MFIC Corporation (MFIC)
Interview with: Irwin Gruverman, Chairman and CEO
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MFIC Corporation – continuing to lead a revolution in fluid processing



Technology
Scientific & Technical Instruments
(OTC: MFIC)

MFIC Corporation

30 Ossipee Road
PO Box 9101
Newton, MA 02464
Phone: 617-969-5452



Irwin Gruverman
Chairman and
Chief Executive Officer

Interview conducted by:
Walter Banks
Co-Publisher

CEOCFOinterviews.com
October 2002

Bio of CEO,
IRWIN J. GRUVERMAN, P.E.,

     Irwin J. Gruverman has extensive management, financing and technolo­gy experience with scientific product organiza­tions, with emphasis on engineered products, diagnostic tests, and radio­pharmaceuti­cal imaging products. He is the Founder of M­FIC Corp, (formerly Biotech­nology Develop­ment Corporation) and is its CEO and Chairman. MFIC is a supplier of high intensity fluid processing Systems and methodology, as well as mixing systems, to the health care, electron­ics, food, cosme­tics, home products and chemical process indus­tries. He is a Founder and Chairman of North American Scientific, Inc., a leader in producing brachytherapy radiation sources for treatment of cancer and other proliferative disorders, and a developer of imaging radiopharmaceuticals for management of cancer therapy and transplant rejection.

       Irwin J. Gruverman was the General Partner of G&G Diagnos­tics Funds, L.P., having a venture arm of Searle (a Monsanto Company) as the sole Limited Partner. The Funds invested mainly in medical diagnostic op­portuni­ties in the U.S. and Europe, and provided early stage funding and advisory services for more than 50 ventures. In 10 years of operation, the Funds aided more than 15 early-stage investees in reaching profitable public status. The Fund was distributed in 2001.

        He was Executive Vice President of DuPont's New England Nuclear Division until 1982, in charge of health care activities, and was responsible for the development and commercial success of Thallium-201 as an imaging diagnostic for heart disease assess­ment. He operated a profitable $100,000,000 business employing 1200 people, which was acquired in 1981 by DuPont. Achievements included establishment of a multi-cyclotron facility to produce medical radioisotopes and the first commercial linear accelerator designed for manufacture of such radioisotopes 

       Mr. Gruverman is a Professional Engineer, with substantial experience in radioisotope applications in medicine and industry, and the application of chemistry, biotechnology, physics and engineer­ing disciplines to commercial opportunities.

      He is a graduate of The Cooper Union (B.S. Chem. Engg. - 1954) and MIT (M.S. Nucl. Engg. - 1955), and has completed post-graduate executive management courses. Mr. Gruverman has ap­plied a knowledge of venture funding approaches and public financing to launching and/or financing of more than 60 technology-based enterprises.

       He has authored more than 100 technical articles, presen­tations and papers, mainly in the fields of isotope methodology, engineering applications, biotechnology applications in medicine, agriculture and the chemical industry, and analysis of busi­ness/high technology funding options.

       Mr. Gruverman is a member of Sigma Xi (Experimental Science Society), Tau Beta Pi (Engineering Honor Society), American Chemical Society, Society of Nuclear Medicine, and other profes­sional groups.

Company Profile:

MFIC Corporation is the world leader in high performance applications of fluid processing. Microfluidizer^® materials processing systems, made by the Microfluidics Division, operate at the highest available pressures, utilizing a proprietary, unique fixed geometry interaction chamber which can subject the fluid stream to shear energy densities up to 10 times that of other processors. The uniform nanostructures created allow preparation of commercial products having unmatched uniformity, stability and reliability. Examples include injectable emulsions and suspensions (such as anesthetics and vaccines), liposomal encapsulation, inkjet inks, high end coatings, catalysts, semiconductor planarization media and color and flavor emulsions for soft drinks. In addition, in the biotech industry, Microfluidizer^® systems are a standard means of cell disruption for recovery of proteins produced by biotechnology processes and are widely used in genomic and proteomics applications, in the biotechnology and pharmaceutical industries. Systems are available in all sizes from laboratory to full scale production.

