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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
August 9, 2000 0-21537
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Date of Report (Date of earliest event reported) Commission File Number
PACIFIC BIOMETRICS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 93-1211114
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
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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.
As previously reported, the Company executed an Agreement of Purchase and Sale
of Assets dated April 18, 2000 and a First Amendment to Agreement of Purchase
and Sale of Assets dated June 22, 2000 (together, the "Purchase Agreement") with
Saigene Corporation ("Saigene"). The Purchase Agreement, which is subject to
stockholder approval, will transfer the business and all assets of the Company's
Seattle laboratory operation to Saigene for a total consideration of $4,000,000.
Saigene has failed to satisfy certain conditions relating to payments as
required and is in default on the Purchase Agreement. Saigene has requested a
further extension to January 20, 2001 to complete the Purchase Agreement and the
Company and Saigene signed a Second Amendment to Agreement of Purchase and Sale
of Assets, dated August 4, 2000 (the "Second Amendment").
In exchange for this extension, Saigene has agreed to the following additional
terms. Saigene paid the Company $75,000 on July 19, 2000 as part of the purchase
price. Saigene will pay $20,000 on each of August 28th, September 20th, October
20th, November 20th and December 20, 2000. One half of each $20,000 payment will
be credited toward the purchase price and one-half of each payment will be
consideration paid for the additional time extension. Payments toward the
purchase price will be credited against the escrow payment required at the time
of closing. All payments made according to the Second Amendment will be
forfeited by Saigene if they fail to make any of the required payments,
including the closing payments. Saigene and the Company have further agreed that
Saigene may extend the January 20, 2001 Closing Date on a month-by-month basis
by increasing the monthly payments to $30,000 beginning January 20, 2001.
One-half of each payment would be credited to the purchase price and one-half of
each payment would be consideration for the additional time extension. The
Company has the right to terminate the Purchase Agreement at the end of any
extension period by giving 20 days prior written notice.
There can be no assurance that Saigene will be able to complete the Purchase
Agreement as amended or consummate the transactions contemplated therein.
Failure to complete this transaction would likely return operational control of
the laboratory to the Company. While the laboratory would have less debt as a
result of the Second Amendment, the Company will not be financially capable of
maintaining the laboratory operation and there can be no assurance that another
buyer could be found in a timely manner. This could force the Company to seek
protection from creditors under the bankruptcy laws.
Even upon completion of the transaction with Saigene, the Company will still
have various debts and claims that need to be settled. These include amounts
owed to various consultants, vendors and suppliers of the Company not related to
the Seattle laboratory operation (estimated to be between $250,000 and
$400,000); deferred pay to current and former employees (approximately
$700,000); and a potential liability of approximately $2.0 million related to
the OsteoPatch technology (See below). The Company will attempt to settle these
debts with cash, stock, and technology assets. There can be no assurance that
the Company will be successful in these negotiations and may have to seek
protection from creditors under the bankruptcy laws. If the Company is
successful in settling the remaining debts, then the Company plans to pursue a
merger with another company as a means of providing some value to common
stockholders. There can be no assurance that the Company will be successful in
finding and negotiating a successful merger or that any such merger would create
value for the stockholders.
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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. Without an agreement with
3M, the Company's OsteoPatch assets may not have any value and the Company
expensed all of these assets in March 1999. In May 2000, 3M notified the Company
that, in its capacity as a secured party in possession of the Sudormed assets,
it demands payment in full of the $1.6 million plus accrued interest and fees
due and owing under the License Agreement between the Company and Sudormed. The
Company and 3M are seeking to settle this claim. 3M has objected to the
laboratory sale transaction that is proceeding with Saigene. Although, the
Company disputes 3M's claim, 3M may seek to enforce its rights through legal
process. The Company is not certain of the impact of 3M's demand on the proposed
transaction with Saigene or what legal rights may be asserted by 3M to protect
its claim. If 3M should be successful in blocking the proposed sale of the
laboratory, or commences a legal action against the Company, the Company may
have no alternative than to seek protection from creditors under the bankruptcy
laws. The Company intends to respond to the actions of 3M as appropriate.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) not applicable
(b) not applicable
(c) Exhibits - Second Amendment to Agreement of Purchase and Sale
of Assets, dated August 4, 2000
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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: August 9, 2000 PACIFIC BIOMETRICS, INC.
By: /s/ Paul Kanan
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Name: Paul G. Kanan
Title: President and Chief Executive Officer
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SECOND AMENDMENT TO
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This Second Amendment To Agreement Of Purchase And Sale Of
Assets (the "Amendment") is made and entered into effective this 4th day of
August, 2000, by and between Saigene Corporation, a Delaware corporation (the
"Buyer"), on the one hand, and Pacific Biometrics, Inc., a Delaware corporation
(hereinafter referred to as the "Parent"), and Pacific Biometrics, Inc., a
Washington corporation (hereinafter referred to as the "Subsidiary"), on the
other hand. Parent and Subsidiary are sometimes hereinafter collectively
referred to as the "Selling Parties."
