7) Subsequent Events

From July 1, 2021 through August 10, 2021 the Company received seven new fixed rate convertible loans for a total of $1.5 million. The Company issued 125,000 shares of common stock and 161,000 warrants (3-year and 5-year lives and $3.50 strike price) as fees paid to lenders. These loans have fixed conversion rates of $2.50-$3.00 (one has a variable conversion rate), carry annual interest rates ranging from 10% to 12%, and terms ranging from six to twelve months. One of the loans (for $735,000) is secured by the assets of PBI Agrochem, Inc., a newly incorporated subsidiary of the Company.

In this time period, the Company retired loans with a principal amount of $973,408 (dated June 8, 2018, November 13, 2018, February 21, 2019, June 19, 2019, July 1, 2019, July 19, 2019, and November 1, 2019) for $167,954 and 763,420 shares of common stock (settling principal, interest and fees) and reduced the principal of another loan with a $100,000 cash payment. After this activity, the Company had $741,687 of principal outstanding with two lenders subject to the standstill and forbearance agreements, which expired March 31, 2021 (see Note 5).

The Company is obligated to issue 665,000 shares of common stock to certain lenders for the quarter ended June 30, 2021, but has not issued the shares. The Company and the lenders are negotiating in good faith to resolve these loans and expect to reach a settlement in the coming month.

During this period, the Company also received $900,000 from the sale of Series AA shares (issuing 360,000 warrants with a five-year term and strike price of $3.50), and repaid $103,600 of related party loans.

In this time period, the Company also entered into a Merchant Cash lender agreement (collecting $66,677) and repaid an existing Merchant Cash lender for $62,832. Under this agreement, the Company pays $1,278 each business day to the lender. During this period, the Company also borrowed and repaid a $300,000 line-of-credit from a second lender.

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:

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, 2020 and in this Report. We qualify all of our forward-looking statements by these cautionary statements.

OVERVIEW:

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

Developments and Accomplishments:

We reported the following accomplishments during the first half of 2021:

Results of Operations

The following disclosure compares the results of operations for the quarter ended June 30, 2021 (“Q2 2021”) with June 30, 2020 (“Q2 2020”) and compares the six months ended June 30, 2021 with June 30, 2020.

Products and Services Revenue

We recognized total revenue of $608,927 for Q2 2021 compared to $268,154 for Q2 2020, a 127% increase. For the year-to-date periods ending on June 30, 2021 and 2020 we recognized total revenue of $1,168,801 and $522,027, respectively, a 124% increase.

Cost of Products and Services

The cost of products and services was $286,660 for Q2 2021 compared to $134,882 for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 our cost of products and services was $512,935 and $310,028, respectively. Gross profit margin on products and services increased from a larger portion of biopharma services that have higher profit margins (to 52.9% in Q2 2021 from 49.6% in Q2 2020 and to 56.1%in the year-to-date period ended June 30, 2021 from 40.6% in the year-to-date period ended June 30, 2020).

Research and Development

Research and development expenses were $256,507 for Q2 2021 compared to $294,602 for Q2 2020. The reported decrease of 13% was attributable to a decrease in outside services. For the year-to-date periods ending on June 30, 2021 and 2020 these expenses were $556,450 and $560,292, respectively. The reported decrease was 1%.

Selling and Marketing

Selling and marketing expenses were $92,813 for Q2 2021 compared to $162,098 for Q2 2020. The reported decreases were primarily attributable to reduced employees in sales and marketing. For the year-to-date periods ending on June 30, 2021 and 2020 these expenses were $186,141 and $351,214, respectively.

General and Administrative

General and administrative expenses were $619,286 for Q2 2021 compared to $1,007,215 for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 these expenses were $1,634,716 and $2,026,225 respectively. The reported decreases were attributable to lower investor relations expenses.

Operating Loss

Operating loss was $646,339 for Q2 2021 compared to $1,330,643 for Q2 2020, a reduction of $684,304, or 51.4%. For the year to date periods ending of June 30, 2021 and 2020 the operating loss was $1,721,441 and $2,725,732, respectively, a $1,004,291 reduction, or 36.8%. The reported decreases were primarily attributable to revenue increases and decreases in costs and expenses in 2021.

Interest Expense, net

Interest expense was $3,526,141 for Q2 2021 compared to $1,724,879 for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 these expenses were $8,194,205 and $3,296,679, respectively. The increases were primarily attributable to the increase in convertible and other debt and the issuance of common stock for interest paid-in-kind.

Unrealized (loss) gain on investment in equity securities

Unrealized loss on investments in equity securities was $134,477 for Q2 2021 compared to an unrealized gain of $196,891 for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 the unrealized loss was $242,380 and an unrealized gain of $346,262, respectively. The reported change was attributable to movement in the market price of the Company’s investment in Nexity.

Loss on extinguishment of liabilities

In connection with debt extensions and forgiveness, we recognized net losses of $498,226 for Q2 2021 compared to $1,710,151 for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 these losses were $1,223,385 and $2,846,518, respectively. The decreases were principally related to the gain recognized on the forgiveness of our first PPP loan of $367,039.

