<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------------------
FORM 10-SB
---------------------
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(g) of
The Securities Exchange Act of 1934
---------------------
EMERGENCY FILTRATION PRODUCTS, INC.
----------------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 87-0561647
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4335 South Industrial Road, Suite 440
Las Vegas, Nevada 89103
- ---------------------------------------- -----------
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (702) 798-4541
Securities to be registered pursuant to Section 12(b) of the Act:
none
Securities to be registered pursuant to Section 12(g) of the Act:
$.001 Common Stock
------------------
(Title of Class)
Page One of 37 Pages
Exhibit Index is Located at Page 36.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I
Item 1. Description of Business ...................................... 1
Item 2. Plan of Operation ............................................ 2
Item 3. Description of Property ...................................... 5
Item 4. Security Ownership of Certain
Beneficial Owners and Management ............................. 5
Item 5. Directors, Executive Officers, Promoters
and Control Persons ........................................ 6
Item 6. Executive Compensation ....................................... 10
Item 7. Certain Relationships and
Related Transactions ....................................... 10
Item 8. Description of Securities .................................... 11
PART II
Item 1. Market for Common Equities and Related Stockholder
Matters .................................................... 12
Item 2. Legal Proceedings ............................................ 14
Item 3. Changes in and Disagreements with Accountants ................ 14
Item 4. Recent Sales of Unregistered Securities ...................... 14
Item 5. Indemnification of Directors and Officers .................... 16
PART F/S
Financial Statements ......................................... 19
PART III
Item 1. Index to Exhibits ............................................ 38
Item 2. Description of Exhibits ...................................... 38
</TABLE>
<PAGE> 3
PART I
Item 1. Description of Business
Generally
Emergency Filtration Products, Inc. (the "Company") was organized
under the laws of the State of Nevada on November 1, 1991, under the name "Lead
Creek Unlimited." Until February 9, 1996, the Company conducted no business. The
Company filed with the Secretary of State of the State of Nevada a Certificate
of Amendment changing its name to "Emergency Filtration Products, Inc." on March
8, 1996. The Company is in the business of developing a state-of-the-art
cardio-pulmonary resuscitation ("CPR") isolation mask that is designed to reduce
the possibility of transmission of contagious diseases during the administration
of CPR (the "RespAide(TM)").
On February 9, 1996, the Company entered into an Agreement with
Douglas K. Beplate whereby Mr. Beplate granted to the Company all rights,
including patent rights, to the commercial exploitation of the RespAide(TM). In
consideration of the assignment of these rights, the Company agreed (i) to pay
Mr. Beplate a royalty of 5% of the Company and any licensee on sales of the
RespAide(TM) and any components thereof, payable quarterly; (ii) to compensate
Douglas K. Beplate for consulting services at market value, for which Douglas K.
Beplate was to invoice the Company monthly; and (iii) to deliver to Douglas K.
Beplate 19% of the issued and outstanding common stock of the Company as of the
date of the Agreement. On June 18, 1996, Douglas K. Beplate also executed an
Assignment of Invention assigning to the Company all rights to exploit the
RespAide(TM) technology.
The Company is a specialty filter products company that has
developed the state-of-the-art air filtration technology for removing infectious
bacteria and viruses in air flow systems. The Company's internationally patented
dual-filtered vapor isolation valve (VIV) technology can be used in a wide range
of medical and commercial applications, including: (1) CPR isolation masks to
protect emergency response personnel against infectious diseases during
mouth-to-mouth resuscitation; (2) disposable filters to avoid contamination of
critical components in ventilators and other medical devices; (3) air filtration
systems for semiconductor manufacturing and laboratory "clean rooms"; and (4)
heating, ventilating and air-conditioning (HVAC) filters for use in commercial
and residential buildings, airplanes, and motor vehicles.
Patent
The patent covering the Company's core technology is U.S. Patent
5,575,279, granted to Douglas K. Beplate on April 2, 1996, which is entitled:
Dual-Filtered Rotary Isolation Valve for Resuscitation. The abstract is as
follows:
1.
<PAGE> 4
An isolation valve for the resuscitation of patients which has an upper
housing and a lower housing that snap together, rotate with respect to
one another, and utilize a flexible diaphragm which extends into the
small space between the upper housing and the lowing housing to assure
the establishment of an air-tight seal between the upper housing and the
lower housing. The upper housing begins with an upper tube that expands
outward to create an upper chamber segment. The lower housing has a
lower chamber segment, the wall of which lower chamber segment
establishing the snap-fit with the wall of the upper chamber segment.
The lower chamber segment is formed by the outward expansion of a lower
tube. Breath exhaled by a care provider proceeds along the upper tube to
the upper chamber segment where it must pass through an upper filter
segment, a lower filter segment, and a space between the two that
provides a volume to retain any moisture which evades the filter
segments. The exhaled breath from the care provider then passes through
a check valve that precludes exhaled breath from the patient from
traveling to the care provider [than then] into the lower tube. Breath
exhaled by the patient is exhausted to the atmosphere through one or
more apertures in the bottom of the lower chamber segment after having
passed through an exhalation filter.
The claims cited in the patent include the use of a combination of
hydrophobic and hydrophilic filters as well as a variety of other features and
functional aspects of the technology.
Subsequent to the issuance of the patent, the Company filed for
international patent protection for the same claims. Accordingly, patent
protection has now been secured or is pending on the original VIV filter
technology in many foreign countries. Modifications to the existing technology
and additional claims to enhance the intellectual property rights have been or
will be filed in the form of divisional and continuation in part patents.
The Company has also submitted additional patent applications for the
circuit ventilators, bag valve mask ("BVM"), and products that may use the same
technologies to establish contaminant-free filtered air.
Trademarks
Emergency Filtration has secured registered trademark protection for the
RespAide(TM) product name in the U.S. and intends to secure additional
trademarks as appropriate.
Item 2. Plan of Operation
The Company's cost-efficient business model emphasizes: (1)
in-house research and development; (2) accumulation of intellectual property
assets; (3) ownership of key production equipment;
2.
<PAGE> 5
and (4) outsourcing of all manufacturing, distribution, warehousing, and order
fulfillment. Accordingly, the Company benefits from low overhead, as well as the
pricing advantages inherent in proprietary specialty products.
The Company's management is now completing transformation from a
technology-driven research and development business to a marketing-driven
proprietary products company. Product development efforts remain an important
priority, but are now balanced by an increasing focus on elements of production
and sales.
The Company's current product line includes:
- RespAide(TM) CPR Isolation Mask. The Company has received Federal
Drug Administration ("FDA") approval for its RespAide(TM) CPR
isolation mask incorporating the VIV filter, and recently
commenced volume manufacturing and distribution of complete units
and replacement filters (the RespAide(TM) filter needs to be
replaced after each use). In tests by an independent laboratory,
RespAide(TM) was found to be greater than 99.99% effective
against bacterial and viral transmission -- the highest rating
testing labs will issue for medical devices, and believed by
management of the Company to be superior to any competing product
on the market.
- Disposable Filters for BVMs. The same filter used in the
RespAide(TM) product is ideal for preventing contamination of
"bag valve masks" which are single-use ventilators. The
disposable filter keeps the equipment contaminant-free, thereby
allowing a BVM to be safely reused with a new filter -- a
considerable economic benefit due to the lower replacement and
disposal costs of the filter versus discarding the entire BVM
unit. This product is covered by the FDA's RespAide(TM) approval.
- Ventilator Circuits. To extend its market reach from emergency
response sites to the vast number of respiratory procedures
conducted within medical facilities, the Company has introduced
two new configurations of its VIV technology: (1) a one-way
ventilator circuit that eliminates the exhalation ports for
patient's breath in favor of permitting a T-valve attachment for
monitoring CO(2) levels -- suitable for any inline ventilator
connection; and (2) a two-way ventilator circuit for applications
where ambient air flow must pass evenly in both directions while
still protecting equipment and hoses. This is suitable for use in
anesthesia and general respiratory procedures. The Company has
applied for FDA approval and approval is expected by the end of
October 1999.
3.
<PAGE> 6
In addition, the Company has designed another configuration of
the technology for the BVM market that incorporates a self-contained nebulizer,
a filter, and a bag with built-in CO(2) monitoring capabilities. A patent
application has been filed for this product. The Company is currently conducting
prototype development.
The market for air filters to protect against communicable
diseases has grown rapidly since the mid-1980s -- from practically nil, to an
estimated $800 million (wholesale) for isolation masks alone. Demand has been
driven largely by such factors as the spread of AIDS and hepatitis C, the
resurgence of tuberculosis in many urban settings, and growing concerns in the
medical community about new drug-resistant strains of bacteria. Such concerns
are clearly evident in the results of recent independent surveys indicating that
approximately 45% of doctors, 57% of EMTs, 80% of nurses, and substantially all
paramedics surveyed would refuse to perform mouth-to-mouth resuscitation on an
adult stranger without barrier protection. Indeed, many of the respondents
indicated that they had already walked away from situations in the community
requiring mouth-to-mouth resuscitation.
In addition to emergency ambulance services, police departments,
firefighters, hospitals, doctors, the military, and major CPR training
organizations such as the American Heart Association, management believes that
the market also includes government and private sector entities that will
choose, or may be required by law to keep CPR isolation masks on hand.
To reach the market, the Company has entered into contractual
arrangements with a number of U.S. and international medical product
distributors. Moreover, the Company has retained the services of an influential
channel management group to accelerate market penetration and open up new
marketing avenues.
The Company intends to firmly establish its reputation for
supplying the best medical air filters available, and then begin aggressively
commercializing the technology in the enormous HVAC category. The Company
estimates that the addition of HVAC applications will increase the total
addressable market for dual-filtered vapor isolation valve technology.
Competition
The medical device industry is a highly competitive sector of the health
care industry and there are a large number of established and well financed
entities with significantly greater financial resources, technical expertise and
in depth managerial capabilities than the Company. Although the Company has
achieved patent protection for the RespAide(TM), there is no assurance that
other entities may not compete in or enter the medical and commercial market in
competition with the Company.
4.
<PAGE> 7
Item 3. Description of Property
The Company presently occupies office and warehouse space located
at 4335 South Industrial Road, Suite 440, Las Vegas, Nevada 89103. The property
consists of approximately 1,800 square feet of offices and 1,512 square feet of
warehouse space. The property is leased from an unaffiliated party for 3 years,
commencing October 15, 1998, at $3,809.95 per month.
Item 4. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners.
The following table sets forth the security and beneficial
ownership for each class of equity securities known by the Company to have more
than five (5%) percent of the voting securities.
<TABLE>
<CAPTION>
Name and Amount and
Address of Nature of Percent
Title of Class Beneficial Owner Beneficial Owner of Class
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Peter Clark
2251 Wigwam Parkway
#1823
Henderson, NV 89014 600,293 7.760%
Option Peter Clark
2251 Wigwam Parkway
#1823
Henderson, NV 89014 600,000 --
Common Douglas K. Beplate
3 Palazzo Terrace
Henderson, NV 89014 739,820 9.565%
Option Douglas K. Beplate
3 Palazzo Terrace
Henderson, NV 89014 500,000 --
Common Niso Adato
Levent Cab No. 3
Bricini, Levent 80620
Istanbul, Turkey 450,000 5.818%
</TABLE>
(b) Security Ownership of Management.
5.
<PAGE> 8
The following table sets forth the beneficial ownership for each
class of equity securities of the Company beneficially owned by all directors
and officers of the Company.
<TABLE>
<CAPTION>
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent(1)
Title of Class Owner Owner of Class
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Michael J. Crnkovich 201,000 2.598
Post Office Box 1646 600,000(2)
Winnemucca, NV 89446
Common Peter Clark 600,293 7.760
2251 Wigwam Parkway 600,000(2)
#1823
Henderson, NV 89014
Common Dr. Raymond C.L. Yuan 10,000 0.129
4335 S. Industrial Rd. 100,000(2)
Las Vegas, Nevada 89103
Common J. Thomas Burns 100,000(2) --
4335 S. Industrial Rd.
Las Vegas, Nevada 89103
Common Sherman Lazrus 100,000(2) --
4335 S. Industrial Rd.
Las Vegas, Nevada 89103
Common Douglas K. Beplate(3) 739,820 9.565
3 Palazzo Terrace 500,000(2)
Henderson, NV 89014
</TABLE>
- ----------------
(1) Beneficial, including options.
