PRESSURE BIOSCIENCES, INC. OVERVIEW
We are a leader in the development & 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 safely and
reproducibly control bio-molecular interactions (e.g., cell lysis, biomolecule
extraction). Our primary focus is in the development of PCT-based products for
biomarker and target discovery, drug design and development, biotherapeutics
characterization and quality control, soil & plant biology, forensics, and
counter-bioterror applications. Additionally, major new market opportunities
have emerged in the use of our pressure-based technologies in the following
areas: (1) the use of our recently acquired, patented technology from
Patents
PBI has 14 United States granted patents and one foreign granted patent (
? biological sample preparation - including but not limited to sample
extraction, homogenization, and digestion - in such study areas as
genomic, proteomic, lipidomic, metabolomic and small molecule;
? pathogen inactivation;
? protein purification;
? control of chemical reactions, particularly enzymatic; and
? immunodiagnostics.
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Primary Fields of Use and Application for PCT
Sample preparation is widely regarded as a significant impediment to research and discovery and sample extraction is generally regarded as one of the key parts of sample preparation. The process of preparing samples for genomic, proteomic, lipidomic, and small molecule studies includes a crucial step called sample extraction or sample disruption. This is the process of extracting biomolecules such as nucleic acid i.e., DNA and/or RNA, proteins, lipids, or small molecules from the plant or animal cells and tissues that are being studied. Our current commercialization efforts are based upon our belief that pressure cycling technology provides a superior solution for sample extraction when compared to other available technologies or procedures and thus might significantly improve the quality of sample preparation, and thus the quality of the test result.
Within the broad field of biological sample preparation, in particular sample extraction, we focus the majority of our PCT and constant pressure ("CP") product development efforts in three specific areas: biomarker discovery (primarily through mass spectrometric analysis), forensics, and histology. We believe that our existing PCT and CP-based instrumentation and related consumable products fill an important and growing need in the sample preparation market for the safe, rapid, versatile, reproducible and quality extraction of nucleic acids, proteins, lipids, and small molecules from a wide variety of plant, animal, and microbiological cells and tissues.
Biomarker Discovery and Precision Medicine
The most commonly used technique worldwide for the preservation of cancer and other tissues for long-term storage and subsequent pathology evaluation is to process them into formalin-fixed, paraffin-embedded ("FFPE") samples. We believe that the quality and analysis of FFPE tissues is highly problematic, and that PCT offers significant advantages over current processing methods, including standardization, speed, biomolecule recovery, and safety.
Our customers include researchers at academic laboratories, government agencies,
biotechnology companies, pharmaceutical companies and other life science
institutions in
If we are successful in commercializing PCT in applications beyond our current focus area of genomic, proteomic, lipidomic, and small molecule sample preparation, and if we are successful in our attempts to attract additional capital, our potential customer base could expand to include hospitals, reference laboratories, pharmaceutical manufacturing plants and other sites involved in each specific application. If we are successful in forensics, our potential customers could be forensic laboratories, military and other government agencies. If we are successful in biomarker discovery and precision medicine - specifically the extraction of biomolecules from FFPE tissues, our potential customers could be pharmaceutical companies, hospitals, and laboratories focused on drug discovery or correlation of disease states.
Forensics
The detection of DNA has become a part of the analysis of forensic samples by
laboratories and criminal justice agencies worldwide in their efforts to
identify the perpetrators of violent crimes and missing persons. Scientists from
the
38 Going Concern
We have experienced negative cash flows from operations since our inception. As
of
The audit report issued by our independent registered public accounting firm on
our audited consolidated financial statements for the fiscal year ended
The conditions described above could adversely affect our ability to obtain additional financing on favorable terms, if at all, and may cause investors to have reservations about our long-term prospects, and may adversely affect our relationships with customers. There can be no assurance that our auditing firm will not issue the same opinion in the future. If we cannot successfully continue as a going concern, our stockholders may lose their entire investment in us.
39 RESULTS OF OPERATIONS
Year Ended
Revenue
We had total revenue of
Products, Services, and Other. Revenue from the sale of products and services
was
Grant Revenue. During 2019, we recorded
Cost of Products and Services
The cost of products and services was
Research and Development
Research and development expenses were
Selling and Marketing
Selling and marketing expenses were
General and Administrative
General and administrative costs were
40 Operating Loss
Our operating loss was
Other income (expense), net
Interest Expense. Net interest expense totaled
Gain (Loss) on extinguishment of liabilities
In connection with payments of interest in common stock and debt extensions, we
calculated net losses of
Income Taxes
In the year ended
Net Loss
During the year ended
41
LIQUIDITY AND FINANCIAL CONDITION
As of
We believe our current and projected capital raising plans, and our projected continued increases in revenue, will enable us to extend our cash resources for the foreseeable future. Although we have successfully completed equity and debt financings and reduced expenses in the past, we cannot assure you that our plans to address these matters in the future will be successful.
