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, 2009 or
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)
Title of Each Class
Name of Each Exchange on Which Registered
Securities registered pursuant to Section 12(b) of the Act:
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 in Rule 405 of the Securities Act.
Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ 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 Securities
Exchange Act of 1934 during the preceding 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 ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that registrant was required to submit and post such files.
Yes ¨ No ¨
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. x
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 ¨
Accelerated filer ¨
Non-accelerated filer ¨
(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 ¨ No x
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2009 was
$3,256,650 based on the closing price of the common stock as quoted on the NASDAQ Capital Market on that date.
As of March 26, 2010, there were 2,350,186 shares of the registrant’s common stock outstanding.
Documents Incorporated by Reference
Part III of this Form 10-K incorporates information by reference from the issuer’s definitive proxy statement which will be filed no later than
120 days after the end of the fiscal year covered by this report.
TABLE OF CONTENTS
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Reserved
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(T).
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
Item 15.
Exhibits and Financial Statement Schedules
PART IV
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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:
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our ability to raise additional equity or debt financing on acceptable terms, if at all;
our belief that we have sufficient liquidity to finance operations into the first quarter of 2011;
our need to take additional cost reduction measures, cease operations or sell our operating assets, if we are unable to obtain
sufficient additional financing in the future;
the amount of cash necessary to operate our business;
the anticipated uses of grant revenue and increased grant revenue in future periods;
our plans and expectations with respect to our pressure cycling technology (PCT) operations;
our belief that PCT has achieved significant market acceptance in the mass spectrometry market;
the expected development and success of new product offerings;
the potential applications for PCT in, and the demonstration of proof-of-concept of PCT for, pathogen inactivation, protein
purification, control of chemical reactions and immunodiagnostics, among others;
the expected benefits and results from our research and development efforts;
the expected benefits and results from our collaboration program, strategic alliances and joint ventures;
our expectation of obtaining additional research grants from the government in the future;
our expectations of the results of our development activities funded by government research grants;
general economic conditions; and
the anticipated future financial performance and business operations of our company.
our reasons for focusing our resources in the market for genomic, proteomic and small molecule sample preparation;
the importance of mass spectrometry as a laboratory tool;
the advantages of PCT over other current technologies as a method of sample extraction and for other applications, including
pathogen inactivation, protein purification, control of chemical reactions and immunodiagnostics;
sample preparation may be an impediment to research and discovery;
the capabilities and benefits of our PCT sample preparation system and consumable products;
that other laboratory scientists will achieve results comparable to those reported to date by certain research scientists who
have published or presented publicly on PCT; and
our ability to expand our customer base in sample preparation and for other applications of PCT.
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
Company. We also use the terms ProteoSolveTM, ProteoSolveLRS
trademarks of the Company.
TM, the Power of PCT TM, the PCT ShredderTM, all of which are unregistered
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 application specific kits (which include consumable products and reagents) together make up the PCT Sample Preparation System (“PCT
SPS”).
We have experienced negative cash flows from operations with respect to our pressure cycling technology business since our
inception. During 2008, we undertook a number of cost reduction measures including a comprehensive restructuring program, to significantly
reduce costs, centralize core operations, and refocus business strategy in specific areas where our products have found significant initial
market acceptance. The restructuring program included: a reduction in personnel of eight full-time employees (40% of the workforce),
reduction in travel and meeting attendance for all personnel, decreases in the base salary of most of our employees and all of our executive
officers, a shutdown of our R&D facility in Rockville, MD, a consolidation of our R&D activities in Massachusetts, and delay of several
research & development and marketing programs. These initiatives have significantly decreased cash utilization, from just under $1 million
per quarter in the second half of 2008 to an average of approximately $635,000 per quarter during 2009. As of December 31, 2009, we had a
total cash balance of approximately $1,630,000. In March 2010, we closed on a second tranche of our private placement of units of Series B
Convertible Preferred Stock and Series B Warrants to purchase shares of Series B Convertible Preferred Stock with gross proceeds of
approximately $500,000. Based on our current projections, we believe our current cash resources, which includes the funds we received from
the private placements we completed in 2009 and 2010, are sufficient to fund our normal operations into the first quarter of 2011. Depending
upon the results of the Company’s financing and partnering activities and sales efforts, we may make additional cost reductions as required to
accomplish this goal.
Despite the difficulty in the capital markets and the necessity to implement a very challenging restructuring program, we are quite proud
of the number of accomplishments that we realized during 2009. These activities included the following:
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Sale of Series A Convertible Preferred Stock in a Private Placement – On February 12, 2009, we received $1.8 million from the
sale of 156,980 units, consisting of shares of Series A Convertible Preferred Stock and warrants, in a private placement to 35
accredited investors.
Sale of Series B Convertible Preferred Stock in a Private Placement – On November 18, 2009, we received $1.2 million from
the sale of 62,039 units, consisting of shares of Series B Convertible Preferred Stock and warrants, in a private placement to 20
accredited investors.
Collaboration with Protein Forest, a division of Cell BioSciences – On September 30, 2009, we entered into a strategic co-
marketing/selling and research & development agreement with Protein Forest, Inc., a division of Cell BioSciences. The
companies intend to co-market their respective product lines, including in industry publications, at scientific meetings, on each
company’s website, through common collaborator studies, and at key industry trade shows. PBI and Protein Forest also intend
to explore ways to co-develop new instrumentation, accessories/modules for existing instrumentation, and consumables that
combine the protein fractionation/software products of Protein Forest with the extraction and protein digestion enhancement
products of PBI.
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Significant Improvements in DNA Yield From Challenging Forensic Samples Reported With Pressure Cycling Technology –
Scientists from the University of North Texas Health Science Center at Fort Worth, Texas ("UNTHSC") reported notable
improvements in the yields of DNA from challenging forensic samples, such as human hair and bone samples, when the
Company's pressure cycling technology was added to the DNA extraction workflow, as compared to the workflow without
PCT.
PCT Highlighted at the American Phytopathological Society’s 2009 Annual Meeting - Scientists from three separate U.S.
Department of Agriculture (USDA) laboratories presented data generated through the use of PCT. The presentations related to
innovative, plant pathology studies of various pathogens that can significantly and adversely affect important food crops, such
as strawberries, wheat, peas, lentil, barley, canola, and especially citrus.
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Launch of New Products –
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PCT MicroTube Adapter Kit - The PCT MicroTube Adapter Kit includes an ergonomically designed, space-saving
Workstation, PCT MicroTubes and MicroCaps, and specialized tools to enable the user to process up to forty-eight
samples simultaneously in the Company's primary product, the PCT Sample Preparation System, as compared to three
samples currently.
ProteoSolve-CE NATIVE and ProteoSolve-CE STRINGENT, two novel, pressure cycling technology dependent kits
for the extraction of proteins from the nematode (“worm”) Caenorhabditis elegans (“C. elegans”). C. elegans is one of
the most widely used model organisms in laboratory research today.
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Receipt of IRS tax refund - We received $623,262 due to provisions in the American Recovery and Reinvestment Act of 2009
relating to net operating loss carry-backs.
In January 2010, we moved our research and development department to new state of the art laboratories at the Venture Development
Center of the University of Massachusetts Boston. The Umass VDC offers us a number of advantages, including: the opportunity to work
with other life science development stage companies, the opportunity to network with life science departments within the university of
Massachusetts system, and access to part-time help from the students enrolled in the Biology program at Umass Boston.
Since we began operations as Pressure BioSciences in February 2005, we have installed 128 Barocycler instruments. Our customers
include researchers at academic laboratories, government agencies and biotechnology, pharmaceutical and other life sciences companies in the
United States, and six foreign distribution partners.
Installed units
2005
5
2006 2007 2008 2009
54
20
41
8
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 (particularly enzymatic) reactions; and
immunodiagnostics.
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.
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Available Information
Our Internet website address is http://www.pressurebiosciences.com. Through our website, we make available, free of charge, this 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 & 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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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, and PCT consumable products, fill 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.
Mass Spectrometry
Mass spectrometry is one of the most powerful laboratory tools used today, and is frequently used by research scientists to evaluate
proteins and nucleic acids (DNA and RNA). It is playing an increasingly important role in the analysis of biological samples in life sciences
research. A number of important companies and research laboratories in this market are currently our customers, or are in the process of
evaluating our technology for use in their laboratories.
Our plan is to focus primarily on the application of PCT-enhanced protein digestion for the mass spectrometry market and the advantages
of PCT in this market, and the use of PCT in biomarker discovery, soil and plant biology, counter bio-terror and tissue pathology applications.
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 the quality of sample preparation.
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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 life sciences in which we already have products;
the demonstration of the effectiveness 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 multiple sites, resulting in increasing
number of 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 that have been made by various researchers based on their experiences with PCT:
Title
Authors
Category
Affiliation
Richard T. Schumacher
Paper
Vera Gross, Ph.D.
Edmund Y. Ting, ScD.
Alexander Lazarev, Ph.D.
Pressure
BioSciences
Reference
Genetic Engineering News
(GEN) Dec 1 2009 (Vol.
29, No. 21)
Pressure Cycling for
Sample Preparation
PCT System Provides
Automated Alternative to
Manual Methods
Pressure Cycling
Technology (PCT)
Applications for DNA
Extractions from
Challenging Forensic
Samples
Phosphopeptide isolation
from Caenorhabditis
elegans using the CE PrEP,
PCT, and PhosphoScan
Technologies
Incidence and spatial
distribution of Rhizoctonia
and Pythium species
determined with real-time
PCR
High-pressure assisted in-
gel tryptic digest: qualitative
and
quantitative aspects
Suzanne Gonzalez,
Elizabeth Feller, Dixie
Peters, Bruce Budowle,
and Arthur Eisenberg
Oral Presentation University of
North Texas
Center for Human
Identification
20th International
Symposium on
Human Identification
Gabrielle E. Giese, Gary
B. Smejkal. Feixia Chu3,
John J. Collins1, and
Winston P. Kuo
Poster
University of New
Hampshire
Human Proteome
Organization
(HUPO) 2009 8th World
Congress
K. L. Schroeder, T. C.
Poster
USDA
Paulitz, and P. A. Okubara
Michail Alterman,
Poster
FDA, CBER
Melkamu Getie-Kebtie;
Alexander Lazarev; and
Vera S. Gross
American
Phytopathological Society's
2009 Annual Meeting
American Society for Mass
Spectrometry (ASMS)
Annual Meeting 2009
Alexander V. Lazarev;
Poster
Emily Freeman; Vera S.
Gross; Greta Carlson;
Edmund Ting; Alexander R.
Ivanov
Emily Freeman; Yelena
Poster
Margolin; and Alexander R.
Ivanov
Proteomics Under Pressure:
Rapid Extraction and
Digestion in a Single Tube
Searching for efficient and
high throughput
alternatives for essential
sample preparation
techniques in mass
spectrometry-based
functional proteomics
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Pressure
BioSciences
American Society for Mass
Spectrometry (ASMS)
Annual Meeting 2009
Harvard School of
Public Health,
Department of
Genetics and
Complex Disease
The Association of
BioMolecular Resources
Facilities (ABRF) 2009
Company Products
We believe our PCT products allow researchers to improve scientific research studies in the life sciences field. All of our products are
developed with the expectation of meeting or exceeding the needs of research scientists while enhancing the safety, speed, and quality that is
available to them with existing sample preparation technology.
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 to release nucleic acids,
proteins, lipids and small molecules from the specimen into our consumable processing 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 laboratory cold
room. 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 nucleic acids, proteins, lipids, 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 (“PCT
SPS”).
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 (hydraulic). 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 directors as a demonstration instrument and is being marketed as a second instrument alternative to our PCT SPS.
PCT MicroTube Adapter Kit - The PCT MicroTube Adapter Kit includes an ergonomically designed, space-saving Workstation, PCT
MicroTubes and MicroCaps, and specialized tools to enable the user to process up to forty-eight samples simultaneously in the Company's
primary product, the PCT SPS, as compared to three with the Barocycler NEP3229.
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PCT Shredder – The patent-pending "PCT Shredder" is designed to help research scientists safely, rapidly, and conveniently disrupt very
tough samples - such as ticks, muscle, and seeds, that require homogenization prior to PCT or other sample preparation methods. The PCT
Shredder uses a similar PULSE Tube as the PCT SPS, and allows scientists to homogenize tough samples prior to extraction with the PCT
SPS, but without the need to transfer the sample into a second processing container between steps.
Consumable Products
PULSE Tubes (FT500) – The FT500 PULSE Tube 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, buffers are added to the
PULSE tube, the PULSE Tube is capped and 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, lipids, and small molecules.
Non-Disk PULSE Tubes (FT500-ND) – The FT500-ND PULSE Tube is a specially-designed, plastic, single-use, processing container
with one chamber separated by a small disk with about sixty small holes. The FT500-ND is similar to the FT500 in look and feel, except there
is no Lysis Disk separating the body of the processing container into two chambers, as in the FT500-ND. The design change was based on
strong market demand for a new PCT consumable for the rapid and reproducible processing of solutions and suspensions that do not require
partial homogenization by passage through a Lysis Disk, and for a consumable that could accept smaller sample volumes. It is the result of
more than a year of testing in several laboratories using various sample sizes and types. The FT500-ND offers variable sample volumes (5x
the range of the existing FT500).
ProteoSolve - LRS – (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. ProteoSolve-LRS 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.
ProteoSolve - SB – (ProteoSolve for Systems Biology) is a PCT-dependent method for the simultaneous extraction, isolation, and
fractionation of nucleic acids (DNA and RNA), proteins, and lipids from animal and plant samples routinely used in laboratory research. This
patent-pending kit contains proprietary reagents, consumable processing containers (PULSE Tubes), and instructions for use, and is intended
to be used with the Company's patented PCT Sample Preparation System. The kit is based on the unique approach to a "systems biology"
sample preparation method that was first unveiled during early 2008, in collaboration with Dr. Alexander Ivanov of the Harvard School of
Public Health.
