ITEM
1. BUSINESS.
Throughout
this document we use the following terms: Barocycler®, and PULSE®, which are registered trademarks of the Company. We
also use the terms ProteoSolveTM, ProteoSolveLRSTM, the Power of PCTTM, the PCT ShredderTM,
HUB440TM, HUB880TM, micro-PestleTM, PCT-HDTM, BaroFoldTM, Ultra Shear Technology™,
and UST™ all of which are unregistered trademarks of the Company.
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 safely and reproducibly control bio-molecular interactions (e.g., cell lysis, biomolecule
extraction). Our primary focus has been in the development of PCT-based products for biomarker and target discovery, drug design and
development, biotherapeutics characterization and quality control, soil & plant biology, forensics, and counter-bioterror applications.
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 BaroFold, Inc. (the “BaroFold” technology platform) to allow entry
into the bio-pharma contract services sector, and (2) the use of our recently-patented, scalable, high-efficiency, pressure-based Ultra
Shear Technology (“UST”) platform to (i) create stable nanoemulsions of otherwise immiscible fluids (e.g., oils and water)
and to (ii) prepare higher quality, homogenized, extended shelf-life or room temperature stable low-acid liquid foods that cannot be
acceptably preserved using existing non-thermal technologies.
On
April 29, 2020, we entered into a binding letter of intent to merge with Cannaworx Holdings, Inc. (Cannaworx), and their portfolio of
products and intellectual property (the “Cannaworx LOI” and “Cannaworx merger”). Post-merger, certain Cannaworx
products were expected to utilize our proprietary UST platform. Throughout the course of 2020, we entered into four amendments to
the Cannaworx LOI, with the last amendment making the LOI mutually non-exclusive and extending the deadline to January 30, 2021 after
which it expired. On June 12, 2020, we entered into a one-year Collaboration Agreement with Cannaworx and its parent company, Availa
Bio, Inc. on developing UST applications for prospective use in Cannaworx’s products. All parties remain actively engaged in this
collaborative effort.
The
PCT Platform
a.
Description
The
instruments, consumables and software used to perform PCT (the “PCT Platform”) use alternating cycles of hydrostatic
pressure between ambient and ultra-high levels to safely and reproducibly control bio-molecular interactions (e.g., critical steps
performed by hundreds of thousands of scientists worldwide, such as cell lysis and biomolecule extraction). Our primary focus
is in making our recently released, GMP-compliant, next generation PCT-based Barocycler 2320 EXT instrument available globally
to biopharmaceutical drug manufacturers to accelerate biologics development by streamlining workflows for the design, development,
characterization and quality control of biotherapeutic drugs. The PCT Platform is also used in such areas as biomarker and target
discovery, soil & plant biology, anti-bioterror, and forensics. We currently have hundreds of PCT instrument systems placed
in approximately 200 academic, government, pharmaceutical, and biotech research laboratories worldwide. There are over 120 independent
publications highlighting the advantages of using the PCT Platform in scientific research studies, many from key opinion leaders
worldwide. The PCT Platform is offered through the Company’s Research Products & Services Group.
We
are focused on solving the challenging problems inherent in biological sample preparation, a crucial laboratory step performed
by scientists worldwide working in biological life sciences research. Sample preparation is a term that refers to a wide range
of activities that precede most forms of scientific analysis. Sample preparation is often complex, time-consuming and, in our
belief, one of the most error-prone steps of scientific research. It is a widely-used laboratory undertaking – the requirements
of which drive what we believe is a large and growing worldwide market. We have developed and patented a novel, enabling technology
platform that can control the sample preparation process. It is based on harnessing the unique properties of high hydrostatic
pressure. This process, which we refer to as Pressure Cycling Technology, or PCT, uses alternating cycles of hydrostatic pressure
between ambient and ultra-high levels i.e., 20,000 psi or greater to safely, conveniently and reproducibly control the actions
of molecules in biological samples, such as cells and tissues from human, animal, plant and microbial sources.
PCT
is an enabling platform technology based on a physical process that had not previously been used to control bio-molecular interactions.
PCT uses unique instrumentation that is capable of cycling pressure between ambient and ultra-high levels at controlled temperatures
and specific time intervals, to rapidly and repeatedly control the interactions of bio-molecules, such as proteins, DNA, RNA,
lipids and small molecules. Our laboratory instrument family, the Barocycler®, and our proprietary consumables product line,
which include our unique MicroTubes, MicroCaps, MicroPestles, and PULSE® (Pressure Used to Lyse Samples for Extraction) Tubes,
and application specific kits (containing consumable products and reagents), together make up our PCT Sample Preparation System
(the “PCT SPS”).
In
2015, together with an investment bank, we formed a subsidiary called Pressure BioSciences Europe (“PBI Europe”) in
Poland. We have 49% non-controlling ownership interest with the investment bank retaining 51%. Throughout 2020, PBI Europe did
not have any operating activities and we cannot reasonably predict when operations will commence.
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, as well as proteins, lipids, or small molecules from the plant or animal cells and
tissues that are being studied. The majority of our current sales and marketing 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, we focus the majority of our PCT and constant pressure (“CP”) product
development efforts in three specific areas: biomarker discovery, precision medicine and forensics. 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 the United States, Europe, and Asia. Our goal is to continue aggressive market penetration
in these target areas. We also believe that there is a significant opportunity to sell and/or lease additional Barocycler®
instrumentation to additional laboratories at current customer institutions.
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 differentiation of disease states, subtypes and susceptibility to alternative treatments.
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 University of North Texas
and Florida International University have reported improvements in DNA yield from forensic samples (e.g., bone and hair) when
using the PCT platform in the sample preparation process. We believe that PCT may be capable of differentially extracting DNA
from sperm cells and female epithelial cells captured in swabs collected from rape victims and subsequently stored in rape kits.
We also believe that there are many completed rape kits that remain untested for reasons such as cost, time and quality of results.
We further believe that the ability to differentially extract DNA from sperm and not epithelial cells could reduce the cost of
such testing, while increasing the quality, safety and speed of the testing process.
b.
Market
We
focus most of our research and development and commercialization
efforts on sample preparation and quality control analysis for genomic, proteomic, lipidomic, and small molecule studies.
This market is comprised of academic and government research institutions, biotechnology and pharmaceutical companies, and other
public and private laboratories that are engaged in studying genomic, proteomic and small molecule material within plant and animal
cells and tissues. We elected to initially focus our resources in the market of genomic, proteomic and small molecule sample preparation
because we believe it is an area that:
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is
a rapidly growing market;
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has
a large and immediate need for better technology;
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is
comprised mostly of research laboratories, which are subject to minimal governmental regulation;
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is
the least technically challenging application for the development of our products;
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is
compatible with our technical core competency; and
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we
currently have strong patent protection.
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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
and small molecules from a wide variety of plant and animal cells and tissues.
Biomarker
Discovery - Mass Spectrometry
A
biomarker is any substance (e.g., protein, DNA) that can be used as an indicator of the presence or absence of a particular disease-state
or condition, and/or to predict or measure the progression and effects of therapy. Biomarkers can help in the diagnosis, prognosis,
therapy selection and monitoring, prevention, surveillance, control, and cure of diseases and medical conditions.
A
mass spectrometer is a laboratory instrument used in the analysis of biological samples, often focused on proteins, in life sciences
research. It is frequently used to help discover biomarkers. According to the November 2017 published market report by Markets
and Markets “Mass Spectrometry Market by Application (Pharmaceuticals, Biotechnology, Environmental testing), Platform (Single
mass spectrometry (Quadrupole, TOF & Ion Trap), Hybrid mass spectrometry (Triple Quadrupole, QTOF & FTMS)) – Global
Forecast to 2022, the global mass spectrometry market is expected to grow from USD 3.44 billion in 2016 to USD 5.27 billion by
2022, at a CAGR of 7.4% from 2015 to 2020. We believe PCT and CP-based products offer significant advantages in speed and quality
compared with current techniques used in the preparation of samples for mass spectrometry analysis.
Biomarker
Discovery – Precision Medicine
Precision
medicine is an approach to patient care that allows doctors to select treatments that are most likely to help patients based on
a specific biomolecular understanding of their disease. The hope of precision medicine is that treatments will one day be tailored
to the unique biomolecular variations specific to each person’s disease.
A
significant roadblock in obtaining necessary information to advance precision medicine – specifically in proteogenomics,
is sample preparation and the time required using conventional methods. We believe our PCT workflows address this roadblock by
providing a rapid, reproducible means of extracting biomarkers from patient samples in a clinically relevant timeframe
of 2 hours.
Biomarker
Discovery – Cancer and Tumor Microenvironment
The
most commonly used technique worldwide for the preservation of cancer and other tissues for subsequent pathology evaluation is
formalin-fixation followed by paraffin-embedding, or FFPE. 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.
Biopharmaceutical
Quality Control
A
critical step in biopharmaceutical manufacturing processes is quality control, involving characterization of the resulting biotherapeutics
via peptide mapping and analysis of post-translational modifications. Peptide mapping can be used in drug discovery and throughout
the manufacturing process for quality control between batches to produce a unique ‘fingerprint’ of an individual protein
and to compare this with the theoretical gene-derived amino acid sequence. Using conventional methods this process can take overnight
or more. We believe our PCT workflows offer a significant advantage to this process by offering a significant reduction in time
and improvement in reproducibility with a GMP compliant platform. Many protein-based pharmaceuticals undergo specific enzymatic
and chemical modifications (such as glycosylation, when specific carbohydrate moieties, glycans, are attached to the protein core,
thus helping them remain active longer in the patient’s bloodstream). Similar to peptide mapping, analysis of glycans, also
critical quality attributes of biologic drugs, requires tedious sample preparation steps that can be significantly accelerated
and rendered more reproducible by PCT workflows.
Our
customers include researchers at academic laboratories, government agencies, biotechnology companies, pharmaceutical companies
and other life science institutions in the Americas, Europe, Asia, Africa and Australia. Our goal is to continue
aggressive market penetration in these target areas. We also believe that there is a significant opportunity to sell and/or lease
additional Barocycler® instrumentation to additional laboratories within current customer organizations.
If
we are successful in commercializing PCT in applications beyond our current focus area of genomic, proteomic, lipidomic 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 precision medicine applications supporting diagnostic and prognostic decisions, including the extraction
of biomolecules from FFPE tissues, our potential customers could be clinical laboratories, pharmaceutical and biopharmaceutical
companies, and laboratories focused on drug discovery or prediction of disease treatment outcomes.
Sample
Extraction Process
The
process of preparing samples for genomic, proteomic and small molecule studies includes a crucial step called sample extraction
or sample disruption. This is the process of extracting nucleic acid i.e., DNA and/or RNA, proteins or small molecules from the
plant or animal cells and tissues that are being studied. 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. Our current
commercialization efforts are based upon our belief that pressure cycling technology provides a superior solution to sample extraction
compared with other available technologies or procedures and can thus significantly improve the quality of sample preparation,
and thus the quality of the test result.
c.
Products
We
believe our PCT and CP products allow researchers to improve scientific research studies in the life sciences field. Our products
are developed with the expectation of meeting or exceeding the needs of research scientists while enhancing the safety, speed
and quality that is available to them with existing sample preparation methods.
Barocycler®
Instrumentation
Our
Barocycler® product line consists of laboratory instrumentation that subjects a sample to cycles of pressure from ambient
(approximately 14.5 psi) to ultra-high levels (20,000 psi or greater) and then back to ambient, in a precisely controlled manner.
Our
instruments (the Barocycler 2320EXT, the HUB440 and the HUB880) use cycles of high, hydrostatic pressure to quickly and
efficiently break up the cellular structures of a specimen to release proteins, nucleic acids, lipids and small molecules from
the specimen into our consumable processing tubes, referred to as our PULSE® Tubes and MicroTubes. Our instruments have temperature
control options (on-board heating via internal heating jacket or heating and chilling via an external circulating water-bath),
automatic fill and dispensing valves, and an integrated touchscreen for interfacing with an onboard micro-processor or computer.
The microprocessor, computer or laptop computer are capable of saving specific PCT protocols, so the researcher can achieve maximum
reproducibility for the preparation of nucleic acids, proteins, lipids, or small molecules from various biological samples. Our
Barocycler® instruments, consumable products and application specific kits make up our PCT Sample Preparation
System.
