<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------------------
AMENDMENT NO. 6 TO
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)
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 ......................................... 21
PART III
Item 1. Index to Exhibits ............................................ 36
Item 2. Description of Exhibits ...................................... 36
</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.
The Company and third parties have made certain incorrect statements
concerning the business and operations of the Company which may include
projections, forecasts and opinions. These incorrect statements and the correct
information is as follows:
On June 21, 1999 Global Penny Stocks, a stock advisory newsletter, issued a
Report on EFP. In the Report, it was stated that ClubMedic, Inc., a distributor
of EFP products, projected average sales volume of 480,000 units annually. The
actual agreement, entered into on June 1, 1999 calls for 400,000 units to be
sold annually in order for ClubMedic to become an exclusive U.S. distributor.
The ClubMedic agreement may be found as exhibit 10.1 of the Company's Form
10SB12G.
The same Report states, "...the American Lung Association has said it will
endorse the product..." In fact, the ALA has said it will endorse the Company's
technology only when applied to a lung/breathing related product, which has not
yet been developed. The ALA has not endorsed the Company's technology to date.
EFP expects this technology to apply to the lung/breathing market during the
first quarter of 2001.
In an interview with CNBC on June 3, 1999 the following five incorrect
statements were made regarding the Company's activities at that time. The
necessary corrections follow each statement.
1 - It was stated that "We are patented in 65 countries." The Company
decided, in August 1999, to maintain its patents through the European Patent
Organization rather than the Patent Co-operative Treaty. Accordingly, patent
protection has now been secured or is pending on the original VIV filter
technology in the following foreign countries: Australia, Canada, Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Monaco, Netherlands, Portugal, Spain, Sweden, Switzerland, United Kingdom, Aden
(Yemen), Anguilla, Antigua, Bahrain, Belize, Bermuda, Botswana, British Indian
Ocean Territory, British Virgin Islands, Brunei, Cayman Islands, Channel Island
of Jersey, Cyprus, Dominica, Falkland Islands, Fiji Islands, Gambia, Ghana,
Gibraltar, Grenada, Guyana, Kenya, Kiribati, Monserrat, Seychelles, Sierra
Leone, Solomon Islands, St. Vincent, St. Lucia, St. Kitts-Nevis, St. Helena,
Swaziland, Tanganyika, Tanzania, Trinidad, Tobago, Turks & Calcos, Tuvalu,
Uganda, Vanuatu, Western Samoa, Zanzibar and Liechtenstein. At the time the
comment in the CNBC interview was made, the Company was also protected in the
countries of Hong Kong, New Zealand and South Africa. Because it subsequently
chose to exercise patent protection under the European Patent Organization
instead of the Patent Cooperation Treaty it lost those three member countries.
Thus, at the time of comment we were protected in 66 countries and are now
protected in 62 countries
2 - It was stated that, "We are on top and really are the leader in the
industry, even though we're relatively new." The Company is not a sales leader
in the medical device industry.
3 - It was stated that, "We're working with associations such as the
American Heart Association. We've just been authorized to work within their
distribution system." There is no written agreement between EFP and the American
Heart Association. The AHA is under no obligation to EFP on any matter.
4 - It was stated that, "Dirks and Company . . . is taking us on as our
investment banker." At the time this statement was made, EFP and Dirks were
negotiating an investment banking arrangement which never materialized. EFP has
no relationship with Dirks and Company and negotiations terminated in July,
1999.
5 - It was stated that, " In the next six months, [investors] can see some
profits, but if they really want to hit a home run, be patient. It'll be there."
The Company has no profits to date and there is no assurance the Company will be
profitable.
The Company and third parties have made certain incorrect
statements concerning the business and operations of the Company which may
include projections, forecasts and opinions. The six incorrect statements and
the correct information is as follows:
On August 2, 1999, the Company issued a News Release which stated
Human Medical Options International's meeting of its "...first year sales
requirements of 320,000 units is a certain reality." This statement has proven
to be incorrect to date. To date only approximately 1,000 units have been sold.