ProteoSolve – CE – (ProteoSolve for Conventional Extraction) is a PCT-dependent kit for the extraction of proteins from a variety of
samples using optimized detergent-based reagent system compatible with two-dimensional electrophoresis or two-dimensional
chromatographic separation for proteomic analysis. The kit contains all of the reagents and instructions necessary for the extraction of either
denatured or non-denatured proteins, which can then be used for the analysis of protein structure and function.
We believe our development of these products has helped, and will continue to help, drive the adoption of PCT within the life sciences
market.
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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 and commercialization of our technology. We
generally start by submitting initial grant requests that are in response to requests for proposals or “RFPs” from the federal government
through their Small Business Innovation Research (“SBIR”) program. Initial grants (“SBIR I”) are meant to fund approved research projects
for six months, and generally have budgets of approximately $100,000 to $150,000. Additionally, our work in SBIR Phase I grants has been
successful and we have applied, and may in the future apply, for larger NIH SBIR Phase II grants. Such larger grants are typically for a two
year period and are in excess of $750,000 to support significant research projects in areas we would otherwise 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 Phase I grants and one SBIR Phase II grant. Both of our Phase I grants have been completed. The data on one of the
Phase I grants was the basis for the submission, and subsequent award, of our Phase II award of approximately $850,000 in August 2008. The
Phase II grant is for work in the area of using PCT to extract protein biomarkers, sub-cellular molecular complexes, and organelles, with the
expectation that these studies will ultimately lead to the release of a new, commercially available PCT-based system, with validated protocols,
end-user kits, and other consumables intended for the extraction of clinically important protein biomarkers, sub-cellular molecular complexes,
and organelles from human and animal tissues. As of December 31, 2009, the amount of the Phase II SBIR grant available to fund future
research was approximately $337,000.
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
offer 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 PCT
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.
- 7 - -
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, could 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, and biotechnology, pharmaceutical, and other life
science companies in the United States. Our customers also include five foreign distribution partners. During 2009, we continued to
commercialize PCT with sales, and/or leases of our instrumentation to customers in all of these categories. Our goal in 2010 is to continue our
market penetration in these target groups. We also feel that there is a significant opportunity to sell and/or lease 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, and if we are successful in our attempts to attract additional capital, 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.
- 8 - -
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, and “Min” denoting minimized or reduced).
Key Attributes
Closed System
Storage, Transport
Versatility
Reproducibility
Efficiency
Shearing Molecules
Incumbent Technologies
Bead
Tissue
Mortar French
Sonication Beating Homogenizer Pestle Press PCT
-
-
-
-
-
Yes
+
+
-
-
-/+
Yes
-
-
-
-
-
Yes
-
-
-
-
-
-
-
-
-
-
Min
Yes
+
+
+
+
+
Min
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. We have 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 expenses were approximately $1.2 million and $1.8 million for the years ended December 31, 2009 and
2008, respectively. Our research and development activities are split into two functional areas, applications and engineering.
- 9 - -
Applications Research and Development
Our highly educated and trained staff has years of experience in molecular and cellular biology, virology, and proteomics. Our team of
scientists focuses on the development of PCT-dependent genomic, proteomic, and small molecule sample preparation methods that we believe
will result in near-term commercial opportunities. Dr. Alexander 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.
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. The primary focus of our engineering group is to
ensure seamless production processes, perform installations and field service, and work with our application scientists to complete the
development of a high throughput sample processing system for the mass spectrometry market.
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 SPS. 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 Vice President of Sales, Matthew B. Potter. Mr. Potter is responsible for directing the efforts of
our two full-time sales directors, and for covering accounts in the Mid-West and New England regions. We believe that hiring seasoned sales
professionals, with significant industry experience, will allow us to more effectively penetrate the market with a small, focused sales force.
Throughout 2010, we plan to monitor this strategy and may increase the number of sales professionals if our financial resources permit and if
we believe that doing so will accelerate our commercialization efforts.
Foreign Distributor Network
In April 2009, we signed a distribution agreement with TouchDown BioMarketing BV (“TouchDown”), of The Netherlands pursuant to
which we granted TouchDown exclusive distribution rights to all of our products in The Netherlands. The agreement is effective from April 1,
2009 through September 30, 2010.
In June 2008, we signed 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 agreement is effective from January 1, 2008 to December 31, 2010.
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.
- 10 - -
In May 2008, we signed a distribution agreement with the Ivorist Group (“Ivorist”), of Taipei, Taiwan pursuant to which we granted
Ivorist exclusive distribution rights to all of our products in Taiwan. The agreement is effective from May 15, 2008 through June 30, 2010.
In May 2008, we signed a distribution agreement with Analyx Technology Corporation (“Analyx”), of Beijing, People’s Republic of
China, pursuant to which we granted Analyx exclusive distribution rights to all of our products in the People’s Republic of China. The
agreement is effective from May 15, 2008 through June 30, 2010.
Marketing
Our marketing function includes Dr. Nathan Lawrence, our Vice President of Marketing, and a limited amount of external support from
independent service providers. 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 function 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 Research and
Development), but marketing drives the collaborative process. Our marketing team is also responsible for the continued coordination and
support of our foreign, and domestic, distribution partners.
Domestic Co-Marketing Partner
In December 2008, we entered into a strategic marketing, distribution, and technology co-development Agreement with Omni
International (“Omni”) of Marietta, Georgia. Under the terms of the Agreement, we: (1) share market data, customer leads and technology
assessments; (2) co-promote certain products at industry trade shows beginning in 2009; (3) license Omni to sell PBI's recently released,
patent-pending PCT Shredder to laboratories worldwide; and (4) co-develop new instrumentation and consumables that combine the
homogenization capabilities of Omni with our extraction capabilities in an effort to provide research scientists with a targeted approach to
better solve certain sample preparation issues. Programs intended to be developed under this agreement have been delayed due to cost cutting
measures incurred by both companies in 2009.
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 and maintain 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.
License Agreements Relating to Pressure Cycling Technology
BioMolecular Assays, Inc.
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, 2009 and 2008, we incurred
$30,548 and $29,553 in royalties.
- 11 - -
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.
Battelle Memorial Institute
In December 2008, we entered into an exclusive patent license agreement with the Battelle Memorial Institute ("Battelle"). The licensed
technology is described in the patent application filed by Battelle on July 31, 2008 (US serial number 12/183,219). This application includes
subject matter related to a method and a system for improving the analysis of protein samples, including through an automated system utilizing
pressure and a pre-selected agent to obtain a digested sample in a significantly shorter period of time than current methods, while maintaining
the integrity of the sample throughout the preparatory process. Pursuant to the terms of the agreement, we paid Battelle a non-refundable
initial fee of $35,000. In addition to royalty payments on net sales on “licensed products”, we are obligated to make minimum royalty
payments for each year that we retain the rights outlined in the patent license agreement and we are required to have our first commercial sale
of the licensed products within one year following the issuance of the patent covered by the licensed technology.
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. 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 26, 2010, we had thirteen (13) full-time employees.
- 12 - -
Our 13 employees include four employees in the sales and marketing and technical support functions, three in general and administrative,
three in applications research and development, and three in engineering research and development.
Our Executive Officers
The following table sets forth the names, ages and positions of our current executive officers as of March 26, 2010:
Name
Richard T. Schumacher
Edmund Ting, Ph.D.
Nathan P. Lawrence, Ph.D.
Alexander Lazarev, Ph.D.
Matthew B. Potter
Age
59
56
55
45
46
Position
President, Chief Executive Officer, Chief Financial Officer, Treasurer,
Secretary and Director
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.
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 has served as our Chief Financial Officer and Treasurer
since November 18, 2008. 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.
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 and 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.
- 13 - -
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, and 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.
- 14 - -
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 we commenced our
pressure cycling technology operations. As of December 31, 2009, we had available cash of approximately $1.6 million. In March 2010, we
closed on a second tranche of our private placement of units of Series B Convertible Preferred Stock and warrants to purchase shares of Series
B Convertible Preferred Stock with gross proceeds of approximately $500,000. Based on our current projections, we believe our current cash
resources, which includes the funds we received from the private placements we completed in 2009 and 2010, are sufficient to fund our
normal operations into the first quarter of 2011. We believe we will need substantial additional capital to fund our current operation beyond
the first quarter of 2011.
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. We may seek to raise any necessary additional funds through the issuance of warrants, equity or debt
financings or executing collaborative arrangements with corporate partners or other sources, which may be dilutive to existing stockholders or
otherwise have a material effect on our current or future business prospects. 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 substantially diluting or adversely affecting the holdings or the rights of
the holders of our 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;
implement additional cost reduction initiatives; or
limit or cease our operations or otherwise reduce planned expenditures and forego other business opportunities, which could
harm our business.
Our actual results and performance, including our ability to raise additional capital, may be adversely affected by current economic
conditions.
Our actual results and performance could be adversely affected by the current economic conditions in the global economy, which pose a
risk to the overall demand for our products from our customers who may elect to defer or cancel purchases of, or decide not to purchase, our
products in response to continuing tightness in the credit markets, negative financial news and general uncertainty in the economy. In addition,
our ability to obtain additional financing, on acceptable terms, if at all, may be adversely affected by the crisis in the credit markets and the
uncertainty in the current economic climate.
- 15 - -
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, and from government grants.
We currently rely on revenues from our pressure cycling technology products and services in the sample preparation area and from
revenues derived from grants awarded to us by governmental agencies, such as the National Institutes of Health. 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. Competition for government grants
is very intense, and we can provide no assurance that we will continue to be awarded grants in the future. If we are unable to increase
revenues from sales of our pressure cycling technology products and services and government grants, our business will fail.
Our business may be harmed if we encounter problems, delays, expenses, and complications that often affect early-stage companies.
We are an early-stage company and our pressure cycling technology business have a relatively 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, we will 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 is not
satisfied with the results of the evaluation of our products or if a customer cancels or changes its plans.
- 16 - -
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.
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 and sales 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, either because of competition in our industry for
such personnel or because of insufficient financial resources, our growth may be limited. Our success also depends in particular on our ability
to identify, hire, train and retain qualified engineering and sales personnel with experience in design, development and sales 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 additional alliances, joint ventures or other
business relationships to further develop, market and sell our pressure cycling technology product line. We may not be able to:
- 17 - -
·
·
·
·
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 five international distribution agreements, covering Belgium, France, Switzerland, Japan,
China, Taiwan and 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;
·
·
·
·
·
·
reduced protection for intellectual property rights in some countries;
protectionist laws and business practices that favor local companies;
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 lengthy sales cycle for our products;
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.
- 18 - -
We expect that we will be subject to regulation in the United States, such as the FDA, and overseas, if and when 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;
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.
- 19 - -
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.
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.
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.
- 20 - -
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.
The holders of our common stock could suffer substantial dilution as the result of the private placements we completed in 2009 and 2010.
In connection with the private placements we completed in 2009 and 2010, we issued shares of Series A Convertible Preferred Stock and
shares of Series B Convertible Preferred Stock, together with warrants to purchase shares of Series A Convertible Preferred Stock and
common stock in our first private placement, and together with warrants to purchase shares of Series B Convertible Preferred Stock in our
second private placement. Each share of Series A Convertible Preferred Stock and each share of Series B Convertible Preferred Stock is
convertible into 10 shares of common stock. If all of the shares of Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock, together with the warrants to purchase Series A Convertible Preferred Stock and Series B Convertible Preferred Stock and common
stock, were converted or exercised into shares of our common stock, an additional 6,483,620 shares of common stock would be issued and
outstanding. The additional issuance of common stock would cause immediate and substantial dilution to our existing stockholders, and could
cause a significant reduction in the market price of our common stock.
Our shares of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock are entitled to certain rights, privileges and
preferences over our common stock, including the right to receive dividends and a preference upon a liquidation of the company, which
could reduce amounts available for distribution to our common stockholders.
We have never declared or paid any cash dividends on our common stock and do not plan to pay any cash dividends on our common stock
in the foreseeable future. The holders of our shares of Series A Convertible Preferred Stock, however, are entitled to receive a cumulative
dividend at the rate of 5% per annum of the purchase price paid for the Series A Convertible Preferred Stock, payable semi-annually on June
30 and December 31, which commenced on June 30, 2009. The holders of our shares of Series B Convertible Preferred Stock are entitled to
receive a cumulative dividend at the rate of 5% per annum of the purchase price paid for the Series B Convertible Preferred Stock, payable
semi-annually on June 30 and December 31, which commenced on December 31, 2009. Dividends may be paid in cash or in shares of
common stock at our option, subject to certain conditions. If we elect to pay the dividends in cash, we will have less cash available for
operations, and less cash available to the holders of common stock upon a liquidation of the company. For the dividend payments on June 30,
2009 and December 31, 2009, we elected to pay the dividends in common stock. This had a dilutive effect on our common stockholders. If
we continue to elect to pay the dividends in common stock, our common stockholders will suffer additional dilution.
The Series A Convertible Preferred Stock and Series B Convertible Preferred Stock are also entitled to receive preferential treatment in
the event of liquidation, dissolution or winding up of our company, which could leave significantly less assets, if any, available for distribution
to our common stockholders upon a liquidation, dissolution or winding up of our company.
There is no guarantee that we will continue to meet the standards for continued listing on the NASDAQ Capital Market. The value of your
investment in our company may substantially decrease if we were delisted from NASDAQ.
As of the date of this Annual Report on Form 10-K, we are in compliance with the continued listing standards of the NASDAQ Capital
Market. However, we cannot guarantee that we will continue to meet the standards for listing in the future. Upon delisting from the
NASDAQ Capital Market, our common stock would be traded on the over-the-counter bulletin board (“OTC”). OTC transactions involve
risks in addition to those associated with transactions in securities traded on the NASDAQ Capital Market. Many OTC stocks trade less
frequently and in smaller volumes than NASDAQ listed stocks. Accordingly, delisting from the NASDAQ Capital Market could adversely
affect the trading price of our common stock, significantly limit the liquidity of our common stock and impair our ability to raise additional
funds.
- 21 - -
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 12 months. We exercised the renewal option to extend the lease term until July 14, 2010. We pay approximately
$6,500 per month for the use of these facilities.
Effective January 1, 2010, we entered into a three-year lease agreement with the University of Massachusetts, pursuant to which we are
leasing laboratory and office space on campus at the university for research and development activities. We will pay $5,000 per month for the
use of these facilities.
