UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2007 or
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ___________________ to _______________________
Commission file number 000-21615
PRESSURE BIOSCIENCES, INC.
(Exact Name of Registrant as Specified in its Charter)
Massachusetts
(State or Other Jurisdiction of Incorporation or Organization)
14 Norfolk Avenue
South Easton, Massachusetts
(Address of Principal Executive Offices)
(508) 230-1828
(Registrant’s Telephone Number, Including Area Code)
04-2652826
(I.R.S. Employer Identification No.)
02375
( Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, par value $.01 per share
Preferred Share Purchase Rights
The Nasdaq Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined i n Rule 405 of the Securities Act. Ye s o
No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o
No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
(Do not check if smaller reporting company)
Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant June 29, 2007 was
$8,783,302 based on the closing price of the common stock as quoted on the NASDAQ Capital Market on that date.
As of March 21, 2008, there were 2,192,175 shares of the registrant’s common stock outstanding.
Documents Incorporated by Reference
N/A.
TABLE OF CONTENTS
PART I
Page
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Submission of Matters to a Vote of Security Holders
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
PART III
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Directors Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits
1
12
18
18
18
18
19
20
20
28
29
49
49
50
51
55
59
60
61
62
Throughout this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “the Company” and “our company” refer to Pressure
BioSciences, Inc., a Massachusetts corporation, and, unless the context indicates otherwise, also includes our wholly-owned subsidiaries.
Introductory Comment
PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In
some cases, forward-looking statements are identified by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,”
“anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” and similar expressions intended to identify forward-looking
statements. Such statements include, without limitation, statements regarding:
our plans and expectations with respect to our pressure cycling technology (PCT) operations;
potential growth in the market for our PCT products;
-
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- market acceptance and the potential for commercial success of our PCT products;
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our belief that PCT provides a superior solution for sample preparation;
the expected development and success of new product offerings;
the potential applications for PCT;
the expected benefits and results from our research and development efforts;
the expected benefits and results from our collaboration program;
our belief that we have sufficient liquidity to finance operations into early 2009;
our expectation of obtaining additional research grants from the government in the future;
the amount of cash necessary to operate our business;
our ability to raise additional capital when needed;
general economic conditions; and
the anticipated future financial performance and business operations of our company.
These forward-looking statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may
cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity,
performance, or achievements expressed or implied by such forward-looking statements. Also, these forward-looking statements represent
our estimates and assumptions only as of the date of this Report. Except as otherwise required by law, we expressly disclaim any
obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in the Report to reflect
any change in our expectations or any change in events, conditions, or circumstances on which any of our forward-looking statements are
based. Factors that could cause or contribute to differences in our future financial results include those discussed in the risk factors set forth
in Part I, Item 1A of this Report as well as those discussed elsewhere in this Report. We qualify all of our forward-looking statements by
these cautionary statements.
ITEM 1.
BUSINESS.
Throughout this document we use the following terms; Barocycler®, PULSE®, and BioSeq®, which are registered trademarks of the
TM, the Power of PCT, all of which are unregistered trademarks of the
Company. We also use the terms ProteoSolveTM, ProteoSolveLRS
Company.
Overview
We are a life sciences company focused on the development and commercialization of a novel, enabling, platform technology called
pressure cycling technology (“PCT”). PCT uses cycles of hydrostatic pressure between ambient and ultra-high levels (up to 35,000 psi and
greater) to control bio-molecular interactions.
Our pressure cycling technology uses internally developed instrumentation that is capable of cycling pressure between ambient and
ultra-high levels at controlled temperatures to rapidly and repeatedly control the interactions of bio-molecules. Our instrument, the
Barocycler®, and our internally developed consumables product line, which includes PULSE (Pressure Used to Lyse Samples for
Extraction) Tubes as well as the ProteoSolveLRS
make up the PCT Sample Preparation System (“PCT SPS”).
TM kit for the detergent-free extraction of proteins from lipid-rich samples, together
We hold 13 United States and 6 foreign patents covering multiple applications of PCT in the life sciences field. Our pressure cycling
technology employs a unique approach that we believe has the potential for broad use in a number of established and emerging life sciences
areas, including;
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sample preparation for genomic, proteomic, and small molecule studies;
pathogen inactivation;
protein purification;
control of chemical (enzymatic) reactions; and
immunodiagnostics.
In 2007, we continued to engage in activities to support the commercialization of our PCT product line within genomic and proteomic
sample preparation. These activities included the following:
·
·
·
·
Barocycler NEP2320. We introduced for sale the Barocycler NEP2320, a smaller, more compact version of our Barocycler
NEP3229. The Barocycler NEP2320 was originally developed as a demonstration unit for our sales staff. However, we
determined to offer this instrument as a separate product for sale following market feedback for a smaller instrument with
similar capabilities and features as our larger Barocycler NEP3229.
Expanded our Consumables Product Line. We introduced for sale our ProteoSolveLRS kit to expand our consumables
product line. Our ProteoSolveLRS kit offers researchers a unique method for the safe, rapid, efficient and reproducible
extraction of proteins from lipid-rich samples, including adipose and brain tissues, organelles, and membrane preparations,
without the use of detergents, which can be harmful to the sample extraction process.
CE Mark Approval. Our Barocycler instrumentation received CE Marking, which means that our Barocycler instruments
meet the essential requirements of the relevant European health, safety and environmental protection legislation. The CE
Mark is an important step toward our anticipated full-scale launch of our PCT product line in Europe during 2008.
Expanded Our Sales Force. We expanded our domestic sales force from one regional sales director in the beginning of the
year to seven at the end of the year. Additionally, in February 2008 we re-aligned our senior management team to support a
full commercialization effort by hiring Matthew B. Potter as our Vice President of Sales and allowing Nathan P. Lawrence
Ph.D., formerly responsible for marketing and sales, to focus exclusively on marketing and collaboration support, as our
Vice President of Marketing.
- 1 -
·
Expanded Our International Distribution Network. We expanded our international distribution network from one long-term
distribution partnership at the beginning of the year to three long-term partnerships at the end of the year. As of December
31, 2007 our distribution relationships covered Japan, France, Belgium, Switzerland and South Korea.
Since we began operations as Pressure BioSciences in February 2005, we have installed 33 Barocycler instruments, including 20
instruments in 2007, 8 instruments in 2006, and 5 instruments in 2005. Our customers include researchers at academic laboratories,
government agencies and biotechnology, pharmaceutical and other life sciences companies in the United States, and three foreign
distribution partners.
Corporate Information
We were incorporated in the Commonwealth of Massachusetts in August 1978 as Boston Biomedica, Inc. In September 2004, we
completed the sale of the Boston Biomedica core business units and began to focus exclusively on the development and commercialization
of pressure cycling technology. Following this change in business strategy, we changed our legal name from Boston Biomedica, Inc. to
Pressure BioSciences, Inc., or PBI, and commenced operations as Pressure BioSciences in February 2005.
Available Information
Our Internet website address is http://www.pressurebiosciences.com. Through our website, we make available, free of charge, our
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as
reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).
These SEC reports can be accessed through the investor relations section of our website. The information found on our website is not part
of this or any other report we file with or furnish to the SEC.
You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC
20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet website that contains reports, proxy and information statements, and other information regarding Pressure
BioSciences and other issuers that file electronically with the SEC. The SEC’s Internet website address is http://www.sec.gov.
Sample Preparation for Genomic, Proteomic, and Small Molecule Studies
The Market
Since February 2005, we have focused substantially all of our research and development and commercialization efforts on sample
preparation for genomic, proteomic, and small molecule studies. This market is comprised of academic and government research
institutions, biotechnology and pharmaceutical companies, and other public and private laboratories that are engaged in studying genomic,
proteomic and small molecule material within plant and animal cells and tissues.
We elected to initially focus our resources in the market of genomic, proteomic, and small molecule sample preparation because we
believe it is an area that:
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-
-
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-
is a rapidly growing market;
has a large and immediate need for better technology;
is comprised mostly of research laboratories, which are subject to minimal governmental regulation;
is the least technically challenging application for the development of our products;
is compatible with our technical core competency; and
is the area in which we currently have strong patent protection.
We believe that our existing Barocycler instrumentation fills an important and growing need in the sample preparation market for the
safe, rapid, versatile, reproducible, and quality extraction of nucleic acids, proteins, and small molecules from a wide variety of plant and
animal cells and tissues. We continue to invest a significant amount of our engineering resources toward the continued improvement of our
existing instruments and the development of future instrumentation.
- 2 -
Sample Extraction Process
The process of preparing samples for genomic, proteomic, and small molecule studies includes a crucial step called sample extraction,
or sample disruption. This is the process of extracting nucleic acid (“DNA” and/or “RNA”), proteins, or small molecules from the plant or
animal cells and tissues that are being studied. Sample preparation is widely regarded as a significant impediment to research and
discovery, and sample extraction is generally regarded as the key part of sample preparation. Our current commercialization efforts are
based upon our belief that pressure cycling technology provides a superior solution to sample extraction compared to other available
technologies or procedures, and can thus significantly improve sample preparation.
Collaboration Program
Our collaboration program is an important element of our business strategy. Initiating a collaboration with a researcher usually
involves the installation of a Barocycler instrument for an agreed upon period of time, generally three to six months, and the execution of
an agreed upon work plan. Our primary objectives for entering into a collaboration agreement include:
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the development of a new application for PCT in sample preparation;
the advancement and validation of our understanding of PCT within an area of the life sciences in which we have already
have products;
the demonstration of effectiveness and impact of PCT to specific research scientists whom we believe can have a positive
impact on market acceptance of PCT; and
the expectation of peer-reviewed publications and/or presentations at scientific meetings by a third party on the merits of
PCT.
Since we initiated our collaboration program in June 2005, we have placed Barocycler instruments in approximately twenty sites,
resulting in thirty publications and presentations by third party researchers. We believe that this program has provided, and continues to
provide us with independent and objective data about PCT from well respected laboratories throughout the United States. Below is a list of
selected publications and presentations that have been made by various researchers based on their experiences with PCT:
Investigator
Nikhil Patel
Institution
Bascom Palmer Eye
Institute, University
of Miami
Title
Strategies to recover proteins
from ocular tissues for
proteomics
Venue/Journal
Venue Type
Date
Proteomics
Journal
Article
March 5, 2008
Mourad Ferhat
Universite de Lyon
Application of Pressure
Cycling Technology to RNA
Extraction from Legionella
Pneumophila Cells
Meeting of the
French Association
on Legionella
Poster
October 18-19,
2007
Patricia Okubara USDA ARS
Improved extraction of
Rhizoctonia and Pythium
DNA from wheat roots and
soil samples using pressure
cycling technology
Canadian Journal of
Plant Pathology
Journal
Article
September 2007
Paul Pevsner
Department of
Pharmacology, New
York University
School of Medicine
Colon Cancer: Protein
Biomarkers in Tissue and
Body Fluids
BMSS 29th Annual
Meeting, Heriot-
Watt University,
Edinburgh
Poster
September 9th –
12th, 2007
Valerie S. Calvert
George Mason
University
Louis S. Tisa
Frank A.
Witzmann
University of New
Hampshire,
Department of
Microbiology
Indiana University
Medical School,
Department of
Cellular and
Integrative
Physiology
A Systems Biology Approach
to the Pathogenesis of
Obesity-related Nonalcoholic
Fatty Liver Disease Using
Reverse Phase Protein
Microarrays for Multiplexed
Cell Signaling Analysis
Pressure Cycling Technology
(PCT) Facilitates Analysis of
the Frankia Proteome
Applications of Pressure
Cycling Technology (PCT) to
Tissue Sample Preparation for
One-and Two-Dimensional
Gel Electrophoresis.
Hepatology
Journal
Article
June 27, 2007
U.S. Hupo 2007
Poster
March 4-8, 2007
Electrophoresis
Journal
Article
February 15, 2007
Rita Wong
DermTech
International
Analysis of RNA Recovery
and Gene Expression in the
Epidermis Using Non-invasive
Journal of
Dermotological
Journal
Article
November 2006
Tape Stripping
Science
D. Alan Kerr
University of
Louisville
Pressure Cycling Technology
and Its Application in Steroid
Receptor Extraction
Journal of Clinical
Ligand Assay
Journal
Article
Spring 2004
Company Products
Our PCT products have been developed to allow researchers to harness the Power of PCT to improve scientific research studies in the
life sciences field. All of our products are developed with the expectation of meeting the needs of scientific personnel while enhancing the
safety, speed, and quality that is available to them with existing sample preparation technology.
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Barocycler Instrumentation
Our Barocycler product line consists of laboratory instrumentation that subjects a sample to cycles of pressure from ambient to ultra-
high levels and then back to ambient, all in a precisely controlled manner. Our instruments, the Barocycler NEP3229 and Barocycler
NEP2320, use cycles of high hydrostatic pressure to quickly and efficiently break up the cellular structures of a specimen releasing nucleic
acids, proteins and small molecules from the specimen in our consumable tube, referred to as our PULSE tubes. Our Barocycler
instrumentation is designed to fit on a laboratory bench top, inside a biological safety cabinet, or on the shelf of a cold room of a laboratory.
Our instruments have an external chiller hook-up (to control temperature during the PCT process), automatic fill and dispensing valves, and
an integrated micro-processor keypad. The microprocessor is capable of saving up to 99 specific PCT protocols, so the researcher can
achieve maximum reproducibility for the extraction of genomic, proteomic, or small molecules from various biological samples. Our
Barocycler instruments, together with our consumable products described below, make up our current PCT sample preparation system.
Barocycler NEP3229 – The Barocycler NEP3229 contains two units, an upper, user interface and a lower, power source, comprised
primarily of a 1.5 horsepower motor and pump assembly. Combined, the two components of the NEP3229 weigh approximately 350
pounds. The Barocycler NEP3229 is capable of processing up to three samples simultaneously using our specially designed, single-use
PULSE Tubes.
Barocycler NEP2320 – The Barocycler NEP2320 is a smaller and more compact version of our NEP3229 unit. It weighs
approximately 75 pounds, processes one sample at a time, and works on compressed air (pneumatic) and not hydraulics like the larger
NEP3229 unit. Because this instrument is pneumatic, the NEP2320 can be easily attached by an air hose to a typical 85 psi air compressor
found in most scientific laboratories, to many consumer-sold portable compressors, or even to bottled gas. This instrument is currently
being used by our sales force as a demonstration instrument and is being marketed as a second instrument alternative to our PCT Sample
Preparation System.
Consumable Products
PULSE Tubes (FT500) – Our current PULSE Tube, the FT500, is a specially-designed, plastic, single-use, processing container with
two chambers separated by a small disk with about sixty small holes. This small disk is referred to as a Lysis Disk. PULSE Tubes transmit
the power of PCT from the Barocycler instrument to the sample. In sample extraction, the specimen is placed on the Lysis Disk, the
PULSE Tube is placed in the pressure chamber of the Barocycler instrument, pressure chamber fluid is added, and pressurization begins.
As pressure increases, a small moveable piston (the Ram) pushes the specimen from the top (sample) chamber, through the Lysis Disk and
into the bottom (fluid retention) chamber. When pressure is released, the sample (now partially homogenized) is pulled back through the
Lysis Disk by the receding Ram. The combination of physical passage through the Lysis Disk, rapid pressure changes, and other
biophysical mechanisms related to cycled pressure break up the cellular structures of the specimen to quickly and efficiently release nucleic
acids, proteins, and small molecules.
ProteoSolveLRS – (ProteoSolve for Lipid Rich Samples) is a PCT-dependent method for the safe, rapid, efficient, and reproducible
extraction of proteins from lipid-rich samples, including adipose and brain tissues, organelles, and membrane preparations. Proteomic
analysis of these types of samples is widely used in the study of diabetes, cancer, ALS, heart disease, and a number of other serious human
disorders related to obesity. We believe that this PCT-dependent method of protein extraction from lipid-rich samples offers significant
advantages over current extraction techniques, primarily due to the ability to use certain organic solvents instead of harsh detergents in the
extraction process. Harsh detergents are known to compromise the integrity of many proteins; therefore the use of these detergents requires
a very careful and time consuming removal process. The kit includes 12 specially-designed PULSE Tubes, certain organic solvents, other
reagents, and an instruction sheet on how to utilize this patent-pending process to enhance the extraction of proteins from lipid-rich
samples.
We believe our discovery of this PCT-dependent, detergent-free process, and the subsequent development of the ProteoSolveLRS kit, is
an example of how our significant investment in research and development can result in the development of important applications of PCT
in a large and important area of the life sciences.
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Company Services
Government Grants – We view federal agency grants to be an important part of our business plan. These types of grants allow us to bill
the federal agency for work that we are planning to perform as part of the development of our technology, and we expect that such work
will support our commercialization efforts. Additionally, if our work in SBIR Phase I grants is successful, then we expect to apply for
larger NIH SBIR Phase II grants. Such larger grants are typically in excess of $750,000 and can support significant research projects in
areas we would expect to support with internal funds should SBIR Phase II grants not be awarded. To date we have been awarded two
National Institutes of Health (“NIH”) Small Business Innovation Research (“SBIR”) Phase I Grants. The first grant was awarded in
September 2006 to fund experiments to demonstrate the feasibility of using pressure cycling technology in the development of a new
method for the extraction of clinically important protein biomarkers, sub-cellular molecular complexes, and organelles from cells and
tissues. Our second NIH SBIR Phase I grant was awarded in March 2007, to fund the investigation of the purification of nucleic acids
using PCT. The amount awarded under each of these grants was approximately $150,000.
Extended Service Contracts - We offer extended service contracts on our laboratory instrumentation to all of our customers. These
service contracts allow a customer who purchases a Barocycler instrument to receive on-site scheduled preventative maintenance, on-site
repair and replacement of all worn or defective component parts, and telephone support, all at no incremental cost, for the life of the service
contract. We have offered one-year and four-year extended service contracts to customers who purchase Barocycler instruments.
Fee-for-Service – We will occasionally perform PCT services on a fee-for-service basis. We may enter into these types of
arrangements if we believe that the customer has a high likelihood of purchasing a PCT Sample Preparation System or if we believe that
the customer will publish or present results of the work performed in scientific journals or in scientific meetings.
Other Applications of Pressure Cycling Technology
PCT is an enabling, platform technology based on a bio-physical process that had not previously been used to control bio-molecular
interactions. During its early development, under the legacy business of Boston Biomedica, Inc., our scientists were researching and
developing applications of pressure cycling technology in many areas of the life sciences, including genomic, proteomic, and small
molecule sample preparation. The data generated during these early years, combined with the data generated since PBI began significant
operations in February 2005, form the basis of knowledge that we believe will allow us to successfully commercialize PCT both within and
outside of the sample preparation market.
Our research and development efforts have shown that, in addition to genomic, proteomic and small molecule sample preparation, PCT
is potentially beneficial in a number of other areas of the life sciences, including pathogen inactivation, protein purification, control of
chemical (particularly enzymatic) reactions, and immunodiagnostics. Our pursuit of these markets, however, depends on a number of
factors, including our success in commercializing PCT in the area of sample preparation, our judgment regarding the investment required to
be successful in these areas, and the value of these markets to our company. Below is a brief explanation of each of these additional
potential applications and a short description of why we believe PCT can be used to improve scientific studies in these areas.
Pathogen Inactivation
Biological products manufactured for human use, such as blood, vaccines, and drugs, are put through rigorous processing protocols in
an effort to minimize the potential of that product to transmit disease. These protocols may include methods to remove infectious materials
(such as pre-processing testing, filtration, or chromatography), or methods to inactivate infectious materials that are not captured in the
removal steps (such as pasteurization, irradiation, and solvent detergent inactivation). Notwithstanding current diligence in both the
removal and inactivation steps, significant concern remains that some bacteria and viruses capable of transmitting infection to recipients
may not be removed or inactivated with current procedures. In addition, some removal and inactivation methods may not be useful because
of cost, safety, ease-of-use, or other practical concerns. To that end, we believe that a new inactivation method is needed that can safely,
rapidly and inexpensively inactivate pathogens in blood, vaccines, and drugs without the need for chemical or other potentially toxic
additives. We believe we have successfully generated proof-of-concept that PCT can satisfy this need. We believe that compared to current
procedures, a process that uses PCT has the potential to increase safety and yield, lower cost, and decrease the potential side effects of
current methods. We have been issued US, European, and Japanese patents for this PCT-dependent inactivation technology.
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Protein Purification
Many vaccines and drugs are comprised of proteins. These proteins need to be purified from complex mixtures as part of the
manufacturing process. Current purification techniques often result in the loss of a significant amount of the protein, therefore, any method
that could increase the amount of protein being recovered in the purification step, would subsequently lead to a reduction in cost to the
manufacturer. We believe we have successfully generated proof-of-concept that PCT can satisfy this need. We believe that compared to
current purification procedures, a process that uses PCT has the potential to increase protein recovery, increase the quality of the product,
and lower production costs. We have been issued US and European patents in this area.
Control of Chemical (Particularly Enzymatic) Reactions
Chemical reactions encompass many important interactions in nature. Methods used to control chemical reactions could have a positive
effect on the quality, speed, and overall result of the reaction. The control and detection of chemical reactions is particularly useful in the
biotechnology field for synthesizing and characterizing such molecules as nucleic acids and polypeptides. We believe that PCT offers
distinct advantages in controlling chemical reactions over current methods, since PCT can provide precise, automated control over the
timing and synchronization of chemical reactions, particularly enzymatic reactions. We have been issued US and European patents in this
area.
Immunodiagnostics
Many tests used in the clinical laboratory today are based on the formation of a complex between two proteins, such as an antigen and
an antibody. Such “immunodiagnostic” methods are used for the detection of infectious agents (such as HIV, hepatitis viruses, and West
Nile virus), as well as for endocrine, drug testing, and cancer diagnostics. We have generated proof-of-concept that PCT may be used to
control bio-molecular interactions between proteins, such as antigens and antibodies. We believe this capability may provide a greater
degree of sensitivity and quantitative accuracy in immunodiagnostic testing than that offered by methods that are available today. We have
been issued US and European patents in this area.
Customers
Our customers include researchers at academic laboratories, government agencies, biotechnology, pharmaceutical, and other life
science companies in the United States. Our customers also include three foreign distribution partners that we have entered into agreements
with over the past 12 months. During 2007, we sold limited quantities of PCT products to all of these customer groups. Our goal in 2008 is
to continue our market penetration in these target groups, and to increase our commercial operations to serve researchers at these types of
institutions on a global basis. We also feel that there is a significant opportunity to sell additional Barocycler instrumentation to additional
laboratories at current customer institutions.
If we are successful in commercializing PCT in applications beyond our current focus area of genomic, proteomic, and small molecule
sample preparation, our potential customer base could expand to include hospitals, reference laboratories, blood banks and transfusion
centers, plasma collection centers, pharmaceutical manufacturing plants, and other sites involved in each specific application.
Competition
We compete with companies that have existing technologies for the extraction of nucleic acids, proteins, and small molecules from
“hard-to-lyse” cells and tissues, including methods such as mortar and pestle grinding, sonication, rotor-stator homogenization, French
Press, bead beating, freezer milling, enzymatic digestion, and chemical dissolution. We believe that there are a number of significant
issues related to the use of these methods, including: complexity, sample containment, cross-contamination, shearing of bio-molecules of
interest, limited applicability to different sample types, ease-of-use, reproducibility, and cost. We believe that the PCT Sample Preparation
System offers a number of significant advantages over these methods, including labor reduction, temperature control, precision,
reproducibility, versatility, efficiency, simplicity, and safety. To compete, we must be able to clearly and conclusively demonstrate to
potential customers that our products provide these improved performance capabilities.
- 6 -
We believe that our PCT Sample Preparation System is a novel and enabling system for genomic, proteomic and small molecule
sample preparation. As such, many users of current manual techniques will need to be willing to challenge their existing methods of
sample preparation and invest time to evaluate a method that could change their overall workflow in the sample preparation process, prior
to adopting our technology. We are also aware that the cost of the PCT Sample Preparation System may be greater than the cost of many
of the other techniques currently employed. Consequently, we are focusing our sales efforts on those product attributes that we believe will
be most important and appealing to potential customers, namely versatility, reproducibility, quality, and safety.
PCT Compared to Existing Technologies
There are several incumbent technologies that offer scientists varying degrees of success in sample preparation. For several years, PBI
scientists have been performing comparative studies with hundreds of samples to better understand how pressure cycling technology
compares with these competitive technologies. Depending on the area of research and the type of material a scientist may be working with,
there is a different level of importance placed on each attribute. Below is an illustration of how pressure cycling technology, in our opinion,
compares to several existing technologies across the key attributes that we have assessed (with a “-“denoting a negative attribute, and a “+”
denoting a positive attribute).