In a News Release dated May 10, 1999, Mr. Charles Kirk, ClubMedic
co-founder was quoted as saying, "We expect this to be the first in a continuing
string of orders that will total approximately 20,000 units within 60 days. We
believe that our original estimates of a 40,000 unit per month average volume
after a two month mobilization period is quite attainable and likely." This
statement has proven to be incorrect to date. To date only approximately 3,500
units have been sold.
In a News Release dated August 19, 1998, it was stated that
Preferred Health Technologies, Inc., was "...arranging an equity investment of
$500,000 in EMFP." The investment was later made by individuals associated with
Preferred Health Technologies, rather than Preferred Health Technologies as a
company.
In a News Release dated April 20, 1999, Charles Kirk, co-founder
of ClubMedic makes the statement, "we conservatively estimate the combined
market for EFP's current and future filter applications to be well over $20
billion USD." This statement is made on Charles Kirk's own personal basis and no
independent evidence supports this statement.
On January 16, 1999 the Company announced an association with the
World CPR Foundation (WCPRF). There is no written agreement with the WCPRF and
they are under no obligation to EFP on any matter.
On July 6, 1998 the Company announced the signing of a
distribution agreement with ProMedix, Inc. Because of poor sales performance,
both parties agreed to terminate terms of the agreement in December of 1998.
Distribution
The Company sells its specialty filter products directly to
distributors and consumers. In addition, Bergen Brunswig has purchased and
stocked the RespAide (TM) products, in minimum order sizes of 72 units, and has
placed said products in their various distribution centers located in the United
States. In addition, the Company has a written Agreement with Human Medical
Options International, Ltd., a B.V.I. (British Virgin Islands) corporation, and
an Agreement with Club Medic, Inc., a Texas corporation, for the distribution of
its products. See Exhibits 10.1 and 10.2, for copies of said Distribution
Agreements.
Employees
The Company has three (3) full time/and no part time employees.
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.
1.
<PAGE> 4
Summary of the Invention
As its name implies, the Dual-filtered Rotary Isolation Valve for
Resuscitation filters both the air exhaled by the provider of care and the air
exhaled by the patient. Moreover, the path of exhaust air from the patient is
not required to lift any physical object before reaching the atmosphere; so,
small, incipient breaths by a patient who had previously ceased breathing will
not be retarded. Similarly, the usually stronger breath of the care provider
does not act to close any aperture through which the patient's breath reaches
the atmosphere, even if both the provider of care and the patient breathe
simultaneously.
To achieve low production costs and to minimize any slight potential for
failure, the Dual-filtered Rotary Isolation Valve for Resuscitation has an
extremely simple construction. There is an upper housing and a lower housing
which snap together to permit rotation to achieve the most comfortable and
efficient orientation of the upper housing with respect to the provider of care
while simultaneously creating the most comfortable and efficient orientation of
the lower housing with respect to the patient. Of course, the upper housing is
directed toward the care provider, and the lower housing is directed toward the
patient. Preferably, the provider of care will utilize a mouthpiece that may
be attached to the upper housing while a mask may be connected to the lower
housing for the patient.
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 the following foreign countries: Australia, Canada, Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Monaco, Netherlands, Portugal, Spain, Sweden, Switzerland, United Kingdom, Aden
(Yemen), Anguilla, Antigua, Bahrain, Belize, Bermuda, Botswana, British Indian
Ocean Territory, British Virgin Islands, Brunei, Cayman Islands, Channel Island
of Jersey, Cyprus, Dominica, Falkland Islands, Fiji Islands, Gambia, Ghana,
Gibraltar, Grenada, Guyana, Kenya, Kiribati, Monserrat, Seychelles, Sierra
Leone, Solomon Islands, St. Vincent, St. Lucia, St. Kitts-Nevis, St. Helena,
Swaziland, Tanganyika, Tanzania, Trinidad, Tobago, Turks & Calcos, Tuvalu,
Uganda, Vanuatu, Western Samoa, Zanzibar and Liechtenstein. 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.
