<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2000.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION FROM _______ TO ________.
COMMISSION FILE NUMBER 000-27421
EMERGENCY FILTRATION PRODUCTS, INC.
------------------------------------------------------
(Exact name of registrant as specified 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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
At September 30, 2000, there were outstanding 8,980,489 shares of the
Registrant's Common Stock, $.001 par value.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item I. Financial Statements
EMERGENCY FILTRATION PRODUCTS, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
<PAGE> 3
EMERGENCY FILTRATION PRODUCTS, INC.
Balance Sheets
ASSETS
------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 20,261 $ --
Accounts receivable (Note 1) 6,138 9,605
Prepaid expenses -- 958
Inventory (Note 1) 82,182 90,937
--------- ---------
Total Current Assets 108,581 101,500
--------- ---------
PROPERTY AND EQUIPMENT (Note 1)
Molds 109,650 109,650
Furniture and office equipment 37,152 36,884
Accumulated depreciation (70,729) (48,751)
--------- ---------
Total Property and Equipment 76,073 97,783
--------- ---------
OTHER ASSETS
Deposits 4,141 4,141
Patent, net (Note 2) 52,009 29,144
--------- ---------
Total Other Assets 56,150 33,285
--------- ---------
TOTAL ASSETS $ 240,804 $ 232,568
========= =========
</TABLE>
<PAGE> 4
EMERGENCY FILTRATION PRODUCTS, INC.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 123,466 $ 102,051
Accounts payable - related parties (Note 3) 346,070 146,620
Cash overdraft -- 1,176
Note payable (Note 4) 2,139 18,532
Accrued expenses 21,615 21,615
Note payable - related, current (Note 3) 7,523 135,000
----------- -----------
Total Current Liabilities 500,813 424,994
----------- -----------
LONG-TERM DEBT
Note payable - related (Note 3) 157,177 --
----------- -----------
Total Long-Term Debt 157,177 --
----------- -----------
Total Liabilities 657,990 424,994
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.001; authorized
50,000,000 shares; 8,980,489 and 7,823,765 shares
issued and outstanding, respectively 8,981 7,824
Additional paid-in capital 4,625,357 3,920,647
Accumulated deficit (5,051,524) (4,120,897)
----------- -----------
Total Stockholders' Equity (Deficit) (417,186) (192,426)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 240,804 $ 232,568
=========== ===========
</TABLE>
<PAGE> 5
EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 7,739 $ 18,471 $ 26,582 $ 30,437
EXPENSES
Cost of sales 5,853 6,355 14,491 10,549
Depreciation and amortization 8,274 7,047 24,428 21,141
Research and development 90 62,200 41,140 206,190
General and administrative 194,641 139,312 872,894 531,511
--------- --------- --------- ---------
Total Expenses 208,858 214,914 952,953 769,391
--------- --------- --------- ---------
LOSS FROM OPERATIONS (201,119) (196,443) (926,371) (738,954)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest expense (3,633) (414) (4,256) (1,349)
--------- --------- --------- ---------
Total Other Income (Expense) (3,633) (414) (4,256) (1,349)
--------- --------- --------- ---------
NET LOSS $(204,752) $(196,857) $(930,627) $(740,303)
========= ========= ========= =========
BASIC LOSS PER SHARE $ (0.02) $ (0.03) $ (0.11) $ (0.10)
========= ========= ========= =========
</TABLE>
<PAGE> 6
EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Common Stock 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 601,061 601 600,460 --
Common stock issued on
exercise of stock options
at $0.75 per share 67,000 67 50,183 --
Common stock issued for
services at $1.00 per share 77,597 78 77,519 --
Additional capital contribution -- -- 562 --
Net loss for the year ended
December 31, 1999 -- -- -- (983,509)
----------- ----------- ----------- -----------
Balance, December 31, 1999 7,823,765 7,824 3,920,647 (4,120,897)
