Pacific Biometrics, Inc. (OTC Bulletin Board: PBME), a leading provider of specialized reference laboratory and contract research services, today announced the Company's entry into a Loan and Security Agreement with Terry M. Giles, providing for a $4 million loan (the "Loan") to the Company. In connection with, and as required by the Loan, on August 31, 2009, the Company also repurchased 2,391,906 shares of common stock from certain stockholders at a price of $0.70 per share. These shares will be retired to the Company's treasury. The Company received net Loan proceeds of approximately $2,325,666, after payment for the stock repurchase but excluding legal and other expenses for the transaction. Also effective August 31, 2009, Mr. Giles resigned from the Company's Board of Directors.
"We are very pleased that Terry Giles, who has served on our Board of Directors since September 2003, has agreed to provide financing for the Company to fund our working capital and growth needs, in particular our development efforts involving the biomarker services business," stated Ron Helm, Chief Executive Officer of Pacific Biometrics, Inc. "We believe the terms of the Loan are more favorable than we could have obtained from other sources, and the financing allowed us to avoid the dilution to stockholders that would have resulted from an equity-based financing at the current price of our stock. In light of the Director conflict of interest created by this Loan agreement, Mr. Giles agreed to resign from our Board. On behalf of management and the Board of Directors, I would like to thank Mr. Giles for his long-standing service as a Director and for his continuing support of the Company and its growth potential."
The four-year Loan, which bears interest at a fixed rate of 12% per annum, provides for eight monthly interest-only payments, followed by 40 monthly payments comprised of interest plus the amortization of principal. The Company is also obligated to pay a quarterly finance fee of $12,000 to Mr. Giles during the term of the Loan. The Company has the right, at its sole discretion, to obtain an additional $500,000 loan from Mr. Giles during the first 12 months of the Loan.
The Loan and Security Agreement required that the Company use a portion of the Loan proceeds to repurchase up to a maximum of 2.4 million shares of common stock held by certain stockholders, as designated by Mr. Giles, at a repurchase price of $0.70 per share. Accordingly, on August 31, 2009, the Company repurchased a total of 2,391,906 shares of common stock, of which 382,870 were owned by Mr. Giles and the remaining 2,009,036 shares were held by five other stockholders. To facilitate the stock repurchase, Mr. Giles purchased the shares from the other stockholders at a price of $0.70 per share, and then sold all of the shares to the Company at the same price of $0.70 per share.