Their applications lab can help a customer make innovative products or reformulate existing products to new levels of quality... with guaranteed scaleup. The Microfluidics Division manufactures 3 levels of Microfluidizer^® material processors; laboratory, pilot manufacturing and large scaleup production units. Laboratory processors offer process pressures of up to 40,000 psi in applications ranging from industrial processing to cleanroom applications. These include Homogenizers, Table Tops and Floor Models. The scaleup processors include the M–700 Series, the M-210EH electric-hydraulic processors and the custom designed M-610 processor. Scaleup is always guaranteed. Whatever particle size you are obtaining in the laboratory processors, you will easily be able to achieve in our scaleup units.

MFIC's Morehouse-COWLES Division manufactures high speed dispersers, mixers, vertical and horizontal media mills with industry-leading reliability and performance. Uses include paint manufacture, chemical formulation and premix preparation for final Microfluidizer^® processor formulation. For over 75 years, Morehouse-COWLES has been synonymous in the U.S. and international markets with media mill, mixer and dissolver technology, and includes the patented Zinger^® horizontal media mill which offers faster, finer particle reduction.

New products and applications:
MFIC Corporation has introduced a new, patented High-Pressure Multiple Stream Mixer Reactor (MMR) from their Microfluidics Division. It produces uniform nanoparticles with phase purity previously unachievable with conventional batch reaction technology. This degree of reaction chemistry control can lead to cost-effective product improvements and the development and manufacture of new nanomaterials in scalable quantities.

Applications for the new technology include improving the performance of catalysts, planarization polishing media, superconductors, abrasive silica, recording media, photographic media and pigments. It also may be used in the development and production of unique pharmaceutical products.

CEOCFOinterviews: Mr. Gruverman, please give us a brief history of MFIC Corporation.

Mr. Gruverman: “The Company was started by me and a group of my colleagues in 1982. We organized to provide a service in developing drug delivery formulations for pharmaceuticals. We did that for several years, and in the course of doing that, we discovered a technology and device that had been invented at ARTHUR D. LITTLE, which we named Microfluidizer^® processor, which was projected to be equipment and a process for making liposomes. Liposomes were thought to be a good drug delivery system and turned out to be useful. We adopted and enlarged the applications of that technology and later determined that being in the drug delivery development business was going to be highly capital intensive and difficult to grow profitably. Therefore, we opted eventually to morph into an equipment company that provided Microfluidizer® processing equipment. We made that transition in the mid-80’s and have been selling Microfluidizer^® equipment ever since.

We have developed the product line into a group of systems that uniformly and consistently can make nanoparticles and components from reacting process streams. It is the way that you can optimize the energy deposition into a fluid flowing stream and to work on it ten times more intensively than any other mixing processing and formulating technology. In the course of doing that, we developed a full product line, from lab equipment and into full scale production equipment up to about 20 gallons a minute. The devices are used throughout the materials processing industries to manufacture a very wide variety of proprietary goods and usually it provides people with competitive advantages.”

CEOCFOinterviews: How is your equipment used?

Mr. Gruverman: “There are a number of ways to use our equipment. These tend to include improving processing efficiency, the ability to make more stable formulations in the form of emulsions or suspensions, the ability to make products with less energy use and with a lot less waste. We believe we are leading a revolution in the way people process fluid materials. This is beginning to play out very effectively for us. We have grown an average of about 30% a year in the last two years in our Microfluidics Division’s operations despite a difficult selling environment.”

CEOCFOinterviews: You made a couple of acquisitions a few years ago, can you fill us in on your decision making process and how they have worked out for you?

Mr. Gruverman: “We did a couple of acquisitions about four years ago that turned out to be fairly damaging. We thought we could diversify into the lower end mixing and formulating business and create situations in which pre-mixers, based on those technologies, would lead into our Microfluidizer^® processors. The concept however turned out to be not as effective as we thought it would be. Unfortunately, the principal customers of those companies that we acquired were in the paint industry which was undergoing consolidation at the time, and killed the market pretty effectively for the kind of dissolvers and horizontal and vertical mills that were produced by these acquired companies. We spent the next few years growing our core business very effectively and throwing off enough cash from it to support the rather large drains that these acquisitions created for us.”

CEOCFOinterviews: How did that affect your financial picture?

