Pressure BioSciences, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

2. Summary of Significant Accounting Policies (Tables)

2. Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2012

	December 31,
	2012			2011
Raw materials	$	183,655		$	193,121
Finished goods		789,707			875,892
Inventory reserve		(50,000	)		-
Total	$	923,362		$	1,069,013

Customer Concentration

The following table illustrates the level of concentration of the below two groups within revenue as a percentage of total revenues during the years ended December 31, 2012 and 2011:

	For the Year Ended
	December 31,
	2012			2011
Top Five Customers		50	%		37	%
Federal Agencies		41	%		26	%

The following table illustrates the level of concentration of the below two groups within accounts receivable as a percentage of total accounts receivable balance as of December 31, 2012 and 2011:

	For the Year Ended
	December 31,
	2012			2011
Top Five Customers		34	%		89	%
Federal Agencies		32	%		42	%

Computation of Loss per Share

	For the Year Ended
	December 31,
	2012			2011
Numerator:
Net loss	$	(3,450,205	)	$	(2,996,312	)
Accrued interest on convertible debt, after tax		-			18,896
Accrued dividend for Preferred Stock paid in common stock		(278,184	)		(164,904	)
Deemed dividend on warrant modifications		(190,891	)		(704,844	)
Issuance of common stock for dividends paid in kind		(284,116	)		-
Beneficial conversion feature for preferred stock		-			(1,006,574	)
Series A Preferred dividends paid in common stock		-			(188,380	)
Preferred dividends accrued and paid in cash		(196,819	)		(65,543	)
Net loss applicable to common shareholders	$	(4,400,215	)	$	(5,107,661	)

Denominator for basic and diluted loss per share:
Weighted average common shares outstanding		10,113,881			6,618,484

Loss per common share - basic and diluted	$	(0.44	)	$	(0.77	)

	For the Year Ended
	December 31,
	2012		2011
Stock options		1,605,750		1,508,500
Convertible debt		-		412,000
Common stock warrants		6,687,099		4,775,501
Preferred stock warrants		-		-
Convertible preferred stock:
Series A Convertible Preferred		-		-
Series B Convertible Preferred		-		-
Series C Convertible Preferred		-		880,980
Series D Convertible Preferred		750,000		1,143,077
Series E Convertible Preferred		-		-
Series G Convertible Preferred		1,453,200		-
		10,496,049		8,720,058

Stock based compensation expense

	For the Year Ended December 31,
	2012		2011
Research and development	$	30,034	$	39,375
Selling and marketing		28,944		43,201
General and administrative		74,215		39,398
Total stock-based compensation expense	$	133,193	$	121,974

Liabilities measured at fair value on recurring basis

			Fair value measurements at December 31, 2012 using:
	December 31, 2012		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Series D Common Stock Purchase Warrants	$	160,812	$	-	$	-	$	160,812

			Fair value measurements at December 31, 2011 using:
	December 31, 2011		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Series C Common Stock Purchase Warrants	$	205,353	$	-	$	-	$	205,353
Series D Common Stock Purchase Warrants		231,200		-		-		231,200
	$	436,553	$	-	$	-	$	436,553

	January 1, 2012		Change in Fair Value			Reclass to Equity			December 31, 2012
Series C Common Stock Purchase Warrants	$	205,353	$	(74,452	)	$	(130,901	)	$	-
Series D Common Stock Purchase Warrants		231,200		(70,388	)		-			160,812
	$	436,553	$	(144,840	)	$	(130,901	)	$	160,812

	January 1, 2011		Change in Fair Value		December 31, 2011
Series C Common Stock Purchase Warrants	$	-	$	205,353	$	205,353
Series D Common Stock Purchase Warrants		-		231,200		231,200
	$	-	$	436,553	$	436,553

Fair value assumptions

The following table summarizes the assumptions we utilized for grants of stock options to the three sub-groups of our stock option recipients during the twelve months ended December 31, 2012 and 2011:

Assumptions	Non-Employee Board Members			CEO, other Officers and Employees
Expected life	2.0-5.0 (yrs)			6.0 (yrs)
Expected volatility		55.66%-101.54	%		55.66%-124.89	%
Risk-free interest rate		1.00%-4.94	%		0.50%-4.94	%
Forfeiture rate		0.00%-5.00	%		2.00%-5.00	%
Expected dividend yield		0.0	%		0.0	%

Assumptions for re-pricing of the options were:

Assumptions	Awards re-priced during the year ended December 31, 2012
Expected life (in years)		6
Weighted average expected volatility		124.9	%
Risk-free interest rate		0.7	%
Weighted average re-priced Black-Scholes calculated fair value		0.32

- Definition

Tabular disclosure of liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). Where the quoted price in an active market for the identical liability is not available, the Level 1 input is the quoted price of an identical liability when traded as an asset.

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