Barocycler®
2320EXTREME - The Barocycler® 2320EXT is the flagship of the Company’s Barocycler line of PCT-based instruments. It
weighs approximately 80lbs, delivers a maximum pressure of 45,000 psi, and can process either up to 16 MicroTubes simultaneously
or one PULSE® Tube. The working temperature range is 4 – 95ºC and is controlled via an on-board electric heating
jacket or external circulating water bath. All tests are entered and recorded on a touch screen interface. Information from each
test run (pressure profile, cycle number, and temperature) is recorded and can be stored on the instrument, on a USB drive, or
networked into the user’s lab computer system. Pressure profiles can be manipulated in a number of ways, including static
high pressure holds and pressure ramp programs. The Barocycler® 2320EXT is pneumatic and requires an input air source of only
100psi to achieve and cycle at high pressure.
The
Barocycler® 2320EXT was developed to support the PCT-HD/PCT-SWATH application. PCT-HD enables faster, less cumbersome and
higher quality processing of biopsy tissues. With homogenization, extraction, and digestion of proteins occurring in a single
PCT MicroTube under high pressure, this protocol can yield analytical results in under four hours from the start of tissue processing.
PCT-HD was developed by our scientists and engineers in collaboration with Professor Ruedi Aebersold and Dr. Tiannan Guo of the
Institute of Molecular Systems Biology, ETH Zurich, and the University of Zurich, both in Zurich, Switzerland. Drs. Aebersold
and Guo combined PCT-HD with SCIEX’s SWATH-Mass Spectrometry – calling the resulting method “PCT-SWATH”.
Barocycler®
HUB440 –We believe the Barocycler® HUB440 is the first portable, ready to use, “plug-and-play” high pressure
generator for the laboratory bench. The Barocycler® HUB440 is capable of creating and controlling hydrostatic pressure from
500 psi to 58,000 psi and is designed for easy and flexible interfacing with a wide variety of user-specified pressure vessels.
It is computer controlled and runs on software that was developed by us to allow data logging and sophisticated algorithms for
controlling pressure and temperature. We own the rights and have a license to use the specialty LabVIEW software. We believe that
over the coming years, the Barocycler® HUB440 may become one of the main products in our pressure-based instrument line.
Barocycler®
HUB880 - The Barocycler® HUB880 is a compact, portable, bench-top, ultra-high pressure generator with vessel interface flexibility
similar to the HUB440, that uses an air pressure-to-liquid pressure intensifier allowing the user to generate fluid pressure as
high as 90,000 psi with input air pressure of just 126 psi. The HUB880 can be operated through a simple front panel or controlled
using an optional external Data Acquisition and Control Module for dynamic pressure control. We believe that the HUB880 will be
well accepted by scientists that need to achieve super high pressure, such as those working in the life science research, food
safety and vaccine industries.
The
Shredder SG3 –The Shredder SG3 is a low shear mechanical homogenization system for use with tough, fibrous and other
difficult-to-disrupt tissues and organisms. The Shredder SG3 System uses a variety of Shredder PULSE® Tubes to directly and
rapidly grind a biological sample which, when combined with selected buffers, can provide effective extraction of proteins, DNA,
RNA, lipids and small molecules from tissues and organisms. The Shredder SG3 is also used to isolate intact and functional mitochondria
from tissues. The Shredder SG3 features a three-position force setting lever, which enables the operator to select and
apply reproducible force to the sample during the shredding process and eliminates the need for the operator to exert force for
long periods when processing one or more samples.
Barocycler®
Consumable Products
PCT
MicroTubes – PCT MicroTubes are made from a unique fluoropolymer, fluorinated ethylene propylene (FEP). FEP is highly inert
and retains its integrity within an extremely wide temperature range (-200°C to 100°C), while providing important limited
flexibility behavior for PCT applications. MicroTubes hold a maximum total volume of 150 microliters. PCT MicroTubes must be used
with either PCT-MicroCaps or PCT-MicroPestles.
PCT-MicroCaps
– PCT MicroCaps are made from polytetraflouroethylene (PTFE). The PCT MicroCaps are available in three sizes to accommodate
total sample volume: 50, 100 and 150uL. 50uL MicroCaps are used with samples ≤50uL, 100uL MicroCaps are used with samples between
50-100uL, and 150uL MicroCaps are used with samples between 100-150uL.
PCT-Micro
Pestle - PCT μPestles are made from polytetrafluoroethylene (PTFE), a synthetic fluoropolymer of tetrafluoroethylene, also
known as Teflon (by DuPont Co). PTFE is practically inert; the only chemicals known to affect it are certain alkali metals and
most highly reactive fluorinating agents. PCT μPestles, in conjunction with PCT MicroTubes, are designed to enhance the extraction
of proteins, lipids, DNA, RNA and small molecules from minute amounts (0.5 – 3.0 mg) of solid tissue in extraction reagent
volumes as low as 20-30 μL. PCT MicroTubes and PCT μPestles use PCT to effectively disrupt soft tissues and lyse their cells.
As a result, the tissue sample trapped between the MicroTube walls and the μPestles shaft is crushed on every pressure cycle.
This mechanical action, combined with the extraction ability of the buffer under high pressure, results in highly effective tissue
homogenization and extraction.
PCT
μPestles and PCT MicroTubes, together with a PBI Barocycler®, comprise the PCT Micro-Pestle System, which provides a fast,
safe, and efficient means of extraction from extremely small amounts of solid samples such as soft tissue biopsies. The PCT μPestle
System can be used in any PBI Barocycler®.
We
believe our development of these various consumable products has helped, and will continue to help, drive the adoption of PCT
within the life sciences market.
d.
Customers
Our
customers include researchers at academic laboratories, government agencies, biotechnology companies, pharmaceutical firms, and
other life science institutions throughout the Americas, Europe, Asia, Africa and Australia. Our goal is to continue aggressive
market penetration to target groups in these geographical areas. We also believe that there is a significant opportunity to sell
and/or lease additional Barocycler® instrumentation to additional laboratories within current customer organizations.
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:
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Hospitals
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Reference
laboratories
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Government
laboratories (e.g., FDA, USDA, NIH, FBI, and police)
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Pharmaceutical/biotech/diagnostic
companies
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Laboratories
focused on drug discovery, cancer research, and precision medicine
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e.
Competition
We
compete with companies that have existing technologies for the extraction of nucleic acids, proteins, lipids, and small molecules
from cells and tissues, including methods such as mortar and pestle grinding, sonication, rotor-stator homogenization, French
Press, bead beating, freezer milling, enzymatic digestion, and chemical dissolution. We believe that there are a number of significant
issues related to the use of these methods, including: complexity, sample containment, cross-contamination, shearing of biomolecules
of interest, limited applicability to different sample types, ease-of-use, reproducibility, and cost. We believe that our PCT
Sample Preparation System offers a number of significant advantages over these methods, including:
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labor
reduction
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versatility
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temperature
control
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efficiency
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precision
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simplicity
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reproducibility
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safety
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To
be competitive in the industry, we believe we must be able to clearly and conclusively demonstrate to potential customers that
our products provide these improved performance capabilities. We strongly believe that our PCT Sample Preparation System is a
novel and enabling system for genomic, proteomic, and small molecule sample preparation. As such, many users of current manual
techniques will need to be willing to challenge their existing methods of sample preparation and invest time to evaluate a method
that could change their overall workflow in the sample preparation process, prior to adopting our technology.
Further,
we are aware that the cost of the PCT Sample Preparation System may be greater than the cost of many of the other methods currently
employed. Consequently, we are focusing our sales efforts on those product attributes that we believe will be most important and
appealing to potential customers; namely versatility, reproducibility, quality, and safety.
f.
Manufacturing and Supply
We
utilize a contract assembler for our Barocycler® 2320EXT.
They provide us with precision manufacturing services that include management support services to meet our specific application
and operational requirements. Among the services provided to us are:
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CNC
Machining
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Contract
Assembly & Kitting
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Component
and Subassembly Design
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Inventory
Management
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ISO
certification
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At
this time, we believe that outsourcing contract assembly of our Barocycler® 2320EXT is the most cost-effective method
for us to obtain ISO Certified, CE and CSA Marked instruments.
We
currently manufacture and assemble the Barocycler® HUB440,
HUB880, the SHREDDER SG3, and most of our consumables at our South Easton, MA facility. We will regularly reassess the tradeoffs
between in-house assembly versus the benefits of outsourced relationships for of the entire Barocycler® product
line, and future instruments.
g.
Research and Development
Our
research and development activities are split into two functional areas: Applications Development and Engineering.
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Applications
Development R&D: Our highly educated and trained staff has years of experience in molecular and cellular biology,
virology, and proteomics. Our team of scientists focuses on the development and continued improvement of the PCT Sample Preparation
System and on PCT-dependent genomic, proteomic, lipidomic, and small molecule sample preparation applications. Dr. Alexander
Lazarev, our Chief Science Officer, meets regularly with our sales, marketing, and engineering staff to discuss market needs
and trends. Our applications research and development team is responsible for the technical review of all scientific collaborations,
for the support of our marketing and sales departments through the generation of internal data in a number of areas of market
interest, and in the development of commercially-viable PCT-dependent products.
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Engineering
R&D: Our engineering research and development team is focused on the design and development of new and improved instrumentation
and consumable products to support the commercialization of PCT. Our engineering department is led by Dr. Edmund Ting, our
Senior Vice President of Engineering. The primary focus of our engineering group is to develop and continually improve our
line of PCT-based instruments and consumables, ensure seamless production processes, help perform installations and field
service, and work with our application scientists to enhance our PCT-based systems for the mass spectrometry and other markets.
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Collaboration
Program
Our
Collaboration Program is an important element of our business strategy. Initiating a collaboration with a researcher involves
the installation of a Barocycler® instrument for an agreed upon period of time of approximately three to twelve months, a
financial commitment that is beneficial to both the collaborator and PBI, and the execution of an agreed upon work plan. Our primary
objectives for entering into a collaboration agreement include:
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the
development of a new application for PCT and CP in sample preparation;
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the
advancement and validation of our understanding of PCT and CP within an area of life sciences in which we already offer products;
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the
demonstration of the effectiveness of PCT and CP by specific research scientists, particularly Key Opinion Leaders (“KOLs”),
who we believe can have a positive impact on market acceptance of PCT; and
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the
expectation of peer-reviewed publications and/or presentations at scientific meetings by a third party, especially a KOL,
on the merits of PCT and CP.
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Since
we initiated our collaboration program, third party researchers have cited the use of our PCT platform in multiple publications
and presentations. We believe that this program has provided and continues to provide us with independent and objective data about
PCT from well-respected laboratories in the United States and throughout the rest of the world. We believe this program has been
responsible for the sale of multiple Barocycler instruments over the past few years and will continue to help to increase the
sales of instrument systems in the future.
Active
Collaborations:
a.
RedShiftBio Inc.
b.
Thomas Conrads, Inova Schar Cancer Center
c.
Christine Vogel, NYU
d.
Leica Microsystems, GmbH
e.
Dr. Michael Przybylksi, Steinbeis Centre for Biopolymer Analysis and Biological Mass Spectrometry
f.
Dr.V.M. Balasubramaniam, The Ohio State University
g.
University of Delaware
h.
Dr. Jennifer Van Eyk, Cedars Sinai Medical Center
Other
Fields of Use and Applications for PCT
Our
research and development efforts have shown that, in addition to genomic, proteomic, lipidomic, and small molecule sample preparation,
PCT is potentially beneficial in a number of other areas of the life sciences, including pathogen inactivation, protein purification,
control of chemical (particularly enzymatic) reactions, and immunodiagnostics. Other applications in the sample preparation market
include forensics and histology, as discussed above. Our pursuit of these markets, however, depends on a number of factors, including
our success in commercializing PCT in the area of sample preparation, our judgment regarding the investment required to be successful
in these areas, the value of these markets to PBI, and the availability of sufficient financial resources. Below is a brief explanation
of each of these additional potential applications and a short description of why we believe PCT can be used to improve scientific
studies in these areas.
Protein
Purification
Many
vaccines and drugs are comprised of proteins. These proteins need to be purified from complex mixtures as part of the manufacturing
process. Current purification techniques often result in the loss of a significant amount of the protein. Therefore, any method
that could increase the amount of protein being recovered in the purification step, could subsequently lead to a reduction in
cost to the manufacturer. We believe we have successfully generated proof-of-concept that PCT can satisfy this need. We believe
that compared with current purification procedures, a process that uses PCT has the potential to increase protein recovery, increase
the quality of the product, and lower production costs. We have been issued U.S. patents in this area.