Mr. Gruverman: “We went from a company with a very good financial picture; we had about 4 million dollars in the bank and no debt, prior to the acquisitions, and afterward we had about 5 million in debt. We since have reduced our debt to about 3 million. Although we are still heavily in debt yet we are thriving in our business and after four years, we have finally turned around the remaining acquired company.”

CEOCFOinterviews: Does that mean that you can now look toward being profitable again?

Mr. Gruverman: “Yes, our previous acquisitions are no longer a cash drain, and we are looking forward to the next couple of years of profitability and showing what we can do with our bottom line. One of the limiting factors in our financial performance has been the presence of over-hang of goodwill write-off. That has masked the fact that the core business has been profitable because we have been reporting substantial losses that have been based largely on this non-cash charge.

Recent changes in accounting principles, which we are gladly adopting, caused us to write off a good portion of that goodwill this year. Going forward, we expect to show profitability based on the fact that we no longer have to take this non-cash charge. The first two quarters of 2002, without this charge, have shown a small profit and we are looking forward to improving those profit margins as the remaining acquired company, Morehouse-COWLES, has begun to contribute to profitability, along with continued robust performance in the core business.

CEOCFOinterviews: Can you tell us about your Morehouse-COWLES Division?

Mr. Gruverman: “Morehouse-COWLES is a long established business. The COWLES name has been around for more than seventy-five years; it started out as a mustard seed grinding company. It is a well known brand. COWLES is now a generic name. We serve the paint and coatings industry primarily. We do a fair amount of business in Asia, South and Central America, and Mexico, but most of it is in North America. Those industries are growing slowly and are consolidating. It is a very competitive area with about nine significant competitors; most of which are very small companies, and a few larger ones. Price competition is a major factor in the sales process.

We are continuing to run Morehouse-COWLES and have made many changes in its operation and have made it much more efficient. We can now generate gross margins which are at least presentable, although I don’t believe that business will ever generate the margins that we strive for in our core Microfluidics Division business. The Morehouse-COWLES Division has gone from being a difficult part of our business, where it was consuming cash voraciously, to now where it is no longer consuming cash but making a small contribution. We expect that trend to continue.”

CEOCFOinterviews: What attracted you to Morehouse-COWLES?

Mr. Gruverman: “First, they had a technological breakthrough in a novel device called the Zinger^® mill, which is a new type of horizontal media mill that is far more efficient than the existing ones, which could perform a lot better in terms of product characteristics. Those claims were true, but what we didn’t understand is that the machines were not durable; they were poorly engineered and it took us a couple of years until we realized how bad they were and put the fixes in place to make them useful. We have completed that in the last year or so. Hence, we are seeing some resurgence in sales with those devices because we have gotten out and fixed the problem at customer sites.

Secondly, we thought there would be a lot of synergy; because our Microfluidizer^® equipment normally requires pre-mixing prior to use of the equipment, and these devices were typical of the pre-mixers that would normally be used. Unfortunately, it is very difficult to sell them as a package. However, we certainly have managed our way out of the worst of the problem and made that business into an attractive entity. We are not exactly sure what its ultimate fate will be but we think it is a reasonable adjunct to our core business.”

CEOCFOinterviews: And what about the development of the MMR (Multiple Stream Mixer Reactor)?

Mr. Gruverman: “The MMR (Multiple Stream Mixer Reactor) we think is the future for us. MMR has been a program that was enabled by a 2.2 million dollar matching grant from the Advanced Technology Program (ATP) run by the government with NIST as the sponsor. We developed the means of making new materials at the nano scale, using Microfluidics technology. There is a distinction between the two types of process. In the Microfluidizer^® processor, we take two materials that we want to mix or a suspension that we want to exhibit a better size distribution or to make more stable. We do a pre-mix and then run it through our system at pressures up to 40 thousand psi. The stream flows through micro-channels and is separated into two streams, which are forced to collide in a restricted space. In that space, you get an energy deposition field, which is ultra-turbulent and provides energy depositions an order of magnitude greater than any other mixing technology that is known. That creates products which have unique characteristics.

