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Massachusetts		04-2652826
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)
14 Norfolk Avenue South Easton, Massachusetts		02375
(Address of Principal Executive Offices)		(Zip Code)

 

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ

 

 

			Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)			3
	Condensed  Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012			3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2013 and 2012			4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012			5
	Notes to Condensed Consolidated Financial Statements			6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			27
Item 4.	Controls and Procedures			27
PART II - OTHER INFORMATION
Item 1a.	Risk Factors			28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			28
Item 6.	Exhibits			29

 

 

		March 31,				December 31,
ASSETS		2013				2012
		(Unaudited)				(Audited)
CURRENT ASSETS
Cash and cash equivalents		$	167,910			$	1,461
Accounts receivable			278,020				216,265
Inventories, net of $50,000 reserve at March 31, 2013 and December 31, 2012			890,853				923,362
Prepaid income taxes			7,381				7,381
Prepaid expenses and other current assets			103,706				83,435
Total current assets			1,447,870				1,231,904
PROPERTY AND EQUIPMENT, NET			22,444				30,282
Deposits			-				6,472
Intangible assets, net			72,972				85,130
TOTAL ASSETS		$	1,543,286			$	1,353,788
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable		$	1,059,336			$	1,199,846
Accrued employee compensation			153,978				119,338
Accrued professional fees and other			376,901				267,936
Deferred revenue			29,809				46,466
Promissory note			75,000				75,000
Dividend liability			-				60,000
Related party debt			42,357				98,675
Convertible debt			-				863,004
Warrant derivative liability			206,257				160,812
Total current liabilities			1,943,638				2,891,077
LONG TERM LIABILITIES
Deferred revenue			1,633				2,487
TOTAL LIABILITIES			1,945,271				2,893,564
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' DEFICIT
Series D convertible preferred stock, $.01 par value; 850 shares authorized; 300 shares issued and outstanding on March 31, 2013 and on December 31, 2012			3				3
Series G convertible preferred stock, $.01 par value; 240,000 shares authorized; 145,320 shares issued and outstanding on March 31, 2013 and on December 31, 2012			1,453				1,453
Series J convertible preferred stock, $.01 par value; 6,250 shares authorized; 4,650 shares and 0 shares issued and outstanding on March 31, 2013 and on December 31, 2012, respectively			47				-
Series H convertible preferred stock, $.01 par value; 10,000 shares authorized; 0 shares issued and outstanding on March 31, 2013 and on December 31, 2012			-				-
Common stock, $.01 par value; 50,000,000 shares authorized; 12,149,267 shares issued and outstanding on March 31, 2013 and on December 31, 2012			121,493				121,493
Warrants to acquire preferred stock and common stock			3,823,922				3,015,996
Additional paid-in capital			17,664,727				15,940,818
Accumulated deficit			(22,013,628	)			(20,619,539	)
Total stockholders' deficit			(401,985	)			(1,539,776	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	1,543,286			$	1,353,788

 

		For the Three Months Ended
		March 31,
		2013				2012
Revenue:
PCT products, services, other		$	221,569			$	164,772
Grant revenue			149,168				140,889
Total revenue			370,737				305,661
Costs and expenses:
Cost of PCT products and services			104,544				78,194
Research and development			246,458				271,611
Selling and marketing			193,900				238,092
General and administrative			550,859				682,346
Total operating costs and expenses			1,095,761				1,270,243
Operating loss			(725,024	)			(964,582	)
Other (expense) income:
Interest (expense) income, net			(8,900	)			(56,313	)
Change in fair value of warrant derivative liability			(45,445	)			(42,012	)
Total other (expense) income			(54,345	)			(98,325	)
Net loss			(779,369	)			(1,062,907	)
Accrued dividends on convertible preferred stock			(32,173	)			(24,414	)
Deemed dividend on Series J convertible preferred stock			(582,548	)			-
Net loss applicable to common shareholders		$	(1,394,090	)		$	(1,087,321	)
Net loss per share attributable to common stockholders - basic and diluted		$	(0.11	)		$	(0.14	)
Weighted average common stock shares outstanding used in the basic and diluted net loss per share calculation			12,149,267				7,712,539

