Good afternoon. Welcome to the Pressure BioSciences third quarter 2021 investor call and business update. At this time, all participants are on a listen only mode, and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Rick Schumacher. Sir, the floor is yours.
Thank you, Catherine, and welcome everybody to our third quarter financial review and business update. As always, before we begin, I need to read a cautionary statement. The following remarks may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied as such forward-looking statements. Such factors include, among others, those detailed from time to time in the company's filings with the Securities and Exchange Commission. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, or circumstances on which such statements are based.
First of all, I'm pleased to welcome a voice that we heard last time. Welcome back onto the call, John Hollister. John is the Director of Sales and Marketing for Pressure Bio. He's had that role for about a year now. As I had mentioned before, John has worked in the life sciences in the biotech field for a number of years. Not that many 'cause he's not as old as me, but for a number of years. He's had a great background. He came to me through our chairman, Jeff Peterson, who said, John just sold his company and he's in between jobs, and we'd be very lucky to bring him on board. This was two years ago.
I asked if he'd come on board as a part-time consultant to help me out, and he agreed. The path to his next endeavor has been longer than he expected, which for me, I've been rooting in the background that it would take longer than expected. During that time, we lost our head of sales and marketing, Roxanne, who had been with us for 12 years. John came on board full-time at the end of last year and said he would take over that role for as long as he could until his next endeavor started.
He's still with us, and John, I'm privately hoping that your next endeavor continues to be slow in its making because we're the recipient of that. John's had big company experience with GlaxoSmithKline and Amgen. Small company experience. He's a Stanford grad with a master's. He's just a super smart, hardworking guy that we're very lucky to have. John, welcome back to the call.
Thanks, Rick. I appreciate it, and it's my pleasure working with you and the team.
For today's meeting, we're gonna start with a brief discussion of the third quarter results. John and I are gonna talk about some of the highlights, both technical and operational highlights that have occurred during the third quarter. Afterwards, we're more than happy to take some questions. As we have done for the last few meetings on the financial highlights, I'm not gonna go through the long drawn out regurgitation of the K or the Q in this case. Everybody has the Q and probably also have the press release we sent out today.
There are some things we'd like to highlight on the third quarter on the financial overview, which I will, and then we'll talk about the operational and technical highlights, and then as I said, we'll jump into the Q&A. Starting with the financial highlights of Q3 2021 versus 2020. As everyone has seen, I'm sure by now, it was basically a flat quarter compared to last year. I've had a number of calls today, a couple last night after the Q was filed and today, and some investors have called to say, actually it's better than they thought after having the best two first and second quarters we've had, the second best ever and the best since 2018.
They're happy to see that it didn't really change much, that we were pretty much close to where we were in the first two quarters. Several other people called and said they were disappointed, primarily in the PBI Agrochem part. I share that. We're disappointed in the PBI Agrochem. We had expected, hoped for and expected a higher revenue in the brand new Agrochem, which we just, you know, really just started in July and August. We had purchased some inventory and had thought we would get some more sales. We'll talk about that shortly. All in all, it was a good quarter. It wasn't a great quarter. It's been a great three quarters so far this year, and we'll talk about that. Quarter to quarter, again, mostly flat.
Revenue was down about 3%. Some of that came from our instrument sales, which was down 12% and consumables down 7%, so the numbers aren't that big. The BaroFold and UST services actually increased 18%, as we had expected. In the Agrochem, we did $17,000 in sales. Of course, we had no sales in Agrochem a year ago. We had hoped to have more. Now we certainly hope to have significantly more in the fourth quarter, but we did have some initial sales in the third quarter. The operating loss was $1.2 million versus $800,000. A lot of that was investor relations and in stock options. The accrual for stock options that go over the vesting period, which is three years.
The loss per share was down, as you might expect, about $0.20 from $1.02 down to $0.82. For the three quarters to date, we still have a very good set of results when you look at the first nine months of this quarter. Our revenue is up 60% over last year. Instrument sales up 74%, consumables up 23%, BaroFold and UST services up 89%. The operating loss has still improved. It's still down 37%, so we have a 37% improvement on operating loss through the first nine months of this year, and the loss per share has also decreased about $1.20. All in all, we had hoped for a better quarter.
We are certainly hoping for a better fourth quarter. A lot of that being driven by the Agrochem business that we have purchased. We announced that we purchased half a million dollars of inventory, some of which came in in August. A lot of it was to come in in September. Because of the supply chain issues, it sat in a cargo ship for almost four weeks off the coast of L.A. and did not even land until October fourth, and wasn't taken off the ship until around October tenth and didn't arrive into our warehouse until the middle of October, so nothing there could be used and sold during the third quarter.
We did have some additional inventory that we'd purchased early on that we had hoped to move. Basically, we are going back to customers who haven't bought this product for about two years, two to three years. We're trying to reignite them as customers. We're working with the founder of the Agrochem company whose assets we're acquiring, and it's just taking longer than expected. These are terrific products. They're eco-friendly agrochemical products. The sales in prior years, you know, two, three, four years ago, were in the $10 million per year plus. We think we can get back to that. In fact, we think we can get well beyond that as time goes on. It's just taking a little bit longer than we thought.
