3,170,580 
           
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   1,398    98,569 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR   3,865    132,311 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $5,263   $230,880 

 

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

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report5
 

 

   2023   2022 
   For the Nine Months Ended 
   September 30, 
   2023   2022 
CASH FLOWS SUPPLEMENTAL INFORMATION          
Interest paid in cash  $1,219,038   $938,451 
NON CASH TRANSACTIONS:          
Early adoption of ASU 2020-06   -    473,027 
Common stock issued with debt   1,293,270    512,593 
Discount from warrants issued with debt   -    93,576 
Common stock issued in lieu of cash for dividend   162,528    306,333 
Preferred stock issued with debt   539,487    - 
Preferred stock dividends   1,629,133    1,295,566 
Conversion of preferred stock for common stock   14,869    44 
Conversion of debt, interest, preferred stock dividend for preferred stock   10,017,212    - 
Conversion of debt and interest into common stock   509,033    350,500 
Conversion of common stock for preferred stock   6,240    - 
Extension of warrants for Series AA preferred stock   3,626,950    - 

 

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

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report6
 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND SEPTEMBER 30, 2022

(UNAUDITED)

 

   Shares   Amount   Shares   Amount   Warrants   Capital   Deficit   Deficit 
   Combined Preferred Stock   Common Stock   Stock   Additional Paid In   Accumulated   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Warrants   Capital   Deficit   Deficit 
BALANCE, December 31, 2022   109,874   $1,098    13,682,910   $136,829   $31,995,762   $69,006,145   $(133,826,205)  $(32,686,371)
Stock option exercise   -    -    117,552    1,176    -    79,935    -    81,111 
Stock-based compensation   -    -    -    -    -    1,430,244    -    1,430,244 
Series AA Preferred Stock dividend   -    -    -    -    -    -    (431,807)   (431,807)
Issuance of common stock for services   -    -    990,500    9,905    -    1,409,430    -    1,419,335 
Issuance of common stock warrants for services   -    -    -    -    61,609    -    -    61,609 
Conversion of debt and interest for common stock   -    -    203,613    2,036    -    506,997    -    509,033 
Issuance of common stock for dividends paid-in-kind   -    -    73,694    737    -    101,698    -    102,435 
Issuance of common stock for interest paid-in-kind   -    -    1,111,081    11,111    -    1,694,123    -    1,705,234 
Common stock issued for debt extension   -    -    568,200    5,682    -    1,024,257    -    1,029,939 
Stock issued with debt   -    -    783,150    7,832    -    1,079,919    -    1,087,751 
Conversion of preferred stock for common stock   (101,154)   (1,012)   493,540    4,935    -    (3,923)   -    - 
Sale of Common Stock   -    -    40,000    400    -    99,600    -    100,000 
Net loss   -    -    -    -    -    -    (6,857,834)   (6,857,834)
Balance, March 31, 2023   8,720   $86    18,064,240   $180,643   $32,057,371   $76,428,425   $(141,115,846)  $(32,449,321)
Series AA/CC Preferred Stock dividend   -    -    -    -    -    -    (565,272)   (565,272)
Stock-based compensation   -    -    -    -    -    135,554    -    135,554 
Issuance of common stock for services   -    -    147,500    1,475    -    170,925    -    172,400 
Extension of warrants for Series AA Preferred stock   -    -    -    -    3,626,950    -    (3,626,950)   - 
Common stock issued for debt extension   -    -    528,600    5,286    -    486,348    -    491,634 
Conversion of preferred stock for common stock   (44)   -    44,400    444    -    (444)   -    - 
Conversion of debt, accrued interest and accrued dividend for preferred stock   401    4    -    -    -    10,017,208    -    10,017,212 
Conversion of common stock to preferred stock   62    1    (624,000)   (6,240)   -    6,239    -    - 
Issuance of common stock for dividends paid-in-kind   -    -    69,073    690    -    59,403    -    60,093 
Issuance of common stock for interest paid-in-kind   -    -    1,034,000    10,340    -    1,286,106    -    1,296,446 
Stock issued with debt   -    -    302,092    3,021    -    153,653    -    156,674 
Sale of Common Stock   -    -    20,000    200    -    49,800    -    50,000 
Issuance of preferred stock for services   57    1    -    -    -    505,699    -    505,700 
Issuance of Preferred stock for debt extension   185    2    -    -    -    1,396,998    -    1,397,000 
Preferred stock issued with debt   58    1    -    -    -    539,486    -    539,487 
Net loss   -    -    -    -    -    -    (6,922,703)   (6,922,703)
BALANCE, June 30, 2023   9,439   $95    19,585,905   $195,859   $35,684,321   $91,235,400   $(152,230,771)  $(25,115,096)
Stock-based compensation   -    -    -    -    -    140,622    -    140,622 
Series AA/CC Preferred Stock dividend   -    -    -    -    -    -    (632,054)   (632,054)
Issuance of common stock for services   -    -    492,500    4,926    -    320,375    -    325,301 
Common stock issued for debt extension   -    -    250,000    2,500    -    147,500    -    150,000 
Conversion of preferred stock for common stock   (95)   (1)   949,000    9,490    -    (9,489)   -    - 
Issuance of common stock for interest paid-in-kind   -    -    1,949,040    19,490    -    694,034    -    713,524 
Stock issued with debt   -    -    173,500    1,735    -    47,110    -    48,845 
Issuance of preferred stock for services   35    -    -    -    -    111,500    -    111,500 
Issuance of Preferred stock for debt extension   556    6    -    -    -    1,286,594    -    1,286,600 
Net loss   -    -    -    -    -    -    (5,629,945)   (5,629,945)
BALANCE, September 30, 2023   9,935   $100    23,399,945   $234,000   $35,684,321   $93,973,646   $(158,492,770)  $(28,600,703)

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report7
 

 

   Combined Preferred Stock   Common Stock   Stock    Additional Paid In    Accumulated    Total Stockholders’ 
   Shares   Amount   Shares   Amount   Warrants   Capital   Deficit   Deficit 
BALANCE, December 31, 2021   109,878   $1,099    9,120,526   $91,206   $31,715,154   $64,261,048   $(118,277,468)  $(22,208,961)
Early adoption of ASU 2020-06   -    -    -    -    -    (2,728,243)   2,255,216    (473,027)
Stock-based compensation   -    -    -    -    -    64,483    -    64,483 
Series AA Preferred Stock dividend   -    -    -    -    -    -    (432,149)   (432,149)
Issuance of common stock for services   -    -    37,000    370    -    77,330    -    77,700 
Issuance of common stock warrants for services   -    -    -    -    39,761    -    -    39,761 
Warrants issued for debt extension   -    -    -    -    132,537    -    -    132,537 
Common stock issued for debt extension   -    -    214,500    2,145    -    470,755    -    472,900 
Conversion of debt and interest for common stock   -    -    140,200    1,402    -    349,098    -    350,500 
Issuance of common stock for dividends paid-in-kind   -    -    31,810    318    -    63,938    -    64,256 
Issuance of common stock for interest paid-in-kind   -    -    558,100    5,581    -    1,167,877    -    1,173,458 
Stock issued with debt   -    -    92,000    920    -    141,560    -    142,480 
Warrants issued with debt   -    -    -    -    87,436    -    -    87,436 
Net loss   -    -    -    -    -    -    (4,239,685)   (4,239,685)
BALANCE, March 31, 2022   109,878   $1,099    10,194,136   $101,942   $31,974,888   $63,867,846   $(120,694,086)  $(24,748,311)
Stock-based compensation   -    -    -    -    -    32,074    -    32,074 
Stock option exercise   -    -    25,279    253    -    17,190    -    17,443 
Series AA Preferred Stock dividend   -    -    -    -    -    -    (431,708)   (431,708)
Issuance of common stock for services   -    -    40,000    400    -    67,400    -    67,800 
Common stock issued for debt extension   -    -    106,400    1,064    -    190,239    -    191,303 
Conversion of preferred stock for common stock   (4)   (1)   4,400    44    -    (43)   -    - 
Issuance of common stock for dividends paid-in-kind   -    -    86,464    865    -    150,156    -    151,021 
Issuance of common stock for interest paid-in-kind   -    -    224,500    2,245    -    386,270    -    388,515 
Stock issued with debt   -    -    22,000    220    -    35,628    -    35,848 
Net loss   -    -    -    -    -    -    (2,916,338)   (2,916,338)
BALANCE, June 30, 2022   109,874   $1,098    10,703,179   $107,033   $31,974,888   $64,746,760   $(124,042,132)  $(27,212,353)
Stock-based compensation   -    -    -    -    -    32,427    -    32,427 
Issuance of common stock for interest paid-in-kind   -    -    389,500    3,895    -    630,410    -    634,305 
Issuance of common stock for dividends paid-in-kind   -    -    52,032    520    -    90,536    -    91,056 
Issuance of common stock for services   -    -    113,500    1,135    -    166,240         167,375 
Series AA Preferred Stock dividend   -    -    -    -    -    -    (431,709)   (431,709)
Common stock issued for debt extension   -    -    707,900    7,079    -    1,043,396    -    1,050,475 
Warrants issued for services   -    -    -    -    14,734    -    -    14,734 
Stock issued with debt   -    -    254,500    2,545    -    331,720    -    334,265 
Stock warrants issued   -    -    -    -    6,140    -    -    6,140 
Net loss   -    -    -    -    -    -    (4,462,237)   (4,462,237)
BALANCE, September 30, 2022   109,874   $1,098    12,220,611   $122,207   $31,995,762   $67,041,489   $(128,936,078)  $(29,775,522)

