Pressure BioSciences, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

3. Summary of Significant Accounting Policies (Tables)

3. Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2013

	June 30,			December 31,
	2013			2012
Raw materials	$	204,025		$	183,655
Finished goods		712,614			789,707
Inventory reserve		(50,000	)		(50,000	)
Total	$	866,639		$	923,362

Customer Concentration

The following table illustrates the level of concentration as a percentage of total revenues during the three months and six months ended June 30, 2013 and 2012:

	For the Three Months Ended
	June 30,
	2013			2012
Top Five Customers		87	%		73	%
Federal Agencies		61	%		49	%

	For the Six Months Ended
	June 30,
	2013			2012
Top Five Customers		69	%		60	%
Federal Agencies		55	%		50	%

The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of June 30, 2013 and December 31, 2012:

	June 30,			December 31,
	2013			2012
Top Five Customers		76	%		34	%
Federal Agencies		35	%		32	%

Computation of Loss per Share

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Numerator:
Net loss	$	(1,066,041	)	$	(509,692	)	$	(1,845,410	)	$	(1,572,599	)
Accrued dividend for Preferred Stock		(39,237	)		(394,430	)		(71,410	)		(418,844	)
Deemed dividend on Series J Convertible Preferred Stock		(68,634	)		-			(651,182	)		-
Deemed dividend on warrant modifications		-			(185,544	)		-			(185,544	)
Net loss applicable to common shareholders	$	(1,173,912	)	$	(1,089,666	)	$	(2,568,002	)	$	(2,176,987	)

Denominator for basic and diluted loss per share:
Weighted average common stock shares outstanding		11,521,794			10,197,850			11,883,797			10,352,461

Loss per common share - basic and diluted	$	(0.10	)	$	(0.11	)	$	(0.22	)	$	(0.21	)

The following table illustrates our computation of loss per share for the three months and six months ended June 30, 2013 and 2012:

Stockholders' Equity Activity Series C Preferred Convertible Securities Exchange

	For the Six Months Ended
	June 30,
	2013		2012
Stock options		1,759,552		1,555,500
Convertible debt		625,000		7,000
Common stock warrants		11,774,599		5,115,533
Preferred stock warrants		-		-
Convertible preferred stock:
Series D Convertible Preferred		750,000		461,539
Series E Convertible Preferred		-		343,137
Series G Convertible Preferred		1,453,200		-
Series H Convertible Preferred		1,000,000		-
Series J Convertible Preferred		5,087,500		-
		22,449,851		7,482,709

Stock based compensation expense

We recognized stock-based compensation expense of $8,977 and $11,222 for the three months ended June 30, 2013 and 2012, respectively. The following table summarizes the effect of this stock-based compensation expense within each of the line items of our costs and expenses within our Condensed Consolidated Statements of Operations:

	For the Three Months Ended June 30,
	2013		2012
Research and development	$	667	$	3,508
Selling and marketing		523		3,669
General and administrative		7,787		4,045
Total stock-based compensation expense	$	8,977	$	11,222

We recognized stock-based compensation expense of $28,017 and $20,090 for the six months ended June 30, 2013 and 2012, respectively. The following table summarizes the effect of this stock-based compensation expense within each of the line items of our costs and expenses within our Condensed Consolidated Statements of Operations:

	For the Six Months Ended June 30,
	2013		2012
Research and development	$	5,503	$	6,125
Selling and marketing		4,192		6,783
General and administrative		18,322		7,182
Total stock-based compensation expense	$	28,017	$	20,090

Liabilities measured at fair value on recurring basis

The following tables set forth the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of June 30, 2013.

			Fair value measurements at June 30, 2013 using:
	June 30, 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	$	284,876		-		-	$	284,876

		January 1, 2013				Change in Fair Value				June 30, 2013
Series D Preferred Stock Purchase Warrants		$	160,812			$	124,064			$	284,876

Fair value assumptions

The assumptions for the binomial pricing model are represented in the table below for the warrants issued in the Series D private placement reflected on a per share common stock equivalent basis.

Assumptions	November 10, 2011			Warrants revalued at December 31, 2012			Warrants revalued at June 30, 2013
Expected life (in months)		60.0			46.0			40.0
Expected volatility		104.5	%		146.4	%		111.5	%
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		$	0.23

The following tables set forth the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of June 30, 2013.

			Fair value measurements at June 30, 2013 using:
	June 30, 2013		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
April 11, 2013 note, conversion option	$	178,942					$	178,942
May 24, 2013 note, conversion option		124,559						124,559
June 6, 2013 note, conversion option		112,061						112,061
June 26, 2013 note, conversion option		81,939						81,939
Embedded conversion options	$	497,501		-		-	$	497,501

	Issuance fair value		Change in fair value			June 30, 2013
April 11, 2013 note, conversion option	$	274,840	$	(95,898	)	$	178,942
May 24, 2013 note, conversion option		122,223		2,336			124,559
June 6, 2013 note, conversion option		158,715		(46,654	)		112,061
June 26, 2013 note, conversion option		84,146		(2,207	)		81,939
Embedded conversion options	$	639,924	$	(142,423	)	$	497,501

The assumptions for the binomial pricing model are represented in the table below for the warrants issued in the Series D private placement reflected on a per share common stock equivalent basis.

Assumptions	April 11, 2013			Conversion options revalued at June 30, 2013
Expected life (in months)		12			9
Expected volatility		206.2	%		142.2	%
Risk-free interest rate		0.10	%		0.15	%
Exercise price	$	0.14		$	0.17
Fair value per conversion option	$	0.29		$	0.22

Assumptions	May 24, 2013			Conversion options revalued at June 30, 2013
Expected life (in months)		24			23
Expected volatility		170.0	%		165.2	%
Risk-free interest rate		0.27	%		0.36	%
Exercise price	$	0.25		$	0.21
Fair value per conversion option	$	0.31		$	0.30

Assumptions	June 6, 2013			Conversion options revalued at June 30, 2013
Expected life (in months)		12			11
Expected volatility		209.7	%		155.5	%
Risk-free interest rate		0.13	%		0.15	%
Exercise price	$	0.40		$	0.40
Fair value per conversion option	$	0.25		$	0.18

Assumptions	June 26, 2013			Conversion options revalued at June 30, 2013
Expected life (in months)		12			12
Expected volatility		189.2	%		179.8	%
Risk-free interest rate		0.13	%		0.15	%
Exercise price	$	0.17		$	0.17
Fair value per conversion option	$	0.26		$	0.25

Advertising

Advertising costs are expensed as incurred. We did not incur significant advertising expenses during the three or six months ended June 30, 2013 or in the same period of the prior year.

- 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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