 

 

 

		For the Three Months Ended
		March 31,
		2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(779,369	)		$	(1,062,907	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization			21,529				29,323
Accretion of interest and amortization of debt issue costs			-				46,159
Stock-based compensation expense			19,040				8,868
Amortization of third party fees paid in restricted common stock			105,000				31,950
Change in fair value of warrant derivative liability			45,445				42,012
Changes in operating assets and liabilities:
Accounts receivable			(61,755	)			65,239
Inventories			32,509				47,718
Accounts payable			(140,510	)			238,839
Accrued employee compensation			34,640				44,329
Deferred revenue and other accrued expenses			129,775				(588	)
Prepaid expenses and other current assets			(23,801	)			(75,679	)
Net cash used in operating activities			(617,494	)			(584,737	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(1,531	)			-
Net cash used in investing activities			(1,531	)			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of cash dividends			(60,000	)			-
Repayment of related party debt			(31,118	)			-
Proceeds from convertible debt			155,000				-
Proceeds from issuance of Series J convertible preferred stock			721,595				-
Net proceeds from the issuance of common stock			-				377,454
Net cash provided by financing activities			785,477				377,454
Change in cash and cash equivalents			166,449				(207,283	)
Cash and cash equivalents, beginning of period			1,461				222,775
Cash and cash equivalents, end of period		$	167,910			$	15,492
SUPPLEMENTAL INFORMATION:
Income taxes paid		$	-			$	1,900
Accrued dividends on preferred stock			32,173				24,414
Convertible debt exchanged for Series J preferred stock:			1,018,000				-
Issuance of Series J convertible preferred stock for interest			16,374				-
Issuance of Series J convertible preferred stock for related party debt			25,200				-
Issuance of Series J convertible preferred stock for board of director and other fees			54,126				-
Issuance of common stock for services			-				85,950
Deemed dividend on Series J convertible preferred stock			582,548				-
Convertible debt exchanged for common stock			-				387,547

 

1)	Business Overview and Management Plans

2)	Interim Financial Reporting

3)	Summary of Significant Accounting Policies

 

 

 

 

		March 31,				December 31,
		2013				2012
Raw materials		$	180,408			$	183,655
Finished goods			760,445				789,707
Inventory reserve			(50,000	)			(50,000	)
Total		$	890,853			$	923,362

 

 

		For the Three Months Ended
		March 31,
		2013				2012
Top Five Customers			74	%			81	%
Federal Agencies			56	%			48	%

 

 

		March 31,				December 31,
		2013				2012
Top Five Customers			80	%			34	%
Federal Agencies			29	%			32	%

 

		For the Three Months Ended
		March 31,
		2013				2012
Numerator:
Net loss		$	(779,369	)		$	(1,062,907	)
Accrued dividend for Preferred Stock			(32,173	)			(24,414	)
Deemed dividend on Series J Convertible Preferred Stock			(582,548	)			-
Net loss applicable to common shareholders		$	(1,394,090	)		$	(1,087,321	)
Denominator for basic and diluted loss per share:
Weighted average common stock shares outstanding			12,149,267				7,712,359
Loss per common share - basic and diluted		$	(0.11	)		$	(0.14	)

 

		March 31,
		2013				2012
Stock options			1,605,750				1,555,500
Convertible debt			-				50,000
Common stock warrants			11,337,099				5,310,388
Preferred stock warrants			-				-
Convertible preferred stock:
Series C Convertible Preferred			-				880,980
Series D Convertible Preferred			750,000				461,539
Series G Convertible Preferred			1,453,200				-
Series J Convertible Preferred			4,650,000				-
			19,796,049				8,258,407

 

 

 

 

		For the Three Months Ended March 31,
		2013				2012
Research and development		$	4,836			$	2,618
Selling and marketing			3,668				3,113
General and administrative			10,536				3,137
Total stock-based compensation expense		$	19,040			$	8,868

 

 

 

 