The MMR is our terminology for our Multi-Stream Mixer Reactor System, in which two or more pure streams collide in a similar kind of system, each of them independently accelerated and not meeting until they actually get into this ultraturbulent zone. In that zone the reaction between the starting components occurs in this highly energetic area and in doing so, makes nanoparticles of the resultant materials.”

CEOCFOinterviews: In what areas is this useful?

Mr. Gruverman: “There are a number of areas in which this is useful and the most obvious one is where you are making a product by precipitation. One example might be superconductors, which typically are the product of 2-4 reactants combining to precipitate a specific material. Superconductor properties are very much related to the size of the ultimate crystals that are created and we can create crystals at the nanometer level, which have optimal properties. Similar things occur when you make ceramics because if you make the particles small enough before you compact them and make them into structures, they have much more uniform physical properties. One could even think in terms of making an engine block out of ceramic by using such techniques, and we have done a fair amount of work in that direction with other companies.

A second area is catalysts for making petroleum products or for making chemicals from various kinds of gasses or other liquid feeds. These typically perform better if the subdivision of the catalyst materials is very fine, and we can make it finer that any other process. We have demonstrated that, in the ATP grant work, with our partner, Catalytica.”

CEOCFOinterviews: So MMR could be the future of your company.

Mr. Gruverman: “MMR (Multiple Stream Mixer Reactor) is where we think we are going; it can revolutionize the way in which industry makes the materials by precipitation methods, by re-crystallization techniques or by mixing of immiscible materials. For example, if you are trying to react a material that is soluble in water with one that is soluble in oil you need very high interfacial area between the two streams when they react in order to get sensible reaction rates. With immiscible materials, you can gain advantage by causing faster reactions to occur more completely and eliminate side reactions that often occur if mixing is not efficient, such as in stirred tanks where much of this kind of work is done. The other part of it that is interesting is that the energy usage is much lower, and more importantly, the capital cost can be as much as a factor 10 lower than manufacturing with traditional batch technology. The big advantage is that we offer a continuous process that has this inherent efficiency.”

CEOCFOinterviews: How many industries do you see your MMR product being applicable too?

Mr. Gruverman: “We think that the application is going to be extremely broad. We are currently talking to about a dozen major companies, trying to form relationships with them that will have them invest in the technology in return for a royalty-free license for some period of time, and for them to have equity ownership in the technology. We think that is the best method because we believe MMR could have potential that would dwarf anything that we could do on the Microfluidics Division side, but is going to take substantial amounts of capital and time to make it all happen.

I am currently out on tour presenting this to people; we have created a CD to present the technology in a very appropriate way for a lot of different industries and we are seeing much interest in that.”

CEOCFOinterviews: Can you give us an example?

Mr. Gruverman: “One example would be in the pharmaceutical area where we can make nanoparticles for injection. This is important because there are many drugs that are developed that are lipid soluble and cannot be dissolved in water. You cannot inject them in any simple form; you can’t inject a lipidic material because it will coalesce and block blood vessels. What you want to do is make it into a microemulsion or if that is difficult, make a suspension of nanoparticles of the drug, which you can inject after suspending it in a stable formulation, and which will slowly dissolve into the blood stream. We can take the pharmaceutical entity and manufacture it with an MMR to make nanoparticles or we can take the particles that do exist, dissolve them in a solvent in which they will dissolve, and then contact them in our MMR with water. This will precipitate them as  nanoparticles, and then they can be purified and then suspended in an injectable, stabilizing medium."

CEOCFOinterviews: What drugs are they working on that would require this type of thing?

Mr. Gruverman: “In general we can make injectable forms of lipid soluble materials for any application. But specifically, there are a lot of anti-cancer drugs that are lipid soluble and that don’t get used or never have been introduced because of the difficulty of creating a drug delivery system for them and we can do that very effectively.”

CEOCFOinterviews: Are there any areas outside of Healthcare?

Mr. Gruverman: “Another area is abrasives for a process called chemical-mechanical planarization (CMP), which is the methodology used to prepare silicon substrates for deposition of the circuits that go on them and then to polish the construct so that additional layers can be added. That is a huge industry. We can make very effective abrasives with MMR technology because you would not have large crystals present that scratch the surfaces, and that is one of the big problems currently. We have demonstrated with our standard Microfluidizer^® processor equipment that we can make advances in that area, but with the MMR, we should be able to do even better.

