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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 16, 1998
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ELECTROPURE, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 0-16416 33-0056212
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State or other jurisdiction (Commission (IRS Employer
of Incorporation file number) Identification No.)
23456 SOUTH POINTE DRIVE, LAGUNA HILLS, CALIFORNIA 92653
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, include area code (949) 770-9347
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NONE
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(Former name or former address, if changed since last report)
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ITEM 4. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANTS
On June 16, 1998, the Company retained the independent accounting firm of Kelly
& Company to conduct an audit of its financial statements for the fiscal years
ended October 31, 1997 and 1998. For the Company's fiscal years ended October
31, 1996 and 1997, the financial statements were subject to going concern
qualifications and an uncertainty as to the outcome of certain litigation and
claims, but were not otherwise qualified or modified as to audit scope, or
accounting principles by Alex N. Chaplan & Associates. During the two fiscal
years ended October 31, 1996 and 1997, and since October 31, 1997, there were
not any disagreements with Alex N. Chaplan & Associates on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Alex N. Chaplan & Associates, would have caused it to make a reference to the
subject matter of the disagreements in connection with its report, nor were
there any "reportable events" as defined in Item 304(a)(1)(v) of Regulation S-K.
During the two fiscal years ended October 31, 1996 and 1997, and between October
31, 1997 and June 16, 1998, Registrant did not consult with Kelly & Company on
the application of accounting principles to a specified transaction, or the type
of audit opinion that might be rendered on the Registrant's financial statements
or any disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a
reportable event (as defined above).
The change in independent public accountants has delayed the Company's ability
to finalize the audit for the October 31, 1998 fiscal year and the filing of the
Form 10-KSB for such year as well as the Form 10-QSB for the first quarter of
fiscal 1999. The Company expects to file the form 10-KSB on or before April 26,
1999 and then promptly arrange for the annual meeting of shareholders.
ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS
On January 15, 1999, the Company sold one million shares of its Series B
Convertible Preferred Stock ("Series B Preferred Stock") to Anthony M. Frank who
was and is a major shareholder of the Company in a private transaction for
$1,000,000. The Series B Preferred Stock is convertible into one million shares
of the Company's common stock in whole or in part at any time by its holder. The
Series B Preferred Stock is automatically convertible on the same basis if
either of two events occur: a) the Company makes a public offering of any of its
securities, or b) the Company's securities are admitted for listing on a
national securities exchange market system or the NASDAQ system. In the event
the number of shares of the Company's common stock is increased or decreased as
a result of a stock split, stock dividend, reverse stock split, or otherwise,
the number of shares of common stock into which each share of Series B Preferred
Stock may be converted shall concurrently be proportionately issued or
decreased. The Series B Preferred Stock has not rights for participation in any
new or additional issuances of any Company equity instruments.
Each share of Series B Preferred Stock is entitled to four votes on all matters,
including the election of directors and shall vote as a single class along with
the Common Stock, Class B
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Common Stock and Convertible Preferred Stock. Currently, Mr. Frank has 34.3% of
the outstanding voting power of all classes of the Company's stock.
In any liquidation or dissolution of the Company, the holders of the Series B
Preferred Stock will be entitled to a liquidation preference of $1 per share.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS
On or about February 15, 1999, the Company filed a complaint in the Orange
County Superior Court of California, Case No. 805529, against Wyatt Technology
Corporation ("Wyatt Technology") for breach of the October, 1997 Technology
Transfer Agreement (the "Agreement") by which the Company obtained a license to
use and develop certain laser-based technology and patents held by Wyatt
Technology. On or about March 9, 1999, the parties entered into a stipulation
providing, among other things, that pending the final resolution of the
Company's lawsuit against Wyatt Technology, neither Wyatt Technology, nor any of
its agents, servants, employees, representatives or other persons acting in
concert or participating with them, will engage in negotiations with any third
party regarding the licensing, use, dissemination, sale or transfer of any of
the technology which is the subject of the Technology Transfer Agreement; nor
provide the use of or disseminate in any way, any of that technology to any
third party.
On or about February 23, 1999, Wyatt Technology filed a cross-complaint against
the Company, Anthony M. Frank, individually; and 25 unnamed "Doe" defendants for
relief based on alleged (1) breach of contract; (2) rescission of contract; (3)
fraud; (4) declaratory relief; and (5) intentional interference with economic
relationship. The Company was unaware of the filing of this cross-complaint
until several days after it was served on the Company, through the Company's
counsel, on or about March 11, 1999.
Clifford J. Wyatt, who was appointed to the Company's Board of Directors on or
about August 3, 1998 as a direct result of the Agreement, is an executive
officer of Wyatt Technology and owns 7.47% of its shares. Immediately prior to
and since this litigation was filed, repeated demands have been made for the
Company's financial information by Mr. Wyatt personally and through his counsel,
which counsel also represents Wyatt Technology Corporation in the referenced
litigation. In view of the current legal controversy, the Company has suggested
to such counsel that Mr. Wyatt's position as a Director of the Company appears
to be in direct conflict with his employment by and ownership interests in Wyatt
Technology. Still, Mr. Wyatt continued to demand financial information of the
Company citing his rights as a Director to such information.
In acquiescence to these repeated demands, on or about March 3, 1999, the
Company provided Mr. Wyatt with a draft (dated as of February 11, 1999) of its
Form 10-KSB for the fiscal year ended October 31, 1998. Although the Company
believes that such draft was accurate as of such February 11, 1999 date, the
draft was not intended for dissemination and Mr. Wyatt was clearly advised that
the financial statements and disclosures were subject to adjustment and
updating.
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A second draft (dated March 5, 1999) was provided to Mr. Wyatt and reflected
current information known to the Company as of such date. This draft was sent to
Mr. Wyatt on or about March 12, 1999 at which time the Company's management had
not yet been informed by its counsel of the cross-complaint filed by Wyatt
Technology.
On or about April 14, 1999, after normal business hours, Mr. Wyatt sent a letter
by facsimile transmission to the Company whereby he finally resigned as a
Director of Electropure, Inc. citing, as reasons for doing so, many of the same
allegations contained in the cross-complaint filed by Wyatt Technology against
the Company, including alleged misstatements in the draft Form 10-KSB about the
Company's business and in particular, the technology acquired from Wyatt
Technology. In fact, the Company has funded substantial research and development
efforts for such technology. The Company believes that Mr. Wyatt's comments are
without merit. Mr. Wyatt's resignation was effectively received by the Company
on April 15, 1999 and is hereby being disclosed in accordance with his request.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
(b) EXHIBITS:
16.1 Letter from Alex N. Chaplan & Associates dated
April 8, 1999.
17.1 Letter of resignation from Clifford D. Wyatt dated
April 14, 1999.
Pursuant to 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.
ELECTROPURE, INC.
(Registrant)
/S/ CATHERINE PATTERSON
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Catherine Patterson
Chief Financial Officer
April 19, 1999
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EXHIBIT INDEX
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Exhibit
Number Description
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16.1 Letter from Alex N. Chaplan & Associates dated
April 8, 1999.
17.1 Letter of resignation from Clifford D. Wyatt dated
April 14, 1999.