Operating Leases

Our corporate office is currently located at 14 Norfolk Avenue, South Easton, Massachusetts 02375.   We are currently paying approximately $4,800 per month for our corporate office. On December 31, 2013 the lease was amended to extend the expiration date to December 31, 2014 at the rate of $4,800 per month.

Effective January 1, 2010, we entered into a three-year lease agreement with the University of Massachusetts in Boston, pursuant to which we are leasing laboratory and office space on campus at the university for research and development activities. We paid $5,000 per month for the use of these facilities.  On September 26, 2012, the lease was amended to extend the expiration date to December 31, 2014 at a rate of $5,500 per month.

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, 2013:

      Royalty Commitments

      BioMolecular Assays, Inc.

In 1996, we acquired our initial equity interest in BioSeq, Inc., which at the time was developing our original pressure cycling technology. BioSeq, Inc. acquired its pressure cycling technology from BioMolecular Assays, Inc. under a technology transfer and patent assignment agreement. In 1998, we purchased all of the remaining outstanding capital stock of BioSeq, Inc., and at such time, the technology transfer and patent assignment agreement was amended to require us to pay BioMolecular Assays, Inc. a 5% royalty on our sales of products or services that incorporate or utilize the original pressure cycling technology that BioSeq, Inc. acquired from BioMolecular Assays, Inc. We are also required to pay BioMolecular Assays, Inc. 5% of the proceeds from any sale, transfer or license of all or any portion of the original pressure cycling technology. These payment obligations terminate in 2016. During the fiscal years ended December 31, 2013 and 2012, we incurred $23,785 and $23,635 in royalties, respectively.

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. After re-negotiating the contract in 2013 our only obligation for 2013 was a minimum royalty payment of $4,025.  The minimum annual royalty was $10,000 for 2012.

Target Discovery Inc.

In March 2010, we signed a strategic product licensing, manufacturing, co-marketing, and collaborative research and development agreement with Target Discovery Inc. (“TDI”). Under the terms of the agreement, we have been licensed by TDI to manufacture and sell a highly innovative line of chemicals used in the preparation of tissues for scientific analysis ("TDI reagents"). The TDI reagents were designed for use in combination with our pressure cycling technology. The companies believe that the combination of PCT and the TDI reagents can fill an existing need in life science research for an automated method for rapid extraction and recovery of intact, functional proteins associated with cell membranes in tissue samples. We did not incur any royalty obligation under this agreement in 2013 or 2012.

Severance and Change of Control Agreements

Each of Mr. Schumacher, and Drs. Ting, Lazarev, and Lawrence, executive officers of the Company, are entitled to receive a severance payment if terminated by us without cause. The severance benefits would include a payment in an amount equal to one year of such executive officer’s annualized base salary compensation plus accrued paid time off. Additionally, the officer will be entitled to receive medical and dental insurance coverage for one year following the date of termination.

Each of these executive officers, other than Mr. Schumacher, is entitled to receive a change of control payment in an amount equal to one year of such executive officer’s annualized base salary compensation, accrued paid time off, and medical and dental coverage, in the event of a change of control of the Company. In the case of Mr. Schumacher, this payment would be equal to two years of annualized base salary compensation, accrued paid time off, and two years of medical and dental coverage. The severance payment is meant to induce the aforementioned executives to remain in the employ of the Company, in general; and particularly in the occurrence of a change in control, as a disincentive to the control change.

Promissory Note

On November 4, 2011, the Company entered into an agreement with a former placement agent, pursuant to which the Company and the placement agent released each other of their respective obligations under a prior investment banking agreement.  In connection with this agreement, the Company issued the placement agent a promissory note with an original principal amount of $150,000 and a maturity date of May 4, 2012.  The promissory note was interest free until May 4, 2012.  On November 15, 2012, $75,000 of principal and $16,125 of accrued and unpaid interest were converted into 18,225 shares of the Company’s Series G Convertible Preferred Stock. The $75,000 principal balance remaining as of December 31, 2013 earns interest at a rate of 18% per year. The entire note balance along with all accrued interest was paid off in February 2014.

Convertible Debt

Loans in the aggregate amount of $155,000 were received from two individuals in 2013. We accrued interest at a rate of 6% on the loans.   These loans, along with $863,000 of other prior outstanding loans and unpaid interest, were converted to the Company’s Series J Convertible Preferred Shares in February 2013.

