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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES PURSUANT TO
SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
ECO-Rx, Inc.
(Exact name of registrant as specified in its charter)
Florida
(State of Incorporation)
65-0569329
(IRS Employer Identification Number)
2051 Northeast 191 Drive, North Miami Beach, Florida 33179
(Address of Principal Executive Offices)
(305) 937-1862
(Registrant's Telephone Number, Including Area Code)
Securities to be Registered Pursuant to Section 12(b) of the Act:
Title of each class to be registered
NONE
Name of each exchange on each class to be registered
NOT APPLICABLE
Securities to be Registered Pursuant to Section 12(g)(1) of the Act:
Common Stock, $.001 par value per share
(Title of Class)
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ECO-Rx, Inc.
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
Table of Contents
Part I
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<S> <C>
Item 1. Description of Business.............................................. 4
Item 2. Management's Discussion and Analysis or Plan of Operation............ 9
Item 3. Description of Property.............................................. 12
Item 4. Security Ownership of Certain Beneficial
Owners and Management............................................... 13
Item 5. Directors, Executive Officers, Promoters
And Control Persons................................................. 14
Item 6. Executive Compensation............................................... 15
Item 7. Certain Relationships and Related Transactions....................... 15
Item 8. Description of Securities............................................ 16
Part II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters......................... 18
Item 2. Legal Proceedings.................................................... 19
Item 3. Changes in and Disagreements with Accountants........................ 19
Item 4. Recent Sales of Unregistered Securities.............................. 19
Item 5. Indemnification of Directors and Officers............................ 19
Part F/S
Financial Statements.......................................................... 24
Part III
Item 1. Index to Exhibits.................................................... 56
Item 2. Description of Exhibits.............................................. 56
Signatures.................................................................... 57
</TABLE>
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This Registration Statement contains certain forward looking documents
within the meaning of the Private Securities Litigation Reform Act of 1995. The
Registrant intends that such forward looking statements be subject to the safe
harbors created thereby. These forward looking statements include statements
regarding (i) the Registrant's research and development plans, marketing plans,
capital and operations expenditures, and results of operations; (ii) potential
financing arrangements; (iii) potential utility and acceptance of the
Registrant's existing and proposed products; and (iv) the need for, and
availability of, additional financing.
The forward-looking statements included herein are based on current
expectations and involve a number of risks and uncertainties. These forward
looking statements are based on assumptions regarding the Registrant's business
which involve judgments with respect to, among other things, future economic and
competitive conditions and future business decisions, all of which are difficult
or impossible to predict accurately and many of which are beyond the control of
the Registrant. Although the Registrant believes that the assumptions underlying
the forward looking statements are reasonable, any of the assumptions could
prove inaccurate and, therefore, actual results may differ materially from those
set forth in the forward looking statements. In light of the significant
uncertainties inherent in the forward looking information contained herein, the
Registrant or any other person that the objectives or plans of the Registrant
will be achieved should not regard the inclusion of such information as any
representation.
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PART I
Item 1. Description of Business
History and Development of the Company
The Company
- -----------
ECO-Rx, Inc. (the "Company") was originally incorporated as Eco-Aire
Company, Inc. in the State of Florida on February 27, 1995. The Company changed
its name to ECO-Rx, Inc. on July 27, 1999. The Company is engaged in the
business of developing, manufacturing and marketing air purification systems for
use by both the general public and commercial consumers. The Company has been in
the development stage since its incorporation. The Company's mission is to
pioneer the technology, design and manufacturing of air purification equipment
for the destruction of pathogens and for the efficient and effective removal of
odors, allergy and asthma causing agents, pollutants and certain gasses from
indoor air environments.
The Company's air purification system is unique and protected under
patent application. The system employed in the air purification process utilizes
state of the art technology which allows the Company to offer a product that
eliminates fungus, spores, germs, and other allergens from the air without the
use of conventional filter systems. At present, there is one configuration
offered by the Company: a portable system that can be mounted on a wall, sit on
a floor stand, or be placed on a shelf. The Company believes its system is
superior to any air purification system available in the marketplace today. Its
applications range from household use for removal of germs, odors and allergens
from the air, to commercial applications that include the possibility of
removing all germs and some noxious odors from aircraft while in flight,
eliminating smoking odors from vehicles, removing germs, odors, and allergens
from hospital and other medical environments.
The Company has engaged independent testing laboratories who have
verified the performance of its air purification system. In laboratory tests,
the Company's system eliminated all tested pathogens and molds. In addition,
the Company has placed prototype units in commercial facilities, including
doctors offices, banks, and cigar lounges. The acceptance of the units and
their performance has been overwhelmingly positive. Because of their
effectiveness, the single largest problem encountered by the Company, with its
test units, has been the return of units from the test sites.
Management
- ----------
The Company's management team consists of Jerrold M. Nelson, Chairman
of the Board, President and Chief Executive Officer, Gary Arnold, Vice
Chairman, Joseph M. Peiken, Vice President and Chief Financial Officer, and
Roger A. Nelsen, Vice President/Sales and Marketing.
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Jerrold M. Nelson, Chairman of the Board, President and Chief
Executive Officer. Mr. Nelson has over 27 years of experience in the health care
industry. He has worked with several major firms, including Bionomics, OBI
Corporation, and Tuttnauer where he successfully marketed and sold existing
product lines in addition to founding a subsidiary for OBI Corporation to market
new products. He is a former Vice President of Sales for the Singer Corporation.
Mr. Nelson has demonstrated his ability to successfully market and sell both
established product lines in addition to participating in the development and
sales of new products. Mr. Nelson is a respected manager and professional.
Gary Arnold, Vice Chairman. Dr. Arnold has served as an officer and a
board member of the Company since June 1998. Since 1993, Dr. Arnold has been CEO
of Windhorse Corporation, an organizational consultancy providing corporations
with direction in all phases of expanding capital markets, business evaluation
and corporate planning. Windhorse designs, develops and publishes educational,
motivational and management courses. From 1991 to 1993, Dr. Arnold was CEO of
International Commercial Collections and Cook, Arnold and Associates in New
Orleans, where he developed asset and liability searches, employment screening
and credit investigations and collections for the Federal Government and private
industry. Prior to this he served as executive vice president of Capital
Resources, Inc., as a financial analyst with Shearson, Lehman, Hutton and Paine-
Webber and with various other financial and human resources companies.
Joseph M. Peiken, Vice President and Chief Financial Officer. Mr.
Peiken received a Bachelor of Business Administration degree from the University
of Miami and is a Certified Public Accountant. He is a former Partner of the
Certified Public Accounting firm of Pannell Kerr Foster and has taught
continuing education classes for the certified public accounting profession. Mr.
Peiken has extensive experience in the operations of both large and small
business entities with an emphasis on businesses involved in the medical and
medical service disciplines.
Roger A. Nelsen, Vice President/Sales and Marketing. Mr. Nelsen
received a B.S.B.A. degree from the University of Connecticut at Storrs. He is
the founder of Nelsen & Associates, a manufacturing representative organization
specializing in the medical products and health care industry. He has extensive
experience in the development and management of sales organizations and has
demonstrated those abilities with such well known business entities as Johnson &
Johnson, and Everest & Jennings.
Air Purification Product
- ------------------------
The Company has developed, and applied for, patent(s) for its
proprietary technology. The technology uses two basic concepts of
sterilization, Ultraviolet Radiation and Ozone Gas, to destroy airborne
bacteria, viruses, spores and mold. In addition, the Ozone will oxidize some
organic odors. Both components are contained in a closed housing (the
"cartridge") which encompasses a powerful Energy Cell in which the ultraviolet
radiation and ozone continually function. There is no danger involved in
exposure to either the machine or the environment it creates. The system
generates different wavelengths of energy along the air stream within the
cartridge. High levels of ozone are created first and mixed in turbulent
fashion with the incoming air. As the air travels through the cartridge, it
comes in contact with
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ultraviolet radiation. As the air stream nears the exit of the cartridge, the
ozone gas has been reduced and the air stream emitted contains ozone that is
well below (60% below) the levels recommended by OSHA and the EPA. In addition,
the air stream is germ free.
The Cartridge
- -------------
The most fundamental element of the Eco-Rx product is the proprietary
replacement cartridge. It provides a safe, simple way for the end user to
maintain the unit. The user never comes in contact with the bulbs or the killing
chamber because these reside inside the sealed cartridge. This disposable
cartridge of foam actually holds the "killing chamber" for the unit. Since the
"killing chamber" is, in essence, the key to the unit, we have effectively
established an "Eco-Rx Inside" proposition, similar to the strategy that has
been employed effectively by a major computer chip manufacturer within the PC
market. As the installed base of units grows, so grows an ongoing revenue stream
which is driven by the demand for replacement cartridges that only Eco-Rx can
supply.
The Eco-Rx cartridge utilizes a special lamp (within the cartridge)
that has a one year life. The Company is developing a base for the lamp, unique
to it, which it intends to patent.
This use of foam improves the product in several ways. Because the
foam is an excellent packing material, the bulbs can be shipped already set into
the chamber, eliminating the need for additional packing materials, and also
eliminating the need for the end-user to come in contact with the germicidal UV
lamp, when the bulb needs replacing. In addition, the material is very light,
lowering shipping costs of the original unit as well as the replacement
cartridge.
Air Cleaner Market
- ------------------
Over the past decade, indoor air quality ("IAQ") has become one of the
key environmental issues in the U.S. In 1995, the EPA declared poor IAQ as one
of the top five health risks, based on the growing body of scientific research
supporting the conclusion that air inside homes and other buildings can be more
seriously polluted than outdoor air. The World Health Organization estimates
that 30% of all new buildings worldwide will suffer from poor IAQ. As people are
spending approximately 90% of their time indoors, the health risk from poor IAQ
is significant, and continues to grow. Estimates suggest that more people die
each year from causes attributable to particulate air pollution than are killed
in car accidents.
There is a wide variety of health effects from poor IAQ, ranging from
increased incidence of asthma and allergic illnesses to Sick Building Syndrome
(SBS) and Building Related Illness (BRI). The incidence of asthma has grown by
more than 65% in the past fifteen years. The economic impact of poor IAQ is
staggering. Studies from the American Lung Association and the International
Journal of Indoor Air Quality have estimated that poor IAQ is costing American
business between $30 and $170 billion dollars annually in lost employee
productivity due to sickness, absenteeism and diminished job performance.
There are several factors that are influencing the continued increase
in health risk from poor IAQ. First, energy conservation measures from the
1970's have created tighter
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buildings. This has both reduced the number of air exchanges inside buildings
(outside air getting inside) and also increased moisture build-up inside, which
facilitates microorganism growth. Secondly, the use of heat pumps, which recycle
indoor air, have further reduced the amount of outside "fresh" air being
introduced into buildings and have helped increase the concentration of airborne
particulates and microorganisms. Thirdly, reduced preventative maintenance on
HVAC systems and reduced housekeeping have also increased the levels of airborne
contaminants. Finally, the newer building materials being used in construction
have been causing an increase in volatile organic compounds (VOC's) found in the
air. It is important to note that these trends are not expected to change in the
future, suggesting there will be a continually increasing demand for products
that improve the quality of indoor air.
Tuberculosis
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Tuberculosis is again a growing worldwide medical concern, with the
number of cases increasing in recent years at an alarming rate. In 1990 there
were an estimated 7.5 million cases worldwide and an estimated 2.5 million
deaths from the disease. Documentation exists to substantiate the fact that
health care workers and airline passengers are at a high risk to contact this
airborne disease. In 1996 the World Health Organization (WHO) said that 3.8
million new cases were reported but estimated that nearly eight million cases
might have occurred worldwide. In 1998 the Center for Disease Control (CDC)
reported approximately 8 million new cases and 2 million deaths.
A major cause for the spread of the disease is that it is widespread
in Russia and third world countries. Airlines have made this a much "smaller"
world and, coupled with the population as mobile as it is today and aircraft
recirculating its air more than ever, the disease is spreading once again.
Documentation exists to substantiate the fact that health care workers
and airline passengers are at high risk to contact this airborne disease. The
Company's machine can be installed in almost any environment and smaller
versions can be operated on low voltage systems making them candidates for the
transportation industry in addition to normal facility uses.
Small Particulate Filter
- ------------------------
Almost without exception all existing air treatment systems available
in the marketplace today use expensive replaceable filters. The "high end" of
this filter technique is the High-Efficiency-Particulate Air Filter (HEPA)
system. These systems require constant maintenance and, if used in an
environment where airborne germs exist, must be disposed of under the guidelines
of infectious waste, referred to as "red bag" waste. All germs entering the
machine are oxidized leaving nothing dangerous for disposal. Eco-Rx eliminates
the problem, while conventional systems concentrate it. Eco-Rx will have a small
particulate filter to catch "sterile dust" particulates that could remain. In
laboratory testing, over two-thirds of that particulate was destroyed. The
particulate filter will trap the remaining "sterile dust" particulate.
Additional filters will come with the replacement cartridges.
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Manufacturing/Assembly
- ----------------------
Eco-Rx does not plan to establish its own manufacturing capability.
The intention is to work with a contract manufacturer, who can also provide
assistance during the final design, engineering and tooling phases of product
development.
Recently, the Company began discussions with a number of companies in
order to identify a development and manufacturing partner. The initial selection
process is already underway. There appears to be one candidate which has the
capability required and a strong interest in the project. This candidate has
over 35 manufacturing sites worldwide. An expert in plastics molding, it has
specific expertise in injection molding, rotocasting and thermo-forming. It
would also assemble and ship the product for the Company. The Company has been
seeking a relationship such as this to eliminate the need for its own
manufacturing facility.
Future Applications
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In future applications the Company will further expand the usage of
the technology by designing applications in water purification, food
sterilization and usage in other medical and home health care products.
Design and Consulting Agreement
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During 1997, the Company entered into a design and consulting services
agreement with a third party. The Company agreed to pay a royalty of $1 for each
unit sold for a period of fifty years, commencing on the date of first sale, for
all sales made by the Company of the original product to any potential customer
introduced to the Company for which a "Disclaimer Notice" was not given.
Competition
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Almost without exception, existing air treatment systems available in
the marketplace today use expensive replaceable filters. The "high end" of this
filter technique is the High-Efficiency-Particulate Air Filter (HEPA) System.
These systems require constant maintenance, and, if used in an environment where
airborne pathogens exist, must be disposed of under the guidelines of infectious
waste, referred to as "red bag" waste with special clothing and breathing
apparatus.
There is no existing product that can provide safe, effective
operation and still deliver high levels of purification against all three forms
of airborne contaminants. At one end of the product spectrum, the market
includes the replaceable air freshening devices found in restrooms that are
intended to mask lavatory and other odors. As has been discussed, while masking
the odor, these products are not capable of attacking the source of the odor.
The products also require frequent and costly replacement.
Awareness of the effects of poor IAQ continues to grow and will drive
customer's to look for more efficacious product. Companies such as ECOLAB, which
currently supply masking products to commercial accounts, will be looking for
additional products to sell and
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new sources of on-going revenue. The Eco-Rx product represents a significant
opportunity to them, due to on-going replacement cartridge sales volume against
a growing installed user base.
