Pacific Biometrics Reports Record Operating Results for FY2009

Net Income of $1,235,947 Compares with Prior-Year Net Loss of $571,429

• Press Release
• Source: Pacific Biometrics, Inc.
• On 8:30 am EDT, Monday September 28, 2009

SEATTLE, September 28, 2009 /PRNewswire-FirstCall/ -- Pacific Biometrics, Inc. (OTC Bulletin Board: PBME - News), a leading provider of specialized central laboratory and contract research services, today reported its operating results for FY2009. The Company will host an investor conference call today at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) to discuss its operating results and other topics of interest (details provided below).

For the twelve months ended June 30, 2009 (FY2009), revenue increased 32% to a record $10,881,107, compared with revenues of $8,265,237 in FY2008. Operating income improved to $613,430, compared with an operating loss of $566,026 in the fiscal year ended June 30, 2008. The Company reported FY2009 net income of $1,235,947, or $0.07 per basic and $0.06 per diluted share, compared with a FY2008 net loss of $571,429, or $0.03 per share.

"While the nature of our business is subject to numerous uncertainties surrounding the ongoing consolidation within the pharmaceutical industry, the availability of capital for biotech companies, and a trend towards smaller, more adaptive clinical trials, I am confident that PBI is on the right track with its growing focus upon traditional and novel biomarkers," stated Ron Helm, Chief Executive Officer of Pacific Biometrics. "We are pleased to report record sales and an impressive earnings turnaround for the fiscal year that ended June 30, 2009, including a 32% revenue increase that reflects our investments in business development initiatives over the last two fiscal years. Throughout Fiscal 2009, we benefited from strong levels of testing revenue in the diabetes, rheumatoid arthritis, and clinical biomarker therapeutic areas.

"Although the primary component of our business development efforts has been directed towards pharmaceutical and biotech companies, during Fiscal 2009 we saw an increase in revenues from our work with other large clinical trial laboratories that refer specialty laboratory testing to us. The majority of our referral business has been at the direction of clients that are familiar with the experience, expertise and quality of services that we provide. This speaks to the strong reputation for specialty testing services that we have developed within the pharmaceutical and biotech industries in recent years. We also witnessed growth in our biomarker services revenues during the second half of the fiscal year, generating 8% of full-year revenues, compared with 5% in Fiscal 2008. We expect our biomarker services business to represent a growing portion of our revenues in the 2010 fiscal year.

"The Company's profitability improved by more than $1.8 million during Fiscal 2009, when compared with the previous fiscal year," continued Helm. "Gross profit margins expanded from 41.4% of revenues in Fiscal 2008 to 45.6% in the most recent fiscal year, despite higher reagent costs, an increase in laboratory staff to perform many new and more complex assays, and the addition of a separate facility for a new class of assays in our biomarker services area. Meanwhile, our selling, general and administrative expense ratio declined to 40.0% of revenues in Fiscal 2009, from 48.2% in Fiscal 2008, as we leveraged our semi-fixed operating infrastructure expenses across a significantly higher revenue base.

"We generated over $1.1 million in cash from operating activities during the most recent fiscal year, compared with a cash 'burn' of over $1.0 million in Fiscal 2008. This allowed us to repay all of the outstanding Laurus convertible notes and to pay off the amounts outstanding on our equipment credit line with Franklin Funding. Even after payments of $921,000 on notes payable and capital lease obligations, we ended the fiscal year with cash and cash equivalents of almost $1.4 million on our balance sheet. We reduced our total liabilities by 48% during the fiscal year, to approximately $2.0 million, and increased our stockholders' equity by 153% to $2.8 million.

"We are seeing a change in our marketplace with the widespread use of so-called 'adaptive clinical trials' together with novel biomarkers. These contracts are often shorter in duration and tend to move in and out of backlog quickly. Similarly, biomarker assay development work is also of a short duration, often remaining in backlog for less than 90 days, but this has the benefit that the sales cycle is shorter and revenues are realized earlier after contracts are signed. This type of work favors smaller labs, like PBI, that are nimble and flexible, and plays into our biomarker development strength. One consequence of these shifts is a change in the nature and size of our backlog, which now stands at $13.1 million, compared to $15.1 million a year ago. On the other hand, our total active contracts stand at $25.1 million, compared with $21.0 million one year ago, reflecting the increased number of contracts and volume of work flowing through the lab.

"Subsequent to the end of our fiscal year, we completed a $4 million debt financing on favorable terms that allowed the Company to repurchase 13% of its outstanding shares, at a price of $0.70 per share, and provided the Company with additional net capital of approximately $2.3 million to support our growth initiatives.

"In response to the repositioning of PBI in the marketplace, our Board of Directors has approved a change in the Company's name to 'Pacific Biomarkers, Inc.,' subject to approval by our stockholders at the next Annual Meeting. We believe the name change will improve the visibility of PBI's evolving business model and capabilities to our customers and within the investment community," concluded Helm.

Investor Conference Call

Pacific Biometrics, Inc. has scheduled an investor conference call to discuss its operating FY2009 results, along with other relevant subjects. The call is scheduled for 11:00 a.m. EDT (8:00 a.m. PDT) today, Monday, September 28, 2009.

Stockholders 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 September 28, 2009. A replay of the conference call will be available one hour after the call through October 5, 2009 at 5:00 p.m. EDT by dialing 877-344-7529 (international/local participants dial 412-317-0088) and entering the Conference ID 434163.

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.

PBI also provides specialized services in 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; changes effecting the pharmaceutical and biotechnology industries; 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, 2009).

