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

Annual report pursuant to Section 13 and 15(d)

Summary of Significant Accounting Policies (Tables)

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2015

The composition of inventory as of December 31, is as follows:

	2015			2014
Raw materials	$	310,367		$	304,928
Finished goods		778,004			595,624
Inventory reserve		(50,000	)		(50,000	)
Total	$	1,038,371		$	850,552

Summary of Customer Concentration Risk Percentage

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:

	2015			2014
Top Five Customers		38	%		32	%
Federal Agencies		23	%		6	%

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:

	2015			2014
Top Five Customers		93	%		86	%
Federal Agencies		1	%		9	%

Summary of Computation of Loss per Share

The following table illustrates our computation of loss per share for the years ended December 31:

	2015			2014
Numerator:
Net loss	$	(7,415,298	)	$	(4,612,540	)
Beneficial conversion feature for preferred stock		-			(1,495,415	)
Preferred dividends accrued		(23,194	)		(143,771	)
Net loss applicable to common shareholders	$	(7,438,492	)	$	(6,251,726	)

Denominator for basic and diluted loss per share:
Weighted average common shares outstanding		20,726,205			14,264,753

Loss per common share - basic and diluted	$	(0.36	)	$	(0.44	)

Summary of Anti-dilutive Securities Excluded from Computation of Earnings per Share

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 years ended December 31:

	2015		2014
Stock options		5,571,250		3,406,250
Convertible debt		19,689,286		5,453,571
Common stock warrants		29,227,664		19,182,201
Convertible preferred stock:
Series D Convertible Preferred		750,000		750,000
Series G Convertible Preferred		865,700		865,700
Series H Convertible Preferred		1,000,000		1,000,000
Series H2 Convertible Preferred		2,100,000		2,100,000
Series J Convertible Preferred		3,546,000		3,546,000
Series K Convertible Preferred		11,416,000		11,416,000
		74,165,900		47,719,722

Summary of Assumptions for Grants of Stock Options

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 years ended December 31, 2015 and 2014:

Assumptions	Non-Employee Board Members			CEO, other Officers and Employees
Expected life		6.0 (yrs)			6.0 (yrs)
Expected volatility		116.32%-141.15	%		116.32%-141.15	%
Risk-free interest rate		0.65%-2.54	%		0.65%-2.54	%
Forfeiture rate		5.00	%		5.00	%
Expected dividend yield		0.0	%		0.0	%

Summary of Stock Based Compensation Expense

The following table summarizes the effect of this stock-based compensation expense within each of the line items within our accompanying Consolidated Statements of Operations for the years ended December 31:

	2015		2014
Research and development	$	50,617	$	30,550
Selling and marketing		32,704		19,792
General and administrative		125,668		50,783
Total stock-based compensation expense	$	208,989	$	101,125

Schedule of Liabilities Measured at Fair Value on Recurring Basis

The following tables set forth the Company’s financial assets and financial liabilities that were accounted for at fair value on a recurring basis as of December 31, 2015 and December 31, 2014. The development of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.

			Fair value measurements at December 31, 2015 using:
	December 31, 2015		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Available-For-Sale Equity Securities		294,522		294,522		-		-
Total Financial Assets	$	294,522	$	294,522	$	-	$	-

	December 31, 2015		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Series D Preferred Stock Purchase Warrants	$	173,526		-		-	$	173,526
Warrants Issued with Convertible Debt		3,122,450		-		-		3,122,450
Conversion Option Derivative Liabilities		3,940,791		-		-		3,940,791
Total Derivatives	$	7,236,767	$	-	$	-	$	7,236,767


		Fair value measurements at December 31, 2014 using:
		Quoted
		prices in active	Significant other	Significant unobservable
		markets	observable inputs	inputs
	December 31, 2014	(Level 1)	(Level 2)	(Level 3)
Series D Preferred Stock Purchase Warrants	$159,875	-	-	$159,875
Conversion Option Liabilities	590,341	-	-	590,341
Total Derivatives	$750,216	$ -	$ -	$750,216

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:

	January 1, 2015		Issuance fair value		Change in fair value		Gain on extinguishment of derivative liabilities			December 31, 2015
Series D Preferred Stock Purchase Warrants	$	159,875	$	-	$	13,651	$	-		$	173,526
Warrants Issued with Convertible Debt		-		2,320,021		802,429		-			3,122,450
Conversion Option Derivative Liabilities		590,341		5,305,185		600,445		(2,555,180	)		3,940,791
Total Derivatives	$	750,216	$	7,625,206	$	1,416,525	$	(2,555,180	)	$	7,236,767