Pathogen
Inactivation
Biological
products intended for human use, such as blood, vaccines and drugs, are put through rigorous processing protocols in an effort
to minimize the potential of that product to transmit disease. These protocols may include methods to remove infectious materials
such as pre-processing testing, filtration or chromatography, or methods to inactivate infectious agents that are not captured
in the removal steps such as pasteurization, irradiation and solvent detergent inactivation. Notwithstanding current diligence
in both the removal and inactivation steps, significant concern remains that some pathogens (e.g., bacteria, viruses, spores)
capable of transmitting infection to recipients may not be removed or inactivated with current procedures. In addition, some removal
and inactivation methods may not be useful because of cost, safety, ease-of-use or other practical concerns. To that end, we believe
that a superior inactivation method is needed that can safely, rapidly and inexpensively inactivate pathogens in blood, vaccines
and drugs without the need for chemical or other potentially toxic additives. We have successfully generated proof-of-concept
that PCT can satisfy this need. We believe that compared with current procedures, a process that uses PCT has the potential to
increase safety and yield, lower cost and decrease the potential side effects of current methods. We have been issued U.S. patents
for this PCT-dependent inactivation technology.
Control
of Chemical (Particularly Enzymatic) Reactions
Chemical
reactions encompass many important interactions in nature. Methods used to control chemical reactions could have a positive effect
on the quality, speed, and overall result of the reaction. The control and detection of chemical reactions is particularly useful
in the biotechnology field for synthesizing and characterizing such molecules as nucleic acids and polypeptides. We believe that
PCT offers distinct advantages in controlling chemical reactions over current methods, since PCT can provide precise, automated
control over the timing and synchronization of chemical reactions, particularly enzymatic reactions. We have been issued U.S patents
in this area.
Immunodiagnostics
Many
tests used in the clinical laboratory today are based on the formation of a complex between two proteins, such as an antigen and
an antibody. Such “immunodiagnostic” methods are used for the detection of infectious agents such as the human immunodeficiency
virus (“HIV”), hepatitis viruses, West Nile virus, and others, as well as for endocrine, drug testing and cancer
diagnostics. We have generated proof-of-concept that PCT may be used to control biomolecular interactions between proteins, such
as antigens and antibodies. We believe this capability may provide a greater degree of sensitivity and quantitative accuracy in
immunodiagnostic testing than that offered by methods that are available today. We have been issued U.S. patents in this area.
Extended
Service Contracts
We
offer extended service contracts on our laboratory instrumentation to all of our customers. These service contracts allow a customer
who purchases a Barocycler® instrument to receive on-site scheduled preventative maintenance, on-site repair and replacement
of all worn or defective component parts, and telephone support, all at no incremental cost for the life of the service contract.
We offer one-year and four-year extended service contracts to customers who purchase Barocycler® instruments.
The
BaroFold Platform
a.
Description
The
need for the efficient production of recombinant protein biopharmaceuticals has grown rapidly and demand for them will continue to grow
as a result of their high specificity and efficacy. Protein drugs are being manufactured in a variety of host organisms. With the rapid
growth in biosimilars (less expensive versions of popular biopharmaceuticals that are manufactured and marketed after the expiration
of the original patents), expression in bacteria is beginning to play a major role in this industry, particularly when the biological
activity of the protein product is not dependent on post-translational modifications. Overexpression of proteins in bacteria often results
in the accumulation of the protein product in inactive insoluble deposits inside the cells, called inclusion bodies. Inclusion bodies
protect the protein of interest from degradation and present a simple and convenient ways to extract and purify it. Moreover, if the
protein of interest is toxic or lethal to the host cell, then inclusion body expression may be the only available production method.
However, the challenge of protein production in bacterial systems most often lies in conversion of inactive and misfolded proteins
in the inclusion bodies into soluble, properly folded bioactive products. This conversion process is called protein refolding.
Traditional methods of protein refolding rely on using high concentrations of chemical denaturants and detergents to unfold misshapen
proteins, disentangle inactive aggregated proteins and to dissolve them, followed by up to 100-fold dilution or dialysis to
remove interfering chemicals and then letting the proteins refold into their desired active forms. Since chemically-driven unfolding
is harsh, it tends to destroy most protein structure, some of which could be beneficial for subsequent refolding. Moreover, dilution-
or dialysis-based methods take a long time and produce very low yields of refolded protein, while most of the unfolded protein material
tends to get lost into irreversible aggregation. Overall, traditional refolding methods are usually inefficient, include multiple costly
steps and have very low recovery yields. Pressure-mediated disaggregation and unfolding and refolding of proteins offers an attractive
pathway for achieving much higher yields of correctly folded proteins with desired efficaciousness, produced at much lower cost, versus
traditional chemically driven methodologies.
Acquisition
of BaroFold’s PreEMT™ high-pressure protein refolding technology in December 2017
Our
acquisition of the assets of BaroFold, Inc. have significantly
increased PBI’s intellectual property portfolio in high-pressure technologies with the addition of eight issued and several
pending patents. These patents give PBI the ability to operate in several important areas for biologics research and manufacturing:
protein folding, re-folding and disaggregation. The patents also provide PBI the right to grant licenses to third parties to practice
the BaroFold technology in both research laboratories and in biopharmaceutical manufacturing.
Biopharmaceutical
products are typically large-molecule protein therapeutics produced via complex biological manufacturing processes that can result
in undesirable protein misfolding and aggregation outcomes. Misfolded or aggregated proteins typically lack therapeutic activity
and can present health risks to patients, requiring robust remediation within pharmaceutical manufacturing processes. The Barofold
technology improves the quality of manufacturing, decreases manufacturing costs (as much as $2-10M/year per commercial biologic
drug), and facilitates achievement of proper activity from difficult-to-manufacture proteins.
Barofold
technology utilizes high pressure instead of, or in synergy with, chemical denaturants, offering significantly milder conditions
for unfolding and disaggregation of proteins in inclusion bodies. As a result, subsequent refolding can be carried
out faster, more efficiently, and in much smaller volumes. Pressure-based unfolding of proteins in inclusion bodies tends
to only partially unfold the protein and preserve some beneficial structures that could help to guide the refolding process into
the desired outcomes. Consequently, higher yields of active protein and faster manufacturing turn-around further lower
the cost of biopharmaceutical production. Moreover, lower requirements for harsh chemical reagents in high pressure refolding
process result in decrease or elimination of associated hazardous waste generated from chemical removal processes, leading
to further cost reduction and protection of the environment.
The
instruments, consumables and software used to practice the BaroFold technology (the “BaroFold Platform”)
can be used to significantly lower the cost, boost production yield, and improve the quality of protein therapeutics. It employs
high pressure for the disaggregation and controlled refolding of proteins to their native structures at yields and efficiencies
not achievable using existing technologies. The BaroFold Platform has been shown to remove protein aggregates in biotherapeutic
drug manufacturing, thereby improving product efficacy and safety for both new-drug entities and biosimilar products. The BaroFold
Platform can help companies create novel protein therapeutics, accelerate therapeutic protein development, manufacture follow-on
biologics, and significantly optimize life-cycle management of protein therapeutics. It is scalable and practical for standard
manufacturing processes. This unique technology platform can help protein-based biopharmaceutical companies create and manufacture
high quality, novel protein therapeutics and lower the cost of existing formulations. Research and manufacturing licenses are
available.
b.
Market
The
global biopharmaceuticals market was valued at $237 billion in 2018 and is estimated to be valued at $389 billion in 2024,
witnessing a CAGR of 8.59%. The market growth is attributed to the growing acceptance for biopharmaceuticals due to their ability
to treat previously untreatable or poorly managed diseases, resulting in huge market demand for biopharmaceuticals.
We
believe that biopharmaceuticals offer several benefits, such
as highly effective and potent action, fewer side effects, and the potential to actually cure diseases rather than merely treat
the symptoms, which have significantly increased the demand for biopharmaceutical products.
The
predominant majority of biopharmaceutical products are recombinant proteins. Typical examples of such proteins are vaccines, monoclonal
antibodies (MAbs), growth factors (such as Erythropoietin), hormones (such as insulin or HGH), receptor ligands, recombinant
enzymes (Caspase, Cathepsin, etc.), blood factors and other therapeutic and research reagent proteins. Recombinant protein production
can be done in bacteria or in cell cultures derived from higher organisms. Due to significant time and cost savings, attention
to protein production in bacterial hosts has recently spiked, predominantly driven by rapid growth of biosimilars, antibody-drug
conjugates (ADCs) and fusion proteins that are lethal to non-bacterial host cells. A major area of challenge in the
biopharmaceuticals industry results from suboptimal folding configurations and/or agglomeration of proteins during production
and storage, requiring subsequent remediation via unfolding and controlled refolding of these therapeutic proteins into their
optimal configurations. Following initial penetration and acceleration through conversion of market share from traditional
chemical methods, the growth of the protein refolding business is expected to follow the growth trajectory of the entire biopharmaceutical
market.
Our
Barofold platform technology has been shown not only to save manufacturing costs and time, but to boost protein yield and minimize
protein immunogenicity, resulting in greater efficacy and safety for the patient.
Moreover,
PBI’s Barocycler line of products can also be utilized in accelerated protein stability testing to guide biopharmaceutical
formulation development. PBI has initiated several collaborations, including a co-marketing agreement with RedShift BioAnalytics,
Inc., and a research collaboration with the University of Delaware (see the Research and Development section below).
c.
Products
Instruments:
Barocycler 2320 EXT - a convenient screening tool for protein refolding optimization
Originally
developed within the framework of our PCT platform business as a tool for biological sample preparation (as described above),
our Barocycler 2320EXT instrument features a “ramp mode” in its control software that makes it ultimately suitable
for performing research-scale experiments for protein refolding and disaggregation on a laboratory bench scale. Each protein molecule
is biochemically unique and, while pressure is highly efficient in solubilization of practically any misfolded protein contained
within inclusion bodies, a unique chemical environment may be required to persuade each unfolded protein molecule to refold into
a stable biologically active state. Therefore, development of protein refolding methods requires screening experiments necessary
to determine the most optimal composition of the chemical milieu for each protein of interest. The Barocycler 2320EXT is
ideally suited for such experiments, providing researchers with abilities to process up to 12 specimens per batch in varying chemical
environments. We believe that availability of this affordable screening tool will promote adoption of the
high-pressure refolding approach among biopharmaceutical process development teams and academic researchers involved in development
of protein biopharmaceuticals. The same instrument is also uniquely suited for studies of thermodynamics of protein aggregation
and accelerated protein stability tests.
BaroFold
Contract Services
Our
BaroFold contract services can be used to significantly impact and improve the quality of large-molecule protein biotherapeutics.
These services employ high pressure manipulations for the disaggregation and unfolding of proteins to their native structural
states and then controlled refolding of the proteins to the desired therapeutically active state, at yields and efficiencies not
achievable using existing technologies. The Barofold Platform has been shown to eliminate protein aggregation during biotherapeutic
drug manufacturing and storage, thereby improving product yield, efficacy and safety for both new-drug entities and biosimilar
products. The Barofold platform can help companies create novel protein therapeutics, accelerate therapeutic protein development,
manufacture follow-on biologics, and enable life-cycle management of protein therapeutics. It is scalable and practical for standard
manufacturing processes. This unique technology platform can help protein-based biopharmaceutical companies create and manufacture
high quality, novel protein therapeutics and lower the cost of existing formulations. Research and manufacturing licenses are
available.
d.
Customers (examples only, not current customers
for confidentiality reasons)
Biopharmaceutical
companies (Roche, Novartis A.G., Sanofi, Biogen-Idec, Abbvie, Inc., Amgen, Takeda, Pfizer, Merck & Co., etc.)
Biosimilars
companies (Teva, Sandoz, Hospira, Mylan, Allergan, Biocon, Momenta., etc.)
Biopharmaceutical
Contract Development and Manufacturing Organizations (Boehringer-Ingelheim, Lonza, Samsung Biologics, Catalent Pharma
Solutions, Thermo Fisher Scientific, Fujifilm, etc.)
Life
science research reagent manufacturers (Thermo Scientific, GE Healthcare, Danaher Corporation, Millipore-Sigma, Bio-Techne
R&D Systems, etc.)