FDA Requirements
The RespAide(TM) Valve is registered with the United States Food &
Drug Administration ("FDA") as a Class II Medical Device. Its indications for
use are: Non Re-Breathing Valve, 73CBP, Class II Under CFR 868.5870 --
Respiratory Assisted Device used in cardiac or respiratory arrest to assist in
cardiopulmonary resuscitation (CPR). A Class II Medical Device is a
classification for those products that can be sold without prescription or
regulation.
The Company filed a Pre-Market Notification (510K Listing) and the
RespAide(TM) device was determined by the FDA to be substantially equivalent to
legally marketed devices. The Company is not required to file any additional
applications or notifications with the FDA to sell or to continue to sell the
RespAide(TM) device. A Pre-Market Notification is required to be filed when the
Company intends to market a product which is equivalent to other products
approved by the FDA in one or more device classifications. A substantially
equivalent determination assumes compliance with the Current Good Manufacturing
Practice requirements, as set forth in the Quality Systems Regulation for
Medical Devices.
The Company has filed a Device Listing for the RespAide(TM) two-way
circuit vent. It is exempt from Pre-Market Notification under CFR Number
868.5675 of The 162 Medical Device Categories That Are Exempt From Good
Manufacturing Practices. A Device Listing is required anytime you intend to
market a new product that requires FDA registration under the Exempt categories.
No additional notifications are required so long as the device is deemed to be
substantially equivalent.
The Company and its products are subject to Labeling Regulation 21 CFR
Part 801 and additionally 809.10 and has filed its packaging and promotional
materials with the FDA and is compliant. The FDA requires a "truth in
disclosure" labeling policy.
As a Class II Medical Device Manufacturer, the Company is required to
maintain its registration as a Device Establishment and to manufacture in the
Current Good Manufacturing Practice requirements outlined by the FDA and is
compliant. The company is subject to certain post-marketing obligations by the
FDA. Post-market obligations, including medical device reporting and recalls,
require the Company to file any changes to the product with the FDA and to
notify the FDA of any problems with the products after sale and/or during use.
The Company is in full compliance.
All manufacturing is in accordance with the Current Good Manufacturing
Practice requirements as set forth in the Quality Systems Regulation for Medical
Devices. The Company contracts with Westmed Corporation, 3351 E. Hemisphere
Loop, Tucson, AZ 85706, an FDA approved facility, for the manufacture of its
products. Export certificates are required by the FDA for countries that
products are exported to and additional requirements may apply according to each
countries regulations. The Company currently does not export any of its
products. At such time that the company determines to export its products, the
export certificates required by the FDA will be filed.
Item 2. Plan of Operation
Management's Discussion and Analysis of Plan of Operation
Financial Condition
Since the Company's inception, the Company has been involved in
the development of its technology. During this time, revenues have been minimal
and expenditures primarily attributed to research and development. Without
adequate revenues to offset expenditures, the Company has reported a loss in
each of its years of existence. To date, the Company has funded itself by way of
a series of private equity sales. As of the end of fiscal 1998, the Company had
offset its accumulated deficit in this manner and has therefore not found it
necessary to incur any long-term debt. The most valuable asset of the Company is
its intellectual property and technology. The Company has acquired 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 licence those rights. Although the Company
believes its technology to be very valuable in the real sense, this value is not
quantified as such on the Company's Balance Sheet.
Operational Results
During each of the last two years (1997 and 1998), the Company
reported revenues of $26,193 and $140,507, respectively. Revenues have been
primarily from the sale of the emergency CPR assistance device and the Company
is now focusing on a marketing-driven sales effort in order to increase revenues
that will ultimately cover total expenditures.
The cost of goods sold increased both in the amount and as a
percentage of sales in 1998 versus 1997. These increases are due primarily to
the increased volume of business and the highly competitive sector of the health
care industry in which the Company operates.