We believe we will need approximately
A. building a "demo lab" at our South Easton facility, where we will be able
to demonstrate to potential customers, Key Opinion Leaders (KOLs),
collaborators, and potential partners our UST and BaroFold instrument
systems, consumables, and various applications;
B. developing the next generation of UST instruments and applications for the
manufacture of nanoemulsions, for use in multiple large and growing
markets, such as cosmetics, nutraceuticals, pharmaceuticals, and
lubricants; and
C. retaining a small team of sales and marketing personnel to target
biopharmaceutical manufacturing facilities, research laboratories, and
academic institutions, and to cultivate our current customer list of
pharmaceutical, military and paramilitary organizations.
However, if we are unable to obtain such funds through sales, the capital markets or other source of 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. These conditions raise substantive doubt about our ability to continue as a going concern.
Net cash used in operating activities was
Net cash used in investing activities for the year ended
Net cash provided by financing activities for the year ended
In 2019,
A $3,275,099 in aggregate net proceeds were raised from sale of Series AA
Convertible Preferred Stock
B Loans in the aggregate amount of $9,826,550 were received during the year
and we made payments on new and existing debt of $6,824,189 .
Our common stock is currently traded on the OTCQB tier of the OTC Markets under the trading symbol "PBIO."
42
COMMITMENTS AND CONTINGENCIES
Royalty Commitments
In 1996, we acquired our initial equity interest in
In connection with our acquisition of BioSeq, we licensed certain limited rights
to the original pressure cycling technology back to BMA. This license is
non-exclusive and limits the use of the original pressure cycling technology by
BMA solely for molecular applications in scientific research and development,
and in scientific plant research and development. BMA is required to pay us a
royalty equal to 20% of any license or other fees and royalties, but not
including research support and similar payments, it receives in connection with
any sale, assignment, license or other transfer of any rights granted to BMA
under the license. BMA was required to pay us these royalties until the
expiration of the patents held by BioSeq in
Battelle Memorial Institute
In
Target Discovery Inc.
In
43
Severance and Change of Control Agreements
Each of
Pursuant to severance agreements with each of
Pursuant to our equity incentive plans, any unvested stock options held by a named executive officer will become fully vested upon a change in control (as defined in the 2005 Equity Incentive Plan) of our Company.
Lease Commitments
We lease building space under non-cancelable leases in
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
2020 $ 168,960
Thereafter -
$ 168,960 Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as of
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Principles of Consolidation
The consolidated financial statements include the accounts of
Use of Estimates
To prepare our consolidated financial statements in conformity with accounting
principles generally accepted in
44 Revenue Recognition
We recognize revenue in accordance with FASB ASC 606, ASC 606, Revenue from Contracts with Customers, and ASC 340-40, Other Assets and Deferred Costs-Contracts with Customers. Revenue is measured based on a consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. We enter into sales contracts that may consist of multiple distinct performance obligations where certain performance obligations of the sales contract are not delivered in one reporting period. We measure and allocate revenue according to ASC 606-10.
We identify a performance obligation as distinct if both the following criteria are true: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Determining the standalone selling price ("SSP") and allocation of consideration from a contract to the individual performance obligations, and the appropriate timing of revenue recognition, is the result of significant qualitative and quantitative judgments. Management considers a variety of factors such as historical sales, usage rates, costs, and expected margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation in making these estimates. While changes in the allocation of the SSP between performance obligations will not affect the amount of total revenue recognized for a particular contract, any material changes could impact the timing of revenue recognition, which would have a material effect on our financial position and result of operations. This is because the contract consideration is allocated to each performance obligation, delivered or undelivered, at the inception of the contract based on the SSP of each distinct performance obligation.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are in included in cost of revenues as consistent with treatment in prior periods.
Our current Barocycler® instruments require a basic level of instrumentation expertise to set-up for initial operation. To support a favorable first experience for our customers, upon customer request, and for an additional fee, will send a highly trained technical representative to the customer site to install Barocyclers® that we sell, lease, or rent through our domestic sales force. The installation process includes uncrating and setting up the instrument, followed by introductory user training. Our sales arrangements do not provide our customers with a right of return. Any shipping costs billed to customers are recognized as revenue.
The majority of our instrument and consumable contracts contain pricing that is based on the market price for the product at the time of delivery. Our obligations to deliver product volumes are typically satisfied and revenue is recognized when control of the product transfers to our customers. Concurrent with the transfer of control, we typically receive the right to payment for the shipped product and the customer has significant risks and rewards of ownership of the product. Payment terms require customers to pay shortly after delivery and do not contain significant financing components.
Revenue from scientific services customers is recognized upon completion of each stage of service as defined in service agreements.
We apply ASC 845, "Accounting for Non-Monetary Transactions", to account for products and services sold through non-cash transactions based on the fair values of the products and services involved, where such values can be determined. Non-cash exchanges would require revenue to be recognized at recorded cost or carrying value of the assets or services sold if any of the following conditions apply:
a) The fair value of the asset or service involved is not determinable.
b) The transaction is an exchange of a product or property held for sale in
the ordinary course of business for a product or property to be sold in
the same line of business to facilitate sales to customers other than the
parties to the exchange.
c) The transaction lacks commercial substance.