                           (Financial Highlights Follow)



                               PACIFIC BIOMETRICS, INC.
                             CONSOLIDATED BALANCE SHEETS
                                    As of June 30,

                    ASSETS                             2009          2008
                                                       ----          ----
    Current assets:
        Cash and cash equivalents                  $1,365,406    $1,196,310
        Accounts receivable, net                    2,238,912     2,146,080
        Other receivable, net                           9,000       451,291
        Inventory                                     171,885       197,456
        Prepaid expenses and other assets             230,974       100,869
        Deferred financing cost on
         secured convertible note
         - current portion                                  -        18,447
                                                    ---------     ---------
            Total current assets                    4,016,177     4,110,453

    Property and equipment, net                       813,258       884,521

            Total assets                           $4,829,435    $4,994,974
                                                   ==========    ==========

       LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
        Accounts payable                             $678,818      $818,224
        Accrued liabilities                           660,284       450,788
        Advances from customers                       155,471       643,291
        Capital lease obligation -
         current portion                               62,709        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               1,557,282     3,779,850

        Advances from customers -
         long-term portion                            272,032             -
        Capital lease obligations -
         long-term portion                            156,309        91,109
                                                      -------        ------
            Total liabilities                       1,985,623     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                 29,121,334    28,641,278
        Accumulated deficit                       (26,468,517)  (27,704,464)
                                                  -----------   -----------
            Total stockholders' equity              2,843,812     1,124,015

            Total liabilities and
             stockholders' equity                  $4,829,435    $4,994,974
                                                   ==========    ==========

                                PACIFIC BIOMETRICS, INC.
                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                   Years Ended June 30,

                                                     2009            2008
                                                     ----            ----
    Revenues                                     $10,881,107     $8,265,237
                                                 -----------     ----------

      Laboratory expenses and cost of sales        5,920,195      4,841,033
                                                   ---------      ---------
          Gross profit                             4,960,912      3,424,204
                                                   ---------      ---------

    Operating expenses:
        Selling, general and administrative        4,347,482      3,990,230
                                                   ---------      ---------

    Operating income (loss)                          613,430       (566,026)
                                                     -------       --------

    Other income (expense):
      Interest expense                              (158,324)      (893,662)
      Gain on adjustment of embedded and
       freestanding derivatives to fair value        675,691        805,013
      Amortization of deferred financing costs -
       secured convertible debt                      (18,447)      (107,170)
      Other income                                   123,597        190,416
                                                     -------        -------
        Total other income (expense)                 622,517         (5,403)

    Net income (loss) before tax expense           1,235,947       (571,429)
                                                   ---------       --------

    Tax expense                                            -              -

    Net income (loss)                             $1,235,947      $(571,429)
                                                  ==========      =========

    Net income (loss) per share:
      Basic income (loss) per share                    $0.07         $(0.03)
                                                       =====         ======
      Diluted income (loss) per share                  $0.06         $(0.03)
                                                       =====         ======

    Weighted average common shares outstanding:
      Basic                                       19,012,769     18,812,306
                                                  ==========     ==========
      Diluted                                     19,640,041     18,812,306
                                                  ==========     ==========

                                 PACIFIC BIOMETRICS, INC.
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   Years Ended June 30,

                                                          2009        2008
                                                          ----        ----
    Cash flows from operating activities:
      Net income (loss)                              $1,235,947   $(571,429)

      Reconciliation of net income (loss) to net
       cash provided by operating activities:
        Depreciation and amortization                   263,756     236,004
        Accretion of fair value assigned to
         conversion feature and warrants                 88,134     673,772
        Amortization of deferred financing costs on
         secured convertible note                        18,447     107,170
        Bad debt expense                                 20,431     100,000
        Gain from embedded and freestanding
         derivative liabilities relating to secured
         convertible note                              (675,691)   (805,013)
        Warrant expense for equipment lease and
         financing                                        3,940      11,820
        Compensation expense from restricted shares
         and options                                    101,585     170,804
        Changes in assets and liabilities:
        ----------------------------------
          Accounts receivable                          (113,262)   (486,597)
          Other receivable                              442,291    (289,538)
          Inventory                                      25,571     (33,491)
          Prepaid expenses and other assets            (130,105)      3,956
          Advances from customers                      (215,788)   (450,485)
          Accounts payable                             (139,406)    336,166
          Accrued liabilities                           209,496     (28,006)
                                                        -------     -------
            Net cash  provided by (used in)
             operating activities                     1,135,346  (1,024,867)
                                                      ---------  ----------

    Cash flows from investing activities:
      Purchases of capital equipment                    (45,387)   (218,924)
                                                        -------    --------
            Net cash used in investing activities       (45,387)   (218,924)
                                                        -------    --------

    Cash flows from financing activities:
      Payments on notes payable                        (869,136) (1,713,337)
      Payments on capital lease obligations             (51,727)    (66,488)
                                                        -------     -------
            Net cash used in financing activities      (920,863) (1,779,825)
                                                       --------  ----------

    Net increase (decrease) in cash and cash
     equivalents                                        169,096  (3,023,616)
    Cash and cash equivalents, beginning of period    1,196,310   4,219,926
                                                      ---------   ---------

    Cash and cash equivalents, end of period         $1,365,406  $1,196,310
                                                     ==========  ==========

    Supplemental Information:
    Cash paid during the period for interest            $72,173    $235,209
    Cash paid during the period for income tax               $-          $-

    Non-cash investing and financing activities:
      Capital expenditures funded by capital lease
       borrowings                                      $147,106     $65,667

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