(2) The following options of the Company are owned by the directors and
officers and control persons of the Company:
<TABLE>
<CAPTION>
# of Shares Price Expiration
----------- ----- ----------
<S> <C> <C> <C>
Michael J. Crnkovich 100,000 $0.60 12/30/00
500,000 $0.75 01/08/01
Peter Clark 100,000 $0.60 12/30/00
500,000 $0.75 01/08/01
Douglas K. Beplate 500,000 $0.75 01/08/01
Raymond Yuan 100,000 $0.60 12/30/00
J. Thomas Burns 100,000 $0.60 12/30/01
Sherman Lazrus 100,000 $1.40 12/09/01
</TABLE>
(3) Consultant [co-founder and inventor]; 668,667 pledged to a third party.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Michael J. Crnkovich 44 President, Chief Executive
Officer, Director (Chairman
of the Board)
Peter Clark 47 Secretary, Treasurer, Director
</TABLE>
6.
<PAGE> 9
<TABLE>
<S> <C> <C>
Dr. Raymond C.L. Yuan 55 Director
J. Thomas Burns 60 Director
Sherman Lazrus 65 Director
Douglas K. Beplate 44 Control Person
</TABLE>
The above listed officers and directors will serve until the next
annual meeting of the shareholders or until their death, resignation,
retirement, removal, or disqualification, or until their successors have been
duly elected and qualified. Vacancies in the existing Board of Directors are
filled by majority vote of the remaining Directors. Officers of the Company
serve at the will of the Board of Directors. There is no family relationship
between any executive officer and director of the Company.
Resumes
Michael J. Crnkovich, Chairman, President and CEO, joined the Company as
Director of Marketing in 1997, and was appointed to his present
positions later that same year. Mr. Crnkovich has more than 20 years'
experience in management and marketing. He began his career in 1978 as a
co-owner of Unico South (Boise, Idaho), a retail clothing store. In
1981, Mr. Crnkovich became Sales Manager for Hayden Beverage (Boise,
Idaho), a major beverage distributor. He left that position in 1985 when
he was hired as Sales Manager for Billingsley Motors (Winnemucca,
Nevada), an eight-line General Motors/ Chrysler automobile dealership;
and was promoted to General Manager in 1990, a position he held until
joining the Company in 1997. Mr. Crnkovich has served on the Boards of
Directors of Winnemucca Century Club (Winnemucca, Nevada), and the
Nevada Auto Dealers Association. He was graduated from Boise State
University with a Bachelor of Science degree in Business Management in
1978, and received subsequent training and education at the General
Motors Executive Forum, and Zig Zigler Sales Training.
Peter Clark, Vice President, Sales and Marketing, joined the Company in
1995, and was subsequently appointed Secretary/ Treasurer and elected to
the Board of Directors in 1997. Mr. Clark has more than 17 years'
experience in product development, sales, and marketing. He began his
career in 1981 as a buyer for Udisco, d.b.a. Sunset Sports Center (Salt
Lake City, Utah), and remained in that position until 1986. In 1986, Mr.
Clark became merchandise Coordinator, Western Region for Herman's
Sporting Goods, Inc. (Carteret, New Jersey); and was promoted to
Merchandise Director in 1989, a position he held until joining the
Company in 1995. Mr. Clark was graduated from Colorado State University
in 1975 with a Bachelor of Science degree in Exercise and Sports
Science.
7.
<PAGE> 10
J. Thomas Burns, Director, was elected to the Board in May, 1998. Mr.
Burns has more than 25 years of senior management and marketing
experience in the medical devices field, and was previously President
and CEO of Laerdal Medical Corporation (Armonk, New York), a competitor
of the Company and currently the leading supplier of CPR isolation
masks. Mr. Burns began his career in 1965, and held several sales
positions in the medical devices industry until 1971. In 1971, he became
Manager - Market Planning for Ohio Medical Products (Ohmeda), (Madison,
Wisconsin), a position he held until 1977 when he became Director of
Marketing for Mallinckrodt Critical Care (Glens Falls, New York). Mr.
Burns left that position in 1985 to join Laerdal as Senior Vice
President; subsequently being promoted to Executive Vice President and
COO in 1987, and President and CEO in 1989, a position he held until
1994. During his tenure as President of Laerdal, he also served on the
Board of Directors, and as President of Laerdal Corporation, a holding
company, Chairman of Laerdal manufacturing Corporation, Co-Chairman of
Laerdal, California, Inc., and President of Laerdal Medical, Canada. Mr.
Burns was graduated from the University of Delaware in 1965 with a
Bachelor of Arts degree and received a Master of Business Administration
degree from the University of Southern California in 1969.
Dr. Raymond C.L. Yuan, Director, was elected to the Board in December
1997. Dr. Yuan has over 20 years of international experience in
corporate finance, management, marketing, and new product development.
Since 1993, he has served as Managing Director of AsiaWorld Medical
Technology Limited, an exclusive master distributor of advanced medical
and healthcare products in South East Asia, including the People's
Republic of China. In addition, Dr. Yuan currently serves in the
following positions: President of the MedNet Group located in Hong Kong,
a group of healthcare education and communications companies; Managing
Director of Bio-health Consultancy (Hong Kong) Limited, a consulting
firm specializing in bio-health and biotechnology consulting to medical
institutions; and Executive Director of Financial Resource
International, Limited located in Hong Kong, an international investment
banking firm. Dr. Yuan began his career in 1976 at General Foods
Corporation (New York, New York), where he held several positions
through 1983. From 1984 to 1988, he was Managing Director of ChinaWorld
International Ltd. (Hong Kong), an international technology transfer and
trading firm; leaving to become Executive Director of Financial Resource
International Ltd. (Hong Kong), an investment banking concern, where he
remained until joining AsiaWorld Medical Technology in 1993. Dr. Yuan
was graduated from the University of California, Berkeley, in 1967 with
a Bachelor of Science degree in Chemistry. He subsequently received a
Masters degree in Physical Chemistry from Columbia University (1968); a
Ph.D. in Chemical Physics from Columbia University (1972); was a
National Health Institute Post-doctoral Fellow at Yale University with a
concentration in Biophysics (1972); was a Rudolph J. Anderson Fellow at
Yale University with a concentration in
8.
<PAGE> 11
Molecular Biology (1974); and received a Master of Business
Administration degree from Stern School of Business Administration, New
York University in 1983. Dr. Yuan is fluent in English and several
Chinese dialects, including Mandarin.
Sherman Lazrus, Director, was elected to the Board in December 1998, and
has nearly 40 years' experience in government and private sector health
care and health care finance. Mr. Lazrus presently serves as President
of American Medical Capital, a division of American Medical Enterprises,
LLC located in Bethesda, Maryland, a financial services and investment
banking company specializing in the health care industry, a position he
has held since 1991. Between 1960 and 1966, he served as Department
Budget Examiner, Planning Specialist, Office of Director of HEW's
National Institutes of Health & Office of Secretary of HEW. From 1966 to
1968, Mr. Lazrus worked on the staff of the Governor of Maryland,
including serving as Director of Planning and Management for the
Department of Human Resources, D.C. Government, remaining in that
position until 1973. From 1973 to 1975, Mr. Lazrus was Director, office
of Policy Coordination, Office of Assistant Secretary of Health (HEW);
and from 1975 and 1976, he served as Deputy Assistant Secretary of
Defense for Health Resources and Programs (DOD). In 1976, he became Vice
President of American Medical International, Inc. located in Bethesda,
Maryland, a major NYSE-listed multi-hospital corporation. From 1978 to
1987, he was President of American Health Assoc., Inc. located in
Bethesda, Maryland, a health care consulting, marketing, and management
company; leaving in 1987 to become President and CEO of Eastmark, Inc.
located in Bethesda, Maryland, a financial services and investment
company specializing in health care facilities. He left that position in
1991 to join American Medical Capital. Mr. Lazrus was graduated from
George Washington University in 1961 with a Bachelor of Arts degree in
1963.
Douglas K. Beplate, is a full-time consultant to the Company. He is the
inventor of the Company's internationally patented dual-filter vapor
isolation valve, and is deemed to be a co-founder of the Company. Mr.
Beplate is an accomplished new product developer, and holds numerous
patents in over 30 countries regarding medical and other technologies.
He began his career in 1978 as co-owner of UniCo South Clothing Store
located in Boise, Idaho, a retail clothing store. From 1980 to 1986, he
was Buyer and Regional Coordinator for Udisco Sunset and Wolfes Sporting
Goods located in Salt Lake City, Utah, a sporting goods chain. From 1986
to 1990, Mr. Beplate became a consultant for JPC Concepts located in Los
Angeles, California, a consulting consortium. In 1990, he founded
Kindertot located in Salt Lake City where he designed and patented
technologies including infant carriers, reusable diapers, bed sheets,
and moisture alarms. He sold the technologies in Kindertot in 1993 to
become a product research and development and design consultant, working
for Sterling Medical located in Salt Lake City, Utah, from 1993 to 1994;
9.
<PAGE> 12
and NuMedical Technologies located in Salt Lake City, Utah, from 1994 to
1995. Mr. Beplate discontinued his consulting activities in 1995 to
concentrate on his dual-filter vapor isolation valve technology and the
operations of the Company. He is a graduate of Boise State University.
Item 6. Executive Compensation.
The following table sets forth the cash compensation which was
paid by the Company for services rendered to the Company. During fiscal years
ended 1996, 1997 and 1998, the following payments were made:
<TABLE>
<CAPTION>
Remuneration
------------
Name Position 1996 1997 1998
- ---- -------- ---- ---- ----
<S> <C> <C> <C> <C>
Michael J. Crnkovich President -0- -0- 40,000
Chief Executive
Officer
Peter Clark Secretary,
Treasurer -0- -0- 30,000
All Executive Officers
as a group
</TABLE>
No compensation is payable to Directors of the Company in
connection with attendance at board meetings, except as to such Directors who
also serve as Officers of the Company in capacities other than Directors and/or
Officers. At this time no other compensation has been scheduled for any other
member of the Board of Directors or Officers of the Company.
Future compensation of Officers will be determined by the Board
of Directors based upon the financial condition and performance of the Company,
the financial requirements of the Company, and upon the individual performance
of each Officer. The Board of Directors intends to ensure that the salaries paid
to the Company's Officers and employees are reasonable and prudent and are based
upon both the financial condition and performance of the Company and upon the
performance of individual Officers and employees.
Item 7. Certain Relationships and Related Transactions.
On February 9, 1996, the Company entered into an Agreement with
Douglas K. Beplate whereby Mr. Beplate granted to the Company all rights,
including patent rights, to the commercial exploitation of the RespAide(TM). In
consideration of the assignment of these rights, the Company agreed (i) to pay
Mr. Beplate a royalty of 5% of the Company and any licensee on sales of the
entire RespAide(TM) and any components thereof, payable quarterly; (ii) to
compensate Mr. Beplate for consulting services at market value, for which Mr.
Beplate was to invoice the Company monthly;
10.
<PAGE> 13
and (iii) delivery to award Mr. Beplate 19% of the issued and outstanding common
stock of the Company as of the date of the Agreement. On June 18, 1996, Mr.
Beplate also executed an Assignment of Invention assigning to the Company all
rights to exploit the RespAide(TM) technology.
Except as hereinabove set forth, there have been no related party
transactions, or any other transactions or relationships required to be
disclosed pursuant to Item 404 of Regulation S-B.
Item 8. Description of Securities.
The Company's authorized capital stock consists of 50,000,000
shares, par value $.001 per share. There are 7,736,025 Common Shares issued and
outstanding as of the date hereof.
The Company was initially incorporated with an authorized capital
of 2,500 shares of no par value common stock. On July 11, 1996, the Board of
Directors of the Company unanimously resolved to (i) increase the authorized
capital to 50,000,000 shares of common stock, with a proportional increase in
the stockholdings of each then-existing stockholder in the ratio of 20,000
shares for one; (ii) increase the par value to one mill ($0.001) per share; and
(iii) effect a reverse split of the then-outstanding common stock of the Company
on the basis of one new share for every 13.0091 shares then issued and
outstanding, with fractional shares being rounded up to the next highest number
of shares.
