Pressure BioSciences (PBIO) 10-Q2024 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2024

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)

(508) 230-1828

(Registrant’s telephone number, including area code)

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

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):

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 August 26, 2024 was 37,379,297.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

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

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

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

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

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

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(UNAUDITED)

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

PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(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™”)

Uncle Bud’s Acquisition and Sales/Marketing Platform In January 2024, PBI completed the acquisition of Uncle Bud’s Hemp (renamed Uncle Bud’s Health & Wellness or “UB”), a direct-to-consumer (DTC) packaged goods company, with product development, marketing, and selling in the DTC vertical. Uncle Bud’s sells their products both online and through major retail chains.

2) Going Concern

The accompanying consolidated 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. We have experienced losses from operations and negative cash flows from operations. As of March 31, 2024, we do not have adequate working capital resources to satisfy our current liabilities and as a result, there is substantial doubt regarding our ability to continue as a going concern. We have been successful in raising debt and equity capital in the past and as described in Notes 6 and 7. In addition we raised debt and equity capital after March 31, 2024 as described in Note 9 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.

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, 2023. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the final results that may be expected for the year ending December 31, 2024.

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. In addition, estimates were made in projecting future cash flows to quantify impairment of assets, fair value of share based awards and investments in equity securities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from the estimates, and such differences may be material to the Company’s consolidated financial statements.

Intangibles assets as of March 31, 2024 are as follows:

 Schedule of Intangible Assets

Expected amortization expense of intangible assets over the next 2 years is as follows:

Schedule of Expected Amortization Expense of Intangible Assets

Twelve Months ended March 31,

Impairment of Long-Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Accounting for the Impairment of Long-Lived Assets.  This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the estimated future cash flows from the use of the asset are less than the carrying amount of that asset.

During the quarter ended March 31, 2024, there were no triggering events related to the customer list for Uncle Bud’s which required an analysis to be performed.

Principles of Consolidation

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

Revenue Recognition

The Company recognizes revenue under ASC Topic 606, Revenue from contract with Customers (“Topic 606”). The following is a summary of the revenue recognition policy for each of the Company’s subsidiaries.

Revenue is recognized under Topic 606, at a point in time and over a period of time, in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements:

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

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

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

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

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

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

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

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

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

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

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

Uncle Buds Health and Wellness, Inc. (“Uncle Bud’s”, “UB”)

As part of the acquisition of Uncle Bud’s, the Company analyzed ASC Topic 606, Revenue from Contracts with Customers and determined to recognized revenue when control of the product is transferred to the customer and they have assumed the risk of loss, which is typically when it is received by the customer.

UB generated $153,787 of direct-to-consumer (DTC) sales. The Company estimated UB deferred revenue to be approximately $15,000 as of March 31, 2024, which the Company deemed to be nominal.

Additionally, Uncle Bud’s has no future contracts or obligations to the customer to provide future services or expenses whereby future revenue is generated.

Disaggregation of revenue

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

Schedule of Disaggregation of Revenue 

Contract balances

Schedule of Contract Balances 

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.

Schedule of Future Related to Performance Obligations 

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.

Segment Reporting

We organize our business segments based on the nature of the products and services offered. Operating segments are defined as the components of a business which separate financial information is available. In Note 8, the table of financial data, the total of the operating results of these business segments is reconciled, as appropriate, to the corresponding consolidated amount. There are some corporate expenses that were not allocated to the business segments, and these expenses are contained in the “Operating expenses” under Parent.

Our Industrial segment contains the UST, BaroFold and PCT Platforms. Due to our purchase of Uncle Bud’s , the Company analyzed ASC 280-10-50 and determined that Uncle Bud’s qualifies as an operating segment. Our Consumer segment represents the activity of Uncle Bud’s. Uncle Bud’s offers products direct-to-consumer online and through major retail chains.

Based on the above, management has determined to report under the following segments:

Goodwill

Goodwill is recorded as the excess, if any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured at the acquisition date) of total net tangible and identified intangible assets acquired. Goodwill and other intangible assets with indefinite lives are not amortized but are tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. We first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If the qualitative assessment determines it is necessary, we will perform a quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any).

We are required to identify our reporting units and determine the carrying value of each reporting unit. We analyze financial information of our operations to identify discrete segments that constitute a reporting unit. We assign assets acquired and liabilities assumed in business combinations to those reporting units. We are required to determine the fair value of each reporting unit and compare it to the carrying amount of the reporting unit. To the extent the carrying amount of a reporting unit exceeds the fair value of the reporting unit, we would be required to book an impairment loss.

All assessments of goodwill impairment are conducted at the individual reporting unit level. As of March 31, 2024, the only reporting unit with goodwill is Uncle Bud’s.

