UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
(Mark
One)
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x
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Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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For the fiscal year ended
December 31, 2009 or
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¨
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Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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For
the transition period from ___________________ to
_______________________
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Commission
file number 000-21615
PRESSURE
BIOSCIENCES, INC.
(Exact
Name of Registrant as Specified in its Charter)
Massachusetts
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04-2652826
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(State
or Other Jurisdiction of Incorporation or Organization)
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(I.R.S.
Employer Identification No.)
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14 Norfolk Avenue
South Easton, Massachusetts
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02375
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(Address
of Principal Executive Offices)
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(
Zip Code)
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(508) 230-1828
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(Registrant’s
Telephone Number, Including Area Code)
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Securities registered pursuant to Section 12(b) of
the Act:
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Title of Each Class
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Name of Each Exchange on Which
Registered
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Common
Stock, par value $.01 per share
Preferred
Share Purchase Rights
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The
Nasdaq Stock Market,
LLC
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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 ¨
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Accelerated filer ¨
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Non-accelerated filer ¨
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Smaller reporting company x
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(Do not check if smaller reporting company)
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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
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Page
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PART
I
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Item
1.
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Business
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1
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Item
1A.
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Risk
Factors
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15
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Item
1B.
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Unresolved
Staff Comments
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22
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Item
2.
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Properties
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22
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Item
3.
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Legal
Proceedings
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22
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Item
4.
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Reserved
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22
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PART
II
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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23
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Item
6.
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Selected
Financial Data
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25
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Item
7.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
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25
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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35
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Item
8.
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Financial
Statements and Supplementary Data
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37
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Item
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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60
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Item
9A(T).
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Controls
and Procedures
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60
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Item
9B.
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Other
Information
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61
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PART
III
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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62
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Item
11.
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Executive
Compensation
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63
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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63
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Item
13.
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Certain
Relationships and Related Transactions, and Directors
Independence
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63
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Item
14.
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Principal
Accountant Fees and Services
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64
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PART
IV
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Item
15.
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Exhibits
and Financial Statement Schedules
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65
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Introductory
Comment
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.
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;
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our
belief that we have sufficient liquidity to finance operations into the
first quarter of 2011;
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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;
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the
amount of cash necessary to operate our business;
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the
anticipated uses of grant revenue and increased grant revenue in future
periods;
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our
plans and expectations with respect to our pressure cycling technology
(PCT) operations;
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our
belief that PCT has achieved significant market acceptance in the mass
spectrometry market;
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the
expected development and success of new product
offerings;
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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;
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the
expected benefits and results from our research and development
efforts;
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the
expected benefits and results from our collaboration program, strategic
alliances and joint ventures;
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our
expectation of obtaining additional research grants from the government in
the future;
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our
expectations of the results of our development activities funded by
government research grants;
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general
economic conditions; and
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the
anticipated future financial performance and business operations of our
company.
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our
reasons for focusing our resources in the market for genomic, proteomic
and small molecule sample preparation;
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the
importance of mass spectrometry as a laboratory tool;
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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;
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sample
preparation may be an impediment to research and
discovery;
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the
capabilities and benefits of our PCT sample preparation system and
consumable products;
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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
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our
ability to expand our customer base in sample preparation and for other
applications of PCT.
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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.
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,
ProteoSolveLRSTM, the
Power of PCTTM, the
PCT ShredderTM, all of
which are unregistered trademarks of the Company.
Overview
We are a
life sciences company focused on the development and commercialization of a
novel, enabling, platform technology called pressure cycling technology (“PCT”).
PCT uses cycles of hydrostatic pressure between ambient and ultra-high levels
(up to 35,000 psi and greater) to control bio-molecular
interactions.
Our
pressure cycling technology uses internally developed instrumentation that is
capable of cycling pressure between ambient and ultra-high levels at controlled
temperatures to rapidly and repeatedly control the interactions of
bio-molecules. Our instrument, the Barocycler®, and our internally developed
consumables product line, which includes PULSE (Pressure Used to Lyse Samples
for Extraction) Tubes as well as 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.
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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.
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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.
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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.
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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.
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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.
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2005
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2006
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2007
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2008
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2009
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Installed
units
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5 |
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8 |
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20 |
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41 |
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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;
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pathogen
inactivation;
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protein
purification;
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control
of chemical (particularly enzymatic) reactions; and
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immunodiagnostics.