All shares of Common Stock have equal voting rights and, when
validly issued and outstanding, are entitled to one vote per share in all
matters to be voted upon by shareholders. The shares of Common Stock have no
preemptive, subscription, conversion or redemption rights and may be issued only
as fully-paid and non-assessable shares. Cumulative voting in the election of
directors is not permitted, which means that the holders of a majority of the
issued and outstanding shares of Common Stock represented at any meeting at
which a quorum is present will be able to elect the entire Board of Directors if
they so choose and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of liquidation of
the Company, each shareholder is entitled to receive a proportionate share of
the Company's assets available for distribution to shareholders after the
payment of liabilities and after distribution in full of preferential amounts,
if any. All shares of the Company's Common Stock issued and outstanding are
fully-paid and nonassessable. Holders of the Common Stock are entitled to share
pro rata in dividends and distributions with respect to the Common Stock, as may
be declared by the Board of Directors out of funds legally available therefor.
11.
<PAGE> 14
PART II
Item 1. Market Price for Common Equity and Related Stockholder Matters.
(a) Market Price. The Company's Common Stock is quoted
on the Over-The-Counter Bulletin Board System.
As of July 30, 1999, the Company had one hundred forty-one (141)
shareholders of record of its common stock. The Company has not paid cash
dividends on its common stock. The Company anticipates that for the foreseeable
future any earnings will be retained for use in its business, and no cash
dividends will be paid on the common stock. Declaration of common stock
dividends will remain within the discretion of the Company's Board of Directors
and will depend upon the Company's growth, profitability, financial condition
and other relevant factors.
The Company's common stock is traded on the bulletin board system
under the symbol "EMFP." The table below reflects the high and low bid and ask
quotations for each of the Company's fiscal quarters for the two fiscal years
covered by this report. The prices reflect inter-dealer prices, without retail
mark-up, mark-down or commission and do not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
1997
----------
HIGH LOW
---------- ----------
<S> <C> <C>
1st Quarter N/A N/A
2nd Quarter 2.68 1.00
3rd Quarter 1.375 0.25
4th Quarter 1.0625 0.375
</TABLE>
<TABLE>
<CAPTION>
1998
----------
HIGH LOW
---------- ----------
<S> <C> <C>
1st Quarter 0.65625 0.25
2nd Quarter 1.5625 0.25
3rd Quarter 2.093 0.8125
4th Quarter 2.03125 1.375
</TABLE>
<TABLE>
<CAPTION>
1999
----------
HIGH LOW
---------- ----------
<S> <C> <C>
1st Quarter 3.18 1.81
2nd Quarter 2.81 1.31
</TABLE>
12.
<PAGE> 15
(b) Other.
The Securities and Exchange Commission adopted Rule 15g-9, which
established the definition of a "penny stock," for purposes relevant to the
Company, as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require: (i) that a broker or dealer approve a person's account for
transactions in penny stocks; and (ii) the broker or dealer receive from the
investor a written agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased. In order to approve a person's
account for transactions in penny stocks, the broker or dealer must (i) obtain
financial information and investment experience and objectives of the person;
and (ii) make a reasonable determination that the transactions in penny stocks
are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stock in both public offering and in
secondary trading, and about commissions payable to both the broker-dealer and
the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.
For the initial listing in the NASDAQ SmallCap market, a company
must have net tangible assets of $4 million or market capitalization of $50
million or a net income (in the latest fiscal year or two of the last fiscal
years) of $750,000, a public float of 1,000,000 shares with a market value of $5
million. The minimum bid price must be $4.00 and there must be 3 market makers.
In addition, there must be 300 shareholders holding 100 shares or more, and the
company must have an operating history of at least one year or a market
capitalization of $50 million. For continued listing in the NASDAQ SmallCap
market, a company must have net tangible assets of $2 million or market
capitalization of $35 million or a net income (in the latest fiscal year or two
of the last fiscal years) of $500,000, a public float of 500,000 shares with a
market value of $1 million. The minimum bid price must be $1.00 and there must
be 2 market makers. In addition, there must be 300 shareholders holding 100
shares or more.
13.
<PAGE> 16
(c) Dividends.
The payment of dividends is within the discretion of the Board of
Directors of the Company. The Company currently intends to retain all earnings,
if any, in the foreseeable future for use in the development of the Company's
business. The Company has not paid dividends since inception. It is not
anticipated that any dividends will be paid in the foreseeable future and there
can be no assurance that dividends can or will ever be paid. The payment of
dividends is contingent upon future earnings, if any, the Company's financial
condition and capital requirements, general business conditions and other
factors.
Item 2. Legal Proceedings.
(a) In September, 1998, Bruce N. Knudson, a former employee of
the Company, filed an action in the Fifth Judicial Court in and for Washington
County, State of Utah, against the Company and Douglas K. Beplate for alleged
breach of contract, which arose out of an employment relationship, claiming
20,000 shares of stock in the Company, unpaid wages and unreimbursed expenses in
the approximate sum of $40,000. Litigation is pending and the Company believes
that the claims are without merit.
(b) Bruce E. Batchelor, a shareholder and former officer of the
Company has made certain claims for alleged breaches of agreements as they
relate to unpaid wages, reimbursement for expenses, and claims certain rights in
the trademark of the Company as security for the alleged obligations. The
Company has recorded the sum of $135,000 as of June 30, 1999 and December 31,
1998 which represents the amount claimed to be owed to Bruce E. Batchelor. The
Company and patent counsel believe that any claims other than for alleged money
damages is without merit. The Company further believes that it has offsetting
claims against recovery which the Company believes are valid.
Other than described above, there are no legal proceedings
threatened or pending, except such ordinary routine matters which may be
incidental to the business currently being conducted by the Company.
Item 3. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
The Company has not changed accountants since its formation and
there are no disagreements with the findings of said accountants.
Item 4. Recent Sales of Unregistered Securities.
As at December 31, 1996, the Company had issued and outstanding
4,712,001 shares of Common Stock. As at December 31,
14.
<PAGE> 17
1997, the Company had issued and outstanding 5,501,401 shares of Common Stock.
As at December 31, 1998, the Company had issued and outstanding 7,078,107 shares
of common stock. As at July 31, 1999, the Company had issued and outstanding
7,736,025 shares of common stock.
(a) Between March 1996 and July 1996, the Company issued
3,744,678 shares to the initial founders of the Company for cash or in
cancellation of an indebtedness or for services rendered.
(b) Between January 1, 1997 and December 22, 1997, the Company
issued shares to various individuals, pursuant to Regulation D, Rule 504. The
Company filed its Notice of Sale of Securities pursuant to Regulation D, Section
4(6), and/or Uniform Limited Offer and Exemption with the Securities and
Exchange Commission no later than 15 days after the first sale of securities in
the offering and upon completion of the offering, in accordance with law.
(c) Between January 1, 1998 and December 31, 1998, the Company
issued 1,237,639 shares for cash at between $0.40 and $0.60 per share or for
services rendered, at $1.00 per share.
(d) On December 1, 1998, the Company issued a total of 895,734
shares to certain of its employees/consultants for services rendered and/or as
a bonus for said recipient.
(e) Between January 1, 1998 and December 31, 1998 the Company
cancelled 556,667 shares.
(f) On February 12, 1999, February 25, 1999, March 3, 1999 and
June 2, 1999, the Company issued 391,061 shares for $1.00 per share.
(g) On March 17, 1999, the Company issued 235,000 shares to five
individuals for cash or for services rendered, at $1.00 per share.
(h) On June 8, 1999, the Company issued a total of 25,000 shares
for services rendered.
No compensation or commission were paid to any person in
connection with the issuance of the shares, and no underwriter, broker or dealer
participated in such a sale. The transaction or transactions described in each
item above were wholly separate from and unrelated to the transaction or
transactions described in each of the other items. Each issuee in every
transaction described above made a written representation to the Company that he
was acquiring the Company's stock for investment purposes and not with a view to
the resale or redistribution thereof. Each stock certificate issued in every
transaction described in paragraphs (a) and (c) through (f) contains a
restrictive legend. Each of the above transactions was deemed by the Company to
be exempt from registration under Section 4(2) of the Securities Act of 1933, as
a transaction not involving any public offering, except for the sale and
issuance of 450,000 shares of stock to Nisso Adato in September 1998, and
144,000 shares to Q-Mark in July 1996, said shares were issued in reliance upon
Regulation S.
15.
<PAGE> 18
As of the date of this report, 3,975,080 of the issued and
outstanding shares of the Company's Common Stock may be eligible for sale under
Rule 144 promulgated under the Securities Act of 1933, as amended, subject to
certain limitations included in said Rule.
In summary, Rule 144 applies to affiliates (that is, control
persons) and nonaffiliates when they resell restricted securities (those
purchased from the issuer or an affiliate of the issuer in nonpublic
transactions). Nonaffiliates reselling restricted securities, as well as
affiliates selling restricted or nonrestricted securities, are not considered to
be engaged in a distribution and, therefore, are not deemed to be underwriters
as defined in Section 2(11), if six conditions are met:
(1) Current public information must be available about the issuer
unless sales are limited to those made by non-affiliates after
two years.
(2) When restricted securities are sold, generally there must be a
one-year holding period.
(3) When either restricted or nonrestricted securities are sold by an
affiliate after one year, there are limitations on the amount of
securities that may be sold; when restricted securities are sold
by non-affiliates between the first and second years, there are
identical limitations; after two years, there are no volume
limitations for resales by non-affiliates.
(4) Except for sales of restricted securities made by non-affiliates
after two years, all sales must be made in brokers' transactions
as defined in Section 4(4) of the Securities Act of 1933, as
amended, or a transaction directly with a "market maker" as that
term is defined in Section 3(a)(38) of the 1934 Act.
(5) Except for sales of restricted securities made by non-affiliates
after two years, a notice of proposed sale must be filed for all
sales in excess of 500 shares or with an aggregate sales price in
excess of $10,000.
(6) There must be a bona fide intention to sell within a reasonable
time after the filing of the notice referred to in (5) above.
Item 5. Indemnification of Directors and Officers.
Except for acts or omissions which involve intentional
misconduct, fraud or known violation of law or for the payment of dividends in
violation of Nevada Revised Statutes, there shall be no personal liability of a
director or officer to the Company, or its stockholders for damages for breach
of fiduciary duty as a director or officer. The Company may indemnify any person
for
16.
<PAGE> 19
expenses incurred, including attorneys fees, in connection with their good faith
acts if they reasonably believe such acts are in and not opposed to the best
interests of the Company and for acts for which the person had no reason to
believe his or her conduct was unlawful. The Company may indemnify the officers
and directors for expenses incurred in defending a civil or criminal action,
suit or proceeding as they are incurred in advance of the final disposition of
the action, suit or proceeding, upon receipt of an undertaking by or on behalf
of the director or officer to repay the amount of such expenses if it is
ultimately determined by a court of competent jurisdiction in which the action
or suit is brought determined that such person is fairly and reasonably entitled
to indemnification for such expenses which the court deems proper.
Indemnification of Directors, Officers, Employees and Agents
So far as permitted by the Nevada Business Corporation Act, the
Company may indemnify its directors and officers against expenses and
liabilities they incur to defend, settle or satisfy any civil or criminal action
brought against them on account of their being or having been Company directors
or officers unless, in any such action, they are adjudged to have acted with
gross negligence or to have engaged in willful misconduct.
Section 78.751(1) of the Nevada Revised Statutes ("NRS")
authorizes a Nevada corporation to indemnify any director, officer, employee, or
corporate agent "who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative kor investigative, except an action by or in the right
of the corporation" due to his or her corporate role. Section 78.751(1) extends
this protection "against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action , suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful."
Section 78.751(2) of the NRS also authorizes indemnification of
the reasonable defense or settlement expenses of a corporate director, officer,
employee or agent who is sued, or is threatened with a suit, by or in the right
of the corporation. The party must have been acting in good faith and with the
reasonable belief that his of her actions were not opposed to the corporation's
best interests. Unless the court rules that the party is reasonable entitled to
indemnification, the party seeking indemnification must not have been found
liable to the corporation.
To the extent that a corporate director, officer, employee, or
agent is successful on the merits or otherwise in defending any action or
proceeding referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of
the NRS requires that hee or she be indemnified "against expenses, including
attorneys' fees,
17.
<PAGE> 20
actually and reasonably incurred by him in connection with the defense."
Section 78.751(4) of the NRS limits indemnification under Section
78.751(1) and 78.751(2) to situations in which either (i) the stockholders; (ii)
the majority of a disinterested quorum of directors; or (iii) independent legal
counsel determine that indemnification is proper under the circumstances.
