<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------
For the quarterly period Commission file number 0-16416
ended JULY 31, 1999
ELECTROPURE, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0056212
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
23456 South Pointe Drive, Laguna Hills, California 93653
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 770-9347
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
At September 9, 1999, 7,788,925 shares of the Registrant's stock were
outstanding.
- --------------------------------------------------------------------------------
<PAGE> 2
ELECTROPURE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, July 31,
1998 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 57,440 $ 386,397
Receivables:
Trade accounts receivable 161,225 115,103
Notes receivable - related party 70,627 --
------------ ------------
231,852 115,103
------------ ------------
Inventory 320,532 185,152
------------ ------------
Other current assets 24,505 186,576
------------ ------------
TOTAL CURRENT ASSETS 634,329 873,228
------------ ------------
Property and equipment, at cost:
Machinery and equipment 4,900 161,842
Furniture and fixtures 89,811 97,472
Automobiles 23,000 39,797
Leasehold improvements 28,443 46,917
------------ ------------
146,154 346,028
Less accumulated depreciation and amortization 12,109 44,268
------------ ------------
Property and equipment, net 134,045 301,760
------------ ------------
Intangible assets, net of accumulated amortization 528,192 141,945
Other assets 90,000 105,000
------------ ------------
$ 1,386,566 $ 1,421,933
------------ ------------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 3
ELECTROPURE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, July 31,
1998 1999
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 126,843 $ 87,911
Note payable to officer 6,216 6,649
Customer deposit 100,000 170,160
Other current liabilities 116,313 103,582
------------ ------------
TOTAL CURRENT LIABILITIES 349,372 368,302
------------ ------------
Note payable to officer, net of current portion 12,315 7,273
Redeemable convertible preferred stock, $.01 assigned
par value. Authorized 2,600,000 shares; issued and
outstanding 2,600,000 shares in 1998 and 1999 26,000 26,000
Stockholders' equity:
Series B preferred stock, $1.00 assigned par value, 1,000,000 shares
authorized; none issued and outstanding
in 1998; 1,000,000 shares issued and outstanding in 1999 -- 1,000,000
Common stock, $.01 assigned par value. Authorized
20,000,000 shares; 8,618,925 and 7,788,925 shares
issued and outstanding in 1998 and 1999 86,189 77,889
Class B common stock, $.01 assigned par value 83,983
shares authorized, issued and outstanding in 1998 and 1999 840 840
Additional paid-in capital 20,032,205 20,945,159
Accumulated deficit (19,059,605) (20,542,780)
Notes receivable on common stock (60,750) (460,750)
------------ ------------
998,879 1,020,358
------------ ------------
Total Liabilities and Stockholders' Equity $ 1,386,566 $ 1,421,933
------------ ------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
ELECTROPURE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
------------------------------- -------------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 326,835 $ 176,144 $ 501,200 $ 557,240
Cost of sales 317,447 591,170 507,381 1,142,600
------------ ------------ ------------ ------------
Gross profit (loss) 9,388 (415,026) (6,181) (585,360)
------------ ------------ ------------ ------------
Costs and expenses:
Research and development 124,992 218,104 259,336 543,134
General and administrative 253,169 143,108 929,339 297,947
------------ ------------ ------------ ------------
378,161 361,212 1,188,675 841,081
------------ ------------ ------------ ------------
Loss from operations (368,773) (776,238) (1,194,856) (1,426,441)
Interest income (expense), net 5,755 1,783 2,078 10,393
Bonus paid for membrane technology -- (67,127) -- (67,127)
------------ ------------ ------------ ------------
5,755 (65,344) 2,078 (56,734)
Loss before provision for income taxes (363,018) (841,582) (1,192,778) (1,483,175)
Provision for income tax (800) (800) (800) (800)
------------ ------------ ------------ ------------
Net loss $ (363,818) $ (842,382) $ (1,193,578) $ (1,483,975)
============ ============ ============ ============
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.06) $ (0.10) $ (0.20) $ (0.18)
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding 6,087,807 8,128,998 6,087,807 8,128,998
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
ELECTROPURE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Shares Stock
---------------------------------------- --------------------------------------
Series B Series B
Convertible Class B Convertible Class B
Preferred Common Common Preferred Common Common
----------- ---------- -------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1998 -- 8,618,925 83,983 -- 86,189 840
Series B Convertible Preferred
shares issued in private
placement offering 1,000,000 -- -- 1,000,000 -- --
Common shares and warrants
issued in private placement
offering -- 1,020,000 -- -- 10,200 --
Common shares issued for legal
services to be rendered -- 100,000 -- -- 1,000 --
Common shares cancelled upon
settlement of lawsuit -- (1,950,000) -- -- (19,500) --
Warrants granted on common
stock to employees and
consultants for services -- -- -- -- -- --
Net loss -- -- -- -- -- --
--------- ---------- ------ ---------- -------- ----
Balance, July 31, 1999 1,000,000 7,788,925 83,983 1,000,000 77,889 840
--------- ---------- ------ ---------- -------- ----
</TABLE>
<TABLE>
<CAPTION>
Note
Additional Receivable