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Corporate
Information
We were
incorporated in the Commonwealth of Massachusetts in August 1978 as Boston
Biomedica, Inc. In September 2004, we completed the sale of the
Boston Biomedica core business units and began to focus exclusively on the
development and commercialization of pressure cycling technology. Following this
change in business strategy, we changed our legal name from Boston Biomedica,
Inc. to Pressure BioSciences, Inc., or PBI, and commenced operations as Pressure
BioSciences in February 2005.
Available
Information
Our
Internet website address is http://www.pressurebiosciences.com. Through our
website, we make available, free of charge, 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;
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has
a large and immediate need for better
technology;
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is
comprised mostly of research laboratories, which are subject to minimal
governmental regulation;
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is
the least technically challenging application for the development of our
products;
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is
compatible with our technical core competency;
and
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is
the area in which we currently have strong patent
protection.
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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.
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;
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the
advancement and validation of our understanding of PCT within an area of
life sciences in which we already have
products;
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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
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the
expectation of peer-reviewed publications and/or presentations at
scientific meetings by a third party on the merits of
PCT.
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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
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Authors
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Category
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Affiliation
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Reference
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Pressure
Cycling for Sample Preparation
PCT
System Provides Automated Alternative to Manual Methods
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Richard
T. Schumacher
Vera
Gross, Ph.D.
Edmund
Y. Ting, ScD.
Alexander
Lazarev, Ph.D.
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Paper
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Pressure
BioSciences
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Genetic
Engineering News (GEN) Dec 1 2009 (Vol. 29, No. 21)
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Pressure
Cycling Technology (PCT) Applications for DNA Extractions from Challenging
Forensic Samples
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Suzanne
Gonzalez, Elizabeth Feller, Dixie Peters, Bruce Budowle, and Arthur
Eisenberg
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Oral
Presentation
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University
of North Texas Center for Human Identification
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20th
International Symposium on
Human
Identification
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Phosphopeptide
isolation from Caenorhabditis
elegans
using the CE PrEP, PCT, and PhosphoScan Technologies
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Gabrielle
E. Giese, Gary B. Smejkal. Feixia Chu3, John J. Collins1, and Winston P.
Kuo
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Poster
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University
of New Hampshire
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Human
Proteome Organization
(HUPO)
2009 8th World Congress
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Incidence
and spatial distribution of Rhizoctonia and Pythium species determined
with real-time PCR
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K.
L. Schroeder, T. C. Paulitz, and P. A. Okubara
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Poster
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USDA
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American
Phytopathological Society's 2009 Annual Meeting
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High-pressure
assisted in-gel tryptic digest: qualitative and
quantitative
aspects
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Michail
Alterman, Melkamu Getie-Kebtie; Alexander Lazarev; and Vera S.
Gross
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Poster
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FDA,
CBER
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American
Society for Mass Spectrometry (ASMS) Annual Meeting
2009
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Proteomics
Under Pressure: Rapid Extraction and Digestion in a Single
Tube
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Alexander
V. Lazarev; Emily Freeman; Vera S. Gross; Greta Carlson; Edmund Ting;
Alexander R. Ivanov
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Poster
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Pressure
BioSciences
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American
Society for Mass Spectrometry (ASMS) Annual Meeting
2009
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Searching
for efficient and high throughput
alternatives
for essential sample preparation techniques in mass spectrometry-based
functional proteomics
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Emily
Freeman; Yelena Margolin; and Alexander R. Ivanov
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Poster
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Harvard
School of Public Health, Department of Genetics and Complex
Disease
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The
Association of BioMolecular Resources Facilities (ABRF)
2009
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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.
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.
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.
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.
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).
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Incumbent Technologies
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Bead
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Tissue
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Mortar
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French
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Key Attributes
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Sonication
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Beating
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Homogenizer
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Pestle
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Press
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PCT
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Closed
System
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+
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- |
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- |
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- |
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+ |
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Storage,
Transport
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+
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- |
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- |
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- |
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+ |
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Versatility
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- |
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- |
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- |
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+ |
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Reproducibility
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- |
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- |
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+ |
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Efficiency
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-/+
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- |
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- |
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- |
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+ |
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Shearing
Molecules
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Yes
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Yes
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Yes
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Min
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Yes
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Min
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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.