Pursuant to Section 78.175(5) of the NRS, the corporation may
advance an officer's or director's expenses incurred in defending any action or
proceeding upon receipt of an undertaking. Section 78.751(6)(a) provides that
the rights to indemnification and advancement of expenses shall not be deemed
exclusive of any other rights under any bylaw, agreement, stockholder vote or
vote of disinterested directors. Section 78.751(6)(b) extends the rights to
indemnification and advancement of expenses to former directors, officers,
employees and agents, as well as their heirs, executors, and administrators.
Regardless of whether a director, officer, employee or agent has
the right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his or her behalf against liability resulting from his or
her corporate role.
Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to officers, directors or persons controlling the Company
pursuant to the foregoing, the Company has been informed that in the opinion of
the U.S. Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933 and is therefore
unenforceable.
Transfer Agent
The Transfer Agent for the Company's Common Stock is American
Registrar & Transfer Company, 342 East 900 South, Salt Lake City, Utah 84111.
18.
<PAGE> 21
PART F/S
Financial Statements.
The following financial statements are attached to this report and
filed as a part thereof.
1) Table of Contents - Financial Statements
2) Independent Auditor's Report
3) Balance Sheets
4) Statement of Operations
5) Statement of Stockholders' Equity
6) Statement of Cash Flows
7) Notes to Financial Statements
19.
<PAGE> 22
EMERGENCY FILTRATION PRODUCTS, INC.
FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998
20.
<PAGE> 23
C O N T E N T S
<TABLE>
<S> <C>
Independent Auditors' Report ............................................. 22
Balance Sheets ........................................................... 23
Statements of Operations ................................................. 25
Statements of Stockholders' Equity ....................................... 26
Statements of Cash Flows ................................................. 28
Notes to the Financial Statements ........................................ 30
</TABLE>
21.
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Emergency Filtration Products, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheet of Emergency Filtration Products,
Inc. as of December 31, 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1998 and
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Emergency Filtration Products,
Inc. as of December 31, 1998, and the results of its operations and its cash
flows for the years ended December 31, 1998 and 1997 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company has not generated revenues sufficient to cover
its operating costs, which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 6. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
March 22, 1999
22.
<PAGE> 25
EMERGENCY FILTRATION PRODUCTS, INC.
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 110,362 $ 61,184
Accounts receivable (Note 1) 545 3,162
Accounts receivable - related party (Note 3) 7,605 10,000
Prepaid expenses -- 5,788
Inventory (Note 1) 102,300 63,696
--------- ---------
Total Current Assets 220,812 143,830
--------- ---------
PROPERTY AND EQUIPMENT (Note 1)
Molds 104,250 98,850
Furniture and office equipment 36,884 35,059
Accumulated depreciation (41,049) (27,811)
--------- ---------
Total Property and Equipment 100,085 106,098
--------- ---------
OTHER ASSETS
Deposits 4,141 4,141
Patent (Note 2) 22,679 22,735
--------- ---------
Total Other Assets 26,820 26,876
--------- ---------
TOTAL ASSETS $ 347,717 $ 276,804
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
23.
<PAGE> 26
EMERGENCY FILTRATION PRODUCTS, INC.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 31,625 $ 49,644
Accounts payable - related party (Note 3) 135,000 135,000
Note payable (Note 5) 2,004 13,702
Leases payable (Note 4) 3,370 8,091
Accrued expenses 6,490 8,754
----------- -----------
Total Current Liabilities 178,489 215,191
----------- -----------
LONG-TERM DEBT -- --
----------- -----------
Total Liabilities 178,489 215,191
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, par value $0.001; authorized
50,000,000 shares; 7,729,168 and 7,078,107 shares
issued and outstanding, respectively 7,729 7,078
Additional paid-in capital 3,842,333 3,191,923
Accumulated deficit (3,680,834) (3,137,388)
----------- -----------
Total Stockholders' Equity 169,228 61,613
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 347,717 $ 276,804
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
24.
<PAGE> 27
EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Operations
<TABLE>
<CAPTION>
For the
Six Months For the Years Ended
Ended December 31,
June 30, -----------------------------
1999 1998 1997
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
REVENUES $ 11,966 $ 140,507 $ 26,193
COST OF SALES 4,194 125,734 23,166
----------- ----------- -----------
GROSS MARGIN 7,772 14,773 3,027
----------- ----------- -----------
EXPENSES
Depreciation and amortization 14,094 24,485 9,727
Bad debt expense -- 966 --
Research and development 143,990 576,588 241,672
General and administrative 392,199 1,093,776 353,407
----------- ----------- -----------
Total Expenses 550,283 1,695,815 604,806
----------- ----------- -----------
LOSS FROM OPERATIONS (542,511) (1,681,042) (601,779)
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Other expenses -- (38,514) --
Loss on disposal of assets -- (3,014) --
Interest expense (935) (17,906) (12,203)
----------- ----------- -----------
Total Other Income (Expense) (935) (59,434) (12,203)
----------- ----------- -----------
NET LOSS $ (543,446) $(1,740,476) $ (613,982)
=========== =========== ===========
BASIC LOSS PER SHARE $ (0.08) $ (0.30) $ (0.12)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
25.
<PAGE> 28
EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Additional
----------------------------- Paid-in Accumulated
Shares Amount Capital Deficit
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 4,712,001 $ 4,712 $ 753,538 $ (782,930)
Common stock canceled (54,000) (54) (13,446) --
Common stock issued for services
at $0.25 per share 40,000 40 9,960 --
Common stock issued for cash
at $0.25 per share 656,000 656 163,344 --
Proceeds from exercised warrants
at $0.75 per share 147,400 147 110,403 --
Stock issuance cost -- -- (1,000) --
Additional capital contributed -- -- 294,875 --
Net loss for the year ended
December 31, 1997 -- -- -- (613,982)
----------- ----------- ----------- -----------
Balance, December 31, 1997 5,501,401 5,501 1,317,674 (1,396,912)
Common stock issued for cash at
prices ranging from $0.40 to $1.00
per share 809,056 809 657,833 --
Common stock issued for services
at prices ranging from $0.40 to $1.00
per share 1,221,066 1,221 1,112,712 --
Common stock issued in lieu of
debt at $1.00 per share 103,251 103 103,148 --
Common stock canceled at
predecessor cost (original
founders) of $0.00 per share (556,667) (556) 556 --
Net loss for the year ended
December 31, 1998 -- -- -- (1,740,476)
----------- ----------- ----------- -----------
Balance, December 31, 1998 7,078,107 $ 7,078 $ 3,191,923 $(3,137,388)
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
26.
<PAGE> 29
EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Common Additional
---------------------------- Paid-in Accumulated
Shares Amount Capital Deficit
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1998 7,078,107 $ 7,078 $ 3,191,923 $(3,137,388)
Common stock issued for cash
at $1.00 per share (unaudited) 601,061 601 600,460 --
Common stock issued for services
at $1.00 per share (unaudited) 50,000 50 49,950 --
Net loss for the six months ended
June 30, 1999 (unaudited) -- -- -- (543,446)
----------- ----------- ----------- -----------
Balance, June 30, 1999 (unaudited) 7,729,168 $ 7,729 $ 3,842,333 $(3,680,834)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
27.
<PAGE> 30
EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the
Six Months For the Years Ended
Ended December 31,
June 30, -----------------------------
1999 1998 1997
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (543,446) $(1,740,476) $ (613,982)
Adjustments to reconcile net loss to net
cash (used by) operating activities:
Depreciation and amortization 14,094 24,485 9,727
Loss on disposal of assets -- 3,014 --
Bad debts -- 966 --
Common stock issued for services 50,000 1,113,933 (3,500)
Changes in assets and liabilities:
(Increase) decrease in deposits -- (719) --
(Increase) decrease in inventory (38,604) 41,536 (105,232)
(Increase) decrease in prepaid expenses 5,788 (5,788) --
(Increase) decrease in accounts receivable
and accounts receivable related 5,012 10,640 (24,768)
Increase (decrease) in cash overdraft -- (193) 193
Increase (decrease) in accrued expenses (2,264) 24,192 8,183
Increase (decrease) in accounts payable
and accounts payable-related party (18,019) (56,945) 123,396
----------- ----------- -----------
Net Cash (Used by) Operating Activities (527,439) (585,355) (605,983)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment (7,225) -- (49,230)
Patent costs (800) (17,426) --
----------- ----------- -----------
Net Cash (Used by) Investing Activities (8,025) (17,426) (49,230)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issuance costs -- -- (1,000)
Proceeds from issuance of stock 601,061 658,642 274,550
Proceeds from convertible debt debentures -- -- 38,990
Payments on convertible debt debentures -- -- (8,650)
Additional capital contributed -- -- 294,875
Stock subscription received -- -- 32,455
Proceeds from note payable -- 13,702 --
Payment on leases payable (4,721) (8,379) (10,076)
Payment on note payable (11,698) -- --
----------- ----------- -----------
Net Cash Provided by Financing Activities $ 584,642 $ 663,965 $ 621,144
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
28.
<PAGE> 31
EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
For the
Six Months For the Years Ended
Ended December 31,
June 30, ----------------------------
1999 1998 1997
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 49,178 $ 61,184 $ (34,069)
CASH AT BEGINNING OF PERIOD 61,184 -- 34,069
----------- ----------- -----------
CASH AT END OF PERIOD $ 110,362 $ 61,184 $ --
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest $ 935 $ 2,468 $ 4,020
Income taxes $ -- $ -- $ --
NON CASH FINANCING ACTIVITIES:
Common stock issued for services $ 50,000 $ 1,113,933 $ (3,500)
Common stock issued in lieu of convertible
debt debentures and accrued interest $ -- $ 103,251 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
29.
<PAGE> 32
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
June 30, 1999 and December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
Emergency Filtration Products, Inc. (the Company) was incorporated in
the State of Nevada on November 1, 1991 as Lead Creek Unlimited. In
March 1996, pursuant to a Plan of Reorganization, the Company changed
its name to Emergency Filtration Products, Inc.
Between November 1, 1991 and February 9, 1996, the Company had no
line of business. As of the latter date, the Company entered into an
agreement to acquire title to a technology in the emergency
respiration equipment field. The Company is currently engaged in the
development, production and sale of this equipment.
b. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year end.
c. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
d. Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful
accounts of $966 at December 31, 1998.
e. Provision for Taxes
At December 31, 1998, the Company had net operating loss
carryforwards of approximately $3,100,000 that may be offset against
future taxable income through 2013. No tax benefit has been reported
in the financial statements, because the potential tax benefits of
the loss carryforwards are offset by a valuation allowance of the
same amount.
f. Property and Equipment
Property and equipment are stated at cost. Expenditures for small
tools, ordinary maintenance and repairs are charged to operations as
incurred. Major additions and improvements are capitalized.
Depreciation is computed using the straight-line and accelerated
methods over estimated useful lives as follows:
Molds 7 years
Furniture and office equipment 5 to 7 years
Depreciation expense for the six months ended June 30, 1999 was
$13,238. Depreciation expense for the years ended December 31, 1998
and 1997 was $22,825 and $9,229, respectively.
30.
<PAGE> 33
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
June 30, 1999 and December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Inventory
Inventory is stated at the lower of cost (computed on a first-in,
first-out basis) or market. The inventory consists of raw materials
used in the assembly and production of the emergency respiration
equipment.
h. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
i. Basic Loss Per Share
The computations of basic loss per share of common stock are based on
the weighted average number of common shares outstanding during the
period of the financial statements. Common stock equivalents,
consisting of stock options, have not been included in the
calculation as their effect is antidilutive for the periods
presented.
j. Advertising
The Company follows the policy of charging the costs of advertising
to expense as incurred.
k. Year 2000 Issue
The Company is conducting a comprehensive review of its computer
systems to identify the systems that could be affected by the Year
2000 Issue, and is developing an implementation plan to resolve the
issue.
The issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems
that do not properly recognize such information could generate
erroneous data or cause a system to fail.
Because the Company has not completed its review of the computer
systems, management is unable to estimate the cost of making the
systems year 2000 compliant.
l. Unaudited Financial Statements
The accompanying unaudited financial statements include all of the
adjustments which, in the opinion of management, are necessary for a
fair presentation. Such adjustments are of a normal, recurring
nature.
31.