Probably some of them had inventory of the other products that they're using since these products hadn't been on the market for a couple of years in the U.S. Between that and the fact that the major product that would sell between really September and December wasn't even taken off the ship until the middle of October, those are the two things that adversely affected us, but we do expect that the raw product that we purchased and the product we're processing in our new facility outside of Reno, Nevada, will be available and is available for sale, and we are expecting to see those sales in the fourth quarter.
John, if you wanna add anything, particularly of some of the insights you have of being on the firing line every day, with our customers, I'd be happy to turn it over to you.
Yeah. I just don't think that it can be understated the logistics issues that we face, and it's been in the news, has impacted the launch of the Agrochem business, as it does affect our shipment of our devices across this country and internationally. And we're learning a lot about logistics and the challenges that the logistics world is and its impact. Looking forward to those sorts of issues getting out of the way and so that we can ship our product faster.
As much as we were disappointed, the fact that we were still able to have a quarter of over $500,000 that was still twice what the average quarter was last year, the fact that we were able to get some of our products made in the last minute and shipped out, you know, we're happy with that. One of the issues we had is getting parts in to make our instrument for our PCT platform, the Barocycler.
You know, we have 325, roughly, that we've placed over the last 10 or so years around the world, and just getting parts in to build those has been difficult and we've had to go to other suppliers. We've had to find different ways to get parts in. We've had to be very ingenious in doing this to be able to ship, I think it was the five instruments we shipped in the third quarter.
We also lost our contract manufacturer, as we put in the press release and particularly in the 10-Q, who's only 11 miles away because they went with a national company that basically came in and made them an offer they couldn't refuse by taking all the space in their contract manufacturing facility. They gave us notice, but we had to set up the approval from our notified body in order to CE mark and get the UL marking on our products. We had to get all of that done this year. We had to set up a facility that was acceptable, that passed inspection to build these instruments in-house because building them out of house was not possible.
The cost of finding another group and that short period of time was astronomical. We built them ourselves under spec and with the right labeling. We did all of that and all in all things came out pretty well, with the exception of the issues with you know kicking off the Agrochem business, which again, we're very optimistic that the sales we were hoping for the third and fourth quarter will still happen, but most of them in the fourth rather than kind of equal between the two. It was actually the best nine-month year to date we've had since 2018. We're pleased with that too.
In terms of the operational and technical highlights, I mean, on top of everything else, I'm very proud of the team here. We've put press releases out to crow about some of these things, but it's really been terrific. I mean, setting up the warehouse in order to receive and process and package and ship an inventory. John talked about things we're learning, and one thing we're certainly learning is that in the Agrochem business, it's gonna be inventory necessary to have good inventory at all times. When your customer wants to have a certain eco-friendly insecticide, fertilizer, a pesticide, they don't wanna wait a month. They don't care about supply chain issues. We need to have it. We're learning how to do all this.
We do have another shipment of product that has arrived and a third shipment of product that is on a cargo ship now. This is all raw product that comes in and needs some level of processing by us once it gets into our laboratory, into our processing facility. We've set up that laboratory. We've had successful UltraShear processing. We announced on both astaxanthin. Astaxanthin is considered to be maybe the most potent antioxidant on the face of the earth. It comes from, primarily from krill. When we put out the press release, I think it was July seventh, John, we got. You've been chasing these, but I think we had. There's seven, that I know of, key astaxanthin producers in the world.
Many of them are also, you know, selling in the U.S. I think six of them called us, and several of them have worked with us. One of them, which happens to be, I believe, the largest in the world, has signed an agreement with us to have us make some product for them, different lots of product, because they're very interested. My gosh, if our UltraShear can make the product so it is more bioavailable, so you can use less and get a better effect, that means that the producer can save money by having it go much further, and the consumer can save money, hopefully, I know I'm dreaming a bit, by having the producer charge less because they're making it go further. Everybody wins.
John, I don't know if you wanna add. We don't wanna talk about names yet, but.
Oh.
Certainly you've been on the firing line with these multiple astaxanthin producers.
They are visibly impressed with our formulation work that we've been doing. I have to say, aesthetically, the astaxanthin that's emulsified, nano-emulsified is just beautiful. Just this clear red product that you could envision it being infused in different products and/or taken directly are very exciting, and we look forward to seeing some bioavailability data at some point in the not too distant future.
Astaxanthin, again, comes primarily from krill and also from algae, and it is harvested and it is in scarce supply. If you can find a way to make a certain amount go three, four times further, then you really got something. We believe we can make it go much further. We believe we have something, and we are working with companies. These things don't happen overnight, but they do happen when you have something that's better than what's out there. We believe we have something that's better than what's out there. We feel very optimistic that we're onto something big in the area of astaxanthin. Astaxanthin is, again, one molecule, one product that this works for because it is harvested in an oil.