Common stock issued for
cash at $0.50 per share
(unaudited) 50,000 50 24,950 --
Common stock issued for
services at prices ranging
from $0.50 to $0.85 per
share (unaudited) 460,236 460 243,041 --
Common stock issued for cash
at $0.75 per share (unaudited) 72,333 72 54,178 --
Common stock issued on exercise
of options at $0.75 per share
(unaudited) 86,333 87 64,663 --
Common stock issued for services
at $0.75 per share (unaudited) 204,087 204 152,861 --
Common stock issued for patent
costs (unaudited) 20,000 20 14,980 --
----------- ----------- ----------- -----------
Balance forward 8,716,754 $ 8,717 $ 4,475,320 $(4,120,897)
----------- ----------- ----------- -----------
</TABLE>
<PAGE> 7
EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- Paid-In Accumulated
Shares Amount Capital Deficit
----------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Balance forward 8,716,754 $ 8,717 $ 4,475,320 $(4,120,897)
Common stock issued on exercise
of options at $0.75 per share
(unaudited) 1,667 2 1,248 --
Common stock issued for cash at
prices ranging from $0.40 to $0.50
per share (unaudited) 145,000 145 61,105 --
Common stock issued for services
at $0.75 per share (unaudited) 117,068 117 87,684 --
Net loss for the nine months ended
September 30, 2000 (unaudited) -- -- -- (930,627)
----------- ----------- ----------- -----------
Balance, September 30, 2000
(unaudited) 8,980,489 $ 8,981 $ 4,625,357 $(5,051,524)
=========== =========== =========== ===========
</TABLE>
<PAGE> 8
EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
--------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $(204,752) $(196,857) $(930,627) $(740,303)
Adjustments to reconcile net loss to
net cash (used by) operating activities:
Depreciation and amortization 8,274 7,047 24,428 21,141
Common stock issued for services 87,801 6,857 484,367 56,857
Changes in operating assets and liabilities:
(Increase) decrease in inventory 2,034 6,224 8,755 (32,380)
(Increase) decrease in prepaid expenses -- -- 958 5,788
(Increase) decrease in accounts receivable
and accounts receivable related 2,879 (6,358) 3,467 (1,346)
Increase (decrease) in cash overdraft -- -- (1,176) --
Increase (decrease) in accrued expenses -- 15,125 -- 12,861
Increase (decrease) in accounts payable
and accounts payable - related parties 36,879 65,310 220,865 47,291
--------- --------- --------- ---------
Net Cash (Used by) Operating Activities (66,885) (102,652) (188,963) (630,091)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Patent costs (1,506) -- (10,315) (800)
Acquisition of equipment (268) -- (268) (7,225)
--------- --------- --------- ---------
Net Cash (Used by) Investing Activities (1,774) -- (10,583) (8,025)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock 62,500 -- 206,500 601,061
Proceeds from notes and leases payable 31,500 -- 31,500 --
Payment on notes and leases payable (5,981) (4,562) (18,193) (20,981)
--------- --------- --------- ---------
Net Cash Provided by Financing Activities 88,019 (4,562) 219,807 580,080
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 19,360 (107,214) 20,261 (58,036)
CASH AT BEGINNING OF PERIOD 901 110,362 -- 61,184
--------- --------- --------- ---------
CASH AT END OF PERIOD $ 20,261 $ 3,148 $ 20,261 $ 3,148
========= ========= ========= =========
</TABLE>
<PAGE> 9
EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------- -------------------------
2000 1999 2000 1999
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest $ 3,633 $ 414 $ 4,256 $ 1,349
Income taxes $ -- $ -- $ -- $ --
NON-CASH FINANCING ACTIVITIES:
Common stock issued for services $ 87,801 $ 6,857 $484,367 $ 56,857
Common stock issued for patent costs $ -- $ -- $ 15,000 $ --
</TABLE>
<PAGE> 10
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
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
$1,092 and $1,092 at September 30, 2000 and December 31, 1999,
respectively.