Academic
research laboratories involved in development of protein pharmaceuticals, expression of recombinant proteins, protein
structure analysis and biophysical characterization.
e.
Competition
Over
two decades, Barofold, Inc. built an intellectual property portfolio centered around the use of hydrostatic pressure
for protein refolding and disaggregation. Following Barofold’s acquisition by PBI in 2017, this portfolio, combined with
the PBI patents in adjacent areas, puts PBI in a unique position worldwide to commercialize, practice and license out the right
to practice high pressure protein refolding, disaggregation and accelerated stability testing. There is no direct competition
to PBI that is using high pressure for these applications. Competing traditional approaches use chemicals for refolding and appear
inferior in many aspects, as described above.
f.
Manufacturing and Supply
Manufacturing
of the Barocycler 2320EXT has been covered above, since this instrument shares its utility with applications of PCT technology
platform. The PCT MicroTube consumable line is also shared between these two application areas.
PBI
currently develops GMP-compliant, pilot-scale, high-pressure systems for processing of protein batches up to 10L in volume
at pressure up to 60,000 psi.
In
order to provide access for our customers to manufacturing scale high pressure equipment, PBI is currently in negotiations with
several HPP (High Pressure Processing) equipment vendors supplying large pressure systems to food manufacturers. Upon successful
feasibility studies conducted by customers themselves, or within the framework of Barofold Contract Services, PBI will act as
a contractor to assist protein refolding customers in scaling up the process and identifying, procuring and validating appropriate
large-scale equipment for high pressure protein refolding.
g.
Research and Development
The
PBI team has gained access to a significant body of research data through acquisition of the assets of Barofold, Inc. Barofold
has spent over two decades perfecting high-pressure protein refolding applications and produced many publications and patents
(see below). Our team’s experience in high pressure refolding is being used in Contract Service work currently offered by
PBI to our biopharmaceutical customers, as described above. As an equipment vendor, PBI has a goal of taking advantage of these
R&D instrument assets and turning a benchtop high pressure protein refolding solution into a convenient, popular and easily
accessible workflow for thousands of laboratories worldwide. As the knowledge about this method spreads and feasibility of great
economic impact of utilizing this approach at a production scale is demonstrated, PBI plans to license high pressure refolding
methods to its biopharmaceutical customers.
Additionally,
several new applications of high pressure in biopharmaceutical development are stemming from a combined Barofold and PBI intellectual
property portfolio. One of these highly promising applications, namely, pressure-assisted accelerated protein stability testing,
is currently being developed by PBI’s R&D team in collaboration with the Center for Biomanufacturing Science
and Technology of the University of Delaware, headed by Professor Christopher J. Roberts. Many protein biopharmaceuticals must
be kept in solution. Any physical factors such as exposure to temperature fluctuations in storage and shipment, mechanical vibration,
exposure to light, etc., could promote protein aggregation, if the biotherapeutic protein is stored in a suboptimal chemical environment.
Protein aggregates tend to be highly immunogenic, i.e., causing a patient’s immune system to recognize protein drug as a
foreign object and destroy it, leading to undesired inflammatory response and counteracting the desired therapeutic effect. Each
protein drug may require optimization of its chemical environment (formulations development) to guarantee maximal stability and
shelf life. Meanwhile, high pressure is a convenient tool for controlled protein unfolding. Partially unfolded proteins tend to
aggregate more rapidly. Brief exposure of the protein drug in a specific formulation to a “pressure shock” can
be used to promote aggregation, allowing researchers to screen for best formulations that prevent drug aggregation
in a matter of only a few days. Conventional approaches for accelerated stability testing utilize exposure to high temperature.
Since thermal effects on proteins are stochastic (i.e., random), there is little chance that every protein molecule will follow
the same fate after thermal shock. Pressure exerts its effect on all protein molecules of the same type/conformation in exactly
the same manner, making the pressure shock more effective in such studies. Our collaborative research program with Professor Roberts’s
team is directed towards development of validated workflows for high pressure accelerated stability testing.
The
UST Platform
a.
Description
The
UST Platform is based on the use of intense shear forces generated from ultra-high pressure (greater than 20,000 psi) discharged
through a controlled nanometer-scale valve orifice. UST has been shown to turn hydrophobic extracts into stable, effectively
water-soluble formulations on a small, laboratory scale. The UST Platform offers the potential to produce stable nanoemulsions
of oil-like products in water. Such formulations could potentially have enormous success in many markets, including pharmaceuticals,
nutraceuticals (such as medically important plant oil extracts like CBD-enriched plant oil soluble in water),
cosmetic and personal care products, liquid foods and beverages, agrochemicals, as well as inks, paints, lubricants and other
industrial products. We believe that UST has the potential to play a significant role in a number of commercially important
areas, including (i) the creation of stable nanoemulsions of otherwise immiscible fluids (e.g., oils and water), and (ii) the
preparation of higher quality, homogenized, extended shelf-life or room temperature stable low-acid liquid foods that cannot be
effectively preserved using existing non-thermal technologies, e.g., dairy products.
UST
is an emerging technology that combines intense fluid shear with an instant, short-lived burst of heat achieved by specialized
high-pressure equipment that can produce commercially sterile, pumpable, homogeneous fluid products. The UST process can provide
energetic cellular disruption that results in the inactivation of bacteria, bacterial spores, viruses, and enzymes. Depending
on operating conditions, low nano-scale emulsions (nanoemulsions) of oil and water mixtures can be produced that have been shown
to have improved room-temperature shelf stability, and superior sensory profiles (taste, smell, texture and appearance).
Of particular importance, oil-based active components delivered in such extreme nano-emulsions in water facilitates greatly improved
absorption and bioavailability in the water-based biochemistry of humans, animals and plants, allowing for much lower loading
quantities of actives required in manufacture, while ensuring safer and more controlled effective dosing.
The
Company has received its first US patent and two patents in China on UST, focused on a low cost, scalable
approach for product manufacturing. The Company believes this method can find use in various nanoemulsion applications for pharmaceutical
(e.g., drug delivery), biotechnology (e.g., protein recovery, biomolecule extraction), and food (e.g., shelf-stable “clean
label” products). We plan to design, develop, manufacture, and market a lab-scale UST-based production instrument that we
will license to the life sciences and other industries. We also plan to develop a pilot plant scale UST-based production
instrument for larger-scale production demonstrations, in our expectation to license the technology with larger manufacturing
scale equipment to food, cosmetics, nutraceuticals, and other companies worldwide.
b.
Market
In
20I9, we have focused efforts on developing and demonstrating the UST protocol and seeding early adopters, which would provide
insights into market, formulation, product development, and ultimately end product requirements. Our initial market focus has
been on cannabis extracts, as this market’s unmet needs for nanoemulsions solutions offer high visibility and ready
access to funding, versus many other important target markets, such as Cosmetics, Food and Beverage, Nutraceutical, Pharmaceutical,
and Industrial fluids and lubricants. In 2020, we refined the Ultra Shear Technology™ K45 instrument allowing us
to run samples for multiple potential customers, which demonstrated the goal of producing room temperature stable, transparent
nanoemulsions. (Transparency is achieved when nanoemulsion droplet sizes are smaller than the wavelength of visible light –
an important indicator of achievement of extremely low-scale nanoemulsions.) We secured orders from companies for 15 units,
which is the target number for our first production run. We also moved forward in the development of the BaroShear Mini: bench-top,
laboratory-based instrument for research, formulation, and small volume processing; and the BaroShear Max; high-volume, industrial-scale,
clean-in-place (CIP), production instrument. In 2021, we plan to commercialize both the standard K45 and BaroShear Mini, as well
as continue the development of the BaroShear Max.
c.
Products
The
BaroShear Ultra Shear Technology platform development portfolio is currently comprised of three models for use in research, formulation,
and processing of oil and water nanoemulsions.
○
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BaroShear
Mini – bench-top instrument to be used for research, formulation, and small volume processing where budget is a
concern. Throughput of 1mL / minute
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BaroShear
K45 – pilot scale, floor standing instrument for throughput of at least 1L / hour.
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BaroShear
Max – floor standing, fully automated, CIP industrial production system for throughput up to 1L / minute.
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d.
Customers
Cannabis
extracts, cosmetic & personal care products, liquid foods & beverages, nutraceuticals, pharmaceuticals, agrochemicals,
inks, paints, lubricants and other industrial products, and researchers
and processors interested in developing stable, water-soluble nanoemulsions for any application.
e.
Competition - High Pressure
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Avestin
/ ATA Scientific – Australia
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Bee
Int’l, Easton, MA – USA
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DyHydromatics,
Maynard, MA - USA
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ELVEFLOW
an Elvesys brand, Paris, FRANCE
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Microfluidics
an IDEX Corp Company, Westwood, MA – USA
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f.
Manufacturing and Supply
PBI’s
current strategy is to have the development handled by PBI’s development and engineering team, with manufacturing to
be outsourced to a Contract Manufacturing Organization (CMO). Aftermarket service and support will initially be handled by
PBI’s service and repair staff. As unit placements grow, we will investigate expansion of PBI’s service and support
organization or augment it with external partners.
g.
Research and Development
PBI’s
UST engineering team is developing a product portfolio consisting of three model instruments with the following research &
formulation, pre-production and production models scheduled for launch as follows:
BaroShear
K45 mini – bench-top instrument, Q2 2021
BaroShear
K45 – floor standing model, Q4 2021
BaroShear
Max – floor standing, fully automated, CIP equipment, prototype delivery to Ohio State University – Q2 2020. Commercial
release planned for late 2021/2022 timeframe.
Other
a.
Sales and Marketing
Our
marketing and sales functions are led by Richard T. Schumacher, our Chief Executive Officer. Mr. Schumacher oversees and directs
all marketing and sales activities, including trade show attendance and sponsorship, on-line advertising, website maintenance
and improvement, search engine optimization, creation and dissemination of newsletters, market research initiatives, the arrangement
of on-location seminars, lectures, and demonstrations of instrumentation and consumables capabilities, and the supervision of
our sales and marketing personnel. Mr. Schumacher is also responsible for the overall coordination of our collaboration programs,
from initial set-up, research plan design, and training, service, and data analysis. Some of these responsibilities are shared
with other departments such as Research and Development, but marketing and sales drives the collaborative process. Mr. Schumacher
is also responsible for the continued coordination and support of our foreign distribution partners.
Our
sales and marketing efforts are centered on using the independent data developed and disseminated by our collaboration partners
to help drive the installed base of our PCT Sample Preparation System, BaroFold services, and BaroShear UST platform. The development
of scientific data by our partners and our internal researchers provides our sales and marketing staff with additional tools that
are essential in selling existing and newly developed paradigm-shifting, high value technologies and services.
Our
domestic PCT sales force currently consists of one sales director and one field salesperson. Our sales director is currently responsible
for servicing the U.S., excluding New England, as well as all CBD-related UST customers and our field salesperson handles New
England and the international distributors.
Our
domestic BaroShear UST sales efforts in the non-CBD market is handled by both the sales director and the field salesperson. We
believe that partnering with seasoned, capable equipment distribution partners in the cannabis and other laboratory / process
markets will drive lead generation and purchase orders faster than if we were to build our own sales force.
b.
Marketing Strategy
We
recognize that our enabling PCT, BaroFold, and UST pressure platforms are powerful, novel platform technologies. We also recognize
that the power of pressure in today’s laboratories is not yet generally known by researchers. Our first goal is to greatly
broaden the awareness of pressure and its applications among research scientists and to ensure they know that these technologies
exist through our high-pressure instruments, requisite consumables, and unique services. To accomplish this expansion of knowledge
about the power of pressure and the subsequent adoption of our pressure-based technology platforms, we have developed and are
implementing a multi-faceted approach to marketing our products and services.