 

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

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report8
 

 

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(UNAUDITED)

 

1) Business Overview, Liquidity and Management Plans

 

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

 

The Company was founded on the belief that its PCT platform had the potential to significantly increase the quality of sample preparation in both research and clinical settings. This premise has been well proven and PBI has been successful in installing its PCT platform in the laboratories of key opinion leaders worldwide. Although developed subsequently, the Company now assesses that the commercial potential for its UST platform across diverse multi-billion-dollar markets far exceeds the potential of the PCT platform. Consequently, in January 2022, PBI made the critical strategy decision to immediately shift its primary business focus from PCT to its innovative UST Platform.

 

The UST Platform (8 issued patents) is based on the use of intense shear forces from ultra-high-pressure discharge (greater than 20,000 psi) through a dynamically controlled nano-gap valve under precisely controlled temperatures. UST has been shown to turn hydrophobic (water-repelling) oil-based supplements (e.g., CBD, curcumin, astaxanthin), therapeutics (e.g., prednisone), and other active ingredients (e.g., retinol) into long-term stable, effectively water-soluble, highly bioavailable, oil-in-water nanoemulsion formulations. The Company first introduced the UST Platform in May 2022 through participation in several cannabis/health & wellness meetings combined with a free-sample program. Executed agreements were subsequently announced with six CBD companies and one cosmeceutical/skincare company for full commercialization in Q3 202 3. The Company began shipping Nano CBD topical spray on October 2, 2023.

 

The BaroFold Platform (14 issued patents) can be used to significantly improve the quality and production costs of protein biotherapeutics. It employs high pressure manipulations for the disaggregation, unfolding and controlled refolding of proteins to their desired native structures at yields and efficiencies not achievable using existing technologies. The BaroFold Platform has been shown to remove protein aggregates in biotherapeutic drug manufacturing, thereby improving product efficacy, safety, and cost for both new-drug entities and biosimilar (follow-on biologic) products. It is scalable and practical for standard manufacturing processes.

 

The PCT Platform (17 issued patents) uses alternating cycles of hydrostatic pressure between ambient and ultra-high pressures to control bio-molecular interactions safely and reproducibly in sample preparation (e.g., the critical steps performed by tens of thousands of scientists worldwide prior to analytical measurements, such as cell lysis and biomolecule extraction from tissue samples). Our focus for PCT is on making, GMP-compliant, next generation PCT-based Barocycler EXTREME system available globally to biopharmaceutical drug manufacturers for use in the design, development, characterization, and quality control of biotherapeutic drugs. We currently have over 350 PCT Systems placed in approximately 250 academic, government, pharmaceutical, and biotech research laboratories worldwide. There are currently over 200 independent publications highlighting the advantages of using the PCT Platform in scientific research & clinical laboratories.

 

2) Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. However, we have experienced losses from operations and negative cash flows from operationing business since our inception. As of September 30, 2023, we do not have adequate working capital resources to satisfy our current liabilities and as a result, there is substantial doubt regarding our ability to continue as a going concern. We have been successful in raising debt and equity capital in the past as described in Notes 5 and 6. In addition, we raised debt and equity capital after September 30, 2023, as described in Note 7. We have financing efforts in place to continue to raise cash through debt and equity offerings. Although we have successfully completed financings and reduced expenses in the past, we cannot assure you that our plans to address these matters in the future will be successful. These financial statements do not include any adjustments that might result from this uncertainty.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report9
 

 

3) Summary of Significant Accounting Policies

 

Basis of Presentation

 

The unaudited interim financial statements of Pressure BioSciences, Inc. and its consolidated subsidiaries (collectively, the “Company”) included herein have been prepared by the Company in accordance with the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission. Under these rules and regulations, some information and footnote disclosures normally included in financial statements prepared under accounting principles generally accepted in the United States of America have been shortened or omitted. Management believes that all adjustments necessary for a fair statement of the financial position and the results of operations for the periods shown have been made. All adjustments are normal and recurring. These financial statements should be read together with the Company’s audited financial statements included in its Form 10-K for the fiscal year ended December 31, 2022. Operating results for the nine months ended September 30, 2023 are not necessarily indicative of the final results that may be expected for the year ending December 31, 2023.

 

Use of Estimates

 

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

 

Recent Accounting Pronouncements

 

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

 

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

 

Principles of Consolidation

 

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

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report10
 

 

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 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 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.

 

Most 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 takes on the significant risks and rewards of ownership of the product. Payment terms require customers to pay shortly after delivery and do not contain significant financing components.

 

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

 

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

 

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

 

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

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report11
 

 

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

 

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

 

Disaggregation of revenue

 

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

 

In thousands of US dollars ($)  Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
Primary geographical markets  2023   2022   2023   2022 
North America  $251   $138   $1,067   $709 
Europe   76    13    130    61 
Asia   86    (7)   468    352 
   $413   $144   $1,665   $1,122 

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
Major products/services lines  2023   2022   2023   2022 
Hardware  $273   $1   $994   $532 
Consumables   50    49    173    165 
Contract research services   -1    -    35    125 
Sample preparation accessories   31    41    113    93 
Technical support/extended service contracts   34    41    123    94 
                     
Agrochem Products   15    10    181    93 
Shipping and handling   11    2    38    20 
Other   -    -    8    - 
   $413   $144   $1,665   $1,122 

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
Timing of revenue recognition  2023   2022   2023   2022 
Products transferred at a point in time  $379   $103   $1,506   $903 
Services transferred over time   34    41    159    219 
   $413   $144   $1,665   $1,122 

 

Contract balances

 

In thousands of US dollars ($) 

September 30,

2023

  

December 31,

2022

 
Receivables, which are included in ‘Accounts Receivable’  $329   $295 
Contract liabilities (deferred revenue)   59    60 

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report12
 

 

Transaction price allocated to the remaining performance obligations

 

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

 

In thousands of US dollars ($)  2023   2024   Total 
Extended warranty service  $48   $11   $59 

 

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.

 

Concentrations

 

Credit Risk

 

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

 

The following table illustrates the level of concentration as a percentage of total revenues during the three and nine months ended September 30, 2023 and 2022.

 

   Three Months Ended
September 30,
   Nine months Ended
September 30,
 
   2023   2022   2023   2022 
Top five customers   80%   42%   49%   31%
Federal agencies   18%   4%   5%   1%

 

The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of September 30, 2023 and December 31, 2022. The Top Five Customers category may include federal agency receivable balances if applicable.