e. Provision for Taxes
At September 30, 2000, the Company had net operating loss carryforwards of
approximately $5,000,000 that may be offset against future taxable income
through 2020. 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
<PAGE> 11
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
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 following is an illustration of the reconciliation of the numerators
and denominators of the basic loss per share calculation:
<TABLE>
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
-------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Income (loss) (numerator) $ (204,752) $ (196,857) $ (930,627) $ (740,303)
Weighted average
shares outstanding
(denominator) 8,402,127 7,403,692 8,402,127 7,403,692
----------- ----------- ----------- -----------
Basic loss per share $ (0.02) $ (0.03) $ (0.11) $ (0.10)
=========== =========== =========== ===========
</TABLE>
The computation of basic earnings per share of common stock is based on the
weighted standard average number of 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. Change in Accounting Principle
The Financial Accounting Standards Board has issued certain new standards,
including standards on earnings per share (SFAS 128), capital structure
(SFAS 129), comprehensive income (SFAS 130), operating segments (SFAS 131)
and postretirement benefits (SFAS 132). The adoption of these standards did
not have a material impact on the Company's financial statements.
k. Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
<PAGE> 12
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
l. Revenue Recognition
Revenue is recognized upon shipment of goods to the customer.
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.
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 years ended December 31, 1999 and 1998 and the nine
months ended September 30, 2000 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 is
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.
NOTE 3 - RELATED PARTY TRANSACTIONS
At December 31, 1999, $135,000 was recorded by the Company which
represented an amount claimed to be owed to a shareholder and former
officer of the Company for unpaid wages and reimbursements. The shareholder
also claimed that he had legal rights to certain trademarks of the Company
until he was paid in full. On June 2, 2000, the Company entered into a
Settlement Agreement and Mutual Release with the shareholder, settling on
an amount of $146,500. The amount accrues interest at 10% per annum.
Principal and interest are to be paid in monthly installments of $1,800
beginning on July 1, 2000 until paid. Current portion of the debt at
September 30, 2000 is $7,523, leaving a long-term balance of $137,177 at
September 30, 2000.
At September 30, 2000, the Company owed another related party amounts equal
to $20,000. This amount is included with the above amounts on the Company's
balance sheet at September 30, 2000.
Certain employees, officers and shareholders are also owed amounts in past
due wages and expense reimbursements as of September 30, 2000 and December
31, 1999. In addition, certain shareholders of the Company have advanced
funds to the Company in order to cover operating costs. The total amount
owed to these related parties as of September 30, 2000 and December 31,
1999 was $346,070 and $146,620, respectively. The amounts are non-interest
bearing, unsecured, and due on demand.
<PAGE> 13
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 4 - NOTE PAYABLE
A note was signed by the Company to an insurance company for product
liability insurance for a one year period from October 1999 to October
2000. The remaining amount due at September 30, 2000 and December 31, 1999
was $2,139 and $18,532, respectively.
NOTE 5 - 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 $5,051,524 at September 30, 2000
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 6 - 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, 1999 are as
follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
----------- -----------
<S> <C>
2000 $ 48,535
2001 28,989
2002 -
2003 -
2004 and thereafter -
-----------
Total $ 77,524
===========
</TABLE>
<PAGE> 14
EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 7 - 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 year ended
December 31, 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 and 67,000 options were exercised at $0.75
per share for total proceeds of $50,250. During the nine months ended
September 30, 2000, additional options were granted for a total of
1,900,000 restricted common shares of the Company at an exercise price of
$0.75 per share. 188,000 options were exercised at $0.75 per share during
the nine months ended September 30, 2000 for total proceeds of $66,000. The
total amount of outstanding stock options at September 30, 2000 is
summarized as follows:
<TABLE>
<CAPTION>
Shares Exercise Price Exercised By
---------- -------------- --------------
<S> <C> <C>
300,000 $0.60 December 2000
2,465,000 $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
1,800,000 $0.75 January 2003
100,000 $0.75 July 2003
</TABLE>
<PAGE> 15
Item II. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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 quarter ended 9/30/2000, 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 license 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 the quarter ended 9/30/2000, the Company reported revenues of
$7,739. Revenues have been primarily from the sale of the emergency CPR
assistance device and the company is now focusing on securing licensing
agreements and on a marketing-driven sales effort in order to increase revenues
that will ultimately cover total expenditures.
The cost of goods sold increased as a percentage of sales in the third
quarter of 2000 versus the third quarter of 1999. This increase is due primarily
to the increased volume of business and the purchase of inventory to facilitate
orders shipped in the fourth quarter.