We determined no impairment of our goodwill occurred for the period ended March 31, 2024.

Concentrations

Credit Risk

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

The following table illustrates the level of concentration as a percentage of total revenues during the three months ended March 31, 2024 and 2023.

Schedule of Customer Concentration Risk Percentage 

The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of March 31, 2024 and December 31, 2023. The Top Five Customers category may include federal agency receivable balances if applicable.

Investment in Equity Securities

As of March 31, 2024, we held 100,250 shares of common stock of Nexity Global SA, (a Polish publicly traded company).

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

As of March 31, 2024, 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 $66,031. We recorded $4,155 as an unrealized gain during the three months ended March 31, 2024 for changes in market value.

Computation of Loss per Share

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

The following table illustrates our computation of loss per share for the three months ended March 31, 2024 and 2023:

Schedule of Computation of Loss Per Share 

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

Schedule of Anti-Dilutive Securities Excluded from Computation of Earnings Per Share 

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 three months ended March 31, 2024:

 Summary of Assumptions for the Grants of Stock Options

Valuation and Amortization Method - The fair value of each option award is estimated on the date of grant using the Black-Scholes pricing model based on certain assumptions. The estimated fair value of employee stock options is amortized to expense using the straight-line method over the vesting period.

Expected Term - The Company uses the simplified calculation of expected life, as the Company does not currently have sufficient historical exercise data on which to base an estimate of expected term. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted.

Expected Volatility - Expected volatility is based on the Company’s historical stock volatility data over the expected term of the award.

Risk-Free Interest Rate - The Company bases the risk-free interest rate used in the Black-Scholes valuation method on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term.

Forfeitures - The Company records stock-based compensation expense only for those awards that are expected to vest. The Company estimated a forfeiture rate of 5% for awards granted based on historical experience and future expectations of options vesting. The Company used this historical rate as our assumption in calculating future stock-based compensation expense.

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 $240,292 and $1,430,244 for the three months ended March 31, 2024 and 2023, respectively. The following table summarizes the effect of this stock-based compensation expense within each of the line items of our costs and expenses within our Consolidated Statements of Operations:

 Schedule of Stock Based Compensation Expense

Fair Value of Financial Instruments

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

Fair Value Measurements

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

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

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

The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2024:

 Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

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, 2023:

4) Business Combination

On January 9, 2024, the Company acquired the assets and assumed the liabilities of Uncle Buds. Under the provision of ASC 805 Business Combinations, the acquisition is considered an acquisition of a business since the Company is continuing the business of UB which has defined inputs and substantive processes that contribute to the ability to create outputs.

The Company believes that the purchase of the assets and assumption of liabilities of Uncle Bud’s will result in synergies from combining the existing commercial customers of the Company with the retire focus, and customer list of Uncle Bud’s, as the Company desires to use its existing products into the retail channel.

The business combination accounting is not yet complete and the amounts assigned to assets acquired and liabilities assumed are provisional. Therefore, this may result in future adjustments to the provisional amounts as new information is obtained about facts and circumstances that existed at the acquisition date.

The following are the unaudited pro forma results of operations for the three months ended March 31, 2024 and 2023, as if Uncle Bud’s had been acquired on January 1, 2023. The pro forma results include estimates and assumptions that management believes are reasonable. However, pro forma results are not necessarily indicative of the results that would have occurred if the business combination had been in effect on January 1, 2023.

Schedule of Unaudited Pro Forma Results of Operations

The purchase price is as follows:

Schedule of Acquisition

Notes

Upon analysis of Uncle Bud’s business combination, the Company has estimated the fair value of the assets and liabilities acquired as follows:

Schedule of Estimated Fair Value Of Assets And Liabilities Acquired

The Uncle Bud’s transaction produced a goodwill of $4,727,976. The Company anticipates that there will be no material increase or decrease to its tax situation based on this goodwill.

On January 9, 2024, the Company and CBH International LLC, dba Uncle Bud’s, signed an Asset Purchase Agreement (the “Agreement”) for the Company to acquire all of Uncle Bud’s assets and assume selected liabilities, including a $734,000 long-term loan and all trade payables.

Uncle Bud’s stockholders received 127 shares in PBIO convertible Series DD Preferred Stock that converts into 2,540,000 common shares of PBIO. Such shares are subject to standard restrictions on resale. In addition, the parties agreed to an earnout for additional shares of PBIO Common Stock worth up to $4,000,000 based on the achievement of revenue and pre-tax income results in 2024, and subsequently entered into an amendment to terminate the contingent and earnout clause of the Agreement and issued 8,000,000 non-qualified stock options. All options had an exercise price of $0.30, (100% vest immediately), have a ten-year life as long as the Optionee remains affiliated with PBI (one-year life after loss of affiliation), and all other terms and conditions as specified in the 2024 plan.