ITEM 3.
LEGAL PROCEEDINGS.
We are not currently involved in any legal proceedings.
ITEM 4.
RESERVED.
- 22 - -
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, 2008 through December 31, 2009.
Fiscal Year Ended December 31, 2008
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year Ended December 31, 2009
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Common Stock Price
High
$
Low
5.72 $
5.09
3.75
2.37
3.80
3.14
2.25
0.55
High
$
1.23 $
2.10
1.85
1.80
Low
0.55
0.80
1.31
1.32
As of March 26, 2010, there were 20,000,000 shares of common stock authorized of which 2,350,186 shares were issued and outstanding,
and held by 108 stockholders of record. As of March 26, 2010, we had 1,000,000 shares of preferred stock authorized of which 171,864
shares of Series A Convertible Preferred Stock and 88,711 shares of Series B Convertible Preferred Stock were issued and outstanding and
held by 68 stockholders of record. Each share of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock is
convertible into 10 shares of common stock.
We have never declared or paid any cash dividends on our common stock and do not plan to pay any cash dividends on our common stock
in the foreseeable future. As part of the private placement completed in February 2009, the holders of the Series A Convertible Preferred
Stock are entitled to receive a cumulative dividend at the rate of 5% per annum of $11.50 (the “Purchase Price”), payable semi-annually on
June 30 and December 31, which commenced on June 30, 2009 (with the first payment pro-rated based on the number of days occurring
between the date of issuance and June 30, 2009). The Series B Convertible Preferred Stock issued in the November 18, 2009 and March 18,
2010 private placements will pay a cumulative dividend at the rate of 5% per annum of the Purchase Price, payable semi-annually within 45
days of June 30th and December 31st, which commenced on December 31, 2009 (with the first payment pro-rated based on the number of
days occurring between the date of issuance and December 31, 2009 for the November 18, 2009 private placement or June 30, 2010 for the
March 18, 2010 private placement). Dividends may be paid in cash or in shares of common stock at our option, subject to certain conditions.
We issued 29,473 shares of common stock for the six month period ending June 30, 2009. The Board of Directors approved the issuance of
stock for the six month period ending June 30, 2009 and for the six month period ending December 31, 2009. The Series A holders will
receive 39,098 shares of common stock for the six month period ending December 31, 2009 and the Series B holders will receive 5,027 shares
of common stock for the prorated period ending December 31, 2009.
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Recent Sales of Unregistered Securities
On February 12, 2009, we completed a private placement, pursuant to which we sold an aggregate of 156,980 units (the “Series A Units”)
for a purchase price of $11.50 per unit, resulting in gross proceeds to us of $1,805,270 (the “Series A Private Placement”). The Series A Units
were issued and sold to a total of 35 accredited investors pursuant to a Securities Purchase Agreement entered into as of February 12, 2009 (the
“Securities Purchase Agreement”). Each Series A Unit consists of (i) one share of a newly created series of preferred stock, designated
“Series A Convertible Preferred Stock,” par value $0.01 per share (the “Series A Convertible Preferred Stock”) convertible into 10 shares of
our common stock, (ii) a warrant to purchase, at the purchaser’s election to be made within 7 days of the closing, either 10 shares of our
common stock, at an exercise price equal to $1.25 per share, with a term expiring 15 months after the date of closing (“15 Month Common
Stock Warrant”), or one share of Series A Convertible Preferred Stock at an exercise price equal to $12.50 per share, with a term expiring 15
months after the date of closing (“15 Month Preferred Stock Warrant”) (all purchasers elected to receive the 15 Month Preferred Stock
Warrant); and (iii) a warrant to purchase 10 shares of common stock at an exercise price equal to $2.00 per share, with a term expiring 30
months after the date of closing (the “30 Month Common Stock Warrants”).
On November 18, 2009, we sold an aggregate of 62,039 units (the “Series B Units”) of Series B Convertible Preferred Stock, par value
$0.01 per share (the “Series B Convertible Preferred Stock”) and warrants for a purchase price of $18.80 per Series B Unit (the “Series B
Purchase Price”), resulting in gross proceeds to us of $1,166,333. This is the first tranche of a $2.5 million private placement (the “Series B
Private Placement”). We closed on the second tranche of the Series B Private Placement on March 18, 2010 with the sale of an additional
26,672 Series B Units with gross proceeds of $501,434. Each Series B Unit consists of (i) one share of a newly created Series B Convertible
Preferred Stock convertible into 10 shares of our common stock and (ii) a warrant to purchase one share of Series B Convertible Preferred
Stock at an exercise price equal to $23.80 per share for the warrants issued in November 2009 and at an exercise price of $28.80 for the
warrants issued in March 2010, in each case with a term expiring on August 11, 2011 (“Series B Warrant”).
In connection with the Series B Private Placement, the Company paid a finder’s fee of $100,478, plus warrants to purchase 5,344 shares
of Series B Convertible Preferred Stock at $28.80 per share, expiring August 11, 2012.
In connection with each of the Series A Private Placement and the Series B Private Placement, the Company agreed that if it completes a
subsequent equity financing within one year from the initial closing of the Series A Private Placement and the Series B Private Placement,
respectively, it will offer each purchaser the opportunity to exchange the Series A Units or the Series B Units, as the case may be, purchased
for the equity securities issued in such subsequent financing, subject to compliance with applicable rules and regulations.
The sale of the units in the Series A Private Placement and the Series B Private Placement were issued and sold 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. The Company based such reliance upon representations made by each purchaser of Series A Units and Series B Units,
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 Series A Units and the Series B Units 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 Series A Units and the shares of
Series A Convertible Preferred Stock, 15 Month Preferred Stock Warrants and 30 Month Common Stock Warrants comprising the Series A
Units, and the Series B Units and the shares of Series B Convertible Preferred Stock and the Series B Warrants comprising the Series B Units
may not be re-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.
Repurchases by Pressure BioSciences
We did not repurchase any of our equity securities during the fourth quarter of 2009.
- 24 - -
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 application specific kits, which include consumable products and reagents, together make up the PCT Sample Preparation System (“PCT
SPS”).
We have experienced negative cash flows from operations with respect to our pressure cycling technology business since we commenced
our pressure cycling operations. During 2008, we undertook a number of cost reduction measures including a comprehensive restructuring
program, to significantly reduce costs, centralize core operations, and refocus business strategy in specific areas where our products have
found significant initial market acceptance. The restructuring program included: a reduction in personnel of eight full-time employees (40%
of the workforce), reduction in travel and meeting attendance for all personnel, decreases in the base salary of most of our employees and all of
our executive officers, a shutdown of our research and development facility in Rockville, MD, a consolidation of our research and
development activities in Massachusetts, and delay of several research and development and marketing programs. These initiatives have
significantly decreased cash utilization, from just under $1 million per quarter in the second half of 2008 to an average of approximately
$635,000 per quarter during 2009. As of December 31, 2009, we had a total cash balance of approximately $1,630,000. In March 2010, we
closed on a second tranche of our private placement of units of Series B Convertible Preferred Stock and warrants to purchase shares of Series
B Convertible Preferred Stock with gross proceeds of approximately $500,000. Based on our current projections, we believe our current cash
resources, which includes the funds we received from the private placements we completed in 2009 and 2010, are sufficient to fund our
normal operations into the first quarter of 2011. Depending upon the results of the Company’s financing and partnering activities and sales
efforts, we may make additional cost reductions as required to accomplish this goal.
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. We plan to focus primarily on the application of PCT-enhanced protein digestion for the mass
spectrometry market and the advantages of PCT in this market, and the use of PCT in biomarker discovery, soil and plant biology, counter bio-
terror and tissue pathology applications.
- 25 - -
To support our current strategy, our primary focus is the execution of our commercialization plan for PCT in sample preparation. We
remain focused on projects that we feel represent near-term revenue opportunities. 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, the sale of other PCT equipment, such as the PCT Shredder, and by the recurring revenue
streams that we hope to realize from the sale of the single-use PULSE Tubes, PCT-dependent kits, 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 it is important for us to continue to focus on increasing the number of
installed Barocyclers in the field. To this end, we have offered our prospective customers the opportunity to lease or rent the Barocycler
instruments, and in some cases we have engaged in short-term reagent rental agreements. Under a reagent rental agreement we provide the
customer with a Barocycler instrument in exchange for a minimum purchase commitment of consumable products. 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 in
the form of rental payments and consumable purchases. We define sales, leases, and rentals of Barocycler instruments as revenue-generating
installations.
We also derive revenues from Small Business Innovation Research (“SBIR”) grants awarded to us by the National Institutes of
Health. These types of grants allow us to bill the federal agency for work that we are planning to perform as part of the development, and
commercialization, of our technology. Additionally, if our work in SBIR Phase I grants is successful, then we expect to apply for larger NIH
SBIR Phase II grants. To date we have been awarded two National Institutes of Health (“NIH”) Small Business Innovation Research (“SBIR”)
Phase I Grants and one SBIR Phase II Grant. Both of our Phase I Grants have been completed. The data on one of the Phase I grants was the
basis for the submission, and subsequent award, of our Phase II award of approximately $850,000. The Phase II Grant is for work in the area
of the use of PCT to extract protein biomarkers, sub-cellular molecular complexes, and organelles, with the expectation that these studies will
ultimately lead to the release of a new, commercially available PCT-based system, with validated protocols, end-user kits, and other
consumables intended for the extraction of clinically important protein biomarkers, sub-cellular molecular complexes, and organelles. As of
December 31, 2009, the amount of the Phase II SBIR grant available to fund future research was $336,957.
We completed our Series A Private Placement and the first tranche of our Series B Private Placement in 2009, pursuant to which we sold
an aggregate of 156,980 shares of Series A Convertible Preferred Stock and 62,039 shares of Series B Convertible Preferred Stock, together
with warrants, resulting in aggregate gross proceeds to us of $2,971,603. We also closed the sale of a second tranche of 26,672 shares of
Series B Convertible Preferred Stock and warrants in the Series B Private Placement on March 18, 2010 with gross proceeds of $501,434.
We believe we have sufficient cash resources to fund normal operations into the first quarter of 2011 due to the restructuring measures we
have undertaken and the $3,473,037 we received in connection with our 2009 and 2010 private placements. We believe we will need
substantial additional capital to fund our current operations beyond the first quarter of 2011. If we are able to obtain additional capital or
otherwise increase our revenues, we may increase spending in specific research and development applications and engineering projects and
may hire additional sales personnel or invest in targeted marketing programs. In the event that we are unable to obtain financing on
acceptable terms, or at all, we may be required to limit or cease our operations, pursue a plan to sell our operating assets, or otherwise modify
our business strategy, which could materially harm our future business prospects.
RESULTS OF OPERATIONS
Years Ended December 31, 2009 as compared to 2008
Revenue
We had total revenue of $1,244,910 in the year ended December 31, 2009 as compared to $852,263 in the prior year.
PCT Products, Services, Other. Revenue from the sale of PCT products and services was $831,602 in 2009 as compared to $655,252 in
2008. This increase in revenue in 2009 was driven primarily by the installation of a total of 54 Barocycler instruments during 2009 as
compared to 41 during 2008, and the launch of the PCT MicroTube Adapter Kit. When we install instrumentation under lease or rental
agreements, we record the revenue over the life of the agreement.
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Unit Installations
Domestic
International
Total Installations
2009 2008
26
47
15
7
41
54
We expect the number of units installed will continue to increase in future periods as we continue to gain commercial awareness of our
technology, although we may experience some delays in customer purchases due to current economic conditions in the United States and
globally. We continue to 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, we expect that the average revenue per installation may continue
to fluctuate from period to period as we continue to drive our installed base and commercialize PCT. We also expect that as we continue to
expand the installed base of Barocycler instruments in the field, we will realize increasing revenue from the sale of consumable products and
extended service contracts. In the short-term, these recurring revenue streams may continue to fluctuate from period to period.
Grant Revenue. During 2009, we recorded $413,308 of grant revenue as compared to $197,011 in 2008. Grant revenue recorded during
2009 was related to the $850,000 SBIR Phase II grant that we were awarded in June 2008 and to an SBIR Phase I grant of approximately
$110,000 awarded in January 2009. The amount of grant revenue that we recognize in any given period is dependent upon the level of
resources we devote to grant-related work in the period under existing grant awards.
Cost of PCT Products and Services
The cost of PCT products and services was $402,340 for the year ended December 31, 2009, compared to $401,017 in 2008. The increase
in cost of PCT products and services was due primarily to the increase in the number of units installed under sale, lease, or rental arrangements
during the period and, to a lesser extent, costs associated with our June 2009 launch of our PCT MicroTube Adapter Kits. Costs of PCT
products and services as a percentage of PCT revenue decreased to 48% for the year ended December 31, 2009, as compared to 61% for the
year ended December 31, 2008. The decrease in the cost of PCT products and services as a percentage of PCT revenue was due primarily to
the sale of Barocycler units that were demonstration models that had been previously expensed resulting in a lower cost of PCT products in
the current year. The Company also recovered four units from the field that were previously expensed to costs of PCT products and
services. The prior year cost of PCT products and services as a percentage of PCT revenue reflected our sale of 12 Barocycler instruments to
our foreign distributors at discounted prices during 2008.
We believe that our cost of PCT products and services will decrease as a percentage of revenue as we continue to install more instruments,
convert short-term rentals to direct sales, and sell more consumable products, such as PULSE Tubes and ProteoSolve 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.
Research and Development
Research and development expenditures decreased to $1,175,136 during 2009 from $1,810,590 in 2008. This decline in R&D expenses
was primarily due to the significant restructuring and cost-reduction programs that we initiated in the second half of 2008, including the
termination of seven R&D employees. The headcount in R&D during the year ended December 31, 2009 was three, compared to ten during
the same period in 2008. The decline in expenses was also due to a significant decrease in the number of R&D projects we funded during
2009.
Research and development expense included $137,161 and $162,421 of non-cash, stock-based compensation in 2009 and 2008,
respectively.