The predominant product forms are freestanding HEPA type air cleaners
and filtration devices built into HVAC systems. These products have some
effectiveness against airborne particulates, but they do little to combat odors
or pollutants like smoke, bacteria and viruses. Many of these filtering systems
are out-of-date; they all require frequent filter replacement and maintenance,
which ultimately drives their level of effectiveness. Because the filter's are
typically connected to in-line HVAC systems, this market represents enormous
sales potential.
At the other end of the spectrum are custom-designed air purification
devices, which include large freestanding germicidal UV or ozone generating
machines. These machines, which represent a very small portion of the market,
are extremely expensive (from $1,000 to $10,000 per unit). Since their
design/technology exposes the UV radiation or ozone to the environment, they
either require evacuation to run safely at levels with high enough
concentrations to be effective, or their performance against airborne
contaminants is relatively poor.
Employees
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The Company has four full-time employees. The Company retains the
services of Jerrold M. Nelson, Gary Arnold, Joseph M. Peiken and Roger A. Nelsen
on a full time basis. While these employees are not currently salaried, during
1998 the Company entered into agreements with each of them for consulting
services which were paid during the year through the settlement of loans made to
these employees during 1996 and 1997. See Item 7 of this Part I.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction
with the Financial Statements appearing elsewhere in this Registration
Statement.
Plan of Operations
The Company has been in the development stage since its incorporation
in the State of Florida on February 27, 1995. The Company's mission is to
pioneer the technology, design and manufacturing of air purification equipment
for the destruction of pathogens and for the efficient and effective removal of
odors, allergy and asthma causing agents, pollutants and certain gases from
indoor air environments. The Company has a wholly owned subsidiary, Eco-Aire
Marketing, Inc., which is inactive.
The Company remains a development stage company with immaterial
revenues and substantial general and administrative expenses. The Company's cash
has been provided from its fund-raising activities, all of which have been
conducted on a private basis, and from loans from shareholders. The notes
payable by the Company to stockholders and others at September 30, 1999 are as
follows:
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Notes Payable to Shareholders
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David Mack Note accruing interest at 10%; all unpaid interest and principal became $100,000
due during June 1998, and is personally guaranteed by Jerrold M. Nelson,
Joseph M. Peiken and Theodore M. Shlisky, three of the Company's
stockholders. As of December 31, 1998, this note was payable on demand
and was accruing interest at 18%. Mr. Mack has agreed to accept $5,000 as
payment in full of all interest due under this note if the note is paid
in full in 1999.
David Mack Unsecured loan, interest accruing at 8.75% payable annually commencing 80,000
December 1996. The loan became due during December 1998. As of December
31, 1998, this note was payable on demand and was accruing interest at
18%. Mr. Mack has agreed to accept $5,000 as payment in full of all
interest due under this note if the note is paid in full in 1999.
Virginia Levitt Various unsecured loans, interest accruing at 15%, with maturity dates 50,000
Eddie Levitt ranging from January 31, 1999 to March 12, 999. These notes were renewed
Morris Levitt and now have maturity dates ranging from November 30, 1999 to December
Alan Douglas 31, 1999.
Eddie Levitt Unsecured, bearing interest at 15%, due on demand. 20,000
Jerrold M. Nelson
Dan Glaviano
Notes Payable to Others
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Rozel International Unsecured, bearing interest at 12%. The maturity date of this note is 100,000
Holdings the earlier of: (a) the infusion of gross proceeds of $300,000 in
additional debt or equity capital, (b) the closing of an initial public
offering or "reverse merger" of the Company into a publicly traded entity
or (c) December 31, 1999.
_________
Total: $350,000
========
</TABLE>
The Company's plan of business is more particularly described in Item
1 of this Registration Statement under the caption "Description of Business."
The information which follows is a narrative description of the Company's
results of operations, liquidity and capital resources.
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Results of Operations
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The Company had revenues of $54,547 from its date of organization
(February 27, 1995) through September 30, 1999. It had no revenues for the nine
months ended September 30, 1999. The Company had a net loss of $112,688 for the
nine months ended September 30, 1999, a net loss of $487,662 for the nine months
ended September 30, 1998, and a net loss of $1,813,707 since February 27, 1995,
the date of inception. The Company's general and administrative expenses totaled
$94,586 and $501,679 for the nine months ended September 30, 1999 and 1998,
respectively, $324,879 for the year ended December 31, 1998, and $1,216,804 from
inception through September 30, 1999. As of September 30, 1999, total
liabilities exceeded total assets by $558,035.
Management does not believe that the Company will develop any material
revenues until the Company is able to license its technology or sell and
distribute its products. Management is presently involved in preliminary
negotiations for a licensing agreement which, if successfully completed, may
result in substantial profits to the Company. No assurances can be given,
however, that such negotiations will be successful. Until the Company is able to
arrange licensing agreements or sell its own products, it must depend upon
continued private sales of its securities and loans from its shareholders to
fund its losses.
Liquidity and Capital Resources
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The Company had cash of $1,037 at September 30, 1998, $5,837 at
December 31, 1998, and $500 at September 30, 1999. From its organization through
September 30, 1999, the Company has been substantially dependent on the proceeds
of various private offerings of its equity securities and loans from
stockholders to fund its operating expenses. The Company has principally engaged
in borrowing activity from its shareholders (who have loans outstanding to the
Company of $250,000 in the aggregate as of September 30, 1999) and one unrelated
party for $100,000. The Company has no loan arrangement with any commercial
lending institution and is unlikely to receive traditional commercial debt
financing in the foreseeable future. Management estimates the Company's present
operating expenses to be a minimum of $13,000 and a maximum of $20,000 per
month, depending upon the Company's payments to outside research consultants and
other consultants. The Company is also dependent upon the proceeds of financing
from the sale of its securities to fund production and development of new
products, and to implement the sale and leasing of its systems to commercial
customers.
The Company continues to explore opportunities with various investors,
joint venture candidates, and prospective licensees. As of the date of this
Registration Statement, the Company has not received any binding commitment for
equity or debt financing, nor has it entered into any joint venture or licensing
agreement with respect to its air machine. Management believes that the Company
can continue to operate on a maintenance basis at a cost of no more than $13,000
per month for the foreseeable future, provided that the Company obtains
sufficient cash from one or more of the sources described above to meet its
operating expenses.
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Development Stage Operations and Going Concern
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Since formation, the Company's operations have been devoted
primarily to:
. Raising capital
. Developing its product
. Obtaining financing
. Developing its marketing plan
Accordingly, the Company is considered to be in the development stage,
as its planned production and sales have not yet commenced.
Management's plans include the following:
. Commencement of production and development of new products
. Implementation of sales and leasing of commercial units
. Pursuing licensing agreements for the technology
The Company has made progress expanding the patent coverage and
marketing strategy. The Company has adopted a plan to implement certain courses
of action for raising capital and marketing. The Company has also held
presentations for major companies to license the technology, and manufacture,
sell and distribute its products, and is presently attempting to negotiate a
licensing agreement with a major company for those purposes; however, the
Company can make no assurances that such negotiations will be successful.
The Company has been in the development stage since its inception on
February 27, 1995. The financial statements included as part of this
registration statement are presented on the basis that the Company will continue
as a going concern. This contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a reasonable
length of time. As shown in the Company's consolidated financial statements, the
Company has incurred net losses for the nine months ended September 30, 1999 and
1998. As of September 30, 1999, total liabilities exceeded total assets by
$558,035.
The Company's ongoing losses, as well as the Company's ability to
obtain additional long-term financing, adequate stockholder capital
contributions, and future equity funding, create an uncertainty about the
Company's ability to continue as a going concern. The Company's financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
Item 3. Description of the Property
The Company's executive offices are currently located at 2051
Northeast 191 Drive, North Miami Beach, Florida 33179. As of September 30,
1999, the Company was not paying any rent for the use of these premises. As of
September 30, 1999, the Company had no laboratory, research or manufacturing
facilities. The Company leased a factory on a month-to-month basis at $1,000
per month through February 27, 1997, at which time a one year lease was executed
at a different location providing for a monthly rental of $1,375. The factory
was
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subsequently abandoned. Rental expense for all operating leases amounted to
approximately $41,000 during 1998. As of September 30, 1999, the Company had no
rent commitments.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The table on the next following page sets forth information with
respect to the anticipated beneficial ownership of the Common Stock by (i) each
of the officers and directors of the Company, (ii) each person known by the
Company to be the beneficial owner of five percent or more of the outstanding
Common Stock, and (iii) all executive officers and directors as a group, as of
September 30, 1999. Unless otherwise indicated, the Company believes that the
beneficial owner has sole voting and investment power over such shares.
Name and Address of Number of Shares Percentage
Beneficial Owner Beneficially Owned Ownership of Class/(1)/
- ----------------------------- ------------------ -----------------------
Gary Arnold/(3)(4)/ 440,000 7.53%
4929 Toby Lane
Kenner, LA 70065
Roger A. Nelsen/(2)(3)/ 150,328 2.57%
103 Lawlor Drive
Tolland, CT 06084
Dorothy Nelson/(4)(5)/ 1,127,233 19.29%
68 Zachariah Place
Warwick, RI 02889
Jerrold M. Nelson/(2)(3)/ 0 0.00%
68 Zachariah Place
Warwick, RI 02889
Joseph M. Peiken/(2)(3)(4)/ 1,170,429 20.03%
2051 Northeast 191 Drive
North Miami Beach, FL 33179
Theodore M. Shlisky/(4)/ 1,127,233 19.29%
48 Knights Road
Kings Park Lane, NY 11754
Kevin S. Waltzer/(4)/ 666,206 11.40%
2865 S. Gable Rd., PMB 393
New Town, PA 18940
All officers and directors
As a group (4 persons) 2,887,990 49.43%
____________________
See footnotes on the next page.
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/(1)/ Calculated on the basis of 5,842,939 shares of Common Stock issued and
outstanding.
/(2)/ Officer of the Company.
/(3)/ Director of the Company.
/(4)/ Includes, in accordance with Rule 13d-3, shares of which the named person
is the beneficial owner.
/(5)/ Ms. Nelson is the spouse of Jerrold M. Nelson, Chairman, President and
Chief Executive Officer of the Company.
Item 5. Directors, Executive Officers, Promoters, and Control Persons
The following table sets forth the directors, executive officers and
other significant employees of the Company, their ages, and all offices and
positions with the Company. Officers and other employees serve at the will of
the Board of Directors.
<TABLE>
<CAPTION>
Term Served as
Name of Director Age Director/Officer Positions With Company
- ---------------- --- -------------------- ------------------------------
<S> <C> <C> <C>
Gary Arnold 45 Since June 1998 Director, Vice Chairman
Roger A. Nelsen 52 Since September 1997 Director, Vice President of
Sales and Marketing
Jerrold M. Nelson 57 Since February 1995 Director, Chairman, President
and Chief Executive Officer
Joseph M. Peiken 59 Since February 1995 Vice President/Chief Financial
Officer and Secretary
</TABLE>
Jerrold M. Nelson, Chairman of the Board of Directors, President and
Chief Executive Officer. Mr. Nelson has over 27 years of experience in the
health care industry, where he worked at such major firms as Bionomics, OBI
Corporation, and Tuttnauer where he successfully marketed and sold existing
product lines in addition to founding a subsidiary for OBI Corporation to market
new products. He is a former Vice President of Sales for the Singer
Corporation. Mr. Nelson has demonstrated his ability to successfully market and
sell both established product lines in addition to participating in the
development and sales of new products. Mr. Nelson is a respected manager and
professional.
Joseph M. Peiken, Director, Vice President, Chief Financial Officer
and Secretary. Mr. Peiken received a Bachelor of Business Administration degree
from the University of Miami and is a Certified Public Accountant. He is a
former Partner of the Certified Public Accounting firm of Pannell Kerr Foster
and has taught continuing education classes for the certified public accounting
profession. Mr. Peiken has extensive experience in the operations
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of both large and small business entities with an emphasis on business involved
in medical and medical service disciplines.
Roger A. Nelsen, Director, Vice President/Sales and Marketing. Mr.
Nelsen received a B.S.B.A. degree from the University of Connecticut at Storrs.
Mr. Nelsen is the founder of Nelsen & Associates, a manufacturing representative
organization specializing in the medical products and health care industry. He
has extensive experience in the development and management of sales
organizations and has demonstrated those abilities with such well known business
entities as Johnson & Johnson, and Everest & Jennings.
Gary Arnold, Vice Chairman of the Board. Dr. Arnold has served as an
officer and a board member of the Company since June 1998. Since 1993, Dr.
Arnold has been CEO of Windhorse Corporation, an organizational consultancy
providing corporations with direction in all phases of expanding capital
markets, business evaluation and corporate planning. Windhorse designs,
develops and publishes educational, motivational and management courses. From
1991 to 1993, Dr. Arnold was CEO of International Commercial Collections and
Cook, Arnold and Associates in New Orleans, where he developed asset and
liability searches, employment screening and credit investigations and
collections for the Federal Government and private industry. Prior to this he
served as executive vice president of Capital Resources, Inc., as a financial
analyst with Shearson, Lehman, Hutton and Paine-Webber and with various other
financial and human resources companies.
Item 6. Executive Compensation
The following table and notes present for the two years ended December
31, 1998, the compensation paid by the Company to the Company's Chief Executive
Officer and to the Company's four most-highly compensated executive officers,
other than the Company's Chief Executive Officer, who were serving at December
31, 1998 and whose total annual salary and bonus exceeded $100,000 (none).
<TABLE>
<CAPTION>
Restricted Securities
Name and Stock Underlying
Principal Position Year Salary ($) Award(s)($) Options/SARs($)
(a) (b) (c) (f) (g)
- ------------------------ ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Jerrold M. Nelson 1998 -0- -- --
Chairman of the Board,
President
1997 -0- -- --
</TABLE>
Item 7. Certain Relationships and Related Transactions
On December 2, 1997, the Company issued 10,000 restricted shares to
Gary Arnold, a Director of the Company, in consideration of his services to the
Company.
15
<PAGE>
During 1996 and 1997, the Company loaned funds, at 7% interest, to
certain stockholders and others. As of December 31, 1997, the total loans
outstanding to such individuals were as follows:
Jerrold M. Nelson $ 45,351.00
Joseph M. Peiken 55,775.00
Roger A. Nelsen 45,322.00
Theodore M. Shlisky 49,106.82
Others 10,033.00
-----------
Total: $205,587.82
The foregoing loans and additional amounts were expensed as consulting
fees during 1998 as follows:
Jerrold M. Nelson $ 65,411.91
Joseph M. Peiken 71,275.00
Roger A. Nelsen 68,322.01
Theodore M. Shlisky 49,106.83
Others 12,533.00
-----------
Total: $266,648.75
There are no other loans or advances to officers, directors or
stockholders. There are no other contracts between the Company and any
insiders.
Item 8. Description of Securities
The following statements do not purport to be complete and are
qualified in their entirety by reference to the detailed provisions of the
Company's Articles of Incorporation and Bylaws, copies of which will be
furnished to an investor upon written request therefor. See "Additional
Information."