 

   September 30,
2023
   December 31,
2022
 
Top five customers   80%   93%
Federal agencies   22%   0%

 

Product Supply

 

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

 

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

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report13
 

 

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 (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.

 

Investment in Equity Securities

 

As of September 30, 2023, we held 100,250 shares of common stock of Nexity Global SA, (a Polish publicly traded company).

 

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

 

As of September 30, 2023, our consolidated balance sheet reflected the fair value, determined on a recurring basis based on Level 1 inputs of our investment in Nexity, to be $77,918. We recorded $14,280 as an unrealized gain during the nine months ended September 30, 2023 for changes in market value.

 

Computation of Loss per Share

 

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

 

The following table illustrates our computation of loss per share for the three and nine months ended September 30, 2023 and 2022:

 

   2023   2022   2023   2022 
   For the Three Months Ended September 30,   For the Nine months Ended September 30, 
   2023   2022   2023   2022 
Numerator:                    
Net loss attributable to common shareholders  $(6,261,999)  $(4,893,946)  $(24,666,565)  $(12,913,826)
Denominator for basic and diluted loss per share:                    
Weighted average common stock shares outstanding   21,716,950    11,131,742    20,337,229    10,429,817 
Loss per common share - basic and diluted  $(0.29)  $(0.44)  $(1.21)  $(1.24)

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report14
 

 

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, Series AA Convertible Preferred Stock, Series BB Convertible Stock and Series CC Convertible Preferred Stock are presented below as if they were converted into common shares according to the conversion terms.

 

   As of September 30, 
   2023   2022 
Stock options   3,420,754    1,307,822 
Convertible debt   7,417,906    6,471,034 
Common stock warrants   15,732,940    16,293,768 
Convertible preferred stock:          
Series D Convertible Preferred Stock   6,250    25,000 
Series G Convertible Preferred Stock   -    26,857 
Series H Convertible Preferred Stock   -    33,334 
Series H2 Convertible Preferred Stock   -    70,000 
Series J Convertible Preferred Stock   -    115,267 
Series K Convertible Preferred Stock   -    229,334 
Series AA Convertible Preferred Stock   8,601,000    8,645,000 
Series BB Convertible Preferred Stock   8,580,000    - 
Series CC Convertible Preferred Stock   4,010,000    - 
    47,768,850    33,217,416 

 

Accounting for Stock-Based Compensation Expense

 

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

 

Determining Fair Value of Stock Option Grants

 

The following table summarizes the assumptions we utilized for grants of stock options to the three sub-groups of our stock option recipients during the nine months ended September 30, 2023:

 

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

 

Valuation and Amortization Method - The fair value of each option award is estimated on the date of the 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 the 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.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report15
 

 

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 0% to 5% for awards granted based on historical experience and future expectations of options vesting. The Company used this historical rate as our assumption in calculating future stock-based compensation expense.

 

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

 

The Company recognized stock-based compensation expense of $140,622 and $32,427 for the three months ended September 30, 2023 and 2022, respectively. The company recognized stock-based compensation expense of $1,706,420 and $128,984 for the nine months ended September 30, 2023 and 2022, respectfully. The following table summarizes the effect of this stock-based compensation expense within each of the line items of our costs and expenses within our Consolidated Statements of Operations:

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
Cost of sales  $11,183   $2,184   $75,724   $8,694 
Research and development   35,676    9,499    241,585    37,803 
Selling and marketing   17,150    4,583    102,675    18,166 
General and administrative   76,613    16,161    1,286,436    64,321 
Total stock-based compensation expense  $140,622   $32,427   $1,706,420   $128,984 

 

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.

 

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 September 30, 2023:

 

      

Fair value measurements at

September 30, 2023 using:

 
   September 30, 2023  

Quoted

prices in

active

markets

(Level 1)

  

Significant

other

observable

inputs

(Level 2)

  

Significant

unobservable

inputs

(Level 3)

 
Equity Securities  $77,918   $77,918           -            - 
Total Financial Assets  $77,918   $77,918   $-   $- 

 

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

 

      

Fair value measurements at

December 31, 2022 using:

 
  

December 31,

2022

  

Quoted

prices in

active

markets

(Level 1)

  

Significant

other

observable

inputs

(Level 2)

  

Significant

unobservable

inputs

(Level 3)

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

 

4) Commitments and Contingencies

 

Operating Leases

 

The Company accounts for its leases under ASC 842. The Company has elected to apply the short-term lease exception to leases of one year or less. Our corporate office is currently located at 14 Norfolk Avenue, South Easton, Massachusetts 02375. We are currently paying $7,650 per month, on a lease extension, signed on December 5, 2022, that expires December 31, 2023, for our corporate office. We expanded our space to include offices, warehouse and a loading dock on the first floor starting May 1, 2017 with a monthly rent increase already reflected in the current payments.

 

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

 

Year  Total 
October 1 – December 31, 2023  $15,887 
2024   64,393 
2025   66,969 
2026   51,778 
Total future undiscounted lease payments   199,027 
Less imputed interest   (61,481)
Present value of lease liabilities  $137,546 

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report16
 

 

The operating cash flows from the operating leases were $122,671 for the nine months ended September 30, 2023 and $82,001 for the nine months ended September 30, 2022. The weighted-average remaining lease term (years) of the above leases is 2.59 year as of September 30, 2023.

 

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

 

Operating Leases  September 30, 2023   December 31, 2022 
Right of use asset  $159,424   $282,095 
Right of use liability, current  $66,259   $142,171 
Right of use liability, long term  $71,287   $139,924 
Total lease liability  $137,546   $282,095 

 

The weighted-average discount rate is 12%.

 

The Company had no financing leases during the nine months ended September 30, 2023 and 2022.

 

The components of lease cost for operating leases for the nine months ended September 30, 2023 and 2022 are as follows:

 

   September 30, 2023   September 30, 2022 
Operating lease cost  $153,290   $152,193 
Short-term lease cost   110,205    123,514 
Total lease cost  $263,495   $275,707 

 

Battelle Memorial Institute

 

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

 

Target Discovery Inc.

 

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

 

In April 2012, we signed a non-exclusive license agreement with TDI to grant the non-exclusive use of our pressure cycling technology. We executed an amendment to this agreement on October 1, 2016 wherein we agreed to pay a monthly fee of $1,400 for the use of a lab bench, shared space, and other utilities, and $2,000 per day for technical support services as needed. The agreement requires TDI to pay the Company a minimum royalty fee of $60,000 in 2022 and $60,000 in 2023. For the nine months ended September 30, 2023 and September 30, 2022, the Company reported $55,400 and $65,100, respectively in TDI fees.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report17
 

 

Severance and Change of Control Agreements

 

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

 

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

 

5) Debt

 

Convertible Debt

 

On various dates during the nine months ended September 30, 2023, the Company issued convertible notes for net proceeds of approximate total of $4.3 million which contained varied terms and conditions as follows: a) 1-12 month maturity date; b) interest rates of 0-120%; c) convertible to the Company’s common stock at issuance at a fixed rate of $2.50 or at variable conversion rates upon the Company’s up-listing to NASDAQ or NYSE or an event of default. These notes were issued with shares of common stock that were fair valued at issuance date. The aggregate relative fair value of the shares of common stock and preferred stock issued with the notes of $1,832,757  was recorded as a debt discount to be amortized over the term of the notes. We also evaluated the convertible notes for derivative liability treatment and determined that the notes did not qualify for derivative accounting treatment on September 30, 2023.

 

For the nine months ended September 30, 2023, deferred financing costs and OID issued with the debt are $648,470  and the Company repaid $2,462,269.

 

The summary of specific terms of the convertible notes and outstanding balances as of September 30, 2023, and December 31, 2022, are listed in the tables below. The convertible notes are from numerous parties and with original issue dates from July 2019 to September 2023 and maturity dates from July 2020 to September 2024. There are approximately $12.3 million of notes that are past due as of September 30, 2023.