Upon the closing, all employees of Uncle Bud’s have become employees of PBIO and Uncle Bud’s has become the Consumer Products Business Unit of the Company.

Goodwill considerations – ASC 350-20-35-34 states, “A component of an operating segment is a reporting unit if the component constitutes a business or a nonprofit activity for which discrete financial information is available and segment management, as that term is defined in paragraph 280-10-50-7, regularly reviews the operating results of that component.” In this case Uncle Bud’s is a reporting unit with discrete financial information should be shown in the Uncle Buds segment along with any impairment. All assessments of goodwill impairment are conducted at the segment reporting unit level.

5) 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 480 Neponset Street, Unit 10B, Canton, MA 02021.

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 did not renew this lease and let it expire on December 30, 2023.

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 February 5, 2024 we moved and entered a new lease for our corporate office (the “Canton Lease”). The Company accounts for the Canton Lease as an operating lease under ASC 842. Payment of rent began on April 1, 2024. The lease terminates on April 30, 2029. Monthly rent begins at $11,651 and escalates over the lease term to $13,678. Upon the commencement of the Canton Lease, the Company recorded a right-of-use asset and lease liability in the amount of $471,155 based on the net present value of lease payments discounted using an estimated borrowing rate of 24%.

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

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

Following is a schedule by years of future minimum rental payments required under operating leases with initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2024:

Schedule of Future Minimum Rental Payments 

The operating cash flows from the operating leases were $48,561 for the three months ended March 31, 2024 and $90,279 for the three months ended March 31, 2023. The weighted-average remaining lease term (years) of the above leases is 4.34 years as of March 31, 2024.

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

 Schedule of Right of Use Asset and the Corresponding Lease Liability

The weighted-average discount rate is 22%.

The Company had no financing lease during the three months ended March 31, 2024 and 2023.

The components of lease cost for operating leases for the three months ended March 31, 2024 and 2023 are as follows:

 Schedule of Lease Cost for Operating Leases

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 2024 or 2023.

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 2023 and $60,000 in 2024. For the three months ended March 31, 2024 and March 31, 2023, the Company reported $15,450 and $15,450, respectively in TDI fees.

Severance and Change of Control Agreements

Each of Mr. Schumacher, and Drs. Ting, and Lazarev, executive officers of the Company, are entitled to receive a severance payment if terminated by 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.

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.

6) Debt

Convertible Debt

On various dates during the three months ended March 31, 2024, the Company issued convertible notes for net proceeds of approximate total of $2.1 million which contained varied terms and conditions as follows: a) 4-12 month maturity date; b) interest rates of 0-15%; 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 issued with the notes of $140,455 was recorded as a debt discount to be amortized over the term of the notes. The aggregate relative fair value of the preferred stock issued with the notes of $260,000 was also 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 March 31, 2024.

For the three months ended March 31, 2024, deferred financing costs and OID issued with the debt are $113,100 and the Company repaid $394,229.

The summary of specific terms of the convertible notes and outstanding balances as of March 31, 2024 and December 31, 2023 are listed in the tables below. The convertible notes are from numerous parties and with original issue dates from July, 2019 to March, 2024, and maturity dates from March, 2020 to March, 2025. There are approximately $16.8 million of notes that are past due as of March 31, 2024.

Schedule of Convertible Debts and Outstanding Balances 

Notes:

For the three months ended March 31, 2024, the Company recognized amortization expense related to the debt discounts indicated above of $1,301,688. The unamortized debt discounts as of March 31, 2024 related to the convertible notes amounted to $403,060.

As of March 31, 2024, the principal balance that are 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 three months ended March 31, 2024, three (3) notes from one lender with total principal of $272,500 was outstanding and no interest, penalties and fees were accrued in connection with the Standstill and Forbearance Agreements.

Convertible Loan Modifications and Extinguishments

We refinanced certain convertible loans during the three months ended March 31, 2024 at substantially the same terms for extensions ranging over a period of two to twelve months. We amortized any remaining unamortized debt discount as of the modification date over the remaining, extended term of the new loans. We applied ASC 470 of modification accounting to the debt instruments which were modified during the quarter or those settled with new notes issued concurrently for the same amounts but different maturity dates. The terms such as the interest rate, prepayment penalties, and default rates will be the same over the new extensions. According to ASC 470, an exchange of debt instruments between or a modification of a debt instrument by a debtor and a creditor in a nontroubled debt situation is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. If the terms of a debt instrument are changed or modified and the cash flow effect on a present value basis is less than 10 percent, the debt instruments are not considered to be substantially different and will be accounted for as modifications.

