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)

3 Months Ended

Mar. 31, 2014

The composition of inventory as of March 31, 2014 and December 31, 2013 is as follows:

	March 31,			December 31,
	2014			2013
Raw materials	$	157,239		$	147,290
Finished goods		679,513			639,386
Inventory reserve		(50,000	)		(50,000	)
Total	$	786,752		$	736,676

Customer Concentration

The following table illustrates the level of concentration as a percentage of total revenues during the three months ended March 31, 2014 and 2013:

	For the Three Months Ended
	March 31,
	2014			2013
Top Five Customers		65	%		74	%
Federal Agencies		1	%		56	%

The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of March 31, 2014 and December 31, 2013:

	March 31,			December 31,
	2014			2013
Top Five Customers		88	%		86	%
Federal Agencies		13	%		16	%

Computation of Loss per Share

The following table illustrates our computation of loss per share for the three months ended March 31, 2014 and 2013:

	For the Three Months Ended
	March 31,
	2014			2013
Numerator:
Net loss	$	(1,759,655	)	$	(779,369	)
Accrued dividend for Preferred Stock		(44,987	)		(32,173	)
Deemed dividend on Series K convertible preferred stock		(1,280,066	)		-
Deemed dividend on Series J convertible preferred stock		-			(582,548	)
Net loss applicable to common shareholders	$	(3,084,708	)	$	(1,394,090	)

Denominator for basic and diluted loss per share:
Weighted average common stock shares outstanding		12,122,045			12,149,267

Loss per common share - basic and diluted	$	(0.25	)	$	(0.11	)

Stockholders' Equity Activity Series C Preferred Convertible Securities Exchange

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 to our net loss. The Series D Convertible Preferred Stock, Series G Convertible Preferred Stock, Series H Convertible Preferred Stock, Series J Convertible Preferred Stock and Series K Convertible Preferred Stock are presented below as if they were converted into common shares according to the conversion terms in Note 5.

	March 31,
	2014		2013
Stock options		1,730,750		1,605,750
Convertible debt		932,500		-
Common stock warrants		18,222,827		11,337,099
Convertible preferred stock:
Series D Convertible Preferred		750,000		750,000
Series G Convertible Preferred		1,453,200		1,453,200
Series H Convertible Preferred		1,000,000		-
Series J Convertible Preferred		5,087,500		4,650,000
Series K Convertible Preferred		10,729,000		-
		40,355,777		19,796,049

Stock based compensation expense

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 Consolidated Statements of Operations:

	For the Three Months Ended March 31,
	2014		2013
Research and development	$	7,553	$	4,836
Selling and marketing		5,991		3,668
General and administrative		5,352		10,536
Total stock-based compensation expense	$	18,896	$	19,040

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 March 31, 2014.

	Fair value measurements at March 31, 2014 using:
	March 31, 2014		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Series D Preferred Stock Purchase Warrants	$	585,281		-		-	$	585,281

January 1,

2014

Change in Fair Value

Reclassification into equity

March 31,

2014

Series D Preferred Stock Purchase Warrants

344,570

495,848

(255,137

)

585,281

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, 2013			Warrants revalued at March 31, 2014
Expected life (in months)		60.0			34.0			31.0
Expected volatility		104.5	%		154.8	%		160.3	%
Risk-free interest rate		0.875	%		0.78	%		0.73	%
Exercise price	$	0.81		$	0.25		$	0.25
Fair value per warrant	$	0.54		$	0.21		$	0.48

	Fair value measurements at March 31, 2014 using:
	March 31, 2014		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
December 4, 2013 note, conversion option	$	218,875		-		-	$	218,875
December 23, 2013 note, conversion option		174,644		-		-		174,644
Embedded conversion options	$	393,519		-		-	$	393,519

	January 1, 2014		Change in fair value		Reclassification into equity			March 31, 2014
April 11, 2013 note, conversion option	$	130,734	$	7,348	$	(138,082	)	$	-
June 26, 2013 note, conversion option		55,307		6,118		(61,425	)		-
December 4, 2013 note, conversion option		98,129		120,746		-			218,875
December 23, 2013 note, conversion option		72,027		102,617		-			174,644
Embedded conversion options	$	356,197	$	236,829	$	(199,507	)	$	393,519

The assumptions for the binomial pricing model are represented in the table below for the conversion options reflected on a per share common stock equivalent basis.

Assumptions	April 11, 2013			Conversion options revalued at February 10, 2014
Expected life (in months)		12			2
Expected volatility		206.2	%		116.4	%
Risk-free interest rate		0.10	%		0.04	%
Exercise price	$	0.14		$	0.25
Fair value per conversion option	$	0.29		$	0.20

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 February 10, 2014
Expected life (in months)		12			5
Expected volatility		189.2	%		137.9	%
Risk-free interest rate		0.13	%		0.07	%
Exercise price	$	0.17		$	0.25
Fair value per conversion option	$	0.26		$	0.23

Assumptions	December 4, 2013			Conversion options revalued at March 31, 2014
Expected life (in months)		24			20
Expected volatility		170.3	%		145.2	%
Risk-free interest rate		0.30	%		0.35	%
Exercise price	$	0.40		$	0.40
Fair value per conversion option	$	0.16		$	0.39

Assumptions	December 23, 2013			Conversion options revalued at March 31, 2014
Expected life (in months)		36			33
Expected volatility		151.4	%		159.2	%
Risk-free interest rate		0.77	%		0.73	%
Exercise price	$	0.40		$	0.40
Fair value per conversion option	$	0.17		$	0.47

- 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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