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Selling and Marketing
Selling and marketing expenses decreased to $1,054,869 in 2009 from $1,686,590 for the year ended December 31, 2009. This decline in
selling and marketing expense was primarily due to the significant restructuring and cost-reduction programs that we initiated in the second
half of 2008, including the termination of four sales directors and one marketing assistant. The headcount in selling and marketing during the
year ended December 31, 2009 was five, compared to ten during 2008. A significant decrease in advertising, exhibit booth rental, and travel
expense also contributed to the reduction in overall selling and marketing expense incurred.
Selling and marketing expense included $73,689 and $93,947 of non-cash, stock-based compensation expense in 2009 and 2008,
respectively.
General and Administrative
General and administrative costs totaled $1,809,133 in the year ended December 31, 2009, as compared to $1,920,465 in 2008. The
decline in expenses was due to compensation savings from reduced headcount and reduced Board member fees offset by increases in investor
relations activities.
During the years ended December 31, 2009 and 2008, general and administrative expense included $218,155 and $252,827 of non-cash,
stock-based compensation expense, respectively. The year ended December 31, 2009 includes a grant of stock options to purchase an
aggregate of 485,000 shares of our common stock in total to our employees and our four independent directors, resulting in a charge of
$112,943 during 2009. The year ended December 31, 2009 also includes a one-time charge of $15,675 of non-cash stock-based compensation
expense in connection with the grant of a non-qualified, fully-vested option to purchase 15,000 shares of our common stock to our new
independent director. The same period in 2008 includes a one-time charge of $100,556 of non-cash stock-based compensation expense in
connection with the grant of non-qualified, fully-vested stock options to purchase 10,000 shares of our common stock to each of our four
independent directors.
Operating Loss
Our operating loss was $3,196,568 for the year ended December 31, 2009 as compared to $4,966,399 for the comparable period in 2008,
a decrease of $1,769,831 or 36%. During the second half of 2008, we initiated a number of cost reduction measures, including a
comprehensive restructuring program to significantly reduce costs, centralize core operations, and refocus our business strategy in specific
areas where our products had found significant initial market acceptance. The restructuring program included: a reduction in personnel of
twelve full-time employees, reduction in travel and meeting attendance for all personnel, reduced Board of Directors fees, decreases in the
base salary of most of our employees and all of our executive officers, a shutdown of our R&D facility in Rockville, MD, a consolidation of
our research and development activities in Massachusetts, and delay or cancellation of several research and development and marketing
programs.
These initiatives have significantly decreased our rate of cash utilization, from just under $1 million per quarter in the second half of 2008
to an average of approximately $635,000 per quarter for 2009.
Interest Income
Interest income totaled $4,990 for the year ended December 31, 2009 as compared to $57,954 for the year ended December 31,
2008. The decrease is due to lower average cash balances and lower yields on these balances during the year ended December 31, 2009, as
compared to the same period in 2008. Several high-yield CDs matured in 2008.
Income Taxes
In the year ended December 31, 2009, we recorded a refund of income taxes of $623,262 due to provisions in the American Recovery and
Reinvestment Act of 2009 relating to net operating loss carry-backs. The cash was received in August 2009. There was no provision for an
income tax benefit during the same period in 2008. Aside from the impact of the passage of this law, we do not expect any additional income
tax benefits relating to carry-backs to prior periods. If we are successful in commercializing PCT and in generating operating income, then we
may be able to utilize certain net operating losses we may have at the time against such future operating profits.
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Net Loss
During the year ended December 31, 2009, we recorded a net loss applicable to common shareholders of $3,284,779 or $(1.42) per share,
as compared to $4,908,445 or $(2.24) per share in the same period of 2008. Our net loss in the year ended December 31, 2009 was lower than
the corresponding net loss in the same period in 2008 as the result of increased revenue, the income tax benefit, and lower operating costs, as
described above. For 2009, the difference between net loss applicable to common shareholders and net loss relates to the beneficial
conversion associated with the intrinsic value of the Series A Convertible Preferred Stock and Series B Convertible Preferred Stock.
LIQUIDITY AND FINANCIAL CONDITION
As of December 31, 2009, our working capital position was $2,209,205, the primary components of which were cash and cash
equivalents, accounts receivable, inventory, prepaid expenses, and deposits, partially offset by accounts payable, accrued employee
compensation, and other accrued expenses. As of December 31, 2008, our working capital balance was $1,602,556, the primary components
of which were cash and cash equivalents, income taxes receivable, prepaid expenses, and deposits. We expect to continue to fund our
operations from our working capital balance.
During 2008, we took a number of cost reduction measures, including a comprehensive restructuring program to significantly reduce
costs, centralize core operations, and refocus our business strategy in specific areas where our products have found significant market
acceptance. The restructuring program included: a reduction in personnel of eight full-time employees (40% of the workforce), reduction in
travel and meeting attendance for all personnel, continued reduction in investor relations activities, decreases in the base salary of most of our
employees and all of our executive officers, a shutdown of the our R&D facility in Rockville, MD, a consolidation of our research and
development activities in Massachusetts and delay of several research and development and marketing programs. These initiatives
significantly decreased our rate of cash utilization, from just under $1 million per quarter to an average of just under $635,000 per quarter
during 2009.
On February 12, 2009, we completed a private placement, pursuant to which we sold an aggregate of 156,980 units (the “Series A Units”)
for a purchase price of $11.50 per unit (the “Series A Purchase Price”), resulting in gross proceeds to us of $1,805,270 (the “Series A Private
Placement”). See Note 8 to our Consolidated Financial Statements for a further description of the Series A Convertible Preferred Stock and
Warrants issued in the Series A Private Placement.
On November 18, 2009, we sold an aggregate of 62,039 units (the “Series B Units”) of Series B Convertible Preferred Stock, par value
$0.01 per share (the “Series B Convertible Preferred Stock”) and warrants for a purchase price of $18.80 per Series B Unit (the “Series B
Purchase Price”), resulting in gross proceeds to us of $1,166,333.20. This is the first tranche of a $2.5 million private placement (the “Series B
Private Placement”). We closed on the second tranche of the Series B Private Placement on March 18, 2010 with the sale of an additional
26,672 Series B Units with gross proceeds of $501,434. Each Series B Unit consists of (i) one share of a newly created Series B Convertible
Preferred Stock, convertible into 10 shares of our common stock and (ii) a warrant to purchase one share of Series B Convertible Preferred
Stock at an exercise price equal to $23.80 per share share for the warrants issued in November 2009 and at an exercise price of $28.80 per
share for the warrants issued in March 2010, in each case with a term expiring on August 11, 2011 (“Series B Warrant”).
In connection with the Series B Private Placement, we paid a finder’s fee of $100,478, plus warrants to purchase 5,344 shares of Series B
Convertible Preferred Stock at $28.80 per share, expiring August 11, 2012.
On December 19, 2008, we received $200,000 from one of our distributors in the escrow account for the private placement. Prior to
February 12, 2009, the distributor requested that the $200,000 be used as payment for anticipated future purchases of our PCT instrument and
consumable products, and not for an investment in the private placement. This amount was recorded as deferred revenue in 2009. As of
December 31, 2009, the remaining unused balance of $132,808 was returned to our distributor.
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We believe that because of the cost restructuring measures we have undertaken, together with the $3,473,037 we received in connection
with our 2009 and 2010 private placements of units, consisting of Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock and warrants, we have sufficient cash resources to fund normal operations into the first quarter of 2011. Depending upon the results of
the Company’s financing and partnering activities and sales efforts, we may make additional cost reductions as required to accomplish this
goal. We believe we will need substantial additional capital to fund our current operations beyond the first quarter of 2011. If we are able to
obtain additional capital or otherwise increase our revenues, we may increase spending in specific research and development applications and
engineering projects and may hire additional sales personnel or invest in targeted marketing programs. In the event that we are unable to
obtain financing on acceptable terms, or at all, we may be required to limit or cease our operations, pursue a plan to sell our operating assets,
or otherwise modify our business strategy, which could materially harm our future business prospects.
Net cash used in operations during 2009 was $1,809,261 as compared to net cash used in operations of $4,420,209 during 2008. The
decrease in cash used in operations in 2009 as compared to 2008 is principally the result of the increased revenues and lower operating
expenses in 2009.
Net cash used in investing activities during 2009 was $152,925 as compared to net cash used in investing activities of $145,819 in the
prior year. During year ended December 31, 2009, we installed 26 Barocycler instruments under collaboration or lease agreements while
selling six demonstration units. Cash used in investing activities during the year ended December 31, 2008 was for the purchase of furniture
and fixtures associated with our move to new corporate offices, and for Barocycler instruments that we purchased and installed under
collaboration or lease agreements.
Net cash provided by financing activities during 2009 was $2,703,756. As noted above, during 2009 we received the proceeds from the
Series A Private Placement and the first tranche of the Series B Private Placement. The expenses related to the Series A Private Placement
totaled approximately $233,000 and the expenses related to Series B Private Placement totaled approximately $117,000, including the finder’s
fees in the Series B Private Placement. In connection with the Series B Private Placement, we paid a finder’s fee of $100,478, plus warrants to
purchase 5,344 shares of Series B Convertible Preferred Stock at $28.80 per share, expiring August 11, 2012.
Net cash provided by financing activities for the year ended December 31, 2009 also included a stock warrant exercise. Net cash provided
by financing activities for the year ended December 31, 2008 was due to an exercise of employee stock options to purchase shares of our
common stock.
COMMITMENTS AND CONTINGENCIES
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. (“BMA”) 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 BMA 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 BMA 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 year ended December 31, 2009 and 2008, we incurred approximately $30,548 and
$29,553, respectively in royalty expense associated with our obligation to BMA.
In connection with our acquisition of BioSeq, Inc., we licensed certain limited rights to the original pressure cycling technology back to
BMA. This license is non-exclusive and limits the use of the original pressure cycling technology by BMA solely for molecular applications
in scientific research and development and in scientific plant research and development. BMA 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 BMA under the license. BMA 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 BMA under this
license.
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Purchase Commitments
On December 14, 2009, we submitted a purchase order to Source Scientific, LLC, the manufacturer of the Company’s PCT Barocycler
instrumentation, for 50 Barocycler NEP2320 units and 12 Barocycler NEP3229 units with various spare parts. Pursuant to the terms of the
purchase order, we placed a deposit with Source Scientific, LLC, of approximately $169,000 representing approximately 25% of the expected
total value of the order. The purchase price for the 50 NEP2320 units and 12 NEP3229 units is based upon a fixed bill of materials. We will
be billed for the unpaid purchase price of each unit at the time each unit is completed and ready for sale.
Severance and Change of Control Agreements
Each of our executive officers is entitled to receive a severance payment if terminated by the Company without cause. The severance
benefits would include a payment in an amount equal to one year of each executive officer’s annualized base salary compensation plus accrued
paid time off. Additionally, each executive 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 $1.0 million.
Each of our executive officers, other than Mr. Richard T. Schumacher, our President and Chief Executive Officer, 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 $1.3 million. The severance payment is meant 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 occurrence
of a change in control.
Lease Commitments
We lease building space under non-cancelable leases in South Easton, MA and in the Venture Development Center at the University of
Massachusetts in Boston.
Following is a schedule by years of future minimum rental payments required under operating leases with initial or remaining non-
cancelable lease terms in excess of one year as of December 31, 2009:
Year ending December 31:
2010
2011
2012
Thereafter
Total minimum payments required
- 31 - -
$133,914
105,304
60,000
-
$299,218
CRITICAL ACCOUNTING POLICIES
FASB Codification
We follow accounting standards set by the Financial Accounting Standards Board, (“FASB”). The FASB sets GAAP that we follow to
ensure we consistently report our financial condition, results of operations, and cash flows. References to GAAP issued by the FASB in this
Report are to the FASB Accounting Standards Codification, sometimes referred to as the Codification or ASC. The FASB finalized the
Codification effective for periods ending on or after September 15, 2009. Prior FASB standards like FASB Statement No. 13, Accounting for
Leases, are no longer being issued by the FASB.
Principles of Consolidation
The consolidated financial statements include the accounts of Pressure BioSciences, Inc., and its wholly-owned subsidiary PBI BioSeq, Inc.
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 FASB ASC 605, Revenue Recognition. 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 collectability 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 highly trained technical representative to the customer site to
install every Barocycler that we sell, lease, or rent through our domestic sales force. The installation process includes uncrating and setting up
the instrument, followed by introductory user training. Product revenue related to current Barocycler instrumentation is recognized upon the
completion of the installation and introductory training process of the instrumentation at the customer location, for domestic
installations. Product revenue related to sales of PCT instrumentation 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 our customers with a right of return. Product revenue related to our consumable products such as PULSE Tubes,
MicroTubes, and application specific kits is recorded upon shipment through a common carrier. Shipping costs are included in sales and
marketing expense. Any shipping costs billed to customers are recognized as revenue.
In accordance with FASB ASC 840, 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. Many of our lease and rental agreements allow the lessee to purchase the
instrument at any point during the term of the agreement with partial or full credit for payments previously made. We pay all maintenance
costs associated with the instrument during the term of the leases.
- 32 - -
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 FASB ASC 605-25 Multiple-Element Arrangements. 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.
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, 2009 concluded they were not impaired.
Long-Lived Assets and Deferred Costs
In accordance with FASB ASC 360-10-05, Property, Plant, and Equipment, 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, 2009 and determined that our long-lived assets were not impaired.
RECENT ACCOUNTING STANDARDS
In June 2009, the FASB issued FASB ASC 105, Generally Accepted Accounting Principles, which establishes the FASB Accounting
Standards Codification as the sole source of authoritative generally accepted accounting principles. Pursuant to the provisions of FASB ASC
105, the Company has updated references to GAAP in its financial statements issued for the period ended December 31, 2009. The adoption
of FASB ASC 105 did not impact the Company’s financial position or results of operations.
On January 1, 2008, the Company adopted FASB ASC 820, Fair Value Measurements and Disclosures. FASB ASC 820 defines fair
value, establishes a framework for measuring the fair value of assets and liabilities, and expands disclosure requirements regarding the fair
value measurement. FASB ASC 820 does not expand the use of fair value measurements. This statement, as issued, is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. There was no significant
effect on our financial statements. We do not believe that the adoption of FASB ASC 820 to non-financial assets and liabilities will
significantly affect our financial statements.