On April 11, 2013, we signed a promissory note in the amount of $275,000.  The lender paid $125,000, net of $12,500 of original issue discount, upon closing of the note.  The lender paid an additional $50,000, net of $5,000 original issue discount, on June 26, 2013. The balance of the Consideration shall be paid in the amounts and the dates as the lender chooses.  The note and unpaid interest on the note are due and payable one year from the effective date of each payment.  The Company has the right to repay the notes at any time within six months of the effective date of each closing.  If the Company repays the note within 90 days of the effective date interest is 0%.  If the note is not repaid within the 90 days a onetime interest charge of 12% will be applied. The Company has reserved at least 6,000,000 shares of common stock for conversion under this note.  The Company evaluated the terms of this note in accordance with ASC 815-40, Derivatives and Hedging Contracts in Entity’s Own Stock. The lender has the right to convert all or part of the unpaid principal and interest into common stock at a conversion price of 60% of the lowest trade price in the 25 trading days prior to conversion after six months from the effective date of each closing. The Company determined that the conversion feature met the definition of a liability and therefore, bifurcated the conversion feature as a derivative liability. The derivative liability is measured at the end of each reporting period and the change in fair value is recorded as other expense or income in the statement of operations. The fair value of the conversion feature was $186,041 at December 31, 2013 and reflected in the conversion option liability line in the consolidated balance sheet. On October 10, 2013, this note was amended to change the lenders right to convert and the borrower’s right to repay to December 10, 2013. On December 10, 2013, this note was amended to change the lenders right to convert and the borrower’s right to repay to February 10, 2014.

The proceeds from the convertible debt issued on April 11, 2013, were allocated between the host debt instrument and the convertible option based on the residual method.  The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $274,840 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the entire gross proceeds of $137,500 was offset by a debt discount of $137,500 which will be amortized to interest expense over the twelve month life of the debt. The additional $149,840 adjustment between the convertible option liability and the debt discount was charged directly to other expense.

The proceeds from the convertible debt issued on June 26, 2013, were allocated between the host debt instrument and the convertible option based on the residual method.  The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $84,146 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the entire gross proceeds of $55,000 was offset by a debt discount of $55,000 which will be amortized to interest expense over the twelve month life of the debt. The additional $34,146 adjustment between the convertible option liability and the debt discount was charged directly to other expense.

So long as the note is outstanding, the Company shall notify the lender of the issuance of any security with a term more favorable to the holder, and the lender may at its option, include the terms as a part of the transaction documents.  Both the April 11, 2013 note and the June 26, 2013 note were paid off in February 2014.

On May 24, 2013, we entered into a Convertible Redeemable Note.  The lender paid $97,500, net of $2,500 in legal fees, on the closing date.  The note does not bear interest.  The $100,000 principal is due on May 24, 2015.  The Company shall have the right to redeem the note at 120% of the unpaid principal if paid within 90 days of the issuance day, 130% of the unpaid principal if repaid between 91 and 180 days following the issuance day and 150% at any time thereafter. The Company has reserved 1,000,000 shares of common stock for conversion under this note. At any time six months after the closing date, the lender at its option may convert part, or all, of the note then outstanding into shares of the Company’s common stock at a conversion price of 70% of the average weighted average price of the common stock for the 10 trading days preceding the conversion date.  The Company determined that the conversion feature met the definition of a liability and therefore, bifurcated the conversion feature as a derivative liability. The derivative liability is measured at the end of each reporting period and the change in fair value is recorded as other expense or income in the statement of operations.

The proceeds from the convertible debt issued on May 24, 2013, were allocated between the host debt instrument and the convertible option based on the residual method.  The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $122,223 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the entire gross proceeds of $100,000 is offset by a debt discount of $100,000 which will be amortized to interest expense over the twenty-four month life of the debt. The additional $24,723 adjustment between the convertible option liability and the debt discount was charged directly to other expense.

The entire balance of the debt was repaid on November 22, 2013 and the fair value of the conversion option liability remaining on the balance sheet in the amount of $103,521 was reclassified to additional paid in capital.

On June 6, 2013, we signed a convertible debenture in the amount of $500,000.  The lender paid an initial payment of $213,000 net of a “finder’s fee” discount of $25,000 and $12,000 in legal fees, on the closing date.  The lender has the right, any time after six months from the issue date to convert any or part of the outstanding and unpaid principal into shares of the Company’s common stock at a price of $0.40 per share subject to adjustments for stock splits, stock dividends or rights offerings.  The Company has the right to prepay the debenture for a payment of 120% of the outstanding principal plus accrued and unpaid interest.  The Company is required to reserve at least 2.5 times the number of shares actually issuable upon full conversion of this debenture.  The Company determined that the conversion feature met the definition of a liability in accordance with ASC 815-40 and therefore bifurcated the conversion feature as a derivative liability. The derivative liability is measured at the end of each reporting period and the difference in fair value is recorded as other expense or income in the statement of operations.

The proceeds from the convertible debt issued on June 6, 2013, were allocated between the host debt instrument and the convertible option based on the residual method.  The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $158,715 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the gross proceeds of $250,000 was offset by a debt discount of $195,715 which will be amortized to interest expense over the twelve month life of the debt.

