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)

6 Months Ended

Jun. 30, 2014

The composition of inventory as of June 30, 2014 and December 31, 2013 is as follows:

	June 30,			December 31,
	2014			2013
Raw materials	$	197,916		$	147,290
Finished goods		705,303			639,386
Inventory reserve		(50,000	)		(50,000	)
Total	$	853,219		$	736,676

Customer Concentration

The following table illustrates the level of concentration as a percentage of total revenues during the three months and six months ended June 30, 2014 and 2013:

	For the Three Months Ended
	June 30,
	2014			2013
Top Five Customers		64	%		87	%
Federal Agencies		3	%		61	%

	For the Six Months Ended
	June 30,
	2014			2013
Top Five Customers		42	%		69	%
Federal Agencies		2	%		55	%

The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of June 30, 2014 and December 31, 2013:

	June 30,			December 31,
	2014			2013
Top Five Customers		77	%		86	%
Federal Agencies		17	%		16	%

Computation of Loss per Share

The following table illustrates our computation of loss per share for the three months and six months ended June 30, 2014 and 2013:

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Numerator:
Net loss	$	(603,187	)	$	(1,066,041	)	$	(2,362,842	)	$	(1,845,410	)
Accrued dividend for Preferred Stock		(9,606	)		(39,237	)		(54,593	)		(71,410	)
Deemed dividend on Series J Convertible Preferred Stock		-			(68,634	)		-			(651,182	)
Deemed dividend on Series K Convertible Preferred Stock		(107,996	)		-			(1,388,062	)		-
Net loss applicable to common shareholders	$	(720,789	)	$	(1,173,912	)	$	(3,805,497	)	$	(2,568,002	)

Denominator for basic and diluted loss per share:
Weighted average common stock shares outstanding		13,567,472			11,521,794			12,848,751			11,883,797

Loss per common share - basic and diluted	$	(0.05	)	$	(0.10	)	$	(0.30	)	$	(0.22	)

Stockholders' Equity Activity Series C Preferred Convertible Securities Exchange

The Series C Convertible Preferred Stock, 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.

	For the Six Months Ended
	June 30,
	2014		2013
Stock options		1,585,750		1,759,552
Convertible debt		917,860		625,000
Common stock warrants		17,757,044		11,774,599
Convertible preferred stock:
Series D Convertible Preferred Stock		750,000		750,000
Series G Convertible Preferred Stock		865,700		1,453,200
Series H Convertible Preferred Stock		1,000,000		1,000,000
Series J Convertible Preferred Stock		4,995,000		5,087,500
Series K Convertible Preferred Stock		11,463,000		-
		39,334,354		22,449,851

Stock based compensation expense

The Company recognized stock-based compensation expense of $21,488 and $8,977 for the three months ended June 30, 2014 and 2013, 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 Condensed Consolidated Statements of Operations:

	For the Three Months Ended June 30,
	2014		2013
Research and development	$	10,301	$	667
Selling and marketing		5,914		523
General and administrative		5,273		7,787
Total stock-based compensation expense	$	21,488	$	8,977

We recognized stock-based compensation expense of $40,384 and $28,017 for the six months ended June 30, 2014 and 2013, 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 Condensed Consolidated Statements of Operations:

	For the Six Months Ended June 30,
	2014		2013
Research and development	$	17,854	$	5,503
Selling and marketing		11,905		4,192
General and administrative		10,625		18,322
Total stock-based compensation expense	$	40,384	$	28,017

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 June 30, 2014.

Fair value measurements at June 30, 2014 using:

June 30,

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

321,115

January 1,

2014

Change in Fair Value

Reclassified to Equity

June 30,

2014

Series D Preferred Stock Purchase Warrants

344,570

306,950

(330,405

)

321,115

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 June 30, 2014
Expected life (in months)		60.0			34.0			28.0
Expected volatility		104.5	%		154.8	%		159.7	%
Risk-free interest rate		0.875	%		0.78	%		0.36	%
Exercise price	$	0.81		$	0.25		$	0.25
Fair value per warrant	$	0.54		$	0.21		$	0.30

Fair value measurements at June 30, 2014 using:

	June 30, 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	$	10,449					$	10,449
June 4, 2014 note, conversion option		30,937						30,937
Embedded conversion options	$	41,386		-		-	$	41,386

	January 1, 2014		Issuance fair value		Change in fair value			Reclassification into equity			June 30, 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		-		(87,680	)		-			10,449
December 23, 2013 note, conversion option		72,027		-		48,804			(120,831	)		-
June 4, 2014 note, conversion option		-		57,071		(26,134	)		-			30,937
Embedded conversion options	$	356,197	$	57,071	$	(51,544	)	$	(320,338	)	$	41,386

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	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	$	0.25		$	0.23

Assumptions	December 4, 2013			Conversion options revalued at June 30, 2014
Expected life (in months)		24			1
Expected volatility		170.3	%		77.1	%
Risk-free interest rate		0.30	%		0.02	%
Exercise price	$	0.40		$	0.40
Fair value per conversion option	$	0.16		$	0.02

Assumptions	December 23, 2013			Conversion options revalued at June 23, 2014
Expected life (in months)		36			30
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		$	0.32

Assumptions	June 4, 2014			Conversion options revalued at June 30, 2014
Expected life (in months)		8			7
Expected volatility		121.8	%		102.6	%
Risk-free interest rate		0.07	%		0.08	%
Exercise price	$	0.45		$	0.45
Fair value per conversion option	$	0.16		$	0.09

- 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.

+ References + Details