Anything that's encased in oil, when you nano-emulsify it's particularly using UltraShear technology, our patented. As you know, we now have seven patents issued. A year ago, we only had three. Now we have seven, including two in the U.S. The two key ones are in the U.S. You know, we're onto something we think quite big here. But it's one molecule out of dozens or hundreds that we can get excited about. CBD, of course, is another one. Neem oil comes from the neem bark of the neem tree. Neem oil is an oil that has a natural ability to be an insecticide as many essential oils do, out there.
Orange peel and many other oils that come from natural products can be natural insecticides, pesticides. We were able to nano-emulsify neem oil. Neem oil is something that you can buy in any hardware store. I know a lot of people that use it and swear by it that it really works and works great. Isn't that what we want? Natural products out there, so we're not gonna be killing the lakes, as National Geographic had a couple of months ago, a big story on the dying Great Lakes in the U.S. and Canada, primarily because of runoff of fertilizers and insecticides. We need to continue to look for more eco-friendly products, and that's what PBI Agrochem is all about.
We're excited about our ability, not just astaxanthin and neem oil, but also CBD. We published a press release not too long ago that we were up to 14 months. We'd broken a year, and we said it was 14 months, so it was four months ago. Now we're up to 18 months, and the product looks in the container as good as it did on the day it was made 18 months ago. CBD comes out of the cannabis plant in an oil, and when you put CBD oil into something that's ingested or rubbed on, it has a very low bioavailability, which means it's not available for the biology of your body to ingest it, to intake it, to spread it around the body so it can do what it's going to do.
You need to make it more bioavailable. We know that in general, nanoemulsion, that is, droplets of oil that are so small they're nano-sized, and most emulsions that we have in this world, of which there's many, are macro or microemulsions. But when you break that oil down, which contains the active ingredient, to a nano-size, then it has a much better availability to be bioavailable. It also is almost always much more stable, long-term stable. We've proven the stability of CBD that we make is now at 18 months and running. We will be doing two bioavailability studies. But again, just like John said about the astaxanthin, the look of this material is just sparkling. It's just very, very sparkling.
We've seen plenty of so-called nanoemulsion and microemulsion products, and they're just ugly, quite frankly. This stuff is very clear. John, you've also been talking to some of the CBD companies, of which there's actually quite a few, that have called us and talked to you, just unexpectedly, right?
Yeah. You know, I think that what has most impressed me is how reproducible the UltraShear technology, this nano-emulsifying that we're able to do, almost independent of the oil across the board in all sorts of different areas. Pharmaceuticals, you know, I could see us because there are many pharmaceutical products that are oil-based where just by definition their absorption is not optimal, that we can improve them. We can help companies that have a generic old product and nano-emulsify it and make it a better version of an old drug, or the same can be applied to new drugs.
The same is true with all sorts of nutraceuticals that depend on oils that are commonly either taken by themselves but are very difficult for the body to metabolize. By nano-emulsifying it, mixing oil and water, and chopping it down to very small particles, you know, 50 nanometers, the body just readily accepts them and absorbs them, and it becomes available. To your point, it's the world is our oyster, as the old expression is. There are so many potential applications for UST. What we're having to gear up to, because we're getting pressure from a number of different customers, as Rick has mentioned, who have called us looking for help, we're now getting pressed to get into commercial manufacturing, which we've shared in our press release not long ago.
It's extremely exciting. You know, Katie bar the door. There are so many different marketplaces where the potential of UST could have great benefits.
Great, John. Thanks. You mentioned it, and we're on UST. We did announce just a couple weeks ago that we've made a strategic decision to set up at least two toll manufacturing sites, one on the West Coast and one on the East Coast. Some of this came from a couple of groups that have come to John in the last year or even the last six months that have said, "We're too small to be buying your instrument or leasing your instrument," or "It's just not what we do. Would you do this for us?" We've had multiple groups that have said that they would want to purchase from us and let us do the manufacturing, so that's called toll manufacturing and toll processing.
We're looking at setting up systems out in California and back here in the most likely New England, perhaps even right near us in Boston, where we can make this available fee for service. If we had that now, I think we'd have probably half a dozen companies immediately that would be utilizing that service. Two of them in particular, John invited me to be on the phone call with over the last month. One is a Vietnam vet, a helicopter pilot that is trying to give back and he's asked us to make a CBD product.
We formulated it, made it for him, and sent it to him, and he's just ecstatic about it, and he's waiting. He's one of the guys pressuring John to pressure me to see how quickly we can get this toll manufacturing set up. Another is a group that is looking at a nasal spray with CBD, and that will be longer because that'll—they're gonna go through FDA. But still, they're just two of many, and we're not advertising, we're not telling. The only advertising we do is sending out a press release. Usually we get, like, with astaxanthin, we get phone calls starting the day they go out or the day after they go out from interested parties. We know there's a market out there for us.
We're excited about the toll manufacturing. I'll get back to that in a little bit. There are two more things that I want to talk about. One is the BaroFold. We had a press release on an expansion. John and Dr. Lazarev and Dr. King came up with an idea that we should make available our instruments that we sell for pressure cycling technology. They can also be used in small studies for refolding proteins. Remember, proteins are molecules that have these strings of peptides that fold over each other and they have to be like a key in a lock. It has to be exactly the way mother nature wanted it to be.