Key Attributes
Safety
Closed System
Storage, Transport
Versatility
Reproducibility
Efficiency
Shearing Molecules
Sonication
-
-
-
-
-
Yes
Relationship with Source Scientific, LLC
Mortar
Pestle
Bead
Beating
Incumbent Technologies
Tissue
Homogenizer
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Yes
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Yes
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Min
French
Press
PCT
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Yes
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Min
In June 2004, we transferred certain assets and liabilities of our PBI Source Scientific, Inc. subsidiary to a newly formed limited
liability company known as Source Scientific, LLC. At the time of the transfer, we owned 100% of the ownership interests of Source
Scientific, LLC. We subsequently sold 70% of our ownership interests of Source Scientific, LLC to Mr. Richard Henson and Mr. Bruce A.
Sargeant pursuant to a purchase agreement (the “Source Scientific Agreement”). As a result of the sale of 70% of our ownership interests,
Mr. Henson and Mr. Sargeant each owned 35% and we owned the remaining 30% of Source Scientific, LLC. Under the Source Scientific
Agreement, we received notes receivable in the aggregate amount of $900,000 (the “Notes”) payable at the end of three years bearing 8%
interest. The Source Scientific Agreement offered Mr. Henson and Mr. Sargeant the option (“the Option”) to purchase our 30% ownership
interest in Source Scientific, LLC until May 31, 2007, at an escalating premium (10-50%) over our initial ownership value, provided that
they first paid off the Notes in their entirety.
On May 29, 2007, we executed a consent agreement with Mr. Henson and Mr. Sargeant, Source Scientific LLC, and BIT Analytical
Instruments, Inc. (“the Consent Agreement”) pursuant to which the Notes were repaid in full in the aggregate amount of $1,201,534 in
principal and interest, and Mr. Henson and Mr. Sargeant exercised their Option through BIT Analytical Instruments, Inc. to purchase our
remaining 30% ownership interest in Source Scientific, LLC for an aggregate price of $578,573. As a result of these transactions, we no
longer retain any direct or indirect ownership interest in Source Scientific, LLC.
- 7 -
The execution of these transactions, and receipt of the funds, triggered our recognition of a gain on the sale of assets related to
discontinued operations of $1,534,476, net of income taxes of $218,060, during the three months ended June 30, 2007.
Manufacturing and Supply
Source Scientific, LLC, currently provides all of the manufacturing and assembly services for our instrumentation products. We plan to
continue to utilize Source Scientific, LLC as our primary assembler and contract manufacturer of our current, and future, Barocycler
instruments. During 2007, however, we initiated several engineering initiatives to position us for greater independence from any one
supplier, and we are in the process of developing a network of manufacturers and sub-contractors to reduce our reliance on any single
supplier. Until we develop a broader network of manufacturers and subcontractors, obtaining alternative sources of supply or
manufacturing services could involve significant delays and other costs and challenges, and may not be available to us on reasonable terms,
if at all. The failure of a supplier or contract manufacturer to provide sufficient quantities, acceptable quality and timely products at an
acceptable price, or an interruption of supplies from such a supplier could harm our business and prospects.
Research and Development
Our research and development activities are split into two functional areas, applications and engineering.
Applications Research and Development
Our highly educated, experienced, and trained staff has years of experience in molecular and cellular biology, virology, and
proteomics. This team focuses on the development of PCT-dependent genomic, proteomic, and small molecule sample preparation methods
that we believe will result in an immediate commercial return-on-investment. To help ensure the success of this objective, Dr. Alex
Lazarev our Vice President of Research & Development and his team meet regularly with our sales, marketing, and engineering
departments to discuss market needs and trends. Our applications research and development staff is responsible for the technical review of
all scientific collaborations, for the support of our marketing and sales departments through the generation of internal data in a number of
areas of market interest, and in the development of commercially-viable PCT-dependent products. The discovery and subsequent
development of ProteoSolveLRS is an example of how our investment in applications research and development has expanded the potential
commercialization of PCT.
Engineering Research and Development
Our engineering research and development team is focused on the design and development of new and improved instrumentation and
consumable products to support the commercialization of PCT. Our engineering department is led by Dr. Edmund Ting, our Senior Vice
President of Engineering, and is supported by a full-time senior engineer and third parties. Over the past year, the majority of this
department’s efforts have been directed towards the development of additional features and benefits for the NEP3229, on the development
of the NEP2320, and on the design of additional consumables for the PCT Sample Preparation System. Dr. Ting and his team have also
begun the design of a Barocycler that can achieve pressures of approximately 87,000 psi, (useful for both sample preparation and
inactivation), a Barocycler with minimal features and benefits that we believe will fill the need for a very basic, low cost, “mass market”
type instrument, as well as a Barocycler that is small, portable, and robust enough to take out into the field. Future instrumentation could
also include larger, more sophisticated, high-throughput, fully-automated instruments that could process several thousand samples per day.
In addition to instrumentation, we believe there is significant market demand for PCT-dependent consumable products that are
designed to process samples smaller, and larger, than the samples that can be processed by our current PULSE Tubes. Additionally, we are
investing research and development resources toward the development of application specific PULSE Tubes with the intention of offering
added convenience for our customer base, as well as expanding the application of PCT into other areas of life sciences.
Our research and development expenses were approximately $2.0 million and $1.4 million for the years ended December 31, 2007 and
2006, respectively.
- 8 -
Sales and Marketing
Our sales and marketing efforts are centered on using the independent data developed and disseminated by our collaboration partners
to help drive the installed base of PCT Sample Preparation Systems. The development of scientific data by our partners and our internal
researchers provides our sales and marketing staff with additional tools that are essential in selling a new technology such as PCT.
Sales
Direct US Sales Force
Our domestic sales force is led by our newly hired Vice President of Sales, Matthew B. Potter. Mr. Potter is responsible for directing
the efforts of our seven full-time sales directors, each of whom is responsible for covering a specific region of the United States. We hired
and trained six of these regional sales directors during 2007, primarily in the final four months of the year. We believe that hiring seasoned
sales professionals, with at least 10 - 15 years of industry experience, will allow us to more effectively penetrate the market with a small,
focused sales force. Throughout 2008, we plan to monitor this strategy and may increase the number of sales professionals if our resources
permit and we believe that doing so will accelerate our commercialization efforts.
Foreign Distributor Network
We have a distribution agreement with Veritas Corporation (“Veritas”) of Tokyo, Japan pursuant to which we granted Veritas exclusive
distribution rights to all of our products in Japan. The term of this agreement expired on December 31, 2007, however we are currently
operating under the terms of the agreement as we negotiate a three year extension.
In December 2007, we signed a distribution agreement with Disruptive Technologies (“DT”) of Villecresnes, France pursuant to which
we granted DT exclusive distribution rights to all of our products in France, Belgium, and Switzerland. The agreement is effective from
January 1, 2008 through December 31, 2010.
In September 2007, we signed a distribution agreement with CM Corporation (“CM”), of Seoul, South Korea pursuant to which we
granted CM exclusive distribution rights to all of our products in South Korea. The agreement is effective from September 1, 2007 through
August 31, 2010.
Marketing
Our marketing team includes our Vice President of Marketing and a marketing associate. Our marketing department oversees and
directs marketing activities such as trade show attendance and sponsorship, on-line advertising, website maintenance and improvement,
search engine optimization, creation and dissemination of a PCT newsletter, market research initiatives, and the arrangement of on-location
seminars, lectures, and demonstrations of PCT capabilities. Our marketing team is also responsible for the overall coordination of our
collaboration programs, from initial set-up, research plan design, and training, service, and data analysis. Some of these responsibilities are
shared with other PBI departments (such as R&D), but marketing drives the collaborative process.
Intellectual Property
We believe that protection of our patents and other intellectual property is essential to our business. Our practice is to file patent
applications to protect technology, inventions, and improvements to inventions that are important to our business development. We also
rely on trade secrets, know-how, and technological innovations to develop and maintain our potential competitive position. To date, we
have been granted thirteen United States patents, three European patents, one Australian patent, one Japanese patent, and one Canadian
patent. Our issued patents expire between 2015 and 2027. Our failure to obtain adequate patent protection may adversely affect our ability
to enter into, or affect the terms of, any arrangement for the marketing or sale of any of our PCT products. It may also allow our
competitors to duplicate our products without our permission and without compensation.
- 9 -
License Agreements Relating to Pressure Cycling Technology
In 1996, we acquired our initial equity interest in BioSeq, Inc., which at the time was developing our original pressure cycling
technology. BioSeq, Inc. acquired its pressure cycling technology from BioMolecular Assays, Inc. under a technology transfer and patent
assignment agreement. In 1998, we purchased all of the remaining outstanding capital stock of BioSeq, Inc., and at such time, the
technology transfer and patent assignment agreement was amended to require us to pay BioMolecular Assays, Inc. a 5% royalty on our
sales of products or services that incorporate or utilize the original pressure cycling technology that BioSeq, Inc. acquired from
BioMolecular Assays, Inc. We are also required to pay BioMolecular Assays, Inc. 5% of the proceeds from any sale, transfer or license of
all or any portion of the original pressure cycling technology. These payment obligations terminate in 2016. During the fiscal years ended
December 31, 2007 and 2006, we paid BioMolecular Assays, Inc. $19,596 and $9,809 in royalties.
In connection with our acquisition of BioSeq, Inc., we licensed certain limited rights to the original pressure cycling technology back to
BioMolecular Assays, Inc. This license is non-exclusive and limits the use of the original pressure cycling technology by BioMolecular
Assays, Inc. solely for molecular applications in scientific research and development and in scientific plant research and development.
BioMolecular Assays, Inc. is required to pay us a royalty equal to 20% of any license or other fees and royalties, but not including research
support and similar payments, it receives in connection with any sale, assignment, license or other transfer of any rights granted to
BioMolecular Assays, Inc. under the license. BioMolecular Assays, Inc. must pay us these royalties until the expiration of the patents held
by BioSeq, Inc. in 1998, which we anticipate will be 2016. We have not received any royalty payments from BioMolecular Assays, Inc.
under this license.
Regulation
Many of our activities are subject to regulation by governmental authorities within the United States and similar bodies outside of the
United States. The regulatory authorities may govern the collection, testing, manufacturing, safety, efficacy, labeling, storage, record
keeping, transportation, approval, advertising, and promotion of our products, as well as the training of our employees.
All of our commercialization efforts to date are focused in the area of genomic, proteomic, and small molecule sample preparation. We
do not believe that our current Barocycler products used in sample preparation are considered “medical devices” under the United States
Food, Drug and Cosmetic Act (the “Act”) and we do not believe that we are subject to the law’s general control provisions that include
requirements for registration, listing of devices, quality regulations, labeling, and prohibitions against misbranding and adulteration. Nor do
we believe that we are subject to regulatory inspection and scrutiny. If, however, we are successful in commercializing PCT in applications
beyond our current focus area of genomic, proteomic, and small molecule sample preparation, such as protein purification, pathogen
inactivation and immunodiagnostics, our products may be considered “medical devices” under the Act, at which point we would be subject
to the law’s general control provisions and regulation by the U.S. Food and Drug Administration (the “FDA”) that include requirements for
registration listing of devices, quality regulations, labeling, and prohibitions against misbranding and adulteration. The process of obtaining
approval to market these devices in the other potential applications of PCT would be costly and time consuming and could prohibit us from
pursuing such markets.
We may also become subject to the European Pressure Equipment Directive, which requires certain pressure equipment meet certain
quality and safety standards. We do not believe that we are currently subject to this directive because our Barocycler instruments are below
the threshold documented in the text of the directive. If our interpretation were to be challenged, we could incur significant costs defending
the challenge, and we could face production and selling delays, all of which could harm our business.
Our Barocycler instrumentation received CE Marking, which means that our Barocycler instruments meet the essential requirements of
the relevant European health, safety and environmental protection legislation. The CE Mark is an important step toward our anticipated
full-scale launch of our PCT product line in Europe during 2008. In order to maintain our CE Marking, a requirement to sell equipment in
many countries of the European Union, we are obligated to uphold certain safety and quality standards.
Employees
As of March 24, 2008 we had 27 full-time employees.
- 10 -
Our 27 employees include 11 employees in the sales and marketing and technical support functions, four in general and administrative,
10 in applications research and development, and two in engineering research and development.
- 11 -
ITEM 1A.
RISK FACTORS
This report contains forward-looking statements that involve risks and uncertainties, such as statements of our objectives, expectations
and intentions. The cautionary statements made in this report should be read as applicable to all forward-looking statements wherever they
appear in this report. Our actual results could differ materially from those discussed herein. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed elsewhere in this report.
We will require additional capital to further develop our pressure cycling technology products and services and cannot ensure that
additional capital will be available on acceptable terms or at all.
We have experienced negative cash flows from operations from our pressure cycling technology business since its inception. As of
December 31, 2007, we had available cash of approximately $5.4 million. Based on our current projections, we believe our current cash
resources are sufficient to fund our normal operations into early 2009.
We will need additional capital sooner than we currently expect if we experience unforeseen costs or expenses, unanticipated liabilities
or delays in implementing our business plan, developing our products and achieving commercial sales. We also believe that we will need
substantial capital to accelerate the growth and development of our pressure cycling technology products and services in the sample
preparation area, as well as for applications in other areas of life sciences. Our capital requirements will depend on many factors, including
but not limited to:
the problems, delays, expenses, and complications frequently encountered by early-stage companies;
·
· market acceptance of our pressure cycling technology products and services for sample preparation;
·
·
the success of our sales and marketing programs; and
changes in economic, regulatory or competitive conditions in the markets we intend to serve.
To satisfy our potential capital requirements to cover the cost of the development and commercialization of our pressure cycling
technology products and services relating to sample preparation and other life science applications, we expect to raise additional funds in
the public or private capital markets. Additional financing may not be available to us on a timely basis, if at all, or on terms acceptable to
us. If adequate funds are not available or if we fail to obtain acceptable additional financing, we may be required to:
·
·
·
obtain financing with terms that may have the effect of diluting or adversely affecting the holdings or the rights of the
holders of our common stock;
obtain funds through arrangements with future collaboration partners or others that may require us to relinquish rights to
some or all of our technologies or products; or
otherwise reduce planned expenditures and forego other business opportunities, which could harm our business.
We have a history of operating losses, anticipate future losses and may never be profitable.
We have experienced significant operating losses in the area of pressure cycling technology in each period since we began investing
resources in pressure cycling technology in 1998. These losses have resulted principally from research and development, sales and
marketing, and general and administrative expenses associated with the development of our pressure cycling technology business. We
expect to continue to incur operating losses until sales of our pressure cycling technology products increase substantially. We cannot be
certain when, if ever, we will become profitable. Even if we were to become profitable, we might not be able to sustain such profitability on
a quarterly or annual basis.
Our financial results depend on revenues from our pressure cycling technology products and services, which has a limited operating
history.
We currently rely on revenues from our pressure cycling technology products and services in the sample preparation area. We only
recently commercialized our pressure cycling technology products and services for sample preparation. Our limited sales and operating
history may not be adequate to enable you to fully assess our ability to achieve market acceptance of our product offering. If we are unable
to increase sales of our pressure cycling technology products and services, our business will fail.
- 12 -
Our business may be harmed if we encounter problems, delays, expenses, and complications that affect early-stage companies.
We are an early-stage company and our pressure cycling technology business has a limited operating history. Early-stage companies
may encounter problems, delays, expenses and complications, many of which may be beyond our control or may harm our business or
prospects. These include:
·
·
·
·
unanticipated problems and costs relating to the development, testing, production, marketing, and sale of our products;
delays and costs associated with our ability to attract and retain key personnel;
availability of adequate financing; and
competition.
We cannot guarantee that we will successfully complete the transition from an early-stage company to the commercialization of our
pressure cycling technology products and services.
We may be unable to obtain market acceptance of our pressure cycling technology products and services.
Many of our initial sales of our pressure cycling technology products and services have been to our collaborators, following their use of
our products in studies undertaken in sample preparation for genomics, proteomics and small molecules studies. Our technology requires
scientists and researchers to adopt a method of sample extraction that is different than existing techniques. Our PCT sample preparation
system is also more costly than existing techniques. Our ability to obtain market acceptance will depend, in part, on our ability to
demonstrate to our potential customers that the benefits and advantages of our technology outweigh the increased cost of our technology
compared to existing methods of sample extraction. If we are unable to demonstrate the benefits and advantages of our products and
technology as compared to existing technologies, then we may not gain market acceptance and our business will fail.
The sales cycle of our pressure cycling technology products is lengthy. We have incurred and may continue to incur significant
expenses and we may not generate any significant revenue related to those products.
Many of our current and potential customers have required between three and six months, or more to test and evaluate our pressure
cycling technology products. This increases the possibility that a customer may decide to cancel its order or otherwise change its plans,
which could reduce or eliminate our sales to that potential customer. As a result of this lengthy sales cycle, we have incurred and may
continue to incur significant research and development, selling and marketing, and general and administrative expense related to customers
from whom we have not yet generated any revenue from our products, and from whom we may never generate the anticipated revenue if a
customer cancels or changes its plans.
Our business could be harmed if our products contain undetected errors or defects.
We are continuously developing new, and improving our existing, pressure cycling technology products in sample preparation and we
expect to do so in other areas of life sciences depending upon the availability of our resources. Newly introduced products can contain
undetected errors or defects. In addition, these products may not meet their performance specifications under all conditions or for all
applications. If, despite internal testing and testing by our collaborators, any of our products contain errors or defects or fail to meet
customer specifications, then we may be required to enhance or improve those products or technologies. We may not be able to do so on a
timely basis, if at all, and may only be able to do so at considerable expense. In addition, any significant reliability problems could result in
adverse customer reaction, negative publicity or legal claims and could harm our business and prospects.
Our success may depend on our ability to manage growth effectively.
We expect our operations to grow at a rapid pace as we further commercialize our pressure cycling technology in sample preparation
and other areas of life sciences. Our failure to manage growth effectively could harm our business and prospects. Given our limited
resources and personnel, growth of the business could place significant strain on our management, information technology systems, sources
of manufacturing capacity and other resources. To properly manage our growth, we may need to hire additional employees and identify
new sources of manufacturing capabilities. Failure to effectively manage our growth could make it difficult to manufacture our products
and fill orders, as well as lead to declines in product quality or increased costs, any of which would adversely impact our business and
results of operations.
- 13 -
Our success is substantially dependent on the continued service of our senior management.
Our success is substantially dependent on the continued service of our senior management. We do not have long-term employment
agreements with our key employees. The loss of the services of any of these individuals could make it more difficult to successfully
operate our business and achieve our business goals. In addition, our failure to retain existing engineering, research and development and
sales personnel could harm our product development capabilities and customer and employee relationships, delay the growth of sales of our
products and could result in the loss of key information, expertise or know-how.
We may not be able to hire or retain the number of qualified personnel, particularly engineering personnel, required for our business,
which would harm the development and sales of our products and limit our ability to grow.
Competition in our industry for senior management, technical, sales, marketing, finance and other key personnel is intense. If we are
unable to retain our existing personnel, or attract and train additional qualified personnel, our growth may be limited. Our success also
depends in particular on our ability to identify, hire, train and retain qualified engineering personnel with experience in design and
development of laboratory equipment.
Our reliance on a single third party for all of our manufacturing, and certain of our engineering, and other related services could harm
our business.
We currently rely on Source Scientific, LLC, a third party contract manufacturer, to manufacture our products, provide engineering
expertise, and manage the majority of our sub-contractor supplier relationships. Because of our dependence on one manufacturer, our
success will depend, in part, on the ability of Source Scientific to manufacture our products cost effectively, in sufficient quantities to meet
our customer demand, if and when such demand occurs, and meeting our quality requirements. If Source Scientific experiences
manufacturing problems or delays, or if Source Scientific decides not to continue to provide us with these services, our business may be
harmed. While we believe other contract manufacturers are available to address our manufacturing and engineering needs, if we find it
necessary to replace Source Scientific, there will be a disruption in our business and we would incur additional costs and delays that would
harm our business.
Our failure to manage current or future alliances or joint ventures effectively may harm our business.
We have entered into business relationships with distribution partners, and we may enter into alliances, joint ventures or other business
relationships to further develop our pressure cycling technology product line. We may not be able to:
·
·
·
·
identify appropriate candidates for alliances, joint ventures or other business relationships;
assure that any candidate for an alliance, joint venture or business relationship will provide us with the support anticipated;
successfully negotiate an alliance, joint venture or business relationship on terms that are advantageous to us; or
successfully manage any alliance or joint venture.
Furthermore, any alliance, joint venture or other business relationship may divert management time and resources. Entering into a
disadvantageous alliance, joint venture or business relationship, failing to manage an alliance, joint venture or business relationship
effectively, or failing to comply with any obligations in connection therewith, could harm our business and prospects.
We may not be successful in growing our international sales.
We cannot guarantee that we will successfully develop our international sales channels to enable us to generate significant revenue
from international sales. To date, we have entered into three international distribution agreements, one of which covers Belgium, France,
and Switzerland, another covering Japan, and the third which covers South Korea. We have generated limited sales to date from
international sales and cannot guarantee that we will be able to increase our sales. As we expand, our international operations may be
subject to numerous risks and challenges, including:
· multiple, conflicting and changing governmental laws and regulations, including those that regulate high pressure equipment;
·
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reduced protection for intellectual property rights in some countries;
protectionist laws and business practices that favor local companies;
- 14 -
·
·
·
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political and economic changes and disruptions;
export/import controls;
tariff regulations; and
currency fluctuations.
Our operating results are subject to quarterly variation.
Our operating results may fluctuate significantly from period to period depending on a variety of factors, including the following:
·
·
·
·
·
our ability to increase our sales of our pressure cycling technology products for sample preparation on a consistent quarterly
or annual basis;
the product mix of the Barocycler instruments we install in a given period, and whether the installations are completed
pursuant to sales, rental or lease arrangements, and the average selling prices that we are able to command for our products;
our ability to manage our costs and expenses;
our ability to continue our research and development activities without unexpected costs and expenses; and
our ability to comply with state and federal regulations without incurring unexpected costs and expenses.
Our instrumentation operates at high pressures and may therefore become subject to certain regulation in the European Community.
Regulation of high pressure equipment may limit or hinder our development and sale of future instrumentation.
Our Barocycler instruments operate at high pressures. If our Barocycler instruments exceed certain pressure levels, our products may
become subject to the European Pressure Equipment Directive, which requires certain pressure equipment meet certain quality and safety
standards. We do not believe that we are subject to this directive because our Barocycler instruments are currently below the threshold
documented in the text of the directive. If our interpretation were to be challenged, we could incur significant costs defending the
challenge, and we could face production and selling delays, all of which could harm our business.
We expect that we will be subject to regulation in the United States, such as the FDA, and overseas as we begin to invest more resources
in the development and commercialization of PCT in applications outside of sample preparation.
Our current pressure cycling technology products in the area of sample preparation are not regulated by the U.S. Food and Drug
Administration, or the FDA. Applications in which we intend to develop and commercialize pressure cycling technology, such as protein
purification, pathogen inactivation and immunodiagnostics, are expected to require regulatory approvals or clearances from regulatory
agencies, such as the FDA, prior to commercialization. We expect that obtaining these approvals or clearances will require a significant
investment of time and capital resources and there can be no assurance that such investments will receive approvals or clearances that
would allow us to commercialize the technology for these applications.
If we are unable to protect our patents and other proprietary technology relating to our pressure cycling technology products, our
business will be harmed.
Our ability to further develop and successfully commercialize our products will depend, in part, on our ability to enforce our patents,
preserve our trade secrets, and operate without infringing the proprietary rights of third parties. We currently have thirteen United States
patents issued and several pending patent applications for our pressure cycling technology. Several of these have been followed up with
foreign applications, for which three patents have been issued in Europe and one patent has been issued in Australia, one in Japan, and one
in Canada. We expect to file additional foreign applications in the future relating to our pressure cycling technology, and we will file
additional United States applications as we develop new patentable intellectual property. The patents which have been issued expire
between 2015 and 2027.
There can be no assurance that:
·
·
any patent applications filed by us will result in issued patents;
patent protection will be secured for any particular technology;
- 15 -
·
·
·
·
any patents that have been or may be issued to us will be valid or enforceable;
any patents will provide meaningful protection to us;
others will not be able to design around our patents; or
our patents will provide a competitive advantage or have commercial value.
The failure to obtain adequate patent protection would have a material adverse effect on us and may adversely affect our ability to enter
into, or affect the terms of, any arrangement for the marketing or sale of any product.
Our patents may be challenged by others.
We could incur substantial costs in patent proceedings, including interference proceedings before the United States Patent and
Trademark Office, and comparable proceedings before similar agencies in other countries, in connection with any claims that may arise in
the future. These proceedings could result in adverse decisions about the patentability of our inventions and products, as well as about the
enforceability, validity, or scope of protection afforded by the patents.
If we are unable to maintain the confidentiality of our trade secrets and proprietary knowledge, others may develop technology and
products that could prevent the successful commercialization of our products.
