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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 28, 1999 0-21537
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Date of Report Commission File Number
(Date of earliest event reported)
PACIFIC BIOMETRICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 93-1211114
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(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
23120 Alica Parkway, Suite 200
Mission Viejo, CA 92692
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(Address of Principal Executive Offices) (Zip Code)
(949) 455-9724
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(Registrant's telephone number, including area code)
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Item 5. Other Events.
The Company has not filed its Form 10-KSB, which was due on extention on October
13, 1999. The Company, due to lack of funds, was unable to engage an audit firm
to perform the necessary year end audit of the June 30, 1999 financials required
to make a timely filing. The Company can not estimate when, or if, it will be
able to comply with the requirement to submit audited financials.
As previously reported, the landlord of the Company's office and laboratory
space in Lake Forest, California was proceeding against the Company to cancel
the lease. The landlord has obtained a judgement against the Company from Orange
County Superior Court for approximately $150,000 related to the default on the
lease. In addition, liabilities continue to accrue at about $13,000 per month
until the space is leased. If the landlord is able to complete a pending lease
on the property the total liability to the Company might be approximately
$300,000.
As previously disclosed, the Company has continued to negotiate forbearance
agreements with Transamerica Business Credit related to payments due on capital
leases. In exchange for the most recent Forbearance Agreement the Company has
granted Transamerica additional warrants and a lien position on assets of the
Company. This Forebearance Agreement has expired as of September 30, 1999 and
has not been extended at this time.
The Minnesota Mining and Manufacturing Company (3M), as a party in possession of
secured property, has not informed the Company of its plans for the Sudormed
assets. This includes the SkinPatch(TM) technology rights, which are part of the
Company's Osteopatch(TM) product. The Company had sought to reestablish certain
rights to this technology in order to create additional value for the Company's
other intellectual property related to the Osteopatch(TM). Without an agreement
with 3M the Company's Osteopatch(TM) assets may not have any value.
On August 30, 1999, Pacific Biometrics, Inc. (the "Company") announced by press
release that the Company entered into a Letter of Intent with Saigene
Corporation ("Saigene") to sell to Saigene the assets, properties, and business
of the Company's subsidiary in Seattle, Washington ("PBIW"), which primarily
encompass the laboratory operations of the Company. This transaction
specifically excludes the OsteoPatch(TM) and SalivaSac(R) technologies of the
Company for which the Company is trying to conclude other transactions, although
with no success to date. On September 15, 1999 the Company signed a Management
Agreement and Memorandum of Understanding with Saigene. These documents specify
the terms under which Saigene assumed control of day to day operations of the
Company's laboratory operations. The agreement will terminate upon completion of
the sale of laboratory operations to Saigene, termination by either party or
termination by March 31, 2000. Although Saigene has commenced due diligence, the
Company has not received any final documentation to complete the sales of
laboratory operations. The Letter of Intent, if not extended, is binding through
November 28, 1999
The Saigene Letter of Intent provides exclusivity with respect to the
acquisition of the laboratory operations for 45 days and Saigene has a right of
first refusal regarding any other offers for PBIW for an additional period of 45
days. The offer to purchase PBIW assets, properties and business is subject to a
number of contingencies including: (1) the successful negotiation of a mutually
acceptable agreement between Saigene and the Preferred Shareholders for the
acquisition of their
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stock; (2) the approval of certain creditors of the Company; (3) completion of
due diligence by Saigene to their satisfaction; and (4) Saigene successfully
obtaining financing sufficient, in the sole opinion of Saigene's management, to
adequately fund the combined operations of Saigene and PBIW, but in no event
less than $2.0 million. There can be no assurance that these contingencies will
be satisfied as they are not under the control of the Company. In addition, this
transaction will require shareholder approval. The Company does not currently
have sufficient financial resources to initiate and complete the process of
shareholder approval and such resources may not be obtainable in a timely manner
or at all. Furthermore, the Company may have to cease operations due to
insufficient cash resources. Although the Company has negotiated a management
contract with Saigene in order to avoid a potential shutdown of PBIW, there can
be no assurance that Saigene will be in a position to maintain financial
responsibility for PBIW.
If the transaction with Saigene is successfully completed, the remainder of the
Company is not viable as currently structured. Accordingly, the Company is
seeking to sell technology and/or merge the Company with another entity that
would be financially viable. Likewise, if the transaction is not completed, the
Company may owe Saigene for funds invested in the laboratory operations. There
can be no assurance that the Company will be able to sell any of its technology
or find another company for a merger. Failure to sell additional assets or
merge, would likely lead to a ceasing of all operations of the Company. Given
the Company's financial condition and given the likely inability to maintain
Directors and Officers liability insurance, the majority of the Directors and
Officers of the Company have resigned. The lack of financial resources will
probably force the Company to temporarily or permanently cease operations. The
fact that the Company can not pay its creditors at this time could result in
creditors pushing the Company into bankruptcy. If this were to happen the
Company would lose additional intellectual property in that the license for
assay technology related to the Osteopatch(TM) would lapse in a bankruptcy
situation. In the event of bankruptcy, it is likely that the shareholders will
not receive any return on their investment.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) not applicable
(b) not applicable
(c) Exhibits - none
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 28, 1999 PACIFIC BIOMETRICS, INC.
By: /s/ Paul G. Kanan
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Name: Paul G. Kanan
Title: President and Chief Executive Officer
