Pacific Biometrics Reports Third Quarter and Nine-Month Operating Results

SEATTLE, WA--(Marketwire - May 18, 2009) - Pacific Biometrics, Inc. (OTCBB: PBME), a leading provider of specialized central laboratory and contract research services, today announced its operating results for the third quarter and first nine months of FY2009. The Company will host an investor conference call at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) today, May 18, 2009, to discuss its operating results and other topics of interest (details provided below).

For the nine months ended March 31, 2009, revenue increased 31% to $7,889,177, compared with $6,025,507 in the first nine months of FY2008. Operating income improved to $547,824, versus an operating loss of $548,156 in the nine months ended March 31, 2008. The Company reported net income of $1,168,742, or $0.06 per diluted share, for the nine months ended March 31, 2009, compared with a net loss of $684,509, or $0.04 per share, in the corresponding period of the previous fiscal year.

Revenue for the three months ended March 31, 2009 increased 24% to $2,853,222, compared with $2,296,310 in the third quarter of FY2008. Operating income totaled $206,691 in the most recent quarter, versus $236,480 in the prior-year quarter. The Company recorded net income of $197,808, or $0.01 per diluted share, in the third quarter of FY2009, compared with net income of $282,275, or $0.01 per diluted share, in the third quarter of FY2008.

“We continued to benefit from strong demand for specialty laboratory testing in the diabetes and rheumatoid arthritis areas in the most recent quarter and are pleased to report that third quarter revenues increased 24% from the prior-year period,” commented Ron Helm, Chief Executive Officer of Pacific Biometrics. “On a year-to-date basis, total revenues rose 31% and continued to reflect the Company’s significant investments in business development initiatives during the past two fiscal years.

“For the nine months ended March 31, 2009, the Company’s profitability improved by more than $1.8 million when compared with the corresponding period of the previous year. Net income totaled $1,168,742, reflecting a dramatic earnings turnaround when compared with a net loss of $684,509 in the first nine months of Fiscal 2008. The Company also generated over $1.3 million in cash from its operating activities during the first nine months of Fiscal 2009, compared to a burn of over $800,000 in cash in the prior-year period. This improvement in operating cash flows has allowed us to invest in new strategic opportunities and to be more aggressive in our efforts to penetrate the rapidly growing biomarker services market.

“Third quarter earnings were impacted by accelerated spending on instrument platforms and laboratory staffing in order to expand the assay development capabilities of our Pacific Biomarkers subsidiary and to continue building our business development initiatives. We are optimistic that such investments will allow the Company to pursue additional market and revenue opportunities in Fiscal 2010 and future years that will complement the organic growth of our legacy business model. Cost increases in petrochemical-based reagents and the payment of performance bonuses also influenced our bottom-line performance in the most recent quarter.

“We expect to look back upon Fiscal 2009 as a year during which we (1) substantially strengthened our balance sheet by paying off all long- and short-term debt; (2) recorded an impressive earnings turnaround; (3) bolstered our competitive position in our core areas of cardiovascular disease, diabetes, metabolic syndrome, osteoporosis and arthritis; and (4) positioned the Company for growth opportunities in the multi-billion-dollar biomarker services industry. These are exciting times for Pacific Biometrics, and while our quarterly results can fluctuate due to the timing of order receipts and contract performance, we are very optimistic regarding prospects for the Company in the years ahead,” concluded Helm.

Investor Conference Call

Pacific Biometrics, Inc. has scheduled an investor conference call to discuss its operating results for the third quarter and first nine months of FY2009, along with other relevant subjects. The call is scheduled for 11:00 a.m. EDT (8:00 a.m. PDT) today, May 18, 2009.

Shareholders and other interested parties may listen to the conference call by dialing 800-860-2442 (international/local participants dial 412-858-4600) and requesting the “Pacific Biometrics, Inc. Conference Call” a few minutes before 11:00 a.m. EDT on May 18, 2009. A replay of the conference call will be available one hour after the call through May 27, 2009 at 5:00 p.m. EDT by dialing 877-344-7529 (international/local participants dial 412-317-0088) and entering the Conference ID 430456.