In December 2007, the FASB issued FASB ASC 805, Business Combinations and FASB ASC 810, Consolidations.
FASB ASC 805 significantly changes the accounting for business combinations. Under FASB ASC 805, 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. FASB ASC 805 further changes the accounting treatment for certain specific items, including:
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- Acquisition costs will be generally expensed as incurred;
- Non-controlling interests (formerly known as “minority interests” – see FASB ASC 810 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.
In April 2008, the FASB issued FASB ASC 350-30, Intangibles Other Than Goodwill which requires that an entity consider its own
historical experience in renewing similar arrangements, or a consideration of market participant assumptions in the absence of historical
experience. FASB ASC 350-30 also requires entities to disclose information that enables users of financial statements to assess the extent to
which the expected future cash flows associated with the asset are affected by the entity’s intent and/or ability to renew or extend the
arrangement. We have adopted FASB ASC 350-30. The adoption of this statement does not have any impact to our financial statements.
FASB ASC 810 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. FASB ASC 810 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. FASB ASC
810 also includes expanded disclosure requirements regarding the interests of the parent and its non-controlling interest.
We have adopted FASB ASC 810 and the statement does not have a material affect on our consolidated results of operations and financial
condition.
In March 2008, the FASB issued FASB ASC 815, Derivatives and Hedging, which requires additional disclosures about the objectives of
derivative instruments and hedging activities, the method of accounting for such instruments under FASB ASC 815 and its related
interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial
performance, and cash flows. We adopted FASB ASC 815 and our adoption of FASB ASC 815 did not have a material impact on our financial
statements.
On June 30, 2009, the Company adopted FASB ASC 855, Subsequent Events, which requires disclosure of the period after the balance
sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements. The adoption of FASB ASC 855 did not have a material impact on our financial statements.
- 34 - -
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
- 35 - -
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Pressure BioSciences, Inc. and Subsidiary:
We have audited the consolidated balance sheets of Pressure BioSciences, Inc. and Subsidiary (the “Company”) as of December 31, 2009 and
2008, and the related consolidated statements of operations, 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 Subsidiary as of December 31, 2009 and 2008, 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.
/s/ UHY LLP
Boston, Massachusetts
March 31, 2010
- 36 - -
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2009 AND 2008
CURRENT ASSETS
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowances of $8,400 at December 31, 2009 and $0 at December
31, 2008
Inventories
Deposits
Prepaid income taxes
Prepaid expenses and other current assets
Total current assets
PROPERTY AND EQUIPMENT, NET
OTHER ASSETS
Intangible assets, net
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Accrued employee compensation
Accrued professional fees and other
Deferred revenue
Total current liabilities
LONG TERM LIABILITIES
Deferred revenue
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY
December 31, December 31,
2009
2008
$
1,609,778 $
20,012
868,208
50,000
203,211
638,350
182,010
3,176
86,563
2,743,100
209,117
571,831
382,236
6,600
235,111
2,323,103
249,465
252,249
231,026
3,223,591 $
279,658
2,855,010
$
$
148,087 $
105,824
271,926
8,058
533,895
1,609
535,504
263,486
161,374
278,982
16,705
720,547
10,821
731,368
Series A convertible preferred stock, $.01 par value; 1,000,000 shares authorized; 152,213
shares issued and outstanding on December 31, 2009 and 0 shares on December 31, 2008
(Liquidation value of $1,750,450)
Series B convertible preferred stock, $.01 par value; 1,000,000 shares authorized; 62,039
shares issued and outstanding on December 31, 2009 and 0 shares on December 31, 2008
(Liquidation value of $1,166,333)
Common stock, $.01 par value; 20,000,000 shares authorized; 2,328,426 shares issued and
outstanding on December 31, 2009 and 2,195,283 shares issued and outstanding on December
31, 2008
Warrants to acquire preferred stock and common stock
Additional paid-in capital
Accumulated deficit
Total stockholders' equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
1,523
620
-
-
23,284
1,352,165
9,297,115
(7,986,620)
2,688,087
3,223,591 $
21,953
-
6,803,530
(4,701,841)
2,123,642
2,855,010
$
The accompanying notes are an integral part of these consolidated financial statements
- 37 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
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
Interest income
Loss before income taxes
Income tax refund
Net loss
Accrued and deemed dividends on convertible preferred stock
Net loss applicable to common shareholders
For the Year Ended
December 31,
2009
2008
$
831,602 $
413,308
1,244,910
655,252
197,011
852,263
402,340
1,175,136
1,054,869
1,809,133
4,441,478
401,017
1,810,590
1,686,590
1,920,465
5,818,662
(3,196,568)
(4,966,399)
4,990
57,954
(3,191,578)
623,262
(2,568,316)
(716,463)
(4,908,445)
-
(4,908,445)
-
$ (3,284,779) $ (4,908,445)
Net loss per share attributable to common stockholders - basic and diluted
$
(1.42) $
(2.24)
Weighted average common stock shares outstanding used in the basic and diluted net loss per share
calculation
2,314,316
2,194,093
The accompanying notes are an integral part of these consolidated financial statements
- 38 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
Series A
Preferred Stock
Series B
Preferred Stock
Total
Preferred Stock
Common Stock
Shares
Amount Shares Amount
Shares
Amount
Shares
Amount Stock Warrants
Additional
Paid-In
Capital
Retained
Earnings/
(Accumulated
Deficit)
Total
Stockholders'
Equity
BALANCE, December 31,
2007
Stock-based
compensation
Issuance of common
stock
Net loss
BALANCE, December 31,
2008
- $
-
- $
-
- $
- 2,192,175 $ 21,922 $
- $ 6,284,616 $
206,604
$
6,513,142
- $
-
- $
-
- $
- 2,195,283 $ 21,953 $
- $ 6,803,530 $
(4,701,841) $
2,123,642
3,108
31
509,195
9,719
509,195
9,750
(4,908,445)
(4,908,445)
Stock-based
compensation
Issuance of convertible
preferred stock
Issuance of common
stock
Offering costs
Issuance of warrants
Stock warrant exercise
Beneficial conversion of
preferred stock
Conversion of preferred
stock to common stock
Common stock paid-in-
kind dividends earned
Issuance of common
stock for dividends paid-
in-kind
Net loss
156,980
1,570
62,039
620 219,019
2,190
16,000
160
4,000
40
4,000
40
(8,767)
(87)
(8,767)
(87)
87,670
877
(790)
429,004
1,667,535
26,400
(354,177)
61,762
1,363,967
(11,802)
630,252
(630,252)
429,004
1,669,725
26,560
(354,177)
1,363,967
50,000
-
-
29,473
294
33,599
(2,568,316)
33,893
(2,568,316)
(86,211)
(86,211)
BALANCE, December 31,
2009
152,213 $
1,523
62,039 $
620 214,252 $
2,143 2,328,426 $ 23,284 $
1,352,165 $ 9,297,115 $
(7,986,620) $
2,688,087
The accompanying notes are an integral part of these consolidated financial statements.
- 39 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to operating cash flows:
Depreciation and amortization
Stock-based compensation expense
Bad debt expense
Changes in operating assets and liabilities:
Restricted cash
Accounts receivable
Inventories
Deposits
Accounts payable
Accrued employee compensation
Deferred revenue and other accrued expenses
Prepaid expenses and other current assets
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the issuance of common stock
Proceeds from stock warrant exercise
Net proceeds from the issuance of preferred stock
Net cash provided by financing activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
SUPPLEMENTAL INFORMATION:
Income taxes paid
Income tax refund received
Beneficial conversion feature on convertible preferred stock
For the Year Ended
December 31,
2009
2008
$ (2,568,316) $ (4,908,445)
204,341
429,005
53,680
199,999
509,195
-
29,988
(47,774)
(66,519)
200,226
(115,399)
(55,550)
(24,915)
151,972
(1,809,261)
(50,000)
(90,646)
(399,283)
171,247
110,757
(215,816)
93,307
159,476
(4,420,209)
(152,925)
(152,925)
(145,819)
(145,819)
-
50,000
2,653,756
2,703,756
9,750
-
-
9,750
741,570
868,208
1,609,778 $
(4,556,278)
5,424,486
868,208
- $
623,262
630,252
6,177
301,060
-
$
$
The accompanying notes are an integral part of these consolidated financial statements
- 40 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
(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 application specific kits (which include consumable products and reagents) together make up the PCT Sample Preparation System (“PCT
SPS”).
We have experienced negative cash flows from operations with respect to our pressure cycling technology business since our
inception. During 2008, we undertook a number of cost reduction measures including a comprehensive restructuring program, to significantly
reduce costs, centralize core operations, and refocus business strategy in specific areas where our products have found significant initial
market acceptance. The restructuring program included: a reduction in personnel of eight full-time employees (40% of the workforce),
reduction in travel and meeting attendance for all personnel, decreases in the base salary of most of our employees and all of our executive
officers, a shutdown of our research and development facility in Rockville, MD, a consolidation of our R&D activities in Massachusetts, and
delay of several research & development and marketing programs. These initiatives have significantly decreased cash utilization, from just
under $1 million per quarter in the second half of 2008 to an average of approximately $635,000 per quarter during 2009. Based on our
current projections, we believe our current cash resources, which includes the funds we received from the private placements we completed in
2009 and 2010, are sufficient to fund our normal operations into the first quarter of 2011. Depending upon the results of the Company’s
financing and partnering activities and sales efforts, we may make additional cost reductions as required to accomplish this goal.
On February 12, 2009, we completed a private placement, pursuant to which we sold an aggregate of 156,980 units, consisting of Series A
Convertible Preferred Stock and warrants, for a purchase price of $11.50 per unit, resulting in gross proceeds to us of $1,805,270 (the “Series
A Private Placement”). See Note 8 to our Consolidated Financial Statement for a further description of the Series A Convertible Preferred
Stock and Warrants issued in the Series A Private Placement.
On November 18, 2009, we sold an aggregate of 62,039 units (the “Series B Units”) for a purchase price of $18.80 per unit, resulting in
gross proceeds to us of $1,166,333.20. This is the first tranche of a $2.5 million private placement (the “Series B Private Placement”). We
closed the second tranche of the Series B Private Placement on March 18, 2010 with the sale of an additional 26,672 Series B Units with gross
proceeds of $501,434. Each Series B Unit consists of (i) one share of a newly created Series B Convertible Preferred Stock convertible into 10
shares of our common stock and (ii) a warrant to purchase one share of Series B Convertible Preferred Stock at an exercise price equal to
$23.80 per share for the warrants issued in November 18, 2009 and at an exercise price equal to $28.80 per share for the warrants issued in
March 2010, in each case with a term expiring on August 11, 2011 (“Series B Warrant”). See Note 8 to our Consolidated Financial Statement
for a further description of the Series B Convertible Preferred Stock and Series B Warrants issued in the Series B Private Placement.
In connection with the first tranche closing of the Series B Private Placement, we paid a finder’s fee of $68,907, plus warrants to purchase
3,665 shares of Series B Convertible Preferred Stock at $28.80 per share, expiring August 11, 2012.
We believe we have sufficient cash resources to fund normal operations into the first quarter of 2011 due to the restructuring measures we
have undertaken and the $2,971,603 we received in connection with our Series A Private Placement and Series B Private Placement. We
believe we will need substantial additional capital to fund our current operations beyond the first quarter of 2011. If we are able to obtain
additional capital or otherwise increase our revenues, we may increase spending in specific research and development applications and
engineering projects and may hire additional sales personnel or invest in targeted marketing programs. In the event that we are unable to
obtain financing on acceptable terms, or at all, we may be required to limit or cease our operations, pursue a plan to sell our operating assets,
or otherwise modify our business strategy, which could materially harm our future business prospects.
- 41 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
(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
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
collectability 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 highly trained technical representative to the customer site to
install every Barocycler that we sell, lease, or rent through our domestic sales force. The installation process includes uncrating and setting up
the instrument, followed by introductory user training. Product revenue related to current Barocycler instrumentation is recognized upon the
completion of the installation and introductory training process of the instrumentation at the customer location, for domestic
installations. Product revenue related to sales of PCT instrumentation 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 our customers with a right of return. Product revenue related to our consumable products such as PULSE Tubes,
MicroTubes, and application specific kits is recorded upon shipment through a common carrier. Shipping costs are included in sales and
marketing expense. Any shipping costs billed to customers are recognized as revenue.
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. Many of our lease and rental agreements allow the lessee to purchase the instrument at any point during the term of
the agreement with partial or full credit for payments previously made. 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.
- 42 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
Our transactions sometimes involve multiple elements (i.e., products and services). Revenue under multiple element arrangements is
recognized in accordance with FASB ASC 605-25 Multiple-Element Arrangements. 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.
(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. As of December 31, 2009, we held $20,000 in a
restricted account as collateral for our corporate credit card and therefore classified this balance as restricted cash on our consolidated balance
sheet.
(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. 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.
(vi) Inventories
Inventories are valued at the lower of cost (average cost) or market (sales price). The cost of Barocyclers consists of the cost charged by
the contract manufacturer. The cost of manufactured goods includes material, freight-in, direct labor, and applicable overhead. As of
December 31, 2009, the recorded cost of all categories was less than the recent sales price. The composition of inventory as of December 31,
2009 and 2008 is as follows:
Raw materials
Finished goods
Total
(vii) Property and Equipment
December 31,
2009 2008
$ 92,453 $ 83,451
545,897 488,380
$638,350 $571,831
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, 2009. Based on this analysis, we have concluded that no impairment of intangible assets
had occurred.
- 43 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
(ix) Long-Lived Assets and Deferred Costs
The Company’s long-lived assets and other assets are reviewed for impairment in accordance with the guidance of the FASB ASC 360-
10-05, Property, Plant, and Equipment, whenever events or changes in circumstances indicate that the carrying amount of the asset may not
be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future
undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset exceeds its fair value. Through December 31, 2009, the Company had not
experienced impairment losses on its long-lived assets. While our current and historical operating losses and cash flow are indicators of
impairment, we performed an impairment test at December 31, 2009 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.