 

   September 30, 2023   December 31, 2022 
Holders  Interest
Rate
   Conversion
Price
   Principal   Interest
Rate
   Conversion
Price
   Principal 
Main Investor   10%  $2.50 (1)   $8,586,750    10%  $2.50 (1)  $9,393,150 
Others   0 to 24%  $2.50 (2) or $7.50    10,379,763    0 to 24%  $2.50 (2) or $7.50
   8,886,036 
Totals             -               18,279,186 
Discount             744,393              455,517 
Net            $18,222,120             $17,823,669 

 

Notes:

 

(1)Conversion price of these note is $2.50 except for a note for $189,750, which will be adjusted to, upon an Event of Default, the lower of (i) the conversion price or (ii) a 25% discount to the 5-day average VWAP of the stock prior to default and $729,100 lower of (i) $2.50 or (ii) the conversion price of the Series AA Preferred Stock as adjusted. These notes are secured by all assets of the company.
   
(2)Conversion price of these notes is $2.50 but also varies with one or more of these notes having the following conversion adjustment:

 

a.Notes are convertible before maturity at $2.50 per share or mandatorily convertible when the Company up-lists to the NASDAQ at the lower of $2.50 or the up-list price.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report18
 

 

b.Notes are convertible upon an Event of Default at 75% multiplied by the lowest trading price for the common stock during the five days prior to the conversion.
c.Notes are convertible at $2.50 per share except that following an Event of Default the conversion price will be adjusted to 75% multiplied by the lowest trading price for the common stock during the five days prior to the conversion.
d.Notes can be voluntary converted at lower of 1) $2.50/share; or 2) purchase price of stock sold by PBI at a price lower than $2.50/share. In the event of default, these notes can be converted at lower of 1) $2.50/share; 2) 30% discount to 5-day VWAP prior to date of default.
e.Notes can be voluntary converted at lower of 1) $2.50/share; or 2) purchase price of stock sold by PBI at a price lower than $2.50/share. In the event of default, these notes can be converted at lower of 1) $2.50/share; 2) 25% discount to 5-day VWAP prior to date of default.
f.Conversion price is lower of (i) $2.50 or (ii) the price per share that the Company last sold Common Stock after the execution of an anti-dilution protection agreement.
g.Note can be converted at a Voluntary Conversion Price which is the lower of 1) $2.50/share; or 2) purchase price of stock sold by the Company at a price lower than $2.50 except that following an Event of Default, the Holder shall have the right, with no further consent from the Borrower, to convert notes which can be the lower of 1) the Voluntary Conversion Price, or 2) 70% of the 5-day VWAP prior to conversion.
h.Conversion price is $2.50. If note is in default, it is $1.
i.Notes can be voluntarily converted before maturity at $2.50 per share. Lender retains the option upon an Up-list to convert at the lower of $2.50 or 10% off Up-list price.
j.Notes can be converted at the lesser of $2.5 per share or 25% discount to the opening price of the Company’s first day of trading on either Nasdaq or NYSE. In addition, if the Company fails to pay the Note in cash on maturity date, the conversion price will be adjusted to the lesser of (i) original conversion price or (ii) a 35% discount to the VWAP prior to each conversion date.
k.Some notes are not convertible until 180 days from the date of issuance of the Note and following an Event of Default will be convertible at the lowest trading price of the 20 days prior to conversion. The loan with a principal balance of $950,000 as of September 30, 2023 is guaranteed by the Company’s Chief Executive Officer, but the lender may only enforce this guarantee after certain conditions have been met, specifically after (i) the occurrence of an Event of Default (as defined in the Note), (ii) the failure of the Company to cure the Default in 10 business days, and (iii) a failure by the Company to issue, or cause to be issued, shares of its common stock upon submission by the lender of a notice of conversion.
l.Some notes can be converted at the lesser of $2.50 per share or 25% discount to the opening price of the Company’s first day of trading on either Nasdaq or NYSE. In addition, if the Company fails to pay the Note in cash on maturity date, the conversion price will be adjusted to the lesser of original conversion price or the product of the VWAP of the common stock for the 5 trading dates immediately prior to the maturity date multiplied by 0.75.

 

For the nine months ended September 30, 2023, the Company recognized amortization expense related to the debt discounts indicated above of $2,621,523. The unamortized debt discounts as of September 30, 2023 related to the convertible notes amounted to $744,393.

 

As of September 30, 2023, the principal balance that is secured by the assets of the Company’s subsidiary, PBI Agrochem, Inc. is $352,188.

 

Standstill and Forbearance Agreements

 

In recent years, the Company entered into Standstill and Forbearance Agreements with lenders who hold variable-rate convertible notes. Pursuant to these agreements the lenders agreed to not convert any portion of their notes into shares of common stock at a variable rate. During the nine months ended September 30, 2023, the Company settled one note with total principal of $302,484, leaving one final lender (three notes) with total principal of $272,500 outstanding and incurred interest, penalties and fees of approximately $253,425  in connection with the Standstill and Forbearance Agreements.

 

Convertible Loan Modifications and Extinguishments

 

We refinanced certain convertible loans during the nine months ended September 30, 2023 at substantially the same terms for extensions ranging over a period of two to nine 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.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report19
 

 

The cash flows of new debt exceeded 10% of the remaining cash flows of the original debt on several loans. During the nine months ended September 30, 2023 we recorded gains on extinguishment of liabilities of approximately $0.7 million  by calculating the difference of the fair value of the new debt and the carrying value of the old debt. During the nine months ended September 30, 2023, the Company extended 17 loans totaling $3,917,898 and increased the principal to $4,067,898.  The Company issued 1,346,800 shares of common stock and 741 shares of preferred stock  for these extensions and increased principal.

 

Other Debt

 

No notes in Other Debt are past due as of September 30, 2023.

 

   September 30, 2023   December 31, 2022 
Holders  Interest Rate   Principal   Interest Rate   Principal 
Non-Convertible   (1)  $1,016,500    (1)  $878,809 
Merchant debt (3)        1,014,010         760,160 
SBA (2)   3.75%   162,522    3.75%   150,000 
Totals        2,193,032        $1,788,969 
Discount        -         - 
Long Term        162,522         150,000 
Short Term       $2,030,510        $1,638,969 

 

Notes:

 

(1)Interest varies from 1% to 10%. The maturity is between being past due and May 2, 2023. As of September 30, 2023, $861,500 of the non-convertible debt is past due.
(2)The Company entered a COVID-19 government loan in 2020, the Economic Injury Disaster Loan (or “EIDL”). The Company’s EIDL loan, $150,000, accrues interest at 3.75% and requires monthly payments of $731 for principal and interest beginning in December 2022. The balance of the principal will be due in 30 years. In connection with the EIDL loan the Company entered into a security agreement with the SBA, whereby the Company granted the SBA a security interest in all of the Company’s right, title and interest in all of the Company’s assets. During the nine months ended September 30, 2023, $14,719 interest was deferred and added to principal on EIDL loan and the Company repaid $2,197 principal on this loan. During the year ended December 31, 2020, the Company borrowed $367,039 (two-year term and 1% interest rate per annum) under the Payroll Protection program (or “2020 PPP”). During the year ended December 31, 2021, the Company borrowed $367,039 through a second Payroll Protection program (or “2021 PPP”) and extended the monthly payment date on the EIDL to December 2022. In year 2021, both 2020 PPP and 2021 PPP was forgiven by the United States and SBA.
(3)During the nine months ended September 30, 2023 and the year ended December 31, 2022 we signed various Merchant Agreements which are secured by second position rights to all customer receipts until the loan has been repaid in full and subject to interest rates of 4.1% - 100.9% per month. Under the terms of these agreements, we received the disclosed Purchase Price and agreed to repay the disclosed Purchase Amount, which is collected by the Merchant lenders at the Daily Payment Rate. We accounted for the Merchant Agreements as loans under ASC 860 because while we provided rights to current and future receipts, we still had control over the receipts. The difference between the Purchase Amount and the Purchase Price is imputed interest that is recorded as interest expense when paid each day. The Company’s Chief Executive Officer guarantees the Company’s performance of all representations, warranties, and covenants made by the Company in the Agreement. For loans outstanding on September 30, 2023, the maturity dates ranged from June 26, 2023 to October 15, 2023. For loan outstanding on December 31, 2022, the maturity dates ranged from April 4 to June 6, 2023.