We also rely on trade secrets and other unpatented proprietary information in our product development activities. To the extent we rely
on trade secrets and unpatented know-how to maintain our competitive technological position, there can be no assurance that others may
not independently develop the same or similar technologies. We seek to protect our trade secrets and proprietary knowledge, in part,
through confidentiality agreements with our employees, consultants, advisors and contractors. Nevertheless, these agreements may not
effectively prevent disclosure of our confidential information and may not provide us with an adequate remedy in the event of unauthorized
disclosure of such information. If our employees, consultants, advisors, or contractors develop inventions or processes independently that
may be applicable to our products, disputes may arise about ownership of proprietary rights to those inventions and processes. Such
inventions and processes will not necessarily become our property, but may remain the property of those persons or their employers.
Protracted and costly litigation could be necessary to enforce and determine the scope of our proprietary rights. Failure to obtain or maintain
trade secret protection, for any reason, could harm our business.
If we infringe on the intellectual property rights of others, our business will be harmed.
It is possible that the manufacture, use or sale of our pressure cycling technology products or services may infringe patent or other
intellectual property rights of others. We may be unable to avoid infringement of the patent or other intellectual property rights of others
and may be required to seek a license, defend an infringement action, or challenge the validity of the patents or other intellectual property
rights in court. We may be unable to secure a license on terms and conditions acceptable to us, if at all. Also, we may not prevail in any
patent or other intellectual property rights litigation. Patent or other intellectual property rights litigation is costly and time-consuming, and
there can be no assurance that we will have sufficient resources to bring any possible litigation related to such infringement to a successful
conclusion. If we do not obtain a license under such patents or other intellectual property rights, or if we are found liable for infringement,
or if we are unsuccessful in having such patents declared invalid, we may be liable for significant monetary damages, may encounter
significant delays in successfully commercializing and developing our pressure cycling technology products, or may be precluded from
participating in the manufacture, use, or sale of our pressure cycling technology products or services requiring such licenses.
We may be unable to adequately respond to rapid changes in technology and the development of new industry standards.
The introduction of products and services embodying new technology and the emergence of new industry standards may render our
existing pressure cycling technology products and related services obsolete and unmarketable if we are unable to adapt to change. We may
be unable to allocate the funds necessary to improve our current products or introduce new products to address our customers’ needs and
respond to technological change. In the event that other companies develop more technologically advanced products, our competitive
position relative to such companies would be harmed.
- 16 -
We may not be able to compete successfully with others that are developing or have developed competitive technologies and products.
A number of companies have developed, or are expected to develop, products that compete or will compete with our products. We
compete with companies that have existing technologies for the extraction of nucleic acids, proteins and small molecules from cells and
tissues, including methods such as mortar and pestle, sonication, rotor-stator homogenization, French press, bead beating, freezer milling,
enzymatic digestion, and chemical dissolution. We are aware that there are additional companies pursuing new technologies with similar
goals to the products developed or being developed by us. Some of the companies with which we now compete, or may compete in the
future, have or may have more extensive research, marketing, and manufacturing capabilities, more experience in genomics and proteomics
sample preparation, protein purification, pathogen inactivation, immunodiagnostics, and DNA sequencing and significantly greater
technical, personnel and financial resources than we do, and may be better positioned to continue to improve their technology to compete in
an evolving industry. To compete, we must be able to demonstrate to potential customers that our products provide improved performance
and capabilities. Our failure to compete successfully could harm our business and prospects.
In connection with our sale of substantially all of the assets of Boston Biomedica to SeraCare Life Sciences in September 2004, we
continue to be exposed to possible indemnification claims in amounts up to the purchase price for the assets, which could prevent us
from pursuing our remaining business operations in the event an indemnification claim is brought against us.
In 2004 we sold substantially all of the assets of Boston Biomedica, our predecessor business, to SeraCare Life Sciences. Following
the sale, we retained assets and liabilities relating to our pressure cycling technology business. In connection with the sale of assets, we
agreed to provide indemnification for breaches of representations and warranties contained in the asset purchase agreement. Our
indemnification obligations with respect to most matters have expired, though our obligations relating to breaches of certain representations
and warranties, such as environmental and tax matters, continue to survive. Our indemnification obligations are limited by an overall cap
equal to the $29 million purchase price. If we are required to pay any claims for indemnification from SeraCare Life Sciences, we will have
less cash available to fund our operations, our business will be harmed and it may be difficult to continue our business at all.
Provisions in our articles of organization and bylaws and our poison pill may discourage or frustrate shareholders’ attempts to remove
or replace our current management.
Our articles of organization and bylaws contain provisions that may make it more difficult or discourage changes in our management
that our stockholders may consider to be favorable. These provisions include:
·
·
·
·
a classified board of directors;
advance notice for stockholder nominations to the board of directors;
limitations on the ability of stockholders to remove directors; and
a provision that allows a majority of the directors to fill vacancies on the board of directors.
Our shareholders rights agreement, or “poison pill”, may also have the effect of discouraging or preventing a change in control.
These provisions could prevent or frustrate attempts to make changes in our management that our stockholders consider to be
beneficial and could limit the price that our stockholders might receive in the future for shares of our common stock.
The costs of compliance with the reporting obligations of the Exchange Act, and with the requirements of the Sarbanes-Oxley Act of
2002, may place a strain on our limited resources and our management’s attention may be diverted from other business concerns.
As a result of the regulatory requirements applicable to public companies, we incur legal, accounting, and other expenses that are
significant in relation to the size of our company. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented
by the SEC and Nasdaq, have required changes in corporate governance and financial disclosure practices of public companies, some of
which are currently applicable to us and others will or may become applicable to us in the future. These rules and regulations will increase
our legal and financial compliance costs and may make some activities more time-consuming. These requirements may place a strain on
our systems and on our management and financial resources.
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ITEM 1B.
UNRESOLVED STAFF COMMENTS.
Not Applicable.
ITEM 2.
PROPERTIES.
Our corporate offices are currently located at 14 Norfolk Avenue, South Easton, Massachusetts 02375. In November 2007, we signed
an 18 month lease agreement commencing in February 2008 pursuant to which we lease approximately 5,500 square feet of office space,
with an option for an additional 18 months. We pay approximately $6,500 per month for the use of these facilities.
On June 1, 2006, we entered into a lease agreement with Scheer Partners and the Maryland Economic Development Corporation,
pursuant to which we lease laboratory and office space in Rockville, MD. In August 2007, we extended the lease agreement through May
31, 2009. We pay approximately $3,300 per month for the use of these facilities.
On March 1, 2006, we entered into a sub-lease agreement with Proteome Systems, pursuant to which we lease approximately 650
square feet of laboratory space plus 100 square feet of office space from Proteome Systems in Woburn, Massachusetts. The lease period
extends through December 31, 2008 and we pay approximately $3,200 per month for the use of these facilities.
ITEM 3.
LEGAL PROCEEDINGS.
We are not currently involved in any legal proceedings.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is traded on the NASDAQ Capital Market under the trading symbol “PBIO”.
The following table sets forth, for the periods indicated, the high and low sales price per share of common stock, as reported by the
NASDAQ Capital Market from January 1, 2006 through December 31, 2007.
Fiscal Year Ended December 31, 2006
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
Common Stock Price
High
Low
$
4.80
4.10
3.48
5.80
3.67
3.04
2.88
3.01
Fiscal Year Ended December 31, 2007
High
Low
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
4.35 $
5.70
5.00
7.78
3.50
4.00
3.67
3.98
As of March 19, 2008, there were 20,000,000 shares of common stock authorized of which 2,192,175 shares were issued and
outstanding, and held by 94 stockholders of record.
We have never declared or paid any cash dividends on our common stock and do not plan to pay any cash dividends in the foreseeable
future. We intend to retain any future earnings to finance our growth.
Recent Sales of Unregistered Securities
On November 21, 2007, we completed a private placement, pursuant to which we sold an aggregate of 126,750 shares of common
stock for a purchase price of $5.00 per share, resulting in gross proceeds to us of approximately $633,750 (the “Private Placement”). The
shares were issued and sold to a total of 8 accredited investors pursuant to a Securities Purchase Agreement entered into as of November 21,
2007 (the “Securities Purchase Agreement”).
The shares were issued in the Private Placement without registration under the Securities Act, in reliance upon the exemption from
registration set forth in Rule 506 of Regulation D (“Regulation D”) promulgated under the Securities Act. We based our reliance, in part,
upon representations made by each purchaser of shares, including, but not limited to, representations as to the purchaser’s status as an
“accredited investor” (as defined in Rule 501(a) under Regulation D) and the purchaser’s investment intent. The shares were not offered or
sold by any form of general solicitation or general advertising; as such terms are used in Rule 502 under Regulation D. The shares cannot
be offered or sold in the United States absent an effective registration statement or an exemption from the registration requirements under
applicable federal and state securities laws.
In connection with the Private Placement, we filed a Registration Statement on Form S-3 (the “Registration Statement”) covering the
resale of the shares purchased in the Private Placement. The Registration Statement was declared effective on January 22, 2008.
Repurchases by Pressure BioSciences
We did not repurchase any of our equity securities during the fourth quarter of 2007.
Equity Compensation Plan Information
The information required by this Item 5 with respect to securities authorized for issuance under equity compensation plans is set forth
in Part III, Item 12 of this Form 10-K.
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ITEM 6.
SELECTED FINANCIAL DATA.
Not Applicable.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION.
OVERVIEW
We are a life sciences company focused on the development and commercialization of a novel, enabling, platform technology called
pressure cycling technology (“PCT”). PCT uses cycles of hydrostatic pressure between ambient and ultra-high levels (up to 35,000 psi and
greater) to control bio-molecular interactions.
Our pressure cycling technology uses internally developed instrumentation that is capable of cycling pressure between ambient and
ultra-high levels at controlled temperatures to rapidly and repeatedly control the interactions of bio-molecules. Our instrument, the
Barocycler®, and our internally developed consumables product line, which includes PULSE (Pressure Used to Lyse Samples for
Extraction) Tubes as well as the ProteoSolveLRS
make up the PCT Sample Preparation System (“PCT SPS”).
TM kit for the detergent-free extraction of proteins from lipid-rich samples, together
Our pressure cycling technology employs a unique approach that we believe has the potential for broad applications in a number of
established and emerging life sciences areas, including;
-
-
-
-
-
sample preparation for genomic, proteomic, and small molecule studies;
pathogen inactivation;
protein purification;
control of chemical (enzymatic) reactions; and
immunodiagnostics.
Since we began operations as Pressure BioSciences in February 2005, we have focused substantially all of our research and
development and commercialization efforts on sample preparation for genomic, proteomic, and small molecule studies.
Our business strategy is to commercialize pressure cycling technology in the area of sample preparation for genomic, proteomic, and
small molecule studies (“sample preparation”). We also plan to pursue the further development and commercialization of PCT in other life
sciences applications, which could include working with various strategic partners that have greater scientific, and regulatory, expertise in
the respective applications than we do.
To support our current strategy, our primary focus in 2007 was the execution of our commercialization plan for PCT in sample
preparation. We increased our spending in important areas of our business during 2007, including increased expenses associated with
additional staff in the areas of sales and research and development, to support our sales expansion and increased research and development
activities.
If we are successful commercializing our technology in the sample preparation market, we believe that our financial results will be
positively affected by a combination of the revenue from the sale, lease, and rental of the Barocycler instruments, and by the recurring
revenue streams that we hope to realize from the sale of the single-use PULSE Tubes, PCT-dependent kits (such as ProteoSolveLRS),
and extended service contracts on our instrumentation. We believe the recurring revenue streams that could be generated from our
instruments in the field is a very important component of our future financial success. Therefore, we believe that in the short-term it is more
important for us to focus on increasing the number of installed Barocyclers in the field than it is for us to record revenue in the current
period. To this end, we have offered our prospective customers the opportunity to lease or rent the Barocycler instruments. While these
arrangements do not provide us with the immediate revenue of a sale, they do serve to expand the utilization of PCT and they provide a
stream of revenue from the monthly rental income and the sale of consumable products. We define sales, leases, and rentals of Barocycler
instruments as revenue-generating installations.
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We also derive revenues from Small Business Innovation Research (“SBIR”) grants awarded to us by the National Institutes of Health.
In September 2006, and in March 2007, we received SBIR Phase I grants in the aggregate amount of $300,000. These grants have funded
experiments to demonstrate the feasibility of using pressure cycling technology in various applications in the life sciences. If our work in
SBIR Phase I grants is successful, then we expect to have the opportunity to apply for larger NIH SBIR Phase II grants. Additionally, if our
work with the SBIR grants is successful, the publication of application notes in specific areas of research should further support our
commercialization efforts.
RESULTS OF OPERATIONS
Years Ended December 31, 2007 as compared to 2006
Revenue
We had total revenue of $645,870 in the year ended December 31, 2007 as compared to $210,289 in the prior year.
Revenue from the sale of PCT products and services was $399,787 in 2007 as compared to $210,289 in 2006. This increase in revenue
in 2007 was driven primarily by the installation of a total of 20 Barocycler instruments during 2007 as compared to eight in the prior year.
Although the number of instruments that we installed more than doubled in 2007 as compared to 2006, the increase in revenue was not as
significant. During 2006, all of the instruments installed were the higher priced NEP3229 model while during 2007 many of the
instruments installed were the lower priced NEP2320 model. Additionally, in 2007 many of our installations were completed pursuant to
lease or rental agreements rather than outright sales. When we install instrumentation under lease or rental agreements, we record the
revenue over the life of the agreement, generally 12 months or 36 months.
We expect the number of units installed will continue to increase in future periods as we continue to commercialize our technology.
We also expect that some portion of future installations will be for the smaller, lower priced, Barocycler NEP2320 model and some will be
placed under lease or short-term rental agreements. Therefore, the average revenue per installation may fluctuate from period to period as
we continue to drive our installed base and commercialize PCT.
During 2007, we recorded $246,083 of grant revenue. This revenue was earned in connection with our research and development
efforts performed, under the two SBIR Phase I grants that we were awarded during 2006 and 2007. During 2006, we did not record any
grant revenue.
Cost of PCT Products and Services
The cost of PCT products and services was $209,050 for the year ended December 31, 2007 compared to $165,233 for the comparable
period in 2006. This decrease in overall cost of goods sold as a percentage of revenue is due to a number of factors. The first factor was the
third quarter 2007 sale of four prototype Barocycler NEP2320 instruments. These units were prototypes and therefore the costs associated
with development and assembly of these instruments were recorded as research and development expense, as such costs were incurred. The
second factor that contributed to an increase in overall gross margin in 2007 relative to 2006 was a shift in the product mix to include an
increasing number of consumables and the sale of several production Barocycler NEP2320 units, which have a higher gross margin than
the NEP3229.
We believe that our cost of PCT Products and Services will continue to improve as a percentage of revenue as we continue to install
more instrumentation, and sell more consumable products, such as PULSE Tubes and ProteoSolveLRS kits. However, we expect our gross
margin may fluctuate from period to period as we continue to sell, lease, or rent a varying mix of Barocycler instrumentation and
consumable products.
- 21 -
Research and Development
Research and development expenditures increased to $2,022,730 during 2007 from $1,429,711 in 2006. This increase was primarily
due to a significant increase in headcount from an average of three research and development employees during 2006 to an average of 10 in
2007. Consistent with our plans to increase our research and development capabilities, the growth in our staff has allowed us to perform
more experiments and provide a higher level of support to our collaboration partners, and to our newly hired sales team. We believe these
efforts are important to the continued development and commercialization of PCT. Also contributing to the increase in research and
development expense was the approximate $400,000 that we incurred in the development of the Barocycler NEP2320. In addition to
developing a new product and a demonstration instrument for our sales force, this expenditure has resulted in the development of the core
technology required to create future pneumatic (air driven) PCT instrumentation. We believe that pneumatic pressure technology will allow
us to more easily and rapidly develop the smaller, portable, less expensive instruments that we believe represents an additional significant
market opportunity.
Research and development expense included $141,115 and $181,609 of non-cash, stock-based compensation expense related to
Statement of Financial Accounting Standards (“SFAS”) 123R “ Share-Based Payment” (“SFAS 123R”) in 2007 and 2006, respectively.
We plan to reduce the level of hiring in 2008, relative to 2007. Therefore, we expect our spending in this area to increase less
significantly than it has in the prior year. We believe that with our existing staff, we can continue to pursue research and development
programs, and continue to invest in our intellectual property portfolio, in the sample preparation area.
Selling and Marketing
Selling and marketing expenses increased to $1,386,519 in 2007 from $528,265 for the year ended December 31, 2006. In March 2007
we announced our plans to begin active commercialization of PCT. As part of this plan, we outlined our intent to build a targeted US-based
sales force. During 2007, we completed the hiring of six additional regional directors (bringing the total to seven) and continued to increase
our spending in marketing, and sales support. Additionally, we shifted our technical services department into the sales and marketing
function to reflect a shift in departmental responsibilities.
Selling and marketing expense included $70,770 and $44,086 of non-cash, stock-based compensation expense related to SFAS 123R in
2007 and 2006, respectively.
We expect that selling and marketing expense will continue to increase throughout 2008 in support of our commercialization efforts.
We also plan to continue the expansion of our marketing programs and the further development of our foreign distribution network.
General and Administrative
General and administrative costs totaled $2,174,739 in the year ended December 31, 2007, as compared to $2,145,196 in 2006. Our
general and administrative costs remained relatively flat despite an increase in spending in the areas of investor relations, Sarbanes-Oxley
compliance, and legal costs associated with our intellectual property. These increases were almost entirely offset by a decrease in non-cash,
stock-based compensation expense related to SFAS 123R. In 2007, our SFAS 123R general and administrative expense was $150,479; in
2006, our general and administrative SFAS 123R expense was $424,628. The decrease in general and administrative SFAS 123R expense
was due to the fact that the outside members of our Board of Directors did not receive any stock options in 2007. The expense related to the
stock option grants to outside members of our Board of Directors during 2006 was $313,071.
We expect general and administrative spending in 2008 to be approximately the same as it was in 2007. We will continue to incur costs
in support of our investor relations programs, Sarbanes-Oxley compliance, and other costs associated with being a publicly-traded company,
and some continued investment in the development of our infrastructure.
- 22 -
Operating Loss from Continuing Operations
The operating loss from continuing operations was $5,147,168 in 2007, as compared to $4,058,116 in the year ended December 31,
2006. The $1,089,052 increase relates primarily to an increase in spending in the research and development and selling and marketing areas
of our business, in support of our development and commercialization of PCT.
Included in our operating loss was $367,110 and $660,278 of non-cash, stock-based compensation expense related to SFAS 123R in
2007 and 2006, respectively.
We expect our operating loss in 2008 to be higher than the operating loss incurred in 2007, due primarily to expected increased
spending in our sales and marketing activities and, to a lesser extent, our research and development activities. We do, however, expect that
the gross profit from increasing revenues will mitigate the impact of our increased spending on our overall operating loss.
Realized gain of sale on securities held for sale
During 2007, we recorded a gain on sale of securities of $2,028,720 in connection with the sale of our remaining 513,934 shares of
Panacos Pharmaceuticals common stock. In 2006, we realized a gain of $517,938 in connection with the sale of 57,900 shares of Panacos
Pharmaceuticals common stock. As of December 31, 2007, we no longer held any shares of Panacos Pharmaceuticals common stock.
Interest Income
Interest income totaled $286,600 for the year ended December 31, 2007, as compared to interest income of $381,713 in 2006. The
prior year period included approximately $100,000 of interest income from our chief executive officer in connection with his loan payable
to us. This Note was paid in full in December 2006.
Income Tax Benefit from Continuing Operations
For the year ended December 31, 2007 we recorded a benefit for income taxes from continuing operations of $520,214. Despite our
history of operating losses, we recorded this benefit due to our expected ability under federal income tax law to carry back current operating
losses to offset taxable income that was recorded in 2005. During 2006, we recorded a benefit for income taxes from continuing operations
of $745,354.
We do not expect to record any income tax benefit for the foreseeable future due to the fact that we are no longer able to carry back
current losses against taxable income from prior periods and because we expect our operating losses to continue for several years. If we are
successful commercializing PCT and if we are able to generate operating income, then we may be able to utilize the net operating loss
carry-forwards that we generate.
Gain on Sale of Net Assets Related to Discontinued Operations
During 2007, we realized a gain on the sale of Source Scientific, LLC of $1,155,973. This gain is comprised of the $378,503 charge
that we recorded in the first quarter of 2007 under the provisions of Staff Accounting Bulletin (“SAB”) Topic 5E, “Accounting for
Divestiture of a Subsidiary or Other Business Operation (“SAB Topic 5E”) and the gain of $1,534,476, net of income taxes of $218,060,
that we recorded during the second quarter of 2007, the period in which we completed the sale.
We recorded this gain in connection with the receipt on May 29, 2007 of $1,780,071 from Mr. Richard W. Henson and Mr. Bruce A.
Sargeant, the principals of Source Scientific, LLC, as full payment for their purchase of our remaining interest in that business. During
2006, we accounted for our investment in Source Scientific, LLC under the provisions of SAB Topic 5E. In accordance with SAB Topic
5E, we were to record the losses of Source Scientific, LLC, to the extent they exceeded cumulative income for the year. During 2006,
Source Scientific, LLC, was never in a cumulative loss position therefore we did not record any loss in connection with our interest in
Source Scientific, LLC.
Net Loss
Our net loss in 2007 was $1,155,661 as compared to a net loss of $2,413,111 in 2006. This decrease in net loss was due to an increase
in operating expenses of the business that was more than offset by the gain in the sale of marketable securities and the gain in the sale of
assets related to discontinued operations. Without these non-recurring items, our net loss in 2007 would have exceeded that recorded in
2006.
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We expect that our net loss in 2008 will be significantly higher than it was in 2007. Our expectation of an increase in net loss is based
upon plans to increase operating costs relative to 2007 in our selling and marketing and, to a lesser extent, our research and development
activities. Additionally, our net loss in 2008 will not be mitigated by the gain on sale of marketable securities and the gain on sale of assets
related to discontinued operations, as was the case in 2007. Finally, during 2008 we do not expect to record a benefit for income taxes as we
did in 2007.
LIQUIDITY AND FINANCIAL CONDITION
As of December 31, 2007, our working capital position was $5,933,822, the primary components of which were cash and cash
equivalents, income tax receivable, prepaid expenses and deposits on open purchase orders for the production of Barocycler instruments,
partially offset by accounts payable, accrued employee compensation, other accrued expenses, and accrued income taxes. As of December
31, 2006, our working capital position was $5,770,086, the primary components of which were cash and cash equivalents, income tax
receivable, prepaid expenses and other current assets, partially offset by accounts payable, accrued employee compensation, other accrued
expenses, and accrued income taxes. The prior year working capital balance excluded the $2,060,875 of investment in marketable
securities, and the related deferred tax liability of $669,520, that we had classified as current.
This increase in working capital of $163,736 is due primarily to the receipt of cash proceeds from the sale of our remaining shares in
Panacos Pharmaceuticals common stock, our receipt of proceeds from the sale of our ownership interest in Source Scientific, LLC and the
sale of 126,750 shares of our common stock in November 2007, partially offset by our utilization of working capital to fund our operations.
We expect our working capital position to decline as we fund our operations from our cash and cash equivalents. We believe that we
have sufficient liquidity to fund our operations at their current level, and with planned increases in selected areas of our business, into early
2009. The extent to which we increase our operational costs is dependent upon our judgment of the investment required to successfully
commercialize PCT and our ability to secure additional funding through equity or debt financings.
Net cash used in continuing operations during 2007 was $3,896,422 as compared to net cash used in continuing operations of
$2,102,976 during 2006. The cash used in operations in 2007 included our net loss, an increase in deposits on open purchase orders,
inventory and accounts receivable, partially offset by a decrease in income tax receivable and an increase in accrued employee
compensation. We expect net cash used in continuing operations to increase in 2008 as we increase our selling and marketing and research
and development activities.
Net cash provided by investing activities during 2007 was $1,852,482 as compared to $452,854 in the prior year. The cash generated in
2007 was entirely from the sale of 513,934 shares of Panacos Pharmaceuticals common stock, partially offset by purchases of fixed assets.
The cash generated in the same period in 2006 was entirely from the sale of 57,900 shares of Panacos Pharmaceuticals common stock, also
partially offset by purchases of fixed assets. We expect that our investment in fixed assets will increase in 2008 as we continue to increase
our staff and operating facilities.
Net cash generated from financing activities during 2007 was $571,133 and relates to the sale of 126,750 shares of our common stock
to 8 non-affiliated investors pursuant to a private placement that we completed in November 2007. Net cash used in financing activities in
2006 included $323,158 to purchase 110,889 shares of our common stock from unaffiliated shareholders for an average price of $2.91 per
share, partially offset by proceeds generated by the exercise of options to purchase 2,000 shares of our common stock by a Director. The
stock purchase from the unaffiliated shareholders was made pursuant to the authorization of our Board of Directors in September 2006.