Key
Opinion Leaders and Publications
To
initially reach scientists, we have established collaborations with key opinion leaders (KOL) who recognized early the potential
for our pressure-based platforms and who went on to report their discoveries in peer reviewed journals. Among the KOLs working
with us is Dr. Ruedi Aebersold (Head of the Department of Biology, ETH, Zurich). Dr. Aebersold, a pioneer in proteomics, worked
with our scientists and engineers to develop PCT-SWATH (aka PCT-HD), a superior method for the extraction and preparation of proteins
from samples intended for analysis by mass spectrometry. Other KOLs include Dr. Jennifer van Eyk (Director of Advanced Clinical
Biosystems Institute in the Department of Biomedical Sciences Cedar Sinai, Los Angeles, CA) and Dr. Wayne Hubble (Jules Stein
Professor at the University of California, LA). Dr. van Eyk is a recognized expert in the causes of heart disease and is using
PCT in her attempt to discover cardiac disease biomarkers. Dr. Hubble, a member of the National Academy of Sciences, is a leader
in the field of electron paramagnetic resonance (EPR). He uses PCT in his studies of protein-protein interactions, so very important
in the discovery of drug targets and drug design. The publications and presentations of these and other world class scientists
have been invaluable in gaining initial entry of PCT in several areas of research. In addition to publications by our numerous
KOLs, there are also many additional peer reviewed publications from dozens of other scientists discussing the advantages of the
PCT platform in bio-molecule sample preparation, as well as the advantages of our BaroFold technology and our UST platform. To
this end, we do all we can to disseminate the work of these scientists in an effort to increase the exposure of PCT, BaroFold,
and UST to the worldwide research community.
Broadcasting
PCT and Our Products
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1.
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We
attend, exhibit, and present at top scientific meetings such as the American Society of Mass Spectrometry (ASMS) and both
the US and International meetings of the Human Proteome Organization (HUPO). These meetings are an opportunity to present
our technology and to showcase our products to scientists who require sample preparation in their research studies.
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2.
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Routine
and timely “blast” emails to scientists in our database. Topics include new PCT-related publications, announcements
of meetings, product advertisements, and a quarterly newsletter. The database we use is proprietary, as it has been built
from attending scientific meetings and searching the internet for relevant publications and contact information. Pardot Marketing
automation software is utilized for routing email campaigns, allowing us to measure customer engagement with our landing pages,
articles and emails.
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3.
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We
manage our database with SalesForce, a state-of-the-art Customer Relationship Management (CRM) system. Through SalesForce,
we employ the marketing automation software Pardot to manage our email blasts. Pardot enables us to assess open rates, levels
of interest, and to create automatic and constant contact with potential clients.
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4.
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We
use social media platforms like LinkedIn, Twitter and Facebook to broadcast publications, webinars, our presence at scientific
meetings, and press releases. We employ LeadForensics and SRAX to amplify our targeting and social media efforts. Social
media enables us to easily reach scientists world-wide.
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5.
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We
significantly upgraded our website. The upgraded website contains a state-of-the art search engine that enables researchers
to rapidly find PCT-related publications and products.
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6.
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The
website contains product information, published articles, and videos of our products to foster engagement, product
interest, leads, order placement, and learning.
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7.
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Our
scientists regularly present their findings and discuss our products at scientific sessions at regional, national, and international
scientific conferences, and at corporate, government, and academic laboratories.
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8.
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In
addition to electronic advertising, we have used and will continue to use print media to showcase our products.
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In
2021, we plan to expand our Sales and Marketing team, in order to support these efforts.
c.
Foreign Distribution Network
We
have previously established distribution arrangements covering
China, Poland, South Korea, Japan, and 24 countries in Western Europe.
In
May of 2014, we entered into a three-year distribution agreement with Powertech Technology Co, Ltd., of China, pursuant to which
we granted Powertech Technology exclusive distribution rights to all of our PCT products in China. This agreement expired in 2019.
We continue to maintain a distribution relationship with Powertech and are in contract renewal discussions.
In
February 2016, we entered into a three-year distribution agreement with Bioanalytic of Poland, pursuant to which PBI granted
Bioanalytic exclusive distribution rights to all of our PCT products in Poland. This agreement expired in 2019. We continue
to maintain a distribution relationship with Bioanalytic and are in contract renewal discussions.
In
September of 2016, we entered into a three-year distribution agreement with Vita Co. of Japan, pursuant to which we granted Vita
Co. exclusive distribution rights to all of our PCT products in Japan. This agreement expired in 2019. We continue to maintain
a distribution relationship with Vita and are in contract renewal discussions.
In
September of 2016, we entered into a distribution agreement with I&L GmbH of Germany, pursuant to which we granted
I&L exclusive distribution rights to all of our products until March 30, 2018 in the countries designated as Western Europe
(Andorra, Austria, Belgium, Denmark, Finland, France, Germany, Gibraltar, Greece, Iceland, Italy, Ireland, Liechtenstein, Luxembourg,
Malta, Monaco, Norway, Netherlands, Portugal, San Marino, Spain, Sweden, Switzerland, and the United Kingdom). This agreement
expired March 31, 2020. We continue to maintain a distribution relationship with I&L GmbH and are in contract
renewal discussions.
In
January 2020, we entered into a three-year distribution agreement with SCINCO Co., LTD of South Korea, pursuant to which PBI granted
SCINCO exclusive distribution rights to all of our PCT products in South Korea.
Non-Exclusive
and Other Distribution Agreements
In
November 2011, we entered into a distributor agreement with OROBOROS Instruments Corp. (“OROBOROS”) of Austria,
pursuant to which we granted OROBOROS non-exclusive world-wide distribution rights to our Shredder SG3 System and related products.
We
are also the exclusive distributor, throughout the Americas, for Constant Systems, Ltd.’s (“CS”) cell
disruption equipment, parts, and consumables. CS, a British company located northwest of London, England, has been providing niche
biomedical equipment, related consumable products, and services to a global client base since 1989. CS designs, develops, and
manufactures high pressure cell disruption equipment used by life sciences laboratories worldwide, particularly disruption systems
for the extraction of proteins. The CS equipment provides a constant and controlled cell disruptive environment, giving the user
superior, constant, and reproducible results whatever the application. CS has over 900 units installed in over 40 countries worldwide.
The CS cell disruption equipment has proven performance in the extraction of cellular components, such as protein from yeast,
bacteria, mammalian cells, and other sample types.
The
CS pressure-based cell disruption equipment and our PCT-based instrumentation complement each other in several important ways.
While both the CS and our technologies are based on high pressure, each product line has fundamental scientific capabilities that
the other does not offer. Our PCT Platform uses certain patented pressure mechanisms to achieve small-scale, molecular level effects.
CS’s technology uses different, proprietary pressure mechanisms for larger-scale, non-molecular level processing. In a number
of routine laboratory applications, such as protein extraction, both effects can be critical to success. Therefore, for protein
extraction and a number of other important scientific applications, we believe laboratories will benefit by using the CS and PBI
products, either separately or together.
In
June 2013, CS and PBI signed an expanded distribution agreement that made us the exclusive distributor of CS products throughout
all of the Americas until the end of 2019. We are in renewal discussions for this agreement.
d.
Intellectual Property
We
believe that protection of our patents and other intellectual property is essential to our business. Subject to the availability
of sufficient financial resources, our practice is to file patent applications to protect technology, inventions, and improvements
to inventions that are important to our business development. We also rely on trade secrets, know-how, and technological innovations
to develop and maintain our potential competitive position.
To
date, we have been awarded 26 total United States and foreign patents related to our PCT technology platform, and one
US patent and two additional patents in China related to our Ultra Shear Technology. We also received eight patents with our
purchase of the assets of BaroFold in December 2017.
The
Company received one US patent and two patents in China for UST, focused on a low-cost scalable approach for product
manufacturing. The Company believes this method can find use in various nanoemulsion applications for pharmaceutical (e.g., drug
delivery), biotechnology (e.g., protein recovery, biomolecule extraction), and food/beverage (e.g., shelf-stable “clean
label”) products. We plan to design, develop, manufacture, and market three different modules of BaroShear UST platform:
1.
a bench-top, research / formulation, low throughput instrument that we will license for formulation development;
2.
a lab-or pilot scale production instrument that we will license into life science companies and other industries;
3.
a production scale UST-based instrument for manufacturing applications that we will license to food, cosmetics, nutraceuticals,
and other processors worldwide.
Our
issued patents expire between 2021 and 2030. Any failure to obtain and maintain adequate patent protection may adversely affect
our ability to enter into, or affect the terms of, any arrangement for the marketing, sale or licensing of any of
our products or technology platforms. It may also allow our competitors to duplicate our products without our permission
and without compensation.
License
Agreements Relating to Pressure Cycling Technology
BioMolecular
Assays, Inc.
In
1996, we acquired our initial equity interest in BioSeq, Inc., which at the time was developing our original pressure cycling
technology. BioSeq, Inc. acquired its pressure cycling technology from BioMolecular Assays, Inc. under a technology transfer and
patent assignment agreement. In 1998, we purchased all of the remaining outstanding capital stock of BioSeq, Inc., and at such
time, the technology transfer and patent assignment agreement was amended to require us to pay BioMolecular Assays, Inc., a 5%
royalty on our sales of products or services that incorporate or utilize the original pressure cycling technology that BioSeq,
Inc. acquired from BioMolecular Assays, Inc. We are also required to pay BioMolecular Assays, Inc. 5% of the proceeds from any
sale, transfer or license of all or any portion of the original pressure cycling technology. These payment obligations terminated
March 7, 2016.
In
connection with our acquisition of BioSeq, Inc., we licensed certain limited rights to the original pressure cycling technology
back to BioMolecular Assays, Inc. This license is non-exclusive and limits the use of the original pressure cycling technology
by BioMolecular Assays, Inc. solely for molecular applications in scientific research and development and in scientific plant
research and development. BioMolecular Assays, Inc. 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 BioMolecular Assays, Inc. under the license. BioMolecular Assays, Inc. was required
to pay us these royalties until the expiration in March 2016 of the patents held by BioSeq, Inc. since 1998. We have not received
any royalty payments from BioMolecular Assays, Inc. under this license.
Battelle
Memorial Institute
In
December 2008, we entered into an exclusive patent license agreement with the Battelle Memorial Institute (“Battelle”).
The licensed technology is the subject of a patent application filed by Battelle in 2008 and relates to a method and a system
for improving the analysis of protein samples, including through an automated system utilizing pressure and a pre-selected agent
to obtain a digested sample in a significantly shorter period of time than current methods, while maintaining the integrity of
the sample throughout the preparatory process. In addition to royalty payments on net sales of “licensed products,”
we are obligated to make minimum royalty payments for each year that we retain the rights outlined in the patent license agreement
and we are required to have our first commercial sale of the licensed products within one year following the issuance of the patent
covered by the licensed technology. After re-negotiating the terms of the contract in 2013, the minimum annual royalty was $1,200
in 2014 and $2,000 in 2015; the minimum royalties were $3,000 in 2016, $4,000 in 2017 and $5,000 in 2018 and each calendar year
thereafter during the term of the agreement.
e.
Developments and Accomplishments
We
reported a number of accomplishments in 2020:
On
January 20, 2021, PBI targets revolution in effectiveness of therapeutics via improved drug delivery and dosing safety; announces
collaboration with SinuSys Corp to improve and optimize their lead sinus health product candidate prior to Phase llb trials.
On
December 17, 2020, PBI reports its PCT Platform is at the forefront in generating pivotal findings by diverse COVID-19 research
teams in the USA, China, and Europe.
On
December 15, PBI announces planned presentation on December 17, 2020 at the Life Sciences Investor Forum: https://www.lifesciencesinvestorforum.com/
On
November 17, PBI reports Third Quarter 2020 Financial Results – as compared to the Third Quarter of 2019 instrument sales
increase 68%, total revenue increases 7%, and operating loss decreases 23%.
On
November 11, Company was awarded the first U.S. patent for its revolutionary Ultra Shear TechnologyTM (USTTM)
platform.
On
October 6, PBI achieved a critical milestone in revolutionary nanoemulsions technology development and entered the production
era for commercial system (BaroShear K45) development.
On
August 12, PBI was awarded a pivotal U.S. patent for novel, high-pressure enhanced consumable device. The new patent secures and
protects PBI’s best-selling PCT Sample Preparation Consumable Product, the PCT MicroPestle.
On
June 20, PBI and Leica Microsystems sign worldwide co-marketing alliance: combination of proprietary technologies expected to
accelerate cancer R&D with innovative tumor processing workflow
On
June 4, PBI announces first manufacturing build completely sold out for revolutionary UST System for processing hemp-derived cannabinoid
oil into stable, water-soluble nanoemulsions
On
May 14, Pressure BioSciences announced the launch of FDA-registered hand sanitizer as first product developed through pending
merger partners.
On
April 16, PBI and RedShiftBio demonstrate potential of combining proprietary technologies to enable new tool for development and
production of biotherapeutics.
On
March 12, PBI announced that it is nearing a complete sellout on its pre-launch offering of game-changing UST Platform for processing
CBD Oil into water-soluble nanoemulsions.