 

Related Party Notes

 

   September 30, 2023   December 31, 2022 
Holders  Interest Rate   Principal   Interest Rate   Principal   Security 
Officers & Directors   -(1)  $522,450    -(1)  $521,950    Unsecured 
Other Related Parties   12%   126,050    12%   120,850    Unsecured 
Totals        648,500         642,800      
Discount        514         7,915      
Net       $647,986        $634,885      

 

Notes:

 

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

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report20
 

 

During the nine months ended September 30, 2023, we received short-term convertible loans of $164,700 with $5,514 OID from related parties and repaid $159,000 of related party loans. These notes bear interest of 12% to 120% and are due upon demand. All related party notes are convertible at $2.50/share.

 

We amortized $592,099  of debt discounts during the nine months ended September 30, 2023 for all non-convertible and related party notes. The total unamortized discount for all non-convertible and related party convertible notes as of September 30, 2023, and December 31, 2022 was $514 and $7,915, respectively.

 

6) Stockholders’ Deficit

 

Preferred Stock

 

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

 

   September 30, 2023   December 31, 2022 
Series D Convertible Preferred Stock, $.01 par value; 850 shares authorized; 75 shares issued and outstanding on September 30, 2023, and 300 shares issued and outstanding on December 31, 2022 (Liquidation value of $300,000)  $-   $3 
Series G Convertible Preferred Stock, $.01 par value; 240,000 shares authorized; no shares issued and outstanding on September 30, 2023 and 80,570 shares issued and outstanding on December 31, 2022   -    806 
Series H Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; no shares issued and outstanding on September 30, 2023 and 10,000 shares issued and outstanding on December 31, 2022   -    100 
Series J Convertible Preferred Stock, $.01 par value; 6,250 shares authorized; no shares issued and outstanding on September 30, 2023 and 3,458 shares issued and outstanding on December 31, 2022   -    35 
Series K Convertible Preferred Stock, $.01 par value; 15,000 shares authorized; no shares issued and outstanding on September 30, 2023 and 6,880 shares issued and outstanding on December 31, 2022   -    68 
Series AA Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 8,601 shares issued and outstanding on September 30, 2023 and December 31, 2022, respectively   86    86 
Series BB Convertible Preferred Stock, $.01 par value; 1,000 shares authorized; 858 shares issued and outstanding on September 30, 2023 and no shares outstanding at December 31, 2022   10    - 
Series CC Convertible Preferred Stock, $.01 par value; 2,000 shares authorized; 401 shares issued and outstanding on September 30, 2023 and no shares outstanding at December 31, 2022   4    - 
Series H2 Convertible Preferred Stock, $.01 par value; 21 shares authorized; no shares issued and outstanding on September 30, 2023 and 21 shares issued and outstanding on December 31, 2022   -    - 
Series A Junior Participating Preferred Stock, $.01 par value, 20,000 shares authorized, no shares outstanding   -    - 
Series A Convertible Preferred Stock, $.01 par value, 313,960 shares authorized, no shares outstanding   -    - 
Series B Convertible Preferred Stock, $.01 par value, 279,256 shares authorized, no shares outstanding   -    - 
Series C Convertible Preferred Stock, $.01 par value, 88,098 shares authorized, no shares outstanding   -    - 
Series E Convertible Preferred Stock, $.01 par value, 500 shares authorized, no shares outstanding   -    - 
Total Convertible Preferred Shares  $100   $1,098 

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report21
 

 

On May 1, 2023, Pressure Biosciences, Inc. (the “Company”) filed Articles of Amendment to Restated Articles of Organization (the “Amendment”) with the Secretary of the Commonwealth of Massachusetts to designate 1,000 shares of its Preferred Stock as Series BB Convertible Preferred Stock, par value $0.01 per share (the “Series BB Preferred Stock”) and 2,000 shares of Preferred Stock as Series CC Convertible Preferred Stock, par value $0.01 per share (the “Series CC Preferred Stock”). Each of the Certificate of Designation of Series BB Convertible Preferred Stock (the “Series BB COD”) and Certificate of Designation of Series CC Convertible Preferred Stock (the “Series CC COD”) filed with the Amendment set forth the terms and provisions of the Series BB Preferred Stock and Series CC Preferred Stock, respectively.

 

Series BB Preferred Stock

 

Rank. The Series BB Preferred Stock ranks prior to the Company’s common stock, par value $0.01 per share (the “Common Stock”), and subordinate to the Series AA and Series CC Preferred Stock, and to all other classes of classes and series of equity securities of the Company, which by its terms does not rank on a parity with or senior to the Series BB Preferred, and all indebtedness of the Company.

 

Dividends. The holders of shares of the Series BB Preferred Stock are not entitled to receive dividends.

 

Voting Rights. The Series BB Preferred Stock has all of the same voting rights as the Common Stock. Each share of Series BB Preferred Stock. The holders of Series BB Preferred Stock shall have the right to vote along with the holders of Common Stock in an amount equal to 10,000 votes for each share of Series BB Preferred Stock held.

 

Voluntary Conversion. The holders of Series BB Preferred Stock have the right to convert its Series BB Preferred Stock into Common Stock at a ratio of 10,000 shares of Common Stock for each share of Series BB Preferred Stock held, subject to adjustment as set forth in Section 4(e) of the Series BB COD.

 

Company Forced Conversion. The Company has the right to cause the conversion of all shares of Series BB Preferred Stock into Common Stock (“Forced Conversion”). Following the effectiveness of a registration statement permitting the resale of the Conversion Shares held by holders of the Series BB Preferred Stock, the Company may effectuate a Forced Conversion if either of the following conditions are satisfied: (i) the VWAP of the Common Stock shall equal or exceed 300% of $2.50 (with such dollar figure to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction that affects the share price of the Common Stock) for either 10 consecutive trading days, or 15 of 25 consecutive trading days immediately preceding the date of the Forced Conversion Notice; or (ii) listing of the Common Stock on any national securities exchange (NYSE, NYSE American or Nasdaq). The Company shall not have an obligation to register the Conversion Shares of the shares of Series BB Preferred Stock that are issued pursuant to any exchange of previously issued securities.

 

Series CC Preferred Stock

 

Rank. The Series CC Preferred Stock ranks prior to the Common Stock, pari passu to the Series AA Preferred Stock, and prior to all other classes and series of equity securities of the Company which by its terms does not rank on a parity with or senior to the Series CC Preferred Stock (the “Junior Stock”). The Series CC Preferred Stock is subordinate to and ranks junior to all indebtedness of the Company.

 

Quarterly Dividends. The holders of shares of the Series CC Preferred Stock are entitled to receive, out of funds legally available therefor, dividends at an annual rate equal to 8% of the Liquidation Preference Amount (as defined below), calculated on the basis of a 360-day year, consisting of twelve 30-day months, and shall accrue on a daily basis from April 24, 2023. Accrued and unpaid dividends shall compound on a quarterly basis, and shall be, except as set forth in Section 2(b) of the Series CC COD, payable in cash. The first such dividend payment shall be due and payable on April 30, 2023, with subsequent dividend payments due and payable on June 30, September 30, and December 31, 2023. Each year thereafter, dividend payments shall be due and payable on March 31, June 30, September 30, and December 31.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report22
 

 

Junior Stock Dividends. The Company shall not declare or pay any cash dividends on or make any other distributions with respect to or redeem, purchase, or otherwise acquire for consideration, any shares of Junior Stock unless and until all accrued and unpaid dividends on the Series CC Preferred Stock have been paid in full, subject to restrictions as set forth in Section 3(a) of the Series CC COD.