The gross profit percentage of the Company decreased slightly
from 1997 to 1998 as a result of the increased costs and competition.
Total expenditures increased substantially in 1998 as compared to
1997. The primary reasons for this occurrence are:
Depreciation and amortization expense increased from $9,727 to
$24,485 during the fiscal year ended December 31, 1997 and 1998, respectively.
This increase is due to the additional property and equipment that was acquired
and the amortization of the patent costs.
Research and development costs increased from $241,672 to
$576,588 during the fiscal years ended December 31, 1997 and 1998, respectively,
as a result of the significant focus on developing the technology and the
increase in the personnel involved in the development of the technology. Certain
consultants were issued shares of common stock during 1998 that were recorded as
a consulting expense.
General and administrative costs increased from $353,407 to
$1,093,776 during the fiscal years ended December 31,1997 and 1998,
respectively, primarily as a result of additional compensation and travel costs
related to marketing the Company's product. Certain employees were issued shares
of common stock during 1998 that were recorded as additional compensation.
Other expenses increased from $12,203 to $59,434 during the
fiscal years ended December 31, 1997 and 1998, respectively, primarily as a
result of additional interest expense and a contingency loss.
Capital Funding
The Company currently is unable to generate sufficient cash from
operations to sustain its business efforts as well as to accommodate its growth
plans. Until it is able to generate sufficient cash flow, the Company will seek
capital funding from outside resources. The Company presently has no commitment
for such funding and has not concluded what form, whether debt or equity, such
funding will be derived through.
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 Nelson Laboratories,
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. The Company has applied for FDA 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.
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 purification filters to protect against
communicable diseases has grown rapidly since the mid-1980's - from practically
nil, to an estimated 1,460,000,000.00 in 1997. 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. (See Exhibit 99.2)
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.
The Company currently holds National Stocking Numbers for it's
RespAide(TM) CPR Isolation Mask and RespAide(TM) VIV Filter Technology. These
stocking numbers make both products acceptable for inventory for all four
branches of the Service and the U. S. Coast Guard. There is no obligation from
the military to purchase the product based on the National Stocking Numbers.
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.
Year 2000
The Company has performed a preliminary review of its computer
applications, including software and hardware, related to their continuing
functionality for the Year 2000 and beyond. Based on this review, the Company
does not believe that it has any material exposure with respect to the Year 2000
issue in regards to its computer applications. Management believes that the
Company is not dependent on any other internal computer applications for its
day-to-day applications. The Company is continuing to conduct a comprehensive
review of its computer systems to identify the systems that could be affected by
Year 2000 issue. The Company does not normally directly interface with third
parties in connection with computer use. The Company has communicated,
informally, with selected third parties, with whom it does not have any material
relationship, to assess any risk with respect to Year 2000 issues. The
historical cost to the Company for its year 2000 preparations have been nominal,
future costs are not yet known due to the Company's ongoing assessments, and the
Company has now deferred or delayed any projects or expenditures in anticipation
of any Year 2000 issues. The Company believes that its worse case scenario for
the change to Year 2000 would be a minor disruption of the distribution of its
products. Such disruption could have a material impact on the Company and its
results of operations. The Company is in the process of finalizing a contingency
plan to address any Year 2000 issues, such as a disruption in its distribution.
The Company believes that its contingency plan, if required, will be finalized
and operational prior to November 15, 1999.
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%
--------- ------
Total 2,890,113 23.143%
</TABLE>
5.
<PAGE> 8
(b) Security Ownership of Management.
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
--------- ------
Total Shares 1,551,113 20.052%
</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
Total shares subject to options 2,000,000
</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 attended Boise State University, 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.
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.
The prices were obtained from the internet, the source of the
information is believed to be reliable.
<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, Thomas Fehr, #703 Aerospace Center, 1104 Country
Hills Drive, Ogden, UT 84403, 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.