On
February 27, PBI launched new era in preparation of water-soluble nanoemulsions for CBD and other valuable oils with opening of
UST Demonstration Laboratory.
On
January 30, PBI announced acceleration of UST Platform rollout for water-soluble CBD with planned release of additional BaroShear
product – a benchtop, R&D scale, BaroShear “Mini” instrument.
On
January 24, PBI announced significant new order and near sellout on revolutionary nanoemulsification system for water-soluble
CBD oil. Company said that additional orders are expected shortly.
On
January 17, PBI reported the Company’s UST Platform was featured in a leading North American Cannabis Magazine and that
the article highlighted the potential of the UST Platform to play a significant role in multiple billion-dollar markets, such
as CBD, nutraceuticals, cosmetics, biopharmaceuticals, and food/beverage.
On
January 9, 2020, PBI reported that the number of published scientific papers in 2019 citing the advantages of the Company’s
PCT Platform remained strong, with over 20 journal articles for the second straight year.
f.
Liquidity
Management
has developed a plan to continue operations. This plan includes controlling expenses, streamlining operations, and obtaining capital
through equity and/or debt financing. We have been successful in raising cash through debt and equity offerings in the past. We
have efforts in place to continue to raise cash through debt and equity offerings.
Although
we have successfully completed equity financings and reduced expenses in the past, we cannot assure our investors that our plans
to address these matters in the future will be successful. Additional financing may not be available to us on a timely basis or
on terms acceptable to us, if at all. In the event we are unable to raise sufficient funds on terms acceptable to us, we may be
required to:
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severely
limit or cease our operations or otherwise reduce planned expenditures and forego other business opportunities, which could
harm our business. The accompanying financial statements do not include adjustments that may be required in the event of the
disposal of assets or the discontinuation of the business;
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obtain
financing with terms that may have the effect of diluting or adversely affecting the holdings or the rights of the holders
of our capital stock; or
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obtain
funds through arrangements with future collaboration partners or others that may require us to relinquish rights to some or
all of our technologies or products.
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g.
Regulation
Many
of our activities are subject to regulation by governmental authorities within the United States and similar bodies outside of
the United States. The regulatory authorities may govern the collection, testing, manufacturing, safety, efficacy, labeling, storage,
record keeping, transportation, approval, advertising, and promotion of our products, as well as the training of our employees.
Currently,
our PCT commercialization efforts are focused in the area of genomic, proteomic, lipidomic, and small molecule sample preparation.
We do not believe that our current Barocycler® products used in sample preparation are considered “medical devices”
under the United States Food, Drug and Cosmetic Act (the “FDA Act”) and we do not believe that we are subject
to the law’s general control provisions that include requirements for registration, listing of devices, quality regulations,
labeling and prohibitions against misbranding and adulteration. We also do not believe that we are subject to regulatory inspection
and scrutiny. If, however, we are successful in commercializing PCT in applications beyond our current focus area of genomic,
proteomic, lipidomic, and small molecule sample preparation, such as protein purification, pathogen inactivation and immunodiagnostics,
our products may be considered “medical devices” under the FDA Act, at which point we would be subject to the law’s
general control provisions and regulation by the FDA that include requirements for registration listing of devices, quality regulations,
labeling, and prohibitions against misbranding and adulteration. The process of obtaining approval to market these devices in
the other potential applications of PCT would be costly and time consuming and could possibly prohibit us from pursuing such markets.
Some
of our devices may also become subject to the European Pressure Equipment Directive, which requires certain pressure equipment
meet certain quality and safety standards. We do not believe that we are currently subject to this directive because our Barocycler®
instruments are below the threshold documented in the text of the directive. If our interpretation were to be challenged, we could
incur significant costs defending the challenge, and we could face production and selling delays, all of which could harm our
business.
We
self-certified that our Barocycler® instrumentation was electromagnetically compatible, or “CE” compliant, which
means that our Barocycler® instruments meet the essential requirements of the relevant European health, safety and environmental
protection legislation. In order to maintain our CE Marking, a requirement to sell equipment in many countries of the European
Union, we are obligated to uphold certain safety and quality standards. Due to outsourcing manufacturing to CBM for all Barocycler
2320 EXT instruments currently in inventory or sold in 2020, an ISO certified contract manufacturer, we believe compliance with
CE and other required marks and certifications is well controlled.
h.
Employees
At
December 31, 2020, we had twelve (12) full-time employees. All employees enter into confidentiality agreements intended to protect
our proprietary information. We believe that our relations with our employees are good. None of our employees are represented
by a labor union. Our performance depends on our ability to attract and retain qualified professional, scientific and technical
staff. The level of competition among employers for skilled personnel is high. Subject to our limited financial resources, we
attempt to maintain employee benefit plans to enhance employee morale, professional commitment and work productivity and provide
an incentive for employees to remain with us.
i.
Corporate Information
We
were incorporated in the Commonwealth of Massachusetts in August 1978 as Boston Biomedica, Inc. In 1996, Boston Biomedica completed
a successful initial public offering and was listed on the NASDAQ market. In September 2004, we completed the sale of Boston
Biomedica’s core business units and began to focus exclusively on the development and commercialization of the PCT platform.
Following this change in business strategy, we changed our legal name from Boston Biomedica, Inc. to Pressure BioSciences, Inc.
We began operations as PBI in February 2005, research and development activities in April 2006, early marketing and selling activities
of our Barocycler® instruments in late 2007, and active marketing and selling of our PCT-based instrument platform in 2012.
j.
Available Information
Our
Internet website address is http://www.pressurebiosciences.com. Through our website, we make available, free of charge, reports
that we file with the Securities and Exchange Commission (“SEC”), which include, but are not limited
to, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any and all amendments to
such reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. These
SEC reports can be also accessed through the investor relations section of our website. The information found on our website is
not part of this or any other report we file with or furnish to the SEC.
ITEM
1A. RISK FACTORS.
This
Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties, such as statements of our
objectives, expectations and intentions. The cautionary statements made in this Annual Report on Form 10-K should be read as applicable
to all forward-looking statements wherever they appear in this report. Our actual results could differ materially from those discussed
herein. Factors that could cause or contribute to such differences include those discussed below, as well as those discussed elsewhere
in this Annual Report on Form 10-K.
Risks
Related To Our COMPANY
We
have received an opinion from our independent registered public accounting firm expressing substantial doubt regarding our ability
to continue as a going concern.
The
audit report issued by our independent registered public accounting firm on our audited consolidated financial statements for
the fiscal year ended December 31, 2020 contains an explanatory paragraph regarding our ability to continue as a going concern.
The audit report states that our auditing firm determined that there was substantial doubt in our ability to continue as a going
concern due to the risk that we may not have sufficient cash and liquid assets at December 31, 2020 to cover our operating and
capital requirements for the next twelve-month period; and if sufficient cash cannot be obtained, we would have to substantially
alter, or possibly even discontinue, operations. The accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Management
has developed a plan to continue operations. This plan includes continued control of expenses and obtaining equity or debt financing.
Although we have successfully completed equity financings and reduced expenses in the past, we cannot assure you that our plans
to address these matters in the future will be successful.
The
factors 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.
Our
revenue is dependent upon acceptance of our products by the market. The failure of such acceptance will cause us to curtail or
cease operations.
Our
revenue comes from the sale of our products. As a result, we will continue to incur operating losses until such time as sales
of our products reach a mature level and we are able to generate sufficient revenue from the sale of our products to meet our
operating expenses. There can be no assurance that customers will adopt our technology and products, or that businesses and prospective
customers will agree to pay for our products. In the event that we are not able to significantly increase the number of customers
that purchase our products, or if we are unable to charge the necessary prices, our financial condition and results of operations
will be materially and adversely affected.
Our
business could be adversely affected if we fail to implement and maintain effective disclosure controls and procedures and internal
control over financial reporting.
We
concluded that as of December 31, 2020, our disclosure controls and procedures and our internal control over financial reporting
were not effective. We have determined that we have limited resources for adequate personnel to prepare and file reports under
the Securities Exchange Act of 1934 within the required time periods and that material weaknesses in our internal control over
financial reporting exist relating to our accounting for complex equity transactions. If we are unable to implement and maintain
effective disclosure controls and procedures and remediate the material weaknesses in a timely manner, or if we identify other
material weaknesses in the future, our ability to produce accurate and timely financial statements and public reports could be
impaired, which could adversely affect our business and financial condition. We identified a lack of sufficient segregation of
duties. Specifically, this material weakness is such that the design over these areas relies primarily on detective controls and
could be strengthened by adding preventive controls to properly safeguard assets. In addition, investors may lose confidence in
our reported information and the market price of our common stock may decline.
We
have a history of operating losses, anticipate future losses and may never be profitable.
We
have experienced significant operating losses in each period since we began investing resources in PCT and CP. These losses have
resulted principally from research and development, sales and marketing, and general and administrative expenses associated with
the development of our PCT business. During the year ended December 31, 2020, we recorded a net loss available to common shareholders
of $17,584,710 or ($5.32) per share, as compared with $15,868,083 or ($7.98) per share, for the corresponding period
in 2019. We expect to continue to incur operating losses until sales increase substantially. We cannot be certain when, if ever,
we will become profitable. Even if we were to become profitable, we might not be able to sustain such profitability on a quarterly
or annual basis.
If
we are unable to obtain additional financing, business operations will be harmed and if we do obtain additional financing then
existing shareholders may suffer substantial dilution.
We
need substantial capital to implement our sales distribution strategy for our current products and to develop and commercialize
future products using our pressure cycling technology products and services in the sample preparation area, as well as for applications
in other areas of life sciences. Our capital requirements will depend on many factors, including but not limited to:
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the
problems, delays, expenses, and complications frequently encountered by early-stage companies;
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market
acceptance of our pressure cycling technology products and services for sample preparation;
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the
success of our sales and marketing programs; and
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changes
in economic, regulatory or competitive conditions in the markets we intend to serve.
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We
expect the net proceeds from an expected equity offering, along with our current cash position, will enable us to fund our operating
expenses and capital expenditure requirements for at least the next 36 months. Thereafter, unless we achieve profitability, we
anticipate that we will need to raise additional capital to fund our operations and to otherwise implement our overall business
strategy. We currently do not have any contracts or commitments for additional financing. There can be no assurance that financing
will be available in amounts or on terms acceptable to us, if at all. Any additional equity financing may involve substantial
dilution to then existing shareholders.
If
adequate funds are not available or if we fail to obtain acceptable additional financing, we may be required to:
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severely
limit or cease our operations or otherwise reduce planned expenditures and forego other business opportunities, which could
harm our business;
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obtain
financing with terms that may have the effect of substantially diluting or adversely affecting the holdings or the rights
of the holders of our capital stock; or
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obtain
funds through arrangements with future collaboration partners or others that may require us to relinquish rights to some or
all of our technologies or products.
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Our
financial results depend on revenues from our pressure cycling technology products and services, and from government grants.
We
currently rely on revenues from PCT, CP, and CS technology products and services in the sample preparation area and from revenues
derived from grants awarded to us by governmental agencies, such as the National Institutes of Health. We have been unable to
achieve market acceptance of our product offerings to the extent necessary to achieve significant revenue. Competition for government
grants is very intense, and we can provide no assurance that we will continue to be awarded grants in the future. If we are unable
to increase revenues from sales of our pressure cycling technology products and services and government grants, our business will
fail.
We
may be unable to obtain market acceptance of our pressure cycling technology products and services.
Many
of the initial sales of our pressure cycling technology products and services have been to our collaborators, following their
use of our products in studies undertaken in sample preparation for genomics, proteomics, lipidomics, and small molecules studies.
Later sales have been to key opinion leaders. Our technology requires scientists and researchers to adopt a method of sample extraction
that is different from existing techniques. Our PCT sample preparation system is also more costly than most existing techniques.
Our ability to obtain market acceptance will depend, in part, on our ability to demonstrate to our potential customers that the
benefits and advantages of our technology outweigh the increased cost of our technology compared with existing methods of sample
extraction. If we are unable to demonstrate the benefits and advantages of our products and technology as compared with existing
technologies, we will not gain market acceptance and our business will fail.
Our
business may be harmed if we encounter problems, delays, expenses, and complications that often affect companies that have not
achieved significant market acceptance.