Pigment dye synthesis is a big area in which Microfluidics technology is used very broadly to make things like ink-jet inks. If you use ink-jet ink, the chances are very good that it was made in the U.S., and made on a Microfluidizer^® processor. What we are finding is that ink-jet ink technology is spreading into processes like fabric printing and printing on ceramics. There the requirements are even more difficult to meet and the MMR can make some of the pigment materials that need to be incorporated into these inks in nanoparticle sizes, so that they will not plug dispersing jets and so that they will give resolutions in the printing that is desirable and unachievable by other methods.

There are many applications for which we think our MMR technology is going to be right in the ‘ballpark’, and we are looking forward to having partners to help us develop that technology as part of our future. It’s all based on our core Microfluidics technology, which is proprietary and patented. We have recently been issued patents on the MMR technology, and have strong worldwide protection for approximately fifteen years.”

CEOCFOinterviews: What is your competition and what is your challenge?

Mr. Gruverman: “There is competing equipment for the Microfluidizer® processing equipment. The most comparable are homogenizers. Other processing equipment is available, which is not capable of creating the same kind of energy intensity fields that we can, but for many applications, is perfectly satisfactory.  Our challenge is to show people that they can make better products, by using the higher intensity energy deposition, and we often succeed. Our Microfluidics products have a lot more technology built into them, and for that reason tend to be higher priced than competitive mixing equipment. We have developed a lower cost equipment line in the last few years, our 700 series, which is price competitive with competing equipment that doesn’t perform as effectively. We are hoping to move into lower performance applications than we have been able to address before, mainly on a cost comparison basis. In many demanding applications we find that we have no meaningful competition.”

CEOCFOinterviews: Have you looked at the market size for Microfluidics?

Mr. Gruverman: “It is a difficult question to answer because we address a wide variety of needs in a very fragmented market. There are on the order of seven or eight hundred million dollars a year worth of mixing equipment sold in the United States. How much of that is in the area that we compete in is not clear. Looking at competitive sales volumes and adding them up, this might be a 150 million dollar market. We think the MMR potential could be much larger than that, but we have no idea how to estimate the time scale that would be required to reach those levels because it is almost entirely missionary selling; we are trying to get people to look at a revolutionary way of doing what they are already doing.

It is easier in the pharmaceutical industry because there the cost of equipment is not a major issue. You can try things off-line much more readily than you can in a big refinery. The food industry is another good example where we contributed with the Microfluidics equipment in things like low-calorie formulations of dairy products. There, it is all about texture and ‘mouth feel’ and we can simulate this by preparing protein in forms which taste like fat to the user.”

CEOCFOinterviews: Can you give us a picture of how profitable the Microfluidizer® processor end of your business has been?

Mr. Gruverman: “Yes, the Microfluidizer^® processor line is a profitable end of our business. Our sales volume last year in Microfluidizer equipment was in the area of 11 million dollars. I think that as a stand-alone business, it would have generated about 1 million dollars in profit. We used that up almost completely in our supporting our Morehouse-COWLES business, and in writing off a lot of goodwill. It has grown 30% a year for two years, although this year it seems to have leveled off somewhat. We expect growth to resume and the orders and inquiry levels that we are seeing, as well as the interest in the equipment, seems to be increasing again. People have been reluctant to spend money on capital equipment in the last couple of years, but we have not seen much of that, and it did not seem to impact our business. Over the last few quarters we have seen some small effects, but we are still growing and we are still profitable.”

CEOCFOinterviews: How do you go about marketing your product?

Mr. Gruverman: “For the Microfluidics Division we employ combination of means. Currently, we have 5 regional sales managers. The president of the company serves as our chief sales/marketing person. He operates through the regional managers in the U.S., Europe and Asia, and they operate through sales agents throughout those regions. We have about thirty five independent regional sales agents that represent our product under the control of the regional sales managers. We have a strong internal sales staff that does telemarketing and follow-up on leads. We have a lead-generation program based on very active advertising programs, and an active symposium series. In addition, we operate applications labs in Boston, California and Germany, where sample testing is offered and demonstrations are performed.