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.
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.
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.
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
|
|
Age
|
|
Position
|
Richard
T. Schumacher
|
|
59
|
|
President,
Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and
Director
|
Edmund
Ting, Ph.D.
|
|
56
|
|
Senior
Vice President of Engineering
|
Nathan
P. Lawrence, Ph.D.
|
|
55
|
|
Vice
President of Marketing
|
Alexander
Lazarev, Ph.D.
|
|
45
|
|
Vice
President of Research and Development
|
Matthew
B. Potter
|
|
46
|
|
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.
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.
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.
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
|
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.
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:
|
·
|
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
|
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.
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.
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.
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.
ITEM
1B.
|
UNRESOLVED
STAFF COMMENTS.
|
Not
Applicable.
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.
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.
|
|
Common Stock Price
|
|
Fiscal Year Ended December 31,
2008
|
|
High
|
|
|
Low
|
|
First
Quarter
|
|
$ |
5.72 |
|
|
$ |
3.80 |
|
Second
Quarter
|
|
|
5.09 |
|
|
|
3.14 |
|
Third
Quarter
|
|
|
3.75 |
|
|
|
2.25 |
|
Fourth
Quarter
|
|
|
2.37 |
|
|
|
0.55 |
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31,
2009
|
|
High
|
|
|
Low
|
|
First
Quarter
|
|
$ |
1.23 |
|
|
$ |
0.55 |
|
Second
Quarter
|
|
|
2.10 |
|
|
|
0.80 |
|
Third
Quarter
|
|
|
1.85 |
|
|
|
1.31 |
|
Fourth
Quarter
|
|
|
1.80 |
|
|
|
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.
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.
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;
|
|
-
|
control of chemical (enzymatic)
reactions; and
|
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.
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.
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.
Unit
Installations
|
|
2009
|
|
|
2008
|
|
Domestic
|
|
|
47 |
|
|
|
26 |
|
|
|
|
7 |
|
|
|
15 |
|
Total
Installations
|
|
|
54 |
|
|
|
41 |
|
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.
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.
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.
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.
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.
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
|
|
$ |
133,914 |
|
2011
|
|
|
105,304 |
|
2012
|
|
|
60,000 |
|
Thereafter
|
|
|
- |
|
Total
minimum payments required
|
|
$ |
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.
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:
|
-
|
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.
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
|
Not
Applicable
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
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
|
PRESSURE
BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
DECEMBER
31, 2009 AND 2008
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
1,609,778 |
|
|
$ |
868,208 |
|
Restricted
cash
|
|
|
20,012 |
|
|
|
50,000 |
|
Accounts
receivable, net of allowances of $8,400 at December 31, 2009 and $0 at
December 31, 2008
|
|
|
203,211 |
|
|
|
209,117 |
|
Inventories
|
|
|
638,350 |
|
|
|
571,831 |
|
Deposits
|
|
|
182,010 |
|
|
|
382,236 |
|
Prepaid
income taxes
|
|
|
3,176 |
|
|
|
6,600 |
|
Prepaid
expenses and other current assets
|
|
|
86,563 |
|
|
|
235,111 |
|
Total
current assets
|
|
|
2,743,100 |
|
|
|
2,323,103 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
249,465 |
|
|
|
252,249 |
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
Intangible
assets, net
|
|
|
231,026 |
|
|
|
279,658 |
|
TOTAL
ASSETS
|
|
$ |
3,223,591 |
|
|
$ |
2,855,010 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
148,087 |
|
|
$ |
263,486 |
|
Accrued
employee compensation
|
|
|
105,824 |
|
|
|
161,374 |
|
Accrued
professional fees and other
|
|
|
271,926 |
|
|
|
278,982 |
|
Deferred
revenue
|
|
|
8,058 |
|
|
|
16,705 |
|
Total
current liabilities
|
|
|
533,895 |
|
|
|
720,547 |
|
LONG
TERM LIABILITIES
|
|
|
|
|
|
|
|
|
Deferred
revenue
|
|
|
1,609 |
|
|
|
10,821 |
|
TOTAL
LIABILITIES
|
|
|
535,504 |
|
|
|
731,368 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