<PAGE> 34
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
June 30, 1999 and December 31, 1998
NOTE 2 - PATENT
The Company entered into an agreement to acquire the rights to
certain intellectual property, which property includes title to the
patent on a component of an emergency CPR assistance device, called a
dual filtered rotary isolation valve. Rights pertaining thereto
include the right to maintain, sell and improve the device, and to
license those rights. The Company has agreed to pay a 5% royalty on
any sales related to the patented intellectual property. Additional
costs related to the patent were capitalized during the year ended
December 31, 1998 which consist of legal and filing fees incurred to
maintain the patent throughout the world. Amortization is computed
over an estimated life of 15 years. Impairment of the patent will be
analyzed annually. The patent was published by the U.S. Patent Office
on November 15, 1996, the U.S. Patent number is 5,575,279.
Amortization expense for the six months ended June 30, 1999 was $856.
Amortization expense for the years ended December 31, 1998 and 1997
was $1,660 and $498, respectively.
NOTE 3 - RELATED PARTY TRANSACTIONS
At June 30, 1999 and December 31, 1998, $135,000 has been recorded by
the Company which represents an amount claimed to be owed to a
shareholder and former officer of the Company for unpaid wages and
reimbursements. The shareholder also claims that he has legal rights
to certain trademarks of the Company until he is paid in full. The
Company believes that the claim is unsubstantiated but is currently
trying to negotiate a settlement amount with the shareholder.
Management believes that in the unlikely case of an unfavorable
outcome, the potential loss will not exceed the $135,000 recorded.
Management is uncertain as to the outcome as of the date of this
audit report.
The Company has also made periodic advances to certain officers and
shareholders of the Company. $7,605 and $10,000 was due from these
officers and shareholders as of June 30, 1999 and December 31, 1998,
respectively. The amount is non-interest bearing, unsecured and due
on demand.
NOTE 4 - LEASES PAYABLE
The Company leases certain equipment with lease terms through
October, 1999. Obligations under these capital leases have been
recorded in the accompanying financial statements at the present
value of future minimum lease payments. The capitalized cost of
$26,545 less accumulated depreciation of $12,943 is included in
property and equipment in the accompanying financial statements.
32.
<PAGE> 35
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
June 30, 1999 and December 31, 1998
NOTE 4 - LEASES PAYABLE (Continued)
Obligations under these capital leases consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
Total $ 3,370 $ 8,091
Less: current portion (3,370) (8,091)
-------- --------
Long-term portion $ -- $ --
======== ========
</TABLE>
The future minimum lease payments under these capital leases and the
net present value of the future minimum lease payments are as
follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ ----------
<S> <C>
1999 $ 8,720
2000 --
2001 --
2002 --
2003 and thereafter --
-------
Total future minimum lease payments 8,720
Less: amount representing interest (629)
Present value of future minimum lease
payments $ 8,091
=======
</TABLE>
NOTE 5 - NOTE PAYABLE
A note was signed by the Company to an insurance company for product
liability insurance for a one year period from October 1998 to
October 1999. The remaining amount due at June 30, 1999 and December
31, 1998 was $2,004 and $13,702, respectively.
33.
<PAGE> 36
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
June 30, 1999 and December 31, 1998
NOTE 6 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. The Company has incurred
significant losses which have resulted in an accumulated deficit of
$3,137,388 at December 31, 1998 which raises substantial doubt about
the Company's ability to continue as a going concern. The
accompanying financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might
result from the outcome of this uncertainty. It is the intent of
management to create additional revenues through the development and
sales of its emergency respiration equipment and to rely upon
additional equity financing if required to sustain operations until
revenues are adequate to cover the costs.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company is leasing office space in Las Vegas, Nevada for three
years beginning October 15, 1998. The monthly rental payment is
currently $3,810.
Minimum future lease payments on the lease as of December 31, 1998
are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ ----------
<S> <C>
1999 $ 46,548
2000 48,535
2001 28,989
2002 --
2003 and thereafter --
--------
Total $124,072
========
</TABLE>
NOTE 8 - STOCK OPTIONS
During 1998, the Company granted stock options to various individuals
for a total of 3,120,000 restricted common shares of the Company at
exercise prices ranging from $0.60 to $1.40 per share. During the six
months ended June 30, 1999, additional stock options were granted for
a total of 785,000 restricted common shares of the Company at
exercise prices ranging from $1.00 to $5.00 per share. The total
amount of outstanding stock options at June 30, 1999 is summarized as
follows:
34.
<PAGE> 37
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
June 30, 1999 and December 31, 1998
NOTE 8 - STOCK OPTIONS (Continued)
<TABLE>
<CAPTION>
Shares Exercise Price Exercised By
---------- -------------- ----------------
<S> <C> <C>
300,000 $0.60 December 2000
2,620,000 $0.75 January 2001
100,000 $0.60 December 2001
100,000 $1.40 December 2001
100,000 $1.00 March 2002
150,000 $1.00 February 2002
50,000 $2.50 February 2002
50,000 $4.00 February 2002
150,000 $1.00 January 2002
100,000 $2.50 January 2002
75,000 $4.00 January 2002
75,000 $5.00 January 2002
35,000 $1.00 March 2003
</TABLE>
35.
<PAGE> 38
PART III
Item 1. Exhibit Index
<TABLE>
<CAPTION>
Sequential
No. Page No.
- --------------------------------------------------------------------------------
<S> <C> <C>
(3) Articles of Incorporation and Bylaws
3.1 Articles of Incorporation
3.2 Bylaws
(4) Instruments Defining the Rights of Holders
(23) Consents - Experts
23.1 Consent of Jones, Jensen & Co.
(27) Financial Data Schedule
27.1 Financial Data Schedule
</TABLE>
36.
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
EMERGENCY FILTRATION PRODUCTS, INC.
(Registrant)
Date: September 17, 1999
By: /s/ Michael Crnkovich
----------------------------------
Michael Crnkovich
President
37.
<PAGE> 1
EXHIBIT 3.1
- -------------------------
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
NOV. 01, 1991 ARTICLES OF INCORPORATION
FOR
9796-91 LEAD CREEK UNLIMITED
CHERYL A. LAW SECRETARY OF STATE
/s/ Cheryl A. Law
---------------------
ADDRESS OF PRINCIPAL AGENT: MICHAEL J. CRNKOVICH
310 E. MINOR
WINNEMUCCA, NV. 89445
NATURE OF BUSINESS - REAL ESTATE DEVELOPMENT
2500 SHARES OF STOCK WITH NO PAR VALUE
DIRECTORS:
1) MICHAEL J. CRNKOVICH 310 E. MINOR WINNEMUCCA, NV. 89445
2) DOUGLAS K. BEPLATE 10306 ASHLEY PARK DR. SANDY, UT. 84092
3) GIL WESTON MEIER 320 E. VINE ST. SALT LAKE CITY, UT. 84107
INCORPORATORS:
1) MICHAEL J. CRNKOVICH 310 E. MINOR WINNEMUCCA, NV. 89445
2) DOUGLAS K. BEPLATE 10306 ASHLEY PARK DR., SANDY, UT. 84092
THIS CORPORATION IS TO HAVE PERPETUAL EXISTENCE
WE WOULD LIKE ONE CERTIFIED COPY
INCORPORATOR SIGNING THE ARTICLES OF INCORPORATION
/s/ Michael J. Crnkovich /s/ Douglas K. Beplate
--------------------- ------------------------------
MICHAEL J. CRNKOVICH DOUGLAS K. BEPLATE
310 E. MINOR 10306 ASHLEY PARK DRIVE
WINNEMUCCA, NV. 89445 SANDY, UT. 84092
Signature of Douglas K. Beplate
Notarized 10-21-1991
Notary Public: Vanice J. Rice Ex-1-94
-----------------------------
Salt Lake County Utah
NOTARY PUBLIC
VANICE J. RICE
West One Bank
8940 South Highland Drive
Salt Lake City, Utah 84121
My Commission Expires January 11, 1994
STATE OF UTAH
<PAGE> 2
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(Before Payment of Capital or Issuance of Stock) Filed by:
MICHAEL J. CRNKOVICH and DOUGLAS K. BEPLATE
- ------------------------------------- -------------------------------------
name of incorporator or director name of incorporator or director
certify that:
1. They constitute at least two-thirds of the original incorporators
or of the directors of LEAD CREEK UNLIMITED, a Nevada corporation.
2. The original Articles were filed in the Office of the Secretary of
State on November 1, 1991.
3. As of the date of this certificate, no stock of the corporation has
been issued.
4. They hereby adopt the following amendments to the articles of
incorporation of this corporation:
Article 1 is amended to read as follows:
EMERGENCY FILTRATION PRODUCTS, INC.
MICHAEL J. CRNKOVICH
-------------------------------------
Signature
DOUGLAS K. BEPLATE
-------------------------------------
Signature
State of Nevada ) -------------------------------------
) ss. GRACE KLUTSCHKOWSKI
County of Humboldt ) [SEAL] NOTARY PUBLIC
HUMBOLDT Co. NEVADA
My Appointment Expires
OCT. 17, 1998
-------------------------------------
On , personally appeared before me, a Notary Public,
-------------------------
MICHAEL J. CRNKOVICH, who acknowledged that they executed the above instrument.
/s/ GRACE KLUTSCHKOWSKI
-------------------------------------
Signature of Notary
(NOTARY STAMP OF SEAL) SEE ATTACHED NOTARY
<PAGE> 3
CERTIFICATE OF EMERGENCY FILTRATION PRODUCTS, INC.
A NEVADA CORPORATION,
PURSUANT TO SECTION 207(4) OF THE
NEVADA REVISED STATUTES
FIRST: The name of the corporation is Emergency Filtration Products, Inc.
(the "Company").
SECOND: On July 11, 1996, the Board of Directors of the Company unanimously
consented to (i) an increase in the Company's authorized capital from 2,500
shares of common voting stock to 50,000,000 shares of common voting stock, with
a corresponding increase in the number of issued and outstanding shares of
common stock held by each stockholder of record at the effective date of the
change in authorized capital; (ii) an increase in the par value of the Company's
common voting stock from no par to one mill ($0.001) per share, with appropriate
adjustments in the additional paid in capital and stated capital accounts of the
Company; and (iii) a reverse split of the Company's common stock in the ratio of
one new share for every 13.0091 shares issued and outstanding as of the date of
filing of this Certificate, with fractional shares being rounded up to the next
highest number of shares.
THIRD: The number of authorized shares and the par value of the Company's
common stock immediately before the above-referenced resolutions were 2,500
shares and no par, respectively.
FOURTH: The number of authorized shares and the par value of the Company's
common stock immediately after the above-referenced resolutions were 50,000,000
shares and one mill ($0.001), respectively.
FIFTH: The number of shares of the Company's common stock to be issued
after the reverse split in exchange for each pre-split share of common stock is
1/13.0091 for one share.
SIXTH: No fractional shares will be issued as a result of the reverse
split. There is no provision for the payment of money or the issuance of scrip
to stockholders otherwise entitled to a fraction of a share as a result of the
reverse split.
SEVENTH: The approval of the affected stockholders is not required and has
not been sought.
EIGHTH: The reverse split will be effective as of the date of filing of
this Certificate with the Secretary of State of Nevada.
<PAGE> 4
CERTIFICATE OF EMERGENCY FILTRATION PRODUCTS, INC.
A NEVADA CORPORATION,
PURSUANT TO SECTION 207(4) OF THE
NEVADA REVISED STATUTES
FIRST: The name of the corporation is Emergency Filtration Products, Inc.
(the "Company").
SECOND: On July ___, 1996, the Board of Directors of the Company
unanimously consented to (i) an increase in the Company's authorized capital
from 2,500 shares of common voting stock to 50,000,000 shares of common voting
stock, with a corresponding increase in the number of issued and outstanding
shares of common stock held by each stockholder of record at the effective date
of the change in authorized capital; (ii) an increase in the par value of the
Company's common voting stock from no par value to one mill ($0.001) per
share, with appropriate adjustments in the additional paid in capital and
stated capital accounts of the Company; and (iii) a reverse split of the
Company's common stock in the ratio of one new share for every 13.0091 shares
issued and outstanding as of the date of filing of this Certificate, with
fractional shares being rounded up to the next highest number of shares.
THIRD: The number of authorized shares and the par value of the Company's
common stock immediately before the above-referenced resolutions were 2,500
shares and no par, respectively.
FOURTH: The number of authorized shares and the par value of the
Company's common stock immediately after the above-referenced resolutions were
50,000,000 shares and one mill ($0.001), respectively.