When you make a monoclonal protein in the lab, it sometimes comes out misfolded. You do a lot of work to get it fixed using chemicals and changing things, or you come to us with our eight patents on our BaroFold, and we can use pressure, amazing pressure, to unfold proteins and then to refold them. Sometimes they unfold, then refold the correct way, and then that molecule can now be used. If you're making a drug, you're making a monoclonal antibody as a fight against arthritis or cancer or anything, and it's misfolded, it cannot be used.
If you build into your scale manufacturing cycle a refolding using our technology, then if it does refold the way it's supposed to be, then you can get to market and stay on market. We're working with six different groups, three of them right now. One of them, today I went down into our manufacturing, our lab, our processing lab, and saw where our two key scientists were doing some folding and refolding, not experiments in R&D, but actually for a well-financed biotherapeutic company that has an issue with what they hope to be a billion-dollar drug, except it folds incorrectly when you make it in the lab. We've shown that BaroFold, our patented procedure, can actually help them.
They've asked us to actually go to step two, which we mentioned three months ago, to start working with their contract manufacturer. This is the first step. We're making a reasonable amount, hundreds of milliliters, not just, you know, a handful of milliliters. We're doing this on our modified UltraShear modified pressure cycling technology instrumentation. This idea that John and Sasha and Ed came up with is terrific. John, we can't name names, but we have a multi-billion dollar company that you've leased, I think, two instruments to in the last couple of months, correct?
That is correct. They are very excited about trying to solve a problem that they were running into. I'll tell you my experience at Amgen as a global commercial lead in oncology, where I was the leader on several different product teams, all biologics, one of the go-no-go decisions very early on in the development of a new molecule is, can you manufacture it? The tendency for some of these biologics to clump, for lack of a better word, into what are called inclusion bodies, it's very difficult to extract those proteins from those bodies. Then secondly, the proteins, back to your organic chemistry of folding or unfolding, or folding improperly, causes a big problem and very expensive and very inefficient in terms of trying to fix that problem.
All of a sudden, we with BaroFold have the opportunity to help pharmaceutical companies solve this key manufacturing step, which may in fact make a molecule go from a no-go to a go, by solving that problem. Very exciting, and it's amazing to see the organic growth of this area of our business.
We would expect to receive some type of royalty or use license fee for anybody that needs our BaroFold processing, and they build it into their standard operating procedure of making their protein drug. That could be quite handsome if you think about one of these drugs getting to market in a few years and maybe selling $100 million or $1 billion or several billion dollars a year, and we're part of the manufacturing procedure.
The last thing I want to mention before the Q&A is that we've unveiled, and I put some of these in my quote in today's press release, some of the rather aggressive goals that we have for the fourth quarter and for next year, that you know, we expect to close this agrochemical company acquisition of assets. We are working with them. We're working with basically the founder and owner of that company who's introducing us and the company to the distributors they used to use a few years ago, and the companies, the farms, and others that used to use their product. Again, it's taking longer than we had expected or hoped.
Some of it is just it takes longer, and some of it is the supply chain issues that it's hard to sell a product if it's not in inventory. We're working through all of that, and we're very optimistic that we'll be able to close this and generate some very good revenue in the fourth quarter and then next year, even better. On the Agrochem side, clearly, this company needs to be on a national exchange, a stock exchange, whether it's NASDAQ or New York Stock Exchange. We need to be there for multiple reasons. We've talked about it before. We continue to talk with the exchanges. We continue to work towards a goal of getting uplisted as soon as possible.
It is a clear goal of this company to do that. We believe that with the AgroChem, the product line that we've brought on and will expand on, and with the UltraShear going to market in the next few months, probably in the first quarter or first few months of next year, we'll be up and running and we can talk about that. With those two things and our core business coming back as we've seen it come back, we do believe we've run the numbers over and over again, and we believe that we can get this company to profitability by or before the end of next year, the end of 2022.
We need to do that. We believe we have the people and the technology, the products and the market to get it done. The capital has been the problem, and we've raised some capital, as we've mentioned, in our Q over the last three or four months, which has actually changed the company tremendously. I will hold off on that to see what questions we have. I think at this point I'm gonna turn it back to Catherine, who is gonna jump on and explain how people can ask questions.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone now. We ask that while posing your question, you please pick up your handset if listening on speaker phone to provide optimum sound quality. Once again, if you have any questions or comments, please press star one on your phone now. Please hold a moment while we poll for questions. Your first question is coming from Thomas Calder. Your line is live.
Thank you. Hi, Rick. Enjoyed the presentation. I had re-watched your Benzinga when you were at 16 months with the CBD. We could talk all around these issues, but I can synthesize it in one question: When are you gonna turn all these bullets into monetized reality? Because that's what investors aren't seeing with all your presentations, and you're the gatekeeper on information.
Very shortly. We've gone out on a limb. As I said, I've been spoken to by our lawyers who don't like us going out on a limb. We've gone out on a limb and said, "This company is going to be. You're not gonna recognize this company this time next year. You know, we're gonna be the next overnight success." I was speaking to someone the other day who said that overnight successes usually take 10 or 15 years. We're gonna be the next overnight success. We really believe that. You know, Tom, we don't wanna be another me-too company. Our dream is to be a billion-dollar company. Our dream is to be a billion-dollar life science company.