Net cash provided by discontinued operations during 2007 of $1,562,011 was due to the completion of the divestiture of Source
Scientific, LLC. During the same period in 2006, we received cash from discontinued operations of $886,390. This amount was due
entirely to the receipt of the final escrow payment in connection with the 2004 sale of the Boston Biomedica core businesses to SeraCare
Life Sciences, Inc.
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CRITICAL ACCOUNTING POLICIES
Use of Estimates
To prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America, we are required to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. In addition, significant estimates were made in projecting future cash flows to quantify impairment of assets,
deferred tax assets, the costs associated with fulfilling our warranty obligations for the instruments that we sell, and the estimates employed
in our calculation of fair value of stock options awarded. We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from the estimates and
assumptions used.
Revenue Recognition
We recognize revenue in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No.
104, Revenue Recognition ("SAB 104"). Revenue is recognized when realized or earned when all the following criteria have been met:
persuasive evidence of an arrangement exists; delivery has occurred and risk of loss has passed to the customer; the seller’s price to the
buyer is fixed or determinable; and collectibility is reasonably assured.
Our current instruments, the Barocycler NEP3229 and NEP2320, require a basic level of instrumentation expertise to set-up for initial
operation. To support a favorable first experience for our customers, we send a representative to the customer site to install every
Barocycler that we sell through our domestic sales force. The installation process includes uncrating and setting up the instrument and
conducting an introductory user training course. Product revenue related to current Barocycler instrumentation is recognized upon the
installation of our instrumentation at the customer location. Product revenue related to sales of PCT products to our foreign distributors is
recognized upon shipment through a common carrier. We provide for the expected costs of warranty upon the recognition of revenue for
the sales of our instrumentation. Our sales arrangements do not provide a right of return to our customers. Product revenue related to our
consumable products such as PULSE Tubes and ProteoSolveLRS kits is recorded upon shipment through a common carrier. Shipping costs
are included in the costs of sales. Any shipping costs billed to customers are recognized as revenue.
In accordance with the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No.
13, “Accounting for Leases”, we account for our lease agreements under the operating method. We record revenue over the life of the lease
term and we record depreciation expense on a straight-line basis over the thirty-six month estimated useful life of the Barocycler
instrument. The depreciation expense associated with assets under lease agreement is included in the “Cost of PCT products and services”
line item in our Consolidated Statements of Operations. We pay all maintenance costs associated with the instrument during the term of the
leases.
Revenue from government grants is recorded when expenses are incurred under the grant in accordance with the terms of the grant
award.
Our transactions sometimes involve multiple elements (i.e., products and services). Revenue under multiple element arrangements is
recognized in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Accounting for Revenue Arrangements with
Multiple Deliverables”. Under this method, if an element is determined to be a separate unit of accounting, the revenue for the element is
based on fair value and determined by vendor specific objective evidence (“VSOE”), and recognized at the time of delivery. If an
arrangement includes undelivered elements that are not essential to the functionality of the delivered elements, we defer the fair value of
the undelivered elements with the residual revenue allocated to the delivered elements. Fair value is determined based upon the price
charged when the element is sold separately. If there is not sufficient evidence of the fair value of the undelivered elements, no revenue is
allocated to the delivered elements and the total consideration received is deferred until delivery of those elements for which objective and
reliable evidence of the fair value is not available. We provide certain customers with extended service contracts and, to the extent VSOE is
established, these service revenues are recognized ratably over the life of the contract which is generally one to four years.
- 25 -
Intangible Assets
We have classified as intangible assets, costs associated with the fair value of certain assets of businesses acquired. Intangible assets
relate to the remaining value of acquired patents associated with PCT. The cost of these acquired patents is amortized on a straight-line
basis over sixteen years. We annually review our intangible assets for impairment. When impairment is indicated, any excess of carrying
value over fair value is recorded as a loss. An impairment analysis of intangible assets as of December 31, 2007 concluded they were not
impaired.
Long-Lived Assets and Deferred Costs
In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, if indicators of impairment
exist, we assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be
recovered through the undiscounted future operating cash flows related to the long-lived assets. If impairment is indicated, we measure the
amount of such impairment by comparing the carrying value of the asset to the fair value of the asset and record the impairment as a
reduction in the carrying value of the related asset and a charge to operating results. While our current and historical operating losses and
cash flow are indicators of impairment, we performed an impairment analysis at December 31, 2007 and determined that our long-lived
assets were not impaired.
RECENT ACCOUNTING STANDARDS
In September 2006, FASB issued SFAS 157, “Fair Value Measurements”. SFAS No. 157 establishes a formal framework for
measuring fair value under GAAP and expands on disclosure of fair value measurements. Although SFAS No. 157 applies to and amends
the provisions of existing FASB and AICPA pronouncements, it does not, of itself, require any new fair value measurements, nor does it
establish valuation standards. SFAS No. 157 applies to all other accounting pronouncements requiring or permitting fair value
measurements, except for; SFAS No. 123R, share based payment and related pronouncements, the practicability exceptions to fair value
determinations allowed by various other authoritative pronouncements, and AICPA Statements of Position 97-2 and 98-9 that deal with
software revenue recognition. This statement is effective for financial statements issued for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years.
In December 2007, the FASB issued SFAS 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”) and SFAS No. 160, “Non-
controlling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS 160”).
SFAS 141(R) significantly changes the accounting for business combinations. Under SFAS 141(R), an acquiring entity will be
required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date at fair value with limited
exceptions. SFAS 141(R) further changes the accounting treatment for certain specific items, including:
- Acquisition costs will be generally expensed as incurred;
- Noncontrolling interests (formerly known as “minority interests” – see SFAS 160 discussion below) will be valued at fair
value at the acquisition date;
- Acquired contingent liabilities will be recorded at fair value at the acquisition date and subsequently measured at either the
higher of such amount or the amount determined under existing guidance for non-acquired contingencies;
-
-
-
-
In-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition
date;
Restructuring costs associated with a business combination will be generally expensed subsequent to the acquisition date;
and
Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will
affect income tax expense.
SFAS 141(R) includes a substantial number of new disclosure requirements. FAS 141(R) applies prospectively to business
combinations for which the acquisition date is on or after January 1, 2009.
- 26 -
SFAS 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. Specifically, this statement requires the recognition of non-controlling interests (minority interests) as
equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to non-
controlling interests will be included in consolidated net income on the face of the income statement. SFAS 160 clarifies that changes in a
parent’s ownership interest in a subsidiary that does not result in deconsolidation are treated as equity transactions if the parent retains its
controlling financial interest. In addition, this statement requires that a parent recognize a gain or loss in net income when a subsidiary is
deconsolidated. Such gain or loss will be measured using the fair value of the non-controlling equity investment on the deconsolidation
date. SFAS 160 also includes expanded disclosure requirements regarding the interests of the parent and its non-controlling interest.
SFAS 160 is effective for fiscal years, and interim periods within such year, beginning January 1, 2009. Early adoption of both SFAS
141(R) and SFAS 160 is prohibited. We do not expect that either SFAS 141(R) or SFAS 160 will have a material affect on our consolidated
results of operations and financial condition.
- 27 -
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
- 28 -
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2007 and 2006
ASSETS
$
$
$
CURRENT ASSETS
Cash and cash equivalents
Accounts receivable
Inventories
Deposits
Prepaid income taxes
Income tax receivable
Prepaid expenses and other current assets
Investments in marketable securities
Total current assets
PROPERTY AND EQUIPMENT, NET
OTHER ASSETS
Intangible assets, net
Assets of discontinued operation
Total other assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Accrued employee compensation
Accrued professional fees and other expenses
Income taxes payable
Deferred taxes
Deferred revenue
Total current liabilities
LONG TERM LIABILITIES
Deferred revenue
Liabilities of discontinued operation
Total long term liabilities
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY
2007
2006
5,424,486 $
118,471
172,548
553,483
56,863
249,541
94,783
-
6,670,175
257,797
5,335,282
37,495
19,658
175,300
38,687
710,013
71,476
2,060,875
8,448,786
207,696
328,290
-
328,290
7,256,262 $
376,922
1,420,996
1,797,918
10,454,400
152,729 $
377,190
186,840
4,519
-
15,075
736,353
6,767
-
6,767
174,289
242,497
150,978
45,962
669,520
4,099
1,287,345
9,126
1,042,493
1,051,619
743,120
2,338,964
Preferred stock; 1,000,000 shares authorized; 0 outstanding
Common stock, $.01 par value; 20,000,000 shares authorized; 2,192,175 and 2,065,425 shares
issued and outstanding
Additional paid-in capital
Accumulated other comprehensive income
Retained earnings
Total stockholders' equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
-
-
21,922
6,284,616
-
206,604
6,513,142
7,256,262 $
20,654
5,347,641
1,384,876
1,362,265
8,115,436
10,454,400
The accompanying notes are an integral part of these consolidated financial statements
- 29 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
REVENUE:
PCT Products, services, other
Grant revenue
Total revenue
COSTS AND EXPENSES:
Cost of PCT products and services
Research and development
Selling and marketing
General and administrative
Total operating costs and expenses
Operating loss from continuing operations
OTHER INCOME:
Realized gain on securities available for sale
Interest income
Total other income
Loss from continuing operations before income taxes
Income tax benefit from continuing operations
Loss from continuing operations
DISCONTINUED OPERATIONS:
For the Year Ended
December 31,
2007
2006
$
399,787 $
246,083
645,870
210,289
-
210,289
209,050
2,022,730
1,386,519
2,174,739
5,793,038
165,233
1,429,711
528,265
2,145,196
4,268,405
(5,147,168)
(4,058,116)
2,028,720
286,600
2,315,320
517,938
381,713
899,651
(2,831,848)
520,214
(3,158,465)
745,354
(2,311,634)
(2,413,111)
Gain on sale of net assets related to discontinued operations (net of income tax of $218,060)
Net loss
Loss per share from continuing operations - basic and diluted
Income per share from discontinued operations - basic and diluted
Net loss per share - basic and diluted
1,155,973
(1,155,661) $
-
(2,413,111)
(1.11) $
0.55
(0.56) $
(1.01)
-
(1.01)
$
$
$
Weighted average number of shares used to calculate income (loss) per share - basic and diluted
2,078,657
2,396,077
The accompanying notes are an integral part of these consolidated financial statements
- 30 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
Other Comprehensive Loss
Net loss
Holding gain
Reclassification of unrealized gain to realized gain on securities during the period
Unrealized loss on marketable securities
Income tax benefit related to items of other comprehensive loss
Total other comprehensive loss, net of taxes
Comprehensive loss
For the Year Ended
December 31,
2007
2006
$
(1,155,661) $
(2,413,111)
(27,479)
(2,028,720)
(2,056,199)
671,323
(1,383,417)
(517,938)
(1,901,355)
748,268
(1,384,876)
(2,540,537) $
(1,153,087)
(3,566,198)
$
The accompanying notes are an integral part of these consolidated financial statements
- 31 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
Common Stock
$.01 Par
Value
Additional
Paid-In
Capital
Shares
Accumulated
Other
Comprehensive
Income
Loan Receivable
from Officer/
Director
Total
Retained Stockholders'
Earnings
Equity
BALANCE, December 31, 2005
2,424,189 $ 24,242 $ 6,027,020 $
2,537,963 $
(1,000,000) $ 3,775,376 $ 11,364,601
Stock options and other warrants exercised
Interest accrued on loan receivable from CEO/Director
Exchange of shares for payoff of loan receivable from
CEO/Director
Repurchase shares via stock buy-back program
Stock-based compensation
Net loss
Unrealized loss on investments (net of tax)
2,000
20
5,380
(249,875)
(110,889)
(2,499) (1,022,988)
(322,049)
(1,109)
660,278
BALANCE, December 31, 2006
2,065,425 $ 20,654 $ 5,347,641 $
(25,487)
1,025,487
(1,153,087)
1,384,876 $
(2,413,111)
- $ 1,362,265 $
Issuance costs relating to private placement
Stock issued in private placement
Stock-based compensation
Net loss
Unrealized loss on investments (net of tax)
126,750
1,268
(62,617)
632,482
367,110
BALANCE, December 31, 2007
2,192,175 $ 21,922 $ 6,284,616 $
(1,384,876)
- $
(1,155,661)
- $
206,604 $
5,400
(25,487)
-
(323,158)
660,278
(2,413,111)
(1,153,087)
8,115,436
(62,617)
633,750
367,110
(1,155,661)
(1,384,876)
6,513,142
The accompanying notes are an integral part of these consolidated financial statements.
- 32 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Less gain on sale of discontinued operations
Loss from continuing operations
Adjustments to reconcile loss to net cash used in operating activities:
Depreciation and amortization
Non-cash, stock-based compensation expense
Loss on disposal of property and equipment
Interest received with exchange of stock from Director/CEO
Realized gain on sale of marketable securities
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Deposits
Income tax receivable
Prepaid income taxes
Prepaid expenses and other current assets
Accounts payable
Accrued employee compensation
Other accrued expenses
Deferred revenue
Income taxes payable
Net cash used in operating activities from continuing operations
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment
Proceeds from sale of marketable securities
Net cash provided by investing activities from continuing operations
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock
Proceeds from the issuance of common stock
Net cash provided by (used in) financing activities from continuing operations
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating cash flows
Cash flows from investing activities
Net cash provided by discontinued operations
CHANGE IN CASH AND CASH EQUIVALENTS:
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
SUPPLEMENTAL INFORMATION:
Income taxes paid
Income taxes received
For the Year Ended
December 31,
2007
2006
$
$
(1,155,661) $
(1,155,973)
(2,311,634) $
(2,413,111)
-
(2,413,111)
179,446
367,110
-
-
(2,028,720)
(80,976)
(152,890)
(378,183)
460,472
(18,176)
(23,307)
(21,560)
134,693
10,129
8,617
146,256
660,278
42,781
(25,487)
(517,938)
21,303
65,549
(156,120)
(178,891)
(38,687)
(15,370)
117,894
148,143
44,966
13,225
(41,443)
(17,767)
(3,896,422)
(2,102,976)
(180,915)
2,033,397
1,852,482
-
571,133
571,133
(65,609)
518,463
452,854
(323,158)
5,400
(317,758)
(218,060)
1,780,071
1,562,011
(230,915)
1,117,305
886,390
89,204
5,335,282
5,424,486 $
(1,081,490)
6,416,772
5,335,282
20,800 $
723,801
230,863
-
$
$
The accompanying notes are an integral part of these consolidated financial statements
- 33 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
(1) Business Overview and Management Plans
We are a life sciences company focused on the development and commercialization of a novel, enabling, platform technology called
pressure cycling technology (“PCT”). PCT uses cycles of hydrostatic pressure between ambient and ultra-high levels (up to 35,000 psi and
greater) to control bio-molecular interactions.
Our pressure cycling technology uses internally developed instrumentation that is capable of cycling pressure between ambient and
ultra-high levels at controlled temperatures to rapidly and repeatedly control the interactions of bio-molecules. Our instrument, the
Barocycler®, and our internally developed consumables product line, which includes PULSE (Pressure Used to Lyse Samples for
Extraction) Tubes as well as the ProteoSolveLRS
make up the PCT Sample Preparation System (“PCT SPS”).
TM kit for the detergent-free extraction of proteins from lipid-rich samples, together
We have experienced negative cash flows from operations with respect to our pressure cycling technology business since its
inception. As of December 31, 2007, we had available cash of approximately $5.4 million. We believe that we have sufficient liquidity
to fund our operations at their current level, and with planned increases in selected areas of our business, into early 2009. The extent to
which we increase our operational costs is dependent upon our judgment of the investment required to successfully commercialize PCT
and our ability to secure additional funding through equity or debt financing. If we are unable to increase the number of installations of
Barocycler instruments and if we are unable to secure additional funding through equity or debt financing we will be prepared to reduce
our spending. We have developed plans based on these contingencies and such reductions of spending will include the delay of certain
research and development projects and the reduction of the cost of our workforce. We believe that implementing such changes to our
business plan will allow us to extend our existing cash balances into the middle of 2009, without significantly impacting our short-term
commercialization efforts.
(2) Summary of Significant Accounting Policies
(i) Principles of Consolidation
The consolidated financial statements include the accounts of Pressure BioSciences, Inc., and its wholly-owned subsidiary PBI BioSeq,
Inc.
(ii) Use of Estimates
To prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America, we are required to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. In addition, significant estimates were made in projecting future cash flows to quantify impairment of assets,
deferred tax assets, the costs associated with fulfilling our warranty obligations for the instruments that we sell, and the estimates employed
in our calculation of fair value of stock options awarded. We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from the estimates and
assumptions used.
(iii) Revenue Recognition
We recognize revenue in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No.
104, Revenue Recognition ("SAB 104"). Revenue is recognized when realized or earned when all the following criteria have been met:
persuasive evidence of an arrangement exists; delivery has occurred and risk of loss has passed to the customer; the seller’s price to the
buyer is fixed or determinable; and collectibility is reasonably assured.
- 34 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
Our current instruments, the Barocycler NEP3229 and NEP2320, require a basic level of instrumentation expertise to set-up for initial
operation. To support a favorable first experience for our customers, we send a representative to the customer site to install every
Barocycler that we sell through our domestic sales force. The installation process includes uncrating and setting up the instrument and
conducting an introductory user training course. Product revenue related to current Barocycler instrumentation is recognized upon the
installation of our instrumentation at the customer location. Product revenue related to sales of PCT products to our foreign distributors is
recognized upon shipment through a common carrier. We provide for the expected costs of warranty upon the recognition of revenue for
the sales of our instrumentation. Our sales arrangements do not provide a right of return to our customers. Product revenue related to our
consumable products such as PULSE Tubes and ProteoSolveLRS kits is recorded upon shipment through a common carrier. Shipping costs
are included in the costs of sales. Any shipping costs billed to customers are recognized as revenue.
In accordance with the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No.
13, “Accounting for Leases”, we account for our lease agreements under the operating method. We record revenue over the life of the lease
term and we record depreciation expense on a straight-line basis over the thirty-six month estimated useful life of the Barocycler
instrument. The depreciation expense associated with assets under lease agreement is included in the “Cost of PCT products and services”
line item in our Consolidated Statements of Operations. We pay all maintenance costs associated with the instrument during the term of the
leases.
Revenue from government grants is recorded when expenses are incurred under the grant in accordance with the terms of the grant
award.
Our transactions sometimes involve multiple elements (i.e., products and services). Revenue under multiple element arrangements is
recognized in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Accounting for Revenue Arrangements with
Multiple Deliverables”. Under this method, if an element is determined to be a separate unit of accounting, the revenue for the element is
based on fair value and determined by vendor specific objective evidence (“VSOE”), and recognized at the time of delivery. If an
arrangement includes undelivered elements that are not essential to the functionality of the delivered elements, we defer the fair value of
the undelivered elements with the residual revenue allocated to the delivered elements. Fair value is determined based upon the price
charged when the element is sold separately. If there is not sufficient evidence of the fair value of the undelivered elements, no revenue is
allocated to the delivered elements and the total consideration received is deferred until delivery of those elements for which objective and
reliable evidence of the fair value is not available. We provide certain customers with extended service contracts and, to the extent VSOE is
established, these service revenues are recognized ratably over the life of the contract which is generally one to four years.
(iv) Cash and Cash Equivalents
Our policy is to invest available cash in short-term, investment grade interest-bearing obligations, including money market funds, and
bank and corporate debt instruments. Securities purchased with initial maturities of three months or less are valued at cost plus accrued
interest, which approximates fair market value, and are classified as cash equivalents.
(v) Research and Development
Research and development costs, which are comprised of costs incurred in performing research and development activities including
wages and associated employee benefits, facilities, consumable products and overhead costs that are expensed as incurred. Our research
activities are performed at our laboratories in Woburn, Massachusetts and Rockville, Maryland and in conjunction with the collaboration
partner sites. In support of our research and development activities we utilize our Barocycler instruments that are capitalized as fixed assets
and depreciated over their expected useful life.
- 35 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
(vi) Inventories
Inventories are valued at the lower of cost or market. The composition of inventory as of December 31, 2007 and 2006 is as follows:
Raw materials
Finished goods
Total
(vii) Property and Equipment
December 31,
2007
2006
$
$
28,115 $
144,433
172,548 $
3,158
16,500
19,658
Property and equipment are stated at cost, less accumulated depreciation. For financial reporting purposes, depreciation is recognized
using the straight-line method, allocating the cost of the assets over their estimated useful lives of three years for certain laboratory
equipment, from three to five years for management information systems and office equipment, and three years for all PCT finished units
classified as fixed assets.
(viii) Intangible Assets
We have classified as intangible assets, costs associated with the fair value of acquired intellectual property. Intangible assets
including patents are being amortized on a straight-line basis over sixteen years. We perform a quarterly review of our intangible assets for
impairment. When impairment is indicated, any excess of carrying value over fair value is recorded as a loss. An impairment analysis of
intangible assets was performed as of December 31, 2007. Based on this analysis, we have concluded that no impairment of intangible
assets had occurred.
(ix) Long-Lived Assets and Deferred Costs
In accordance with the Financial Accounting Standards Board (“FASB”) Statements of Financial Accounting Standards (“SFAS”) No.
144, “Accounting for the Impairment or Disposal of Long-Lived Assets” , if indicators of impairment exist, we assess the recoverability of
the affected long-lived assets by determining whether the carrying value of such assets can be recovered through the undiscounted future
operating cash flows. If impairment is indicated, we measure the amount of such impairment by comparing the carrying value of the asset
to the fair value of the asset and record the impairment as a reduction in the carrying value of the related asset and a charge to operating
results. While our current and historical operating losses and cash flow are indicators of impairment, we performed an impairment test at
December 31, 2007 and determined that such long-lived assets were not impaired.
(x) Concentrations
Credit Risk
Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents and trade
receivables. We have cash investment policies which, among other things, limit investments to investment-grade securities. We perform
ongoing credit evaluations of our customers, and the risk with respect to trade receivables is further mitigated by the fact that many of our
customers are government institutions and university labs.
During 2007 and 2006 our top five customers accounted for 66.4% and 80.0% of our total revenues, respectively. During 2007, various
agencies of the Federal Government of the United States in the aggregate accounted for 54.8% of our total revenues.
As of December 31, 2007 and 2006 our top five accounts receivable accounted for 93.8% and 92.4% of our total receivables balance,
respectively. As of December 31, 2007, various agencies of the Federal Government of the United States in the aggregate accounted for
40.8% of our total accounts receivable.
- 36 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
Product Supply
Source Scientific, LLC has been our sole contract manufacturer for all of our PCT instrumentation. During 2007, however, we initiated
several engineering initiatives to position us for greater independence from any one supplier, and we are in the process of developing a
network of manufacturers and sub-contractors to reduce our reliance on any single supplier. Until we develop a broader network of
manufacturers and subcontractors, obtaining alternative sources of supply or manufacturing services could involve significant delays and
other costs and challenges, and may not be available to us on reasonable terms, if at all. The failure of a supplier or contract manufacturer to
provide sufficient quantities, acceptable quality and timely products at an acceptable price, or an interruption of supplies from such a
supplier could harm our business and prospects.
(xi) Computation of Loss per Share
Basic loss per share is computed by dividing loss available to common shareholders by the weighted average number of common
shares outstanding. Diluted loss per share is computed by dividing loss available to common shareholders by the weighted average number
of common shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had
been issued. For purposes of this calculation, stock options are considered common stock equivalents in periods in which they have a
dilutive effect. Stock options that are anti-dilutive are excluded from this calculation. The following table illustrates our computation of
loss per share for the years ended December 31, 2007 and 2006.
For the Year Ended
December 31,
2007
2006
Numerator:
Loss from continuing operations - basic and diluted
$
(2,311,634) $
(2,413,111)
Denominator:
Weighted Average Shares Outstanding, basic and diluted
2,078,657
2,396,077
Loss per share from continuing operations - basic and diluted
$
(1.11) $
(1.01)
Shares excluded from calculations
211,796
118,751
(xii) Accounting for Income Taxes
Effective January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes”. This interpretation prescribes a
recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition of tax benefits, classification on the balance sheet,
interest and penalties, accounting in interim periods, disclosure, and transition. We adopted FIN 48 effective January 1, 2007. FIN 48
requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax
position. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate
and consequently, affect our operating results. Prior to the adoption of FIN 48, we recorded liabilities related to uncertain tax positions
based upon Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies”.
We account for income taxes under the asset and liability method, which requires recognition of deferred tax assets, subject to
valuation allowances, and liabilities for the expected future tax consequences of events that have been included in the financial statements
or tax returns. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of asset and
liabilities for financial reporting and income tax purposes. A valuation allowance is established if it is more likely than not that all or a
portion of the net deferred tax assets will not be realized.