RECITALS:
WHEREAS, the parties have entered into that certain Agreement
Of Purchase And Sale Of Assets, dated April 18, 2000, by and between the Buyer
and Selling Parties (the "Asset Purchase Agreement") and the First Amendment to
Agreement of Purchase and Sale of Assets, dated June 22, 2000 (the "First
Amendment"); and
WHEREAS, Buyer seeks to modify the timing of the payments
required under the Asset Purchase Agreement and the First Amendment and to
extend the Closing Date; and
WHEREAS, Selling Parties are willing to modify the timing of
the payments and to extend the Closing Date of the Asset Purchase Agreement, as
amended by the First Amendment, on the terms and conditions state herein.
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein, and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows:
AGREEMENT:
1. Extension of Closing Date. The parties agree that the term
"Closing Date" shall now mean January 20, 2001, instead of August 15, 2000.
Notwithstanding the foregoing, Buyer may advance the Closing Date at any time by
paying the remaining balance of the Purchase Price, or may extend the Closing
Date as provided in Section 3, below.
2. Payment of Purchase Price. The parties acknowledge and
agree that Buyer has paid Seventy-Five Thousand Dollars ($75,000.00) of the One
Hundred Fifty Thousand Dollars ($150,000.00) required to be paid, on or before
July 15, 2000, under the First Amendment, and that the following provisions
shall replace the provisions of the First Amendment with respect to the payment
of the Purchase Price: (a) In addition to the $75,000.00 previously paid on or
about July 17, 2000, Buyer shall pay Selling Parties the sum of Twenty Thousand
Dollars ($20,000.00) on August 28, 2000, and then pay $20,000.00 on the 20th day
of each calendar month thereafter until the
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Closing Date (which $20,000.00 payments shall each hereinafter collectively be
referred to as the "Extension Payments"); (b) Ten Thousand Dollars ($10,000.00)
of each of the Extension Payments shall constitute consideration for the
extension of the Closing Date and shall not be credited towards payment of the
Purchase Price, and the remaining Ten Thousand Dollars ($10,000.00) of each such
Extension Payment shall be credited against the cash portion of the Purchase
Price; (c) on the Closing Date, Buyer shall pay to Selling Parties the remaining
cash portion of the Purchase Price required under Section 1.3(d)(ii) of the
Asset Purchase Agreement (which amount is currently $275,000.00); and (d) on the
Closing Date, Buyer shall place Three Hundred Thousand Dollars ($300,000.00)
into escrow as required under Section 1.3(d)(iii) of the Asset Purchase
Agreement, subject to reduction as provided in this Second Amendment. The
$10,000.00 of each Extension Payment credited against the Purchase Price shall
reduce the $300,000.00 Buyer is required to place in escrow at the Closing under
Section 1.3(d)(iii) of the Asset Purchase Agreement. The Extension Payments are
subject to the same conditions as the Fifty Thousand Dollars ($50,000.00)
previously paid under section 1.3(d)(i) of the Asset Purchase Agreement.
Additionally, Buyer's failure to pay any Extension Payment within Five (5) days
of its due date shall constitute a material default by Buyer.
3. Further Extension of Closing Date. Buyer may extend the
Closing Date beyond January 20, 2001, for additional 30-day periods by paying to
Selling Parties the sum of Thirty Thousand Dollars ($30,000.00) for each such
extension (the "Extension Fee"). Fifteen Thousand Dollars ($15,000.00) of each
Extension Fee paid by Buyer shall constitute consideration for the additional
extension of the Closing Date and shall not be credited towards payment of the
Purchase Price, and the remaining Fifteen Thousand Dollars ($15,000.00) of each
Extension Fee shall be credited against the cash portion of the Purchase Price.
Again, the $15,000.00 of each Extension Fee credited against the Purchase Price
shall reduce the $300,000.00 Buyer is required to place in escrow at the Closing
under Section 1.3(d)(iii) of the Asset Purchase Agreement. However, in the event
that the Closing does not take place on or before January 20, 2001, then the
Selling Parties may terminate the Asset Purchase Agreement at the end of any
extension period by giving Buyer not less than Twenty (20) days written notice.
For example, if the Closing does not occur on or before January 20, 2001, and
Buyer pays the Extension Fee to the Selling Parties on or before such date
(thereby extending the Closing Date to February 19, 2001), then the Selling
Parties may terminate the Asset Purchase Agreement on February 19, 2001
(assuming the Closing does not occur on or before such date) by giving Buyer
written notice on or before January 31, 2001 of their intent to terminate the
Asset Purchase Agreement as of February 19, 2001.
4. Counterparts; Facsimile Signatures. This Amendment may
be executed in one or more counterparts, using facsimile signatures, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5. Other Terms Remain in Effect. All other terms and
provisions of the Asset Purchase Agreement and First Amendment shall remain in
full force and effect. Any capitalized terms not defined herein shall have the
meanings set forth in the Asset Purchase Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Second Amendment as of the day and year first above written.
BUYER PARENT
Saigene Corporation, Pacific Biometrics, Inc.,
a Delaware corporation a Delaware corporation
By: /s/ Ronald R. Helm By: /s/ Paul Kanan
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Ronald R. Helm Paul Kanan
Its: Chief Executive Officer Its: Chief Executive Officer
SUBSIDIARY
Pacific Biometrics, Inc.,
a Washington corporation
By: /s/ Paul Kanan
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Paul Kanan
Its: Chief Executive Officer
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