The following table illustrates the level of concentration of the below two groups within revenue as a percentage of total revenues during
the years ended December 31, 2009 and 2008:
Top Five Customers
Federal Agencies
For the Year Ended
December 31,
2009
2008
48%
37%
52%
33%
The following table illustrates the level of concentration of the below two groups within accounts receivable as a percentage of total
accounts receivable balance as of December 31, 2009 and 2008:
Top Five Customers
Federal Agencies
Product Supply
December 31,
2009
2008
62%
12%
81%
1%
Source Scientific, LLC has been our sole contract manufacturer for all of our PCT instrumentation. During 2008, 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.
- 44 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
(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, convertible preferred stock, common stock dividends, warrants to acquire preferred stock convertible
into common stock, and warrants and options to acquire common stock, are all considered common stock equivalents in periods in which they
have a dilutive effect and are excluded from this calculation in periods in which these are anti-dilutive. The following table illustrates our
computation of loss per share for the years ended December 31, 2009 and 2008.
Numerator:
Net loss
Accrued preferred stock dividend
Beneficial conversion feature for Series A Preferred Stock
Beneficial conversion feature for Series B Preferred Stock
Series A Preferred dividends paid-in-kind
Net loss applicable to common shareholders
Denominator for basic and diluted loss per share:
Weighted average common stock shares outstanding
Loss per common share - basic and diluted
For the Year Ended
December 31,
2009
2008
$ (2,568,316) $(4,908,445)
-
-
(52,318)
(489,803)
(140,449)
(33,893)
$ (3,284,779) $(4,908,445)
2,314,316 2,194,093
$
(1.42) $
(2.24)
The following table presents securities that could potentially dilute basic loss per share in the future. For all periods presented, the
potentially dilutive securities were not included in the computation of diluted loss per share because these securities would have been anti-
dilutive.
Stock options
Common stock warrants
Preferred stock warrants
Convertible preferred stock:
Series A Convertible Preferred
Series B Convertible Preferred
(xii) Accounting for Income Taxes
December 31,
2009
157,402
1,619,800
2,186,840
2008
82,659
-
-
1,522,130
620,390
6,106,562
-
-
82,659
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 assets 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. If substantial changes in the company’s ownership should occur, as defined in Section 382 of the
Internal Revenue Code, there could be sufficient limitations on the amount of net loss carry forwards that could be used to offset future
taxable income.
In the first half of 2009, we recorded a benefit for income taxes of $623,262 due to provisions in the American Recovery and
Reinvestment Act of 2009 relating to net operating loss carry-backs. We received the cash during the second half of 2009. There was no
provision for an income tax benefit during the same period in 2008. Aside from the impact of the passage of this congressional act, we do not
expect any additional income tax benefits relating to carry-backs to prior periods. If we are successful in commercializing PCT and in
generating operating income, then we may be able to utilize certain net operating losses we may have at the time against such future operating
profits.
- 45 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
(xiii) Accounting for Stock-Based Compensation
We maintain equity compensation plans under which incentive stock options and non-qualified stock options are granted to employees,
independent members of our Board of Directors and outside consultants. We recognize equity compensation expense over the requisite
service period using the Black-Scholes formula to estimate the fair value of the stock options on the date of grant.
Determining Fair Value of Stock Option Grants
Valuation and Amortization Method - The fair value of each option award is estimated on the date of grant using the Black-Scholes
pricing model based on certain assumptions. The estimated fair value of employee stock options is amortized to expense using the straight-
line method over the vesting period.
Expected Term - The Company uses the simplified calculation of expected life, described in the FASB ASC 718, Compensation-Stock
Compensation, as the Company does not currently have sufficient historical exercise data on which to base an estimate of expected
term. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options
granted.
Expected Volatility - Expected volatility is based on the Company’s historical stock volatility data over the expected term of the award.
Risk-Free Interest Rate - The Company bases the risk-free interest rate used in the Black-Scholes valuation method on the implied yield
currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term.
Forfeitures - - As required by FASB ASC 718, Compensation-Stock Compensation, the Company records stock-based compensation
expense only for those awards that are expected to vest. The Company estimated a forfeiture rate of 5% for awards granted based on historical
experience and future expectations of options vesting. We used this historical rate as our assumption in calculating future stock-based
compensation expense.
The following table summarizes the assumptions we utilized for grants of stock options to the three sub-groups of our stock option
recipients during the twelve months ended December 31, 2009 and 2008:
Assumptions
Expected life
Expected volatility
Risk-free interest rate
Forfeiture rate
Expected dividend yield
Outside
Consultants
2.0 (yrs)
Outside Board
Members and
Consultants
5.0 (yrs)
CEO and other
Officers and
Employees
6.0 (yrs)
79.60%
1.27%
0.00%
0.0%
55.66% - 77.86%
2.60% - 4.94%
5.00%
0.0%
55.66% - 92.53%
2.76% - 4.94%
5.00%
0.0%
We recognized stock-based compensation expense of $429,005 and $509,195 for the years ended December 31, 2009 and 2008,
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:
- 46 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
Research and development
Selling and marketing
General and administrative
Total stock-based compensation expense
For the Year Ended, December 31,
2009
2008
$
$
137,161 $
73,689
218,155
429,005 $
162,421
93,947
252,827
509,195
During the years ended December 31, 2009 and 2008, the total fair value of stock options awarded was $284,745 and $403,711,
respectively.
As of December 31, 2009, the total estimated fair value of unvested stock options to be amortized over their remaining vesting period was
$225,149. The non-cash, stock based compensation expense associated with the vesting of these options will be $184,585 in 2010 and
$40,564 in 2011.
(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 June 2009, the FASB issued FASB ASC 105, Generally Accepted Accounting Principles, which establishes the FASB Accounting
Standards Codification as the sole source of authoritative generally accepted accounting principles. Pursuant to the provisions of FASB ASC
105, the Company has updated references to GAAP in its financial statements issued for the period ended December 31, 2009. The adoption
of FASB ASC 105 did not impact the Company’s financial position or results of operations.
On January 1, 2008, the Company adopted FASB ASC 820, Fair Value Measurements and Disclosures. FASB ASC 820 defines fair
value, establishes a framework for measuring the fair value of assets and liabilities, and expands disclosure requirements regarding the fair
value measurement. FASB ASC 820 does not expand the use of fair value measurements. This statement, as issued, is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. There was no significant
effect on our financial statements. We do not believe that the adoption of FASB ASC 820 to non-financial assets and liabilities will
significantly affect our financial statements.
In December 2007, the FASB issued FASB ASC 805, Business Combinations and FASB ASC 810, Consolidations.
FASB ASC 805 significantly changes the accounting for business combinations. Under FASB ASC 805, 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. FASB ASC 805 further changes the accounting treatment for certain specific items, including:
- Acquisition costs will be generally expensed as incurred;
- Non-controlling interests (formerly known as “minority interests” – see FASB ASC 810 discussion below) will be valued at
fair value at the acquisition date;
- 47 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
- 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.
In April 2008, the FASB issued FASB ASC 350-30, Intangibles Other Than Goodwill which requires that an entity consider its own
historical experience in renewing similar arrangements, or a consideration of market participant assumptions in the absence of historical
experience. FASB ASC 350-30 also requires entities to disclose information that enables users of financial statements to assess the extent to
which the expected future cash flows associated with the asset are affected by the entity’s intent and/or ability to renew or extend the
arrangement. We have adopted FASB ASC 350-30. The adoption of this statement does not have any impact to our financial statements.
FASB ASC 810 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. FASB ASC 810 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. FASB ASC
810 also includes expanded disclosure requirements regarding the interests of the parent and its non-controlling interest.
We have adopted FASB ASC 810 and the statement does not have a material affect on our consolidated results of operations and financial
condition.
In March 2008, the FASB issued FASB ASC 815, Derivatives and Hedging, which requires additional disclosures about the objectives of
derivative instruments and hedging activities, the method of accounting for such instruments under FASB ASC 815 and its related
interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial
performance, and cash flows. We adopted FASB ASC 815 and our adoption of FASB ASC 815 did not have a material impact on our financial
statements.
On June 30, 2009, the Company adopted FASB ASC 855, Subsequent Events, which requires disclosure of the period after the balance
sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements. The adoption of FASB ASC 855 did not have a material impact on our financial statements.
(xvii) Advertising
Advertising costs are expensed as incurred. During 2009 and 2008 we incurred $8,853 and $68,716, respectively in advertising expense.
(xviii) Rent Expense
Rental costs are expensed as incurred. During 2009 and 2008 we incurred $82,821 and $148,982, respectively in rent expense for the use
of our corporate office and research and development facilities.
- 48 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
(3) Property and Equipment
Property and equipment as of December 31, 2009 and 2008 consisted of the following components:
Laboratory and manufacturing equipment
Office equipment
Leasehold improvements
PCT collaboration, demonstration and leased systems
Total property and equipment
Less accumulated depreciation
Net book value
December 31,
2009
2008
8,117
$ 151,451 $ 127,355
132,101 129,101
8,117
486,393 398,352
778,062 662,925
(528,597) (410,676)
$ 249,465 $ 252,249
Depreciation expense for the years ended December 31, 2009 and 2008 was $155,709 and $169,359, respectively.
(4) Intangible Assets
Intangible assets as of December 31, 2009 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 lives of approximately 6 years. We performed a 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, 2009. We have concluded that there is no impairment of intangible assets. Intangible
assets at December 31, 2009 and 2008 consisted of the following:
PCT Patents
Less accumulated amortization
Net book value
December 31,
2009
2008
$ 778,156 $ 778,156
(547,130) (498,498)
$ 231,026 $ 279,658
Amortization expense for each of the years ended December 31, 2009 and 2008 was $48,632.
(5) 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 2009 and 2008 we contributed $10,098 and
$19,238, respectively, in the form of discretionary company matching contributions.
(6) Income Taxes
The components of the benefit for income taxes are as follows:
- 49 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
Current benefit: federal
Current benefit: state
Total current benefit
Deferred provision: federal
Deferred provision: state
Total deferred provision
Total benefit for income taxes
For the Year Ended
December 31,
2008
2009
623,262 $
-
623,262
-
-
-
623,262 $
$
$
-
-
-
-
-
-
-
Significant items making up the deferred tax assets and deferred tax liabilities as of December 31, 2009 and 2008 are as follows:
Current deferred taxes:
Other accruals
Less: valuation allowance
Total current deferred tax assets (liabilities)
Long term deferred taxes:
Accelerated tax depreciation
Non-cash, stock-based compensation, NQ
Goodwill and intangibles
Operating loss carryforwards and tax credits
Less: valuation allowance
Total long term deferred tax assets (liabilities), net
December 31,
2009
2008
$
$
39,121 $
(39,121)
- $
83,467
(83,467)
-
$
(4,893) $
345,987
(93,034)
13,672
276,152
(112,618)
4,951,236 4,216,958
(5,199,296) (4,394,164)
-
-
Total net deferred tax liabilities
$
- $
-
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 2009 and 2008 for the full amount of our deferred tax assets due to the
uncertainty of realization. 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, 2009. We released approximately $623,000 of
the valuation allowance during 2009 due to new legislation within the American Recovery and Reinvestment Act of 2009 relating to net
operating loss carrybacks.
We had net operating loss carry-forwards for federal income tax purposes of $5,110,998 as of December 31, 2009. 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 2011 through 2028.
In February of 2009, we sold approximately 156,000 Series A Units of equity consisting of one share of Series A Convertible Preferred
Stock, a warrant to purchase shares of common stock and a warrant to purchase a share of Series A Convertible Preferred Stock. In November
of 2009, we sold approximately 62,000 Series B Units of equity consisting of one share of Series B Convertible Preferred Stock and a warrant
to purchase a share of Series B Convertible Preferred Stock. We are considering whether the sale of the equity units will result in further
limitations of our net operating losses under Section 382.
We had net operating loss carry-forwards for state income tax purposes of approximately $24,237,587 at December 31, 2009. These net
operating loss carry-forwards expire at various dates from 2010 through 2028.
- 50 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
Our effective income tax (benefit) provision rate was different than the statutory federal income tax (benefit) provision rate as follows:
Federal tax benefit (provision) rate
Permanent differences
State tax expense
Net operating loss carryback
Valuation allowance
Effective income tax benefit rate from continuing operations
(7) Commitments and Contingencies
Operating Leases
For the Year Ended
December 31,
2009
2008
34%
(3)%
0%
19%
(31)%
19%
34%
(2)%
0%
0%
(32)%
0%
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 leased approximately 5,500 square feet of office space, with an
option for an additional 12 months. We exercised the renewal option to extend the lease term until July 14, 2010. We pay approximately
$6,500 per month for the use of these facilities.
Effective January 1, 2009, we terminated our lease agreement with Scheer Partners and the Maryland Economic Development
Corporation, pursuant to which we leased laboratory and office space in Rockville, MD. We paid approximately $3,300 per month for the use
of these facilities through December 31, 2008 with no further obligation.
Effective January 31, 2009, we terminated our sub-lease agreement with Proteome Systems, pursuant to which we leased approximately
650 square feet of laboratory space plus 100 square feet of office space from Proteome Systems in Woburn, Massachusetts. We paid
approximately $3,200 per month for the use of these facilities through January 31, 2009 with no further obligation.
Royalty Commitments
BioMolecular Assays, Inc.
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, 2009 and 2008, we incurred
$30,548 and $29,553 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.
- 51 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
Battelle Memorial Institute
In December 2008, we entered into an exclusive patent license agreement with the Battelle Memorial Institute ("Battelle"). The licensed
technology is described in the patent application filed by Battelle on July 31, 2008 (US serial number 12/183,219). This application includes
subject matter related to a method and a system for improving the analysis of protein samples, including through an automated system utilizing
pressure and a pre-selected agent to obtain a digested sample in a significantly shorter period of time than current methods, while maintaining
the integrity of the sample throughout the preparatory process. Pursuant to the terms of the agreement, we paid Battelle a non-refundable
initial fee. In addition to royalty payments on net sales on “licensed products”, we are obligated to make minimum royalty payments for each
year that we retain the rights outlined in the patent license agreement. and we are required to have our first commercial sale of the licensed
products within one year following the issuance of the patent covered by the licensed technology.
