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): August 14, 1998
MICROFLUIDICS INTERNATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 000-11625 042793022
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
30 Ossipee Road, Newton, Massachusetts 02464-9101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 969-5452
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 14, 1998 (the "Closing Date"), Microfluidics International
Corporation ("MFIC"), a Delaware corporation, purchased substantially all of the
assets (the "Transferred Assets") of Epworth Manufacturing Company of South
Haven, Michigan ("Epworth") and Morehouse-COWLES, Inc. of Fullerton, California
("Morehouse", and together with Epworth, the "Sellers") pursuant to an Asset
Purchase Agreement (the "Agreement") dated as of June 19, 1998 by and among
MFIC, Epworth and Morehouse. Messrs. J.B. Jennings and Bret A. Lewis are the
sole stockholders of both Epworth and Morehouse (the "Principals"). Epworth and
Morehouse each manufactures and distributes a product line of crushing/grinding,
mixing, dissolving and dispersion systems for solid or solids materials
processing which are marketed together under the EMCO U.S.A. trade name. MFIC
intends to continue the operations of Epworth and Morehouse each as a separate
division of MFIC and to continue the use of the Transferred Assets to
manufacture and distribute crushing/grinding, mixing, dissolving and dispersion
systems. The Transferred Assets included cash and cash equivalents, accounts
and notes receivables, inventories, machinery and equipment, intellectual
property rights, furniture and fixtures and leasehold interests and
improvements.
In accordance with the Agreement, MFIC paid or delivered to the Sellers
the following as consideration for the purchase price of the Transferred Assets
(the "Purchase Price"): (i) $5,508,480 in cash of which $3,610,971.07 was
applied to the payment of certain liabilities as set forth in the Agreement,
(ii) two subordinated promissory notes in the aggregate principal amount of
$800,000 (the "Promissory Notes"), and (iii) 900,000 shares of MFIC's restricted
common stock, $.01 par value per share, subject to the restrictions set forth in
a Stockholders Agreement among MFIC and the Principals dated August 14, 1998
(the "Stockholders Agreement"). In addition, MFIC assumed approximately
$1,999,025 in accounts payable and accrued liabilities set forth on the Sellers'
balance sheets as of December 31, 1997 (the "Assumed Liabilities"), certain of
which were also paid on the Closing Date. The consideration paid by MFIC for
the Transferred Assets was determined through arms-length negotiations between
MFIC and the Sellers.
The Agreement provides that the Purchase Price may be subject to a post-
closing reduction based upon the comparison of (a) the net book value of the
Transferred Assets less the Assumed Liabilities as of September 30, 1998 as
reflected on the unaudited balance sheet of MFIC to (b) the net book value of
the Transferred Assets less the Assumed Liabilities as of June 30, 1998 as
reflected on the audited balance sheets of the Sellers.
MFIC paid $1,897,509 from its working capital and borrowed $4,096,050.44
from Comerica Bank, its primary lender, in order to finance the purchase and
payoff certain of the Assumed Liabilities. The revolving loan, security and
ancillary agreements with Comerica Bank (the "Revolving Loan Agreement")
provides up to $5,000,000 in loans with monthly interest payments and the
outstanding principal amount due on September 1, 2001. The line of credit
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expires on September 1, 2001. The current outstanding principal balance under
the Revolving Loan Agreement is $4,096,050.44 and bears interest at a rate of
7.125% per annum
Effective on the Closing Date, MFIC expanded its Board of Directors from
four to six members and appointed the Principals to fill the resulting
vacancies. Subject to the terms and conditions set forth in the Agreement, MFIC
agreed to use reasonable efforts to cause the nomination of the Principals as
directors of MFIC at the 1999 annual meeting of its shareholders. Thereafter,
subject to the terms and conditions set forth in the Agreement, MFIC agreed to
use its reasonable efforts to continue to support the nomination of the
Principals as directors of MFIC at subsequent annual meetings of its
shareholders.
Mr. Jennings will be the president of the MFIC's newly created
Morehouse-COWLES Division and Mr. Lewis will be the president of MFIC's newly
created Epworth Mill Division.
The description contained herein of the transaction is qualified in its
entirety by reference to the Agreement (Exhibit 2), Stockholders Agreement
(Exhibit 4), Promissory Notes (Exhibit 99.1 and Exhibit 99.2) and press release
(Exhibit 99.3), copies of which are attached hereto and incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of business acquired.
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Audited financial statements of each of Epworth and Morehouse, and
the notes thereto, required by this item will be filed by amendment to
this Form 8-K not later than October 28, 1998.
(b) Pro forma financial information.
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The pro forma financial information required by this Item will be
filed by amendment to this Form 8-K not later than October 28, 1998.
(c) Exhibits.
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The following exhibits are filed as part of this report pursuant to Item
601 of Regulation S-K:
Exhibit
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Number Description
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2 Asset Purchase Agreement dated as of June 19, 1998, by and
among MFIC, Epworth and Morehouse (Filed as Exhibit 2.1 to
Schedule 13D of Bret A. Lewis, File No. 005-35850, and
incorporated herein by reference).
4 Stockholders Agreement dated August 14, 1998, by and among
MFIC and the Principals (Filed as Exhibit 2.2 to Schedule
13D of Bret A. Lewis, File No. 005-35850, and incorporated
herein by reference).
99.1 $500,000 Subordinated Promissory Note issued by MFIC to
Epworth.
99.2 $300,000 Subordinated Promissory Note issued by MFIC to
Epworth.
99.3 Press Release issued by MFIC on August 20, 1998.
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SIGNATURE
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, thereunto duly authorized.
MICROFLUIDICS INTERNATIONAL CORPORATION
Date: August 26, 1998 By: /s/ Irwin J. Gruverman
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Irwin J. Gruverman
Chief Executive Officer
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EXHIBIT INDEX
Exhibit
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Number Description
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2 Asset Purchase Agreement dated as of June 19, 1998, by and
among MFIC, Epworth and Morehouse (Filed as Exhibit 2.1 to
Schedule 13D of Bret A. Lewis, File No. 005-35850, and
incorporated herein by reference).
4 Stockholders Agreement dated August 14, 1998, by and among
MFIC and the Principals (Filed as Exhibit 2.2 to Schedule
13D of Bret A. Lewis, File No. 005-35850, and incorporated
herein by reference).
99.1 $500,000 Subordinated Promissory Note issued by MFIC to
Epworth.
99.2 $300,000 Subordinated Promissory Note issued by MFIC to
Epworth.
99.3 Press Release issued by MFIC on August 20, 1998.
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