On Tuesday, Pressure BioSciences, Inc. (OTC:PBIO) announced financial results for Q2 2012. For the second straight quarter, the maker of the patented Pressure Cycling Technology (PCT) Platform reported a revenue increase of approximately 70% over the same period last year.  On the surface, this is a very positive sign for the company. After all, who wouldn’t want 70% revenue growth? But the situation looks even better if you dig into the release and look at the overall picture.

Pressure BioSciences makes money in three ways: the sale of instruments, the sale of consumables and the acquisition of grant money. These results show significant increases in all three revenue streams. Part of the beauty of the company’s model is that once a piece of their equipment is sold into a lab there will be recurring revenues from the consumables (tubes, reagents, kits) ad infinitum. As a logical result the company has focused their sales efforts on getting as many of their machines into labs as possible. To that end, revenue from instrument sales rose nearly 20% while revenues from consumables grew 10%.

These are impressive numbers considering that the company was historically in a research and development phase and just this year has enacted an aggressive commercialization plan. They have announced several international distribution agreements in the last 10 months (here, here, here and here) that are starting to bear fruit and should only add to PBI’s value over time as the sales partners increase PCT’s market penetration in countries around the world. These partnerships offer an efficient and effective way for such a small company (11 employees) to expand its footprint.

This is the type of product that takes a bit of time to establish itself in the marketplace. PCT takes an important process, that of preparing tissue samples for study, and completely changes the way it is done. Basically, PCT improves and controls the process of separating parts of tissues (organisms, cells, parts of cells…), achieving control and repeatability only dreamed of by those using the more archaic standard processes. The company has 24 issued patents with more in process. They have more scientific validation from highly reputable scientists across several industries than you can imagine, mostly finding that PCT greatly improves results. Still, it is an uphill battle for any product that deviates from ‘the way it has always been done.’ PBIO is showing definite signs of winning that battle.

The third revenue stream, grant money, is very interesting to consider. The grant money reported for the last two quarters is from a Phase II SBIR award from the U.S. Department of Defense (Army). The contract pays, over a two-year period, about $650,000 incrementally as various milestones are met. The task is to adapt current PCT systems to the DoD’s needs for safe and efficient pathogen sampling. The system needs to process more samples more quickly than currently capable of doing and it needs to be able to run on auxiliary power systems. If a whole unit of soldiers has been exposed to some unknown bio-chemical weapon, they are going to need to quickly process a whole bunch of samples in the field to determine the nature of the threat.  Or perhaps the unit would need to be tested for the presence of a threat prior to deployment.

This arrangement has a couple of benefits. First, the company has an excellent shot at getting significant orders from the Army following the fulfillment of the product development contract. There are, obviously, no guarantees. But it is very common for these types of awards, if successfully completed, to generate further revenue. Second, the company is paid to refine their product offerings in ways that should translate to significant sales across several industries, in addition to the US Army. Some of the larger labs, dealing with drug discovery and development, have needs to process many samples (hundreds, sometimes even thousands) in a short period of time. The level of automation and volume required by the Army should work well for these major potential customers. These are changes the company was interested in making anyway, but getting non-dilutive funding to do it adds value far beyond the $650,000 that the Army is paying PBI for this development.

Add to all of this another important aspect of the financial results – a major tightening of the belt – and you start to see more clearly the possibilities. In Q2 2012, the company cut nearly $200,000 (approximately 25%) from the Q2 2011 burn rate. In a multi-billion dollar market space alongside giants like Agilent Technologies, Inc. (NYSE:A) and Thermo Fisher Scientific, Inc. (NYSE:TMO), limiting costs and maximizing resources is essential. The company’s CEO, Ric Schumacher, runs a pretty tight ship and still gets results.

He also tends to offer guidance that is fairly accurate, which is a refreshing change of pace for a company of this size. He feels that Pressure BioSciences will show more revenue growth over the balance of 2012 and beyond. With two consecutive quarters of 70% growth under the belt and all indicators pointing up, we tend to believe him. With a market cap in the paltry $3 million range, PBIO is certainly a short-term value play with serious long-term potential.