That is a dream that can be achieved if you have the people and the technology and the markets. Guess what? We have the people, the technology and the markets. What we've been missing for the last few years, which is why this has gone slower than, believe me, than we wanted to, is adequate funding, capitalization. With capitalization, when you're developing something that doesn't really exist, our super maximum UltraShear technology, why did we get seven issued patents? You don't get a patent on something that's me too. It's gotta be unique. It's gotta be one of a kind. It's gotta be different. Tom, to answer your question, the waiting's over. We have spent a lot of time working on the development of three technology platforms. We've,
I guess we're gluttons for punishment, so we brought a fourth platform in called Agrochem because we think there's an opportunity there, and we know that UltraShear can make very good product even better down the road. 2022, we believe that we started to see that come to light if you look at some of the responses, what John has said and what I've said from the customers that are looking at products that we're making, nano-emulsifying for them using our prototype instruments. We have three different instruments, a benchtop, a floor model, and then a super maximum model that can do very large amounts as if you're a big soft drink company and you wanted to infuse something in it. We're working in all three. We have a partnership with Ohio State. They have an entire college of food and agriculture.
They're behind us 100%. We will be shipping our instrument to Ohio State. It's overdue. It was due months ago, but because of supply chain, but mainly because of capital, not having enough capital, we've taken longer than we wanted to get to where we are, but we're there. We're getting ready to ship the instrument. It'll be shipped this year, which means we only have a few more weeks to go. More importantly, Tom, we can't just ship the instrument. We need to have one here. We're building not one, but two. I know that I had some investors call and ask me about the debt we've taken on. We're building two instruments, and these instruments cost hundreds of thousands of dollars a piece. We're not building one.
We're replacing the Ohio State prototype that goes out in a few weeks with two instruments here, and then we also have to build two additional instruments for our West Coast tolling site. A lot of expenses that are coming up, but we're at a point now that we believe that the stake is in the ground, the line is in the ground. We know what we need, so we're starting to build the instruments that will replace the ones that we're shipping out and be the ones that are generating revenue starting early in 2022.
It's all about revenue and lead time, isn't it?
Capital.
Well, yeah. With my first career of 16 years in the semiconductor industry, so depending on how things are going, as one president said to me, "You know as well as I do what you're purchasing today is what you're selling 12 or 16 or 20 weeks out, depending on the lead time and how long it takes to manufacture that semiconductor." That was like a light bulb. The other thing, the only suggestion I could make, you have some great ideas. You're working on some great products like the krill oil. If you had six or 10, and that was your focus for the next six months, because these are not just technologies, they're disruptor technologies. If you have a breakthrough in CBD, it makes pretty much everybody else's CBD a me-too worthless product.
You have to have a real player in that niche. Same with the krill oil, the little red pill or whatever. I mean, that's why I'd really like to see more information coming out on how you're focusing and pinpointing this information to make your dream come true.
Tom, we've heard about electric cars and trucks for a decade, right? I mean, we've heard about them.
Oh, more than that, yeah.
More than that. I'm a truck guy. I'm a F-150. I'm a truck guy. I've been waiting for a decade to get my electric truck, you know? I'm as impatient for Ford or Chevy or whomever to get me my truck as I know our investors are for getting UltraShear out. These things take time. I mean, Ford has more money than we do, and they still don't have a good F-150. You know, I guess they're coming out with something now. You know, I've been waiting for that. These things take time. The time is now, as the saying goes. We're preparing. We've already ordered hundreds of thousands of dollars of equipment to be shipped in here.
We're building two systems that will mimic our prototype that we know works. I wish we had another two years to work on the prototype, but guess what? We don't, and it works great. A second generation, maybe two years from now, will work even better. Right now, we know it works great. We're building two systems. We're building the first toll systems here. We wanna be up and running and commercialized in a matter of a few months of next year. We need to start generating that revenue that we all wanna see.
Okay. Thank you.
Your next question is coming from Rory Jensen. Your line is live.
Hey, Rick.
Hey, Rick. Can you hear me?
I hear you fine.
All right. We don't have Mr. Peterson here with us today.
I will have Mr. Peterson back next time for the K because I think having the chairman on the board when the K comes out is very important. Right now we've got John with us, Mr. Hollister.
Okay.
Because I think you guys wanna hear from the guy that's on the firing line of the sales.
That's right. We're gonna go forward. We're not gonna go backwards. I kind of understand where Thomas, your first caller, came from. We can talk about Bradford A. Young from, you know, a while ago and we're gonna do all this. You know, the focus is, you know, we gotta be focused. I know you're holding this whole Agrochem here to the chest, but I'm kind of interested what are we looking at with this? Is this small scale stuff? I mean, are we doing organic fertilizers? Is this for craft, boutique? I mean, are we doing large scale industrial? What are these fertilizers going to be used for? Can you talk anything about that?