Common Stock
The Company is presently authorized to issue 10,000,000 Shares of
$.001 par value Common Stock. As of September 30, 1999, the Company had
5,842,939 shares issued and outstanding.
The holders of Shares are entitled to equal dividends and
distributions per share with respect to the Common Stock when, as and if
declared by the Board of Directors from funds legally available therefor. No
holder of any shares has a pre-emptive right to subscribe for any securities of
the Company nor are any common shares subject to redemption or convertible into
other securities of the Company. Upon liquidation, dissolution or winding up of
the Company, and after payment of creditors and preferred stockholders, if any,
the assets will be divided pro-rata on a share-for-share basis among the holders
of the shares. All shares now outstanding are
16
<PAGE>
fully paid, validly issued and non-assessable. Each share is entitled to one
vote with respect to the election of any director or any other matter upon which
shareholders are required or permitted to vote. Holders of the Company's shares
do not have cumulative voting rights, so that the holders of more than 50% of
the combined shares voting for the election of directors may elect all of the
directors, if they choose to do so and, in that event, the holders of the
remaining shares will not be able to elect any members to the Board of
Directors.
Preferred Stock
The Company is presently authorized to issue 5,000,000 shares of $.001
par value Preferred Stock. As of September 30, 1999, the Company has issued no
shares of Preferred Stock.
The Articles of Incorporation of the Company authorize the Board of
Directors to issue from time to time all or any shares of Preferred Stock, in
one or more series, and to fix for each such series such voting powers, full or
limited, or not voting powers, and such designations, preferences (including
seniority upon liquidation), relative participating optional or other special
rights, redemption rights, conversion privileges and such qualifications,
limitations, or restrictions thereof, as shall be stated and expressed in
resolutions adopted by the Board providing for the issuance of such series of
Preferred Stock.
17
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
The Company's Common Stock has been authorized to trade by the NASD on
the OTC Pink Sheets under the symbol "ECRX" as of September 22, 1999. The
Market Maker for the Common Stock of the Company is National Capital LLC, 6801
Broadway Extension, Oklahoma City, Oklahoma 73116 ("National Capital"). In a
letter to National Capital dated September 27, 1999, the NASD cleared National
Capital's request to submit a quote of $5.00 Bid, $5.50 Ask on the OTC Pink
Sheets for the Common Stock of the Company. Prior to September 1999, there was
no market for the Company's Common Stock. The Company is not aware of any
trades which occurred prior to September 30, 1999.
As of September 30, 1999, there were 60 holders of record of the
Company's common stock.
As of September 30, 1999, there were 5,836,439 shares of common stock
issued and outstanding. Of those shares, 5,497,326 shares are "restricted"
securities of the Company within the meaning of Rule 144(a)(3) promulgated under
the Securities Act of 1933, as amended, because such shares were issued and sold
by the Company in private transactions not involving a public offering. Of
these restricted securities, 2,887,990 shares held by affiliates may be sold
pursuant to a registration statement or pursuant to Rule 144.
In general, under Rule 144, as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (in general, a person who has a control relationship with the
company) who has owned restricted securities of common stock beneficially for at
least one year is entitled to sell, within any three-month period, that number
of shares of a class of securities that does not exceed the greater of (i) one
percent (1%) of the shares of that class then outstanding or, if the common
stock is quoted on NASDAQ, (ii) the average weekly trading volume of that class
during the four calendar weeks preceding such sale. A person who has not been
an affiliate of the Company for at least the three months immediately preceding
the sale and has beneficially owned shares of common stock for at least two (2)
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
No prediction can be made as to the effect, if any, that future sales
of shares of common stock or the availability of common stock for future sale
will have on the market price of the common stock prevailing from time to time.
Sales of substantial amounts of common stock on the public market could
adversely affect the prevailing market price of the common stock.
The Company has never paid a cash dividend on its common stock. The
payment of dividends may be made at the discretion of the Board of Directors of
the Company and will
18
<PAGE>
depend upon, among other things, the Company's operations, its capital
requirements, and its overall financial condition.
Item 2. Legal Proceedings
None.
Item 3. Changes In and Disagreements With Accountants
None.
Item 4. Recent Sales of Unregistered Securities
On September 22, 1999, the Company issued 6,500 restricted shares of
the Company in private sales for $32,500 ($5.00 per share).
Item 5. Indemnification of Officers and Directors
The statutes, charter provisions, bylaws, contracts or other
arrangements under which controlling persons, directors or officers of the
registrant are insured or indemnified in any manner against any liability which
they may incur in such capacity are as follows:
Florida Statute
- ---------------
Section 607.0850 of the Florida Statutes ("Indemnification of
Officers, Directors, Employees, and Agents") provides that each Florida
corporation shall have the following powers:
"(1) A corporation shall have power to indemnify any person who was
or is a party to any proceeding (other than an action by, or in the right of,
the corporation), by reason of the fact that he or she is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
liability incurred in connection with such proceeding, including any appeal
thereof, if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The termination of any proceeding by
judgment, order, settlement, or conviction or upon a plea of nolo contendere or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in, or not opposed to, the best interests of the corporation or, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
(2) A corporation shall have power to indemnify any person, who was or
is a party to any proceeding by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee, or agent of the
19
<PAGE>
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses and amounts paid in
settlement not exceeding, in the judgment of the board of directors, the
estimated expense of litigating the proceeding to conclusion, actually and
reasonably incurred in connection with the defense or settlement of such
proceeding, including any appeal thereof. Such indemnification shall be
authorized if such person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made under this subsection
in respect of any claim, issue, or matter as to which such person shall have
been adjudged to be liable unless, and only to the extent that, the court in
which such proceeding was brought, or any other court of competent jurisdiction,
shall determine upon application that, despite the adjudication of liability but
in view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsection (1) or subsection (2), or in defense of any
claim, issue, or matter therein, he or she shall be indemnified against expenses
actually and reasonably incurred by him or her in connection therewith.
(4) Any indemnification under subsection (1) or subsection (2), unless
pursuant to a determination by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in subsection (1) or
subsection (2). Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by
majority vote of a committee duly designated by the board of directors (in which
directors who are parties may participate) consisting solely of two or more
directors not at the time parties to the proceeding;
(c) By independent legal counsel:
1. Selected by the board of directors prescribed in paragraph
(a) or the committee prescribed in paragraph (b); or
2. If a quorum of the directors cannot be obtained for
paragraph (a) and the committee cannot be designated under paragraph (b),
selected by majority vote of the full board of directors (in which directors who
are parties may participate); or
(d) By the shareholders by a majority vote of a quorum consisting
of shareholders who were not parties to such proceeding or, if no such quorum is
obtainable, by a majority vote of shareholders who were not parties to such
proceeding.
20
<PAGE>
(5) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by paragraph (4)(c)
shall evaluate the reasonableness of expenses and may authorize indemnification.
(6) Expenses incurred by an officer or director in defending a civil
or criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if he or she is ultimately found
not to be entitled to indemnification by the corporation pursuant to this
section. Expenses incurred by other employees and agents may be paid in advance
upon such terms or conditions that the board of directors deems appropriate.
(7) The indemnification and advancement of expenses provided pursuant
to this section are not exclusive, and a corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office. However, indemnification or advancement of expenses shall not be made to
or on behalf of any director, officer, employee, or agent if a judgment or other
final adjudication establishes that his or her actions, or emissions to act,
were material to the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director, officer,
employee, or agent had reasonable cause to believe his or her conduct was lawful
or had no reasonable cause to believe his or her conduct was unlawful;
(b) A transaction from which the director, officer, employee, or
agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of s. 607.0834 are applicable; or
(d) Willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
(8) Indemnification and advancement of expenses as provided in this
section shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
(9) Unless the corporation's articles of incorporation provide
otherwise, notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary determination of the board or of the
shareholders in the specific case, a director, officer, employee, or agent of
the corporation who is or was a party to a proceeding may apply for
21
<PAGE>
indemnification or advancement of expenses, or both, to the court conducting the
proceeding, to the circuit court, or to another court of competent jurisdiction.
On receipt of an application, the court, after giving any notice that it
considers necessary, may order indemnification and advancement of expenses,
including expenses incurred in seeking court-ordered indemnification or
advancement of expenses, if it determines that:
(a) The director, officer, employee, or agent is entitled to
mandatory indemnification under subsection (3), in which case the court shall
also order the corporation to pay the director reasonable expenses incurred in
obtaining court-ordered indemnification or advancement of expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the exercise
by the corporation of its power pursuant to subsection (7); or
(c) The director, officer, employee, or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or both, in
view of all the relevant circumstances, regardless of whether such person met
the standard of conduct set forth in subsection (1), subsection (2), or
subsection (7).
(10) For purposes of this section, the term "corporation" includes, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, so that
any person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, is in the same position
under this section with respect to the resulting or surviving corporation as he
or she would have with respect to such constituent corporation if its separate
existence had continued.
(11) For purposes of this section:
(a) The term "other enterprises" includes employee benefit plans;
(b) The term "expenses" includes counsel fees, including those for
appeal;
(c) The term "liability" includes obligations to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to any
employee benefit plan), and expenses actually and reasonably incurred with
respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or
completed action, suit, or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal;
(e) The term "agent" includes a volunteer;
22
<PAGE>
(f) The term "serving at the request of the corporation" includes
any service as a director, officer, employee, or agent of the corporation that
imposes duties on such persons, including duties relating to an employee benefit
plan and its participants or beneficiaries; and
(g) The term "not opposed to the best interest of the corporation"
describes the actions of a person who acts in good faith and in a manner he or
she reasonably believes to be in the best interests of the participants and
beneficiaries of an employee benefit plan.
(12) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against the
person and incurred by him or her in any such capacity or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify the person against such liability under the provisions of this
section. "
Bylaw Provision
- ---------------
Article VIII of the registrant's bylaws provides as follows:
"Each person (including here and hereinafter, the heirs, executors,
administrators, or estate of such person): (I) who is or was a Director or
officer of the Corporation; (ii) who is or was an agent or employee of the
Corporation other than an officer and as to whom the Corporation has agreed to
grant such indemnity; or (iii) who is or was serving at the request of the
Corporation as its representative in the position of a Director, officer, agent
or employee of another corporation, partnership, joint venture, trust or other
enterprise and as to whom the Corporation has agreed to grant such indemnity;
shall be indemnified by the corporation as of right to the fullest extent
permitted or authorized by current or future legislation or by current or future
judicial or administrative decision, against any fine, liability, cost or
expense, including attorneys' fees, asserted against him or incurred by him in
his capacity as such Director, officer, agent, employee, or representative, or
arising out of his status as such Director, officer, agent, employee, or
representative, or arising out of his status as such Director, officer, agent,
employee or representative. The foregoing right of indemnification shall not be
exclusive of other rights to which those seeking an indemnification may be
entitled. The Corporation may maintain insurance, at its expense, to protect
itself and any such person against any such fine, liability, cost or expense,
whether or not the corporation would have the legal power to directly indemnify
him against such liability."
23
<PAGE>
PART F/S
<TABLE>
<S> <C>
Index to Financial Statements
Consolidated Financial Statements (Audited)...................................... 25
Report of Independent Auditor............................................... 26
Consolidated Balance Sheets as of December 31, 1998 and 1997................ 27
Consolidated Statements of Operations from Inception (02/27/95)
and for the Years Ended December 31, 1998 and 1997.......................... 28
Consolidated Statements of Stockholders' Deficit from Inception (02/27/95)
and the Years Ended December 31, 1998, 1997, 1996 (unaudited)
and 1995 (unaudited)........................................................ 29
Consolidated Statements of Cash Flows from Inception (02/27/95)
and for the Years Ended December 31, 1998 and 1997.......................... 30-31
Notes to Consolidated Financial Statements.................................. 32-40
Consolidated Interim Financial Statements (unaudited)............................ 41
Consolidated Balance Sheets (unaudited) as of
September 30, 1999 and 1998................................................. 42
Consolidated Statements of Operations (unaudited) for
the Quarter Ended September 30, 1999 and 1998............................... 43-44
Consolidated Statements of Stockholder's Deficit (unaudited)
for the Nine Months Ended September 30, 1999 and 1998....................... 45
Consolidated Statement of Cash Flows (unaudited) for
the Nine Months Ended September 30, 1999 and 1998 and for the
period from Inception (02/27/95) through December 31, 1999.................. 46
Notes to Consolidated Financial Statements.................................. 47-55
</TABLE>
24
<PAGE>
ECO-Rx, Inc. f/k/a Eco-Aire Company, Inc.
(A Development Stage Company)
Consolidated Financial Statements
For the Years Ended
December 31, 1998 and 1997
-25-
<PAGE>
[LETTERHEAD OF MORRISON, BROWN, ARGIZ & COMPANY APPEARS HERE]
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Stockholders
ECO-RX, Inc. f/k/a Eco-Aire Company, Inc.
We have audited the accompanying consolidated balance sheets of ECO-RX, Inc.
f/k/a Eco-Aire Company, Inc. (a development stage company) and subsidiary (the
"Company") as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' deficit and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The consolidated
statements of operations, stockholders' deficit and cash flows for the period
February 27, 1995 (inception) through December 31, 1998 are unaudited and we
express no opinion on those statements.