 

Class Voting Rights. So long as more than ten percent (10%) of the Series CC Preferred Stock remain outstanding, the Company shall not, and shall not permit any subsidiary to, without the affirmative vote or consent of the holders of at least 75% of the shares of the Series CC Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting, in which the holders of the Series CC Preferred Stock vote separately as a class: (i) authorize, create, issue or increase the authorized or issued amount of any class or series of stock, including but not limited to the issuance of any more shares of previously authorized Preferred Stock, ranking prior to the Series CC Preferred Stock, with respect to the distribution of assets on liquidation, dissolution or winding up; (ii) amend, alter or repeal the provisions of the Series CC Preferred Stock, whether by merger, consolidation or otherwise, so as to adversely affect any right, preference, privilege or voting power of the Series CC Preferred Stock; (iii) repurchase, redeem or pay dividends on (whether in cash, in kind, or otherwise), shares of Junior Stock; (iv) amend the Articles of Incorporation or By-Laws of the Company so as to affect materially and adversely any right, preference, privilege or voting power of the Series CC Preferred Stock; (v) effect any distribution with respect to Junior Stock or parity stock; (vi) reclassify the Company’s outstanding securities; or (vii) effect a transaction with one or more persons or entities whereby such other persons or entities will own more than the 50% of the outstanding shares of Common Stock following such transaction.

 

General Voting Rights. Except with respect to transactions upon which the Series CC Preferred Stock shall be entitled to vote separately as a class as set forth in “Class Voting Rights” above and except as otherwise required by Massachusetts law, the Series CC Preferred Stock shall have no voting rights. The Common Stock into which the Series CC Preferred Stock is convertible shall, upon issuance, have all of the same voting rights as the Common Stock.

 

Liquidation Preference. In the event of the liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of shares of the Series CC Preferred Stock then outstanding shall be entitled to receive, out of the assets of the Company whether such assets are capital or surplus of any nature, an amount equal to $25,000.00 per share (the “Liquidation Preference Amount”) of the Series CC Preferred Stock, on a pro rata and pari passu basis with any parity stock (the “Pari Passu Preferred Stock”), together with all accrued but unpaid dividends, before any payment shall be made or any assets distributed to the holders of the Common Stock or any other Junior Stock. If the assets of the Company are not sufficient to pay in full the Liquidation Preference Amount payable to the holders of outstanding shares of the Series CC Preferred Stock and any series of preferred stock or any other class of stock on a parity as to rights on liquidation, dissolution or winding up, with the Series CC Preferred Stock, then all of said assets will be distributed among the holders of the Series CC Preferred Stock, the Pari Passu Preferred Stock and the other classes of stock on a parity with the Series CC Preferred Stock, if any, ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

Voluntary Conversion. The holders of Series CC Preferred Stock have the right to convert its Series CC Preferred Stock into a number of fully paid and nonassessable shares of Common Stock (the “Conversion Shares”) equal to the quotient of (i) the Liquidation Preference Amount of the shares of Series CC Preferred Stock being converted thereon divided by (ii) the Conversion Price then in effect as of the date of the delivery by such holder of its notice of election to convert. The “Conversion Price” shall mean $2.50 per share, subject to adjustment under Section 5(e) of the Series CC COD.

 

Company Forced Conversion. The Company has the right to cause the conversion of all shares of Series CC Preferred Stock into Common Stock (“Forced Conversion”). Following the effectiveness of a registration statement permitting the resale of the Conversion Shares held by holders of the Series CC Preferred Stock the Company may effectuate a Forced Conversion if either of the following conditions are satisfied as of the Forced Conversion Effective Date: (i) the VWAP of the Common Stock shall equal or exceed 300% of the Conversion Price for either 10 consecutive trading days, or 15 of 25 consecutive trading days immediately preceding the date of the Forced Conversion Notice; or (ii) listing of the Common Stock on any national securities exchange (NYSE, NYSE American or Nasdaq). The Company shall not have an obligation to register the Conversion Shares of the shares of Series CC Preferred Stock that are issued pursuant to any exchange of previously issued securities.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report23
 

 

Conversion Restriction. At no time may a holder of shares of Series CC Preferred Stock convert shares of the Series CC Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder at such time, the number of shares of Common Stock which would result in such holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules thereunder) in excess of 4.99% of all of the Common Stock outstanding at such time (the “Conversion Restriction”); provided, however, that a holder may waive the Conversion Restriction by providing the Company with sixty-one (61) days’ notice that such holder is waiving the Conversion Restriction.

 

During the nine months ended September 30, 2023 the Company issued a total of 953 shares of Series BB restricted preferred stock and 401 shares of Series CC restricted preferred stock to accredited investors and consultants, with the following detail:

 

92 shares of Series BB preferred stock with a fair value of $617,200, for services rendered;
741 shares of Series BB preferred stock with a fair value of $2,683,600 for convertible debt extensions;
58 shares of Series BB preferred stock with a fair value of $539,487 and issued with convertible debt;
62 shares of Series BB preferred stock from the conversion of common stock to preferred stock;
95 shares of Series BB preferred stock was converted into common stock;
401 shares of Series CC preferred stock with a fair value of $10,017,212 for the conversion of debt/accrued interest and dividends.

 

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 September 30, 2023, options to acquire 3,420,754 shares were outstanding under these Plans.

 

As of September 30, 2023, total unrecognized compensation cost related to the unvested stock-based awards was $963,322 , which is expected to be recognized over weighted average period of 2.2 years. The aggregate intrinsic value associated with the options outstanding and exercisable as of September 30, 2023, based on the September 30, 2023, closing stock price of $0.20, was $0.00.

 

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

 

   Stock Options   Warrants         
   Weighted Average   Weighted Average   Total 
   Shares   price per share   Shares   price per share   Shares   Exercisable 
Balance outstanding, December 31, 2022   1,307,822   $0.72    16,278,769   $3.50    17,586,591    17,570,591 
Granted   2,230,484    1.50    100,000    3.50    2,330,484      
Exercised   (117,552)   0.69    -    -    (117,552)     
Expired   -    -    (645,829)   3.50    (645,829)     
Forfeited   -    -    -    -    -      
Balance outstanding, September 30, 2023   3,420,754   $1.23    15,732,940   $3.50    19,153,694    18,289,721 

 

As of September 30, 2023, the 3,420,754 options outstanding have a $1.23 weighted average exercise price and 8.14 years of weighted average remaining life for outstanding options and 7.75 years of weighted average remaining life for exercisable options. Of these options, 2,556,781 are currently exercisable.

 

On April 13, 2023, the Board authorized a 3-year extension of common stock warrants held by Series AA preferred shares holders. Therefore, 8,897,603 warrants were extended with new expiration dates between May 2, 2026 to September 14, 2029. Based on a fair value computation, this extension resulted in net incremental expense of $3,626,950, which was booked as an increase in the value of warrants and an increase of the retained deficit.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report24
 

 

As of September 30, 2023, the warrants outstanding have a $3.50 weighted average exercise price and a 2.42 year weighted average remaining life.

 

Common Stock and Warrant Issuances

 

During the nine months ended September 30, 2023, the Company accrued approximately $3,715,204  in interest expense for these obligations to issue common stock. During the nine months ended September 30, 2022, the Company accrued $634,305 in interest expense for these obligations to issue common stock.

 

During the nine months ended September 30, 2023 the Company issued a total of 9,717,035 shares of restricted common stock and to accredited investors and consultants, with the following detail:

 

  4,094,121 shares of common stock with a fair value of $3,715,204 to lenders for interest paid-in-kind;
  1,630,500 shares with a fair value of $1,917,036 for services rendered;
  203,613 shares with a fair value of $509,033 for conversions of debt principal and interest;
  117,552 shares for stock option exercises (at an exercise price of $0.69 per share);
  142,767 shares with a fair value of $162,528 for dividends paid-in-kind;
  1,258,742 shares with a fair value of $1,293,270 for common stock issued with convertible debt;
  1,346,800 shares with a fair value of $1,671,573 for convertible debt extensions;
  60,000 shares with a fair value of $150,000 for sale of common, and
  1,486,940 shares for the conversion of preferred stock to common stock.