Paid-in Accumulated Common
Capital Deficit Stock Total
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Balance, October 31, 1998 $ 20,032,205 $(19,059,605) $ (60,750) $ 998,879
Series B Convertible Preferred
shares issued in private
placement offering -- -- -- 1,000,000
Common shares and warrants
issued in private placement
offering 609,800 -- (400,000) 620,000
Common shares issued for legal
services to be rendered 99,000 -- -- 100,000
Common shares cancelled upon
settlement of lawsuit (273,000) -- -- (292,500)
Warrants granted on common
stock to employees and
consultants for services 77,154 -- -- 77,154
Net loss -- (1,483,175) -- (1,483,175)
------------ ------------ --------- -----------
Balance, July 31, 1999 $ 20,545,159 $(20,542,780) $(460,750) $ 1,020,358
------------ ------------ --------- -----------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
ELECTROPURE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months ended
July 31,
-------------------------------
1998 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,192,778) $ (1,483,175)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation 5,943 32,159
Amortization 85,045 386,247
Issuance of warrants for services 11,375 64,770
Issuance of common stock for services 32,217 100,000
Issuance of common stock for building 90,000 --
Interest expense arising from issuance of convertible debt 400,175 --
Increase (decrease) in assets:
Trade accounts receivable (7,710) (46,122)
Accounts receivable - related party (19,500) (70,627)
Inventories (138,992) (135,380)
Other current assets (21,958) 47,071
Increase (decrease) in liabilities:
Trade accounts payable 15,767 (38,932)
Customer deposit -- 70,160
Other current liabilities 10,187 (12,731)
------------ ------------
CASH USED IN OPERATING ACTIVITIES (730,229) (1,086,560)
------------ ------------
Cash flows used in investing activities:
Purchase of property and equipment (83,019) (199,874)
Purchase of intangible assets (200,000) --
Increase in notes receivable, related parties (200,000) --
------------ ------------
CASH USED IN INVESTING ACTIVITIES (483,019) (199,874)
------------ ------------
Cash flows provided by (used in) financing activities:
Principal payments on notes payable (12,429) (4,609)
Proceeds from issuance of Series B Convertible Preferred Stock -- 1,000,000
Proceeds from issuance of stock - private placement 550,000 620,000
Proceeds from notes payable to stockholders converted to equity 400,000 --
Proceeds from collection of receivables on common stock 25,000 --
------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES 962,571 1,615,391
------------ ------------
Net increase (decrease) in cash (250,677) 328,957
CASH AT BEGINNING OF PERIOD 367,680 57,440
------------ ------------
CASH AT END OF PERIOD $ 117,003 $ 386,397
------------ ------------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
- --------------------------------------------------------------------------------
(1) INTERIM FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The accompanying unaudited condensed financial statements include all
adjustments which management believes are necessary for a fair presentation of
the results of operations for the periods presented, except those which may be
required to adjust assets and liabilities to the net realizable value should the
Company not be able to continue operations. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. It is suggested that
the accompanying condensed financial statements be read in conjunction with the
Company's audited financial statements and footnotes as of and for the year
ended October 31, 1998, included in the Company's Annual Report on Form 10-KSB.
Certain reclassifications have been made to prior period financial statements to
conform with the 1999 presentation.
- --------------------------------------------------------------------------------
(2) INVENTORY
- --------------------------------------------------------------------------------
Inventory, stated at the lower of cost (determined using the first in, first out
method, or replacement market) consists of components for both water
purification and ion exchange membrane products.
- --------------------------------------------------------------------------------
(3) EARNINGS PER COMMON SHARE
- --------------------------------------------------------------------------------
In 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings
Per Share". This pronouncement replaced the previously reported primary and
fully diluted earnings per share with basic and diluted earnings per share
("EPS"), respectively. Earnings for the three and nine month periods ended July
31, 1998 and 1999 have been calculated in accordance with this pronouncement.
Basic EPS is computed by dividing income or loss available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted EPS is similar to Basic EPS except that the weighted average of
common shares outstanding is increased to include the number of additional
common shares that would have been outstanding if potentially dilutive common
shares had been issued.
- --------------------------------------------------------------------------------
(4) CONCENTRATIONS OF RISK
- --------------------------------------------------------------------------------
During the nine months ended July 31, 1999, $239,582 of the Company's net sales
of water and wastewater treatment products were from EDI products, and $317,658
was generated from the sale of ion membrane exchange products. The Company had
$356,998 in sales of its EDI products and $144,202 in sales of its ion exchange
membrane products during the nine months ended July 31, 1998.