We do presentations throughout many industries where our products are used. We generate thousands of leads that are followed up at our headquarters. These leads are funneled to the managers, who funnel them to the agents. That process has worked well. Overseas, we have a strong presence; about a quarter of or sales are outside of the U.S. For Microfluidics, we have distributors in the UK and in the Pacific Rim. We operate through a combination of sales agents and distributors outside of the United States. In Europe, we have an applications laboratory and office facility, which oversees the activities of our dozen or so selling agents. European sales have been on the order of 10% of our sales for 2001 and they appear to be growing nicely. We believe that we have an effective selling channel with this combination of processes.”

CEOCFOinterviews: Do you find that your product moves better outside the United States or inside?

Mr. Gruverman: “It runs in cycles. Most of our sales have been inside North America. We got up to as high as 35% of sales in Asia at one time, before the Japanese economy began to slow down. That has hung in around the 15-20% mark. It appears to be getting more robust at this time. North America is our mainstay, and most of our sales are on the east coast and west coast.”

CEOCFOinterviews: One area that we haven’t talked about is your Microfluidics application for ‘Cell Disruption’.

Mr. Gruverman: “The one application where we are a standard product is a process called ‘Cell Disruption’. This is ubiquitous in the pharmaceutical and Biotech industry in that when you manufacture protein drugs by fermentation or cell culture, you then have to recover the protein that you formed, by disrupting the cells and getting the cytoplasm (the liquid component) out of the cell and then processing it. The Microfluidizer^® processor, I believe, to be the best method of doing that, of anything in existence. We obtain the highest protein recovery yields with less need for further separation and purification. Further, our process is readily scaleable, unlike other methods.  I dare say that there isn’t a significant Biotech or Pharmaceutical company that does not now use the Microfluidizer^® for that process.

In all, there are more than 2500 Microfluidizer^® processor systems in service today. They have been put into place over the last fifteen years, and we find that applications keep getting developed by people so that the technology now has a life of its own in its diffusion from company to company. So many people have used it, and people do change jobs. We have even documented one situation in which a scientist changed jobs and would not report for work until his new employer bought him a Microfluidizer^® processor; we found that to be rather interesting.”

CEOCFOinterviews: Why is the Microfluidizer^® processor so important to modern pharmaceutical formulation?

Mr. Gruverman: “We believe that you can’t do modern pharmaceutical formulation without access to a Microfluidizer^® processor because you can test so many formulations in such a short amount of time over a large range of variables. The lab machine weighs only about forty pounds and it is easy to take apart and clean. You can do dozens of test runs a day, using the Microfluidizer^® equipment, and you get performance levels that are easily extrapolated. The Microfluidics technology appears to be linearly scaleable at any throughput; whatever you can do at the bench in a few CCs per minute, you can reproduce on a production machine at twenty gallons per minute and get essentially the same results. It is quite unusual for an engineering technology to be that scaleable.”

CEOCFOinterviews: You have different models with different price structuring, am I correct on that?

Mr. Gruverman: “Yes, we have laboratory scale, pilot manufacturing scale and large production systems. We have different lines of manufacturing systems that either are designed for very clean operations as in the pharmaceutical industry or can be used in industrial situations such as making pigments. Those come in two different lines. The less expensive lines also tend to be more effective in a lot of different areas, which do require clean equipment. We have begun offering that equipment in the clean industries by redesigning some of the components so that it meets good manufacturing practice requirements (GMP). It is a whole continuum of cost structures and capabilities. We no longer claim that there are two separate lines.”

CEOCFOinterviews: Do you generate revenues through consumables?

Mr. Gruverman: “Approximately 25% of our sales are consumable components. For example, the key component of the machine is something called the interaction chamber, in which the pre-mixed materials are actually conducted down microchannels, in two streams, and then forced to collide in the interaction zone. That component is subject to some wear. It is a fixed geometry system.