Purchase Commitments
On December 14, 2009, we submitted a purchase order to Source Scientific, LLC, the manufacturer of the Company’s PCT Barocycler
instrumentation, for 50 Barocycler NEP2320 units and 12 Barocycler NEP3229 units with various spare parts. Pursuant to the terms of the
purchase order, we placed a deposit with Source Scientific, LLC, of approximately $169,000 representing approximately 25% of the expected
total value of the order. The purchase price for the 50 NEP2320 units and 12 NEP3229 units is based upon a fixed bill of materials. We will
be billed for the unpaid purchase price of each unit at the time each unit is completed and ready for sale.
Severance and Change of Control Agreements
Each of our executive officers; Mr. Schumacher, 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 $1.0 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 $1.3 million. The severance payment is meant 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 occurrence of a change in control.
(8) 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, 2009, 20,000 shares of preferred stock have been designated as Series A Junior Participating Preferred Stock, none of which are issued and
outstanding, 313,960 shares of preferred stock have been designated as Series A Convertible Preferred Stock, par value $0.01 per share
(“Series A Convertible Preferred Stock”), of which 156,980 shares are issued and outstanding, and. 279,256 shares of preferred stock have
been designated as Series B Convertible Preferred Stock, par value $0.01 per share (“Series B Convertible Preferred Stock”), of which 62,039
shares are issued and outstanding.
- 52 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
Series A Convertible Preferred Stock
On February 12, 2009, we completed a private placement, pursuant to which we sold an aggregate of 156,980 units (the “Series A Units”)
for a purchase price of $11.50 per unit (the “Series A Purchase Price”), resulting in gross proceeds to us of $1,805,270 (the “Series A Private
Placement”). Each Series A Unit consisted of (i) one share of Series A Convertible Preferred Stock convertible into 10 shares of our common
stock, (ii) a warrant to purchase one share of Series A Convertible Preferred Stock at an exercise price equal to $12.50 per share, with a term
expiring 15 months after the date of closing (“15 Month Series A Preferred Stock Warrant”); and (iii) a warrant to purchase 10 shares of
common stock at an exercise price equal to $2.00 per share, with a term expiring 30 months after the date of closing (the “30 Month Common
Stock Warrants”). We did not pay any placement fees associated with this transaction but the expenses related to the offering totaled
approximately $233,000.
The proceeds from the sale of each Series A Unit was allocated between the Series A Convertible Preferred Stock, the 15 Month Series A
Preferred Stock Warrant and the 30 Month Common Stock Warrant based on the relative estimated fair value of each security. The estimated
fair value of the warrants was determined using the Black-Scholes formula, resulting in an allocation of the gross proceeds of $882,253 to the
total warrants issued. The allocation of the gross proceeds to the Series A Convertible Preferred Stock was $923,017. In accordance with the
provisions of FASB ASC 470-20, Debt with Conversion and Other Options, an additional adjustment between Additional Paid in Capital and
Accumulated Deficit of $489,803 was recorded to reflect an implicit non-cash dividend related to the allocation of proceeds between the stock
and warrants issued. The $489,803 represents the value of the adjustment to additional paid in capital related to the beneficial conversion
feature of the Series A Convertible Preferred Stock. The value adjustment was calculated by subtracting the fair market value of the
underlying common stock on February 12, 2009 issuable upon conversion of the Series A Convertible Preferred Stock from the fair market
value of the Series A Convertible Preferred Stock as determined when the Company performed a fair market value allocation of the proceeds
to the Series A Convertible Preferred Stock and warrants.
Each share of Series A Convertible Preferred Stock will receive a cumulative dividend at the rate of 5% per annum of the Series A
Purchase Price, payable semi-annually on June 30 and December 31, commencing on June 30, 2009 (with the first payment being pro-rated
based on the number of days occurring between the date of issuance and June 30, 2009). Dividends may be paid in cash or in shares of
common stock at our option, subject to certain conditions. The shares of Series A Convertible Preferred Stock also are entitled to a liquidation
preference, such that in the event of any voluntary or involuntary liquidation, dissolution or winding up of our company, the holders of Series
A Convertible Preferred Stock will be paid out of the assets of the Company available for distribution to our stockholders before any payment
shall be paid to the holders of common stock, an amount per share equal to the Series A Purchase Price, plus accrued and unpaid
dividends. The Series A Convertible Preferred Stock and the Series B Convertible Preferred Stock (as described below) will be treated on an
equivalent basis with respect to payments made in connection with a liquidation. The Board approved the method of payment in the form of
common stock for the June 30, 2009 dividend and the December 31, 2009 dividend.
Each share of Series A Convertible Preferred Stock is convertible into 10 shares of common stock at any time at the option of the holder,
subject to adjustment for stock splits, stock dividends, recapitalizations and similar transactions (the “Series A Conversion Ratio”). Unless
waived under certain circumstances by the holder of Series A Convertible Preferred Stock, such holder’s shares of Series A Convertible
Preferred Stock may not be converted if upon such conversion the holder’s beneficial ownership would exceed certain thresholds. Each share
of Series A Convertible Preferred Stock will automatically be converted into shares of common stock at the Series A Conversion Ratio then in
effect: (i) if, after 12 months from the closing of the Series A Private Placement, the common stock trades on the Nasdaq Capital Market (or
other primary trading market or exchange on which the common stock is then traded) at a price equal to $4.00 for 20 out of 30 consecutive
trading days with average daily trading volume of at least 10,000 shares or (ii) upon a registered public offering by the Company at a per share
price equal to $2.30 with aggregate gross proceeds to the Company of not less than $10 million.
The holders of Series A Convertible Preferred Stock are not entitled to vote on any matters presented to the stockholders of the Company
for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting),
except that the holders of Series A Convertible Preferred Stock may vote separately as a class on any matters that would amend, alter or repeal
any provision of our Restated Articles of Organization, as amended, in a manner that adversely affects the powers, preferences or rights of the
Series A Convertible Preferred Stock and such holders may also vote on any matters required by law.
- 53 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
At any time after February 11, 2014, upon 30 days written notice, we have the right to redeem the outstanding shares of Series A
Convertible Preferred Stock at a price equal to the Series A Purchase Price, plus all accrued and unpaid dividends thereon. The redemption
price may be paid in two annual installments.
15 Month Series A Preferred Stock Warrants and 30 Month Common Stock Warrants
The warrants have the following exercise prices and terms: (i) the 15 Month Series A Preferred Stock Warrants have an exercise price
equal to $12.50 per share, with a term expiring on May 12, 2010; and (ii) the 30 Month Common Stock Warrants have an exercise price equal
to $2.00 per share, with a term expiring on August 12, 2011. Unless waived under certain circumstances by the holder of the 30 Month
Common Stock Warrant, such holder’s 30 Month Common Stock Warrants may not be exercised if upon such exercise the holder’s beneficial
ownership would exceed certain thresholds.
Each of the 15 Month Series A Preferred Stock Warrants and the 30 Month Common Stock Warrants permit the holder to conduct a
“cashless exercise” at any time the holder of the warrant is an “affiliate” (as defined in the Securities Purchase Agreement) of the Company.
The warrant exercise price and/or number of shares issuable upon exercise of the applicable warrant will be subject to adjustment for
stock dividends, stock splits or similar capital reorganizations, as set forth in the warrants.
Subject to the terms and conditions of the applicable warrants, the Company has the right to call for cancellation of the 15 Month Series A
Preferred Stock Warrants if the volume weighted average price of our common stock on the Nasdaq Capital Market (or other primary trading
market or exchange on which our common stock is then traded) equals or exceeds $1.75 for either (i) 10 consecutive trading days or (ii) 15 out
of 25 consecutive trading days. Subject to the terms and conditions of the 30 Month Common Stock Warrant, the Company has the right to
call for cancellation the 30 Month Common Stock Warrant if the volume weighted average price for our common stock on the Nasdaq Capital
Market (or other primary trading market or exchange on which our common stock is then traded) equals or exceeds $2.80 for either (i) 10
consecutive trading days or (ii) 15 out of 25 consecutive trading days.
The warrants granted in connection with the Series A Units were valued based on a Black-Scholes pricing model at the date of the
grant. The 15 Month Series A Preferred Stock Warrants and 30 Month Common Stock Warrants were granted with an exercise price of $1.25
per share of Series A Convertible Preferred Stock and $2.00 per share of common stock, respectively. The 15 Month Series A Preferred Stock
Warrants and 30 Month Common Stock Warrants vested immediately. The relative fair value of the warrants was calculated to be $882,253,
and a non-cash charge of $1.8 million was recorded to Stockholders’ Equity in the first quarter of 2009. The assumptions for the Black-
Scholes pricing model are represented in the table below.
Assumptions
Expected life (in months)
Expected volatility
Risk-free interest rate
Exercise price
Stock price
Fair value per warrant
- 54 - -
Preferred
15.0
142.0%
0.875%
$
1.25
$
0.90
$
0.45
Common
30.0
109.0%
1.375%
2.00
0.90
0.41
$
$
$
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
Series B Convertible Preferred Stock
On November 18, 2009, we sold an aggregate of 62,039 units (the “Series B Units”) for a purchase price of $18.80 per unit (the “Series B
Purchase Price”), resulting in gross proceeds to us of $1,166,333. This is the first tranche of a $2.5 million private placement (the “Series B
Private Placement”). The second tranche closed on March 18, 2010 for the sale of 26,672 Series B Units with gross proceeds of
$501,434. Each Series B Unit consists of (i) one share of Series B Convertible Preferred Stock convertible into 10 shares of our common
stock and (ii) a warrant to purchase one share of Series B Convertible Preferred Stock at an exercise price equal to $23.80 per share for
warrants issued in November 2009 and at an exercise price of $28.80 for warrants issued in March 2010, in each case with a term expiring on
August 11, 2011 (the “Series B Warrant”).
In connection with the Series B Private Placements, we paid a finder’s fee of $100,478, plus warrants to purchase 5,344 shares of Series B
Convertible Preferred Stock at $28.80 per share, expiring August 11, 2012.
The proceeds from the sale of each Series B Unit was allocated between the Series B Convertible Preferred Stock and the Series B
Warrant based on the relative estimated fair value of each security. The estimated fair value of the Series B Warrants was determined using
the Black-Scholes formula, resulting in an allocation of the gross proceeds of $419,624 to the total warrants issued for the first tranche closed
in 2009. The allocation of the gross proceeds to the Series B Convertible Preferred Stock was $746,709 for the first tranche closed in
2009. In accordance with the provisions of FASB ASC 470-20, Debt with Conversion and Other Options, an additional adjustment between
Additional Paid in Capital and Accumulated Deficit of $140,449 was recorded to reflect an implicit non-cash dividend related to the allocation
of proceeds between the Series B Convertible Preferred Stock and Series B Warrants issued in the first tranche closing. The $140,449
represents the value of the adjustment to additional paid in capital related to the beneficial conversion feature of the Series B Convertible
Preferred Stock. The value adjustment was calculated by subtracting the fair market value of the underlying common stock on November 17,
2009 issuable upon conversion of the Series B Convertible Preferred Stock from the fair market value of the Series B Convertible Preferred
Stock as determined when the Company performed a fair market value allocation of the proceeds to the Series B Convertible Preferred Stock
and Series B Warrants.
Each share of Series B Convertible Preferred Stock will receive a cumulative dividend at the rate of 5% per annum of the Series B
Purchase Price, payable semi-annually on June 30 and December 31, commencing on December 31, 2009 (with the first payment being pro-
rated based on the number of days occurring between the date of issuance and December 31, 2009). Dividends may be paid in cash or in
shares of common stock at our option, subject to certain conditions. The shares of Series B Convertible Preferred Stock also are entitled to a
liquidation preference, such that in the event of any voluntary or involuntary liquidation, dissolution or winding up of our company, the
holders of Series B Convertible Preferred Stock will be paid out of the assets of the Company available for distribution to our stockholders
before any payment shall be paid to the holders of common stock, an amount per share equal to the Series B Purchase Price, plus accrued and
unpaid dividends. The Series B Convertible Preferred Stock and the Series A Convertible Preferred Stock will be treated on an equivalent
basis with respect to payments made in connection with a liquidation. The Board approved the method of payment in the form of common
stock for the December 31, 2009 dividend.
Each share of Series B Convertible Preferred Stock is convertible into 10 shares of common stock at any time at the option of the holder,
subject to adjustment for stock splits, stock dividends, recapitalizations and similar transactions (the “Series B Conversion Ratio”). Each share
of Series B Convertible Preferred Stock will automatically be converted into shares of common stock at the Series B Conversion Ratio then in
effect: (i) if, after 12 months from the closing of the applicable tranche of the Series B Private Placement, the common stock trades on the
Nasdaq Capital Market (or other primary trading market or exchange on which the common stock is then traded) at a price equal to 3/10 of the
Series B Purchase Price, or $5.64, for 20 out of 30 consecutive trading days with average daily trading volume of at least 10,000 shares or (ii)
upon a registered public offering by the Company at a per share price equal to 3/10 of the Series B Purchase Price, or $5.64, with aggregate
gross proceeds to the Company of not less than $10 million. Unless waived under certain circumstances by the holder of the Series B
Convertible Preferred Stock, such holder’s Series B Convertible Preferred Stock may not be converted if upon such conversion the holder’s
beneficial ownership would exceed certain thresholds.
- 55 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
The holders of Series B Convertible Preferred Stock are not entitled to vote on any matters presented to the stockholders of the Company
for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting),
except that the holders of Series B Convertible Preferred Stock may vote separately as a class on any matters that would amend, alter or repeal
any provision of our Restated Articles of Organization, as amended, in a manner that adversely affects the powers, preferences or rights of the
Series B Convertible Preferred Stock and such holders may also vote on any matters required by law.
At any time after February 12, 2014, upon 30 days written notice, we have the right to redeem the outstanding shares of Series B
Convertible Preferred Stock at a price equal to the Series B Purchase Price, plus all accrued and unpaid dividends thereon. The redemption
price may be paid in two annual installments. The Series B Convertible Preferred Stock and the Series A Convertible Preferred Stock will be
treated on an equivalent basis with respect to payments made in connection with redemption.