- 37 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
(xiii) Accounting for Stock-Based Compensation
On January 1, 2006, we adopted SFAS No. 123 (revised 2004), “Share-Based Payment” , or SFAS 123R, and its related
implementation guidance as promulgated by both the FASB, and the SEC SAB 107, associated with the accounting for stock-based
compensation arrangements of our employees and directors. These pronouncements require that equity-based compensation cost be
measured at the grant date (based upon an estimate of the fair value of the compensation granted) and recorded to expense over the
requisite service period, which generally is the vesting period. We adopted SFAS 123R using the modified prospective method in the first
quarter of 2006.
We estimate the fair value of equity-based compensation utilizing the Black-Scholes option pricing model. This model requires the
input of several factors such as the expected option term, expected volatility of our stock price over the expected term, expected risk-free
interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected
forfeiture rates, and is subject to various assumptions. We believe this valuation methodology is appropriate for estimating the fair value of
stock options granted to employees and directors which are subject to SFAS 123R requirements. These amounts are estimates and thus may
not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. These amounts, and the amounts
applicable to future quarters, are also subject to future quarterly adjustments based upon a variety of factors. The following table
summarizes the assumptions we utilized for grants of stock options to the two sub-groups of our stock option recipients during the twelve
months ended December 31, 2007 and 2006:
Assumptions
Expected life
Expected volatility
Risk-free interest rate
Forfeiture rate
Expected dividend yield
Outside Board
Members
5.0 (yrs)
55.66% - 77.86%
3.69% - 4.94%
5.00%
0.0%
Officers &
Employees
6.0 (yrs)
55.66% - 92.53%
3.38% - 4.94%
5.00%
0.0%
We developed the above referenced assumptions based on the following rationale. We utilized the simplified method provided by SAB
No. 107 to develop our estimate of expected term of the stock options granted. Under this method, stock options granted to outside board
members are estimated to have an expected term of 5 years and stock options granted to our CEO and all other officers and employees are
estimated to have an expected term of 6 years. All stock options granted have a 10 year contractual life. The stock options granted to
outside directors vest immediately and the stock options granted to the CEO and all other officers and employees vest ratably over three
years. SAB No. 107 provides a simplified approach to developing the estimate of expected term based on the average of the midpoint of the
vesting period and the contractual life. The expected volatility is assumed to approximate the historical volatility that was observed during
the corresponding expected term for each sub-group of option recipients. The risk-free interest rate is a weighted average approximation
based on the U.S. Treasury yields in effect at the time of the grants. We used a dividend yield of zero for the calculation because we have
never paid cash dividends and we have no intention to begin paying dividends in the foreseeable future. While we believe these estimates
are reasonable, the compensation expense recorded would increase if the assumed expected term was increased or a higher expected
volatility was used.
We recognized stock-based compensation expense of $367,110 and $660,278 for the years ended December 31, 2007 and 2006,
respectively. The following table summarizes the effect of this stock-based compensation expense within each of the line items within our
Consolidated Statement of Operations:
Cost of PCT products and services
Research and development
Selling and marketing
General and administrative
Total stock-based compensation expense
- 38 -
Year Ended December 31,
2007
2006
$
$
4,746 $
141,115
70,770
150,479
367,110 $
9,955
181,609
44,086
424,628
660,278
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
The provisions of SFAS 123R require that we make an estimate of our forfeiture rate and adjust the expense that we recognize to
reflect the estimated number of stock options that will go unexercised. Our historical forfeiture rate has been approximately 5%, we used
this historical rate as our assumption in calculating future stock-based compensation expense.
During the years ended December 31, 2007 and 2006, the total fair value of stock options awarded was $590,912 and $1,089,400,
respectively.
As of December 31, 2007, the total estimated fair value of unvested stock options to be amortized over their remaining vesting period
was $688,624. The non-cash, stock based compensation expense associated with the vesting of these options will be $411,344 in 2008,
$214,101 in 2009 and $63,179 in 2010.
(xiv) Fair Value of Financial Instruments
Due to their short maturities, the carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, and accrued
expenses approximate their fair value. Long-term liabilities are primarily related to liabilities transferred under contractual arrangements
with carrying values that approximate fair value.
(xv) Reclassifications
Certain prior year amounts have been reclassified to conform to our current year presentation.
(xvi) Recent Accounting Standards
In September 2006, FASB issued SFAS 157, “Fair Value Measurements”. SFAS No. 157 establishes a formal framework for
measuring fair value under GAAP and expands on disclosure of fair value measurements. Although SFAS No. 157 applies to and amends
the provisions of existing FASB and AICPA pronouncements, it does not, of itself, require any new fair value measurements, nor does it
establish valuation standards. SFAS No. 157 applies to all other accounting pronouncements requiring or permitting fair value
measurements, except for: SFAS No. 123R, “Share-Based Payment” and related pronouncements, the practicability exceptions to fair
value determinations allowed by various other authoritative pronouncements, and AICPA Statements of Position 97-2 and 98-9 that deal
with software revenue recognition. This statement is effective for financial statements issued for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. We do not expect the adoption of SFAS 157 to have a material impact on our
consolidated financial statements.
In December 2007, the FASB issued SFAS 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”) and SFAS No. 160,
“Non-controlling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS 160”).
SFAS 141(R) significantly changes the accounting for business combinations. Under SFAS 141(R), an acquiring entity will be
required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date at fair value with limited
exceptions. SFAS 141(R) further changes the accounting treatment for certain specific items, including:
- Acquisition costs will be generally expensed as incurred;
- Noncontrolling interests (formerly known as “minority interests” – see SFAS 160 discussion below) will be valued at fair
value at the acquisition date;
- Acquired contingent liabilities will be recorded at fair value at the acquisition date and subsequently measured at either the
higher of such amount or the amount determined under existing guidance for non-acquired contingencies;
-
In-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition
date;
- 39 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
-
-
Restructuring costs associated with a business combination will be generally expensed subsequent to the acquisition date;
and
Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will
affect income tax expense.
SFAS 141(R) includes a substantial number of new disclosure requirements. FAS 141(R) applies prospectively to business
combinations for which the acquisition date is on or after January 1, 2009.
SFAS 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. Specifically, this statement requires the recognition of non-controlling interests (minority interests) as
equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to non-
controlling interests will be included in consolidated net income on the face of the income statement. SFAS 160 clarifies that changes in a
parent’s ownership interest in a subsidiary that does not result in deconsolidation are treated as equity transactions if the parent retains its
controlling financial interest. In addition, this statement requires that a parent recognize a gain or loss in net income when a subsidiary is
deconsolidated. Such gain or loss will be measured using the fair value of the non-controlling equity investment on the deconsolidation
date. SFAS 160 also includes expanded disclosure requirements regarding the interests of the parent and its non-controlling interest.
SFAS 160 is effective for fiscal years, and interim periods within such year, beginning January 1, 2009. Early adoption of both SFAS
141(R) and SFAS 160 is prohibited. We do not expect that either SFAS 141(R) or SFAS 160 will have a material affect on our consolidated
results of operations and financial condition.
(xvii) Investment in Marketable Securities
As of December 31, 2007 and 2006, we held 0 and 513,934 shares of common stock of Panacos Pharmaceuticals, Inc., respectively.
During 2007 and 2006 we accounted for this investment in accordance with the provisions of SFAS 115 “Accounting for Certain
Investments in Debt and Equity Securities” as securities available for sale. On December 31, 2006, our balance sheet reflected the fair
value of our investment in Panacos Pharmaceuticals to be approximately $2.1 million, based on the closing price of Panacos
Pharmaceutical shares of $4.01 per share on that day. During 2007 and 2006 the carrying value of our investment in Panacos
Pharmaceuticals common stock changed from period to period based on changes in the closing price of the common stock on the
NASDAQ Global Market. We recorded these changes in market value on a quarterly basis as unrealized gains and losses in Comprehensive
Income or Loss.
(xviii) Advertising
Advertising costs are expensed as incurred. During 2007 and 2006 we incurred $30,572 and $0, respectively in advertising expense.
(xvix) Rent Expense
Rental costs are expensed as incurred. During 2007 and 2006 we incurred $85,555 and $86,864, respectively in rent expense for the
use of our corporate office and research and development facilities.
(3) Discontinued Operations
Source Scientific, LLC
In June 2004, we transferred certain assets and liabilities of our PBI Source Scientific, Inc. subsidiary to a newly formed limited
liability company known as Source Scientific, LLC. At the time of the transfer, we owned 100% of the ownership interests of Source
Scientific, LLC. We subsequently sold 70% of our ownership interests of Source Scientific, LLC to Mr. Richard Henson and Mr. Bruce A.
Sargeant pursuant to a purchase agreement (the “Source Scientific Agreement”). As a result of the sale of 70% of our ownership interests,
Mr. Henson and Mr. Sargeant each owned 35% and we owned the remaining 30% of Source Scientific, LLC. Under the Source Scientific
Agreement, we received notes receivable in the aggregate amount of $900,000 (the “Notes”) payable at the end of three years bearing 8%
interest. The Source Scientific Agreement offered Mr. Henson and Mr. Sargeant the option (“the Option”) to purchase our 30% ownership
interest in Source Scientific, LLC until May 31, 2007, at an escalating premium (10-50%) over our initial ownership value, provided that
they first paid off the Notes in their entirety.
- 40 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
On May 29, 2007, we executed a consent agreement with Mr. Henson and Mr. Sargeant, Source Scientific LLC, and BIT Analytical
Instruments, Inc. (“the Consent Agreement”) pursuant to which the Notes were repaid in full in the aggregate amount of $1,201,534 in
principal and interest, and Mr. Henson and Mr. Sargeant exercised their Option through BIT Analytical Instruments, Inc. to purchase our
remaining 30% ownership interest in Source Scientific, LLC for an aggregate price of $578,573. As a result of these transactions, we no
longer retain any direct or indirect ownership interest in Source Scientific, LLC.
The execution of these transactions, and receipt of the funds, triggered our recognition of a gain on the sale of assets related to
discontinued operations of $1,534,476, net of income taxes of $218,060, during the twelve months ended December 31, 2007.
Boston Biomedica, Inc
On September 14, 2004, we completed the sale of substantially all of the assets and selected liabilities of the BBI Diagnostics and BBI
Biotech divisions of our legacy company Boston Biomedica, Inc. to SeraCare Life Sciences, Inc. Pursuant to the Asset Purchase
Agreement, the businesses were sold for $30 million in cash of which $27.5 million was paid at the closing and the remaining $2.5 million
was deposited in escrow pursuant to an escrow agreement expiring in March 2006. In December 2004, and again in February 2005, we
settled disagreements with SeraCare Life Sciences, Inc., regarding the value of the inventory and accounts receivable in the closing balance
sheets by releasing approximately $1.4 million from the escrow account. On March 15, 2006, we received approximately $1.1 million in
remaining escrow funds.
(5) Property and Equipment
Property and equipment as of December 31, 2007 and 2006 consisted of the following components:
Laboratory and manufacturing equipment
Office equipment
PCT collaboration, demonstration and leased
systems
Less accumulated depreciation
2007
2006
$
59,361 $
105,906
351,838
517,105
(259,308)
43,986
64,496
227,708
336,190
(128,494)
Net book value
$
257,797 $
207,696
Depreciation expense for the years ended December 31, 2007 and 2006 was $130,814 and $97,621, respectively.
(6) Intangible Assets
Intangible assets as of December 31, 2007 reflect an estimate of purchase price attributable to patents in connection with the 1998
acquisition of BioSeq, Inc. and the PCT business. Acquired PCT patents are being amortized to expense on a straight line basis at the rate
of $48,632 per year over their estimated remaining useful life of approximately 7 years. Intangible assets at December 31, 2007 and 2006
consisted of the following:
- 41 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
PCT Patents
Less accumulated amortization
Net book value
2007
2006
778,156 $
(449,866)
328,290 $
778,156
(401,234)
376,922
$
$
Amortization expense for each of the years ended December 31, 2007 and 2006 was $48,632.
(7) Retirement Plan
We provide all of our employees with the opportunity to participate in our retirement savings plan. Our retirement savings plan has
been qualified under Section 401(k) of the Internal Revenue Code. Eligible employees are permitted to contribute to the plan through
payroll deductions within statutory limitations and subject to any limitations included in the plan. During 2007 and 2006 we contributed
$15,708 and $9,565, respectively, in the form of discretionary company matching contributions.
(8) Income Taxes
The components of the benefit for income taxes from continuing operations are as follows:
For the Year Ended
December 31,
2007
2006
Current benefit: federal
Current benefit (provision): state
Total current benefit
Deferred provision: federal
Deferred provision: state
Total deferred provision
$
481,394 $
38,820
520,214
-
-
-
Total benefit for income taxes from continuing operations
$
520,214 $
929,961
(184,607)
745,354
-
-
-
745,354
Significant items making up the deferred tax assets and deferred tax liabilities as of December 31, 2007 and 2006 are as follows:
Current deferred taxes:
Inventories
Other accruals
Unrealized gain on marketable securities
Less: valuation allowance
Total current deferred tax liabilities
Long term deferred taxes:
Accelerated tax depreciation
Source Scientific Note, OID
Non-cash, stock-based compensation, NQ
Goodwill and intangibles
Operating loss carryforwards
Less: valuation allowance
Total long term deferred tax assets (liabilities), net
December 31,
2007
2006
$
- $
$
$
82,748
-
(82,748)
- $
373 $
-
194,300
(132,203)
1,648,542
(1,711,012)
-
24,512
31,536
(669,520)
(56,048)
(669,520)
(721)
57,989
156,035
(151,787)
1,359,572
(1,421,088)
-
Total net deferred tax liabilities
$
- $
(669,520)
A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized.
Accordingly, a valuation allowance was established in 2007 and 2006 for the full amount of our deferred tax assets due to the uncertainty
of realization. During 2006 our valuation allowance increased by $245,081. We believe based on our projection of future taxable operating
income for the foreseeable future, it is more likely than not that we will not be able to realize the benefit of the deferred tax asset at
December 31, 2007 and 2006.
- 42 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
We had net operating loss carry-forwards for federal income tax purposes of approximately $2,476,000 and $577,000 as of December
31, 2007 and 2006, respectively. Included in these numbers are loss carry-forwards that were obtained through the acquisition of BioSeq,
Inc. and are subject to Section 382 NOL limitations. These net operating loss carry-forwards expire at various dates from 2013 through
2025. We had net operating loss carry-forwards for state income tax purposes of approximately $16,165,000 and $13,507,000 as of
December 31, 2007 and 2006, respectively. These net operating loss carry-forwards expire at various dates from 2008 through 2025.
Our effective income tax benefit rate for continuing operations was different than the statutory federal income tax benefit rate as
follows:
Federal tax benefit (provision) rate
Permanent differences
State tax expense
Valuation allowance
Effective income tax benefit rate from continuing operations
(9) Commitments and Contingencies
Operating Leases
For the Year Ended
December 31,
2007
2006
34%
5%
3%
-21%
21%
34%
-2%
-4%
-4%
24%
Our corporate offices are currently located at 14 Norfolk Avenue, South Easton, Massachusetts 02375. In November 2007, we signed
an 18 month lease agreement commencing in February 2008, pursuant to which we lease approximately 5,500 square feet of office space,
with an option for an additional 18 months. We pay approximately $6,500 per month for the use of these facilities.
On June 1, 2006, we entered into a lease agreement with Scheer Partners and the Maryland Economic Development Corporation,
pursuant to which we lease laboratory and office space in Rockville, MD. In August 2007, we extended the lease agreement through May
31, 2009. We pay approximately $3,300 per month for the use of these facilities.
On March 1, 2006, we entered into a sub-lease agreement with Proteome Systems, pursuant to which we lease approximately 650
square feet of laboratory space plus 100 square feet of office space from Proteome Systems in Woburn, Massachusetts. The lease period
extends through December 31, 2008 and we pay approximately $3,200 per month for the use of these facilities.
Royalty Commitments
In 1996, we acquired our initial equity interest in BioSeq, Inc., which at the time was developing our original pressure cycling
technology. BioSeq, Inc. acquired its pressure cycling technology from BioMolecular Assays, Inc. under a technology transfer and patent
assignment agreement. In 1998, we purchased all of the remaining outstanding capital stock of BioSeq, Inc., and at such time, the
technology transfer and patent assignment agreement was amended to require us to pay BioMolecular Assays, Inc. a 5% royalty on our
sales of products or services that incorporate or utilize the original pressure cycling technology that BioSeq, Inc. acquired from
BioMolecular Assays, Inc. We are also required to pay BioMolecular Assays, Inc. 5% of the proceeds from any sale, transfer or license of
all or any portion of the original pressure cycling technology. These payment obligations terminate in 2016. During the fiscal years ended
December 31, 2007 and 2006, we paid BioMolecular Assays, Inc. $19,596 and $9,809 in royalties.
In connection with our acquisition of BioSeq, Inc., we licensed certain limited rights to the original pressure cycling technology back to
BioMolecular Assays, Inc. This license is non-exclusive and limits the use of the original pressure cycling technology by BioMolecular
Assays, Inc. solely for molecular applications in scientific research and development and in scientific plant research and development.
BioMolecular Assays, Inc. is required to pay us a royalty equal to 20% of any license or other fees and royalties, but not including research
support and similar payments, it receives in connection with any sale, assignment, license or other transfer of any rights granted to
BioMolecular Assays, Inc. under the license. BioMolecular Assays, Inc. must pay us these royalties until the expiration of the patents held
by BioSeq, Inc. in 1998, which we anticipate will be 2016. We have not received any royalty payments from BioMolecular Assays, Inc.
under this license.
- 43 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
Purchase Commitments
In March 2007, we executed a purchase order with Source Scientific, LLC under which we agreed to purchase 20 Barocycler NEP3229
units and nine demonstration (NEP2320) units to be used by our sales force. In connection with this purchase order, we placed deposits with
Source Scientific, LLC in the amount of $260,000. The nine demonstration (NEP2320) instruments were prototype units and were therefore
billable on a time and materials basis. As of December 31, 2007 we have taken possession of all of these completed units and the cost was
expensed as incurred in research and development expense within our consolidated statement of operations. The order for 20 NEP3229
units is based on a fixed bill of materials and we are billed for the complete cost of each unit as it is completed, net of the deposit we placed
for each instrument. As of December 31, 2007, none of the NEP3229’s had been completed. We expect all of these units to be completed
and available for sale, lease or collaboration in early 2008.
In June 2007, we executed a purchase order with Source Scientific, LLC under which we agreed to purchase 40 Barocycler NEP2320
units. In connection with this purchase order we placed a deposit with Source Scientific, LLC in the amount of $140,000. In accordance
with the terms of this purchase order, we are billed based on a fixed bill of materials, for the complete cost of each unit as it is completed,
net of the deposit we placed for each instrument.
As of December 31, 2007 we had $379,000 on deposit with Source for 54 remaining units pursuant to these purchase orders. As of
December 31, 2006 we had $168,000 on deposit with Source for 21 remaining units pursuant to open purchase orders.
Indemnification
In connection with our sale of substantially all of the assets of Boston Biomedica, Inc., (“BBI Core Businesses”) to SeraCare Life
Sciences, Inc. in September 2004, we continue to be exposed to possible indemnification claims in amounts up to the purchase price of
approximately $29 million. Our indemnification obligations for breaches of some representations and warranties relating to compliance
with environmental laws extend until September 14, 2009, representations and warranties relating to tax matters extend for the applicable
statute of limitations period (which varies depending on the nature of claim), and representations and warranties relating to our due
organization, subsidiaries, authorization to enter into and perform the transactions contemplated by the Asset Purchase Agreement and
brokers fees, extend indefinitely.
Severance and Change of Control Agreements
Each of our executive officers; Mr. Schumacher, Mr. Myles, Dr. Ting, Dr. Lazarev, Dr. Lawrence and Mr. Potter is entitled to receive
a severance payment if terminated by us without cause. The severance benefits would include a payment in an amount equal to one year of
such executive officer’s annualized base salary compensation plus accrued paid time off. Additionally, the officer will be entitled to receive
medical and dental insurance coverage for one year following the date of termination. The total commitment related to these agreements in
the aggregate is approximately $1.2 million.
Each of our executive officers, other than Mr. Schumacher, is entitled to receive a change of control payment in an amount equal to one
year of such executive officer’s annualized base salary compensation, accrued paid time off, and medical and dental coverage, in the event
of a change of control of the Company. In the case of Mr. Schumacher this payment would be equal to two years of annualized base salary
compensation, accrued paid time off, and two years of medical and dental coverage. The total commitment related to these agreements in
the aggregate is approximately $1.5 million.
- 44 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
(10) Stockholders’ Equity
Preferred Stock
In 1996, our Board of Directors authorized the issuance of 1,000,000 shares of preferred stock with a par value of $0.01. As of
December 31, 2007 none of these shares have been issued.
Common Stock
Shareholders Purchase Rights Plan
On March 3, 2003, our Board of Directors adopted a shareholder purchase rights plan (“the Rights Plan”) and declared a distribution of
one Right for each outstanding share of our Common Stock to shareholders of record at the close of business on March 21, 2003 (the
“Rights”). Initially, the Rights will trade automatically with the common stock and separate Right Certificates will not be issued. The
Rights Plan is designed to deter coercive or unfair takeover tactics and to ensure that all of our shareholders receive fair and equal treatment
in the event of an unsolicited attempt to acquire the Company. The Rights Plan was not adopted in response to any effort to acquire the
Company and the Board is not aware of any such effort. The Rights will expire on February 27, 2013 unless earlier redeemed or
exchanged. Each Right entitles the registered holder, subject to the terms of a Rights Agreement, to purchase from the Company one one-
thousandth of a share of the Company’s Series A Junior Participating Preferred Stock at a purchase price of $45.00 per one one-thousandth
of a share, subject to adjustment. In general, the Rights will not be exercisable until a subsequent distribution date which will only occur if a
person or group acquires beneficial ownership of 15% or more of our common stock or announces a tender or exchange offer that would
result in such person or group owning 15% or more of the common stock. With respect to any person or group who currently beneficially
owns 15% or more of our common stock, the Rights will not become exercisable unless and until such person or group acquires beneficial
ownership of additional shares of common stock.
Subject to certain limited exceptions, if a person or group acquires beneficial ownership of 15% or more of our outstanding common
stock or if a current 15% beneficial owner acquires additional shares of common stock, each holder of a Right (other than the 15% holder
whose Rights become void once such holder reaches the 15% threshold) will thereafter have a right to purchase, upon payment of the
purchase price of the Right, that number of shares of our common stock which at the time of such transaction will have a market value
equal to two times the purchase price of the Right In the event that, at any time after a person or group acquires 15% or more of our
common stock, we are acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning
power are sold, each holder of a Right will thereafter have the right to purchase, upon payment of the purchase price of the Right, that
number of shares of common stock of the acquiring company which at the time of such transaction will have a market value of two times
the purchase price of the Right.
Our Board of Directors may exchange the Rights (other than Rights owned by such person or group which have become void), in
whole or in part, at an exchange ratio of one share of common stock per Right (subject to adjustment). At any time prior to the time any
person or group acquires 15% or more of our Common Stock, the Board of Directors may redeem the Rights in whole, but not in part, at a
price of $0.001 per Right.
Stock Options
On June 16, 2005, our stockholders approved our 2005 Equity Incentive Plan (the “Plan”), pursuant to which an aggregate of
1,000,000 shares of our common stock was reserved for issuance upon exercise of stock options or other equity awards made under the
Plan. Under the Plan, we may award stock options, stock issuances, and other equity interests in the Company to employees, officers,
directors, consultants, and advisors, and to any other persons the Board of Directors deems appropriate. As of December 31, 2007, options
to acquire 867,000 shares are outstanding under the Plan.
We also have 244,000 stock options outstanding under our 1999 Non-qualified Plan and 9,500 stock options outstanding under our
1994 Incentive Stock Option Plan. As of December 31, 2007, there were 4,800 shares available for future grant under the 1999 Non-
qualified Plan. The 1994 Incentive Stock Option Plan expired; therefore, there are no shares available for future grants under this plan.
- 45 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
The following tables summarize information concerning options outstanding and exercisable:
Stock Options
Balance outstanding,
12/31/2005
Granted
Exercised
Expired
Forfeited
Balance outstanding,
12/31/2006
Granted
Exercised
Expired
Forfeited
Balance outstanding,
12/31/2007
Weighted
Average price
per share
2.96
3.91
2.70
4.11
3.32
4.09
3.58
3.45
Shares
585,000 $
382,000
(2,000)
(19,500)
945,500 $
200,000
-
-
(25,000)
1,120,500 $
Weighted
Average price
Exercisable
per share
385,000 $
2.97
524,000 $
3.17
691,166 $
3.23
Options Outstanding
Options Exercisable
Weighted Average
Weighted Average
Number of
Options
Remaining
Contractual
Life
Exercise
Price
Number of
Options
Remaining
Contractual
Life
Exercise
Price
159,000
343,000
389,500
229,000
1,120,500
4.7 $
6.7
8.3
8.7
7.4 $
2.64
2.96
3.71
4.31
3.45
159,000
276,333
128,833
127,000
691,166
4.7 $
6.5
7.9
7.9
6.6 $
2.64
2.97
3.70
4.05
3.23
Range of Exercise
Prices
$2.50 - $2.70
2.71 - 3.08
3.09 - 3.95
3.96 - 5.93
$2.50 - $5.93
The aggregate intrinsic value of options outstanding as of December 31, 2007 was $2,162,565. The aggregate intrinsic value of options
exercisable as of December 31, 2007 was $1,486,007. The aggregate intrinsic value of options outstanding as of December 31, 2006 was
$347,410. The aggregate intrinsic value of options exercisable as of December 31, 2006 was $274,355.