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ECO-RX, Inc. f/k/a
Eco-Aire Company, Inc. and subsidiary as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is in the development stage and its ability to
continue in the normal course of business is dependent upon its ability to raise
capital and the success of future operations. These uncertainties raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
/s/ Morrison, Brown, Argiz & Company
- ------------------------------------
Certified Public Accountants
Miami, Florida
July 29, 1999
-26-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 836 $ 79,118
Inventory 5,307 5,307
Accounts receivable - 16,000
Stock subscription receivable 15,000 -
----------- ----------
TOTAL CURRENT ASSETS 21,143 100,425
ADVANCES TO STOCKHOLDERS - 205,587
FURNITURE AND EQUIPMENT, NET 13,926 18,251
OTHER ASSETS, NET 2,755 38,007
----------- ----------
TOTAL ASSETS $ 37,824 $ 362,270
=========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current portion of lease obligation $ 10,418 $ 6,710
Accounts payable and accrued expenses 233,932 121,900
Notes payable to stockholders 240,000 330,000
----------- ----------
TOTAL CURRENT LIABILITIES 484,350 458,610
LEASE OBLIGATION 22,573 36,698
----------- ----------
TOTAL LIABILITIES 506,923 495,308
----------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock - $.001 par value, 5,000,000 shares
authorized; none issued and outstanding
Common stock - $.001 par value, 10,000,000 shares
authorized; 5,836,439 and 4,751,452 shares issued
and outstanding at December 31, 1998 and 1997,
respectively 5,836 4,751
Additional paid-in capital 1,226,084 847,119
Deficit accumulated during the development stage (1,701,019) (984,908)
----------- ----------
TOTAL STOCKHOLDERS' DEFICIT (469,099) (133,038)
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 37,824 $ 362,270
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-27-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
February 27, 1995
(Inception)
through
Year Ended Year Ended December 31,
December 31, December 31, 1998
1998 1997 (Unaudited)
------------ ------------- -------------
<S> <C> <C> <C>
COSTS AND EXPENSES
General and administrative $ 713,721 $ 296,881 $ 1,122,218
Amortization and depreciation 11,682 18,128 50,063
Interest 40,708 21,147 72,065
Research and development - 28,325 54,342
Abandonment of property - 460,558 460,558
------------ ------------- -------------
TOTAL EXPENSES 766,111 825,039 1,759,246
INTEREST INCOME - 8,227 8,227
OTHER INCOME 50,000 - 50,000
------------ ------------- -------------
NET LOSS $ (716,111) $ (816,812) $ (1,701,019)
============ ============= =============
BASIC AND DILUTED NET LOSS
PER COMMON SHARE $ (.12) $ (.17) $ (.29)
============ ============= =============
SHARES USED IN THE CALCULATION
OF BASIC AND DILUTED NET LOSS
PER SHARE 5,836,439 4,751,452 5,836,439
============ ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-28-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
------------------------
Shares Par Value Capital Stage Total
------------------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Balances at February 27, 1995
(inception) (unaudited) - $ - $ - $ - $ -
Common stock issued for cash
(unaudited) 386 - 92,715 - 92,715
Common stock issued for
services (unaudited) 124 - - - -
Stock splits and change in
par value (unaudited) 3,699,987 3,700 (3,700) - -
--------- -------- ------------ ------------ ----------
Balances at December 31, 1995
(unaudited) 3,700,497 3,700 89,015 - 92,715
Common stock issued for cash
(unaudited) 12 - 60,000 - 60,000
Stock splits and change in
par value (unaudited) 94,216 95 (95) - -
Net loss (unaudited) - - - (168,096) (168,096)
--------- -------- ------------ ------------ ----------
Balances at December 31, 1996
(unaudited) 3,794,725 3,795 148,920 (168,096) (15,381)
Common stock issued for cash 130 - 699,155 - 699,155
Common stock issued for services 1 - - - -
Stock splits 956,596 956 (956) - -
Net loss - - - (816,812) (816,812)
--------- -------- ------------ ------------ ----------
Balances at December 31, 1997 4,751,452 4,751 847,119 (984,908) (133,038)
Common stock issued for cash
and stock subscription receivable 112,000 112 213,888 - 214,000
Common stock issued in
exchange for forgiveness of debt 75,000 75 149,925 - 150,000
Common stock issued
for services 897,987 898 15,152 - 16,050
Net loss - - - (716,111) (716,111)
--------- -------- ------------ ------------ ----------
Balances at December 31, 1998 5,836,439 $ 5,836 $ 1,226,084 $ (1,701,019) $ 469,099
========= ======== ============ ============ ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-29-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Period
February 27, 1995
(Inception)
through
Year Ended Year Ended December 31,
December 31, December 31, 1998
1998 1997 (Unaudited)
------------ ------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (716,111) $ (816,812) $ (1,701,019)
------------ ------------ -----------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 11,682 18,128 23,608
Abandonment of property - 460,558 -
Services received in exchange for stock 16,050 - -
Changes in operating assets and liabilities:
Inventory - (91,671) (5,307)
Accounts receivable 16,000 13,160 (15,000)
Advances to stockholders 205,587 (8,227) -
Other assets 32,573 (57,840) (2,755)
Accounts payable and accrued expenses 112,032 58,974 233,932
------------ ------------ -----------------
TOTAL ADJUSTMENTS 393,924 393,082 234,478
------------ ------------ -----------------
NET CASH USED IN OPERATING
ACTIVITIES (322,187) (423,730) (1,466,541)
------------ ------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to stockholders - (197,360) -
Capital expenditures (4,678) (160,202) (37,534)
------------ ------------ -----------------
NET CASH USED IN INVESTING
ACTIVITIES (4,678) (357,562) (37,534)
------------ ------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stockholder loans 60,000 150,000 240,000
Proceeds from issuance of common stock 199,000 699,155 1,231,920
Proceeds from (payment of) lease obligation (10,417) (8,680) 32,991
------------ ------------ -----------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 248,583 840,475 1,504,911
------------ ------------ -----------------
NET INCREASE (DECREASE) IN CASH (78,282) 59,183 836
CASH AT BEGINNING OF YEAR 79,118 19,935 -
------------ ------------ -----------------
CASH AT END OF YEAR $ 836 $ 79,118 $ 836
============ ============ =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-30-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Period
February 27, 1995
(Inception)
through
Year Ended Year Ended December 31,
December 31, December 31, 1998
1998 1997 (Unaudited)
------------ ------------ -----------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $ 22,063 $ 11,527 $ 33,590
============ ============ =================
SUPPLEMENTAL SCHEDULE OF
NON-CASH ACTIVITY:
Leased equipment $ - $ 52,088 $ 52,088
============ ============ =================
75,000 shares of common stock issued
in exchange for settlement of outstanding
note to a stockholder $ 150,000 $ - $ 150,000
============ ============ =================
897,987 shares of common stock issued
in exchange for services received $ 16,050 $ - $ 16,050
============ ============ =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-31-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
ECO-Rx, Inc. f/k/a Eco-Aire Company, Inc. has been in the
development stage since its incorporation in the State of Florida
on February 27, 1995. The Company's mission is to pioneer the
technology, design and manufacturing of air purification
equipment for the destruction of pathogens and for the efficient
and effective removal of odors, allergy and asthma causing
agents, pollutants and certain gases from indoor air
environments.
The consolidated financial statements include the accounts of
ECO-Rx, Inc. f/k/a Eco-Aire Company, Inc. and its wholly-owned
subsidiary, Eco-Aire Marketing, Inc., collectively referred to as
the "Company". Eco-Aire Marketing, Inc. is inactive and ECO-Rx,
Inc. f/k/a Eco-Aire Company, Inc.'s investment in said company
has been eliminated in consolidation.
(B) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out)
or market and consist primarily of metal, bulbs, ballasts,
machines in process and miscellaneous supplies.
(C) READINESS FOR YEAR 2000
The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the
applicable year. As a result, those computer programs having
time-sensitive software would recognize a date using "00" as the
year 1900 rather than the year 2000. The Company is in its
development stage and does not have sophisticated computer
equipment that may cause the Year 2000 issue to adversely affect
its operations.
(D) INTANGIBLE ASSETS
In April, 1998, the AICPA issued Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" ("SOP 98-5"). SOP
98-5 provides guidance for the financial reporting of start-up
costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. The
Company has adopted SOP 98-5 as of December 31, 1998.
32
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) INCOME TAX
Effective January 1, 1996, the Company, with the consent of its
stockholders, elected to be treated as an "S" Corporation for
income tax purposes, under which election federal and state
income taxes are payable by the individual stockholders rather
than the Company. Accordingly, no provision or liability for
income taxes has been included in the consolidated financial
statements for the year ended December 31, 1997.
On September 30, 1998, the Company terminated its election to be
treated as an S Corporation. The Company now accounts for income
taxes under Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". As of December 31, 1998, the
Company has an unused net operating loss. Due to the uncertainty
relating to the ultimate utilization of the net operating loss,
the Company has provided a valuation reserve for the entire
amount at December 31, 1998.
(F) EARNINGS PER SHARE
Earnings per share is determined in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share".
This statement establishes standards for computing and presenting
earnings per share ("EPS"). It replaces the presentation of
primary EPS with a presentation of basic EPS. This statement
requires restatement of all prior-period EPS data presented.
The net loss per share is computed by dividing the net loss for
the period by the weighted average number of shares outstanding
(as adjusted retroactively for the dilutive effect of common
stock options) for the period plus the dilutive effect of
outstanding common stock options and warrants considered to be
common stock equivalents. Stock options and other common stock
equivalents are excluded from the calculations as their effect
would be anti-dilutive.
Basic and diluted earnings per share amounts are equal because
the Company has a net loss and consideration of the outstanding
options, warrants and their equivalents would result in anti-
dilutive effects to earnings per share.
The weighted average number of shares used to compute EPS was
5,836,439 and 4,751,452 for the years ended December 31, 1998 and
1997, respectively.
33
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) USE OF 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 disclosures of contingent assets
and liabilities at the date of the financial statements and the
related reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates made in preparation of the financial statements.
(H) FURNITURE AND EQUIPMENT
The Company's furniture and equipment is stated at cost.
Depreciation is computed on the straight line method over the
estimated useful lives of the assets, which range from 3 to 5
years.
(I) CONCENTRATIONS OF CREDIT RISK
A major portion of the Company's business is expected to be
conducted using its patented technology. Consequently, the
Company's profitability may be subjected to changes in technology
and its use in commerce.
(J) NEW ACCOUNTING PRONOUNCEMENTS
The Company has adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No.
130") effective for the period ending December 31, 1998. SFAS No.
130 requires companies to report by major components and in
total, the change of its net assets during the period from non-
owner sources. The adoption of SFAS No. 130 did not have a
significant effect on the Company's financial position, results
of operations, or cash flows.
During 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No.
131 establishes standards for the way companies report
information about operating segments in annual financial
statements and establishes standards for related disclosures
about products and services, geographic areas and major
customers. The Company's air purification business is currently
the only segment reportable under SFAS No. 131.
(K) PATENTS
The Company has applied for several patents in connection with
its technology; however, the Company has elected to expense all
costs associated with obtaining these patents for the year ending
December 31, 1998.
34
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN
Since formation, the Company's operations have been devoted primarily
to:
. Raising capital
. Developing its product
. Obtaining financing
. Developing its marketing plan
Accordingly, the Company is considered to be in the development stage,
as its planned production and sales have not yet commenced.
Management's plans include the following:
. Commencement of production and development of new products
. Implementation of sales and leasing of commercial units
. Pursuing licensing agreements for the technology
The Company has made progress expanding the patent coverage and
marketing strategy. The Company has adopted a plan to implement
certain courses of action for raising capital and marketing. The
Company has also held presentations for major companies, to license
the technology, sell or distribute its products.
The Company has been in the development stage since its inception on
February 27, 1995. These statements are presented on the basis that
the Company will continue as a going concern. This contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business over a reasonable length of time. As shown
in the accompanying consolidated financial statements, the Company has
incurred net losses during the years ended December 31, 1998 and 1997
of $716,111 and $816,812, respectively. As of December 31, 1998,
current liabilities exceeded current assets by $463,207.
These factors, as well as the Company's ability to obtain additional
long-term financing, adequate stockholder capital contributions, and
future equity funding, create an uncertainty about the Company's
ability to continue as a going concern. The financial statements do
not include any adjustments that might be necessary should the Company
be unable to continue as a going concern.
35
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 3 - RELATED PARTIES
During 1997, several advances were made to certain shareholders which
accrued interest at 7% per annum. During 1998, the Company entered
into agreements with these shareholders for consulting services which
were paid during the year through the settlement of the open advances.
NOTE 4 - STOCK SUBSCRIPTION RECEIVABLE
The Company recorded a stock subscription receivable in the amount of
$15,000 at December 31, 1998. The monies were subsequently collected
by June, 1999. The receivable was recorded as a current asset due to
the short term nature of the repayment period.
NOTE 5 - FURNITURE AND EQUIPMENT
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Furniture and equipment $ 37,534 $ 32,855
Less accumulated depreciation 23,608 14,604
-------- --------
$ 13,926 $ 18,251
======== ========
</TABLE>
Depreciation expense for the years ended December 31, 1998 and 1997
was $9,003 and $16,700, respectively.
NOTE 6 - OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Patents $ - $ 26,218
Developmental costs - 16,031
Deposits 2,755 7,035
Prepaid royalty - 10,000
Organization costs - 2,500
-------- --------
2,755 61,784
Less accumulated amortization - 23,777
-------- --------
$ 2,755 $ 38,007
======== ========
</TABLE>
Amortization expense for the years ended December 31, 1998 and 1997
was $2,679 and $1,428, respectively.
36
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
These accounts consist of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Accounts payable $205,666 $112,280
Accrued interest 28,266 9,620
-------- --------
$233,932 $121,900
======== ========
</TABLE>
NOTE 8 - NOTES PAYABLE TO STOCKHOLDERS
The notes payable to stockholders at December 31, 1998 and 1997 is
comprised of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Note accruing interest at 10%; all unpaid
interest and principal becomes due June,
1998, and is personally guaranteed by three
of the Company's stockholders. As of
December 31, 1998 this note was payable on
demand and was accruing interest at 18%. $100,000 $100,000
Unsecured loan, interest accruing at 8.75%
payable annually commencing December, 1996.
Loan matures December, 1998 at which time
all principal and unpaid interest is due.
As of December 31, 1998 this note was
payable on demand and was accruing interest
at 18%. 80,000 80,000
Note accruing interest at 15%, maturing in
May, 1998. This note was converted to 75,000
shares of common stock during 1998. - 150,000
Various unsecured loans, interest accruing
at 15%, with maturity dates ranging from
January, 1999 to March, 1999. These notes
were renewed and now have maturity dates
ranging from November, 1999 to December,
1999. 50,000 -
Unsecured, non-interest bearing note
payable, due on demand. This note
was repaid in January, 1999. 10,000 -
-------- --------
$240,000 $330,000
======== ========
</TABLE>
37
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 9 - COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company, from time to time, is a defendant in legal actions
arising from normal business activities. Management has reviewed
pending litigation with legal counsel and believes that those actions
are without merit or that the ultimate liability, if any, resulting
from them will not materially affect the Company's financial position.
OPERATING LEASE
The Company leased a factory on a month-to-month basis at $1,000 per
month through February, 1997, at which time a one year lease was
executed at a different location providing for a monthly rental of
$1,375. The factory was subsequently abandoned. Rental expense for all
operating leases amounted to approximately $41,000 and $25,000 during
1998 and 1997, respectively. As of December 31, 1998, the Company had
no rent commitments.
LEASE OBLIGATION
Future minimum lease payments under a noncancelable equipment lease
consisted of the following at December 31, 1998:
<TABLE>
Years ending December 31,
<S> <C>
1999 $10,418
2000 10,418
2001 10,418
2002 1,737
---------
$ 32,991
=========
</TABLE>
DESIGN AND CONSULTING AGREEMENT
During 1997, the Company entered into a design and consulting services
agreement with a third party. The Company shall pay a royalty of $1
for each unit sold for a period of five years, commencing on the date
of first sale. The Company will pay the same $1 royalty for an
additional 45 years with respect to any and all sales made by the
Company of the original product to any potential customer introduced
to the Company for which a "Disclaimer Notice" was not given.
38
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 10 - STOCKHOLDERS' DEFICIT
LOSS PER SHARE
Loss per share is computed by dividing net loss by the weighted
average number of outstanding shares of common stock. Net loss per
share for the periods presented does not include the effects of stock
options and warrants because their effects would be anti-dilutive.
The following table sets forth the computation of net loss per share:
<TABLE>
<CAPTION>
For the Period
February 27,
1995
(inception)
Year Ended Year Ended through
December 31, December 31, December 31,
1998 1997 (Unaudited)
------------- ------------ -------------
<S> <C> <C> <C>
Net loss $ (716,111) $ (816,812) $ (1,701,019)
============= ============ =============
Basic and diluted:
Weighted average common shares
outstanding used in computing basic
net loss per share 5,836,439 4,751,452 5,836,439
============= ============ =============
Basic and diluted net loss per share $ (.12) $ (.17) $ (.29)
============= ============ =============
</TABLE>
During 1997, the Company amended its articles of incorporation and
changed the capital structure from common stock authorized of 1,000
shares with a par value of $1, to 10,000,000 shares of common stock
authorized with a par value of $.001 and also authorized preferred
stock of 5,000,000 shares with a par value of $.001.