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
SEPTEMBER 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 (Deficit)............................. 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
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>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 3,148 $ 61,184
Accounts receivable (Note 1) 3,381 3,162
Accounts receivable - related party (Note 3) 11,127 10,000
Prepaid expenses -- 5,788
Inventory (Note 1) 96,076 63,696
-------- --------
Total Current Assets 113,732 143,830
-------- --------
PROPERTY AND EQUIPMENT (Note 1)
Molds 104,250 98,850
Furniture and office equipment 36,884 35,059
Accumulated depreciation (47,668) (27,811)
-------- --------
Total Property and Equipment 93,466 106,098
-------- --------
OTHER ASSETS
Deposits 4,141 4,141
Patent (Note 2) 22,251 22,735
-------- --------
Total Other Assets 26,392 26,876
-------- --------
TOTAL ASSETS $233,590 $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 (DEFICIT)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 46,935 $ 49,644
Accounts payable - related party (Note 3) 50,000 --
Note payable (Note 5) -- 13,702
Leases payable (Note 4) 812 8,091
Accrued expenses 21,615 8,754
Contingent liability (Note 3) 135,000 135,000
----------- -----------
Total Current Liabilities 254,362 215,191
----------- -----------
LONG-TERM DEBT -- --
----------- -----------
Total Liabilities 254,362 215,191
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.001; authorized
50,000,000 shares; 7,736,025 and 7,078,107 shares
issued and outstanding, respectively 7,736 7,078
Additional paid-in capital 3,849,183 3,191,923
Accumulated deficit (3,877,691) (3,137,388)
----------- -----------
Total Stockholders' Equity (Deficit) (20,772) 61,613
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 233,590 $ 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
Nine Months
Ended December 31,
September 30, -----------------------------
1999 1998 1997
--------- ----------- ---------
(Unaudited)
<S> <C> <C> <C>
REVENUES $ 30,437 $ 140,507 $ 26,193
COST OF SALES 10,549 125,734 23,166
--------- ----------- ---------
GROSS MARGIN 19,888 14,773 3,027
--------- ----------- ---------
EXPENSES
Depreciation and amortization 21,141 24,485 9,727
Bad debt expense -- 966 --
Research and development 206,190 576,588 241,672
General and administrative 531,511 1,093,776 353,407
--------- ----------- ---------
Total Expenses 758,842 1,695,815 604,806
--------- ----------- ---------
LOSS FROM OPERATIONS (738,954) (1,681,042) (601,779)
--------- ----------- ---------
OTHER INCOME (EXPENSE)
Other expenses -- (38,514) --
Loss on disposal of assets -- (3,014) --
Interest expense (1,349) (17,906) (12,203)
--------- ----------- ---------
Total Other Income (Expense) (1,349) (59,434) (12,203)
--------- ----------- ---------
NET LOSS $(740,303) $(1,740,476) $(613,982)
========= =========== =========
BASIC LOSS PER SHARE $ (0.10) $ (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 (Deficit)
<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 (Deficit) (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) 56,857 57 56,800 --
Net loss for the nine months ended
September 30, 1999 (unaudited) -- -- -- (740,303)
--------- ------ ---------- -----------
Balance, September 30, 1999
(unaudited) 7,736,025 $7,736 $3,849,183 $(3,877,691)
========= ====== ========== ===========
</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
Nine Months
Ended December 31,
September 30, -----------------------------
1999 1998 1997
------------- ----------- ---------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(740,303) $(1,740,476) $(613,982)
Adjustments to reconcile net loss to net
cash (used by) operating activities:
Depreciation and amortization 21,141 24,485 9,727
Loss on disposal of assets -- 3,014 --
Bad debts -- 966 --
Common stock issued for services 56,857 1,113,933 (3,500)
Changes in assets and liabilities:
(Increase) decrease in deposits -- (719) --
(Increase) decrease in inventory (32,380) 41,536 (103,232)
(Increase) decrease in prepaid expenses 5,788 (5,788) --
(Increase) decrease in accounts receivable
and accounts receivable related (1,346) 10,640 (24,768)
Increase (decrease) in cash overdraft -- (193) 193
Increase (decrease) in accrued expenses 12,861 24,192 8,183
Increase (decrease) in accounts payable
and accounts payable-related party 47,291 (56,945) (123,396)
--------- ----------- ---------