Total expenditures decreased slightly in the third quarter of 2000 as
compared to the third quarter of 1999. The primary reason for this occurrence is
the decrease in research and development expenditures as the company moves
toward a marketing-driven sales effort. Research and development costs
<PAGE> 16
decreased from $62,200 to $90 during the quarters ended September 30, 1999 and
2000, respectively. General and administrative costs increased from $139,312 to
$194,641 during the quarters ended September 30, 1999 and 2000, respectively, as
a result of increased expenditures for professional and consulting services.
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; 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:
[X] 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 test by Nelson Laboratories, RespAide(TM) was found to be greater
than 99.9% 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.
[X] 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
<PAGE> 17
discarding the entire BVM unit. The Company has applied for FDA
approval.
[X] 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 of patient's breath in favor of
permitting a T-valve attachment of 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.
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 has been
granted for this product. The Company is currently conducting prototype
development.
The market for air purification filters for protection against communicable
diseases has grown rapidly since the mid-1980's - from practically nil, to an
estimated 1,460,000,000 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.
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 military national stocking numbers for the
RespAide(TM) CPR isolation mask and replacement filters. These stocking numbers
make both products acceptable for inventory in all four branches of the military
and the U.S. Coast Guard. The Company has recently begun receiving orders from
the Defense Supply Center Philadelphia for these products.
<PAGE> 18
To reach the market, the Company has entered into contractual arrangements
with a number of U.S. and international medical product distributors.
Additionally, the Company is actively pursuing licensing agreements with other
companies that have market penetration.
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.
This discussion may contain certain forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Actual results
could differ materially from those forward-looking statements. The factors that
may cause actual results to differ materially is that the Company has no
arrangement, agreement or understanding with respect to engaging in a merger
with, joint venture with or acquisition of, a private or public company and that
there can be no assurance that the Company will be successful in identifying and
evaluating suitable business opportunities or including a business combination.
PART II
OTHER INFORMATION
<PAGE> 19
Item 1 - Changes in the Rights of the Company's
Security Holders. . . . . . . . . . . . . . . . . . . . .None
Item 2 - Defaults by the Company on its
Senior Securities. . . . . . . . . . . . . . . . . . . . None
Item 3 - Submission of Matter to Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . . None
Item 4 - Other Information
(a) Board meetings
The board held one meeting during the current quarter, including both
regularly scheduled and special meetings and actions by unanimous written
consent.
(b) Committee
The board of directors has not established any audit committee. In
addition, the Company does not have any other compensation or executive or
similar committees. The Board of Directors acts as the audit committee. The
Company recognizes that an audit committee, when formally established, will play
a critical role in the financial reporting system of the Company by overseeing
and monitoring management's and the independent auditors' participation in the
financial reporting process.
Until such time as an audit committee has been established, the full board
of directors undertakes those tasks normally associated with an audit committee
to include, but not by way of limitation, the (i) review and discussion of the
audited financial statements with management, (ii) discussions with the
independent auditors the matters required to be discussed by the Statement On
Auditing Standards No. 61, as may be modified or supplemented, and (iii)
received from the auditors disclosures regarding the auditors' Independents
Standards Board Standard No. 1, as may be modified or supplemented.
(c) Legal Proceedings
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 December 31, 1998 and December 31, 1999 which
represents the amount claimed to be owed to Bruce E. Batchelor. The Company has
entered into a payment plan resolving all differences and has agreed to pay the
principal sum of $146,500 in monthly installments of $1,800 or more, commencing
on the later of July 1, 2000 or 30 days after the documents have been signed by
Bruce E. Batchelor.
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.
<PAGE> 20
Item 6 - Exhibits and Reports on Forms 10KSB and 10SB12G/A
The following reports on Forms 10KSB and 10SB12G/A are incorporated herein
by reference:
(1) Form 10KSB filed April 14, 2000
(2) Form 10SB12G/A filed February 24, 2000
The following documents are filed as part of this report:
1) Unaudited Financial Statements filed as part of this report with
the related consolidated statements of operations and accumulated
deficit, and cash flow for the quarter then ended.
2) Financial Data Schedule 27.1.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 17, 2000 Emergency Filtration Products, Inc.
-----------------------------------
(Registrant)
By: /s/ Michael J. Crnkovich
-------------------------------
Michael J. Crnkovich
Chief Executive Officer