About Pacific Biometrics, Inc. (PBI)

Established in 1989, PBI provides specialized central laboratory and contract research services to support pharmaceutical and diagnostic manufacturers conducting human clinical trial research, including expert services in the areas of cardiovascular disease, diabetes, osteoporosis, arthritis, and nutrition. The PBI laboratory is accredited by the College of American Pathologists, New York State, and the Lipid Standardization Program. PBI’s clients include many of the world’s largest pharmaceutical, biotech, and diagnostic companies.

Pacific Biomarkers, a wholly owned subsidiary of PBI, focuses specifically on the emerging field of biomarker assay development and testing. Services include validating and performing ligand-binding assays for novel clinical biomarkers, immunogenicity testing, and multiplex testing.

PBI is headquartered in Seattle, Washington, and its common stock trades on the OTC Bulletin Board under the symbol “PBME.” For more information about PBI, visit the company’s web site at www.pacbio.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This press release includes forward-looking statements including, but not limited to, the following: growth in revenues and backlog; results of business development activities; financial results; future growth; and the viability and acceptance of its established and new services, including the Company’s biomarker services. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those described in the forward-looking statements. These risks include, but are not limited to, the following: the Company’s ability to enter into contracts for its laboratory testing or biomarker services; client changes or early terminations of studies; variability in backlog; the success of marketing and business development efforts, and competitive factors; the Company’s ability to manage growth; and other risks and uncertainties set forth in periodic filings with the U.S. Securities and Exchange Commission (including Form 10-K for the year ended June 30, 2008).

(Financial Highlights Follow)