Stock Buy-back Program
During the quarter ended September 30, 2006 our board of directors approved a stock buy-back program pursuant to which we are
authorized to use up to $500,000 of our cash resources to purchase shares of the Company’s common stock in the open market or in
privately negotiated transactions. As of December 31, 2006, we had purchased 110,889 shares of our common stock from unaffiliated
shareholders for approximately $2.91 per share. We did not acquire any shares through our stock buy-back program during 2007.
Sale of Common Stock
On November 21, 2007, we completed a private placement, pursuant to which we sold an aggregate of 126,750 shares of common
stock, $0.01 par value (the “Shares”), for a purchase price of $5.00 per share, resulting in gross proceeds to us of approximately $633,750
(the “Private Placement”). The Shares were issued and sold to a total of 8 accredited investors pursuant to a Securities Purchase Agreement
entered into as of November 21, 2007 (the “Securities Purchase Agreement”).
The Shares were issued in the Private Placement without registration under the Securities Act of 1933, as amended (the “Securities
Act”), in reliance upon the exemption from registration set forth in Rule 506 of Regulation D (“Regulation D”) promulgated under the
Securities Act. We based such reliance upon representations made by each purchaser of Shares, including, but not limited to,
representations as to the purchaser’s status as an “accredited investor” (as defined in Rule 501(a) under Regulation D) and the purchaser’s
investment intent. The Shares were not offered or sold by any form of general solicitation or general advertising, as such terms are used in
Rule 502 under Regulation D. The Shares may not be offered or sold in the United States absent an effective registration statement or an
exemption from the registration requirements under applicable federal and state securities laws.
- 46 -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007
In connection with the Private Placement, we agreed to prepare and file a Registration Statement on Form S-3 (the “Registration
Statement”) covering the resale of the Shares purchased in the Private Placement, and to use its commercially reasonable efforts to cause
such Registration Statement to be declared effective as promptly as possible after the filing thereof and to keep the Registration Statement
continuously effective under the Securities Act until all shares covered by such Registration Statement have been sold, or may be sold
without volume restrictions pursuant to Rule 144 (or any successor Rule under the Securities Act). The Registration Statement was
declared effective by the SEC on January 22, 2008.
(11) Related Party Transaction
On December 29, 2006, Richard T. Schumacher, President and Chief Executive Officer, delivered to us 249,875 shares of his common
stock of the Company in full and complete satisfaction and payment of all outstanding amounts, including all principal and accrued interest,
of Mr. Schumacher’s loan receivable to us. The loan amount consisted of $1,000,000 in principal and $25,487 in interest accrued in the
fourth quarter of 2006. The number of shares was determined based upon a value of $4.10 per share, the volume weighted average trading
price of the shares of our common stock on the NASDAQ Capital Market during the 60 trading days ending on December 29, 2006. In
connection with the payment of the loan, we terminated our security interest in Mr. Schumacher’s shares of common stock, and released to
Mr. Schumacher the remaining 229,782 shares of common stock previously held as collateral.
- 47 -
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Pressure BioSciences, Inc. and Subsidiaries:
We have audited the consolidated balance sheets of Pressure BioSciences, Inc., and Subsidiaries (the “Company”) as of December 31, 2007
and 2006, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash
flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are
free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Pressure BioSciences, Inc., and Subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for
the years then ended in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 2 to the consolidated financial statements, effective January 1, 2007, the Company adopted FASB Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109”. As discussed in Note 2 to the
consolidated financial statements, effective January 1, 2006, the Company adopted Financial Accounting Standards Board Statement No.
123 (Revised 2004) - "Share-Based Payments."
/s/ UHY LLP
Boston, Massachusetts
March 27, 2008
- 48 -
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None
ITEM 9A.
CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we
file under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to our management, including our President (Principal Executive
Officer) and our Senior Vice President and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
As of December 31, 2007, we carried out an evaluation, under the supervision and with the participation of our management, including
our President (Principal Executive Officer) and our Senior Vice President of Finance and Chief Financial Officer (Principal Financial
Officer) of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-
15(e) under the Exchange Act. Based upon that evaluation, our President (Principal Executive Officer) and our Senior Vice President of
Finance and Chief Financial Officer (Principal Financial Officer) concluded that our disclosure controls and procedures are effective in
enabling us to record, process, summarize, and report information required to be included in our periodic SEC filings within the required
time period.
Report of Management on Internal Control over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial
reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, as a process designed by, or under the supervision of our
principal executive and principal financial officers and effected by our board of directors, management and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and includes those policies and procedures that:
-
-
-
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
disposition of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorization of our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
our assets that could have a material effect on the financial statements.
Our internal control system is designed to provide reasonable assurance to our management and board of directors regarding the
preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
- 49 -
We have assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this
assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework.
Based on our assessment, we believe that, as of December 31, 2007, our internal control over financial reporting is effective at a
reasonable assurance level based on these criteria.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules
of the SEC that permit us to provide only management's report in this annual report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the fourth quarter of 2007 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION.
None.
- 50 -
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Our Directors
The names of our directors, their ages as of March 24, 2008, their committee membership and certain biographical information are
set forth below:
Name
R. Wayne Fritzsche(1)
Calvin A. Saravis, Ph.D (2)
J. Donald Payne (1)
P. Thomas Vogel(1)
Richard T. Schumacher
Age
59
78
52
68
57
Position
Chairman of the Board
Director Since
2003
Director
Director
Director
Director, President, Chief
Executive Officer and Clerk
1987
2003
2004
1978
Year Term
Expires and
Class
2009, Class I
2009, Class I
2010, Class II
2010, Class II
2008, Class III
(1) Member of the Audit Committee, Compensation Committee, and Nominating Committee
(2) Member of the Compensation Committee, Nominating Committee, and Chairman of the Scientific Advisory Board
Mr. R. Wayne Fritzsche has served as a director and Chairman of our Board of Directors since October 2, 2003. Mr. Fritzsche has
served as a member of our Scientific Advisory Board since 1999. Mr. Fritzsche is the founder of Fritzsche & Associates, Inc., a consulting
firm which provides strategic, financial, and scientific consulting to medical companies in the life sciences and healthcare industries, and
has served as its President since 1991. Since 2003, Mr. Fritzsche has also served as interim President of Chemokine Pharmaceutical
Company, Inc. (formerly PGBP Pharmaceuticals), a small molecule discovery company. Since 2001, Mr. Fritzsche has served as a board
member of Opexa Pharmaceuticals, a multiple sclerosis and cell immunology therapy company, and Vascular Sciences, Inc., an
extracorporeal, macular degeneration company. He also previously served as a board member of Intelligent Medical Imaging, an automated
microscopic imaging company, from 1994 to 1997, Clarion Pharmaceuticals, a drug development company, from 1994 to 1996, Nobex
Pharmaceuticals, a drug delivery firm, from 1996 to 2001, Cardio Command, Inc., a transesophageal cardiac monitoring and pacing firm,
from 1999 to 2001, and Hesed BioMed, an antisense oligonucleotide and catalytic antibody company, from 2000 to 2002. Mr. Fritzsche
holds a BA from Rowan University, and an MBA from the University of San Diego.
Dr. Calvin A. Saravis has served as one of our directors since 1986. Dr. Saravis has also served as Chairman of our Scientific Advisory
Board since 2003. From 1984 to 1998 he was an Associate Professor of Surgery (Biochemistry) at Harvard Medical School (presently
emeritus) and from 1983 to 1999, he was an Associate Research Professor of Pathology at Boston University School of Medicine (presently
emeritus). From 1971 to 1997, Dr. Saravis was a Senior Research Associate at the Mallory Institute of Pathology and from 1979 to 1997 he
was a Senior Research Associate at the Cancer Research Institute-New England Deaconess Hospital. Dr. Saravis received his Ph.D. in
immunology and serology from Rutgers University.
Mr. J. Donald Payne has served as one of our directors since December 30, 2003. Since September 2001, Mr. Payne has served as
President and a Director of Nanospectra Biosciences, Inc., a privately-held medical device company developing products for cancer. Prior
to that, Mr. Payne held various executive positions in finance and administration of public and private life science companies since 1992,
served as a financial executive in the energy industry from 1980 through 1990, and was in public accounting from 1976 to 1980. Mr. Payne
received an MBA from Rice University in 1992 and a BBA from Texas A&M University in 1976. He is a Certified Public Accountant in
Texas, and a member of the AICPA and Financial Executives Institute.
- 51 -
Mr. P. Thomas Vogel has served as one of our directors since January 9, 2004. Since 2006 Mr. Vogel is the President of Vogel
Associates, a consulting company, and a Principal of Franchise Finders, LLC, a franchise consulting company. From April 2002 until
December 2005, Mr. Vogel served as the President and Chief Executive Officer of AdipoGenix, Inc, an early-stage drug discovery
company focused on obesity and metabolic diseases. From 2000 to 2002, Mr. Vogel served as President and Chief Executive Officer of
Arradial, Inc., an early stage biopharmaceutical company. From 1996 to 2000, Mr. Vogel was Chief Executive Officer and Director of
Mosaic Technologies, Inc., an early-stage molecular biology company. From 1992 to 1995, Mr. Vogel was President of Fisher Scientific
Company, a $1 billion laboratory supply distribution business. Mr. Vogel served as President of PB Diagnostics from 1991 to 1992, as
President of Instrumentation Laboratory from 1990 to 1991, and as President of Serono Diagnostics from 1988 to 1990. Mr. Vogel was in
the venture capital arena from 1982 to 1987. Prior to that, from 1974 to 1982, Mr. Vogel worked in the Diagnostics Division of Abbott
Laboratories, Inc., where he served as Divisional Vice President and General Manager of Diagnostic Products. Mr. Vogel graduated from
the Georgia Institute of Technology with a Bachelor's Degree in Electrical Engineering and from The Wharton Business School with a
Master's Degree in Business Administration.
Mr. Richard T. Schumacher, the founder of our company, has served as one of our directors since 1978. He has served as our Chief
Executive Officer since April 16, 2004 and President since September 14, 2004. He previously served as Chief Executive Officer and
Chairman of the Board of our company from 1992 to February 2003. From July 9, 2003 until April 14, 2004 he served as a consultant to our
company pursuant to a consulting agreement. He served as President of our company from 1986 to August 1999. Mr. Schumacher served as
the Director of Infectious Disease Services for Clinical Sciences Laboratory, a New England-based medical reference laboratory, from
1986 to 1988. From 1972 to 1985, Mr. Schumacher was employed by the Center for Blood Research, a nonprofit medical research institute
associated with Harvard Medical School. Mr. Schumacher received a B.S. in Zoology from the University of New Hampshire.
Our Executive Officers
The following table sets forth the names, ages and positions of our current executive officers:
Name
Richard T. Schumacher
Edward H. Myles
Edmund Ting, Ph.D.
Nathan P. Lawrence, Ph.D.
Alexander Lazarev, Ph.D.
Matthew B. Potter
Age
57
36
53
53
43
44
Position
President, Chief Executive Officer and Director
Senior Vice President of Finance, Chief Financial Officer, Treasurer and Assistant
Clerk
Senior Vice President of Engineering
Vice President of Marketing
Vice President of Research and Development
Vice President of Sales
Set forth below is biographical information for each of our executive officers, other than Mr. Schumacher whose biographical
information is set forth above under the heading “Our Directors”.
Mr. Edward H. Myles was appointed to serve as Vice President of Finance and Chief Financial Officer on April 3, 2006 and was
promoted to the position of Senior Vice President of Finance and Chief Financial Officer on February 12, 2007. Prior to joining Pressure
BioSciences, Inc., Mr. Myles served as the controller for EMD Pharmaceuticals, a wholly-owned affiliate of Merck KGaA, from 2003 to
2006. At EMD, Mr. Myles had a wide variety of responsibilities in the areas of accounting and business development. Prior to EMD
Pharmaceuticals, Mr. Myles worked in the health care investment banking group of SG Cowen Securities Corporation from 2002 to 2003.
From 2000 to 2002, Mr. Myles was enrolled in the full-time MBA program at Washington University in St. Louis, where he co-founded
Luminomics, an early-stage biotechnology company. Prior to enrolling in graduate school, Mr. Myles was the Corporate Controller of
Boston Biomedica, Inc. Prior to joining Boston Biomedica, Inc., in 1997 he worked at the accounting firms Price Waterhouse LLP and
Coopers & Lybrand LLP where he held positions of increasing responsibility between 1993 and 1997. Mr. Myles became a CPA in 1996,
and earned a BSBA, with honors, in accounting and finance from the University of Hartford, and an MBA from Washington University in
St. Louis.
- 52 -
Dr. Edmund Ting joined as Senior Vice President of Engineering on April 24, 2006. Prior to joining, Dr. Ting served as the Chief
Research Officer of Avure Technologies, a leading worldwide manufacturer of high pressure hydrostatic processing equipment for the food
and materials processing industry, where he worked from 2001 to 2006. From 1990 to 2001, Dr. Ting was employed by Flow International
Corporation, a world leader in the ultrahigh pressure waterjet cutting technology market, and the parent company of Avure Technologies
until November 2005. Dr. Ting last held the position of VP of Engineering Research and Development at Flow International Corporation.
From 1984 to 1990, Dr. Ting was a research scientist, then a group leader at Grumman Aerospace Corporation. Dr. Ting earned a Bachelor
of Science degree in mechanical engineering from Northeastern University and a Science Doctorate in materials science and engineering
from the Massachusetts Institute of Technology.
Dr. Nathan P. Lawrence was appointed Vice President of Marketing and Sales on April 1, 2006. Dr. Lawrence joined Pressure
BioSciences Inc. in 2005, serving as Director of Research and Development until his promotion to Vice President of Marketing and
Business Development in 2006. Dr. Lawrence was responsible for the development of protocols based on Pressure Cycling Technology
(PCT). From 2004 through 2005, Dr. Lawrence worked for 454 Life Sciences in product development. Prior to 454 Life Sciences, Dr.
Lawrence was Director of Research and Development for Boston Biomedica, Inc. from 1998-2004. He was responsible for the
development of PCT, as well as the development of nucleic acid-based diagnostic assays. Prior to joining Boston Biomedica, Inc., Dr.
Lawrence held several positions with increasing responsibility in Research and Development and manufacturing at Becton Dickinson and
Gene Trak Systems. Dr. Lawrence holds a BA from the University of Miami, an M.S. from Southern Connecticut State University, and a
Ph.D. from Yale University.
Dr. Alexander Lazarev was promoted to the position of Vice President of Research and Development, effective March 20, 2007. Prior
to his promotion he served as our Director of Research and Development, since joining us on April 3, 2006. Prior to joining Pressure
BioSciences, Inc., Dr. Lazarev worked as a Visiting Scientist at the Barnett Institute of Chemical and Biological Analysis at Northeastern
University in 2005, and served as a Director of New Technology Development at Proteome Systems, Inc., where he was involved in
research and development of innovative proteomic analysis applications from 2001 until early 2006. From 1998 to 2001, Dr. Lazarev was
employed as Senior Scientist at the Proteomics Division of Genomic Solutions, Inc. Prior to his employment at Genomic Solutions, Inc.,
Dr. Lazarev was employed in an analytical contract service startup company, PhytoChem Technologies, Inc., which was founded as a spin-
off from ESA, Inc. in 1997. Previously, Dr. Lazarev held various scientific positions at the Ohio State University School of Medicine and
the Uniformed Services University of Health Sciences. Most of his scientific career has been dedicated to development of methods and
applications for biochemical analysis. Since 2005, Dr. Lazarev has been elected as an Executive Board member of the MASSEP.org, a
non-profit scientific discussion forum dedicated to the promotion and improvement of chromatography and other analytical technologies.
Dr. Lazarev earned his undergraduate and graduate degrees at the University of Kazan, Russian Federation.
Mr. Matthew B. Potter joined PBI as our Vice President of Sales on February 25, 2008 and was appointed an executive officer on
March 6, 2008. Mr. Potter has worked in many different disciplines that include molecular biology, chromatography, personalized
medicine, diagnostics, & biophysics. Prior to joining PBI Mr. Potter was the Vice President of Sales & Marketing at Abcam, Inc. from July
2007 to January 2008. Prior to Abcam, Mr. Potter was the National Sales Manager: Key Accounts Pharmaceutical at Qiagen, Inc. from July
2005 to May 2007. Prior to Qiagen, Mr. Potter was Director, Sales and Marketing at MicroCal, LLC from January 2000 to July 2005. Mr.
Potter is also a former Treasurer of the New England Scientific Manufacturers Association and has been cited as a co-author and
contributor on assorted scientific publications during his tenure working at the Worcester Foundation for Experimental Biology. Mr. Potter
holds a BA in Biology from Clark University and an MBA from Assumption College, both located in Worcester, MA.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common
stock, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC.
Based solely on our review of the copies of such filings we have received and written representations from certain reporting persons,
we believe that all of our executive officers, directors, and greater than 10% stockholders complied with all Section 16(a) filing
requirements applicable to them during our fiscal year ended December 31, 2007.
- 53 -
Code of Ethics
Pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, we have adopted a Code of Ethics for Senior Financial Officers that
applies to our principal executive officer, principal financial officer, principal accounting officer, controller, and other persons performing
similar functions. A copy of the code of ethics is posted on, and may be obtained free of charged from our Internet website at
http://www.pressurebiosciences.com. If we make any amendments to this Code of Ethics or grant any waiver, including any implicit
waiver, from a provision of this Code of Ethics to our principal executive officer, principal financial officer, principal accounting officer,
controller, or other persons performing similar functions, we will disclose the nature of such amendment or waiver, the name of the person
to whom the waiver was granted and the date of waiver in a Current Report on Form 8-K.
Audit Committee
Our Board of Directors has appointed an Audit Committee of the Board of Directors, comprised of Messrs. Wayne Fritzsche, J. Donald
Payne, and P. Thomas Vogel. The Board of Directors has determined that Mr. Payne qualifies as an “audit committee financial expert” as
defined in Item 407(d)(5) of Regulation S-K.
- 54 -
ITEM 11.
EXECUTIVE COMPENSATION.
Compensation Committee
General. Messrs. Fritzsche, Payne, and Vogel and Dr. Saravis are currently the members of the Compensation Committee. The
Compensation Committee operates pursuant to a written charter, a copy of which is publicly available on the investor relations portion of
our website at www.pressurebiosciences.com. The primary functions of the Compensation Committee include (i) reviewing and approving
our executive compensation, (ii) reviewing the recommendations of the President and Chief Executive Officer regarding the compensation
of our executive officers, (iii) evaluating the performance of the Chief Executive Officer, (iv) overseeing the administration and approval
of grants of stock options and other equity awards under our equity incentive plans, and (v) recommending compensation for our Board of
Directors and each committee thereof for review and approval by the Board of Directors. The Compensation Committee held one (1)
meeting during calendar 2007.
Compensation Objectives
In light of the early stage of commercialization of our products, we recognize the importance of attracting and retaining key employees
with sufficient experience, skills, and qualifications in areas vital to our success, such as operations, finance, sales and marketing, research
and development and engineering, and individuals who are committed to our short- and long-term goals. The Compensation Committee has
designed our executive compensation programs with the intent of attracting, motivating, and retaining experienced executives and
rewarding them for their contributions by offering them a competitive base salary, annual cash incentive bonuses, and long-term equity-
based incentives, typically in the form of stock options. The Compensation Committee strives to balance the need to retain key employees
with financial prudence given our history of operating losses and the early stage of our commercialization.
Executive Officers and Director Compensation Process
The Compensation Committee considers and determines executive compensation according to an annual and semi-annual objective
setting and measurement cycle. Specifically, corporate goals for the year are initially developed by our executive officers and are then
presented to the Board of Directors and Compensation Committee for review and approval. Individual goals are intended to focus on
contributions that facilitate the achievement of the corporate goals. Individual goals are first proposed by each executive officer, other than
the President and Chief Executive Officer, then discussed by the entire senior executive management team and ultimately compiled and
prepared for submission to the Board of Directors and the Compensation Committee, by the President and Chief Executive Officer. The
Compensation Committee sets and approves the goals for the President and Chief Executive Officer. Generally, corporate and individual
goals are set during the first quarter of each calendar year. The objective setting process is coordinated with our annual financial planning
and budgeting process so our Board of Directors and Compensation Committee can consider overall corporate and individual objectives in
the context of budget constraints and cost control considerations. Annual salary increases, bonuses, and equity awards, such as stock option
grants, if any, are tied to the achievement of these corporate and individual performance goals as well as our financial position and
prospects.
Under the annual performance review program, the Compensation Committee evaluates individual performance against the goals for
the recently completed year. The Compensation Committee’s evaluation generally occurs in the first quarter of the following year. The
evaluation of each executive (other than the President and Chief Executive Officer) begins with a written self-assessment submitted by the
executive to the President and Chief Executive Officer. The President and Chief Executive Officer then prepares a written evaluation based
on the executive’s self-assessment, the President and Chief Executive Officer’s evaluation, and input from others within our company. This
process leads to a recommendation by the President and Chief Executive Officer for a salary increase, bonus, and equity award, if any,
which is then considered by the Compensation Committee. In the case of the President and Chief Executive Officer, the Compensation
Committee conducts his performance evaluation and determines his compensation, including salary increase, bonus, and equity awards, if
any. We generally expect, but are not required, to implement salary increases, bonuses, and equity awards, for all executive officers, if and
to the extent granted, by April 1st.
- 55 -
Non-employee director compensation is set by our Board of Directors upon the recommendation of the Compensation Committee. In
developing its recommendations, the Compensation Committee is guided by the following goals: compensation should be fair relative to
the required services for a director of comparable companies in our industry and at our company’s stage of development; compensation
should align directors’ interests with the long-term interest of stockholders; the structure of the compensation should be simple, transparent,
and easy for stockholders to understand; and compensation should be consistent with the financial resources, prospects, and competitive
outlook for our company.
In evaluating executive officer and director compensation, the Compensation Committee considers the practices of companies of
similar size, geographic location, and market focus. In order to develop reasonable benchmark data the Compensation Committee has
referred to publicly available sources such as Salary.com and the BioWorld Survey. While the Compensation Committee does not believe
benchmarking is appropriate as a stand-alone tool for setting compensation due to the unique aspects of our business objectives and current
stage of development, the Compensation Committee generally believes that gathering this compensation information is an important part of
its compensation-related decision making process.
The Compensation Committee has the authority to hire and fire advisors and compensation consultants as needed and approve their
fees. No advisors or compensation consultants were hired or fired in fiscal 2007.
The Compensation Committee is also authorized to delegate any of its responsibilities to subcommittees or individuals as it deems
appropriate. The Compensation Committee did not delegate any of its responsibilities in fiscal 2007.
In February 2008, our Board of Directors met with senior management and discussed the 2007 business and financial results and
reviewed the proposed objectives for 2008. The Board of Directors and the Compensation Committee also reviewed the proposed 2008
budget and operating plan and determined that discussions of salaries, bonuses and equity awards should be deferred until the middle of the
year. Considering this, the Compensation Committee recommended, and the Board of Directors approved the following actions to be taken:
·
Implement a 4% cost of living increase for all employees hired prior to December 31, 2007, except for Mr. Schumacher, and for
our regional sales directors, effective immediately.
· Grant each non-employee member of the Board of Directors non-qualified stock options to purchase 10,000 shares of our
common stock, effective on April 15, 2008.
- 56 -
Summary Compensation Table
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth the total compensation paid or earned for the fiscal years ended December 31,
2007 and 2006 for: (i) each individual serving as our Chief Executive Officer (“CEO”) or acting in a similar capacity during any part of
fiscal 2007 and 2006; and (ii) the other two most highly paid executive officers (collectively, the "Named Executive Officers").
Name and Principal Position
Richard T. Schumacher
President & Chief Executive Officer
Fiscal Year
2007
2006
$
Salary (1)
288,697 $
267,981
Bonus (2)
Awards (3)
- $
55,000
102,297 $
67,987
12,069 $
15,628
403,063
406,596
Option
All other
Compensation (4)
Total
Edward H. Myles
Senior Vice President of Finance
& Chief Financial Officer
Edmund Ting, Ph.D
Senior Vice President of Engineering
2007
2006
2007
2006
178,538
120,962
-
17,000
45,993
40,018
3,306
50,349
227,837
228,329
185,673
114,423
-
17,500
50,304
40,340
3,163
3,234
239,140
175,497
(1) Salary refers to base salary compensation paid through the Company’s normal payroll process.