Our
pressure cycling technology business continues to face challenges in achieving market acceptance. If we encounter problems, delays,
expenses and complications, many of which may be beyond our control or may harm our business or prospects. These include:
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availability
of adequate financing;
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unanticipated
problems and costs relating to the development, testing, production, marketing, and sale of our products;
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delays
and costs associated with our ability to attract and retain key personnel; and
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competition.
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The
sales cycle of our pressure cycling technology products is lengthy. We have incurred and may continue to incur significant expenses
and we may not generate any significant revenue related to those products.
Many
of our current and potential customers have required between three and six months or more to test and evaluate our pressure cycling
technology products. This increases the possibility that a customer may decide to cancel its order or otherwise change its plans,
which could reduce or eliminate our sales to that potential customer. As a result of this lengthy sales cycle, we have incurred
and may continue to incur significant research and development, selling and marketing, and general and administrative expense
related to customers from whom we have not yet generated any revenue from our products, and from whom we may never generate the
anticipated revenue if a customer is not satisfied with the results of the evaluation of our products or if a customer cancels
or changes its plans.
Our
business could be harmed if our products contain undetected errors or defects.
We
are continuously developing new and improving our existing, pressure cycling technology products in sample preparation and we
expect to do so in other areas of life sciences depending upon the availability of our resources. Newly introduced products can
contain undetected errors or defects. In addition, these products may not meet their performance specifications under all conditions
or for all applications. If, despite internal testing and testing by our collaborators, any of our products contain errors or
defects or fail to meet customer specifications, then we may be required to enhance or improve those products or technologies.
We may not be able to do so on a timely basis, if at all, and may only be able to do so at considerable expense. In addition,
any significant reliability problems could result in adverse customer reaction, negative publicity or legal claims and could harm
our business and prospects.
Our
success may depend on our ability to manage growth effectively.
Our
failure to manage growth effectively could harm our business and prospects. Given our limited resources and personnel, growth
of our business could place significant strain on our management, information technology systems, sources of manufacturing capacity
and other resources. To properly manage our growth, we may need to hire additional employees and identify new sources of manufacturing
capabilities. Failure to effectively manage our growth could make it difficult to manufacture our products and fill orders, as
well as lead to declines in product quality or increased costs, any of which would adversely impact our business and results of
operations.
Our
success is substantially dependent on the continued service of our senior management.
Our
success is substantially dependent on the continued service of our senior management, specifically our Chief Executive Officer,
Richard T. Schumacher. The loss of the services of any of our senior management could make it more difficult to successfully operate
our business and achieve our business goals. In addition, our failure to retain existing engineering, research and development,
operations, and marketing/sales personnel could harm our product development capabilities and customer and employee relationships,
delay the growth of sales of our products, and result in the loss of key information, expertise, or know-how.
We
may not be able to hire or retain the number of qualified personnel, particularly engineering and sales personnel, required for
our business, which would harm the development and sales of our products and limit our ability to grow.
Competition
in our industry for senior management, technical, sales, marketing, finance and other key personnel is intense. If we are unable
to retain our existing personnel, or attract and train additional qualified personnel, either because of competition in our industry
for such personnel or because of insufficient financial resources, our growth may be limited. Our success also depends in particular
on our ability to identify, hire, train and retain qualified engineering and sales personnel with experience in design, development
and sales of laboratory equipment.
Our
reliance on a single third party for all of our manufacturing, and certain of our engineering, and other related services could
harm our business.
We
currently solely rely on CBM Industries, a third-party contract manufacturer, to manufacture our Barocycler 2320EXT instrumentation,
provide manufacturing expertise, and manage the majority of our sub-contractor supplier relationships for this instrument. Because
of our dependence on one manufacturer, our success will depend, in part, on the ability of CBM to manufacture our products cost
effectively, in sufficient quantities to meet our customer demand, if and when such demand occurs, and meeting our quality requirements.
If CBM experiences manufacturing problems or delays, or if CBM decides not to continue to provide us with these services, our
business may be harmed. While we believe other contract manufacturers are available to address our manufacturing and engineering
needs, if we find it necessary to replace CBM, there will be a disruption in our business and we would incur additional costs
and delays that would harm our business.
Our
failure to manage current or future alliances or joint ventures effectively may harm our business.
We
have entered into business relationships with four distribution partners and one co-marketing partner, and we may enter into additional
alliances, joint ventures or other business relationships to further develop, market and sell our pressure cycling technology
product line. We may not be able to:
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identify
appropriate candidates for alliances, joint ventures or other business relationships;
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assure
that any candidate for an alliance, joint venture or business relationship will provide us with the support anticipated;
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successfully
negotiate an alliance, joint venture or business relationship on terms that are advantageous to us; or
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successfully
manage any alliance or joint venture.
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Furthermore,
any alliance, joint venture or other business relationship may divert management time and resources. Entering into a disadvantageous
alliance, joint venture or business relationship, failing to manage an alliance, joint venture or business relationship effectively,
or failing to comply with any obligations in connection therewith, could harm our business and prospects.
We
may not be successful in growing our international sales.
We
cannot guarantee that we will successfully develop our international sales channels to enable us to generate significant revenue
from international sales. We currently have four international distribution agreements that cover 24 countries in Europe, Asia
and Australia. We have generated limited sales to date from international sales and cannot guarantee that we will be able to increase
our sales. As we expand, our international operations may be subject to numerous risks and challenges, including:
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multiple,
conflicting and changing governmental laws and regulations, including those that regulate high pressure equipment;
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reduced
protection for intellectual property rights in some countries;
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protectionist
laws and business practices that favor local companies;
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political
and economic changes and disruptions;
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export
and import controls;
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tariff
regulations; and
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currency
fluctuations.
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Our
operating results are subject to quarterly variation. Our operating results may fluctuate significantly from period to period
depending on a variety of factors, including but not limited to the following:
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our
ability to increase our sales of our pressure cycling technology products for sample preparation on a consistent quarterly
or annual basis;
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the
lengthy sales cycle for our products;
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the
product mix of the Barocycler® instruments we install in a given period, and whether the installations are completed pursuant
to sales, rental or lease arrangements, and the average selling prices that we are able to command for our products;
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our
ability to manage our costs and expenses;
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our
ability to continue our research and development activities without incurring unexpected costs and expenses; and
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our
ability to comply with state and federal regulations without incurring unexpected costs and expenses.
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Our
instrumentation operates at high pressures and may therefore become subject to certain regulations in the European Community.
Regulation of high-pressure equipment may limit or hinder our development and sale of future instrumentation.
Our
Barocycler® instruments operate at high pressures. If our Barocycler® instruments exceed certain pressure levels, our
products may become subject to the European Pressure Equipment Directive, which requires certain pressure equipment meet certain
quality and safety standards. We do not believe that we are subject to this directive because our Barocycler® instruments
are currently below the threshold documented in the text of the directive. If our interpretation were to be challenged, we could
incur significant costs defending the challenge, and we could face production and selling delays, all of which could harm our
business.
We
expect that we will be subject to regulation in the United States, such as by the Food and Drug Administration, and overseas,
if and when we begin to invest more resources in the development and commercialization of PCT in applications outside of sample
preparation for the research field.
Our
current pressure cycling technology products in the area of sample preparation for the research field are not regulated by the
FDA. Certain applications in which we intend to develop and commercialize pressure cycling technology, such as protein purification,
pathogen inactivation and immunodiagnostics, are expected to require regulatory approvals or clearances from regulatory agencies,
such as the FDA, prior to commercialization, when we expand our commercialization activities outside of the research field. We
expect that obtaining these approvals or clearances will require a significant investment of time and capital resources and there
can be no assurance that such investments will receive approvals or clearances that would allow us to commercialize the technology
for these applications.
If
we are unable to protect our patents and other proprietary technology relating to our pressure cycling technology products, our
business will be harmed.
Our
ability to further develop and successfully commercialize our products will depend, in part, on our ability to enforce our patents,
preserve our trade secrets, and operate without infringing the proprietary rights of third parties. To date, we have been granted
15 United States and foreign patents related to our PCT technology platform, and two additional patents in China related to our
Ultra Shear Technology. We also received eight patents with our purchase of the assets of BaroFold in December 2017.
There
can be no assurance that (a) any patent applications filed by us will result in issued patents; (b) patent protection will be
secured for any particular technology; (c) any patents that have been or may be issued to us will be valid or enforceable; (d)
any patents will provide meaningful protection to us; (e) others will not be able to design around our patents; and (f) our patents
will provide a competitive advantage or have commercial value. The failure to obtain adequate patent protection would have a material
adverse effect on us and may adversely affect our ability to enter into, or affect the terms of, any arrangement for the marketing
or sale of any product.
Our
patents may be challenged by others.
We
could incur substantial costs in patent proceedings, including interference proceedings before the United States Patent and Trademark
Office, and comparable proceedings before similar agencies in other countries, in connection with any claims that may arise in
the future. These proceedings could result in adverse decisions about the patentability of our inventions and products, as well
as about the enforceability, validity, or scope of protection afforded by the patents.
If
we are unable to maintain the confidentiality of our trade secrets and proprietary knowledge, others may develop technology and
products that could prevent the successful commercialization of our products.
We
rely on trade secrets and other unpatented proprietary information in our product development activities. To the extent we rely
on trade secrets and unpatented know-how to maintain our competitive technological position, there can be no assurance that others
may not independently develop the same or similar technologies. We seek to protect our trade secrets and proprietary knowledge,
in part, through confidentiality agreements with our employees, consultants, advisors and contractors. These agreements may not
be sufficient to effectively prevent disclosure of our confidential information and may not provide us with an adequate remedy
in the event of unauthorized disclosure of such information. If our employees, consultants, advisors, or contractors develop inventions
or processes independently that may be applicable to our products, disputes may arise about ownership of proprietary rights to
those inventions and processes. Such inventions and processes will not necessarily become our property but may remain the property
of those persons or their employers. Protracted and costly litigation could be necessary to enforce and determine the scope of
our proprietary rights. Failure to obtain or maintain trade secret protection, for any reason, could harm our business.
If
we infringe on the intellectual property rights of others, our business may be harmed.
It
is possible that the manufacture, use or sale of our pressure cycling technology products or services may infringe patent or other
intellectual property rights of others. We may be unable to avoid infringement of the patent or other intellectual property rights
of others and may be required to seek a license, defend an infringement action, or challenge the validity of the patents or other
intellectual property rights in court. We may be unable to secure a license on terms and conditions acceptable to us, if at all.
Also, we may not prevail in any patent or other intellectual property rights litigation. Patent or other intellectual property
rights litigation is costly and time-consuming, and there can be no assurance that we will have sufficient resources to bring
any possible litigation related to such infringement to a successful conclusion. If we do not obtain a license under such patents
or other intellectual property rights, or if we are found liable for infringement, or if we are unsuccessful in having such patents
declared invalid, we may be liable for significant monetary damages, may encounter significant delays in successfully commercializing
and developing our pressure cycling technology products, or may be precluded from participating in the manufacture, use, or sale
of our pressure cycling technology products or services requiring such licenses.
We
may be unable to adequately respond to rapid changes in technology and the development of new industry standards.
The
introduction of products and services embodying new technology and the emergence of new industry standards may render our existing
pressure cycling technology products and related services obsolete and unmarketable if we are unable to adapt to change. We may
be unable to allocate the funds necessary to improve our current products or introduce new products to address our customers’
needs and respond to technological change. In the event that other companies develop more technologically advanced products, our
competitive position relative to such companies would be harmed.
We
may not be able to compete successfully with others that are developing or have developed competitive technologies and products.
A
number of companies have developed, or are expected to develop, products that compete or will compete with our products. We compete
with companies that have existing technologies for the extraction of nucleic acids, proteins and small molecules from cells and
tissues, including but not limited to methods such as mortar and pestle, sonication, rotor-stator homogenization, French press,
bead beating, freezer milling, enzymatic digestion, and chemical dissolution.
We
are aware that there are additional companies pursuing new technologies with similar goals to the products developed or being
developed by us. Some of the companies with which we now compete, or may compete in the future, have or may have more extensive
research, marketing, and manufacturing capabilities, more experience in genomics and proteomics sample preparation, protein purification,
pathogen inactivation, immunodiagnostics, and DNA sequencing and significantly greater technical, personnel and financial resources
than we do, and may be better positioned to continue to improve their technology to compete in an evolving industry. To compete,
we must be able to demonstrate to potential customers that our products provide improved performance and capabilities. Our failure
to compete successfully could harm our business and prospects.