 

During the nine months ended September 30, 2023, the Company issued 100,000 warrants (four-year term at a $3.50 exercise price) to acquire common stock at a fair value of $61,609 to a consultant for professional services.

 

During the nine months ended September 30, 2022, we issued 3,100,085 shares of restricted common stock to accredited investors and consultants, 140,200 shares with a fair value of $350,500 for conversions of debt principal and interest for common stock, 1,172,100 of the shares with a fair value of $2,196,278 were issued for interest paid-in-kind, 190,500 of the shares with a fair value of $312,875 were issued for services rendered,170,306 shares with a fair value of $306,333 for dividends paid-in-kind, 368,500 shares with a fair value $512,593 for new convertible debt issuances, 25,279 shares with a fair value of $17,433 from a stock option exercise, 1,028,800 shares with a fair value of $1,714,678 for debt extension and shareholders converted shares of series AA convertible preferred stock into 4,400 shares of common stock

 

During the nine months ended September 30, 2022, we issued 277,500 warrants (three-year to five-year terms at a $3.50 exercise price) to acquire common stock at a total fair value of $280,608 to a lender in conjunction with the signing of new convertible loans, a vendor for services rendered and for debt extension.

 

7) Subsequent Events

 

From October 1, 2023, through November 10, 2023, the Company issued seven (7) convertible loan with a principal balance of $439,000. The terms of the convertible notes were 15 days to 12 months with interest rates of 10-120% and convertible into the Company’s common stock at a fixed rate of $2.50 per share. In this time the Company also issued 278,500 shares of common stock for new convertible debt loans in the third quarter, 455,350 shares of common stock for accrued interest paid-in-kind, 310,000 shares of common stock for debt extensions, 505,000 shares of common stock from the conversion of Series BB preferred stock, 145,809 shares of common stock for Series AA preferred dividends and 40 Series BB preferred stock for professional services.

 

On October 18, 2023, the Board of Directors (the “Board”) of Pressure BioSciences, Inc. (the “Company”) approved an amendment (the “Amendment”) to the Pressure BioSciences, Inc. 2021 Equity Incentive Plan (the “Plan”). The Plan originally provided that no one person could be granted awards pursuant to the Plan during any one fiscal year to purchase more than 300,000 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”). Pursuant to the amendment, the yearly limit for any one person was raised to 500,000 shares of Common Stock.

 

On the same date, the Board granted a total of 1,500,000 stock options to a number of employees, consultants and the four members of the Board with each option having an exercise price of $0.25 per share. Each award of options expires on October 18, 2033. The options for the members of the Board vest in equal amounts over twelve (12) months. The options for Mr. Schumacher and Drs. Ting and Lazarev were each vested 25% on the date of issuance and 25% of the options vest each year for the next three (3) years.

 

In addition, on the same date, the Board approved the repricing of all outstanding options (including those held by the Board members and the named executive officers) to $0.25. The previous exercise prices of the outstanding stock options held by the Board members and the named executive officers ranged from $0.69 to $1.50.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report25
 

 

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

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

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

 

These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements, expressed or implied, by such forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations or any change in events, conditions or circumstances on which any of our forward-looking statements are based. Factors that could cause or contribute to differences in our future financial and other results include those discussed in the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 and in this Report. We qualify all of our forward-looking statements by these cautionary statements.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report26
 

 

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

 

The Company was founded on the belief that its PCT platform had the potential to significantly increase the quality of sample preparation in both research and clinical settings. This premise has been well proven and PBI has been successful in installing its PCT platform in the laboratories of key opinion leaders worldwide. Although developed subsequently, the Company now assesses that the commercial potential for its UST platform across diverse multi-billion dollar markets far exceeds the potential of the PCT platform. Consequently, in January 2022, PBI made the critical strategy decision to immediately shift its primary business focus from PCT to its innovative UST Platform.

 

The UST Platform (8 issued patents) is based on the use of intense shear forces from ultra-high pressure discharge (greater than 20,000 psi) through a dynamically-controlled nano-gap valve under precisely controlled temperatures. UST has been shown to turn hydrophobic (water-repelling) oil-based supplements (e.g., CBD, curcumin, astaxanthin), therapeutics (e.g., prednisone), and other active ingredients (e.g., retinol) into long-term stable, effectively water-soluble, highly bioavailable, oil-in-water nanoemulsion formulations. The Company began early commercial introduction of the UST Platform in May 2022, and executed agreements were subsequently announced with three CBD companies and one cosmeceutical/skincare company for commercialization in Q4 2022.

 

The BaroFold Platform (14 issued patents) can be used to significantly improve the quality and production costs of protein biotherapeutics. It employs high-pressure manipulations for the disaggregation, unfolding and controlled refolding of proteins to their desired native structures at yields and efficiencies not achievable using existing technologies. The BaroFold Platform has been shown to remove protein aggregates in biotherapeutic drug manufacturing, thereby improving product efficacy, safety, and cost for both new-drug entities and biosimilar (follow-on biologic) products. It is scalable and practical for standard manufacturing processes.

 

The PCT Platform (17 issued patents) uses alternating cycles of hydrostatic pressure between ambient and ultra-high pressures to control bio-molecular interactions safely and reproducibly in sample preparation (e.g., the critical steps performed by tens of thousands of scientists worldwide prior to analytical measurements, such as cell lysis and biomolecule extraction from tissue samples). Our focus for PCT is on making our, GMP-compliant, next generation PCT-based Barocycler EXTREME system available globally to biopharmaceutical drug manufacturers for use in the design, development, characterization, and quality control of biotherapeutic drugs. We currently have over 350 PCT Systems placed in approximately 225 academic, government, pharmaceutical, and biotech research laboratories worldwide. There are currently over 200 independent publications highlighting the advantages of using the PCT Platform in scientific research & clinical laboratories.

 

2023 Key Accomplishments

 

From January 1, 2023 to September 30, 2023, we announced the following key accomplishments:

 

September 22: PBIO’s partner Veterans Service Team increases existing purchase order by 10X for bottles of UltraShear Nano-CBD topical spray, effective immediately.
September 21: PBIO’s fulfillment of UltraShear Nano-CBD orders is underway; customer shipments begin first week of October
September 8: PBIO’s Barofold technology achieves pivotal equipment sale and begins scale-up in service to leading global contract development and manufacturing organization.
August 30: PBIO provides second progress report on UltraShear Nano-CBD Launch: “Drive to 420”.
August 22: PBIO reports Q22023 financial results, provides business update, and offers guidance.
August 9: PBIO reports strongly accelerating UltraShear Nano-CBD orders.
July 26: PBIO and master distributor Canopy CBD Farms announce major increase in sales pipeline.
July 25: PBIO to evaluate Company’s patented UltraShear process to extend shelf-life of fresh produce.
July 17: Company’s UltraShear Nano-CBD commercial roll-out program enters rapid expansion phase 2.
July 10: Company announces Nano-CBD topical spray distribution agreement with Crème de Canna.
July 6: Key academic publication further validates PBIO’s UltraShear platforms’ impact in clean-label foods.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report27
 

 

July 5: PBIO partners with Somalab Int’l for development & distribution of UltraShear-enabled health products.
June 13: PBIO partners with Veterans Service Team to offer exclusive access for VST members to Nano-CBD.
June 1: PBIO expands on six key goals for June 2023 with expected multi-million-dollar growth potential.
May 22: Commercial availability of Best-in-Class Nano-CBD topical spray with lightning-fast action announced.
May 16: PBIO announces Q1 2023 financial results: all-time quarterly record revenue.
May 9: Extended consumer testing strongly validates market transforming speed and dosing efficiency of PBIO’s UltraShear processed nano-THC oral spray.
April 26: PBIO updates rapid progress on potential sales of exclusive THC licenses.
April 21, 2023: PBIO unveils powerful THC market leapfrog opportunity with exclusive licensing of UltraShear nanoemulsion processing platform.
April 18: PBIO announces expansion into strategic manufacturing facilities with premier process tech company.
April 14: PBIO reports Q4 and FY 2022 financial results – offers guidance for a strong 2023.
April 6, 2023: PBIO and NutraLife Biosciences renew partnership for development and distribution of next generation nutraceuticals.
March 28: Company reports fresh sales momentum for PBI Agrochem.
March 22: PBIO receives $1.5 million contract for UltraShear nanoemulsified CBD.
March 1: Company announces the exchange of over $10 million of debt into equity.
February 1: Company receives record order (nearly $600,000) for 16 PCT instruments.
January 27: PBIO and One World Products partner to develop CBD-Nano sports performance/recovery drink.
January 19: Dramatic consumer testing results confirm UltraShear nanoemulsion oral spray delivers first effects and maximization in lightning speed – simple, reliable dosing delivers profoundly improved results.