(2) A cash bonus is paid to executive officers based on a combination of factors including the performance of the company relative to
specific objectives, the financial condition of the company, and the performance of the individual executive relative to specific objectives.
Amounts for 2006 reflect bonuses earned in 2006 and paid in February 2007. The Compensation Committee has deferred the discussion of
executive bonuses for 2007, to be paid in 2008, until the middle of 2008.
(3) Amounts shown do not reflect compensation received by the Named Executive Officers. Instead, the amounts shown are the
compensation costs recognized by the Company in each of the fiscal years presented for option awards as determined pursuant to SFAS
123R. Please refer to Note 2, xiii, “Accounting for Stock-Based Compensation” in the Notes to our Consolidated Financial Statements
included in this Annual Report on Form 10-K for the year ended December 31, 2007, for the relevant assumptions used to determine the
valuation of our stock option grants. Based on the assumptions outlined in the Notes to the Company’s Consolidated Financial Statements
the value of our stock options awarded to executives and other employees during 2006 and 2007 was between $2.55 and $3.00 per option.
(4) “All Other Compensation” includes the company’s match to the executives’ 401(k) contribution and premiums paid on life insurance
for the executive. Both of these benefits are available to all employees of the company. In the case of Mr. Schumacher, “All Other
Compensation” also includes $7,980 in premiums paid by the company for a life insurance policy to which Mr. Schumacher’s wife is the
beneficiary.
Outstanding Equity Awards at Fiscal-Year End
The following table sets forth certain information regarding outstanding stock options awards for each of the Named Executive
Officers as of December 31, 2007.
Name
Richard T. Schumacher
President & Chief Executive Officer
Edward H. Myles
Senior Vice President of Finance
& Chief Financial Officer
Edmund Y. Ting, Ph.D
Senior Vice President of Engineering
Number of
Securities
Underlying
Unexercised
Options #
Exercisable
Number of Securities
Underlying
Unexercised Options
# Unexercisable (1)
Option
Exercise
Price ($)
Option
Expiration
Date
0
0
0
25,000(2)
(2)
20,000
(2)
70,000
$2.60
5/2/2011
$3.08
2/11/2012
$2.70
12/2/2012
$2.92
6/17/2015
$3.86 3/30/2016
$3.51
2/12/2017
36,666
(3)
$3.86
4/3/2016
40,000
(4)
$3.87
4/24/2016
40,000
60,000
30,000
50,000
10,000
0
18,334
20,000
- 57 -
(1) All unvested stock options listed in this column were granted to the Named Executive Officer pursuant to the Company’s 2005 Equity
Incentive Plan. All of such stock options vest ratably over three years and expire ten years after the date of grant. Unvested stock options
become fully vested and exercisable upon a change of control of the Company.
(2) Options to purchase 75,000 shares of common stock were granted to Mr. Schumacher on June 17, 2005, of which options to purchase
25,000 shares became vested on June 17, 2006, and an additional 25,000 became vested on June 17, 2007. Options to purchase 30,000
shares of common stock were granted to Mr. Schumacher on March 30, 2006 of which 10,000 became vested on March 30, 2007. Options
to purchase 70,000 shares of common stock were granted to Mr. Schumacher on February 12, 2007.
(3) Options to purchase 55,000 shares of common stock were granted to Mr. Myles on April 3, 2006, 18,334 became vested on April 3,
2007.
(4) Options to purchase 60,000 shares of common stock were granted to Dr. Ting on April 24, 2006, 20,000 became vested on April 24,
2007.
Retirement Plan
All employees, including the Named Executive Officers, may participate in our 401(k) Plan. Under the 401(k) Plan, employees may
elect to make before tax contributions of up to 60% of their base salary, subject to current Internal Revenue Service limits. The 401(k) Plan
does not permit an investment in our common stock. We match employee contributions up to 50% of the first 2% of the employee’s
contribution. Our contribution is 100% vested immediately.
Severance Arrangements
Each of our executive officers; Mr. Schumacher, Mr. Myles, Dr. Ting, Dr. Lazarev, Dr. Lawrence and Mr. Potter is entitled to receive
a severance payment if terminated by us without cause. The severance benefits would include a payment in an amount equal to one year of
such executive officer’s annualized base salary compensation plus accrued paid time off. Additionally, the officer will be entitled to receive
medical and dental insurance coverage for one year following the date of termination.
Change-in-Control Arrangements
Each of our executive officers, other than Mr. Schumacher, is entitled to receive a change of control payment in an amount equal to one
year of such executive officer’s annualized base salary compensation, accrued paid time off, and medical and dental coverage, in the event
of a change of control of the Company. In the case of Mr. Schumacher this payment would be equal to two years of annualized base salary
compensation, accrued paid time off, and two years of medical and dental coverage.
Pursuant to the Company’s 2005 Equity Incentive Plan (the “Plan”), any unvested stock options held by a Named Executive Officer
will become fully vested upon a change in control (as defined in the Plan) of the Company.
Director Compensation
The following table sets forth certain information regarding compensation earned or paid to the Company’s directors during fiscal
2007.
Name
R. Wayne Fritzsche
Calvin A. Saravis, Ph.D
J. Donald Payne
P. Thomas Vogel
Fees Earned or
Paid in Cash (1)
Option
Awards (2)
$
32,000 $
32,000
32,000
32,000
Total
32,000
32,000
32,000
32,000
- $
-
-
-
The Company’s non-employee directors receive the following compensation for service as a director of the Company:
(1) A quarterly stipend of $8,000, of which $4,000 is compensation for attending meetings of the full Board of Directors (whether
telephonic or in-person) and $4,000 is compensation for attending committee meetings. There is no limit to the number of meetings of the
Board of Directors or committees that may be called. Cash compensation is paid on or immediately prior to the last day of each fiscal
quarter.
(2) During 2007 the Board of Directors decided not to award fully vested, non-qualified stock options to its non-employee members.
- 58 -
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
Beneficial Ownership Information
The following table sets forth certain information as of March 24, 2008, as to shares of our common stock beneficially owned by:
(i) each person (including any “group” as that term is used in Section 13(d)(3) of the Exchange Act) known by us to be the beneficial owner
of 5% or more of our common stock, (ii) each of our executive officers listed in the Summary Compensation Table under Item 11 of this
report, (iii) each of our directors and (iv) all of our directors and executive officers as a group.
We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we
believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment
power with respect to all shares of common stock that they beneficially own.
Name
Lloyd I. Miller, III (2)*
4550 Gordon Drive
Naples, FL 34102
Richard T, Schumacher (3)(4)*
130 Lake Ridge Drive
Taunton, MA 02780
Edward H. Myles
Edmund Y. Ting, Ph.D
All other executive officers
R. Wayne Fritzsche
Calvin A. Saravis, Ph.D
J. Donald Payne
P. Thomas Vogel
All Executive Officers and Directors as
a Group (4)
Number of
Shares of
Common Stock
Beneficially
Owned (1)
Percent of
Class
157,686
5.5%
449,154
15.8%
38,667
42,000
80,116
63,000
100,000
62,000
60,000
894,937
1.4%
1.5%
2.8%
2.2%
3.5%
2.2%
2.1%
31.4%
* Address provided for beneficial owners of more than 5% of the common stock.
(1) Includes the following shares of common stock issuable upon exercise of options exercisable within 60 days after March 24,
2008: Mr. Schumacher – 223,334; Dr. Saravis - 110,000; Mr. Fritzsche - 73,000; Mr. Payne - 68,000; Mr. Vogel - 70,000; Mr.
Myles – 36,667; Dr. Ting – 40,000.
(2) Based on information contained in a Schedule 13 G/A filed with the SEC on February 11, 2008, Mr. Miller reports shared voting
and shared dispositive power as to 150,646 shares of common stock and sole voting power and sole dispositive power to 7,040
shares.
(3) Does not include 15,162 shares of common stock held by Mr. Schumacher’s minor son as his wife exercises all voting and
investment control over such shares.
(4) Includes an aggregate of 694,334 shares of common stock that the current directors and executive officers have the right to
acquire upon exercise of outstanding stock options exercisable within sixty (60) days after March 24, 2008.
- 59 -
Equity Compensation Plan Information
We maintain a number of equity compensation plans for employees, officers, directors and other entities and individuals whose efforts
contribute to our success. The table below sets forth certain information as of our fiscal year ended December 31, 2007 regarding the shares
of our common stock available for grant or granted under our equity compensation plans.
Plan Category
Equity compensation plans approved by
security holders
Number of
securities to be
issued upon
exercise of
outstanding options
Weighted-average
exercise price of
outstanding
options
Number of securities
remaining available
for future issuance
under equity
compensation plans
1,120,500
$
3.45
137,800
Includes the following plans: 1994 ISO Stock Option Plan, 1999 Non-Qualified Stock Option Plan, and 2005 Equity Incentive
Plan.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; AND DIRECTOR INDEPENDENCE.
Related Persons Transactions
On December 29, 2006, Richard T. Schumacher, our President and Chief Executive Officer, delivered to us 249,875 shares of his
common stock of the company in full and complete satisfaction and payment of all outstanding amounts, including all principal and accrued
interest, of Mr. Schumacher’s loan payable to us. The loan amount consisted of $1,000,000 in principal and $25,487 in interest accrued in
the quarter ended December 31, 2006. The number of shares was determined based upon a value of $4.10 per share, the volume weighted
average trading price of the shares of our common stock on the NASDAQ Capital Market during the 60 trading days ending on December
29, 2006. In connection with the payment of the loan, we terminated our security interest in Mr. Schumacher’s shares of common stock,
and released to Mr. Schumacher the remaining 229,782 shares of common stock previously held as collateral.
Director Independence
The Board of Directors has reviewed the qualifications of each of Messrs. Fritzsche, Payne, Vogel and Dr. Saravis, constituting more
than a majority of our directors, and has affirmatively determined that each individual is“independent” as such term is defined under the
current listing standards of the NASDAQ Stock Market. The Board of Directors has determined that none of these directors has a material
relationship with us that would interfere with the exercise of independent judgment. In addition, each member of the Audit Committee is
independent as required under Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended.
- 60 -
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Independent Registered Public Accounting Fees
The following is a summary of the fees billed to the Company by UHY LLP (“UHY”), our principal accountant, for the fiscal years
ended December 31, 2007 and December 31, 2006, respectively:
Audit Fees
Audit-Related Fees
Fiscal 2007 Fees
($)
Fiscal 2006 Fees
($)
$
$
105,691 $
24,791
130,482 $
155,162
-
155,162
Audit Fees. Consists of aggregate fees billed for professional services rendered for the audit of our consolidated financial statements
and review of the interim consolidated financial statements included in quarterly reports, as well as services that are normally provided by
the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.
Audit-Related Fees. Consists of aggregate fees billed for assurance and related services that are reasonably related to the performance
of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” Fees billed by UHY for 2007 were
fees associated with consents delivered in connection with the Company’s Registration Statement on Form S-3 and certain agreed upon
procedures with respect to Source Scientific, LLC.
There were no other fees for services rendered by UHY other than those described above.
Audit Committee Policy on Pre-Approval of Services
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered
public accounting firm. These services may include audit services, audit-related services, tax services, and other services. Pre-approval is
generally provided for up to one year. The Audit Committee may also pre-approve particular services on a case-by-case basi
- 61 -
PART IV
ITEM 15.
EXHIBITS.
Exhibit No.
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
4.5
4.6
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.17
23.1
31.1
31.2
32.1
32.2
Amended and Restated Articles of Organization of the Company
Articles of Amendment to Amended and Restated Articles of Organization of the
Company
Amended and Restated Bylaws of the Company
Amendment to Amended and Restated Bylaws of the Company
Specimen Certificate for Shares of the Company’s Common Stock
Description of Capital Stock (contained in the Amended and Restated Articles of
Organization, as amended, of the Company filed as Exhibits 3.1 and 3.2)
Rights Agreement dated as of February 27, 2003 between the Company and
Computershare Trust Company, Inc.
Amendment No. 1 to Rights Agreement dated April 16, 2004 between the Company
and Computershare Trust Company, Inc.
Securities Purchase Agreement dated November 21, 2007 between the Company and
the purchasers named therein
Registration Rights Agreement dated November 21, 2007 between the Company and
the purchasers named therein
1994 Employee Stock Option Plan*
1999 Non-Qualified Stock Option Plan*
1999 Employee Stock Purchase Plan*
2005 Equity Incentive Plan.*
Description of Compensation for Certain Directors*
Severance Agreement between the registrant and Richard T. Schumacher*
Form of Severance Agreement including list of officers to whom provided*
LLC Membership Interest Purchase Agreement dated June 8, 2004 by and between
BBI Source Scientific Inc., Boston Biomedica, Inc., and Source Scientific, LLC.
Consent Agreement, dated May 29, 2007, by and among the registrant, PBI Source
Scientific, Inc., Source Scientific, LLC, BIT Analytical Instruments, Inc., Richard W.
Henson and Bruce A. Sargeant.
Asset Purchase Agreement dated April 16, 2004 between the Company, BBI Biotech
Research Laboratories, Inc. and SeraCare Life Sciences, Inc.
Technology Transfer and Patent Assignment Agreement dated October 7, 1996,
between Bioseq, Inc. and BioMolecular Assays, Inc.
Amendment to Technology Transfer and Patent Assignment Agreement dated October
8, 1998 between Bioseq, Inc. and BioMolecular Assays, Inc.
Nonexclusive License Agreement dated September 30, 1998 between Bioseq, Inc. and
BioMolecular Assays, Inc.
Flex Space Office Lease dated May 5, 2005 by and between Saul Holding Limited
Partnership and the registrant
Agreement for Research Services dated February 1, 2006 by and between the
registrant and the University of New Hampshire
Loan Repayment Agreement with Richard T. Schumacher dated December 29, 2006
Consent of Independent Registered Public Accounting Firm
Principal Executive Officer Certification Pursuant to Item 601(b)(31) of Regulation S-
K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Principal Financial and Accounting Officer Certification Pursuant to Item 601(b)(31)
of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Principal Executive Officer Certification Pursuant to Item 601(b)(32) of Regulation S-
K, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Principal Financial and Accounting Officer Certification Pursuant to Item 601(b)(32)
of Regulation S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
- 62 -
Reference
A-3.1**
B-3.1**
A-3.2**
C-3.3**
D-4.1**
A-3.1 & 3.2**
E-4**
F-4**
G-4.9**
G-4.10**
A-10.16**
H**
H**
I-99.1**
Filed herewith
Filed herewith
Filed herewith
J-2.1**
K-10.1**
F-1**
Filed herewith
Filed herewith
Filed herewith
L-10.1**
M-10.1**
N-10.1**
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
A
B
C
D
E
F
G
H
I
J
K
L
M
N
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Registration Statement on
Form S-1 (Registration No. 333-10759) filed with the Commission on August 23, 1996.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 2004.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Annual Report on Form 10-
K for the fiscal year ended December 31, 2002.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Annual Report on Form 10-
KSB for the fiscal year ended December 31, 2004.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Current Report on Form 8-
K filed with the Commission March 12, 2003.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Current Report on Form 8-
K filed with the Commission April 16, 2004.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Registration Statement on
Form S-3 (Registration No. 333-148227) filed with the Commission on December 20, 2007.
We previously filed this exhibit as an appendix to the registrant’s proxy statement filed June 14, 1999.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Registration Statement on
Form S-8 (Reg. No. 333-128594) filed with the Commission on September 26, 2005.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Current Report on Form 8-
K filed with the Commission June 16, 2004.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Current Report on Form 8-
K filed with the Commission on June 1, 2007.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Current Report on Form 8-
K filed with the Commission on May 11, 2005.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Current Report on Form 8-
K filed with the Commission on February 7, 2006.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Current Report on Form 8-
K filed with the Commission on December 29, 2006.
- 63 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 27, 2008
Pressure BioSciences, Inc.
By:
/s/ Richard T. Schumacher
Richard T. Schumacher
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacity and on the dates indicated.
SIGNATURES
TITLES
DATE
/s/ Richard T. Schumacher
Richard T. Schumacher
/s/ Edward H. Myles
Edward H. Myles
/s/ R. Wayne Fritzsche
R. Wayne Fritzsche
/s/ J. Donald Payne
J. Donald Payne
/s/ Calvin A. Saravis, Ph.D.
Calvin A. Saravis, Ph. D.
/s/ P. Thomas Vogel
P. Thomas Vogel
President, Chief Executive Officer (Principal Executive Officer )
March 27, 2008
Senior Vice President and Chief Financial Officer (Principal
Financial and Principal Accounting Officer) and Treasurer
March 27, 2008
Director and Chairman of the Board
Director
Director
Director
March 27, 2008
March 27, 2008
March 27, 2008
March 27, 2008
SUMMARY OF COMPENSATION OF NON-EMPLOYEE DIRECTORS
Compensation for independent members of the Board of Directors of Pressure BioSciences, Inc. (the "Company") consists of
a quarterly stipend of $8,000, of which $4,000 is compensation for attending full Board meetings (whether telephonic or in-person) and
$4,000 is compensation for attending committee meetings. There is no limit to the number of full Board or committee meetings called.
Cash compensation is paid on or immediately prior to the last day of each fiscal quarter. In addition to cash compensation, each
independent member of the Board of Directors also receives a one-time grant of 10,000 fully vested, non-qualified stock options as soon as
feasible after joining the Board of Directors, as well as an annual grant of 30,000 fully vested, non-qualified stock options. To be granted
on April 15th, or the first business day after April 15th in the case that this day falls on a weekend. In 2007, the non-employee directors
elected to waive their right to receive their annual grant of stock options.
SEVERANCE AGREEMENT
THIS AGREEMENT made as of the 3rd day of April, 2006, by and between Pressure BioSciences, Inc., a Massachusetts
corporation, and Richard T. Schumacher (the "Executive").
WHEREAS, the Board of Directors (the "Board") of the Company (as hereinafter defined) recognizes that the possibility of a
termination without Cause (as hereinafter defined), and the possibility of a Change in Control (as hereinafter defined), can create
significant distractions for its key management personnel because of the uncertainties inherent in such situations;
WHEREAS, the Board has determined that it is essential and in the best interest of the Company and its stockholders to retain
the services of the Executive, in general, and particularly in the event of a threat or the occurrence of a Change in Control and to ensure his
continued and full attention, dedication and efforts in such event without undue concern for his personal financial and employment security;
and
WHEREAS, in order to induce the Executive to become an employee of the Company and to remain in the employ of the
Company, in general, and particularly in the event of a threat or the occurrence of a Change in Control, the Company desires to enter into
this Agreement with the Executive to provide the Executive with severance benefits in the event his employment is terminated without
Cause or as a result of, or in connection with, a Change in Control, in accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein, it is agreed as follows:
1. DEFINITIONS.
1.1 ACCRUED COMPENSATION. For purposes of this Agreement, "Accrued Compensation" shall mean an amount which shall include
all amounts earned or accrued through the "Termination Date" (as hereinafter defined) but not paid as of the Termination Date, including (i)
base salary, (ii) reimbursement for reasonable and necessary business expenses incurred by the Executive on behalf of the Company,
pursuant to the Company's expense reimbursement policy in effect at such time, during the period ending on the Termination Date, and (iii)
vacation pay.
1.2 BASE SALARY. For purposes of this Agreement, "Base Salary" shall mean the greater of the Executive's annual base salary (a) at the
rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to the
Termination Date.
1.3 CAUSE. The Company may terminate the Executive's employment at any time for "Cause". For purposes of this Agreement, "Cause"
means (i) any act of personal dishonesty or a breach of trust by the Executive; (ii) intentional violation of the Company’s Code of Conduct
or other Company codes or policies or procedures that are applicable to the Executive; (iii) the commission by the Executive of any crime
classified as a felony under any Federal, state or local law; (iv) any breach by the Executive of the Employee Non-Competition and Non-
Solicitation Agreement or the Employee & Contractor Non-Disclosure and Developments Agreement, each dated as of the date hereof; (v)
the use by the Executive of a controlled substance without a prescription or the use of alcohol which in any way impairs the Executive’s
ability to carry out his duties and responsibilities; (vi) conduct by the Executive constituting an act of moral turpitude, or acts of physical
violence while working for the Company; (vii) the Executive’s willful failure or refusal to perform his duties on behalf of the Company
which are consistent with the scope and nature of the Executive’s responsibilities, or otherwise to comply with a lawful directive of the
Company; and (viii) the Executive’s repeated failure to carry out his duties and responsibilities in a satisfactory manner, provided the
Company provides the Executive with notice of such failure and the Executive does not correct such failure within a period of thirty (30)
days following such notice.
1.4 CHANGE IN CONTROL. For the purpose of this Agreement, a "Change of Control" shall mean:
a. The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 40% or more of the then outstanding shares of common stock of the Company (the “Outstanding Company Common
Stock”); provided, however, that any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) of the
Company or its subsidiaries of 40% or more of Outstanding Company Common Stock shall not constitute a Change in Control; and
provided, further, that any acquisition by a corporation with respect to which, following such acquisition, more than 50% of the then
outstanding shares of common stock of such corporation, is then beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such acquisition
in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common
Stock, shall not constitute a Change in Control; or
b. Any transaction which results in the Continuing Directors (as defined in the Certificate of Incorporation of the Company)
constituting less than a majority of the Board of Directors of the Company; or
c. Approval by the stockholders of the Company of (i) a reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock
immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock of the corporation resulting from
such a reorganization, merger or consolidation, (ii) a complete liquidation or dissolution of the Company or (iii) the sale or other
disposition of all or substantially all of the assets of the Company, excluding a sale or other disposition of assets to a subsidiary of the
Company.
-2-
d. Anything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a
Change of Control results from or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a corporation or
other entity in which the Executive has a greater than ten percent (10%) direct or indirect equity interest, such event shall not constitute a
Change of Control.
1.5 COMPANY. For purposes of this Agreement, "Company" shall mean Pressure BioSciences, Inc. and shall include its "Successors and
Assigns" (as hereinafter defined).
1.6 DISABILITY. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which impairs the Executive's
ability to substantially perform his duties with the Company for a period of one hundred eighty (180) consecutive days, and the Executive
has not returned to his full time employment prior to the Termination Date as stated in the "Notice of Termination" (as hereinafter defined).
1.7 GOOD REASON. For purposes of this Agreement, “Good Reason” shall mean:
a. Material diminution in the Executive’s offices, titles and reporting requirements, authority, duties or responsibilities as in
effect as of a Change or Control or at any time in the ninety (90) days prior to a Change of Control or Notice of Termination;
b. Material Reduction in the Executive’s Base Salary, unless such reduction is part of a company wide reduction in salary for
all similarly situated executives;
c. The Company requiring the Executive to be based at any office or location more than fifty (50) miles from the Company’s
headquarters as of the date hereof;
d. Any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this
Agreement; or
e. Any failure by the Company to comply with and satisfy Section 3 hereof.
1.8 NOTICE OF TERMINATION. For purposes of this Agreement, "Notice of Termination" shall mean (i) a written notice from the
Company of termination of the Executive's employment which indicates the specific termination provision in this Agreement relied upon, if
any, and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated; or (ii) a written notice from the Executive of his resignation for Good Reason, which
indicates the specific provision in Section 1.7 herein, and which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for resignation by the Executive for Good Reason.
-3-
1.9 SUCCESSORS AND ASSIGNS. For purposes of this Agreement, "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or
otherwise.
1.10 TERMINATION DATE. For purposes of this Agreement, "Termination Date" shall mean in the case of the Executive's death, his
date of death, in the case of Good Reason, the last day of his employment, and in all other cases, the date specified in the Notice of
Termination.
2. TERMINATION OF EMPLOYMENT.
2.1 CHANGE OF CONTROL. If the Executive's employment with the Company shall be terminated within twenty four (24) months
following a Change in Control, then the Executive shall be entitled to the following compensation and benefits:
a. If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) by
reason of the Executive's death, or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive the Accrued
Compensation only.
b. If the Executive's employment with the Company shall be terminated without Cause by the Company or by Executive for
Good Reason, then the Executive shall be entitled to each and all of the following:
i. The Company shall pay the Executive all Accrued Compensation;
ii. The Company shall continue to pay the Executive his Base Salary for a period of two (2) years from the Termination
Date in accordance with its normal payroll practices and subject to applicable tax withholding; provided, however, that if the Company
determines that such payments would constitute deferred compensation within the meaning of Section 409A of the Internal Revenue Code
of 1986, as amended, then the Executive agrees to the modifications with respect to timing of such payments in accordance with Section 6
hereof; and
iii. Continue to provide the Executive with medical and dental benefits on the same terms and conditions provided to
other executives of the Company for a period of one (1) year from the Termination Date.
c. The amounts provided for in Sections 2.1(a) and 2.1(b)(i) shall be paid in a single lump sum cash payment within five (5)
days after the Executive's Termination Date (or earlier, if required by applicable law).