We
will need to increase the size of our organization and may experience difficulties in managing growth.
We
are a small company with a minimal number of employees. We expect to experience a period of expansion in headcount, facilities,
infrastructure and overhead and anticipate that further expansion will be required to address potential growth and market opportunities.
Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit,
maintain and integrate new managers. Our future financial performance and its ability to compete effectively will depend, in part,
on its ability to manage any future growth effectively.
Provisions
in our articles of organization and bylaws may discourage or frustrate stockholders’ attempts to remove or replace our current
management.
Our
articles of organization and bylaws contain provisions that may make it more difficult or discourage changes in our management
that our stockholders may consider to be favorable. These provisions include:
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a
classified board of directors;
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advance
notice for stockholder nominations to the board of directors;
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limitations
on the ability of stockholders to remove directors; and
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a
provision that allows a majority of the directors to fill vacancies on the board of directors.
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These
provisions could prevent or frustrate attempts to make changes in our management that our stockholders consider to be beneficial
and could limit the price that our stockholders might receive in the future for shares of our common stock.
The
costs of compliance with the reporting obligations of the Exchange Act, and with the requirements of the Sarbanes-Oxley Act of
2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act, may place a strain on our limited resources and our management’s
attention may be diverted from other business concerns.
As
a result of the regulatory requirements applicable to public companies, we incur legal, accounting, and other expenses that are
significant in relation to the size of our Company. In addition, the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street
Reform and Consumer Protection Act, as well as rules subsequently implemented by the SEC and OTC Markets Group, Inc., have increased
and will continue to increase our legal and financial compliance costs and may make some activities more time-consuming. These
requirements have placed and will continue to place a strain on our systems and on our management and financial resources.
Certain
of our net deferred tax assets could be substantially limited if we experience an ownership change as defined in the Internal
Revenue Code.
Certain
of our net operating losses (“NOLs”) give rise to net deferred tax assets. Our ability to utilize NOLs and
to offset our future taxable income and/or to recover previously paid taxes would be limited if we were to undergo an “ownership
change” within the meaning of Section 382 of the Internal Revenue Code (the “Code”). In general, an “ownership
change” occurs whenever the percentage of the stock of a corporation owned by “5 percent shareholders,” within
the meaning of Section 382 of the Code, increases by more than 50 percentage points over the lowest percentage of the stock of
such corporation owned by such “5 percent shareholders” at any time over the preceding three years.
An
ownership change under Section 382 of the Code would establish an annual limitation on the amount of NOLs we could utilize to
offset our taxable income in any single taxable year to an amount equal to (i) the product of a specified rate, which is published
by the U.S. Treasury, and the aggregate value of our outstanding stock plus; and (ii) the amount of unutilized limitation from
prior years. The application of these limitations might prevent full utilization of the deferred tax assets attributable to our
NOLs. We may have or will have experienced an ownership change as defined by Section 382 through the sale of equity and, therefore,
we will consider whether the sale of equity units will result in limitations of our net operating losses under Section 382 when
we start to generate taxable income. However, whether a change in ownership occurs in the future is largely outside of our control,
and there can be no assurance that such a change will not occur.
We
continue to face risks related to Novel Coronavirus (COVID-19) which could continue to significantly disrupt our research and
development, operations, sales, and financial results.
Our
business was adversely impacted by the effects of the Novel Coronavirus (COVID-19). In addition to global macroeconomic effects,
the Novel Coronavirus (COVID-19) outbreak and any other related adverse public health developments could continue to cause disruption
to our operations, research and development, and sales activities. Our third-party manufacturers, third-party distributors, and
our customers have been and will be disrupted by worker absenteeism, quarantines and restrictions on employees’ ability
to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel
or health-related restrictions. Depending on the magnitude of such effects on our activities or the operations of our third-party
manufacturers and third-party distributors, the supply of our products will be delayed, which could adversely affect our business,
operations and customer relationships. In addition, the Novel Coronavirus (COVID-19) or other disease outbreak will in the short-run
and may over the longer term adversely affect the economies and financial markets of many countries, resulting in an economic
downturn that will affect demand for our products and impact our operating results. There can be no assurance that any decrease
in sales resulting from the Novel Coronavirus (COVID-19) will be offset by increased sales in subsequent periods. Although the
magnitude of the impact of the Novel Coronavirus (COVID-19) outbreak on our business and operations remains uncertain, the continued
spread of the Novel Coronavirus (COVID-19) or the occurrence of other epidemics and the imposition of related public health measures
and travel and business restrictions will adversely impact our business, financial condition, operating results and cash flows.
In addition, we have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations,
or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop
and design our products in a timely manner or meet required milestones or customer commitments.
RISKS
RELATED TO OWNERSHIP OF OUR SECURITIES
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, have included private placements and a registered direct offering. As of December 31, 2020, we have issued shares of Series
A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock, Series D Convertible
Preferred Stock, Series E 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.
As
of December 31, 2020, all of the issued shares of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, and Series E Convertible Preferred Stock had been converted into shares of common stock.
As of December 31, 2020, only 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 outstanding. Further, in connection with those private placements and the Series
D registered direct offering, we issued warrants to purchase common stock. In addition, as of December 31, 2020, we had issued
notes and debentures convertible into common stock at $2.50 to $7.50 per common share. 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 convertible notes and debentures were converted, each as of December 31, 2020, an additional 28,808,263
shares of common stock would be issued and outstanding. 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.
Sales
of a significant number of shares of our common stock in the public market or the perception of such possible sales, could depress
the market price of our common stock.
Sales
of a substantial number of shares of our common stock in the public markets, which include an offering of our preferred stock
or common stock could depress the market price of our common stock and impair our ability to raise capital through the sale of
additional equity or equity-related securities. We cannot predict the effect that future sales of our common stock or other equity-related
securities would have on the market price of our common stock.
Our
share price could be volatile and our trading volume may fluctuate substantially.
The
price of common stock has been and may in the future continue to be extremely volatile. Many factors could have a significant
impact on the future price of our shares of common stock, including:
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our
inability to raise additional capital to fund our operations, whether through the issuance of equity securities or debt;
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our
failure to successfully implement our business objectives;
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compliance
with ongoing regulatory requirements;
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market
acceptance of our products;
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technological
innovations and new commercial products by our competitors;
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changes
in government regulations;
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general
economic conditions and other external factors;
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actual
or anticipated fluctuations in our quarterly financial and operating results; and
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the
degree of trading liquidity in our shares of common stock.
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A
decline in the price of our shares of common stock could affect our ability to raise further working capital and adversely impact
our ability to continue operations.
The
relatively low price of our shares of common stock, and a decline in the price of our shares of common stock, could result in
a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because a significant portion
of our operations has been and will continue to be financed through the sale of equity securities, a decline in the price of our
shares of common stock could be especially detrimental to our liquidity and our operations. Such reductions and declines may force
us to reallocate funds from other planned uses and may have a significant negative effect on our business plans and operations,
including our ability to continue our current operations. If the price for our shares of common stock declines, it may be more
difficult to raise additional capital. If we are unable to raise sufficient capital, and we are unable to generate funds from
operations sufficient to meet our obligations, we will not have the resources to continue our operations.
The
market price for our shares of common stock may also be affected by our ability to meet or exceed expectations of analysts or
investors. Any failure to meet these expectations, even if minor, may have a material adverse effect on the market price of our
shares of common stock.
If
we issue additional securities in the future, it will likely result in the dilution of our shares of existing stockholders.
As
of December 31, 2020, there were 4,168,324 shares of common stock issued and outstanding. Similarly, at such time, there
were no shares of Series A Junior Participating Preferred Stock; Series A Convertible Preferred Stock; Series B Convertible Preferred
Stock; Series C Convertible Preferred Stock; and Series E Convertible Preferred Stock. As of December 31, 2020 there were 300
shares of Series D Convertible Preferred Stock issued and outstanding and convertible into 25,000 shares of common stock, 80,570
shares of Series G Convertible Preferred Stock issued and outstanding convertible into 26,857 shares of common stock, 10,000 shares
of Series H Convertible Preferred Stock issued and outstanding convertible into 33,334 shares of common stock, 21 shares of Series
H2 Convertible Preferred Stock issued and outstanding convertible into 70,000 shares of common stock, 3,458 shares of Series J
Convertible Preferred Stock issued and outstanding convertible into 115,267 shares of common stock, 6,880 shares of Series K Convertible
Preferred Stock issued and outstanding convertible into 229,334 shares of common stock and 8,043 shares of Series AA Convertible
Preferred Stock issued and outstanding convertible into 8,043,000 shares of common stock.
As
of December 31, 2020, there were outstanding options and warrants to purchase an aggregate of 15,790,603 shares of common
stock; and debt convertible into 4,474,868 shares of common stock. From time to time, we also may increase the number of
shares available for issuance in connection with our equity compensation plan, we may adopt new equity compensation plans, and we
may issue awards to our employees and others who provide services to us outside the terms of our equity compensation plans. Our
board of directors may fix and determine the designations, rights, preferences or other variations of each class or series of
preferred stock and may choose to issue some or all of such shares to provide additional financing in the future.
The
issuance of any securities for acquisition, licensing or financing efforts, upon conversion of any preferred stock or exercise
of warrants, pursuant to our equity compensation plans, or otherwise may result in a reduction of the book value and market price
of the outstanding shares of our common stock. If we issue any such additional securities, such issuance will cause a reduction
in the proportionate ownership and voting power of all current stockholders. Further, such issuance may result in a change in
control of our Company.
Financial
Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit a stockholder’s ability to
buy and sell our common stock.
FINRA
has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds
for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial
status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there
is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements
make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability
to buy and sell our common stock and have an adverse effect on the market for our shares.
Our
Common Stock is subject to the “Penny Stock” rules of the SEC and the trading market in our securities is limited,
which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for
the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price
of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules
require:
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That
a broker or dealer approve a person’s account for transactions in penny stocks; and
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The
broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity
of the penny stock to be purchased.
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In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
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Obtain
financial information and investment experience objectives of the person; and
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Make
a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
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The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission
relating to the penny stock market, which, in highlight form:
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Sets
forth the basis on which the broker or dealer made the suitability determination; and
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That
the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Generally,
brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make
it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to
be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny
stocks.
We
have never declared or paid a cash dividend on our common stock and we do not expect to pay cash dividends on our common stock
in the foreseeable future.
Our
shares of Series D Convertible Preferred Stock are entitled to certain rights, privileges and preferences over our common stock,
including a preference upon a liquidation of our Company, which will reduce amounts available for distribution to the holders
of our common stock.
The
holders of our shares of Series D are entitled to payment, prior to payment to the holders of common stock in the event of liquidation
of the Company. If we are dissolved, liquidated or wound up at a time when the Series D Preferred Stock remain outstanding, the
holders of the Series D Preferred Stock will be entitled to receive only an amount equal to the liquidation preference (as it
may be adjusted from time to time), plus any accumulated and unpaid dividends, to the extent that we have funds legally available.
Any remaining assets will be distributable to holders of our other equity securities.
Shares
eligible for future sale may adversely affect the market.
From
time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary
brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations.
In general, pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current
public information requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity
securities), current public information and notice requirements. Any substantial sales of our common stock pursuant to Rule 144
may have a material adverse effect on the market price of our common stock.
We
currently do not intend to pay dividends on our common stock. As result, your only opportunity to achieve a return on your investment
is if the price of our common stock appreciates.
We
currently do not expect to declare or pay dividends on our common stock. In addition, in the future we may enter into agreements
that prohibit or restrict our ability to declare or pay dividends on our common stock. As a result, your only opportunity to achieve
a return on your investment will be if the market price of our common stock appreciates and you sell your shares at a profit.
We
could issue additional common stock, which might dilute the book value of our Common Stock.
Our
Board of Directors has authority, without action or vote of our shareholders, to issue all or a part of our authorized but unissued
shares. Such stock issuances could be made at a price that reflects a discount or a premium from the then-current trading price
of our common stock. In addition, in order to raise capital, we may need to issue securities that are convertible into or exchangeable
for our common stock. These issuances would dilute the percentage ownership interest, which would have the effect of reducing
your influence on matters on which our shareholders vote and might dilute the book value of our common stock. You may incur additional
dilution if holders of stock warrants or options, whether currently outstanding or subsequently granted, exercise their options,
or if warrant holders exercise their warrants to purchase shares of our common stock.