The cash flows of new debt exceeded 10% of the remaining cash flows of the original debt on several loans. During the three months ended March 31, 2024 we recorded losses on extinguishment of liabilities of approximately $1.2 million by calculating the difference of the fair value of the new debt and the carrying value of the old debt. During the three months ended March 31, 2024, the Company extended 19 loans totaling $4,602,842 The Company issued 388,000 shares of common stock and 181 shares of preferred stock for these extensions.

Other Debt

Fifteen (15) notes in Other Debt are past due as of March 31, 2024.

Schedule of Other Debt 

Notes:

Related Party Notes

 Schedule of Related Party Debt

Notes:

During the three months ended March 31, 2024, we received short-term convertible loans of $105,875 with $8,823 OID from related parties and repaid $63,300 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 $8,823 of debt discounts during the three months ended March 31, 2024 for all non-convertible and related party notes. The total unamortized discount for all non-convertible and related party convertible notes as of March 31, 2024, and December 31, 2023 was $0 and $0, respectively.

7) Stockholders’ Deficit

Preferred Stock

We are authorized to issue 1,000,000 shares of preferred stock with a par value of $0.01. As of March 31, 2024, there were no shares of Junior A issued and outstanding and no shares of Series A, B, C, G, H, H2, J and K issued and outstanding and as of December 31, 2023, there were no shares of Junior A issued and outstanding, and no shares of Series A, B, C, G, H, H2, J and K issued and outstanding.

Below is a summary table of the preferred stock:

 Summary of Preferred Stock

Series DD Convertible Preferred Stock

Designation. The designation of such series of the Preferred Stock shall be the Series DD Convertible Preferred Stock, par value $0.01 per share (the “Series DD Preferred Stock”). The maximum number of shares of Series DD Preferred Stock shall be One Thousand (1,000) shares.

Rank. The Series DD Preferred Stock shall rank prior to the common stock, par value $0.01 per share (the “Common Stock”) of Pressure BioSciences, Inc. (the “Company”), and subordinate to the Series AA and Series CC Preferred Stock, and 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 DD Preferred Stock (“Junior Stock”). The Series DD Preferred Stock shall be subordinate to and rank junior to all indebtedness of the Company now or hereafter outstanding.

Dividends. The holders of shares of the Series DD Preferred Stock shall not be entitled to receive dividends.

General Voting Rights. The Series DD Preferred Stock shall have, upon issuance, all of the same voting rights as other issued and outstanding Common Stock of the Company. Each share of Series DD Preferred Stock shall vote based upon the number of Conversion Shares to which they are entitled. The Common Stock into which the Series DD Preferred Stock is convertible shall, upon issuance, have all of the same voting rights as other issued and outstanding Common Stock of the Company.

Voluntary Conversion. At any time on or after the Issuance Date, the holder of any such shares of Series DD Preferred Stock may, at such holder’s option, subject to the limitations set forth in Section 6 herein, elect to convert (a “Voluntary Conversion”) all or any portion of the shares of Series DD Preferred Stock held by such person into a number of fully paid and nonassessable shares of Common Stock (the “Conversion Shares”) in accordance with the Conversion Ratio (as defined in Section 4(d)). The Company shall keep written records of the conversion of the shares of Series DD Preferred Stock converted by each holder. A Holder shall be required to deliver the original certificates representing the shares of Series DD Preferred Stock upon complete conversion of the Series DD Preferred Stock.

(a) Company Forced Conversion. The Company shall have the right, subject to satisfaction of the conditions in this Section 4(c), to cause the conversion of all shares of Series DD Preferred Stock into Common Stock (“Forced Conversion”). The Company shall deliver prior written notice to the Holder at least ten (10) business days (“Forced Conversion Notice”) prior to the effective date (the “Forced Conversion Effective Date”) of such Forced Conversion. Following the effectiveness of a registration statement permitting the resale of the Conversion Shares held by holders of the Series DD 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 $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 DD Preferred Stock that are issued pursuant to any exchange of previously issued securities.

During the three ended March 31, 2024 the Company converted 696 shares of Series BB convertible preferred stock and had 2,862 shares of Series BB convertible preferred stock outstanding which is 623 shares above the authorized of 1,000. As a result, 623 Series BB shares with an approximately fair value of $1,750,000 is included as preferred stock liability as of March 31, 2024. During the three months ended March 31, 2024, the company also issued 127 shares of Series DD restricted preferred stock to investors and consultants, with the following detail:

Common Stock

Stock Options and Warrants

As of March 31, 2024, total unrecognized compensation cost related to the unvested stock-based awards was $433,268, which is expected to be recognized over weighted average period of 2.12 years. The aggregate intrinsic value associated with the options outstanding and exercisable as of March 31, 2024, based on the March 31, 2024 closing stock price of $0.18, was $0.00.

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

Schedule of Options and Warrants Outstanding and Exercisable