During 1997, the Company effectuated two stock splits, a 2,000 for 1
stock split and a 3.60266 for 1 stock split, for its common stock.
NOTE 11 - FAIR VALUE
The Company has estimated the fair value of its financial instruments
at December 31, 1998 and 1997, as required by Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of
Financial Instruments." The carrying values of cash, accounts
receivable, stock subscription receivable, accounts payable and
accrued expenses and debt are reasonable estimates of their fair
values.
39
<PAGE>
NOTE 12 - SHARES ISSUED FOR SERVICES
During 1998, 897,829 shares of common stock were issued in exchange
for services provided to the Company. 160,500 of these shares were
recorded at the market value of the services received. The remaining
737,329 shares were issued for services performed in connection with
the sale of stock and the cost of these services are reflected as a
direct reduction in capital in the consolidated financial statements.
None of these shares were sold through National Association of
Securities Dealers, Inc. (NASD) Broker/Dealers, nor were any
commissions paid for these shares. None of the shares issued for
services have been issued for future sales of stock.
NOTE 13 - SUBSEQUENT EVENTS
In January, 1999, the Company obtained a $100,000 loan bearing
interest at 12%. The maturity date of this note is the earlier of: (a)
the infusion of gross proceeds of $300,000 in additional debt or
equity capital, (b) the closing of an initial public offering or
"reverse merger" of the Company into a publicly traded entity or (c)
December 31, 1999.
On July 27, 1999, the Company changed its name to Eco-RX, Inc.
40
<PAGE>
ECO-Rx, Inc. f/k/a Eco-Aire Company, Inc.
(A Development Stage Company)
Consolidated Financial Statements
For the Nine Months Ended
September 30, 1999 and 1998
And
For the Quarter ended
September 30, 1999 and 1998
(UNAUDITED)
41
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
SEPTEMBER 30, 1999 and 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash $ 500 $ 1,037
Inventory 5,307 5,307
-------------- -------------
TOTAL CURRENT ASSETS 5,807 6,344
-------------- -------------
FURNITURE AND EQUIPMENT, NET 7,114 19,961
OTHER ASSETS, NET 2,755 29,320
-------------- -------------
TOTAL ASSETS $ 15,676 $ 55,625
============== =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 194,338 $ 99,278
Notes payable - stockholders 250,000 240,000
Notes payable - others 100,000 0
Current portion of lease obligation 10,416 10,416
-------------- -------------
TOTAL CURRENT LIABILITIES 554,754 349,694
LEASE OBLIGATION 18,957 27,784
-------------- -------------
TOTAL LIABILITIES 573,711 377,478
STOCKHOLDERS' DEFICIT
Preferred stock - $0.001 par value, 5,000,000 shares
authorized; none issued and outstanding
Common stock - $0.001 par value, 10,000,000 shares
authorized, 5,836,439 and 5,814,106 shares 5,882 5,180
issued and outstanding.
Additional paid-in capital 1,249,788 1,145,537
Deficit accumulated during the development stage (1,813,705) (1,472,570)
-------------- -------------
TOTAL STOCKHOLDERS' DEFICIT (558,035) (321,853)
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 15,676 $ 55,625
============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
42
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
SEPTEMBER 30, 1999 and 1998
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
Nine Months Nine Months (Inception)
Ended Ended Through
September 30, September 30, September 30,
1999 1988 1999
---------------- --------------- ------------------
<S> <C> <C> <C>
COSTS AND EXPENSES
General and administrative 94,586 501,679 1,216,804
Amortization and depreciation 6,813 15,356 56,876
Interest 6,848 16,322 78,913
Research and development 4,441 4,305 58,783
Abandonment of property - - 460,558
---------------- --------------- ------------------
TOTAL EXPENSES 112,688 537,662 1,871,934
INTEREST INCOME 8,227
OTHER INCOME 50,000 50,000
---------------- --------------- ------------------
NET LOSS $ (112,688) $ (487,662) $ (1,813,707)
================ =============== ==================
BASIC AND DILUTED NET LOSS
PER COMMON SHARE $ (0.02) $ (0.09) $ (0.31)
================ =============== ==================
SHARES USED IN THE CALCULATION OF
BASIC AND DILUTED NET LOSS
PER SHARE 5,836,439 5,477,460 5,836,439
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
43
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
SEPTEMBER 30, 1999 and 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
September 30, September 30,
1999 1988
------------- -------------
<S> <C> <C>
COSTS AND EXPENSES
General and administrative 38,340 25,626
Amortization and depreciation 2,271 2,862
Interest 2,468 4,250
Research and development - 6,131
--------- ---------
TOTAL EXPENSES 43,079 38,869
--------- ---------
NET LOSS $ (43,078) $ (38,869)
========= =========
BASIC AND DILUTED NET LOSS
PER COMMON SHARE $ 0.007 $ 0.007
========= =========
SHARES USED IN THE CALCULATION OF
BASIC AND DILUTED NET LOSS
PER SHARE 5,836,439 5,477,460
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
44
<PAGE>
ECO-RX, INC. F/K/A/ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 and 1998
(UNAUDITED)
<TABLE>
<CAPTION> Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
-----------------------------
Shares Par Value Capital Stage total
----------- ------------ -------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances - January 1, 1998 4,751,452 4,751 847,119 (984,908) (133,038)
Common stock issued for cash
and stock subscription receivable 112,000 112 213,888 214,000
Common stock issued in
exchange for forgiveness of debt 75,000 75 1,479,925 150,000
Common stock issued for
services 897,987 898 15,152 16,050
Net Loss (716,111) (716,111)
Balances - January 1, 1999 5,836,439 $5,836 $1,226,084 ($1,701,019) $469,099
Issuance of common
Stock 6,500 65 23,685 23,750
Net loss (112,688) (112,688)
----------- ------------ ------------ ------------ ------------
Balances - September 30, 1999 5,842,939 5,901 1,249,769 (1,813,707) 380,161
=========== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
45
<PAGE>
Eco-Rx, Inc.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
27-Feb-95
(Inception)
Nine Months Nine Months through
ended ended December 31,
September 30, September 30, 1999
1999 1998 (Unaudited)
------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (112,688) (487,662) (1,813,707)
------------ ------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 6,813 15,356 30,421
Abandonment of property
Services received in exchange for stock
Changes in operating assets and liabilities:
Inventory 0 (5,307)
Accounts receivables 15,000 16,000 -
Other assets 8,687 (2,755)
Advances to stockholders 205,587
Accounts payable and accrued expenses (39,594) (22,622) 194,338
------------ ------------ ------------
TOTAL ADJUSTMENTS (17,781) 223,008 216,697
------------ ------------ ------------
NET CASH USED IN OPERATING
ACTIVITIES (130,469) (264,654) (1,597,010)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to stockholders
Capital expenditures (17,066) (37,534)
------------ ------------ ------------
NET CASH USED IN INVESTING
ACTIVITES 0 (17,066) (37,534)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stockholder loans 10,000 (90,000) 250,000
100,000 100,000
Proceeds from issuance of common stock 23,750 298,847 1,255,670
Proceeds from (payment of) lease obligation (3,618) (5,208) 29,373
------------ ------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 130,132 203,639 1,635,043
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (337) (78,081) 499
CASH AT BEGINNING OF YEAR 836 79,118
------------ ------------ ------------
CASH AT END OF PERIOD $ 499 $ 1,037 $ 499
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest: $ 6,848 $ 16,322 $ 40,438
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
46
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
and
FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
ECO-Rx, Inc. f/k/a Eco-Aire Company, Inc. has been in the
development stage since its incorporation in the State of Florida
on February 27, 1995. The Company's mission is to pioneer the
technology, design and manufacturing of air purification
equipment for the destruction of pathogens and for the efficient
and effective removal of odors, allergy and asthma causing
agents, pollutants and certain gases from indoor air
environments.
The consolidated financial statements include the accounts of
ECO-Rx, Inc. f/k/a Eco-Aire Company, Inc. and its wholly-owned
subsidiary, Eco-Aire Marketing, Inc., collectively referred to as
the "Company". Eco-Aire Marketing, Inc. is inactive and ECO-Rx,
Inc. f/k/a Eco-Aire Company, Inc.'s investment in said company
has been eliminated in consolidation.
(B) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out)
or market and consist primarily of metal, bulbs, ballasts,
machines in process and miscellaneous supplies.
(C) READINESS FOR YEAR 2000
The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the
applicable year. As a result, those computer programs having
time-sensitive software would recognize a date using "00" as
the year 1900 rather than the year 2000. The Company is in its
development stage and does not have sophisticated computer
equipment that may cause the Year 2000 issue to adversely
affect its operations.
(D) INTANGIBLE ASSETS
In April, 1998, the AICPA issued Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" ("SOP 98-5"). SOP
98-5 provides guidance for the financial reporting of start-up
costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. The
Company has adopted SOP 98-5 as of December 31, 1998.
-47-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
and
FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) INCOME TAX
Effective January 1, 1996, the Company, with the consent of its
stockholders, elected to be treated as an "S" Corporation for
income tax purposes, under which election federal and state
income taxes are payable by the individual stockholders rather
than the Company. Accordingly, no provision or liability for
income taxes has been included in the consolidated financial
statements for the year ended December 31, 1997.
On September 30, 1998, the Company terminated its election to be
treated as an S Corporation. The Company now accounts for income
taxes under Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". As of December 31, 1998, the
Company has an unused net operating loss. Due to the uncertainty
relating to the ultimate utilization of the net operating loss,
the Company has provided a valuation reserve for the entire
amount at December 31, 1998.
(F) EARNINGS PER SHARE
Earnings per share is determined in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share".
This statement establishes standards for computing and presenting
earnings per share ("EPS"). It replaces the presentation of
primary EPS with a presentation of basic EPS. This statement
requires restatement of all prior-period EPS data presented.
The net loss per share is computed by dividing the net loss for
the period by the weighted average number of shares outstanding
(as adjusted retroactively for the dilutive effect of common
stock options) for the period plus the dilutive effect of
outstanding common stock options and warrants considered to be
common stock equivalents. Stock options and other common stock
equivalents are excluded from the calculations as their effect
would be anti-dilutive.
Basic and diluted earnings per share amounts are equal because
the Company has a net loss and consideration of the outstanding
options, warrants and their equivalents would result in anti-
dilutive effects to earnings per share.
The weighted average number of shares used to compute EPS was
5,836,439 and 5,477,460 for nine months ended September 30, 1999
and 1998 respectively.
-48-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
and
FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) USE OF 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 disclosures of contingent assets
and liabilities at the date of the financial statements and the
related reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates made in preparation of the financial statements.
(H) FURNITURE AND EQUIPMENT
The Company's furniture and equipment is stated at cost.
Depreciation is computed on the straight line method over the
estimated useful lives of the assets, which range from 3 to 5
years.
(I) CONCENTRATIONS OF CREDIT RISK
A major portion of the Company's business is expected to be
conducted using its patented technology. Consequently, the
Company's profitability may be subjected to changes in technology
and its use in commerce.
(J) NEW ACCOUNTING PRONOUNCEMENTS
The Company has adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No.
130") effective for the period ending December 31, 1998. SFAS No.
130 requires companies to report by major components and in
total, the change of its net assets during the period from non-
owner sources. The adoption of SFAS No. 130 did not have a
significant effect on the Company's financial position, results
of operations, or cash flows.
During 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No.
131 establishes standards for the way companies report
information about operating segments in annual financial
statements and establishes standards for related disclosures
about products and services, geographic areas and major
customers. The Company's air purification business is currently
the only segment reportable under SFAS No. 131.
-49-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
and
FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(K) PATENTS
The Company has applied for several patents in connection with
its technology; however, the Company has elected to expense all
costs associated with obtaining these patents.
NOTE 2 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN
Since formation, the Company's operations have been devoted primarily
to:
. Raising capital
. Developing its product
. Obtaining financing
. Developing its marketing plan
Accordingly, the Company is considered to be in the development stage,
as its planned production and sales have not yet commenced.
Management's plans include the following:
. Commencement of production and development of new products
. Implementation of sales and leasing of commercial units
. Pursuing licensing agreements for the technology
The Company has made progress expanding the patent coverage and
marketing strategy. The Company has adopted a plan to implement
certain courses of action for raising capital and marketing. The
Company has also held presentations for major companies, to license
the technology, sell or distribute its products.
The Company has been in the development stage since its inception on
February 27, 1995. These statements are presented on the basis that
the Company will continue as a going concern. This contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business over a reasonable length of time. As shown
in the accompanying consolidated financial statements, the Company has
incurred net losses for the Nine Months ended September 30, 1999 and
1998. As of September 30, 1999, current liabilities exceeded current
assets by $548,947.
-50-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
and
FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
These factors, as well as the Company's ability to obtain additional
long-term financing, adequate stockholder capital contributions, and
future equity funding, create an uncertainty about the Company's
ability to continue as a going concern. The financial statements do
not include any adjustments that might be necessary should the Company
be unable to continue as a going concern.
NOTE 3 - RELATED PARTIES
During 1997, several advances were made to certain shareholders which
accrued interest at 7% per annum. During 1998, the Company entered
into agreements with these shareholders for consulting services which
were paid during the year through the settlement of the open advances.
NOTE 4 - STOCK SUBSCRIPTION RECEIVABLE
The Company recorded a stock subscription receivable in the amount of
$15,000 at December 31, 1998. The monies were subsequently collected
by June, 1999. The receivable was recorded as a current asset due to
the short term nature of the repayment period.
NOTE 5 - FURNITURE AND EQUIPMENT
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Furniture and equipment $ 37,534 $ 38,565
Less accumulated depreciation 30,420 18,604
------------ --------------
$ 7,114 $ 19,961
============ ==============
</TABLE>
Depreciation expense for the nine months ended September 30, 1999 and
1998 was $6,813 and $6,162, respectively.
NOTE 6 - OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
1999 1998
------------ --------------
<S> <C> <C>
Deposits $ 2,755 $ 2,755
Prepaid expenses - 26,565
------------ --------------
$ 2,755 $ 29,320
============ ==============
</TABLE>
-51-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
and
FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
Amortization expense for the nine months ended September 30, 1999 and
1998 was $0 and $9,194, respectively.
NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
These accounts consist of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -------------
<C> <C>
<S>
Accounts payable $ 182,726 $ 95,028
Accrued interest 11,612 4,250
----------- -------------
$ 194,338 $ 99,278
=========== =============
</TABLE>
NOTE 8 - NOTES PAYABLE TO STOCKHOLDERS
The notes payable to stockholders at September 30, 1999 and 1998 is
comprised of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -------------
<S> <C> <C>
Note accruing interest at 10%;
all unpaid interest and principal
becomes due June, 1998, and is
personally guaranteed by three
of the Company's stockholders. As
of December 31, 1998 this note was
payable on demand and was accruing
interest at 18%. $ 100,000 $ 100,000
Note accruing interest at 12%;
maturing the Earlier of: (a) the
infusing of gross proceeds of
$300,000 in additional debt or
equity capital, (b) the closing of
an initial public offering or
"reverse merger" of the Company into
a publicly traded entity or
(c) December 31, 1999. $ 100,000
Unsecured loan, interest accruing at
8.75% payable annually commencing
December, 1996. Loan matures December,
1998 at which time all principal and
unpaid interest is due. As of December
31, 1998 this note was payable on
demand and was accruing interest at 18%. 80,000 80,000
</TABLE>
Various unsecured loans, interest accruing
at
-52-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
and
FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
15%, with maturity dates ranging from
January, 1999 to March, 1999. These notes
were renewed and now have maturity dates
ranging from November, 1999 to December,
1999. 70,000 50,000
Unsecured, non-interest bearing note
payable, due on demand. This note was
repaid in January, 1999. 10,000
----------- -----------
$ 350,00 $ 240,000
=========== ===========
NOTE 9 - COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company, from time to time, is a defendant in legal actions
arising from normal business activities. Management has reviewed
pending litigation with legal counsel and believes that those actions
are without merit or that the ultimate liability, if any, resulting
from them will not materially affect the Company's financial position.
OPERATING LEASE
The Company leased a factory on a month-to-month basis at $1,000 per
month through February, 1997, at which time a one year lease was
executed at a different location providing for a monthly rental of
$1,375. The factory was subsequently abandoned. Rental expense for all
operating leases amounted to approximately $41,000 during 1998. As of
September 30, 1999, the Company had no rent commitments.
LEASE OBLIGATION
Future minimum lease payments under a noncancelable equipment lease
consisted of the following at September 30, 1999:
<TABLE>
<CAPTION>
Years ending September 30,
<S> <C>
2000 $ 10,418
2001 10,418
2002 8,537
--------
$ 29,373
========
</TABLE>
-53-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
and
FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
DESIGN AND CONSULTING AGREEMENT
During 1997, the Company entered into a design and consulting services
agreement with a third party. The Company shall pay a royalty of $1
for each unit sold for a period of five years, commencing on the date
of first sale. The Company will pay the same $1 royalty for an
additional 45 years with respect to any and all sales made by the
Company of the original product to any potential customer introduced
to the Company for which a "Disclaimer Notice" was not given.
NOTE 10 - STOCKHOLDERS' DEFICIT
LOSS PER SHARE
Loss per share is computed by dividing net loss by the weighted
average number of outstanding shares of common stock. Net loss per
share for the periods presented does not include the effects of stock
options and warrants because their effects would be anti-dilutive.
The following table sets forth the computation of net loss per share:
<TABLE>
<CAPTION>
For the Period
February 27,
1995
Year Ended Year Ended (inception)
September 30, September 30, through
1999 1998 September 30,
------------ ------------- -------------
<S> <C> <C> <C>
Net loss $ (112,688) $ (487,662) $ (1,813,707)
========== =========== =============
Basic and diluted:
Weighted average common shares
outstanding used in computing basic
net loss per share 5,836,439 5,477,460 5,836,439
========== =========== =============
Basic and diluted net loss per share $ (.02) $ (.09) $ (.31)
========== =========== =============
</TABLE>
During 1997, the Company amended its articles of incorporation and
changed the capital structure from common stock authorized of 1,000
shares with a par value of $1,
-54-
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
and
FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
to 10,000,000 shares of common stock authorized with a par value of
$.001 and also authorized preferred stock of 5,000,000 shares with a
par value of $.001.
During 1997, the Company effectuated two stock splits, a 2,000 for 1
stock split and a 3.60266 for 1 stock split, for its common stock.
NOTE 11 - FAIR VALUE
The Company has estimated the fair value of its financial instruments
at December 31, 1998 and 1997, as required by Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of
Financial Instruments." The carrying values of cash, accounts
receivable, stock subscription receivable, accounts payable and
accrued expenses and debt are reasonable estimates of their fair
values.
NOTE 12 - SHARES ISSUED FOR SERVICES
During 1998, 897,829 shares of common stock were issued in exchange
for services provided to the Company. 160,500 of these shares were
recorded at the market value of the services received. The remaining
737,329 shares were issued for services performed in connection with
the sale of stock and the cost of these services are reflected as a
direct reduction in capital in the consolidated financial statements.
None of these shares were sold through National Association of
Securities Dealers, Inc. (NASD) Broker/Dealers, nor were any
commissions paid for these shares. None of the shares issued for
services have been issued for future sales of stock.
NOTE 13 - SUBSEQUENT EVENTS
On July 27, 1999, the Company changed its name to Eco-RX, Inc.
-55-
<PAGE>
PART III
Item 1. Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
--------
<S> <C>
3.1 Articles of Incorporation, as amended
3.2 Bylaws
4.1 Form of common stock certificate
10.1 Consulting Agreement with Fitch, Inc. dated
January 17, 1997
</TABLE>
Item 2. Description of Exhibits
None.
56
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
ECO-Rx, Inc.
Dated: November 4, 1999 By: /s/ Joseph M. Peiken
----------------------------
Joseph M. Peiken
Vice President, Chief Financial
Officer and Director
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ECO-Rx, Inc.
Dated: November 4, 1999 By: /s/ Joseph M. Peiken
----------------------------
Joseph M. Peiken
Vice President, Chief Financial
Officer and Director
57
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
ECO-AIRE COMPANY, INC.
The undersigned, for the purpose of forming a Corporation for profit under
the laws of the State of Florida, hereby adopt the following Articles of
Incorporation:
ARTICLE I
NAME:
The name of this Corporation is: Eco-Aire Company, Inc. The principal
place of business of this Corporation shall be:
2051 Northeast 191 Drive
North Miami Beach, Florida 33179
ARTICLE II
NATURE OF BUSINESS:
This Corporation may engage in any activity of business permitted under the
laws of the United States of America and/or of the State of Florida.
ARTICLE III
CAPITAL STOCK:
This Corporation is authorized to issue one thousand (1000) shares of
stock, with a par value of One ($1.00) Dollar.
The amount of capital with which the Corporation shall begin business shall
be no less than $500.00.
ARTICLE IV
TERM OF EXISTENCE:
This Corporation is to exist perpetually.
PRE-EMPTIVE RIGHTS:
Every shareholder, upon the sale of any new stock of this Corporation of
the same kind or class as that which he already holds, shall have the right to
purchase his prorated share thereof at a price at which it is offered to others.
<PAGE>
ARTICLE VI
INITIAL REGISTERED OFFICE AND INITIAL REGISTERED AGENT:
The street address of the initial registered office of this Corporation is
2051 Northeast 191 Drive, North Miami Beach, Florida 33179.
The name of the initial registered agent of this Corporation at that
address is Joseph M. Peiken.
ARTICLE VII
DIRECTORS:
Initially the Corporation shall have two directors. The number of
directors may be increased or diminished from time to time by the by-laws
adopted by the shareholders. The original shareholder is:
Dorothy Nelson
and
The original directors are:
Dorothy Nelson and Jerrold Nelson
SUBSCRIBERS:
The name and street address of the person executing these Articles of
Incorporation as subscriber:
Joseph M. Peiken
2051 Northeast 191 Drive
North Miami Beach, Florida 33179
ARTICLE IV
POWERS:
This Corporation shall have all of the powers enumerated for Corporation
under the laws of the State of Florida.
<PAGE>
ARTICLE X
AMENDMENTS:
These Articles of Incorporation may be amended in any manner provided by
law. Every amendment shall be approved by the board of directors, proposed to
them by the stockholders and approved at a stockholders' meeting by a majority
of the stock entitled to vote thereon, unless the shareholders and directors
sign a written statement manifesting their intention that a certain amendment to
these Articles of Incorporation be made.
IN WITNESS WHEREOF, the undersigned subscriber has executed these Articles of
Incorporation this 13/th/ day of February, 1995.
_______________________________
Joseph M. Peiken
STATE OF FLORIDA )
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this _____ day of
February, 1995, by Joseph M. Peiken who is personally known to me and who did
take an oath.
_______________________________
Notary Public
_______________________________
Printed Name of Notary
My Commission Expires:
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
ECO-AIRE COMPANY, INC.
The Articles of Incorporation of Eco-Aire Company, Inc., a Florida
corporation ("Corporation"), filed with the Department of State on February 27,
1995, Charter Number P9500015883, is hereby amended as shown below:
Article III of the Articles of Incorporation of this Corporation is deleted
in its entirety and the following is inserted in lieu thereof.
ARTICLE III
The total authorized capital stock of this corporation shall be five
Million (5,000,000) shares of common stock, par value $1.00 per share.
The foregoing amendment was adopted by a Joint Corporate Action by all the
Shareholders and all the Directors of this corporation, effective as of November
27, 1996 and the number of votes cast by the shareholders were sufficient for
approval.
IN WITNESS WHEREOF, the undersigned, being President of this Corporation,
has executed these Articles of amendment, as of November 27, 1996.
ECO-AIRE COMPANY, INC.
By: ____________________________
Theodore Shlisky, President
Prepared by: David F. Parish, Esq., FL Bar
#275786 Rudan McClosky, Et al, P.O.
Box 1900 Fort Lauderdale, Florida
33301
(954) 764-6660
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
ECO-AIRE COMPANY, INC.
The Articles of Incorporation of Eco-Aire Company, inc., a Florida
corporation ("Corporation"), filed with the Department of State on February 27,
1995, Charter Number P95000015883, is hereby amended as shown below;
Article III of the Articles of Incorporation of this Corporation is deleted
in its entirety and the following is inserted in lieu thereof:
ARTICLE III
The total authorized capital stock of this Corporation shall be Ten Million
(10,000,000) shares of common stock, par value $0.001 per share, and Five
Million (5,000,000) shares of preferred stock, par value $0.0001 per share.
The Board of Directors is expressly authorized to issue from time to time
all or any shares of Preferred Stock, in one or more series, and to fix for each
such series such voting powers, full or limited, or no voting powers, and such
designations, preferences (including seniority upon liquidation), relative
participating, optional or other special rights, redemption rights, conversion
privileges and such qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions adopted by the
Board of Directors providing for the issuance of such series and to the fullest
extent as now or hereinafter permitted by these Articles of Incorporation, and
the laws of the State of Florida. Unless a vote of any shareholder is required
pursuant to a certificate or certificate establishing a series of Preferred
Stock, the Board of Directors may from time to time increase or decrease (but
not below the number of shares of such series then outstanding) the number of
shares of any series of Preferred Stock subsequent to the issuances of shares of
that series. In case the number of shares of any series is so decreased, the
shares constituting such reduction shall resume the status that such shares had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
The foregoing amendment was adopted by a Joint Corporate Action by all the
Shareholders and all the Directors of this Corporation, effective as of January
31, 1997 and the number of votes cast by the shareholders were sufficient for
approval.
IN WITNESS WHEREOF, the undersigned, being President of this Corporation,
has executed these Articles of Amendment, as of January 31, 1997.
ECO-AIRE COMPANY, INC.
<PAGE>
In case the number of shares of any series is so decreased, the shares
constituting such reduction shall resume the status that such shares had prior
to the adoption of the resolution originally fixing the number of shares of such
series.
The foregoing amendment was adopted by a Joint Corporate Action by all the
Shareholders and all the Directors of this Corporation, effective as of
January 31, 1997 and the number of votes cast by the shareholders were
sufficient for approval.
IN WITNESS WHEREOF, the undersigned, being President of this Corporation,
has executed these Articles of Amendment, as of January 31, 1997.
ECO-AIRE COMPANY, INC.
__________________________________
Theodore Shlisky, President
Prepared by: David F. Parish, Esq., FL Bar #275786
Rudan McClosky, Et al, P.O. Box 1900
Fort Lauderdale, Florida 33301
(954) 764-6660
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
ECO-AIRE COMPANY, INC.
1. The name of the Corporation is Eco-Aire Company, Inc.
2. The following provision of the Articles of Incorporation of Eco-Aire
Company, Inc., a Florida corporation ("Corporation"), filed with The Department
of State on February 27, 1995, Charter No. P-950000-15883, be, and it is hereby,
amended as shown below:
ARTICLE V
Article V is hereby deleted from the Articles of Incorporation of this
corporation, with no provision to be substituted in its place.
3. The foregoing amendment was adopted in accordance with Sections
607.0704 and 607.0821 of the Florida Statutes, by a written consent signed by
all of the Directors and by the holders of a majority of the shares of capital
stock of the Corporation entitled to vote thereon on August 8, 1997, and the
number of votes cast by the Shareholders has executed these Articles of
Amendment as of August 12, 1997.
By:____________________________
Theodore Shlisky
President
<PAGE>
ARTICLES OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
ECO-AIRE COMPANY, INC.
Pursuant to Sections 607.1003 and 607.1006 of the Florida Business
Corporation act, the Articles of Incorporation of ECO-AIRE COMPANY, INC. (the
"Corporation"), are hereby amended according to these Articles of Amendment:
FIRST: The name of the Corporation is ECO-AIRE COMPANY, INC.
SECOND: Article I of the Articles of Incorporation is hereby deleted in
its entirety and the following inserted in lieu thereof:
"The name of the Corporation is: Eco-Rx, Inc.
The principal place of business of the Corporation Shall be:
2051 Northeast 191 Drive
North Miami Beach, Florida 33179"
THIRD: The foregoing amendment was recommended by the Board of Directors
on July 27, 1999 by the unanimous written consent of the Board of Directors of
the Corporation, and was adopted on July 27, 1999 by the written consent of the
shareholders of the Corporation, constituting a sufficient number of votes for
the amendment to be approved in accordance with Florida Statutes.
NOW, THEREFORE: the undersigned officer of the corporation has executed
this instrument this 27 day of July, 1999.
__________________________________
Jerrold Nelson, President
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
ECO-AIRE COMPANY, INC.
ARTICLE I
BUSINESS OFFICES
Eco-Aire Company, Inc. (the "Corporation") shall have such offices as
its business may require within or without the State of Florida.
ARTICLE
REGISTERED OFFICES AND REGISTERED AGENT
2.1. Florida
-------
The address of the initial registered office in the State of Florida
and the name of the initial registered agent of the Corporation at such address
are set forth in the Articles of Incorporation. The Corporation may, from time
to time, designate a different address as its registered office or a different
person as its registered agent, or both; provided, however, that such
designation shall become effective upon the filing of a statement of such change
with the Department of State of the State of Florida as required by law.
2.2. Other States
------------
In the event the Corporation desires to qualify- to do business in one
or more States other than Florida, the Corporation shall designate the location
of the registered office or location of the registered or resident agent in each
such State and designate the registered or resident agent for service of process
at such address in the manner provided by the law of the State in which the
Corporation elects to be qualified.
<PAGE>
ARTICLE III
SHAREHOLDERS MEETINGS
3.1. Place of Meetings
-----------------
Meetings of the shareholders shall be held at the principal office of
the Corporation unless another place (within or without the State of Florida) is
designated in the notice of the meeting.
3.2. Annual Meetings
---------------
An annual meeting of the shareholders shall be held on the first
Monday of each April, or on such other day as the Board of Directors may from
time to time determine, at a time and place designated by the Board of
Directors, for. the election of Directors and for the transaction of other
business.
