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, 2013

	December 31,
	2013			2012
Raw materials	$	147,290		$	183,655
Finished goods		639,386			789,707
Inventory reserve		(50,000	)		(50,000	)
Total	$	736,676		$	923,362

Customer Concentration

	For the Year Ended
	December 31,
	2013			2012
Top Five Customers		53	%		50	%
Federal Agencies		33	%		41	%

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,
	2013			2012
Top Five Customers		86	%		34	%
Federal Agencies		16	%		32	%

Computation of Loss per Share

	For the Year Ended
	December 31,
	2013			2012
Numerator:
Net loss	$	(4,084,427	)	$	(3,450,205	)
Accrued dividend for Preferred Stock paid in common stock		-			(278,184	)
Deemed dividend on warrant modifications		-			(190,891	)
Issuance of common stock for dividends paid in kind		-			(284,116	)
Beneficial conversion feature for preferred stock		(1,002,602	)		-
Preferred dividends accrued		(160,420	)		-
Preferred dividends accrued and paid in cash		-			(196,819	)
Net loss applicable to common shareholders	$	(5,247,449	)	$	(4,400,215	)

Denominator for basic and diluted loss per share:
Weighted average common shares outstanding		11,821,870			10,154,175

Loss per common share - basic and diluted	$	(0.44	)	$	(0.43	)

The following table presents securities that could potentially dilute basic loss per share in the future. For all periods presented, the potentially dilutive securities were not included in the computation of diluted loss per share because these securities would have been anti-dilutive.

	For the Year Ended
	December 31,
	2013		2012
Stock options		1,771,708		1,605,750
Convertible debt		2,242,024		-
Common stock warrants		15,012,327		6,687,099
Preferred stock warrants		-		-
Convertible preferred stock:
Series A Convertible Preferred		-		-
Series B Convertible Preferred		-		-
Series C Convertible Preferred		-		-
Series D Convertible Preferred		750,000		750,000
Series E Convertible Preferred		-		-
Series G Convertible Preferred		1,453,200		1,453,200
Series H Convertible Preferred		1,000,000		-
Series J Convertible Preferred		5,087,500		-
Series K Convertible Preferred		4,000,000		-
		31,316,759		10,496,049

Stock based compensation expense

Assumptions	Non-Employee Board Members	CEO, other Officers and Employees
Expected life	2.0-5.0 (yrs)	6.0 (yrs)
Expected volatility	55.66%-134.75%	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

	For the Year Ended December 31,
	2013		2012
Research and development	$	53,509	$	30,034
Selling and marketing		26,551		28,944
General and administrative		56,736		74,215
Total stock-based compensation expense	$	136,796	$	133,193

Liabilities measured at fair value on recurring basis

December 31,

2013

Quoted prices in active markets (Level 1)

Significant other observable inputs (Level 2)

Significant unobservable inputs

(Level 3)

Series D Common Stock Purchase Warrants

344,570

			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

January 1,

2013

Change in Fair Value

December 31,

2013

Series D Common Stock Purchase Warrants

160,812

183,758

344,570

January 1,

2012

Change in Fair Value

December 31,

2012

Series D Common Stock Purchase Warrants

231,200

(70,388

)

160,812

	Fair value measurements at December 31, 2013 using:
	December 31, 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	$	130,734		-		-	$	130,734
June 26, 2013 note, conversion option		55,307		-		-		55,307
December 4, 2013 note, conversion option		98,129		-		-		98,129
December 23, 2013 note, conversion option		72,027		-		-		72,027
Embedded conversion options	$	356,197		-		-	$	356,197

	January 1, 2013	Issuance date fair value		Change in fair value			Reclassification into equity			December 31, 2013
April 11, 2013 note, conversion option	-	$	274,840	$	(144,106	)	$	-		$	130,734
May 24, 2013 note, conversion option	-		122,223		(18,702	)		(103,521	)		-
June 6, 2013 note, conversion option	-		158,715		(120,535	)		(38,180	)		-
June 26, 2013 note, conversion option	-		84,146		(28,839	)		-			55,307
December 4, 2013 note, conversion option	-		90,444		7,685			-			98,129
December 23, 2013 note, conversion option	-		65,033		7,024			-			72,027
Embedded conversion options	-	$	795,371	$	(297,471	)	$	(141,701	)	$	356,197

Fair value assumptions

Assumptions	April 11, 2013			Conversion options revalued at December 31, 2013
Expected life (in months)		12			4
Expected volatility		206.2	%		149.9	%
Risk-free interest rate		0.10	%		0.04	%
Exercise price	$	0.14		$	0.14
Fair value per conversion option	$	0.29		$	0.13

Assumptions	May 24, 2013			Conversion options revalued at November 22, 2013
Expected life (in months)		24			18
Expected volatility		170.0	%		181.8	%
Risk-free interest rate		0.27	%		0.35	%
Exercise price	$	0.25		$	0.17
Fair value per conversion option	$	0.31		$	0.17

Assumptions	June 6, 2013			Conversion options revalued at December 26, 2013
Expected life (in months)		12			5
Expected volatility		209.7	%		132.9	%
Risk-free interest rate		0.13	%		0.07	%
Exercise price	$	0.40		$	0.40
Fair value per conversion option	$	0.25		$	0.06

Assumptions	June 26, 2013			Conversion options revalued at December 31, 2013
Expected life (in months)		12			6
Expected volatility		189.2	%		136.5	%
Risk-free interest rate		0.13	%		0.07	%
Exercise price	$	0.17		$	0.14
Fair value per conversion option	$	0.26		$	0.14

Assumptions	December 4, 2013			Conversion options revalued at December 31, 2013
Expected life (in months)		24			23
Expected volatility		170.3	%		170.3	%
Risk-free interest rate		0.30	%		0.38	%
Exercise price	$	0.40		$	0.40
Fair value per conversion option	$	0.16		$	0.18

Assumptions	December 23, 2013			Conversion options revalued at December 31, 2013
Expected life (in months)		36			36
Expected volatility		151.4	%		152.5	%
Risk-free interest rate		0.77	%		0.78	%
Exercise price	$	0.40		$	0.40
Fair value per conversion option	$	0.17		$	0.19

- 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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