FIFTH: The number of shares of the Company's common stock to be issued
after the reverse split in exchange for each pre-split share of common stock is
1/13.0091 of one share.
SIXTH: No fractional shares will be issued as a result of the reverse
split. There is no provision for the payment of money or the issuance of scrip
to stockholders otherwise entitled to a fraction of a share as a result of the
reverse split.
SEVENTH: The approval of the affected stockholders is not required and
has not been sought.
EIGHTH: The reverse split will be effective as of the date of filing of
this Certificate with the Secretary of State of the State of Nevada.
/s/ BRUCE E. BATCHELOR
---------------------------------
Bruce E. Batchelor, M.A., Ph.D.
Subscribed and sworn to before me this 11th day of July, 1996.
/s/ LISA R. HUGHES
---------------------------------
NOTARY PUBLIC
Commission Expires 6-9-00
2
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
EMERGENCY FILTRATION PRODUCTS, INC.
ARTICLE I
OFFICES
Section 1.01 Location of Offices. The corporation may maintain such
offices within or without the state of incorporation as the Board of Directors
may from time to time designate or require.
Section 1.02 Principal Office. The address of the principal office of the
corporation shall be at the address of the registered office of the corporation
as so designated in the office of the Lieutenant Governor/Secretary of State of
the state of incorporation, or at such other address as the Board of Directors
shall from time to time determine.
ARTICLE II
SHAREHOLDERS
Section 2.01 Annual Meeting. The annual meeting of the shareholders shall
be held in April of each year or at such other time designated by the Board of
Directors and as is provided for in the notice of the meeting, for the purpose
of electing directors and for the transaction of such other business as may come
before the meeting. If the election of directors shall not be held on the day
designated for the annual meeting of the shareholders, or at any adjournment
thereof, the Board of Directors shall cause the election to be held at a special
meeting of the shareholders as soon thereafter as may be convenient.
Section 2.02 Special Meetings. Special meetings of the shareholders may be
called at any time by the chairman of the board, the president, or by the Board
of Directors, or in their absence or disability, by any vice president, and
shall be called by the president or, in his or her absence or disability, by a
vice president or by the secretary on the written request of the holders of not
less than one-tenth of all the shares entitled to vote at the meeting, such
written request to state the purpose or purposes of the meeting and to be
delivered to the president, each vice-president, or secretary. In case of
failure to call such meeting within 60 days after such request, such
shareholder or shareholders may call the same.
Section 2.03 Place of Meetings. The Board of Directors may designate any
place, either within or without the state of incorporation, as the place of
meeting for any annual meeting or for any special meeting called by the Board
of Directors. A waiver of notice signed by all shareholders entitled to vote at
a meeting may designate any place, either within or without the state of
incorporation, as the place for the holding of such meeting. If no
1
<PAGE> 2
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be at the principal office of the corporation.
Section 2.04 Notice of Meetings. The secretary or assistant secretary, if
any, shall cause notice of the time, place, and purpose or purposes of all
meetings of the shareholders (whether annual or special), to be mailed at least
ten days, but not more than 50 days, prior to the meeting, to each shareholder
of record entitled to vote.
Section 2.05 Waiver of Notice. Any shareholder may waive notice of any
meeting of shareholders (however called or noticed, whether or not called or
noticed and whether before, during, or after the meeting), by signing a written
waiver of notice or a consent to the holding of such meeting, or an approval of
the minutes thereof. Attendance at a meeting, in person or by proxy, shall
constitute waiver of all defects of call or notice regardless of whether
waiver, consent, or approval is signed or any objections are made. All such
waivers, consents, or approvals shall be made a part of the minutes of the
meeting.
Section 2.06 Fixing Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any annual meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the corporation may provide
that the share transfer books shall be closed, for the purpose of determining
shareholders entitled to notice of or to vote at such meeting, but not for a
period exceeding fifty (50) days. If the share transfer books are closed for
the purpose of determining shareholders entitled to notice of or to vote at
such meeting, such books shall be closed for at least ten (10) days immediately
preceding such meeting.
In lieu of closing the share transfer books, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than fifty (50) and, in case
of a meeting of shareholders, not less than ten (10) days prior to the date on
which the particular action requiring such determination of shareholders is to
be taken. If the share transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or to vote at a
meeting or to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this Section, such determination shall apply to any adjournment thereof. Failure
to comply with this Section shall not affect the validity of any action taken at
a meeting of shareholders.
Section 2.07 Voting Lists. The officer or agent of the corporation having
charge of the share transfer books for shares of the corporation shall make, at
least ten (10) days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with address of, and
2
<PAGE> 3
the number of shares held by each, which list, for a period of ten (10) days
prior to such meeting, shall be kept on file at the registered office of the
corporation and shall be subject to inspection by any shareholder during the
whole time of the meeting. The original share transfer book shall be prima
facia evidence as to the shareholders who are entitled to examine such list or
transfer books, or to vote at any meeting of shareholders.
Section 2.08 Quorum. One-half of the total voting power of the
outstanding shares of the corporation entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of the shareholders. If a
quorum is present, the affirmative vote of the majority of the voting power
represented by shares at the meeting and entitled to vote on the subject shall
constitute action by the shareholders, unless the vote of a greater number or
voting by classes is required by the laws of the state of incorporation of the
corporation or the Articles of Incorporation. If less than one-half of the
outstanding voting power is represented at a meeting, a majority of the voting
power is represented by shares so present may adjourn the meeting from time to
time without further notice. At such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed.
Section 2.09 Voting of Shares. Each outstanding share of the corporation
entitled to vote shall be entitled to one vote on each matter submitted to vote
at a meeting of shareholders, except to the extent that the voting rights of
the shares of any class or series of stock are determined and specified as
greater or lesser than one vote per share in the manner provided by the
Articles of Incorporation.
Section 2.10 Proxies. At each meeting of the shareholders, each
shareholder entitled to vote shall be entitled to vote in person or by proxy;
provided, however, that the right to vote by proxy shall exist only in case
the instrument authorizing such proxy to act shall have been executed in
writing by the registered holder or holders of such shares, as the case may be,
as shown on the share transfer of the corporation or by his or her or her
attorney thereunto duly authorized in writing. Such instrument authorizing a
proxy to act shall be delivered at the beginning of such meeting to the
secretary of the corporation or to such other officer or person who may, in the
absence of the secretary, be acting as secretary of the meeting. In the event
that any such instrument shall designate two or more persons to act as proxies,
a majority of such persons present at the meeting, or if only one be present,
that one shall (unless the instrument shall otherwise provide) have all of the
powers conferred by the instrument on all persons so designated. Persons
holding stock in a fiduciary capacity shall be entitled to vote the shares so
held and the persons whose shares are pledged shall be entitled to vote, unless
in the transfer by the pledge or on the books of the corporation he or she
shall have expressly empowered the pledgee to vote thereon, in which case the
pledgee, or his or her proxy, may represent such shares and vote thereon.
Section 2.11 Written Consent to Action by Shareholders. Any action
required to be taken at a meeting of the shareholders, or any other action
which may be taken at a meeting of the shareholders, may be taken without a
meeting, if a consent in writing, setting forth the
3
<PAGE> 4
notion so taken, shall be signed by all of the shareholders entitled to vote
with respect to the subject matter thereof.
ARTICLE III
DIRECTORS
Section 3.01 General Powers. The property, affairs, and business of the
corporation shall be managed by its Board of Directors. The Board of Directors
may exercise all the powers of the corporation whether derived from law or the
Articles of Incorporation, except such powers as are by statute, by the
Articles of Incorporation or by these Bylaws, vested solely in the shareholders
of the corporation.
Section 3.02 Number, Term, and Qualifications. The Board of Directors
shall consist of one to nine person. Increases to said number may be made,
within the numbers authorized by the Articles of Incorporation, as the Board of
Directors shall from time to time determine by amendment to these Bylaws. An
increase in the number of the members of the Board of Directors may also be had
upon amendment to these Bylaws by a majority vote of all of the shareholders,
and the number of directors to be so increased or decreased shall be fixed upon
a majority vote of all of the shareholders of the corporation. Each director
shall hold office until the next annual meeting of shareholders of the
corporation and until his or her successor shall have been elected and shall
have qualified. Directors need not be residents of the state of incorporation
or shareholders of the corporation.
Section 3.03 Classification of Directors. In lieu of electing the
entire number of directors annually, the Board of Directors may provide that
the directors be divided into either two or three classes, each class to be as
nearly equal in number as possible, the term of office of the directors of the
first class to expire at the first annual meeting of shareholders after their
election, that of the second class to expire at the second annual meeting after
their election, and that of the third class, if any, to expire at the third
annual meeting after their election. At each annual meeting after such
classification, the number of directors equal to the number of the class whose
term expires at the time of such meeting shall be elected to hold office until
the second succeeding annual meeting, if there be two classes, or until the
third succeeding annual meeting, if there be three classes.
Section 3.04 Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately
following, and at the same place as, the annual meeting of shareholders. The
Board of Directors may provide by resolution the time and place, either within
or without the state of incorporation, for the holding of additional regular
meeting without other notice than such resolution.
Section 3.05 Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the president, vice president,
or any two directors. The person or persons authorized to call special meetings
of the Board of Directors may fix any place,
4
<PAGE> 5
either within or without the state of incorporation, as the place for holding
any special meeting of the Board of Directors called by them.
Section 3.06 Meetings by Telephone Conference Call. Members of the Board
of Directors may participate in a meeting of the Board of Directors or a
committee of the Board of Directors by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
Section 3.07 Notice. Notice of any special meeting shall be given at least
ten (10) days prior thereto by written notice delivered personally or mailed to
each director at his or her regular business address or residence, or by
telegram. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail so addressed, with postage thereon prepaid. If notice
be given by telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Any director may waive notice
of any meeting. Attendance of a director at a meeting shall constitute a waiver
of notice of such meeting, except where a director attends a meeting solely for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 3.08 Quorum. A majority of the number of directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but if less than a majority is present at a meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
Section 3.09 Manner of Acting. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, and the individual directors shall have not power as such.
Section 3.10 Vacancies and Newly Created Directorship. If any vacancies
shall occur in the Board of Directors by reason of death, resignation or
otherwise, or if the number of directors shall be increased, the directors then
in office shall continue to act and such vacancies or newly created
directorships shall be filled by a vote of the directors then in office, though
less than a quorum, in any way approved by the meeting. Any directorship to be
filled by reason of removal of one or more directors by the shareholders may be
filled by election by the shareholders at the meeting at which the director or
directors are removed.
Section 3.11 Compensation. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 3.12 Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be
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presumed to have assented to the action taken unless his or her or her dissent
shall be entered in the minutes of the meeting, unless he or she shall file his
or her or her written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof, or shall forward such
dissent by registered or certified mail to the secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in factor of such action.
Section 3.13 Resignations. A director may resign at any time by
delivering a written resignation to either the president, a vice president, the
secretary, or assistant secretary, if any. The resignation shall become
effective on its acceptance by the Board of Directors; provided, that if the
board has not acted thereon within ten days from the date presented, the
resignation shall be deemed accepted.
Section 3.14 Written Consent to Action by Directors. Any action required
to be taken at a meeting of the directors of the corporation or any other
action which may be taken at a meeting of directors or of a committee, may be
taken without a meeting, if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors, or all of the members of the
committee, as the case may be. Such consent shall have the same legal effect as
a unanimous vote of all the directors or members of the committee.
Section 3.15 Removal. At a meeting expressly called for that purpose, one
or more directors may be removed by a vote of a majority of the shares of
outstanding stock of the corporation entitled to vote at an election of
directors.
ARTICLE IV
OFFICERS
Section 4.01 Number. The officers of the corporation shall be a
president, one or more vice-presidents, as shall be determined by resolution of
the Board of Directors, a secretary, a treasurer, and such other officers as
may be appointed by the Board of Directors. The Board of Directors may elect,
but shall not be required to elect, a chairman of the board and the Board of
Directors may appoint a general manager.
Section 4.02 Election, Term of Office, and Qualifications. The officers
shall be chosen by the Board of Directors annually at its annual meeting. In
the event of failure to choose officers at an annual meeting of the Board of
Directors, officers may be chosen at any regular or special meeting of the
Board of Directors. Each such officer (whether chosen at an annual meeting of
the Board of Directors to fill a vacancy or otherwise) shall hold his or her
office until the next ensuing annual meeting of the Board of Directors and
until his or her successor shall have been chosen and qualified, or until his
or her death, or until his or her resignation or removal in the manner provided
in these Bylaws. Any one person may hold any two or more of such offices,
except that the president shall not also be the secretary. No person holding
two or more offices shall act in or execute any instrument in the capacity of
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more than one office. The chairman of the board, if any, shall be and remain a
director of the corporation during the term of his or her office. No other
officer need be a director.