						Fair value measurements at March 31, 2013 using:
		March 31, 2013				Quoted prices in active markets  (Level 1)				Significant other observable inputs (Level 2)				Significant unobservable inputs  (Level 3)
Series D Preferred Stock Purchase Warrants		$	206,257				-				-			$	206,257

 

		January 1, 2013				Change in Fair Value				March 31, 2013
Series D Preferred Stock Purchase Warrants		$	160,812			$	45,445			$	206,257

 

Assumptions		November 10, 2011		Warrants revalued at December 31, 2012		Warrants revalued at March 31, 2013
Expected life (in months)		60.0		46.0		43.0
Expected volatility		104.5%		146.4%		133.7%
Risk-free interest rate		0.875%		0.44%		0.36%
Exercise price		$0.81		$0.40		$0.40
Fair value per warrant		$0.54		$0.15		$0.20

 

 

4)	Commitments and Contingencies

 

 

 

 

 

5)	Stockholders’ Deficit

 

1)	20,000 shares have been designated as Series A Junior Participating Preferred Stock (“Junior A”)

2)	313,960 shares have been designated as Series A Convertible Preferred Stock (“Series A”)

3)	279,256 shares have been designated as Series B Convertible Preferred Stock (“Series B”)

4)	88,098 shares have been designated as Series C Convertible Preferred Stock (“Series C”)

5)	850 shares have been designated as Series D Convertible Preferred Stock (“Series D”)

6)	500 shares have been designated as Series E Convertible Preferred Stock (“Series E”)

7)	240,000 shares have been designated as Series G Convertible Preferred Stock (“Series G”)

8)	10,000 shares have been designated as Series H Convertible Preferred Stock (“Series H”)

9)	6,250 shares have been designated as Series J Convertible Preferred Stock  (“Series J”)

Assumptions		Series C Exchange Warrants
Contractual life (in months)		64
Expected volatility		106.7%
Risk-free interest rate		0.75%
Exercise price		$0.74
Fair value per warrant		$0.46

 

 

 

 

 

 

 

 

Assumptions	Series A	Series A	Series B	Series C	Aug/Sep 2011	Feb 2012
		(Affiliates)			Notes	PIPE
Contractual life, in years	4.1	3.1	3.1	5.1	2.1	4.6
Expected volatility	132.0%	114.1%	114.1%	121.9%	126.6%	126.6%
Risk-free interest rate	0.4%	0.4%	0.4%	0.4%	0.4%	0.4%
Exercise price	$0.60	$0.60	$0.60	$0.60	$0.60	$0.60
Fair value per warrant	$0.03	$0.03	$0.03	$0.03	$0.03	$0.03

 

 

 

 

 

Assumptions	Series J warrants February 6, 2013	Series J warrants March 28, 2013
Contractual life (in months)	36	36
Expected volatility	141.8%	144.3%
Risk-free interest rate	0.39%	0.36%
Exercise price	$0.40	$0.40
Fair value per warrant	$0.36	$0.26

 

 

 

		Stock Options								Warrants
						Weighted								Weighted
						Average price								Average price				Total
		Shares				per share				Shares				per share				Shares				Exercisable
Balance outstanding, January 1, 2012			1,508,500			$	2.33				4,775,501			$	1.35				6,284,001				6,112,335
Granted			1,896,250				.81				2,909,068				.62				4,805,318
Exercised			-				-				-				-				-
Expired			(130,000	)			2.28				(116,490	)			2.80				(246,490	)
Forfeited			(1,669,000	)			-				(880,980	)			2.13				(2,549,980	)
Balance outstanding, December 31, 2012			1,605,750			$	0.80				6,687,099			$	0.81				8,292,849				7,989,331
Granted			-				-				4,650,000				0.40				4,650,000
Exercised			-				-				-				-				-
Expired			-				-				-				-				-
Forfeited			-				-				-				-				-
Balance outstanding, March 31, 2013			1,605,750			$	0.80				11,337,099			$	0.70				12,942,849				12,711,330