Series B Warrants
The Series B Warrants issued in November 2009 have an exercise price equal to $23.80 and the Series B Warrants issued in March 2010
have an exercise price equal to $28.80, in each case with a term expiring on August 11, 2011. The Series B Warrants permit the holder to
conduct a “cashless exercise” at any time the holder of the Series B Warrant is an “affiliate” (as defined in the Securities Purchase Agreement)
of the Company.
The Series B Warrant exercise price and/or number of shares issuable upon exercise of the Series B Warrant will be subject to adjustment
for stock dividends, stock splits or similar capital reorganizations, as set forth in the Series B Warrants.
Subject to the terms and conditions of the Series B Warrants, the Company has the right to call for cancellation of the Series B Warrants if
the volume weighted average price of our common stock on the Nasdaq Capital Market (or other primary trading market or exchange on
which our common stock is then traded) equals or exceeds 5/20 of the Series B Purchase Price, or $4.70, for either (i) 10 consecutive trading
days or (ii) 15 out of 25 consecutive trading days.
In connection with the Series B Private Placement on November 18, 2009, we issued warrants to our placement agent to purchase 3,665
shares of Series B Convertible Preferred Stock at $28.80 per share, expiring August 11, 2012. The Series B Warrants and placement agent
warrants issued in November 2009 were valued based on a Black-Scholes pricing model at the date of the grant. The Series B warrants issued
in November 2009 were granted with an exercise price of $2.38 per share of common stock and the placement agent warrants issued in
November 2009 were granted with an exercise price of $2.88 per share of common stock. The Series B Warrants and placement agent
warrants vested immediately. The relative fair value of the Series B Warrants was calculated to be $419,624 and a non-cash charge of $1.1
million was recorded to Stockholders’ Equity in the fourth quarter of 2009. The assumptions for the Black-Scholes pricing model are
represented in the table below for both warrants.
Assumptions
Expected life (in months)
Expected volatility
Risk-free interest rate
Exercise price
Fair value per warrant
- 56 - -
Preferred
21.0
142.0%
1.000%
$
2.38
$
0.80
Placement Agent
33.0
119.0%
1.380%
2.88
0.80
$
$
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
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. On
September 25, 2008, our stockholders approved an amendment to the Plan pursuant to which the number of shares reserved for issuance upon
exercise of stock options or other equity awards made under the Plan was increased from 1,000,000 shares to 1,500,000 shares. Under the
Plan, we may award stock options, shares of common stock, 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, 2009, options to acquire
1,325,500 shares are outstanding under the Plan.
As of December 31, 2009, options to acquire 239,000 shares are outstanding under the 1999 Non-qualified Stock Option Plan. No
additional options may be granted under the 1999 Non-qualified Stock Option Plan.
The following tables summarize information concerning options outstanding and exercisable:
- 57 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
Stock Options
Warrants
Weighted
Average price
per share
Weighted
Average price
per share
Shares
Shares
1,120,500 $
231,500
(3,000)
(1,500)
(125,001)
1,222,499 $
485,000
-
(5,000)
(137,999)
1,564,500 $
3.45
2.94
3.25
3.25
4.01
3.30
0.82
4.25
3.40
2.52
-
-
-
-
-
-
3,846,640 $
(40,000)
-
-
3,806,640 $
-
-
-
-
1.78
1.25
-
-
1.78
Total
Shares
1,120,500
231,500
(3,000)
(1,500)
(125,001)
1,222,499
4,331,640
(40,000)
(5,000)
(137,999)
5,371,140
Options Outstanding
Weighted Average
Remaining
Contractual
Life
Number of
Options
Exercise
Price
Number of
Options
Options Exercisable
Weighted Average
Remaining
Contractual
Life
704,000
319,500
302,000
239,000
1,564,500
6.9 $
5.2
6.4
7.1
6.5 $
1.25
2.93
3.67
4.24
2.52
392,346
283,166
276,000
197,000
1,148,512
5.2 $
4.7
6.3
6.9
5.7 $
Exercisable
691,166
932,334
4,955,152
Exercise
Price
1.61
2.95
3.69
4.21
2.89
Balance outstanding, 12/31/2007
Granted
Exercised
Expired
Forfeited
Balance outstanding, 12/31/2008
Granted
Exercised
Expired
Forfeited
Balance outstanding, 12/31/2009
Range of Exercise
Prices
$0.77 - $2.70
2.71 - 3.08
3.09 - 3.95
3.96 - 5.93
$0.77 - $5.93
Sale of Common Stock
In connection with a private placement of 126,750 shares of common stock (the “Shares”) at a price of $5.00 per share in November 2007,
we agreed to prepare and file a Registration Statement on Form S-3 (the “Registration Statement”) covering the resale of the Shares, and to
use our 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.
(9) Subsequent Events
We performed a review of events subsequent to the balance sheet date through March 31, 2010, the date the financial statements were
issued.
Commitments
Effective January 1, 2010, we entered into a three-year lease agreement with the University of Massachusetts, pursuant to which we are
leasing laboratory and office space on campus at the university. We will pay $5,000 per month for the use of these facilities.
Series B Convertible Preferred Stock
On March 18, 2010, we sold an aggregate of 26,672 Series B Units for a purchase price of $18.80 per unit, resulting in gross proceeds to
us of $501,434. This is the second tranche of the $2.5 million Series B Private Placement.
- 58 - -
PRESSURE BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
In connection with the closing of the second tranche of the Series B Private Placement, we paid a finder’s fee of $31,571, plus warrants to
purchase 1,679 shares of Series B Convertible Preferred Stock at $28.80 per share, expiring August 11, 2012.
- 59 - -
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None
ITEM 9A(T). 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 our Securities
Exchange Act of 1934 filings are 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 and Chief Executive Officer
(Principal Executive Officer) 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 was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.
As of December 31, 2009, we carried out an evaluation, under the supervision and with the participation of our management, including our
Principal Executive Officer and 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 Securities Exchange Act of 1934. Based upon that evaluation, our Principal
Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective at the reasonable
assurance level.
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.
- 60 - -
We have assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. 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, 2009, 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 2009 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION.
On March 31, 2010, we issued warrants to an investor relations firm to purchase 50,000 shares of our common stock at an exercise price
equal to $3.00 per share, with a term expiring on August 11, 2012, in exchange for consulting services provided to us by such firm. The
investor relations firm provided us consulting on general corporate financial matters. The warrants were issued and sold without registration
under the Securities Act, in reliance upon the exemption from registration set forth in Rule 506 of Regulation D promulgated under the
Securities Act. The Company based such reliance upon representations made to it by the investor relations firm, including, but not limited to,
representations as to such firm’s status as an “accredited investor” (as defined in Rule 501(a) under Regulation D) and such firm’s investment
intent. The securities 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) and may not be re-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.
Also on November 18, 2009, we issued 16,000 shares of our common stock and on or about March 31, 2010, we issued 12,000 shares of
our common stock, to another investor relations firm, in each case in exchange for consulting services provided to us by such firm. The
investor relations firm provided us consulting on general corporate financial matters. The shares of common stock issued in November 2009
were issued and sold without registration under Section 4(2) of the Securities Act, for transactions not involving a public offering. The shares
of common stock issued in March 2010 were issued and sold without registration under the Securities Act, in reliance upon the exemption
from registration set forth in Rule 506 of Regulation D promulgated under the Securities Act. The Company based such reliance upon
representations made to it by the investor relations firm, including, but not limited to, representations as to such firm’s status as an “accredited
investor” (as defined in Rule 501(a) under Regulation D) and such firm’s investment intent. The securities 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) and may not be re-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.
- 61 - -
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
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 charge 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.
The information regarding our executive officer is under Item 1, “Our Executive Officers”, of this Form 10-K. The additional information
required by this Item 10 is hereby incorporated by reference to our definitive proxy statement to be filed within 120 days after the close of our
fiscal year.
- 62 - -
ITEM 11.
EXECUTIVE COMPENSATION.
The information required by this Item 11 is hereby incorporated by reference to our definitive proxy statement to be filed within 120 days
after the close of our fiscal year.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
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, 2009 regarding the shares of
our common stock available for grant or granted under our equity compensation plans.
Plan Category
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
174,500
2.52
Equity compensation plans approved by security holders
1,564,500 $
Includes the following plans: 1999 Non-Qualified Stock Option Plan and 2005 Equity Incentive Plan.
The additional information required by this Item 12 is hereby incorporated by reference to our definitive proxy statement to be filed
within 120 days after the close of our fiscal year.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; AND DIRECTOR INDEPENDENCE.
The information required by this Item 13 is hereby incorporated by reference to our definitive proxy statement to be filed within 120 days
after the close of our fiscal year.
- 63 - -
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item 14 is hereby incorporated by reference to our definitive proxy statement to be filed within 120 days
after the close of our fiscal year.
- 64 - -
PART IV
ITEM 15.
Exhibit No.
EXHIBITS.
3.1 Restated Articles of Organization of the Company
3.2 Articles of Amendment to Restated Articles of Organization of the Company
3.3 Articles of Amendment to Restated Articles of Organization of the Company, as amended
3.4 Amended and Restated Bylaws of the Company
3.5 Amendment to Amended and Restated Bylaws of the Company
4.1 Specimen Certificate for Shares of the Company’s Common Stock
4.2 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)
4.3 Rights Agreement dated as of February 27, 2003 between the Company and Computershare Trust
Company, Inc.
4.4 Amendment No. 1 to Rights Agreement dated April 16, 2004 between the Company and
Computershare Trust Company, Inc.
4.5 Securities Purchase Agreement dated November 21, 2007 between the Company and the
purchasers named therein
4.6 Registration Rights Agreement dated November 21, 2007 between the Company and the
purchasers named therein
4.7 Securities Purchase Agreement dated February 12, 2009 between the Company and the
purchasers named therein
4.8 Form of 15 Month Preferred Stock Warrant
4.9 Form of 30 Month Common Stock Warrant
4.10 Registration Rights Agreement dated February 12, 2009 between the Company and the
purchasers named therein
4.11 Securities Purchase Agreement dated November 18, 2009 between the company and the
purchasers named therein
4.12 Registration Rights Agreement dated November 18, 2009 between the Company and the
purchasers named therein
4.13 Series B Preferred Stock Warrant
- 65 - -
Reference
A-3.1**
B-3.1**
O-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**
L-4.1**
L-4.2**
L-4.4**
L-4.5**
O-4.1
O-4.2
O-4.3
Exhibit No.
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.10
1999 Non-Qualified Stock Option Plan*
1999 Employee Stock Purchase Plan*
2005 Equity Incentive Plan.*
Amendment No. 1 to 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*
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.
Reference
H**
H**
I-99.1**
M-10.1**
N-10.7**
N-10.6**
N-10.7**
J-10.1**
10.11
Asset Purchase Agreement dated April 16, 2004 between the Company, BBI Biotech Research
F-1**
Laboratories, Inc. and SeraCare Life Sciences, Inc.
10.12
Technology Transfer and Patent Assignment Agreement dated October 7, 1996, between Bioseq,
N-10.11**
Inc. and BioMolecular Assays, Inc.
10.13
Amendment to Technology Transfer and Patent Assignment Agreement dated October 8, 1998
N-10.12**
between Bioseq, Inc. and BioMolecular Assays, Inc.
10.14
Nonexclusive License Agreement dated September 30, 1998 between Bioseq, Inc. and
N-10.13**
BioMolecular Assays, Inc.
10.16
Agreement for Research Services dated February 1, 2006 by and between the registrant and the
K-10.1**
University of New Hampshire
23.1
31.1
31.2
32.1
32.2
Consent of Independent Registered Public Accounting Firm
Principal Executive Officer Certification Pursuant to Item 601(b)(31) of Regulation S-K, as
Filed herewith
Filed herewith
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Principal Financial Officer Certification Pursuant to Item 601(b)(31) of Regulation S-K, as
Filed herewith
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
Filed herewith
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Principal Financial Officer Certification Pursuant to Item 601(b)(32) of Regulation S-K, as
Filed herewith
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*Management contract or compensatory plan or arrangement.
**Previously filed as follows.
A
B
C
D
E
F
G
H
I
J
K
L
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 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 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 February 18, 2009.
- 66 - -
M
N
O
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 September 29, 2008.
We previously filed this exhibit with the referenced exhibit number as an exhibit to the registrant’s Annual Report on
Form 10-K filed with the Commission on March 27, 2008.
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 November 19, 2009..
- 67 - -
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 31, 2010
Pressure BioSciences, Inc.
SIGNATURES
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.
By:
/s/ Richard T. Schumacher
Richard T. Schumacher
President and Chief Executive Officer
SIGNATURES
/s/ Richard T. Schumacher
Richard T. Schumacher
/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/ Alan D. Rosenson
Alan D. Rosenson
TITLES
President, Chief Executive Officer (Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer)
DATE
March 31, 2010
Director and Chairman of the Board
March 31, 2010
Director
Director
Director
March 31, 2010
March 31, 2010
March 31, 2010
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, 333-
128594, and 333-155405) and Form S-3 (File No. 333-148227) of Pressure BioSciences, Inc. (formerly Boston Biomedica, Inc.) of our report
dated March 31, 2010, 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, 2009.
EXHIBIT 23.1
/s/ UHY LLP
Boston, Massachusetts
March 31, 2010
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.1
I, Richard T. Schumacher, 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 31, 2010
/s/ Richard T. Schumacher
Name: Richard T. Schumacher
Title:
President and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.2
I, Richard T. Schumacher, 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 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 information; 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 31, 2010
/s/ Richard T. Schumacher
Name: Richard T. Schumacher
Title:
President and Chief Executive Officer
(Principal Financial 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, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Richard T.
Schumacher, President and Chief Executive Officer and Principal 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 31, 2010
/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, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Richard T.
Schumacher, President and Chief Executive Officer and Principal 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 31, 2010
/s/ Richard T. Schumacher
Richard T. Schumacher
President and Chief Executive
Officer
(Principal Financial 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.