3.3. Special Meetings
----------------
Special meetings of the shareholders shall be convened if called by
the President or the Board of Directors, or if requested in writing by the
holders of not less than one-tenth (1/10) of all the shares entitled to vote at
the meeting. The call for the meeting shall be issued by the Secretary, unless
the President, Board of Directors or shareholders requesting the meeting shall
designate another person to do so.
3.4. Notice
------
Written notice stating the place, day, and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered to each shareholder of record entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date named for the meeting, either personally or by first-class United States
mail, by or at the direction of the President, the Secretary, or the officer or
persons calling the meeting,
2
<PAGE>
unless other notice provisions are required by law in a particular case. If
mailed, such. notice shall be deemed to be delivered when deposited in the
United States mail addressed to the shareholder at that shareholder's address as
it appears on the stock transfer books of the Corporation, with postage thereon
prepaid.
3.5. Notice of Adjourned Meetings
----------------------------
When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and any business may be transacted at the adjourned
meeting that might have been transacted on the original date of the meeting. If,
however, after the adjournment the Board of Directors fixes a new record date
for the adjourned meeting, a notice of the adjourned meeting shall be given as
provided in paragraph 3.4 above, to each shareholder of record on the new record
date who is entitled to vote at such meeting.
3.6. Waiver of Notice
----------------
Whenever notice is required to be given to any shareholder, a Waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether signed before, during, or after the time stated in the waiver, shall be
the equivalent of the giving of such notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when the person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the shareholders need be specified in the
written waiver of notice.
3
<PAGE>
3.7. Closing of Transfer Books and Fixing Record Date
------------------------------------------------
The Board of Directors may close the stock transfer books of the
Corporation or otherwise make a determination of shareholders for any purpose,
in accordance with the provisions of Section 607.0707 of the Florida Statutes.
3.8. Record of Shareholders Having Voting Rights
-------------------------------------------
If the Corporation shall have more than five (5) shareholders, the
officer or agent having charge of the stock transfer books for shares of the
Corporation shall make, at least ten (10) days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting or any adjournment thereof, with the address of, and the number and
class and series, if any, of shares held by, each. The list, for a period of ten
(10) days prior to such meeting, shall be kept on file at the registered office
of the Corporation, at the principal place of business of the Corporation, or at
the office of the transfer agent or registrar of the Corporation; and any
shareholder shall be entitled to inspect the list at any time during usual
business hours. The list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
at any time during the meeting. If the requirements. of this section have not
been substantially complied with, . then on demand of any shareholder in person
or by proxy, the meeting shall be adjourned until there has been compliance with
the requirements. If no such demand is made, failure to comply with the
requirements of this section shall not affect the validity of any action taken
at such meeting.
3.9. Shareholder Quorum
------------------
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders. When a specified
item of business is required to be voted on by a class or series of stock, a
majority of the shares of such class or series shall
4
<PAGE>
constitute a quorum for the transaction of such item of business by that class
or series. If a quorum is present at a properly held meeting of the
shareholders, the affirmative vote of the holders of a majority of the shares
represented in person or by proxy and entitled to vote on the subject matter
under consideration, shall be the act of the shareholders, unless the vote of a
greater number or voting by classes (1) is required by the Articles of
Incorporation, or (ii) has been provided for in an agreement among all
shareholders entered into pursuant to and enforceable under Chapter 607 of the
Florida Statutes. After a quorum has been established at a shareholders meeting,
the subsequent withdrawal of shareholders or their proxies, reducing the number
of shares represented and entitled to vote at the meeting below the number
required for a quorum, shall not affect the validity of any action taken at the
meeting or any adjournment thereof.
3.10. Proxies
-------
Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting, or a shareholder's duly authorized
attorney-in-fact, may authorize another person or persons to act for that
shareholder by proxy in accordance with the provisions of Section 607.0722 of
the Florida Statutes.
3.11. Action by Shareholders Without a Meeting
----------------------------------------
Shareholder action may be taken by written consent in lieu of a
meeting in accordance with the provisions of Section 607.0704 of the Florida
Statutes.
ARTICLE IV
DIRECTORS
4.1. Function
--------
5
<PAGE>
Except as otherwise provided in Chapter 607 of the Florida Statutes or
in the Articles of Incorporation, all corporate powers shall be exercised by or
under the authority of, and the business and affairs of the Corporation shall be
managed under the direction of, the Board of Directors.
4.2. Qualification
-------------
Directors need not be residents of Florida or shareholders of the
Corporation; however, each Director shall meet such qualifications as may be set
forth in the Articles of Incorporation and in the laws of the State of Florida.
4.3. Compensation
------------
The Board of Directors shall have authority to fix the compensation
of Directors. Nothing herein contained shall be construed to preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor.
4.4. Number
------
The number of members of the Board of Directors shall be two, or such
greater number as may be determined from time-to-time by the Board of Directors
or by the shareholders.
4.5. Election and Term
-----------------
4.5.1. Each person named in the Articles of Incorporation as a
member of the initial Board of Directors shall hold office until the first
annual meeting of shareholders and until his successor shall have been elected
and qualified, or until his earlier resignation, removal from office, or death.
4.5.2. At the first annual meeting of shareholders and at each
annual meeting thereafter, the shareholders shall elect Directors to hold office
until the next succeeding annual
6
<PAGE>
meeting. Each Director shall hold office for the term for which he is elected
and until his successor shall have been elected and qualified, or until his
earlier resignation, removal from office, or death.
4.6. Removal of Directors
--------------------
Any Director, or the entire Board of Directors, may be removed, with
or without cause, at a meeting of the shareholders called expressly for that
purpose, in accordance with the provisions of Section 607.0808 of the Florida
Statutes.
4.7. Vacancies
---------
Any vacancy occurring in the Board of Directors, including any
vacancy created by reason of an increase in the number of Directors, may be
filled by the affirmative vote of a majority of the remaining Directors, though
less than a quorum of the Board of Directors.
4.8. Quorum and Voting
-----------------
A majority of the number of Directors fixed in accordance with these
Bylaws shall constitute a quorum for the transaction of business. Subject to
other provisions of these Bylaws, the act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors. If at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of those present may adjourn the meeting from
time to time until a quorum is obtained. Notice of any such adjourned meeting
shall be given to the Directors who were not present at the time of the
adjournment and, unless the time and place of the adjourned meeting were
announced at the time of the adjournment, to the other Directors.
4.9. Executive and Other Committees
------------------------------
4.9.1. The Board of Directors, by resolution adopted by a majority
of the full Board of Directors, may designate from among its members an
Executive Committee and one or more other committees, each of which, to the
extent provided in such resolution, shall have and may
7
<PAGE>
exercise all the authority of the Board of Directors, as limited by Section
607.0825 of the Florida Statutes.
4.9.2. The Board of Directors, by resolution adopted in accordance
with paragraph 4.9.1 above, may designate one or more Directors as alternate
members of any such committee, who may act in the place and stead of any absent
member or members at any meeting of such committee.
4.10. Place of Meetings
-----------------
Regular or special meetings of the Board of Directors may be held
within or without the State of Florida.
4.11. Time, Notice and Call of Meetings
---------------------------------
4.11.1. Regular meetings of the Board of Directors shall be held
immediately following the annual meeting of shareholders each year; regular
meetings may be held at such other times as the Board of Directors may fix;
special meetings may be held at such times as called by the Chairman of the
Board, the President of the Corporation or any two Directors. Written notice of
the time and place of special meetings of the Board of Directors shall be given
to each Director by personal delivery or by first-class United States mail,
telegram, or cablegram at least two (2) days before the meeting.
4.11.2. Notice of a meeting of the -Board of Directors need not be
given to any Director who signs a waiver of notice either before, during or
after the meeting. Attendance of a Director at a meeting shall constitute a
waiver of notice of such meeting and a waiver of any place of the meeting, the
time of the meeting, or the manner in which it and all objections to the place
has been called or convened, except when a Director states, at the beginning of
the meeting, any objection to the transaction of business because the meeting is
not lawfully called or convened.
8
<PAGE>
4.11.3. Members of the Board of Directors may participate in a
meeting of such Board by conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time. Participation by such means shall constitute
presence in person at a meeting.
4.12. Action Without a Meeting
------------------------
Any action which is required to be taken, or which may be taken, at
a meeting of the Directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, signed
by all the Directors, or all the members of the committee, as the case may be,
is filed in the minutes of the proceedings of the Board or of the committee.
Such consent shall have the same effect as a unanimous vote.
4.13. Director Conflicts of Interest
------------------------------
4.13.1. No contract or other transaction between this Corporation
and one or more of its Directors or any other corporation, firm, association, or
entity in which one or more of its Directors are directors or officers or are
financially interested, shall be either void or voidable because of such
relationship or interest, or because such Director or Directors are present at
the meeting of the Board of Directors or a committee thereof which authorizes,
approves, or ratifies such contract or transaction, or because his or their
votes are counted for such purpose, if:
(i) the fact of such relationship or interest is disclosed
or known to the Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested Directors; or
9
<PAGE>
(ii) the-fact of such relationship or interest is
disclosed or known to the shareholders entitled to vote and they authorize,
approve, or ratify such contract or transaction by vote or written consent; or
(iii) the contract or transaction is fair and reasonable
as to the Corporation at the time it is authorized by the Board, a committee, or
the shareholders.
4.13.2. Common or interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or a
committee thereof which authorizes, approves, or ratifies such contract or
transaction.
ARTICLE V
OFFICERS
5.1. Officers
--------
The Board of Directors shall determine from time- to time the
offices of this Corporation, which may consist of Chairman of the Board,
President, Vice President, Secretary, Assistant Secretary, Treasurer, Assistant
Treasurer, and such other offices as may be determined from time to time by the
Board of Directors. Any two or more offices may be held by the same person. The
officers shall be elected by the Board of Directors and shall meet such
qualifications as shall be determined by the Board of Directors under the
authority of the Articles of Incorporation and of the laws of the State of
Florida.
5.2. Duties
------
Except as may be modified from time to time by the Board of
Directors, the powers and duties of the officers shall be as follows:
5.2.1. The Chairman of the Board shall preside at all meetings of
stockholders and of the Board of Directors, and he shall have the powers and
perform the duties usually pertaining to
10
<PAGE>
such office, and shall have such other powers and perform such other duties as
may be from time to time prescribed by the Board of Directors.
5.2.2. The President shall be the chief executive officer of the
Corporation, and shall have general and active management of the business and
affairs of the Corporation, under the direction of the Board of Directors.
Unless the Board of Directors has appointed another presiding officer, the
President shall preside at all meetings of the shareholders.
5.2.3. The Vice President shall have such powers and perform such
duties as usually pertain to such office or as are properly required of him by
the Board of Directors. In the absence or disability of the President, the Vice
President(s) (in order of their seniority) shall perform the duties and exercise
the powers of the President.
5.2.4. The Secretary shall have custody of, and maintain, all the
corporate records except the financial records, and shall record the minutes of
all meetings of the shareholders and the Board of Directors and its committees,
send all notices of meetings, and perform such other duties as may be prescribed
by the Board of Directors or the President.
5.2.5. The Treasurer shall have custody of all corporate funds and
financial records, shall keep full and accurate accounts of receipts and
disbursements and render accounts thereof at the annual meetings of shareholders
and whenever else required by the Board of Directors or the President, and shall
perform such other duties as may be prescribed by the Board of Directors or the
President.
5.2.6. The Assistant Secretary, Assistant Treasurer, and other
Assistant Officers may exercise, subject to supervision by the officer for whom
they act as assistant(s), except as otherwise provided for by the Board of
Directors, the powers and duties that pertain to such offices respectively and
any such other powers and duties which may be delegated to them.
11
<PAGE>
5.3. Term of Office
--------------
Unless otherwise provided at the time of his election, each person
named as an officer of the Corporation by the Board of Directors shall hold
office until the meeting of the Board of Directors following or concurrent with
the next succeeding annual meeting of the shareholders, and until his successor
shall have been elected and qualified; or until his earlier resignation, removal
from office, or death.
5.4. Removal of Officers
-------------------
Any officer or agent elected or appointed by the Board of Directors
may be removed by the Board of Directors whenever, in its judgment, the best
interests of the Corporation will be served thereby.
5.5. Vacancies
---------
Any vacancy, however occurring, in any office may be filled by the
Board of Directors.
ARTICLE VI
STOCK CERTIFICATES
6.1. Authorization
-------------
The Corporation may issue shares of stock authorized by and in
accordance with its Articles of Incorporation, as same may be amended from time
to time, and none other. Shares may be issued originally only pursuant to a
resolution adopted by the Board of Directors. No shares may be validly issued or
transferred in violation of any provision of these Bylaws or in violation of any
agreement, to which the Corporation is a party, respecting the issuance or
transfer of shares.
6.2. Issuance
--------
12
<PAGE>
Every holder of shares in the Corporation shall be entitled to have
a certificate representing all shares to which that holder is entitled. No
certificate shall be issued for any share until such share is fully paid.
6.3. Signatures
----------
Certificates representing shares in this Corporation shall be
assigned by the President or Vice-President or by such other officers as may be
designated from time to time by the Board of Directors and may be sealed with
the seal of the Corporation or a facsimile thereof. The signatures of the
President or Vice-President or other designated officer may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar
other than the Corporation or an employee of the Corporation.
6.4. Form
----
Each certificate representing shares shall state upon the face
thereof: the name of the Corporation; that the Corporation is organized under
the laws of Florida; the name of the person or persons to whom issued; the
number and class of shares and the designation of the series, if any, which such
certificate represents; and the par value of each share represented by such
certificate or a statement that the shares are without par value.
6.5. Transfer of Stock
-----------------
The Corporation shall cancel stock certificates presented to it for
transfer and issue and register a new certificate or certificates in the name of
a qualified transferee of such shares, if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney; provided, however,
that the Corporation or its transfer agent may establish other reasonable
requirements for transfer, including but not limited to the- guarantee of the
transferor's signature by
13
<PAGE>
a commercial bank or trust company or by a member of the New York Stock Exchange
or of the American Stock Exchange.
6.6. Lost, Stolen, or Destroyed Certificates The Corporation shall issue
a new stock certificate duplicating any certificate previously issued, if the
holder of record of the certificate: (1) submits proof in affidavit form that it
has been lost, destroyed, or wrongfully taken; (ii) requests the issuance of a
new certificate, before the Corporation has notice that the certificate has been
acquired by a purchaser for value in good faith and without notice of any
adverse claim; (iii) gives bond, in such form as the Corporation may direct, to
indemnify the Corporation, the transfer agent, and the registrar against any
claim that may be made on account of the alleged loss, destruction, or theft of
such certificate; and (iv) satisfies any other reasonable requirements imposed
by the Corporation.
ARTICLE VII
BOOKS AND RECORDS
7.1. Books and Records
------------------
7.1.1. The Corporation shall keep correct and complete books and
records of account and shall keep minutes of the proceedings of its
shareholders, Board of Directors, and committees of Directors.