The virtue of a fixed geometry system is that it always performs the same way; there is no possibility of differential treatment of parts of the process stream. The downside of it is that eventually it will start wearing these channels. You are running fluids through these channels at Mach one and two in very tiny channels the width of a human hair, and you do eventually abrade them. We have found ways of lining the contact surfaces with diamond or sapphire that extend the lifetimes tremendously. We also have to provide replacement parts for pumps and various other parts in the equipment. In the aggregate, that amounts to about 25% of our sales. Our average selling price for a laboratory unit might be in the $25,000 range, for a pilot plant unit it might be in the $60,000 range and the large units start at $100,000 and might go as high as half a million dollars. The profit structure is inverted; we make more money on our laboratory systems than we do on our larger systems. The gross margins run in the 40 to 65% range.”

CEOCFOinterviews: Can you continue to grow your business with success in the Microfluidics end until you start to see success with MMR applications?

Mr. Gruverman: “That is our current plan. We think we can grow the core business to 25-30 million dollars over a period of years. With MMR, we really have not had the nerve to suggest when it will achieve its selling potential. It is going to depend on how well we do in attracting co-developers and partners and helping them to develop applications. That is a slow process because we are relying on other peoples time scales and resource commitments; I’ve been there before and it is an unpredictable process.”

CEOCFOinterviews: What are the key aspects of growth for your core Microfluidics Division business?

Mr. Gruverman: “Building the core business, selling more production equipment and increasing the intensity with which we present people with laboratory equipment and induce them to try it. We have programs where we try to get people to lease or borrow a piece of equipment. This often attracts enough interest within their company to at least consider buying a unit. Once we have sold a unit to a company, it is almost an annuity kind of strategy because there is no reason to buy it except to develop a product that will ultimately require a large Microfluidizer^® processor to manufacture it, and we have found that to be true. We have approximately 150 larger pilot and production scale systems that are in routine manufacturing operations in the United States: those are increasing by 20 or 30 a year. Therefore, we see the core business growing very nicely and although we will never be a major company based on this technology, the MMR does give us the prospect at least of creating such a company.”

CEOCFOinterviews: What contributions have you made that may have touched individual lives without their awareness?

Mr. Gruverman: “We celebrated twenty years of creativity and service to the manufacturing community last year. We have helped to maintain American manufacturing excellence in a wide range of industries, and have done so overseas as well. Microfluidics is a well-known brand with wide recognition. People are often surprised when we contact them, that we are not a much larger company. I think that we have made significant contributions in the Healthcare area, where probably 70% of our Microfluidics sales occur. There is a lot of attention being given today to such things as smallpox and anthrax vaccines. Much of the work that is going on there is with Microfluidizer^® processors. We have made huge contributions in the vaccine area in the medical products arena.

I think that coatings are another area in which we have contributed.  Ink Jet technology has enabled our digital culture and people take it for granted. Ink Jet inks have very few problems in application and a lot of that is due to the fact that the Microfluidizer® can manufacture them with no outlier particles that could clog the Ink Jet disperser  structures. This is a performance contribution that we have made and although it is difficult to quantify, I know it is very large.”

CEOCFOinterviews: What about the needs of your customers?

Mr. Gruverman: “We have been quite sensitive to our customer needs. Our products are often ‘cutting edge’ and that means that we encounter problems in customer use that we could not foresee or certainly could not simulate. We have a very good record in responding effectively and rapidly to such situations and those findings usually help future product improvement. We have a continuous process of up-grading our equipment, and any equipment that is out in the field that is more that five or six years old, is probably not as effective as currently supplied equipment. We try to get people to look at upgrading their equipment.”

CEOCFOinterviews: Do you have the cash and credit to go forward?

Mr. Gruverman: “What we are trying to do is pay attention to our core Microfluidics Division business and grow it strongly enough so that we will be able to justify a higher stock price, and then resume our PR and IR programs. That is going to take a different stock market than we have now but we have to be patient about it. We are meeting our covenants and our bank lines are solid. The interest rates are low enough now so that they are not a real drag. I think we are in very good shape financially if we don’t do anything too aggressive. For example, it would take an extraordinary situation to interest us in another acquisition at this time. If the right offer came along, we might sell some assets in order to generate cash to accelerate the development process in another part of the business. We must also see to it that the MMR program is actively pursued with potential partners.”

CEOCFOinterviews: In closing, what would you like to say to your current shareholders as well as potential investors?