It's certainly large scale. The distributors that we've been introduced to, that we've spoken with are dealing with large farms all over the country, mostly East and West Coast and some in the Midwest. We're dealing with eco-friendly materials, and we are dealing with something that could be very, very big. I think next year I honestly believe that this thing could do very, very sizable dollars. We're not talking about selling a couple of million dollars. You know, we're talking about selling many millions of dollars in terms of the eco-friendly materials. They're fertilizers, insecticides, pesticides. Guess what?
A good portion of them are oil-based, so even though they are good in the state they're in now, in the future they're gonna be better 'cause we have desire to nanoemulsify those so that you could be using a lot less and going further with it, which helps everybody, as we said before about nutraceutical. Same thing happens in agriculture. John, you're kinda close to this. You wanna add anything?
Yeah. You know, I think you started touching on something which we probably don't touch on enough. These eco-friendly chemicals are actually, most of them are essential oils. They're safe for us to drink, but they either feed plants, they discourage bugs, or they help plants perform better. In answer to your question about volume, I drove down to Paso Robles with my wife this past weekend. I'm out here in California, through much of the heartland of great fields. Next to every field, and you'll notice this now if you take a look, there's a water station, a pump house. Next to the pump house are always pallets with what are called totes.
Those totes have 1,000 liters of chemicals that are being pumped through the water systems into the fields for different purposes. That's the business that we're getting into. Why it makes so much sense for us, one, it's a tremendous revenue source. Obviously as an eco-friendly, it's good timing because there aren't as many competitors in this space, and there's a very high level of interest. It is very much in the heart of our business because it's oil and water. These agribusinesses have to do today is they have to stir that mixture much like our salad dressing at home, but in big amounts. It takes a lot of time.
We could actually apply our technology to doing that, making a nanoemulsion of these with the potential of getting better absorption. Therefore, perhaps less product is needed to accomplish the same goal. We're very excited. Lastly, this business is focused on selling to distributors, so fewer customers, if you will, but much larger volumes. There's also the potential for turning this into more consumer-oriented products. Cutting down the size of the bottles into spray bottles that you buy at a Home Depot. That is clearly something we're looking at, and nanoemulsions would benefit that product too. Very excited.
Okay. That helps a lot. I just have one more question. On the front end of a cannabis producer, can I see your chemicals being used? On the back end for this, the processing of the THC, CBD, the Ultra Shear Technology being used, is that a yes or a no?
Oh, absolutely. Spot on. I was on a phone call with a very significant investor in the cannabis and hemp agribusiness. He brought up, without me prompting him, the problem of spider mites in hemp fields and cannabis fields. That would be an example of a product that we could have that's available, you know, we'll be distributing to that marketplace. Making a nanoemulsion of it has the potential of making that even better. That's the front end of helping the growers do a better job. On the back end, there's no question that our process does wonders with CBD and/or any cannabinoids. They're all these lipid products that are very difficult for the human to absorb, and we can overcome that problem.
Frankly, we've done it in and we're now doing all sorts of different formulation development with a couple of different companies. Or actually now a few different companies. We're learning a lot about different oils to use as the carrier. We're learning different things about the surfactants that are used. It's really remarkable what we've learned in the last two years. It's in no small part because Rick has managed to pull together a team at Pressure BioSciences that have stayed with him for 15 years.
As they've learned and now on the precipice of really accelerating into the company that they've always envisioned they would become.
Okay. Well, I appreciate you guys answering this. Rick, there's just one more. Is this something we're gonna break out? I didn't get to see the number. I know it was said on the bulletin, but are you gonna break out the Agrochem side?
We are.
Okay.
We are. Going forward, we will break out that number 'cause it, we think it's gonna be significant enough that it deserves to be broken out.
Right. Okay. Well, I pursue that ESG. I love your guys' technology, and we're supporting you, so keep it up.
All right. Thank you.
Sure. Thank you.
Yep.
Your next question is coming from Gary Slachenbaum. Your line is live.
Hi, Rick and John. I wanna congratulate you on your Q3 sales, not only your third quarter, but also for the nine months with the supply issues that you've had. I wanna focus. You've had two or three questions on the Agrochem business, and I wanna be able to focus on that. Going back to your last conference call, you talked about buying roughly half a million dollars in products, okay? I understand a lot of that has come in late. You mentioned October 10, October 15. I wanna ask you regarding the product. You said that half a million dollars in product would correspond to over a million dollars in sales, in revenue. I wanna get a feel. Obviously, it didn't come in late. You mentioned that some came in, there's some landing soon and more.
This is product that was already ordered. Are we looking at more than $1 million in sales from this? Can we talk about going into next year into Q4, which is already half done? Can you give a better feel for what this Agrochem business can do next year? In other words, you thought that could more than double sales. Isn't it possible that we could do a few $ million in Agrochem next year, where we were doing a few $ million in total sales? If you could break into that. I recently spoke to the largest hemp producer in North America in California, who has said to me on two or three occasions how interested he was to talk to you about your process because he thought it would be very, very important.
I know Rick will try to get together with you in the coming weeks. I know you've been busy. If you can focus on agrochem and those numbers, because I think your first caller with questions is, "Where is the revenue coming from?" I think we're hitting some traction. If you could talk about that, I'd appreciate it.