Section 4.03 Subordinate Officers, Etc. The Board of Directors from time
to time may appoint such other officers or agents as it may deem advisable, each
of whom shall have such title, hold office for such period, have such authority,
and perform such duties as the Board of Directors from time to time may
determine. The Board of Directors from time to time may delegate to any officer
or agent the power to appoint any such subordinate officer or agents and to
prescribe their respective titles, terms of office, authorities, and duties.
Subordinate officers need not be shareholders or directors.
Section 4.04 Resignations. Any officer may resign at any time by
delivering a written resignation to the Board of Directors, the president, or
the secretary. Unless otherwise specified therein, such resignation shall take
effect on delivery.
Section 4.05 Removal. Any officer may be removed from office at any
special meeting of the Board of Directors called for that purpose or at a
regular meeting, by vote of a majority of the directors, with or without cause.
Any officer or agent appointed in accordance with the provisions of Section
4.03 hereof may also be removed, either with or without cause, by any officer
on whom such power of removal shall have been conferred by the Board of
Directors.
Section 4.06 Vacancies and Newly Created Offices. If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification,
or any other cause, or if a new office shall be created, then such vacancies
or new created offices may be filled by the Board of Directors at any regular
or special meeting.
Section 4.07 The Chairman of the Board. The Chairman of the Board, if
there be such an officer, shall have the following powers and duties.
(a) He or she shall preside at all shareholders' meetings;
(b) He or she shall preside at all meetings of the Board of Directors;
and
(c) He or she shall be a member of the executive committee, if any.
Section 4.08 The President. The president shall have the following
powers and duties:
(a) If no general manager has been appointed, he or she shall be the
chief executive officer of the corporation, and, subject to the direction of
the Board of Directors, shall have general charge of the business, affairs, and
property of the corporation and general supervision over its officers,
employees, and agents;
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(b) If no chairman of the board has been chosen, or if such officer is
absent of disabled, he or she shall preside at meetings of the shareholders and
Board of Directors;
(c) He or she shall be a member of the executive committee, if any;
(d) He or she shall be empowered to sign certificates representing shares
of the corporation, the issuance of which shall have been authorized by the
Board of Directors; and
(e) He or she shall have all power and shall perform all duties normally
incident to the office of a president of a corporation, and shall exercise such
other powers and perform such other duties as from time to time may be assigned
to him or her by the Board of Directors.
Section 4.09 The Vice Presidents. The Board of Directors may, from time to
time, designate and elect one or more vice presidents, one of whom may be
designated to serve as executive vice president. Each vice president shall have
such powers and perform such duties as from time to time may be assigned to him
or her by the Board of Directors or the president. At the request or in the
absence or disability of the president, the executive vice president or, in the
absence or disability of the executive vice president, the vice president
designated by the Board of Directors or (in the absence of such designation by
the Board of Directors) by the president, the senior vice president, may
perform all the duties of the president, and when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the president.
Section 4.10 The Secretary. The secretary shall have the following powers
and duties:
(a) He or she shall keep or cause to be kept a record of all of the
proceedings of the meetings of the shareholders and of the board of directors
in books provided for the purpose;
(b) He or she shall cause all notices to be duly given in accordance with
the provisions of these Bylaws and as required by statute;
(c) He or she shall be the custodian of the records and of the seal of
the corporation, and shall cause such seal (or a facsimile thereof) to be
affixed to all certificates representing shares of the corporation prior to the
issuance thereof and to all instruments, the execution of which on behalf of
the corporation under its seal shall have been duly authorized in accordance
with these Bylaws, and when so affixed, he or she may attest the same;
(d) He or she shall assume that the books, reports, statements,
certificates, and other documents and records required by statute are properly
kept and filed;
(e) He or she shall have charge of the share books of the corporation and
cause the share transfer books to be kept in such manner as to show at any time
the amount of the
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shares of the corporation of each class issued and outstanding, the manner in
which and the time when such stock was paid for, the names alphabetically
arranged and the address of the holders of record thereof, the number of shares
held by each holder and time when each became such holder or record; and he or
she shall exhibit at all reasonable times to any director, upon application, the
original or duplicate share register. He or she shall cause the share book
referred to in Section 6.04 hereof to be kept and exhibited at the principal
office of the corporation, or at such other place as the Board of Directors
shall determine, in the manner and for the purposes provided in such Section;
(f) He or she shall be empowered to sign certificates representing shares
of the corporation, the issuance of which shall have been authorized by the
Board of Directors; and
(g) He or she shall perform in general all duties incident to the office
of secretary and such other duties as are given to him or her by these Bylaws or
as from time to time may be assigned to him or her by the Board of Directors or
the president.
Section 4.11 The Treasurer. The treasurer shall have the following powers
and duties:
(a) He or she shall have charge and supervision over and be responsible
for the monies, securities, receipts, and disbursements of the corporation;
(b) He or she shall cause the monies and other valuable effects of the
corporation to be deposited in the name and to the credit of the corporation in
such banks or trust companies or with such banks or other depositories as shall
be selected in accordance with Section 5.03 hereof;
(c) He or she shall cause the monies of the corporation to be disbursed
by checks or drafts (signed as provided in Section 5.04 hereof) drawn on the
authorized depositories of the corporation, and cause to be taken and preserved
property vouchers for all monies disbursed;
(d) He or she shall render to the Board of Directors or the president,
whenever requested, a statement of the financial condition of the corporation
and of all of this transactions as treasurer, and render a full financial report
at the annual meeting of the shareholders, if called upon to do so;
(e) He or she shall cause to be kept correct books of account of all the
business and transactions of the corporation and exhibit such books to any
director on request during business hours;
(f) He or she shall be empowered from time to time to require from all
officers or agents of the corporation or statements given such information as he
or she may desire with respect to any and all financial transactions of the
corporation; and
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(g) He or she shall perform in general all duties incident to the office
of treasurer and such other duties as are given to him or her by these Bylaws
or as from time to time may be assigned to him or her by the Board of Directors
or the president.
Section 4.12 General Manager. The Board of Directors may employ and
appoint a general manager who may, or may not, be one of the officers or
directors of the corporation. The general manger, if any shall have the
following powers and duties:
(a) He or she shall be the chief executive officer of the corporation
and, subject to the directions of the Board of Directors, shall have general
charge of the business affairs and property of the corporation and general
supervision over its officers, employees, and agents;
(b) He or she shall be charged with the exclusive management of the
business of the corporation and of all of its dealings, but at all times
subject to the control of the Board of Directors;
(c) Subject to the approval of the Board of Directors or the executive
committee, if any, he or she shall employ all employees of the corporation, or
delegate such employment to subordinate officers, and shall have authority to
discharge any person so employed; and
(d) He or she shall make a report to the president and directors as often
as required, setting forth the results of the operations under his or her
charge, together with suggestions looking toward improvement and betterment of
the condition of the corporation, and shall perform such other duties as the
Board of Directors may require.
Section 4.13 Salaries. The salaries and other compensation of the
officers of the corporation shall be fixed from time to time by the Board of
Directors, except that the Board of Directors may delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
Section 4.03 hereof. No officer shall be prevented from receiving any such
salary or compensation by reason of the fact that he or she is also a director
of the corporation.
Section 4.14 Surety Bonds. In case the Board of Directors shall so
require, any officer or agent of the corporation shall execute to the
corporation a bond in such sums and with such surety or sureties as the Board
of Directors may direct, conditioned upon the faithful performance of his or
her duties to the corporation, including responsibility for negligence and for
the accounting of all property, monies, or securities of the corporation which
may come into his or her hands.
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ARTICLE V
EXECUTION OF INSTRUMENTS, BORROWING OF MONEY,
AND DEPOSIT OF CORPORATE FUNDS
Section 5.01 Execution of Instruments. Subject to any limitation contained
in the Articles of Incorporation or these Bylaws, the president or any vice
president or the general manager, if any, may, in the name and on behalf of the
corporation, execute and deliver any contract or other instrument authorized in
writing by the Board of Directors. The Board of Directors may, subject to any
limitation contained in the Articles of Incorporation or in these Bylaws,
authorize in writing any officer or agent to execute and delivery any contract
or other instrument in the name and on behalf of the corporation, any such
authorization may be general or confined to specific instances.
Section 5.02 Loans. No loans or advances shall be contracted on behalf of
the corporation, no negotiable paper or other evidence of its obligation under
any loan or advance shall be issued in its name, and no property of the
corporation shall be mortgaged, pledged, hypothecated, transferred, or conveyed
as security for the payment of any loan, advance, indebtedness, or liability of
the corporation, unless and except as authorized by the Board of Directors. Any
such authorization may be general or confined to specific instances.
Section 5.03 Deposits. All monies of the corporation not otherwise
employed shall be deposited from time to time to its credit in such banks and
or trust companies or with such bankers or other depositories as the Board of
Directors may select, or as from time to time may be selected by any officer or
agent authorized to do so by the Board of Directors.
Section 5.04 Checks, Drafts, Etc. All notes, drafts, acceptances, checks,
endorsements, and, subject to the provisions of these Bylaws, evidences of
indebtedness of the corporation, shall be signed by such officer or officers or
such agent or agents of the corporation and in such manner as the Board of
Directors from time to time may determine. Endorsements for deposit to the
credit of the corporation in any of its duly authorized depositories shall be
in such manner as the Board of Directors from time to time may determine.
Section 5.05 Bonds and Debentures. Every bond or debenture issued by the
corporation shall be evidenced by an appropriate instrument which shall be
signed by the president or a vice president and by the secretary and sealed
with the seal of the corporation. The seal may be a facsimile, engraved or
printed. Where such bond or debenture is authenticated with the manual
signature of an authorized officer of the corporation or other trustee
designated by the indenture of trust or other agreement under which such
security is issued, the signature of any of the corporation's officers named
thereon may be a facsimile. In case any officer who signed, or whose facsimile
signature has been used on any such bond or debenture, should cease to be an
officer of the corporation for any reason before the same has been delivered by
the corporation, such bond or debenture may nevertheless be adopted
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by the corporation and issued and delivered as through the person who signed it
or whose facsimile signature has been used thereon had not ceased to be such
officer.
Section 5.06 Sale, Transfer, Etc. of Securities. Sales, transfers,
endorsements, and assignments of stocks, bonds, and other securities owned by or
standing in the name of the corporation, and the execution and delivery on
behalf of the corporation of any and all instruments in writing incident to any
such sale, transfer, endorsement, or assignment, shall be effected by the
president, or by any vice president, together with the secretary, or by any
officer or agent thereunto authorized by the Board of Directors.
Section 5.07 Proxies. Proxies to vote with respect to shares of other
corporations owned by or standing in the name of the corporation shall be
executed and delivered on behalf of the corporation by the president or any
vice president and the secretary or assistant secretary of the corporation, or
by any officer or agent thereunder authorized by the Board of Directors.
ARTICLE VI
CAPITAL SHARES
Section 6.01 Share Certificates. Every holder of shares in the
corporation shall be entitled to have a certificate, signed by the president or
any vice president and the secretary or assistant secretary, and sealed with
the seal (which may be a facsimile, engraved or printed) of the corporation,
certifying the number and kind, class or series of shares owned by him or her
in the corporation; provided, however, that where such a certificate is
countersigned by (a) a transfer agent or the assistant transfer agent, or (b)
registered by a registrar, the signature of any such president, vice president,
secretary, or assistant secretary may be a facsimile. In case any officer who
shall have signed, or whose facsimile signature or signatures shall have been
used on any such certificate, shall cease to be such officer of the
corporation, for any reason, before the delivery of such certificate by the
corporation, such certificate may nevertheless be adopted by the corporation
and be issued and delivered as though the person who signed it, or whose
facsimile signature or signatures shall have been used thereon, has not ceased
to be such officer. Certificates representing shares of the corporation shall
be in such form as provided by the statutes of the state of incorporation.
There shall be entered on the share books of the corporation at the time of
issuance of each share, the number of the certificate issued, the name and
address of the person owning the shares represented thereby, the number and
kind, class or series of such shares, and the date of issuance thereof. Every
certificate exchanged or returned to the corporation shall be marked "Canceled"
with the date of cancellation.