We currently record revenue for non-cash transactions at recorded cost or carrying value of the assets or services sold.
We account for lease agreements of our instruments in accordance with ASC 842, Leases.We record revenue over the life of the lease term and we record depreciation expense on a straight-line basis over the thirty-six-month estimated useful life of the Barocycler® instrument. The depreciation expense associated with assets under lease agreement is included in the "Cost of PCT products and services" line item in our accompanying consolidated statements of operations. Many of our lease and rental agreements allow the lessee to purchase the instrument at any point during the term of the agreement with partial or full credit for payments previously made. We pay all maintenance costs associated with the instrument during the term of the leases.
Revenue from government grants is recorded when expenses are incurred under the grant in accordance with the terms of the grant award.
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Deferred revenue represents amounts received from grants and service contracts for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met. Revenue from service contracts is recorded ratably over the length of the contract.
Transaction price allocated to the remaining performance obligations
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.
In thousands of US dollars ($) 2020 2021 Total Extended warranty service
23 18 41
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.
Intangible Assets
We have classified as intangible assets, costs associated with the fair value of
acquired intellectual property. Intangible assets, including patents, are being
amortized on a straight-line basis over sixteen years. We perform an annual
review of our intangible assets for impairment. When impairment is indicated,
any excess of carrying value over fair value is recorded as a loss. As of
Long-Lived Assets
The Company's long-lived assets are reviewed for impairment in accordance with
the guidance of the FASB ASC 360-10-05, Property, Plant, and Equipment, whenever
events or changes in circumstances indicate that the carrying amount of the
asset may not be recoverable. Recoverability of an asset to be held and used is
measured by a comparison of the carrying amount of an asset to the future
undiscounted cash flows expected to be generated by the asset. If such asset is
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the asset exceeds its fair value. Through
Beneficial Conversion Features
In accordance with FASB ASC 470-20, "Debt with Conversion and Other Options" the Company records a beneficial conversion feature ("BCF") related to the issuance of convertible debt or preferred stock instruments that have conversion features at fixed rates that are in-the-money when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security.
Accounts Receivable and Allowance for Doubtful Accounts
We maintain allowances for estimated losses resulting from the inability of our customers to make required payments. Judgments are used in determining the allowance for doubtful accounts and are based on a combination of factors. Such factors include historical collection experience, credit policy and specific customer collection issues. In circumstances where we are aware of a specific customer's inability to meet its financial obligations to us (e.g., due to a bankruptcy filing), we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. We perform ongoing credit evaluations of our customers and continuously monitor collections and payments from our customers. While actual bad debts have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same bad debt rates that we have in the past. A significant change in the liquidity or financial position of any of our customers could result in the uncollectability of the related accounts receivable and could adversely impact our operating cash flows in that period.
46 Inventories
Inventories are valued at the lower of cost (average cost) or market (sales price). The cost of Barocyclers consists of the cost charged by the contract manufacturer. The cost of manufactured goods includes material, freight-in, direct labor, and applicable overhead. In assessing the ultimate realization of inventories, management judgment is required to determine the reserve for obsolete or excess inventory. Inventory on hand may exceed future demand either because the product is obsolete, or because the amount on hand is more than can be used to meet future needs. We provide for the total value of inventories that we determine to be obsolete or excess based on criteria such as customer demand and changing technologies. We historically have not experienced significant inaccuracies in computing our reserves for obsolete or excess inventory.
Equity Transactions
We evaluate the proper classification of our equity instruments that embody an unconditional obligation requiring the issuer to redeem it by transferring assets at a determinable date or that contain certain conditional obligations, typically classified as equity, be classified as a liability. We record amortized financing costs associated with our capital raising efforts in our consolidated statements of operations. These include amortization of debt issue costs such as cash, common stock and warrants and other securities issued to finders and placement agents, and amortization of debt discount created by in-the-money conversion features on convertible debt and allocates the proceeds amongst the securities based on relative fair values. We based our estimates and assumptions on the best information available at the time of valuation; however, changes in these estimates and assumptions could have a material effect on the valuation of the underlying instruments.
Stock-Based Compensation
We account for employee and non-employee director stock-based compensation using the fair value method of accounting. Compensation cost arising from stock options to employees and non-employee directors is recognized using the straight-line method over the vesting period, which represents the requisite service or performance period. The calculation of stock-based compensation requires us to estimate several factors, most notably the term, volatility and forfeitures. We estimate the option term using historical terms and estimate volatility based on historical volatility of our common stock over the option's expected term. Expected forfeitures based on historical forfeitures are used in calculating the expense related to stock-based compensation associated with stock awards. Our estimates and assumptions are based on the best information available at the time of valuation; however, changes in these estimates and assumptions could have a material effect on the valuation of the underlying instruments.
Recent Accounting Standards
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
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