 PACIFIC BIOMETRICS, INC. CONSOLIDATED BALANCE SHEETS March 31, June 30, 2009 2008 ASSETS (unaudited) (audited) ----------- ----------- Current assets: Cash and cash equivalents $ 1,601,858 $ 1,196,310 Accounts receivable, net 1,783,016 2,146,080 Other receivable, net 6,500 451,291 Inventory 163,038 197,456 Prepaid expenses and other assets 136,003 100,869 Deferred financing cost on secured convertible note - current portion - 18,447 ----------- ----------- Total current assets 3,690,415 4,110,453 Property and equipment, net 876,738 884,521 Total assets $ 4,567,153 $ 4,994,974 =========== =========== LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 596,869 $ 818,224 Accrued liabilities 389,728 450,788 Advances from customers 570,911 643,291 Capital lease obligation - current portion 66,219 32,530 Secured convertible note, net of unaccreted fair value assigned to conversion feature and warrants of $0 and $214,771, respectively - 678,535 Embedded derivative liability - 642,470 Freestanding derivative liability - 411,545 Other notes payable - current portion - 102,467 ----------- ----------- Total current liabilities 1,623,727 3,779,850 Capital lease obligations - long-term portion 167,187 91,109 ----------- ----------- Total liabilities 1,790,914 3,870,959 ----------- ----------- Commitments and contingencies - - Stockholders’ equity: Preferred stock, Series A convertible $0.01 par value, 5,000,000 shares authorized, 0 shares issued and outstanding for 2009 and 2008 - - Common stock, $0.01 par value, 30,000,000 shares authorized, 19,099,539 and 18,720,147 shares issued and outstanding, respectively 190,995 187,201 Additional paid-in capital 29,120,966 28,641,278 Accumulated deficit (26,535,722) (27,704,464) ----------- ----------- Total stockholders’ equity 2,776,239 1,124,015 Total liabilities and stockholders’ equity $ 4,567,153 $ 4,994,974 =========== =========== The accompanying condensed notes are an integral part of these Consolidated financial statements. PACIFIC BIOMETRICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended Nine Months Ended March 31, March 31, ------------------------ ------------------------ 2009 2008 2009 2008 ----------- ----------- ----------- ----------- Revenues $ 2,853,222 $ 2,296,310 $ 7,889,177 $ 6,025,507 ----------- ----------- ----------- ----------- Laboratory expenses and cost of sales 1,638,950 1,200,107 4,312,554 3,567,790 ----------- ----------- ----------- ----------- Gross profit 1,214,272 1,096,203 3,576,623 2,457,717 ----------- ----------- ----------- ----------- Operating expenses: Selling, general and administrative 1,007,581 859,723 3,028,799 3,005,873 ----------- ----------- ----------- ----------- Operating income (loss) 206,691 236,480 547,824 (548,156) ----------- ----------- ----------- ----------- Other income (expense): Interest expense (10,503) (210,241) (150,189) (733,553) Gain on adjustment of embedded and freestanding derivatives to fair value - 274,066 675,691 606,926 Amortization of deferred financing costs - secured convertible debt - (26,793) (18,447) (80,378) Other income 1,620 8,763 113,863 70,652 ----------- ----------- ----------- ----------- Total other income (expense) (8,883) 45,795 620,918 (136,353) Net income (loss) before tax expense 197,808 282,275 1,168,742 (684,509) ----------- ----------- ----------- ----------- Tax expense - - - - Net income (loss) $ 197,808 $ 282,275 $ 1,168,742 $ (684,509) =========== =========== =========== =========== Net income (loss) per share: Basic income (loss) per share $ 0.01 $ 0.02 $ 0.06 $ (0.04) =========== =========== =========== =========== Diluted income (loss) per share $ 0.01 $ 0.01 $ 0.06 $ (0.04) =========== =========== =========== =========== Weighted average common shares outstanding: Basic 19,099,539 18,720,147 18,993,693 18,786,668 =========== =========== =========== =========== Diluted 19,700,811 19,221,689 19,594,965 18,786,668 =========== =========== =========== =========== The accompanying condensed notes are an integral part of these Consolidated financial statements. PACIFIC BIOMETRICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Nine Months Ended March 31 ------------------------ 2009 2008 ----------- ----------- Cash flows from operating activities: Net income (loss) $ 1,168,742 $ (684,509) Reconciliation of net loss to net cash provided by operating activities: Depreciation and amortization 192,000 182,845 Accretion of fair value assigned to conversion feature and warrants 88,134 547,135 Amortization of deferred financing costs on secured convertible note 18,447 80,378 Gain from embedded and freestanding derivative liabilities relating to secured convertible note (675,691) (606,926) Warrant expense for equipment lease and financing 3,940 8,866 Compensation expense from restricted shares and options 101,218 164,603 Changes in assets and liabilities: Accounts receivable 363,064 (100,438) Other receivable 444,791 - Inventory 34,418 (33,331) Prepaid expenses and other assets (35,134) (126,550) Advances from customers (72,380) (240,673) Accounts payable (221,355) 18,469 Accrued liabilities (61,060) (34,643) ----------- ----------- Net cash provided by (used in) operating activities 1,349,134 (824,774) ----------- ----------- Cash flows from investing activities: Purchases of capital equipment (42,159) (20,609) ----------- ----------- Net cash used in investing activities (42,159) (20,609) ----------- ----------- Cash flows from financing activities: Payments on notes payable (869,136) (1,283,116) Payments on capital lease obligations (32,291) (55,305) ----------- ----------- Net cash used in financing activities (901,427) (1,338,421) ----------- ----------- Net increase (decrease) in cash and cash equivalents 405,548 (2,183,804) Cash and cash equivalents, beginning of period 1,196,310 4,219,926 ----------- ----------- Cash and cash equivalents, end of period $ 1,601,858 $ 2,036,122 =========== =========== Supplemental Information: Cash paid during the period for interest $ 61,993 $ 185,520 Non-cash investing and financing activities: Capital expenditures funded by capital lease borrowings $ 142,058 $ 65,667 The accompanying condensed notes are an integral part of these Consolidated financial statements.