Section 6.02 Transfer of Shares. Transfers of shares of the corporation
shall be made on the books of the corporation by the holder of record thereof,
or by his or her attorney thereunto duly authorized by a power of attorney duly
executed in writing and filed with the secretary of the corporation or any of
its transfer agents, and on surrender of the certificate of certificates,
properly endorsed or accompanied by proper instruments of transfer,
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representing such shares. Except as provided by law, the corporation and
transfer agents and registrars, if any, shall be entitled to treat the holder
of record of any stock as the absolute owner thereof for all purposes, and
accordingly, shall not be bound to recognize any legal, equitable, or other
claim to or interest in such shares on the part of any other person whether or
not it or they shall have express or other notice thereof.
Section 6.03 Regulations. Subject to the provisions of this Article VI
and of the Articles of Incorporation, the Board of Directors may make such
rules and regulations as they may deem expedient concerning the issuance,
transfer, redemption, and registration of certificates for shares of the
corporation.
Section 6.04 Maintenance of Stock Ledger at Principal Place of Business.
A share book (or books where more than one kind, class, or series of stock is
outstanding) shall be kept at the principal place of business of the
corporation, or at such other place as the Board of Directors shall determine,
containing the names, alphabetically arranged, of original shareholders of the
corporation, their addresses, their interest, the amount paid on their shares,
and all transfers thereof and the number and class of shares held by each. Such
share books shall at all reasonable hours be subject to inspection by persons
entitled by law to inspect the same.
Section 6.05 Transfer Agents and Registrars. The Board of Directors may
appoint one or more transfer agents and one or more registrars with respect to
the certificates representing shares of the corporation, and may require all
such certificates to bear the signature of either or both. The Board of
Directors may from time to time define the respective duties of such transfer
agents and registrars. No certificate for shares shall be valid until
countersigned by a transfer agent, if at the date appearing thereon the
corporation had a transfer agent for such shares, and until registered by a
registrar, if at such date the corporation had a registrar for such shares.
Section 6.06 Closing of Transfer Books and Fixing of Record Date.
(a) The Board of Directors shall have power to close the share books of
the corporation for a period of not to exceed 50 days preceding the date of any
meeting of shareholders, or the date for payment of any dividend, or the date
for the allotment of rights, or capital shares go into effect, or a date in
connection with obtaining the consent of shareholders for any purpose.
(b) In lieu of closing the above transfer books as aforesaid, the Board
of Directors may fix in advance a date, not exceeding 50 days preceding the date
of any meeting of shareholders, or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital shares shall go into effect, or a date in connection with
obtaining any such consent, as a record date for the determination of the
shareholders entitled to a notice of, and to vote at, any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such
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allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, or to give such consent.
(c) If the share transfer books shall be closed or a record date set
for the purpose of determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books shall be closed for, or such record date
shall be, at least ten (10) days immediately preceding such meeting.
Section 6.07 Lost or Destroyed Certificates. The corporation may issue
a new certificate for shares of the corporation in place of any certificate
theretofore issued by it, alleged to have been lost or destroyed, and the Board
of Directors may, in its discretion, require the owner of the lost or destroyed
certificate or his or her legal representatives, to give the corporation a bond
in such form and amount as the Board of Directors may direct, and with such
surety or sureties as may be satisfactory to the board, to indemnify the
corporation and its transfer agents and registrars, if any, against any claims
that may be made against it or any such transfer agent or registrar on account
of the issuance of such new certificate. A new certificate may be issued
without requiring any bond when, in the judgment of the Board of Directors, it
is proper to do so.
Section 6.08 No Limitation on Voting Rights; Limitation on Dissenter's
Rights. To the extent permissible under the applicable law of any jurisdiction
to which the corporation may become subject by reason of the conduct of
business, the ownership of assets, the residence of shareholders, the location
of offices or facilities, or any other item, the corporation elects not to be
governed by the provisions of any statute that (i) limits, restricts, modifies,
suspends, terminates, or otherwise affects the rights of any shareholder to
cast one vote for each share of common stock registered in the name of such
shareholder on the books of the corporation without regard to whether such
shares were acquired directly from the corporation or from any other person and
without regard to whether such shareholder has the power to exercise or direct
the exercise of voting power over any specific fraction of the shares of common
stock of the corporation issued and outstanding or (ii) grants to any
shareholder the right to have his or her stock redeemed or purchased by the
corporation or any other shareholder on the acquisition by any person or group
of persons of shares of the corporation.
Section 6.09 Regulation S Shares. The corporation shall have the
authority to issue shares with Regulation S of the Securities and Exchange
Commission, which shares shall be subject to the resale restrictions of
Regulation S.
ARTICLE VII
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 7.01 How Constituted. The Board of Directors may designate an
executive committee and such other committees as the Board of Directors may
deem appropriate, each of which committees shall consist of two or more
directors. Members of the executive
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committee and of any such other committees shall be designated annually at the
annual meeting of the Board of Directors; provided, however, that at any time
the Board of Directors may abolish or reconstitute the executive committee or
any other committee. Each member of the executive committee and of any other
committee shall hold office until his or her successor shall have been
designated or until his or her resignation or removal in the manner provided in
these Bylaws.
Section 7.02 Powers. During the intervals between meetings of the Board
of Directors, the executive committee shall have and may exercise all powers of
the Board of Directors in the management of the business and affairs of the
corporation, except for the power to fill vacancies in the Board of Directors
or to amend these Bylaws, and except for such powers as by law may not be
delegated by the Board of Directors to an executive committee.
Section 7.03 Proceedings. The executive committee, and such other
committees as may be designated hereunder by the Board of Directors, may fix
its own presiding and recording officer or officers, and may meet at such place
or places, at such time or times and on such notice (or without notice) as it
shall determine from time to time. It will keep a record of its proceedings and
shall report such proceedings to the Board of Directors at the meeting of the
Board of Directors next following.
Section 7.04 Quorum and Manner of Acting. At all meeting of the executive
committee, and of such other committees as may be designated hereunder by the
Board of Directors, the presence of members constituting a majority of the
total authorized membership of the committee shall be necessary and sufficient
to constitute a quorum for the transaction of business, and the act of a
majority of the members present at any meeting at which a quorum is present
shall be the act of such committee. The members of the executive committee, and
of such other committees as may be designated hereunder by the Board of
Directors, shall act only as a committee and the individual members thereof
shall have no powers as such.
Section 7.05 Resignations. Any member of the executive committee, and of
such other committees as may be designated hereunder by the Board of Directors,
may resign at any time by delivering a written resignation to either the
president, the secretary, or assistant secretary, or to the presiding officer
of the committee of which he or she is a member, if any shall have been
appointed and shall be in office. Unless otherwise specified herein, such
resignation shall take effect on delivery.
Section 7.06 Removal. The Board of Directors may at any time remove any
member of the executive committee or of any other committee designated by it
hereunder either for or without cause.
Section 7.07 Vacancies. If any vacancies shall occur in the executive
committee or of any other committee designated by the Board of Directors
hereunder, by reason of
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disqualification, death, resignation, removal, or otherwise, the remaining
members shall, until the filing of such vacancy, constitute the then total
authorized membership of the committee and provided that two or more members are
remaining, continue to act. Such vacancy may be filled at any meeting of the
Board of Directors.
Section 7.08 Compensation. The Board of Directors may allow a fixed sum
and expenses of attendance to any member of the executive committee, or of any
other committee designated by it hereunder, who is not an active salaried
employee of the corporation for attendance at each meeting of said committee.
ARTICLE III
INDEMNIFICATION, INSURANCE, AND
OFFICER AND DIRECTOR CONTRACTS
Section 8.01 Indemnification: Third Party Actions. The corporation shall
have the power to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action, or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he or she is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees) judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with any such action, suit or proceeding,
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action or proceeding, he or she had reasonable
cause to believe that his or her conduct was unlawful.
Section 8.02 Indemnification: Corporate Actions. The corporation shall
have the power to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation, or it or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit, if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue, or matter as to which such a person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his or her duty to
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the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine on application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper.
Section 8.03 Determination. To the extent that a director, officer,
employee, or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in Sections
8.01 and 8.02 hereof, or in defense of any claim, issue, or matter therein, he
or she shall be indemnified against expenses (including attorney's fees)
actually and reasonably incurred by him or her in connection therewith. Any
other indemnification under Sections 8.01 and 8.02 hereof, shall be made by the
corporation upon a determination that indemnification of the officer, director,
employee, or agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Sections 8.01 and 8.02 hereof. Such
determination shall be made either (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit, or proceeding; or (ii) by independent legal counsel on a written opinion;
or (iii) by the shareholders by a majority vote of a quorum of shareholders at
any meeting duly called for such purpose.
Section 8.04 General Indemnification. The indemnification provided by this
Section shall not be deemed exclusive of any other indemnification granted
under any provision of any statute, in the corporation's Articles of
Incorporation, these Bylaws, agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee, or agent,
and shall inure to the benefit of the heirs and legal representatives of such a
person.
Section 8.05 Advances. Expenses incurred in defending a civil or criminal
action, suit, or proceeding as contemplated in this Section may be paid by the
corporation in advance of the final disposition of such action, suit, or
proceeding upon a majority vote of a quorum of the Board of Directors and upon
receipt of an undertaking by or on behalf of the director, officers, employee,
or agent to repay such amount or amounts unless if it si ultimately determined
that he or she is to indemnified by the corporations as authorized by this
Section.
Section 8.06 Scope of Indemnification. The indemnification authorized by
this Section shall apply to all present and future directors, officers,
employees, and agents of the corporation and shall continue as to such persons
who cease to be directors, officers, employees, or agents of the corporation,
and shall inure to the benefit of the heirs, executors, and administrators of
all such persons and shall be in addition to all other indemnification
permitted by law.
8.07 Insurance. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another
17
<PAGE> 18
corporation, partnership, joint venture, trust, or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, or arising out of his or her status, whether or not the corporation
would have the power to indemnify him or her against any such liability and
under the laws of the state of incorporation, as the same may hereafter be
amended or modified.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors.
ARTICLE X
DIVIDENDS
The Board of Directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and on the terms and
conditions provided by the Articles of Incorporation and these Bylaws.
ARTICLE XI
AMENDMENTS
All Bylaws of the corporation, whether adopted by the Board of Directors
or the shareholders, shall be subject to amendment, alteration, or repeal, and
new Bylaws may be made, except that:
(a) No Bylaws adopted or amended by the shareholders shall be altered or
repealed by the Board of Directors.
(b) No Bylaws shall be adopted by the Board of Directors which shall
require more than a majority of the voting shares for a quorum at a meeting of
shareholders, or more than a majority of the votes cast to constitute action by
the shareholders, except where higher percentages are required by law;
provided, however that (i) if any Bylaw regulating an impending election of
directors is adopted or amended or repealed by the Board of Directors, there
shall be set forth in the notice of the next meeting of shareholders for the
election of directors, the Bylaws so adopted or amended or repealed, together
with a concise statement of the changes made; and (ii) no amendment, alteration
or repeal of this Article XI shall be made except by the shareholders.
18
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Emergency Filtration Products, Inc.
Las Vegas, Nevada
We consent to the use in this Registration Statement of Emergency Filtration
Products, Inc. on Form 10-SB of our report dated March 22, 1999 of Emergency
Filtration Products, Inc. for the year ended December 31, 1998, which is part of
this Registration Statement, and to all references to our firm included in this
Registration Statement.
Jones, Jensen & Company
Salt Lake City, Utah
August 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 61,184
<SECURITIES> 0
<RECEIVABLES> 13,162
<ALLOWANCES> 0
<INVENTORY> 63,696
<CURRENT-ASSETS> 143,830
<PP&E> 133,909
<DEPRECIATION> (27,811)
<TOTAL-ASSETS> 276,804
<CURRENT-LIABILITIES> 215,191
<BONDS> 0
0
0
<COMMON> 7,078
<OTHER-SE> 54,535
<TOTAL-LIABILITY-AND-EQUITY> 276,804
<SALES> 140,507
<TOTAL-REVENUES> 140,507
<CGS> 125,734
<TOTAL-COSTS> 1,695,815
<OTHER-EXPENSES> 41,528
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,906
<INCOME-PRETAX> (1,740,476)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,740,476)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,740,476)
<EPS-BASIC> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