Net loss attributable to common stockholders

Net loss attributable to common stockholders was $5,149,342 ($0.90 per share) for Q2 2021 compared to $4,965,752 ($1.70 per share) for Q2 2020. For the year-to-date periods ending on June 30, 2021 and 2020 the losses were $12,188,028 ($2.29 per share) and $9,244,223 ($3.34 per share), respectively. The decreases in loss per share were principally attributable to the increase in weighted shares outstanding.

Liquidity and Financial Condition

We have experienced negative cash flows from operations with respect to our pressure cycling technology business since our inception. As of June 30, 2021, 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 $4.0 million in net proceeds from loans and sales of preferred stock in the six months ended June 30, 2021. We have efforts in place to continue to raise cash through debt and equity offerings. (See Note 7 to the financial statements)

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

Net cash used in operations for the six months ended June 30, 2021 was $2,090,727 as compared to $2,800,494 for the three months ended June 30, 2020.

Net cash used in investing activities for the six months ended June 30, 2021 was $3,962 compared to $532,913 in the six months ended June 30, 2020.

Net cash provided by financing activities for the six months ended June 30, 2021 was $2,122,774 as compared to $3,345,240 for the six months ended June 30, 2020. The cash flows from financing activities in the six months ended June 30, 2021 included $100,000 from the sale of Series AA preferred stock, $4.0 million loan proceeds from convertible debt and other debt. In this period, cash flow from financing was reduced by debt payments of $1,200,996 on convertible debt, and $744,041 on other debt.

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 June 30, 2021, 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 June 30, 2021 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, 2020. These material weaknesses are the following:

During the period covered by this Report, we implemented and performed additional substantive procedures, such as supervisory review of work papers and consistent use of financial models used in equity valuations, to ensure our consolidated financial statements as of and for the three-month period ended June 30, 2021, 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 June 30, 2021 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, 2020 and in this Item 1A. The risks described in our Form 10-K and this Report are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on the Company. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.

There have been no material changes to the risk factors set forth in Item 1A of our 10-K for the year ended December 31, 2020 other than the following:

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

Through June 30, 2021, we have issued Notes to the same holder such that the current gross amount owed to the holder is approximately $9.1 million. Our obligations under the Notes and the transaction documents relating to the Notes are secured by a security interest in all of our assets. As a result, if we default under our obligations under the Notes or the transaction documents, the holders of the Notes, acting through their appointed agent, could foreclose on their security interests and liquidate some or all of these assets, which could harm our business, financial condition and results of operations and could require us to reduce or cease operations. In addition, the pledge of these assets and other restrictions may limit our flexibility in raising capital for other purposes. Because all of our assets are pledged under these financing arrangements, our ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on our financial flexibility.

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

The holders of our common stock could suffer substantial dilution due to our corporate financing practices which, in the past few years has included private placements. As of June 30, 2021, we had 6,260,884 shares outstanding. As of June 30, 2021, if all of the outstanding shares of Series D Convertible Preferred Stock, Series G Convertible Preferred Stock, Series H Convertible Preferred Stock, Series H2 Convertible Preferred Stock, Series J Convertible Preferred Stock, Series K Convertible Preferred Stock and Series AA Convertible Preferred Stock were converted into shares of common stock and all outstanding options and warrants to purchase shares of common stock were exercised and all fixed rate convertible notes and debentures were converted, each as of June 30, 2021, an additional 30,719,832 shares of common stock would be issued and outstanding. The full cash exercise of the options and warrants would result in approximately $55.9 million in cash proceeds to the Company. This additional issuance of shares of common stock would cause immediate and substantial dilution to our existing stockholders and could cause a significant reduction in the market price of our common stock.

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

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

During the six months ended June 30, 2021, we issued 1,642,982 shares of common stock with a fair value of approximately $3.5 million to lenders for interest paid-in-kind, 112,400 shares with a fair value of $238,512 for services rendered, 139,700 shares with a fair value of $349,250 for conversions of debt principal and interest, 21,411 shares for stock option exercises (at an exercise price of $0.69 per share), 56,067 shares with a fair value of $114,298 for dividends paid-in-kind and 120,000 shares with a fair value of $112,877 for Common Stock issued with debt. During this period, we also issued 1,374,600 warrants (three to five-year term at a $3.50 to $5.00 exercise price) to acquire common stock at a fair value of $1.7 million to lenders in conjunction with signing of new convertible loans and interest paid-in-kind.

During the six months ended June 30, 2020, we issued to Series AA holders 64,388 shares of common stock for dividends totaling of $176,748 issued in stock in lieu of cash. During this period the Company also issued 593,277 shares of restricted common stock at a fair value of $1,693,251 to accredited investors and consultants. 420,746 of the shares with a fair value of $1,317,649 were issued for conversions of debt principal and interest; 81,031 of the shares with a fair value of $159,784 were issued for debt extensions and interest payments; 66,500 shares with a fair value of $127,855 were issued to settle an accrued liability; and 25,000 shares with a fair value of $87,963 were issued for services rendered.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

* Filed herewith.

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

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.