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)
|
|
|
1,523 |
|
|
|
- |
|
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)
|
|
|
620 |
|
|
|
- |
|
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
|
|
|
23,284 |
|
|
|
21,953 |
|
Warrants
to acquire preferred stock and common stock
|
|
|
1,352,165 |
|
|
|
- |
|
Additional
paid-in capital
|
|
|
9,297,115 |
|
|
|
6,803,530 |
|
Accumulated
deficit
|
|
|
(7,986,620 |
) |
|
|
(4,701,841 |
) |
Total
stockholders' equity
|
|
|
2,688,087 |
|
|
|
2,123,642 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$ |
3,223,591 |
|
|
$ |
2,855,010 |
|
The
accompanying notes are an integral part of these consolidated financial
statements
PRESSURE
BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
|
For the Year Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
|
PCT
Products, services, other
|
|
$ |
831,602 |
|
|
$ |
655,252 |
|
Grant
revenue
|
|
|
413,308 |
|
|
|
197,011 |
|
Total
revenue
|
|
|
1,244,910 |
|
|
|
852,263 |
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES:
|
|
|
|
|
|
|
|
|
Cost
of PCT products and services
|
|
|
402,340 |
|
|
|
401,017 |
|
Research
and development
|
|
|
1,175,136 |
|
|
|
1,810,590 |
|
Selling
and marketing
|
|
|
1,054,869 |
|
|
|
1,686,590 |
|
General
and administrative
|
|
|
1,809,133 |
|
|
|
1,920,465 |
|
Total
operating costs and expenses
|
|
|
4,441,478 |
|
|
|
5,818,662 |
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(3,196,568 |
) |
|
|
(4,966,399 |
) |
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
4,990 |
|
|
|
57,954 |
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(3,191,578 |
) |
|
|
(4,908,445 |
) |
Income
tax refund
|
|
|
623,262 |
|
|
|
- |
|
Net
loss
|
|
|
(2,568,316 |
) |
|
|
(4,908,445 |
) |
Accrued
and deemed dividends on convertible preferred stock
|
|
|
(716,463 |
) |
|
|
- |
|
Net
loss applicable to common shareholders
|
|
$ |
(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
PRESSURE
BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
|
|
|
|
Series
A
|
|
|
Series
B
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Earnings/
|
|
|
Total
|
|
|
|
Preferred
Stock
|
|
|
Preferred
Stock
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
|
|
|
Paid-In
|
|
|
(Accumulated
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Stock
Warrants
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Equity
|
|
BALANCE,
December 31, 2007
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
2,192,175 |
|
|
$ |
21,922 |
|
|
$ |
- |
|
|
$ |
6,284,616 |
|
|
$ |
206,604 |
|
|
$ |
6,513,142 |
|
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
509,195 |
|
|
|
|
|
|
|
509,195 |
|
Issuance
of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,108 |
|
|
|
31 |
|
|
|
|
|
|
|
9,719 |
|
|
|
|
|
|
|
9,750 |
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,908,445
|
) |
|
|
(4,908,445
|
) |
BALANCE,
December 31, 2008
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
2,195,283 |
|
|
$ |
21,953 |
|
|
$ |
- |
|
|
$ |
6,803,530 |
|
|
$ |
(4,701,841 |
) |
|
$ |
2,123,642 |
|
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
429,004 |
|
|
|
|
|
|
|
429,004 |
|
Issuance
of convertible preferred stock
|
|
|
156,980 |
|
|
|
1,570 |
|
|
|
62,039 |
|
|
|
620 |
|
|
|
219,019 |
|
|
|
2,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,667,535 |
|
|
|
|
|
|
|
1,669,725 |
|
Issuance
of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000 |
|
|
|
160 |
|
|
|
|
|
|
|
26,400 |
|
|
|
|
|
|
|
26,560 |
|
Offering
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(354,177 |
) |
|
|
|
|
|
|
(354,177 |
) |
Issuance
of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,363,967 |
|
|
|
|
|
|
|
|
|
|
|
1,363,967 |
|
Stock
warrant exercise
|
|
|
4,000 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
4,000 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
(11,802 |
) |
|
|
61,762 |
|
|
|
|
|
|
|
50,000 |
|
Beneficial
conversion of preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
630,252 |
|
|
|
(630,252 |
) |
|
|
- |
|
Conversion
of preferred stock to common stock
|
|
|
(8,767 |
) |
|
|
(87 |
) |
|
|
|
|
|
|
|
|
|
|
(8,767 |
) |
|
|
(87 |
) |
|
|
87,670 |
|
|
|
877 |
|
|
|
|
|
|
|
(790 |
) |
|
|
|
|
|
|
- |
|
Common
stock paid-in-kind dividends earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86,211 |
) |
|
|
(86,211 |
) |
Issuance
of common stock for dividends paid-in-kind
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,473 |
|
|
|
294 |
|
|
|
|
|
|
|
33,599 |
|
|
|
|
|
|
|
33,893 |
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,568,316 |
) |
|
|
(2,568,316 |
) |
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.