	January 1, 2014		Issuance fair value		Change in fair value			Gain on extinguishment of derivative liabilities			December 31, 2014
Series D Preferred Stock Purchase Warrants	$	344,570	$	-	$	145,710		$	(330,405	)	$	159,875
Conversion Option Liabilities		356,197		898,684		(344,202	)		(320,338	)		590,341
Total Derivatives	$	700,767	$	898,684	$	(198,492	)	$	(650,743	)	$	750,216

Schedule of Fair Value Assumptions

The fair value of the derivative liabilities were determined using a binomial pricing model. 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, 2014			Warrants revalued at December 31, 2015
Expected life (in months)		60.0			22.0			11.0
Expected volatility		104.5	%		116.0	%		104.9	%
Risk-free interest rate		0.875	%		0.58	%		0.65	%
Exercise price	$	0.81		$	0.25		$	0.25
Fair value per warrant	$	0.54		$	0.15		$	0.16

There were no warrants issued in 2014 with Convertible Debt. The assumptions for the binomial pricing model are represented in the table below for the warrants issued with the Convertible Debt in 2015 reflected on a per share common stock equivalent basis.

Assumptions	At Issuance Fair value			Warrants revalued at December 31, 2015
Expected life (in months)		60.0			55.0-60.0
Expected volatility		118.3-120.1	%		136.3-141.6	%
Risk-free interest rate		1.48-1.69	%		1.29-1.76	%
Exercise price	$	0.40		$	0.40
Fair value per warrant	$	0.19-$0.21		$	0.30

The 2015 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	At Issuance fair value			At Settlement fair value			Conversion options revalued at December 31, 2015
Expected life (in months)		6-24			0-18			18-24
Expected volatility		104.2-153.8	%		86.9%-142.2	%		112.2-114.7	%
Risk-free interest rate		0.05-0.99	%		0.01-0.72	%		1.06	%
Exercise price		$0.10-$0.35			$0.10-$0.25		$	0.28
Fair value per conversion option		$0.09-$0.28			$0.07-$0.26			$0.14-$0.33

The 2014 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	At Issuance fair value	Conversion options revalued at December 31, 2014
Expected life (in months)	6-24	1-32
Expected volatility	104.4-206.2 %	77.4-154.1 %
Risk-free interest rate	0.05-0.99 %	0.03-.0.88 %
Exercise price	$0.13-$0.45	$0.14-0.35
Fair value per conversion option	$0.15-$0.29	$0.00-$0.19

- Definition

Tabular disclosure of all significant concentrations of risk, including credit risk and market risk, arising from all financial instruments (as defined), whether from an individual counterparty or groups of counterparties. The disclosure concerning concentrations of risk may consist of the following information: (1) for concentrations of credit risk disclosure may include: (a) information about the (shared) activity, region, or economic characteristic that identifies the concentration, (b) the maximum amount of loss due to credit risk that, based on the gross fair value of the financial instrument, the entity would incur if parties to the financial instruments that make up the concentration failed completely to perform according to the terms of the contracts and the collateral or other security, if any, for the amount due proved to be of no value to the entity, (c) the policy of requiring collateral or other security to support financial instruments subject to credit risk, information about the entity's access to that collateral or other security, and the nature and a brief description of the collateral or other security supporting those financial instruments, and (d) the policy of entering into master netting arrangements to mitigate the credit risk of financial instruments, information about the arrangements for which the entity is a party, and a brief description of the terms of those arrangements, including the extent to which they would reduce the entity's maximum amount of loss due to credit risk and (2) for disclosure of quantitative information about the market risks of financial instruments that is consistent with the way the company manages or adjusts those risks, disclosure may include: (a) more details about current positions and perhaps activity during the period, (b) the hypothetical effects on comprehensive income (or net assets), or annual income, of several possible changes in market prices, (c) a gap analysis of interest rate re-pricing or maturity dates, (d) the duration of the financial instruments, (e) the entity's value at risk from derivatives and from other positions at the end of the reporting period and the average value at risk during the year, or (f) other ways of reporting quantitative information as internally developed.

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