 

Results of Operations

 

The following disclosure compares the results of operations for the quarter ended September 30, 2023 (“Q2 2023”) with September 30, 2022 (“Q2 2022”) and compares the nine months ended September 30, 2023 with September 30, 2022.

 

Products and Services Revenue

 

We recognized total revenue of $413,009 for Q3 2023 compared to $144,032 for Q3 2022, a 187% increase. For the year-to-date periods ending September 30, 2023 and September 30, 2022, we recognized revenue of $1,665,412 and $1,122,169 respectively, a 48% increase.

 

This increase in revenue was primarily attributable to a $506,828 increase in PCT instrumentation and consumable sales, a $30,295 increase in technical support services and an $87,378 increase in Agrochem products, offset by a decrease of $89,350 in scientific services.

 

Cost of Products and Services

 

The cost of products and services was $229,457 for Q3 2023 compared to $126,203 for Q3 2022. For the year-to-date periods ending September 30, 2023 and September 30, 2022 our cost of products and services were $844,684 and $742,707, respectively. Gross profit margin on products and services increased to 49% in the year-to-date period ended September 30, 2023 from 34% in the same period ended September 30, 2022. The increase in gross profit margin was attributable to $180,670 of Agrochem products sold in 2023 at no cost due to 2022 inventory write-off and a $79,901 instrument non-monetary exchange sale in 2022 was recorded at no profit.

 

Research and Development

 

Research and development expenses were $288,345 for Q3 2023 compared to $262,370 for Q3 2022. For the year-to-date periods ending September 30, 2023 and September 30, 2022, these expenses were $1,004,437 and $716,685, respectively, a 40% increase. The reported increase was due to a $71,777 reclass of salaries to COGS for a non-monetary instrument exchange in 2022 and $241,585 of stock-based compensation expense for employee stock options issued in 2023.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report28
 

 

Selling and Marketing

 

Selling and marketing expenses were $157,773 for Q3 2023 compared to $226,526 for Q3 2022. For the year-to-date periods ending September 30, 2023 and September 30, 2022, these expenses were $537,802 and $422,422, respectively a 27% increase The reported increase was primarily attributable to the hiring of a Marketing FTE in Q2 2023 and $102,675 of stock-based compensation expense for employee stock options issued in 2023.

 

General and Administrative

 

General and administrative expenses were $1,030,244 for Q3 2023 compared to $892,293 for Q3 2022. For the year-to-date periods ending September 30, 2023 and September 30, 2022, these expenses were $5,290,564 and $2,591,644, respectively, a 104% increase. The increase was primarily due to approximately $2.0  million common stock and warrants issued for services, approximately $1.3 million of stock-based compensation expense for employee, BOD and financial consultant stock options issued in 2023, and approximately $132,000 of financial consulting expenses in 2023, offset by an approximately $423,000 decrease in IR expenses.

 

Operating Loss

 

Operating loss was $1,292,809 for Q3 2023 compared to $1,363,360 for Q3 2022. For the year-to-date periods ending September 30, 2023 and September 30, 2022, the operating loss was $6,012,075 and $3,551,289 respectively, a 79% increase. This increase was primarily due to $2.0 millions in common stock and warrants issued for services and $1.7 million of stock-based compensation expense for employee, BOD financial consultant stock options issued in 2023, offset by an approximate $423,000 decrease in IR expenses.

 

Interest Expense, net

 

Interest expense was $4,338,759 for Q3 2023 compared to $2,034,021 for Q3 2022. For the year-to-date periods ending September 30, 2023 and September 30, 2022, these expenses were $14,112,098 and $6,448,771, respectively, a 119% increase. This increase was attributable to an increase in convertible debt and merchant cash loans, in addition to stock issuances for interest paid in kind and stock issued for debt extensions.

 

Unrealized gain on investment in equity securities

 

Unrealized loss on investments in equity securities was $5,965 for Q3 2023 compared to an unrealized loss of $8,675 for Q3 2022. For the nine months ended September 30, 2023, the unrealized gain on investment in equity securities was $14,280 as compared to an unrealized loss of $8,047 for the nine months ended September 30, 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 a net gain of $0 for Q3 2023 compared to $1,054,122 of losses for Q3 2022. For the nine months ended September 30, 2023 the recognized net gain of $687,591 as compared to a net loss of $1,809,249 for the nine months ended September 30, 2022. The increase/decline in gains/losses was attributable to decreased extension and forgiveness activity.

 

Net loss attributable to common stockholders

 

Net loss attributable to common stockholders was $6,261,999 ($0.29 per share) for Q3 2023 compared to $4,893,946 ($0.44 per share) for Q3 2022. For the nine months ended September 30, 2023, the net loss attributable to common stock was $24,666,565 ($1.21 per share) as compared to $12,913,826 ($1.24 per share).

 

Liquidity and Financial Condition

 

We have experienced negative cash flows from operations since our inception. As of September 30, 2023, 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 approximately $6.5 million  in net proceeds from loans in the nine months ended September 30, 2023. We have efforts in place to continue to raise cash through debt and equity offerings. (See Note 7 to the financial statements)

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report29
 

 

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 nine months ended September 30, 2023 was $2,053,823  as compared to $3,051,257 for the nine months ended September 30, 2022.

 

Net cash used in investing activities for the nine months ended September 30, 2023 was $7,495 compared to $20,754 in the nine months ended September 30, 2022.

 

Net cash provided by financing activities for the nine months ended September 30, 2023 was $2,062,716 as compared to $3,170,580 for the nine months ended September 30, 2022.

 

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 September 30, 2023, 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 September 30, 2023 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, 2022. 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

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report30
 

 

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 six-month period ended September 30, 2023, 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 September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

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, 2022 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 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, 2022.

 

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 nine months ended September 30, 2023 the Company issued a total of 9,917,035  of its common shares, 953 shares of Series BB preferred stock and 401 shares of Series CC preferred stock as follows:

 

117,552 shares from option exercises;
1,630,500 shares for professional services;
1,346,800 shares for debt extensions;
203,613 shares for conversion of debt and interest;

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report31
 

 

142,767 shares for dividends paid-in-kind;
4,094,121 shares for interest paid-in-kind;
1,258,742 shares for shares issued with debt;
60,000 shares from sale of common shares;
95 shares of Series BB preferred stock was converted to common stock;
92 shares of Series BB preferred stock for professional services;
741 shares of Series BB preferred stock for debt extensions;
58 shares of Series BB preferred stock issued with debt;
401 shares of Series CC preferred stock for conversion of debt/accrued interest and dividends, and
62 shares of Series BB preferred stock for the conversion of common stock.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

Exhibits    
     
21.1*  

Securities Issuance and Exchange Agreement

 

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.

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report32
 

 

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: November 20, 2023 By:  /s/ Richard T. Schumacher
    Richard T. Schumacher
    President & Chief Executive Officer
    (Principal Executive Officer and Principal Financial Officer)

 

Pressure BioSciences, Inc.September 30, 2023 10Q Report33