PRESSURE
BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
|
For
the Year Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(2,568,316 |
) |
|
$ |
(4,908,445 |
) |
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to operating cash flows:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
204,341 |
|
|
|
199,999 |
|
Stock-based
compensation expense
|
|
|
429,005 |
|
|
|
509,195 |
|
Bad
debt expense
|
|
|
53,680 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
29,988 |
|
|
|
(50,000 |
) |
Accounts
receivable
|
|
|
(47,774 |
) |
|
|
(90,646 |
) |
Inventories
|
|
|
(66,519 |
) |
|
|
(399,283 |
) |
Deposits
|
|
|
200,226 |
|
|
|
171,247 |
|
Accounts
payable
|
|
|
(115,399 |
) |
|
|
110,757 |
|
Accrued
employee compensation
|
|
|
(55,550 |
) |
|
|
(215,816 |
) |
Deferred
revenue and other accrued expenses
|
|
|
(24,915 |
) |
|
|
93,307 |
|
Prepaid
expenses and other current assets
|
|
|
151,972 |
|
|
|
159,476 |
|
Net
cash used in operating activities
|
|
|
(1,809,261 |
) |
|
|
(4,420,209 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Additions
to property and equipment
|
|
|
(152,925 |
) |
|
|
(145,819 |
) |
Net
cash used in investing activities
|
|
|
(152,925 |
) |
|
|
(145,819 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
proceeds from the issuance of common stock
|
|
|
- |
|
|
|
9,750 |
|
Proceeds
from stock warrant exercise
|
|
|
50,000 |
|
|
|
- |
|
Net
proceeds from the issuance of preferred stock
|
|
|
2,653,756 |
|
|
|
- |
|
Net
cash provided by financing activities
|
|
|
2,703,756 |
|
|
|
9,750 |
|
|
|
|
|
|
|
|
|
|
Change
in cash and cash equivalents
|
|
|
741,570 |
|
|
|
(4,556,278 |
) |
Cash
and cash equivalents, beginning of period
|
|
|
868,208 |
|
|
|
5,424,486 |
|
Cash
and cash equivalents, end of period
|
|
$ |
1,609,778 |
|
|
$ |
868,208 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATION:
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$ |
- |
|
|
$ |
6,177 |
|
Income
tax refund received
|
|
|
623,262 |
|
|
|
301,060 |
|
Beneficial
conversion feature on convertible preferred stock
|
|
|
630,252 |
|
|
|
- |
|
The
accompanying notes are an integral part of these consolidated financial
statements
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.
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.
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:
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
Raw
materials
|
|
$ |
92,453 |
|
|
$ |
83,451 |
|
Finished
goods
|
|
|
545,897 |
|
|
|
488,380 |
|
Total
|
|
$ |
638,350 |
|
|
$ |
571,831 |
|
(vii) Property
and Equipment
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.
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:
|
|
For
the Year Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Top
Five Customers
|
|
|
48 |
% |
|
|
52 |
% |
Federal
Agencies
|
|
|
37 |
% |
|
|
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:
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
Top
Five Customers
|
|
|
62 |
% |
|
|
81 |
% |
Federal
Agencies
|
|
|
12 |
% |
|
|
1 |
% |
Product
Supply
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.
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.
|
|
For
the Year Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Numerator:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(2,568,316 |
) |
|
$ |
(4,908,445 |
) |
Accrued
preferred stock dividend
|
|
|
(52,318 |
) |
|
|
- |
|
Beneficial
conversion feature for Series A Preferred Stock
|
|
|
(489,803 |
) |
|
|
- |
|
Beneficia |