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, 2017

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

	2017			2016
Raw materials	$	288,295		$	326,228
Finished goods		748,967			599,056
Inventory reserve		(179,600	)		(20,000	)
Total	$	857,662		$	905,284

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:

	2017			2016
Top Five Customers		37	%		29	%
Federal Agencies		14	%		3	%

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:

	2017			2016
Top Five Customers		85	%		82	%
Federal Agencies		1	%		1	%

Summary of Computation of Loss Per Share

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

	2017			2016
Numerator:
Net loss	$	(10,715,561	)	$	(2,706,984	)

Denominator for basic and diluted loss per share:
Weighted average common shares outstanding		1,114,225			911,312

Loss per common share - basic and diluted	$	(9.62	)	$	(2.97	)

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:

	2017		2016
Stock options		247,692		175,642
Convertible debt		947,203		891,132
Common stock warrants		899,542		881,990
Convertible preferred stock:
Series D Convertible Preferred		25,000		25,000
Series G Convertible Preferred		26,857		28,857
Series H Convertible Preferred		33,334		33,334
Series H2 Convertible Preferred		70,000		70,000
Series J Convertible Preferred		115,267		117,367
Series K Convertible Preferred		229,334		227,200
		2,594,229		2,450,522

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 year ended December 31, 2017:

Assumptions	Non-Employee Board Members			CEO, other Officers and Employees
Expected life		6.0 (yrs	)		6.0 (yrs	)
Expected volatility		92.85%-104.83	%		105.71	%
Risk-free interest rate		1.01%-1.53	%		1.63	%
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:

	2017		2016
Research and development	$	92,055	$	65,500
Selling and marketing		54,404		42,315
General and administrative		259,968		272,149
Total stock-based compensation expense	$	406,427	$	379,964

Schedule of Reconciliation Related to Liabilities

The following table provides a reconciliation of the warrant derivative liability, convertible debt, conversion option derivative liability, stock warrant, additional paid-in capital and accumulated deficit on the consolidated balance sheet as of December 31, 2016:

	Convertible debt, current portion		Convertible debt, long term portion		Warrant Derivative Liability			Conversion Option Liability			Warrants to acquire common stock		Additional Paid-in Capital		Accumulated deficit
Balance, January 1, 2017 (Prior to adoption of ASU 2017-11)	$	4,005,702	$	529,742	$	1,685,108		$	951,059		$	6,325,102	$	27,544,265	$	(42,264,190	)
Reclassified derivative liabilities and cumulative effect of adoption		769,316		154,152	$	(1,685,108	)		(951,059	)		2,636,236		1,446,011		(2,369,548	)
Balance, January 1, 2017 (After adoption of ASU 2017-11)	$	4,775,018	$	683,894	$	-		$	-		$	8,961,338	$	28,990,276	$	(44,633,738	)

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, 2017 and December 31, 2016. 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, 2017 using:
	December 31, 2017		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Available-For-Sale Equity Securities		19,825		19,825		-		-
Total Financial Assets	$	19,825	$	19,825	$	-	$	-

			Fair value measurements at December 31, 2016 using:
	December 31, 2016		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Available-For-Sale Equity Securities		25,865		25,865		-		-
Total Financial Assets	$	25,865	$	25,865	$	-	$	-

	December 31, 2016		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Series D Preferred Stock Purchase Warrants	$	23,313		-		-	$	23,313
Warrants Issued with Convertible Debt		1,661,795		-		-		1,661,795
Conversion Option Derivative Liabilities		951,059		-		-		951,059
Total Derivatives	$	2,636,167	$	-	$	-	$	2,636,167

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, 2016		Issuance fair value		Change in fair value			December 31, 2016
Series D Preferred Stock Purchase Warrants	$	173,526	$	-	$	(150,213	)	$	23,313
Warrants Issued with Convertible Debt		3,122,450		1,094,432		(2,555,087	)		1,661,795
Conversion Option Derivative Liabilities		3,940,791		1,547,127		(4,536,859	)		951,059
Total Derivatives	$	7,236,767	$	2,641,559	$	(7,242,159	)	$	2,636,167

Schedule of Fair Value Assumptions

The fair value of the derivative liabilities was 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, 2016
Expected life (in months)		60.0			5.0
Expected volatility		104.5	%		83.5	%
Risk-free interest rate		0.875	%		0.62	%
Exercise price	$	24.30		$	7.50
Fair value per warrant	$	16.20		$	0.60

The assumptions for the binomial pricing model are represented in the table below for the warrants issued with the Convertible Debt in 2016 reflected on a per share common stock equivalent basis.

Assumptions	At Issuance Fair value			Warrants revalued at December 31, 2016
Expected life (in months)		60.0			43.0-51.0
Expected volatility		118.3-120.1	%		110.0-116.0	%
Risk-free interest rate		1.48-1.69	%		1.93	%
Exercise price	$	12.00		$	12.00
Fair value per warrant	$	5.70-$6.30		$	3.60-4.20

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	At Issuance fair value			At Settlement fair value			Conversion options revalued at December 31, 2016
Expected life (in months)		6.0-24.0			0-18.0			6.0-15.0
Expected volatility		104.2-153.8	%		86.9%-142.2	%		84.4-94.8	%
Risk-free interest rate		0.05-0.99	%		0.01-0.72	%		0.62-0.85	%
Exercise price	$	3.00-$10.50		$	3.00-$7.50		$	8.40
Fair value per conversion option	$	2.70-$8.40		$	2.10-$7.80		$	0.90-$1.80