7.1.2. The Corporation shall keep, at its registered office or
principal place of business or at the office of its transfer agent or registrar,
a record of its shareholders, giving the names and addresses of all
shareholders, and the number, class, and series, if any, of the shares held by
each.
7.1.3. Any books, records, and minutes may be in written form or in
any other form capable of being converted into written form within a reasonable
time.
14
<PAGE>
7.2. Shareholders' Inspection Rights
-------------------------------
Shareholders of record shall have the right to examine and make
extracts from the books and records of the Corporation to the extent provided in
Section 607.1603 of the Florida Statutes.
7.3. Financial Information
---------------------
7.3.1. Unless modified by resolution of the shareholders not later
than four (4) months after the close of each fiscal year, the Corporation shall
prepare a balance sheet showing in reasonable detail the financial condition of
the Corporation as of the close of its fiscal year, and a profit and loss
statement showing the results of the operations of the Corporation during its
fiscal year.
7.3.2. Upon the written request of any shareholder or holder of
voting trust certificates for shares of the Corporation, the Corporation shall
mail to such shareholder or holder of voting trust certificates a copy of the
most recent balance sheet and profit and loss statement.
7.3.3. The balance sheets and profit and loss statements shall be
filed in the registered office of the Corporation in Florida, shall be kept for
at least five (5) years, and shall be subject to inspection during business
hours by any shareholder or holder of voting trust certificates, in person or by
agent.
ARTICLE VIII
INDEMNIFICATION
Each person (including here and hereinafter, the heirs, executors,
administrators, or estate of such person): (i) who is or was a Director or
officer of the Corporation; (ii) who is or was an agent or employee of the
Corporation other than an officer and as to whom the Corporation has agreed to
grant such indemnity; or (iii) who is or was serving at the request of the
Corporation as its
15
<PAGE>
representative in the position of a Director, officer, agent or employee of
another corporation, partnership, joint venture, trust or other enterprise and
as to whom the Corporation has agreed to grant such indemnity; shall be
indemnified by the Corporation as of right to the fullest extent permitted or
authorized by current or future legislation or by current or future judicial or
administrative decision, against any fine, liability, cost or expense, including
attorneys' fees, asserted against him or incurred by him in his capacity as such
Director, officer, agent, employee, or representative, or arising out of his
status as such Director, officer, agent, employee or representative. The
foregoing right of indemnification shall not be exclusive of other rights to
which those seeking an indemnification may be entitled. The Corporation may
maintain insurance, at its expense, to protect itself and any such person
against any such fine, liability, cost or expense, whether or not the
Corporation would have the legal power to directly indemnify him against such
liability.
ARTICLE IX
APPLICABLE LAW
These Bylaws shall be construed and enforced in accordance with the
laws of the State of Florida. All references in these Bylaws to Chapter 607 of
the Florida Statutes and to Sections thereof shall refer to such Sections as
same may be amended from time to time; however, in the event any amendment
thereto is not required to be retroactively applied to the Corporation, the
Board of Directors may elect to continue to comply with the provisions
theretofore in effect or to comply with the provisions as amended.
In the event all the shareholders enter into an agreement under the provisions
of Section 607.0732 of the Florida Statutes, any provisions of that agreement,
which by the terms of the agreement are
16
<PAGE>
intended to supersede provisions of these Bylaws that are inconsistent
therewith, as well as provisions of the Articles of Incorporation, shall govern
and shall supersede these Bylaws.
ARTICLE X
AMENDMENT
These Bylaws may be repealed or amended, and new Bylaws may be
adopted, by either the Board of Directors or the shareholders, but the Board of
Directors may not amend or repeal any Bylaw adopted by shareholders if the
shareholders specifically provide that such Bylaw is not subject to amendment or
repeal by the Directors.
17
<PAGE>
<TABLE>
<CAPTION>
NUMBER SHARES
- -------------------- --------------------
[LOGO OF ECO(RX) APPEARS HERE]
- -------------------- --------------------
<S> <C> <C>
-----------------------------------
Incorporated Under The Laws Of The State Of Florida CUSIP 27885M 10 4
10,000,000 Authorized Shares No Par Value ------------------------------------
SEE REVERSE
FOR CERTAIN DEFINITIIONS
THIS CERTIFIES THAT
Is The Owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF NO PAR VALUE COMMON STOCK OF
ECO-(RX), INC.
transferable only on the books of the Company in person or by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the said Company has caused this Certificate to be executed by the facsimile signatures of its duly
authorized officers and to be sealed with the facsimile seal of the Company.
Dated:
/s/ [ILLEGIBLE]^^ [CORPORATE /s/ [ILLEGIBLE]^^
SECRETARY SEAL] PRESIDENT
COUNTERSIGNED AND REGISTERED
American Securities Transfer & Trust, Inc.
P.O. Box 1596
Denver, Colorado 80201
By__________________________________________________________
Transfer Agent & Registrar Authorized Signature
</TABLE>
<PAGE>
ECO-(RX), INC.
TRANSFER FEE: $20.00 PER NEW CERTIFICATE ISSUED
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT _........Custodian............
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of under Uniform Gifts to Minors
surviviorship and not as tenants Act ......................
in common (State)
Additional abbreviations may also be used though not in the above list.
____________________________________________________________________________________________________________________________________
For Value Received,_______________________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
______________________________________
____________________________________________________________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
___________________________________________________________________________________________________________________ attorney-in-fact
to transfer the said stock on the books of the within-named Corporation, with full power of substitution in the Premises.
Dated __________________________________
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Signature(s) Guaranteed:
_________________________________________________________
The signature(s) must be guaranteed by an eligible guarantor institution (Banks, Stockbrokers, Savings and Loan Associations and
Credit Unions with membership in an approved signature guarantee Medallion Program), Pursuant to S.E.C. Rule 17Ad-15.
</TABLE>
<PAGE>
EXHIBIT 10.1
TERMS & CONDITIONS
These Terms & Conditions (the "Terms & Conditions") are agreed to and accepted
this 17/th/ day of January 1999, by Fitch, Inc., an Ohio corporation ("Fitch"),
and ECO-AIRE, a corporation ("Client"), and shall govern Fitch's provision of
any and all design and consulting services described in any written proposal
signed and dated by Fitch and accepted in writing by Client (a "Proposal"), the
terms of which are incorporated by reference herein.
1. Services Rendered
Fitch shall render to Client certain specific design and consulting
services (the "Work") described in a particular Proposal. Fitch shall not be
obligated to provide any services (including data storage and retrieval
services) or to perform any other work for Client's benefit except as expressly
and specifically described in a Proposal.
2. Payment
A. Fees and Expenses
In exchange for the Work, Fitch shall be entitled to receive from
Client the fees and expenses set forth in the Proposal. Fees and expenses for
additional work or time expenditures caused by Client, Client's agents or
contractors, substantial work changes requested by Client, or other
circumstances beyond Fitch's control must be agreed upon by both parties before
further work proceeds.
B. Payment Terms
All fees and expenses payable by Client will be billed monthly and
payable within 30 days of the date of the invoice. A monthly late-charge of 1.5%
of the billed amount will be added to any unpaid accounts more than 30 days past
due. Prior to commencement of the Work, an initial payment of 50% of the total
professional fees payable under the Proposal (predetermined or estimated) will
be required.
3. Intellectual Property
For the purposes of this section, "Intellectual Property Rights" shall mean
any and all patent, copyright, trademark, service mark, and trade name rights
associated with or relating to the property described.
A. Transfer of Rights
Upon Fitch's receipt of payment in full of all amounts due and owing
to Fitch for performance of the Work (or, when applicable, portions of the
Work), (i) Client shall have an exclusive, perpetual, worldwide, royalty-free
license to use the final designs and recommendations furnished by Fitch to
Client in the performance of such work and accepted by Client, including, but
not limited to, any and all drawings, artwork, computer software,
<PAGE>
prototypes, or other physical embodiments of such final designs and
recommendations, and any and all Intellectual Property Rights associated
therewith, in connection with the particular purposes and field of use specified
in the Proposal, and (ii) Fitch hereby grants such license to Client,
specifically reserving for itself and its assignees all other rights in and to
the work, including any and all Intellectual Property Rights associated with the
Work and not licensed to Client hereunder.
B. Protection of Client's Rights
Client shall have the sole responsibility to secure for itself
statutory protection for its Intellectual Property Rights in the Work. Fitch
agrees to cooperate with client in the preparation and execution of all
documents necessary to secure such protections, upon payment in full of all
amounts due and owing to Fitch under the Proposal; provided, however, that
Client shall promptly pay or reimburse fitch for any and all expenses reasonably
incurred by Fitch in connection with its cooperation.
C. Non-Infringement of Rights of Third Parties
Client shall have sole responsibility for conducting patent,
copyright, trademark, and service mark searches and any other investigations
required in order to ensure that the Work, or any portion thereof, does not and
will not infringe upon or violate any Intellectual Property Rights of any third
party. Fitch represents and warrants to Client that it has no knowledge that the
Work (or any portion thereof) infringes or will infringe upon any Intellectual
Property Rights of a third party. Client shall have sole responsibility to take
all steps necessary to ensure that its use of the Work neither exceeds the uses
permitted by the Intellectual Property Rights in the Work owned or licensed by
Client hereunder nor infringes upon the Intellectual Property Rights of any
third parties.
4. Termination
The Work may be terminated by either party at any time upon 15 days'
written notice to the ocher party. Upon any such termination of the Work, Fitch
shall be entitled to receive reimbursement for all expenses actually incurred,
and compensation for all services actually rendered, on an hourly basis (where
the Proposal indicates an hourly fee) or a percentage-of-completion basis (where
the Proposal indicates a predetermined fee).
5. Confidentiality
"Confidential Information" shall mean information disclosed by one party to
the other party which, at the time of first disclosure, is marked "CONFIDENTIAL"
if disclosed in tangible form, or clearly identified as confidential by the
disclosing party if disclosed in intangible form. Confidential Information shall
not include any information that is: (i) available to the public, other than as
a result of a breach of this agreement; (ii) rightfully received from a third
party not in breach of any obligation of confidentiality; (iii) independently
developed by a party without recourse to Confidential Information of the other
party; or (iv) known to the recipient prior to the time of first disclosure.
Each party agrees, for a period of two (2) years from the date of the
<PAGE>
Proposal, not to disclose any Confidential Information received from the other
party to any third party, except: (i) as may be necessary in performing any work
to be performed by Fitch for Client pursuant to the Proposal or other agreement;
(ii) as required by law; or (iii) as otherwise agreed between the parties. Each
party shall take reasonable care to safeguard the confidentiality of
Confidential Information in its possession, which care shall not be less than
the degree of care used to prevent disclosure of its own confidential
information.
6. Indemnification
A. Indemnification of Client by Fitch
For a period of three years from the date of the Proposal to which
Client's claim for indemnification relates, Fitch shall indemnify and hold
Client harmless from and against any and an liabilities, damages, suits,
actions, claims, costs, losses, or expenses (including reasonable attorneys'
fees) arising out of and directly attributable to the performance of the Work or
any breach of the Proposal or the Terms & Conditions by Fitch, including, but
not limited to, a breach of any of the representations, warranties, covenants,
or agreements contained in Section 3 hereof, or the gross negligence of Fitch in
the performance of the Work; provided, however, that (i) the foregoing
indemnification obligations shall no[ apply to any such liabilities, damages,
suits, actions, claims, costs, losses, or expenses arising out of or relating in
any way to any act or omission by Client or any third party, and (ii) the
maximum amount of Fitch's liability to Client under this paragraph A shall be
limited to the total amount of compensation paid by Client to Fitch for
performance of the Work to which Client's claim for indemnification relates.
Client shall provide reasonable notice to Fitch of any claim asserted against
Client that may give rise to a claim for indemnification hereunder and Client
will provide reasonable assistance to Fitch as necessary for Fitch to defend any
such claim.
B. Indemnification of Fitch by Client
Except as specified in paragraph A above, Client shall indemnify,
defend, and hold Fitch harmless from and against any and A liabilities, damages,
suits, actions, claims, costs, losses, or expenses (including reasonable
attorneys' fees), arising out of or relating in any way to the Work, the
Proposal, and/or the Terms & Conditions. Fitch shall provide reasonable notice
to Client of any claim asserted against Fitch that may give rise to a claim for
indemnification hereunder and Fitch will provide reasonable assistance to Client
as necessary for Client to defend any such claim.
7. Responsibility for Materials
In connection with the Work, Fitch shall neither be responsible for nor
guarantee any fabric, material, software component, product, or article against
wearing, fading, or latent defects.
8. Attribution
<PAGE>
Upon Client's introduction of the Work into the public domain, and without
implying that Client has endorsed Fitch in any way, Fitch shall have the right
to acknowledge its involvement in the Work in any and all public relations,
marketing, advertising or ocher promotional activities engaged in by Fitch. For
this limited purpose, Fitch shall have the right to make reasonable use of
Client's name, as well as likenesses of such portions of the Work as Client has
introduced into the public domain.
9. Dispute Resolution
Any dispute between the parties which arises out of or relates in any way
to the work, the proposal, the Terms & Conditions, and/or the alleged non-
existence, breach, or subject matter thereof (a "Dispute"), shall be governed by
the internal laws of the State of Ohio, without reference to its conflicts of
laws provisions. The maximum amount of Fitch's liability to Client in connection
with a Dispute shall be limited to the total amount of professional fees paid by
Client to Fitch under the proposal. Disputes in which the amount in controversy
does not exceed fifty thousand dollars ($50,000) shall be settled by arbitration
administered by the American Arbitration Association in accordance with its
Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The fees
and expenses of the arbitrator(s) and the administrative fees of the American
Arbitration Association shall be shared equally by the parties. Each party shall
bear its own costs and expenses (including attorneys' fees).
10. Miscellaneous
A. Waiver
No waiver of any provision of the Proposal or the Terms & Conditions
shall be valid or binding upon the parties unless made in writing and signed on
behalf of the parties by their respective duly authorized representatives. The
failure of either party to insist upon strict performance of any provision of
the proposal or the Terms & Conditions shall not constitute a waiver of the
right to insist upon strict performance of the same provision or other
provisions in the future.
B. Severability
If any provision of the proposal or the Terms & Conditions shall be
held to be illegal, invalid or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
C. Force Majeure
Neither party shall be liable for damages for delay or failure to
perform any obligation under the Proposal or the Terms & conditions if such
delay or failure results directly or indirectly from circumstances beyond the
reasonable control of such party.
D. Entire Agreement; Modifications and Amendments
<PAGE>
These Terms & Conditions (including all documents and agreements expressly
incorporated by reference and made a part hereof) shall constitute the entire
agreement of the parties with respect to the subject matter hereof, and the same
shall not be modified or amended except in writing signed by both parties.
Client shall not make any modifications or additions to these Terms & Conditions
without the express written consent of Fitch. Any such modifications or
additions made by Client without Fitch's express written consent shall be null
and void.
IN WITNESS WHEREOF, the parties hereto have agreed to become bound by the
Terms & Conditions effective as of the date first above written.
By: Name: Arthur Eilertson
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Title: SR VP
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Date: 17 JAN 1997
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CLIENT
By: Name: Jerry Nelson
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Title: VP/Sales & Marketing
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Date: 17 Jan 1997
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