-4-
2.2 TERMINATION OTHER THAN CHANGE OF CONTROL. If the Executive's employment with the Company is terminated,
other than within twelve (12) months following a Change of Control, then the Executive shall be entitled to the following compensation
and benefits:
a. If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) by
reason of the Executive's death, or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive the Accrued
Compensation.
b. If the Executive's employment with the Company shall be terminated by Company without Cause or by the Executive for
Good Reason, then the Executive shall be entitled to each and all of the following:
i. The Company shall pay the Executive all Accrued Compensation;
ii. The Company shall continue to pay the Executive his Base Salary for the period of one (1) year from the Termination
Date in accordance with its normal payroll practices and subject to applicable tax withholding; provided, however, that if the Company
determines that such payments would constitute deferred compensation within the meaning of Section 409A of the Internal Revenue Code
of 1986, as amended, then the Executive agrees to the modifications with respect to timing of such payments in accordance with Section 6
hereof; and
iii. Continue to provide the Executive with medical and dental benefits on the same terms and conditions provided to
other executives of the Company for a period of one (1) year from the Termination Date.
c. The amounts provided for in Sections 2.2(a) and 2.2(b)(i) shall be paid in a single lump sum cash payment within five (5)
business days after the Executive’s Termination Date (or earlier, if required by applicable law).
2.3 MITIGATION. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to
the Executive in any subsequent employment except as provided in Sections 2.1(b)(iii) and 2.2(b)(iii).
2.4 OTHER SEVERANCE BENEFITS. The severance pay and benefits provided for in this Section 2 shall be in lieu o f any other
severance or termination pay to which the Executive would otherwise b e entitled under any Company severance or termination plan,
program, practice or arrangement.
-5-
2.5 DIVESTITURE OR SALE OF DIVISION. Notwithstanding any other provision of this Agreement to the contrary, the termination of
the Executive's employment with the Company in connection with the sale, divestiture or other disposition of a Subsidiary or "Division"
(as hereinafter defined) (or part thereof) shall not be deemed to be a termination of employment of the Executive for purposes of this
Agreement provided the Executive accepts employment offered by the purchaser or acquirer of such Subsidiary or Division (or part
thereof) and provided, in the event such sale, divestiture or other disposition of a Subsidiary or Division occurs subsequent to or in
connection with a Change in Control, the Company obtains an agreement from such purchaser or acquiror as contemplated in Section 3(c).
The Executive shall not be entitled to benefits from the Company under this Agreement as a result of such sale, divestiture, or other
disposition, or as a result of any subsequent termination of employment. "Division" shall mean a business unit or other substantial business
operation within the Company that is operated as a separate profit center, but that is not maintained by the Company as a separate legal
entity.
3. SUCCESSORS: BINDING AGREEMENT.
a. This Agreement shall be binding upon and shall inure to the benefit of the Company, and its Successors and Assigns, and
the Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such succession or assignment had taken place; provided, however,
that upon any such succession or assignment that constitutes or is in connection with a Change in Control, the obligations of the Company,
and its Successors and Assigns, under Section 2.2 of this Agreement shall terminate, and the obligations under the remaining Sections of
this Agreement, including but not limited to Section 2.1, shall continue in full force and effect upon the Executive and the corporation or
other entity acquiring the assets and business of the Company as contemplated within the definition of Successors and Assigns.
b. Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his or her
beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal representative.
c. In the event that a Division (or part thereof) is sold, divested, or otherwise disposed of by the Company subsequent to or in
connection with a Change in Control and the Executive is offered employment by the purchaser or acquiror thereof, the Company shall
require such purchaser or acquiror to assume, and agree to perform, the Company's obligations under this Agreement, in the same manner,
and to the same extent, that the Company would be required to perform if no such acquisition or purchase had taken place; provided,
however, neither such purchaser or acquiror, nor the Company and its Successors and Assigns, shall be obligated under Section 2.2 of this
Agreement, which Section 2.2 shall terminate upon such acquisition or purchase.
4. ARBITRATION. Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity
hereof, (collectively, a "Claim") shall be settled by arbitration pursuant to the rules of the American Arbitration Association. Any such
arbitration shall be conducted by one arbitrator, with experience in the matters covered by this Agreement, mutually acceptable to the
parties. If the parties are unable to agree on the arbitrator within thirty (30) days of one party giving the other party written notice of intent
to arbitrate a Claim, the American Arbitration Association shall appoint an arbitrator with such qualifications to conduct such arbitration.
The decision of the arbitrator in any such arbitration shall be conclusive and binding on the parties. Any such arbitration shall be conducted
in Boston, Massachusetts, unless the Executive consents to a different location.
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5. NOTICE. For the purposes of this Agreement, notices and all other communications provided for i n the Agreement (including the
Notice of Termination) shall be in writing and shall be (i) delivered by hand, (ii) transmitted by facsimile or electronic mail with receipt
confirmed, (iii) delivered by overnight courier service with confirmed receipt or (iv) mailed by first class U.S. mail postage pre-paid and
registered or certified, return receipt requested and addressed to the respective addresses last given by each party to the other, provided that
all notices to the Company shall be directed to the attention of the President of the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of
change of address shall be effective only upon receipt.
6. 409A COMPLIANCE. Notwithstanding any other provision herein to the contrary, the Company shall make the payments required
hereunder in compliance with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and any interpretative
guidance issued thereunder. The Company may, in its sole and absolute discretion, delay payments hereunder or make such other
modifications with respect to the timing of payments as it deems necessary to comply with said Section 409A.
7. RELEASE. The Executive agrees that, with the exception of the Accrued Compensation due to him in accordance with the terms
hereunder, that the payment of any severance under Section 2.1(b)(ii) and (iii) and Section 2.2(b)(ii) and (iii) is subject to and conditioned
upon the execution and delivery by the Executive to the Company of a Settlement and Release Agreement (the “Release Agreement”) in
favor of the Company, its affiliates and their respective officers, directors, employees and agents in form and substance reasonably
acceptable to the Company and the expiration of any revocation period provided for under the Release Agreement.
8. NO EMPLOYMENT RIGHT. This Agreement does not constitute, and shall not be construed to provide, any assurance of continuing
employment. Executive's employment with the Company and of its Successors or Assigns is "at will," and, subject to the terms and
conditions of this Agreement, may be terminated by Executive or the Company at any time.
9. NON-DISPARAGEMENT. Executive agrees that he will not make or cause to be disclosed any negative, adverse or derogatory
statements to any media outlet, industry group, financial institution, consultant, client or customer of the Company or any of its affiliates or
any of their directors, officers, employees, agents or representatives, or about any of the Company’s or its affiliates products or services,
business affairs, financial condition or prospects for the future.
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10. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing, specifying such modification, waiver or discharge, and signed by the Executive and the Company.
11. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with t h e laws of the
Commonwealth of Massachusetts without giving effect to the conflict of laws principles thereof. Any action brought by any party to this
Agreement to enforce any decision of an arbitrator made as contemplated in Section 5 above shall be brought and maintained in a court of
competent jurisdiction in the Commonwealth of Massachusetts.
12. SEVERABILITY. The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions hereof.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior
severance agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject
matter hereof, provided, however, that any NonDisclosure and Development Agreement and Non-Competition and Non-Solicitation
Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the
Executive has executed this Agreement as of the day and year first above written.
PRESSURE BIOSCIENCES, INC.
By:
Executive
Richard T. Schumacher
131 Lake Ridge Drive
Taunton, MA 02780
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SEVERANCE AGREEMENT
THIS AGREEMENT made as of the ______ day of April, 2006, by and between Pressure BioSciences, Inc., a Massachusetts
corporation, and [______________] (the "Executive").
WHEREAS, the Board of Directors (the "Board") of the Company (as hereinafter defined) recognizes that the possibility of a
termination without Cause (as hereinafter defined), and the possibility of a Change in Control (as hereinafter defined), can create
significant distractions for its key management personnel because of the uncertainties inherent in such situations;
WHEREAS, the Board has determined that it is essential and in the best interest of the Company and its stockholders to retain
the services of the Executive, in general, and particularly in the event of a threat or the occurrence of a Change in Control and to ensure his
continued and full attention, dedication and efforts in such event without undue concern for his personal financial and employment security;
and
WHEREAS, in order to induce the Executive to become an employee of the Company and to remain in the employ of the
Company, in general, and particularly in the event of a threat or the occurrence of a Change in Control, the Company desires to enter into
this Agreement with the Executive to provide the Executive with severance benefits in the event his employment is terminated without
Cause or as a result of, or in connection with, a Change in Control, in accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein, it is agreed as follows:
1. DEFINITIONS.
1.1 ACCRUED COMPENSATION. For purposes of this Agreement, "Accrued Compensation" shall mean an amount which shall include
all amounts earned or accrued through the "Termination Date" (as hereinafter defined) but not paid as of the Termination Date, including (i)
base salary, (ii) reimbursement for reasonable and necessary business expenses incurred by the Executive on behalf of the Company,
pursuant to the Company's expense reimbursement policy in effect at such time, during the period ending on the Termination Date, and (iii)
vacation pay.
1.2 BASE SALARY. For purposes of this Agreement, "Base Salary" shall mean the greater of the Executive's annual base salary (a) at the
rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to the
Termination Date.
1.3 CAUSE. The Company may terminate the Executive's employment at any time for "Cause". For purposes of this Agreement, "Cause"
means (i) any act of personal dishonesty or a breach of trust by the Executive; (ii) intentional violation of the Company’s Code of Conduct
or other Company codes or policies or procedures that are applicable to the Executive; (iii) the commission by the Executive of any crime
classified as a felony under any Federal, state or local law; (iv) any breach by the Executive of the Employee Non-Competition and Non-
Solicitation Agreement or the Employee & Contractor Non-Disclosure and Developments Agreement, each dated as of the date hereof; (v)
the use by the Executive of a controlled substance without a prescription or the use of alcohol which in any way impairs the Executive’s
ability to carry out his duties and responsibilities; (vi) conduct by the Executive constituting an act of moral turpitude, or acts of physical
violence while working for the Company; (vii) the Executive’s willful failure or refusal to perform his duties on behalf of the Company
which are consistent with the scope and nature of the Executive’s responsibilities, or otherwise to comply with a lawful directive of the
Company; and (viii) the Executive’s repeated failure to carry out his duties and responsibilities in a satisfactory manner, provided the
Company provides the Executive with notice of such failure and the Executive does not correct such failure within a period of thirty (30)
days following such notice.
1.4 CHANGE IN CONTROL. For the purpose of this Agreement, a "Change of Control" shall mean:
a. The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 40% or more of the then outstanding shares of common stock of the Company (the “Outstanding Company Common
Stock”); provided, however, that any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) of the
Company or its subsidiaries of 40% or more of Outstanding Company Common Stock shall not constitute a Change in Control; and
provided, further, that any acquisition by a corporation with respect to which, following such acquisition, more than 50% of the then
outstanding shares of common stock of such corporation, is then beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such acquisition
in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common
Stock, shall not constitute a Change in Control; or
b. Any transaction which results in the Continuing Directors (as defined in the Certificate of Incorporation of the Company)
constituting less than a majority of the Board of Directors of the Company; or
c. Approval by the stockholders of the Company of (i) a reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock
immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock of the corporation resulting from
such a reorganization, merger or consolidation, (ii) a complete liquidation or dissolution of the Company or (iii) the sale or other
disposition of all or substantially all of the assets of the Company, excluding a sale or other disposition of assets to a subsidiary of the
Company.
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d. Anything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a
Change of Control results from or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a corporation or
other entity in which the Executive has a greater than ten percent (10%) direct or indirect equity interest, such event shall not constitute a
Change of Control.
1.5 COMPANY. For purposes of this Agreement, "Company" shall mean Pressure BioSciences, Inc. and shall include its "Successors and
Assigns" (as hereinafter defined).
1.6 DISABILITY. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which impairs the Executive's
ability to substantially perform his duties with the Company for a period of one hundred eighty (180) consecutive days, and the Executive
has not returned to his full time employment prior to the Termination Date as stated in the "Notice of Termination" (as hereinafter defined).
1.7 GOOD REASON. For purposes of this Agreement, “Good Reason” shall mean:
a. Material diminution in the Executive’s offices, titles and reporting requirements, authority, duties or responsibilities as in
effect as of a Change or Control or at any time in the ninety (90) days prior to a Change of Control or Notice of Termination;
b. Material Reduction in the Executive’s Base Salary, unless such reduction is part of a company wide reduction in salary for
all similarly situated executives;
c. The Company requiring the Executive to be based at any office or location more than fifty (50) miles from the Company’s
headquarters as of the date hereof;
d. Any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this
Agreement; or
e. Any failure by the Company to comply with and satisfy Section 3 hereof.
1.8 NOTICE OF TERMINATION. For purposes of this Agreement, "Notice of Termination" shall mean (i) a written notice from the
Company of termination of the Executive's employment which indicates the specific termination provision in this Agreement relied upon, if
any, and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated; or (ii) a written notice from the Executive of his resignation for Good Reason, which
indicates the specific provision in Section 1.7 herein, and which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for resignation by the Executive for Good Reason.
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1.9 SUCCESSORS AND ASSIGNS. For purposes of this Agreement, "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or
otherwise.
1.10 TERMINATION DATE. For purposes of this Agreement, "Termination Date" shall mean in the case of the Executive's death, his
date of death, in the case of Good Reason, the last day of his employment, and in all other cases, the date specified in the Notice of
Termination.
2. TERMINATION OF EMPLOYMENT.
2.1 CHANGE OF CONTROL. If the Executive's employment with the Company shall be terminated within twelve (12) months
following a Change in Control, then the Executive shall be entitled to the following compensation and benefits:
a. If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) by
reason of the Executive's death, or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive the Accrued
Compensation only.
b. If the Executive's employment with the Company shall be terminated without Cause by the Company or by Executive for
Good Reason, then the Executive shall be entitled to each and all of the following:
i. The Company shall pay the Executive all Accrued Compensation;
ii. The Company shall continue to pay the Executive his Base Salary for a period of one (1) year from the Termination
Date in accordance with its normal payroll practices and subject to applicable tax withholding; provided, however, that if the Company
determines that such payments would constitute deferred compensation within the meaning of Section 409A of the Internal Revenue Code
of 1986, as amended, then the Executive agrees to the modifications with respect to timing of such payments in accordance with Section 6
hereof; and
iii. Continue to provide the Executive with medical and dental benefits on the same terms and conditions provided to
other executives of the Company for a period of one (1) year from the Termination Date.
c. The amounts provided for in Sections 2.1(a) and 2.1(b)(i) shall be paid in a single lump sum cash payment within five (5)
days after the Executive's Termination Date (or earlier, if required by applicable law).
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2.2 TERMINATION OTHER THAN CHANGE OF CONTROL. If the Executive's employment with the Company is terminated,
other than within twelve (12) months following a Change of Control, then the Executive shall be entitled to the following compensation
and benefits:
a. If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) by
reason of the Executive's death, or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive the Accrued
Compensation.
b. If the Executive's employment with the Company shall be terminated by Company without Cause or by the Executive for
Good Reason, then the Executive shall be entitled to each and all of the following:
i. The Company shall pay the Executive all Accrued Compensation;
ii. The Company shall continue to pay the Executive his Base Salary for the period of one (1) year from the Termination
Date in accordance with its normal payroll practices and subject to applicable tax withholding; provided, however, that if the Company
determines that such payments would constitute deferred compensation within the meaning of Section 409A of the Internal Revenue Code
of 1986, as amended, then the Executive agrees to the modifications with respect to timing of such payments in accordance with Section 6
hereof; and
iii. Continue to provide the Executive with medical and dental benefits on the same terms and conditions provided to
other executives of the Company for a period of one (1) year from the Termination Date.
c. The amounts provided for in Sections 2.2(a) and 2.2(b)(i) shall be paid in a single lump sum cash payment within five (5)
business days after the Executive’s Termination Date (or earlier, if required by applicable law).
2.3 MITIGATION. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to
the Executive in any subsequent employment except as provided in Sections 2.1(b)(iii) and 2.2(b)(iii).
2.4 OTHER SEVERANCE BENEFITS. The severance pay and benefits provided for in this Section 2 shall be in lieu o f any other
severance or termination pay to which the Executive would otherwise b e entitled under any Company severance or termination plan,
program, practice or arrangement.
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2.5 DIVESTITURE OR SALE OF DIVISION. Notwithstanding any other provision of this Agreement to the contrary, the termination of
the Executive's employment with the Company in connection with the sale, divestiture or other disposition of a Subsidiary or "Division"
(as hereinafter defined) (or part thereof) shall not be deemed to be a termination of employment of the Executive for purposes of this
Agreement provided the Executive accepts employment offered by the purchaser or acquirer of such Subsidiary or Division (or part
thereof) and provided, in the event such sale, divestiture or other disposition of a Subsidiary or Division occurs subsequent to or in
connection with a Change in Control, the Company obtains an agreement from such purchaser or acquiror as contemplated in Section 3(c).
The Executive shall not be entitled to benefits from the Company under this Agreement as a result of such sale, divestiture, or other
disposition, or as a result of any subsequent termination of employment. "Division" shall mean a business unit or other substantial business
operation within the Company that is operated as a separate profit center, but that is not maintained by the Company as a separate legal
entity.
3. SUCCESSORS: BINDING AGREEMENT.
a. This Agreement shall be binding upon and shall inure to the benefit of the Company, and its Successors and Assigns, and
the Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such succession or assignment had taken place; provided, however,
that upon any such succession or assignment that constitutes or is in connection with a Change in Control, the obligations of the Company,
and its Successors and Assigns, under Section 2.2 of this Agreement shall terminate, and the obligations under the remaining Sections of
this Agreement, including but not limited to Section 2.1, shall continue in full force and effect upon the Executive and the corporation or
other entity acquiring the assets and business of the Company as contemplated within the definition of Successors and Assigns.
b. Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his or her
beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal representative.
c. In the event that a Division (or part thereof) is sold, divested, or otherwise disposed of by the Company subsequent to or in
connection with a Change in Control and the Executive is offered employment by the purchaser or acquiror thereof, the Company shall
require such purchaser or acquiror to assume, and agree to perform, the Company's obligations under this Agreement, in the same manner,
and to the same extent, that the Company would be required to perform if no such acquisition or purchase had taken place; provided,
however, neither such purchaser or acquiror, nor the Company and its Successors and Assigns, shall be obligated under Section 2.2 of this
Agreement, which Section 2.2 shall terminate upon such acquisition or purchase.
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4. ARBITRATION. Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity
hereof, (collectively, a "Claim") shall be settled by arbitration pursuant to the rules of the American Arbitration Association. Any such
arbitration shall be conducted by one arbitrator, with experience in the matters covered by this Agreement, mutually acceptable to the
parties. If the parties are unable to agree on the arbitrator within thirty (30) days of one party giving the other party written notice of intent
to arbitrate a Claim, the American Arbitration Association shall appoint an arbitrator with such qualifications to conduct such arbitration.
The decision of the arbitrator in any such arbitration shall be conclusive and binding on the parties. Any such arbitration shall be conducted
in Boston, Massachusetts, unless the Executive consents to a different location.
5. NOTICE. For the purposes of this Agreement, notices and all other communications provided for i n the Agreement (including the
Notice of Termination) shall be in writing and shall be (i) delivered by hand, (ii) transmitted by facsimile or electronic mail with receipt
confirmed, (iii) delivered by overnight courier service with confirmed receipt or (iv) mailed by first class U.S. mail postage pre-paid and
registered or certified, return receipt requested and addressed to the respective addresses last given by each party to the other, provided that
all notices to the Company shall be directed to the attention of the President of the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of
change of address shall be effective only upon receipt.
6. 409A COMPLIANCE. Notwithstanding any other provision herein to the contrary, the Company shall make the payments required
hereunder in compliance with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and any interpretative
guidance issued thereunder. The Company may, in its sole and absolute discretion, delay payments hereunder or make such other
modifications with respect to the timing of payments as it deems necessary to comply with said Section 409A.
7. RELEASE. The Executive agrees that, with the exception of the Accrued Compensation due to him in accordance with the terms
hereunder, that the payment of any severance under Section 2.1(b)(ii) and (iii) and Section 2.2(b)(ii) and (iii) is subject to and conditioned
upon the execution and delivery by the Executive to the Company of a Settlement and Release Agreement (the “Release Agreement”) in
favor of the Company, its affiliates and their respective officers, directors, employees and agents in form and substance reasonably
acceptable to the Company and the expiration of any revocation period provided for under the Release Agreement.
8. NO EMPLOYMENT RIGHT. This Agreement does not constitute, and shall not be construed to provide, any assurance of continuing
employment. Executive's employment with the Company and of its Successors or Assigns is "at will," and, subject to the terms and
conditions of this Agreement, may be terminated by Executive or the Company at any time.
9. NON-DISPARAGEMENT. Executive agrees that he will not make or cause to be disclosed any negative, adverse or derogatory
statements to any media outlet, industry group, financial institution, consultant, client or customer of the Company or any of its affiliates or
any of their directors, officers, employees, agents or representatives, or about any of the Company’s or its affiliates products or services,
business affairs, financial condition or prospects for the future.
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10. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing, specifying such modification, waiver or discharge, and signed by the Executive and the Company.
11. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with t h e laws of the
Commonwealth of Massachusetts without giving effect to the conflict of laws principles thereof. Any action brought by any party to this
Agreement to enforce any decision of an arbitrator made as contemplated in Section 5 above shall be brought and maintained in a court of
competent jurisdiction in the Commonwealth of Massachusetts.
12. SEVERABILITY. The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions hereof.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior
severance agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject
matter hereof, provided, however, that any NonDisclosure and Development Agreement and Non-Competition and Non-Solicitation
Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the
Executive has executed this Agreement as of the day and year first above written.
PRESSURE BIOSCIENCES, INC.
By:
Executive
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Edward H. Myles
Edmund Ting, Ph.D
Nathan P. Lawrence, Ph.D
Alexander Lazarev, Ph.D
Matthew B. Potter
List of Officers to Whom Provided
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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (File Nos. 333-30320, 333-24749 and
333-128594) and Form S-3 (File No. 333-148227) of Pressure BioSciences, Inc. (formerly Boston Biomedica, Inc.) of our report dated
March 27, 2008, relating to the consolidated financial statements which appears in the Annual Report to Shareholders, which is included in
this Annual Report on Form 10-K of Pressure BioSciences, Inc., for the year ended December 31, 2007.
EXHIBIT 23.1
/s/ UHY LLP
Boston, Massachusetts
March 27, 2008
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard T. Schumacher, President and Chief Executive Officer (Principal Executive Officer) of Pressure BioSciences, Inc., certify that:
1. I have reviewed this report on Form 10-K of Pressure BioSciences, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-
15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 27, 2008
Name:
Title:
/s/ Richard T. Schumacher
Richard T. Schumacher
President Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Edward H. Myles, Senior Vice President and Chief Financial Officer, and Principal Financial and Principal Accounting Officer of
Pressure BioSciences, Inc., certify that:
1. I have reviewed this report on Form 10-K of Pressure BioSciences, Inc
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 27, 2008
/s/ Edward H. Myles
Edward H. Myles
Senior Vice President of Finance & Chief
Financial Officer
(Principal Financial and Accounting Officer)
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
EXHIBIT 32.1
In connection with the Annual Report on Form 10-K of Pressure BioSciences, Inc., a Massachusetts corporation (the “Company”) for
the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Richard T.
Schumacher, President & Chief Executive Officer of Pressure BioSciences, Inc., a Massachusetts corporation (the “Company”), do hereby
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United
States Code) that:
(1) The Report of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 27, 2008
/s/ Richard T. Schumacher
Richard T. Schumacher
President and Chief Executive
Officer
(Principal Executive Officer)
A signed original of this written statement required by Section 906 has been provided to Pressure BioSciences, Inc., and will be retained by
Pressure BioSciences, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
EXHIBIT 32.2
In connection with the Annual Report on Form 10-K of Pressure BioSciences, Inc., a Massachusetts corporation (the “Company”) for
the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Edward H.
Myles, Senior Vice President & Chief Financial Officer of Pressure BioSciences, Inc., a Massachusetts corporation (the “Company”), do
hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code) that:
(1) The Report of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 27, 2008
/s/ Edward H. Myles
Edward H. Myles
Senior Vice President of Finance &
Chief Financial Officer (Principal
Financial and Principal Accounting
Officer)
A signed original of this written statement required by Section 906 has been provided to Pressure BioSciences, Inc., and will be retained by
Pressure BioSciences, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.