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)

9 Months Ended

Sep. 30, 2012

	September 30,		December 31,
	2012		2011
Raw materials	$	163,260	$	193,121
Finished goods		742,393		875,892
Total	$	905,653	$	1,069,013

Concentration of Revenue

	For the Three Months Ended
	September 30,
	2012		2011
Top Five Customers		76%		58%
Federal Agencies		38%		29%

	For the Nine Months Ended
	September 30,
	2012		2011
Top Five Customers		54%		29%
Federal Agencies		46%		15%

Concentration of Receivables

	September 30,		December 31,
	2012		2011
Top Five Customers		76%		89%
Federal Agencies		30%		42%

Computation of Loss per Share

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Numerator:
Net loss	$	(796,038	)	$	(561,723	)	$	(2,368,637	)	$	(2,153,269	)
Accrued interest on convertible debt, after tax		—			5,208			—			5,208
Accrued dividend for Preferred Stock		(36,092	)		(71,736	)		(454,936	)		(196,310	)
Beneficial conversion feature for Preferred Stock		—			—			—			(304,823	)
Preferred dividends paid in Common Stock		(88,350	)		—			(249,907	)		(76,017	)
Preferred dividends paid in cash		—			—			—			(42,037	)
Deemed dividend on warrant modifications		(5,347	)		(325,595	)		(190,891	)		(325,595	)
Net loss applicable to common shareholders	$	(925,827	)	$	(953,846	)	$	(3,264,371	)	$	(3,092,843	)
Denominator for basic and diluted loss per share:
Weighted average common stock shares outstanding		10,872,877			6,253,349			9,598,066			6,228,585
Loss per common share - basic and diluted	$	(0.09	)	$	(0.15	)	$	(0.34	)	$	(0.50	)

Anti-dilutive Securities

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Stock options		1,680,250		1,503,500		1,680,250		1,503,500
Convertible debt		—		412,000		—		412,000
Common stock warrants		6,080,501		4,210,074		6,080,501		4,210,074
Convertible preferred stock:
Series A Convertible Preferred		—		155,710		—		155,710
Series B Convertible Preferred		—		13,480		—		13,480
Series C Convertible Preferred		—		880,980		—		880,980
Series D Convertible Preferred		750,000		—		750,000		—
Series E Convertible Preferred		245,098		—		245,098		—
Series G Convertible Preferred		1,200,950		—		1,200,950		—
		9,956,799		7,175,744		9,956,799		7,175,744

Stock-based compensation plan

Assumptions	Awards re-priced during the three months ended September 30, 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

Cost of stock-based compensation

	For the Three Months Ended, September 30,
	2012		2011
Research and development	$	21,633	$	11,609
Selling and marketing		17,877		6,452
General and administrative		57,216		14,459
Total stock-based compensation expense	$	96,726	$	32,520

We recognized stock-based compensation expense of $20,090 and $81,168 for the nine months ended September 30, 2012 and 2011, 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 Consolidated Statements of Operations:

	For the Nine Months Ended, September 30,
	2012		2011
Research and development	$	27,759	$	36,951
Selling and marketing		24,659		40,192
General and administrative		64,398		36,546
Total stock-based compensation expense	$	116,816	$	113,689

Liabilities accounted for at fair value on a recurring basis

			Fair value measurements at September 30, 2012 using:
	September 30, 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		267,566		—		—		267,566
	$	267,566	$	—	$	—	$	267,566

Fair Value Reclassification

	January 1, 2012		Change in Fair Value			Reclassified to Equity			September 30, 2012
Series C Common Stock Purchase Warrants	$	205,353	$	(72,688	)	$	(132,665	)	$	—
Series D Common Stock Purchase Warrants		231,200		36,366			—			267,566
	$	436,553	$	(36,322	)	$	(132,665	)	$	267,566

The following table sets forth the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of December 31, 2011.

	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

Assumptions for the binomial pricing model

					Warrants revalued at April 5, 2012
Assumptions	April 8, 2011		June 20, 2011		April 8, 2011		June 20, 2011
Expected term (in months)		36.0		36.0		24.0		24.0
Expected volatility		118.5%		118.5%		100%		100%
Risk-free interest rate		0.625%		0.625%		0.75%		0.75%
Exercise price	$	2.13	$	2.13	$	2.13	$	2.13
Fair value per warrant	$	0.70	$	0.62	$	0.15	$	0.15

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 September 30, 2012
Expected term (in months)		60.0		50.0
Expected volatility		104.5%		146.4%
Risk-free interest rate		0.875%		0.4375%
Exercise price	$	0.81	$	0.40
Fair value per warrant	$	0.54	$	0.26