				Options Outstanding												Options Exercisable
								Weighted Average												Weighted Average
Range of Exercise Prices				Number of Options				Remaining Contractual Life (Years)				Exercise Price				Number of Options				Remaining Contractual Life (Years)				Exercise Price
	$0.50 - $0.59				213,750				9.3			$	0.50				168,751				9.3			$	0.50
	0.60 - 0.99				536,000				6.8				0.60				440,313				6.3				0.60
	1.00 - 1.50				856,000				4.0				1.00				765,167				3.5				1.00
	$0.50 - $1.50				1,605,750				5.65			$	0.80				1,374,231				5.1			$	0.81

 

 

On January 31, 2012, we issued 100,000 shares of restricted Common Stock to an investor relations firm in payment of services to be rendered over one year. We recorded $72,000 for this issuance of which was amortized over the year. On March 2, 2012, we issued 22,500 shares of restricted Common Stock to an investor relations firm for payment of services already rendered over the prior three months. We recorded $13,950 for this issuance as expense. On April 26, 2012, we issued 17,500 shares of restricted Common Stock to two investor relations firms for payment of services to be rendered over one month. We recorded $9,625 for this issuance as expense. On April 27, 2012, we issued 100,000 shares of restricted Common Stock to an investor relations firm for payment of services to be rendered over six months. We recorded $60,000 for this issuance as expense. On August 13, 2012, we issued 350,000 shares of restricted Common Stock to an investor relations firm for payment of services to be rendered over one year. We recorded $140,000 for this issuance of which $59,947was recorded as expense in 2012 and $85,053 was recognized as a prepaid expense that will be amortized over the remaining months of service. On October 17, 2012 we issued 60,000 shares of restricted Common Stock to three investor relations firms for services rendered and recognized $24,000 as expense. On October 18, 2012 we issued 50,000 shares of restricted Common Stock to an investor relations firm for services rendered and recognized $20,000 as expense. On October 19, 2012 we issued 100,000 shares of restricted Common Stock to an investor relations firm for services rendered and recognized $40,000 as expense.  On October 19, we issued 100,000 shares of stock to the Company’s CEO to compensate him for penalties he incurred when the Company defaulted on a loan that he had made to the Company that was subsequently not repaid and recognized an expense of $40,000. On October 29, 2012 we issued 50,000 shares of restricted Common Stock to an investor relations firm and recognized $20,000 in expense. On November 1, 2012 we issued 175,000 shares of restricted Common Stock to two investor relations firms for services rendered and recognized expense of $70,000.  We valued the above stock issuances using the greater of the estimated fair value of the services received or the Company’s stock price on date of issuance. All of these shares were issued without registration under the Securities Act of 1933, as amended, in reliance upon the exemption set forth in Section 4(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering.

6)	Subsequent Events

●

On April 10, 2013, the Company entered into a six-month, uncollateralized loan agreement (“Subsequent Note”) for a principal sum of $275,000, of which $125,000 was advanced to the Company upon closing. The Subsequent Note includes an original issue discount of 10%, and an interest rate of 12%, but no interest will be due if the Subsequent Note is repaid on or before July 9, 2013.

 

●	On April 18, 2013, we issued 200,000 shares of restricted Common Stock to a newly retained investor relations firm for payment of services until October 2013, and 100,000 shares of restricted Common Stock to a previously retained investor relations firm for payment of services until September 2013.

●

On May 20, 2013, the Company entered into a Securities Purchase Agreement with an existing investor pursuant to which the Company sold an aggregate of 437.5 units for a purchase price of $400.00 per unit or an aggregate Purchase Price of $175,000.  This represents the third and final tranche of a $2.0 million private placement.  Each unit purchased in the private placement (“Unit”) consists of (i) one share of a newly created series of preferred stock, designated Series J Convertible Preferred Stock, par value $0.01 per share convertible into 1,000 shares of the Company’s Common Stock, par value $0.01 per share and (ii) a warrant to purchase 1,000 shares of Common Stock at an exercise price equal to $0.40 per share, with a term expiring three years from the respective closing date.