Yeah. We have inventory. We have a half a million dollars of inventory that either came in August or was taken off the ships in October and is now up in our Nevada warehouse where we process and ship. We have more coming. It's gonna be probably on a cargo ship now or will be this week, coming probably an equal amount. Is it if we have half a million dollars, is that $1 million to sell? If we have $1 million, is that $2 million? The answer is yes. We have very good margins or good margins right now. They become even better if you go into retail, as John was talking about.
The answer is, we expect to see significant revenue. I'm not gonna give you a number in the fourth quarter. I actually don't have to give you a number 'cause I gave you one before. I said between the third and fourth, I thought we could do up to $1 million, so that, you know, somewhere between half a million and $1 million. Since we didn't see it in the third, I guess you can hold me to the fire and say, I expect to see it in the fourth. I accept that. I've already said it and I stick with that. We expect to see half a million to $1 million in sales in the fourth quarter. We also will do much more than that.
We expect to do much more than that next year. Gary, I'm not gonna give you a number, but it's. As I said before, we're not talking about $1 million or $2 million. We're talking about $ millions that we think we can do over the course of next year. Remember, we're just getting started. We're just getting introduced to distributors. We're asking them to buy our product when they already have inventory and of course, some of them aren't willing to do it. We're setting the stage for what could be a very good next year. I'm not backing off. I still think we're gonna have some reasonable sales of our agrochem in the fourth quarter. This is how we're gonna get the profitability. There's two key things.
The Agrochem is one and UltraShear is the other. They're both potentially huge. In our business, isn't it good to have two Goliaths here? Both of them, if they both hit like we think they both hit, that's why I think it's safe to go out on the limb and say by the end of next year, this company will be profitable. You won't recognize this company this time next year. I really don't believe you will. If only one of the two really hits, it's still gonna be big because they're both big.
Rick and John, in talking to this largest hemp producer, you told me your initial sales were to the larger companies.
He expressed to me, when you get to the smaller farmer and smaller producer, the margins are greatly increased. Once you get that going and you'll be able to reach the smaller guy, I think you'll have even bigger margins. Congratulations. I know you've had some delays, but I look forward to the next few quarters to see the agri business, you know, dwarf your regular revenue for the year.
Perhaps the UltraShear dwarfs the agro. Wouldn't that be great?
That'd be great. Amen to that.
Yeah. Thank you, Gary. Catherine, are there any more?
Yes. You have a question coming from Brady Lipp. Your line is live.
Hi, Brady.
Hey, hey, Rick. My question's kind of centered around. It's kind of an expansion, a little bit of Tom's initial question to start this Q&A session. I've done, you know, extensive due diligence. During the course of my extensive due diligence with people in the CBD market and some top-tier people in the biotech pharma area, I've even taken the time to go down and meet with Dr. Subramanian down at Ohio University to get a sense for the market opportunity in the food and beverage industry, which is obviously huge. I was wondering if you could just expand a little bit on if you've had any with people in the CBD market or the pharmaceutical industry.
You had talked a little bit about the, you know, the royalty business model, which I absolutely love, if you can help with the manufacturing process of some big products, whether it's in the CBD market or the biotech or pharmaceutical industry or even in the food and beverage industry. I was wondering if you could elaborate a little bit on what you would expect based on conversations you've had, with people in these various industries, is what would be reasonable from a royalty stream perspective? We could gain a little bit of a sense for what the revenue opportunities are in some of these businesses if you would nail down a relationship with the CBD. That's one question.
The second question is, if you've had objections at all, from any of these industries with that type of model. I'd like to kinda hear the feedback that you've gotten if you've had any of those kinds of conversations.
I'll jump on this. I know we're gonna run out of time soon, so I'll jump on this and then ask John to, I'll be short. The model is one in which we are not gonna sell the instrument. We're going to place the instrument in the facilities, and it's gonna be a monthly charge plus a minimum royalty. Anything that they make over that number, we're gonna get a piece of that. I'm not at liberty to say what piece of it will be, but let's just say that I think we're talking about, you know, $ millions in these industries that are open to us in this model. I personally have not had any pushback. I've had the opposite.
I've had where people have literally said, "We have no problem sharing profit with you. The bigger problem is coming up with hundreds of thousands of dollars to buy your instrument. Now we don't have to do that." We've had actually extremely good response from people about the model of, you know, give us $25,000 and a few thousand a month, but we want a piece of the action versus give us, you know, a few hundred thousand dollars upfront. It's been welcomed. As for the market, you know, there are hundreds of CBD manufacturers. There are hundreds, if not thousands of vitamin and wellness and other supplement manufacturers. There's some big ones, and there's a lot of small ones.
The tolling will take place so this will help the small ones, and the bigger ones will take the instruments. This is our model. If you have a better mousetrap, they're gonna buy it. We have a better mousetrap. We've been building it, and we're getting ready now to start showcasing it. I tell you, the calls that John gets every day, every week from people that read a press release or hear something or see an article are quite a few. Wait until you start you know the word gets out that the product works better because the product has been processed by UltraShear technology. The market is very, very big, Brady. We're not going after one or two or three. We're going after hundreds of manufacturers, either through the tolling or by the installation.