Net Cash (Used by) Operating Activities (630,091) (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 (7,279) (8,379) (10,076)
Payment on note payable (13,702) -- --
--------- ----------- ---------
Net Cash Provided by Financing
Activities $ 580,080 $ 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
Nine Months
Ended December 31,
September 30, --------------------------
1999 1998 1997
------------ ---------- --------
(Unaudited)
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $(58,036) $ 61,184 $(34,069)
CASH AT BEGINNING OF PERIOD 61,184 -- 34,069
-------- ---------- --------
CASH AT END OF PERIOD $ 3,148 $ 61,184 $ --
======== ========== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest $ 1,349 $ 2,468 $4,20
Income taxes $ -- $ --
NON CASH FINANCING ACTIVITIES:
Common stock issued for services $ 56,857 $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
September 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 nine months ended September 30, 1999 was
$19,857. 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
September 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. Revenue Recognition
Revenue is recognized upon shipment of goods to the customer.
The Company has adopted a return policy whereby the customer can
return damaged goods received within 30 days of receipt for a full
refund. The Company established and records a reserve for returned
merchandise on a monthly basis based upon the total amount of
revenues recorded for the prior month. The reserve for returned
merchandise at September 30, 1999 and December 31, 1998 was $0 and
$0, respectively.
31.
<PAGE> 34
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
September 30, 1999 and December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
m. Equity Securities
Equity securities issued for services rendered have been accounted
for at the fair market value of the securities on the date of
issuance.
n. 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.
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 nine months ended September 30, 1999 was
$1,284. Amortization expense for the years ended December 31, 1998
and 1997 was $1,660 and $498, respectively.
NOTE 3 - RELATED PARTY TRANSACTIONS
At September 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 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. $11,127 and $10,000 was due from these
officers and shareholders as of September 30, 1999 and December 31,
1998, respectively. The amount is non-interest bearing, unsecured and
due on demand.
32.
<PAGE> 35
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
September 30, 1999 and December 31, 1998
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.
Obligations under these capital leases consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
Total $ 812 $ 8,091
Less: current portion (812) (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 September 30, 1999 and
December 31, 1998 was $-0- and $13,702, respectively.
33.
<PAGE> 36
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
September 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
nine months ended September 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 September 30, 1999 is
summarized as follows:
34.
<PAGE> 37
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
September 30, 1999 and December 31, 1998
NOTE 8 - STOCK OPTIONS (Continued)
<TABLE>
<CAPTION>
Shares Exercise Price Exercised By
--------- -------------- -------------
<S> <C> <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*
(23) Consents - Experts
23.1 Consent of Jones, Jensen & Co.*
23.1.(a) Supplemental Letter re: financial information
from Jones, Jensen & Co. dated Nov. 2, 1999*
23.1.(b) Supplemental Letter re: financial information from Jones Jensen
& Co. dated Nov. 15, 1999*
23.2 Consent of Thomas Fehr*
(27) Financial Data Schedule
27.1 Financial Data Schedule*
(10) Material Contracts
10.1 Channel Management Agreement between Emergency
Filtration Products, Inc. and Clubmedic, Inc.*
10.2 Distribution Agreement between Emergency
Filtration Products, Inc. and Human Medical
Options International, Ltd.*
(99) Additional Exhibits
99.1 Nelson Laboratories Report*
99.2 Freedonia Group Report*
99.3 8K Dated Dec. 28, 1999*
</TABLE>
* Previously filed as an Exhibit to the Company's Form 10-SB.
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: February 23, 2000
By: /s/ Michael Crnkovich
----------------------------------
Michael Crnkovich
President
37.