-	our need for, and our ability to raise additional equity or debt financing on acceptable terms, if at all;
-	our belief that we have sufficient liquidity to finance normal operations until the end of May 2013;
-	our need to take additional cost reduction measures, cease operations or sell our operating assets, if we are unable to obtain sufficient additional financing in the future;
-	the amount of cash necessary to operate our business;
-	the amount of grant revenue and anticipated uses of grant revenue in future periods;
-	our plans and expectations with respect to our pressure cycling technology (PCT) operations;
-	the potential applications for PCT;
-	the expected expenses, benefits and results from our research and development efforts;
-	the expected benefits and results from our collaboration efforts, strategic alliances and joint ventures;
-	the expected increase in number of PCT units installed and the increase in revenues from sale of consumable products and extended service contracts;
-	the potential size of the market for biological sample preparation;
-	general economic conditions; and
-	the anticipated future financial performance and business operations of our Company.

 

-	sample preparation for genomic, proteomic, and small molecule studies;
-	pathogen inactivation;
-	protein purification;
-	control of chemical (particularly enzymatic) reactions; and
-	Immunodiagnostics (clinical laboratory testing).

 

●	On April 4, 2013 we announced that further advances had been made in the development of an improved method for rape kit sample testing using PBI’s PCT Platform by Dr. Bruce McCord and his team at the International Forensic Research Institute of Florida International University.

●

On March 19, 2013 we announced that the use and advantages of PBI’s PCT Platform had been highlighted in cancer, stem cell, and heart disease studies at an important protein research conference.  We believe that the FDA data indicate that PCT can be used to extract proteins from stem cells with consistency and quality; the Johns Hopkins data indicate that combining PCT with heat might be a way to recover significantly more proteins from FFPE tissues compared to standard (heat) methods, especially membrane proteins (this could be very important with scientists looking for disease biomarkers); and the ETH Zurich data might be significant for extracting proteins from small, needle biopsy samples, something that we believe is vitally needed today yet not well satisfied at the present time, and (we believe) a significant market opportunity.

●

On February 12, 2013, we announced that Dr. Mickey Urdea had been appointed to the Board of Directors of PBI.  Dr. Urdea is one of the most well-known entrepreneurs and leaders in biotechnology today, having founded two successful companies (Halteres Associates and Tethys Bioscience) over the past ten years.  Earlier in his career, Dr. Urdea led the infectious diseases R&D groups at Chiron Corporation and Bayer Diagnostics.  He has also been on the Scientific Advisory Boards of numerous life sciences companies and was a member of the Bill and Melinda Gates Foundation Diagnostic Forum.

 

 

 

 

 

●

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 preventative controls to properly safeguard company assets.

●

A lack of sufficient personnel in the accounting function due to our limited resources with appropriate skills, training and experience to perform the review processes to ensure the complete and proper application of generally accepted accounting principles, particularly as it relates to valuation of warrants and other complex debt /equity transactions. Specifically, this material weakness led to segregation of duties issues and resulted in audit adjustments to the annual consolidated financial statements and revisions to related disclosures, valuation of warrants and other equity transactions.

●

Improve the effectiveness of the accounting group by continuing to augment our existing resources with additional consultants or employees to improve segregation procedures and to assist in the analysis and recording of complex accounting transactions. We plan to mitigate the segregation of duties issues by hiring an independent consultant once we generate significantly more revenue or raise significant additional working capital.

●

Improve segregation procedures by strengthening cross approval of various functions including quarterly internal audit procedures where appropriate.

 

 

 

Exhibits
31.1*		Principal Executive Officer Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Principal Financial Officer Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Principal Executive Officer Certification Pursuant to Item 601(b)(32) of Regulation S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Principal Financial Officer Certification Pursuant to Item 601(b)(32) of Regulation S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*		The following financial information from this Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2013, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Cash Flows; and (iv) the Notes to Financial Statements, tagged as blocks of text

 

 

	PRESSURE BIOSCIENCES, INC.
Date: May 20, 2013	By:	/s/Richard T. Schumacher
		Richard T. Schumacher
		President & Chief Executive Officer (Principal Executive Officer)

 

 

 

 

	PRESSURE BIOSCIENCES, INC.
Date: May 20, 2013	By:	/s/ Conrad F. Mir
		Conrad F. Mir
		Chief Financial Officer (Principal Financial Officer)

 

 

 31