John, can you add to that?
The only thing I'd add, Brady, is that I've had the same response as Rick has from people who've gotten to that level of discussion in terms of a deal structure. They're much more receptive to doing a lease with a royalty. I would say, just you know, as you're doing your modeling, royalties that are an analog to the pharmaceutical royalties that are traditionally paid, which are, you know, out there, and I'm certain you have access to those. Those seem to be a fair analog for the CBD world, as well as it seems in the nutraceuticals too.
All right. Well, thank you very much for that, background on that.
You're welcome. Catherine, any other questions?
We have no further questions from the lines at this time.
I wanna add something 'cause I've had, I'm gonna say half a dozen calls from maybe even 10. I know one of the things that and I didn't offer it because I figured someone would ask it, but no one did, so I'll just offer it. I've had half a dozen people call me and say, "What the heck is going on?" You know, I've seen $4 million more in convertible debt on your balance sheet over the last nine months. Yeah, there is. What I wanted to point out is you gotta look at the balance sheet on September thirtieth and compare it to the balance sheet on December thirty-first.
We have increased our convertible debt by $4 million, roughly. However, 90% of that convertible debt, if not more, has agreed to convert into the uplist when we do our uplist. This is debt that is going to convert into stock at least $2.50 a share, if not more, when we do our uplist. The terms of this debt are much better than the terms of a lot of the debt that we had a year ago.
Some of this debt has replaced some more onerous debt, and the other debt is the debt that is helping us to build these 200,000, you know, multi-hundred thousand dollar instruments that we're building, and many of the other things, and build out the test lab and do so many things that we're doing. When you look at the balance sheet on September thirtieth, you'll see that we have cash. Normally, our balance sheet has $30,000 in cash. Our September thirtieth balance sheet had three-quarters, almost three-quarters of a million dollars in cash. There's $600,000 in cash that we would normally not have. There's $400,000 in receivables that we would normally not have. There's $1 million more positive on the balance sheet.
There's $200,000 in inventory. There's $300,000 in prepaid expenses, and mostly that is inventory that was stuck on a cargo ship. We've prepaid it, but we can't call it inventory 'cause it hasn't been received. There's $1.5 million in assets that are sitting on the balance sheet that have come from that extra debt. If you look at the liabilities, you'll see that we reduced our payables by $300,000. You'll see that reduced our employee compensation accrual by $300,000, and that has been bothering me for years when I can't reimburse employees for expenses that they've incurred and other things that I've had to carry on an accrual. We've reduced that by $300,000. We've reduced our related party debt.
It's well known that myself and some people in my family and Jeff Peterson, our Chairman, have come to the rescue when money's tight and we needed it to do maybe to make payroll, maybe to buy something to make a product to sell it. We've loaned the company money, and we've loaned it for a few days or a few weeks. In Jeff's and my case, it's ended up being a couple of years. In most cases, Jeff and I have had to borrow the money to lend the money. We've reduced our related party debt by $130,000.
If you add up all of the positives on the balance sheet on the other side of the $4 million, you see that there's about $2 million that has gone to the good, that we've used that money to make the balance sheet stronger, to make the company stronger. Then the other $2 million is going into running the company. We're not profitable yet. We're not cash flow positive yet. This is the money that we've taken in. Unlike previous years, when we borrowed money at very onerous rates that we have to pay back, most of this debt is debt that has agreed upfront to convert into an uplist if we're so blessed to do an uplist, which is what we plan to do.
To answer the people who were upset about that called me and said, "You've $4 million more in convertible debt." Yeah. $4 million more. The debt is better. If you're gonna have debt, it's better debt. It's debt that's gonna convert. We've used half of it to clean up many eyesores and really ugly things on the balance sheet to make things better, to make the company better. All in all, I'd say that to be able to have done that and be in the position we're in, I've said before, we're in a better position now than we have been in several years in terms of our balance sheet, in terms of our cash flow. We're in a better position now.
I just wanted to take a few minutes to point out that $4 million that we've borrowed, where it's gone. It's going into some very good places and especially going into building these two new UltraShear systems that a couple of months from now are gonna be up and running here in Eastern Massachusetts. We think by the first or second quarter, generating revenue through the UltraShear. I know we're done with questions. We're done with time. I appreciate everybody coming on. Catherine, I just wanna say that I wanna thank everybody, and I know John does too, but we're out of time. I'll thank everybody for John and for me for joining us and taking the time and for the questions.
As always, you know how to reach me. I don't hide. You can, as I've had six calls just since last night, if you feel like you need, didn't get questions answered, call me, email me, text me, and we'll get back to you as soon as we can. Thanks again, and I look forward to the next call, unless we have one in between, which we always could have. The next call will be for our Q, which generally is in May. I'm hoping that I can be told I was wrong. It's that we don't recognize the company in May, not next November, Rick. It's May, we don't recognize the company 'cause you've changed so much. That's our goal. Thanks, everybody. Talk to you in May of 2022.
Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.