On December 26, 2013 the Company entered into a settlement agreement with the lender resulting in the Company paying the lender $300,000 in full satisfaction of the original debenture. The conversion option liability remaining on the balance sheet in the amount of $38,180 was reclassified to additional paid in capital.

On August 8, 2013 and October 10, 2013, we received $160,000 and $250,000, respectively in a six-month note from an existing shareholder.  Terms of the note include 18% annual interest, a right to convert the note into the next equity transaction of the Company, at the conversion rate of the equity offering, and a three-year warrant to acquire 160,000 shares of common stock and 250,000 shares of common stock, respectively at $0.40 per share. The relative fair value of the warrants was determined to be $28,722 and $33,824, respectively, which was accounted for as a debt discount and amortized to interest expense over the six-month life of the note. Both of these notes and the accrued interest were converted to our Series K Convertible Preferred Stock on December 12, 2013.

On December 4, 2013, we signed a convertible debenture in the amount of $223,000.  The lender paid an initial payment of $200,000 net of a “original issue” discount of $20,000 and $3,000 in legal fees, on the closing date.  The lender has the right at any time from the issue date to convert all or part of the outstanding and unpaid principal into shares of the Company’s common stock at a price of $0.40 per share subject to adjustments for stock splits, stock dividends or rights offerings.  The Company has the right to prepay the debenture for a payment of 120% of the outstanding principal plus accrued and unpaid interest.  The Company is required to reserve at least 4 times the number of shares actually issuable upon full conversion of this debenture.  The Company determined that the conversion feature met the definition of a liability in accordance with ASC 815-40 and therefore bifurcated the conversion feature as a derivative liability. The derivative liability is measured at the end of each reporting period and the difference in fair value is recorded as other expense or income in the statement of operations.  The fair value of the conversion feature was $98,129 at December 31, 2013 and reflected in the conversion option liability line in the consolidated balance sheet. In addition the lender received a warrant to purchase 70,000 shares of the Company’s common stock at an exercise price of $0.3125 per share.  The warrants were valued at $11,100 which was allocated to debt discount and will be amortized to interest expense over the twenty-four month life of the debt.

The proceeds from the convertible debt issued on December 4, 2013, were allocated between the host debt instrument and the convertible option based on the residual method.  The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $90,444 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the gross proceeds of $223,000 was offset by a debt discount of $111,488 which will be amortized to interest expense over the twelve month life of the debt.

On December 23, 2013, we signed a convertible debenture in the amount of $150,000.  The lender paid an initial payment of $125,000 net of a “original issue” discount of $15,000 and $10,000 in legal fees, on the closing date.  The lender has the right, any time from the issue date, to convert any or part of the outstanding and unpaid principal into shares of the Company’s common stock at a price of $0.40 per share subject to adjustments for stock splits, stock dividends or rights offerings.  The Company shall have the right to prepay the debenture for a payment of 120% of the outstanding principal plus accrued and unpaid interest.  The Company is required to reserve at least 3 times the number of shares actually issuable upon full conversion of this debenture.  The Company determined that the conversion feature met the definition of a liability in accordance with ASC 815-40 and therefore bifurcated the conversion feature as a derivative liability. The derivative liability is measured at the end of each reporting period and the change in fair value is recorded as other expense or income in the statement of operations.  The fair value of the conversion feature was $72,027 at December 31, 2013 and reflected in the conversion option liability line in the consolidated balance sheet. In addition the lender received 75,000 shares of Company restricted common stock, of which the fair value of $17,250 was charged to debt discount and will be amortized to interest expense over the thirty-six month life of the debt.

The proceeds from the convertible debt issued on December 23, 2013, were allocated between the host debt instrument and the convertible option based on the residual method.  The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $65,003 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the gross proceeds of $150,000 was offset by a debt discount of $102,153 which will be amortized to interest expense over the thirty-six month life of the debt.

Other Notes

On August 23, 2013, we signed a Merchant Agreement with Strategic Funding Source, Inc. (SFS).   Under the agreement we received $75,000 in exchange for rights to all customer receipts until SFS is paid $99,000, to be collected at the rate of $849 per business day. The payments are secured by essentially all tangible assets of the Company. On August 29, 2013 the agreement was modified to give the Company the right to pre-pay the note at any time prior to January 21, 2014; if pre-paid, the Company will receive a discount based on the date of pre-payment after the funding date. Discounts range from $16,500, if pre-paid within 30 days of funding to $1,500, if pre-paid within 150 days of funding. The note was pre-paid on December 10, 2013.

On December 10, 2013, we signed a Merchant Agreement with Scripline LLC.  Under the agreement we received $96,000 in exchange for rights to all customer receipts until Scripline LLC is paid $126,700, to be collected at the rate of $874 per business day. The payments are secured by essentially all tangible assets of the Company. The outstanding balance is recorded as Other debt on the balance sheet.