7
<PAGE> 8
Approximately 75% of the Company's sales of EDI products during the nine months
ended July 31, 1999 were made to foreign customers. One such foreign customer
accounts for 54% of EDI product sales. The Company makes all sales and receives
all payments in U.S. dollars on all foreign sales. Management believes that
trade accounts receivable, aggregating $115,103 for the period ended July 31,
1999, are fully collectable, and therefore no provision has been recorded for
uncollectable trade accounts receivable.
- --------------------------------------------------------------------------------
(5) SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
In August, 1999, the Board of Directors granted each of the five Directors of
the Company 10,000 warrants with a ten year term to purchase common stock at
$0.9375 per share. Of such warrants, 10,000 were issued to the President of the
Company, and will be accounted for under APB No. 25. The issuance of these
warrants for services will result in an aggregate expense of $4,800 in fiscal
year 1999.
In August, 1999, the Company granted 10,000 warrants to purchase common stock at
$0.9375 per share for consulting services. The warrants are exercisable in 5,000
annual increments commencing on the date of grant and expire on August 13, 2009.
In August, 1999, the Company entered into a five-month agreement for
administrative and accounting services for which it paid $3,500 per month and
also granted 100,000 warrants to purchase common stock at $0.625 per share. The
warrants vest in 20,000 annual increments commencing on February 1, 2000 and
will expire on February 1, 2005.
In September, 1999, the Company granted a total of 18,600 warrants to purchase
common stock at $1.00 per share to two firms which assisted the Company in the
design and fabrication of molds for its EDI module. The warrants expire on
September 1, 2002. The fair value of the services provided was $9,300 and will
be recorded as product design costs.
8
<PAGE> 9
PART I
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
- --------------------------------------------------------------------------------
Certain of the statements contained herein (other than statements of historical
fact) are forward-looking statements. Such forward-looking statements are based
on current management expectations that involve substantial risks and
uncertainties which could cause actual results to differ materially from the
results expected by the Company. Potential risks and uncertainties that could
affect the Company's future operating results include, without limitation,
economic, competitive and legislative developments.
- ---------------------
RESULTS OF OPERATIONS
- ---------------------
References to 1998 and 1999 are for the nine months ended July 31, 1998 and
1999, respectively.
Sales increased for fiscal 1999 by $56,040 as compared to fiscal 1998, due
primarily to an increase in sales of the Company's ion exchange membrane
products.
Costs of goods sold for fiscal 1999 increased by $635,219 as compared to 1998
although sales for the comparative period essentially remained level. The
increase is due primarily to the allocation during 1999 of fixed overhead
expenses to cost of goods sold as compared to no allocation of such expenses
during the prior year period.
Research and development expenses for fiscal 1999 increased by $283,798 compared
to fiscal 1998. These expenses arise from the program which the Company
initiated in December, 1997 to develop the drinking water monitoring technology
acquired from Wyatt Technology Corporation in late October, 1997. The increase
in such expenses result, primarily, from the additional employees and
consultants engaged by the Company to conduct such research program.
General and administrative expenses for fiscal 1999 decreased by $631,392 as
compared to fiscal 1998. The decrease results primarily from a reduction in
legal and accounting expenses during the current period and from a reduction in
costs incurred in fiscal 1998 associated with the conversion of convertible
notes payable and accrued interest totaling $409,847. The reduction also
reflects the allocation of a portion of administrative expenses to both sales
operations and the Company's research and development program.
Interest income and expense activity is reflected as a net figure and represents
an increase of $8,315 in interest income for the fiscal period ended July 31,
1999 as compared to the prior year period. Interest income for fiscal 1999, in
the sum of $11,507, arose from short-term investments.
9
<PAGE> 10
In April, 1999, the Company issued a $65,000 bonus pursuant to the February,
1998 acquisition of proprietary ion membrane technology. An additional $2,127
was issued as a bonus in July, 1999 under such agreement. No such expense was
incurred during the prior fiscal period.
The Company realized a net loss before income taxes of $1,483,175 for fiscal
1999, representing an increase of $290,397 from the prior year level. The
increase was primarily due, as noted above, to increases in research and
development expenses for the Company's ion exchange membranes and water
monitoring technologies.
- ------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- ------------------------------------
At July 31, 1999, the Company had net working capital (total current assets less
total current liabilities) of $504,926. The increase in working capital,
compared to that reported at October 31, 1998, results primarily from the sale
of securities during the current period. The Company accrued $170,000 pursuant
to the prepayment in that amount by a customer for EDI products to be delivered
at a later date.
Sales activities increased during fiscal 1999 as compared to the prior year
period and although the Company incurred a loss from such operations for the
current period, cost-cutting efforts and increased marketing activities are
expected to generate higher sales revenues during the latter part of fiscal
1999. However, no assurances can be given as to future sales. During fiscal
1998, the Company primarily funded its working capital and other cash needs from
the sale of securities. In January, 1999, the Company received net proceeds of
$1,000,000 pursuant to a private placement sale of Series B Convertible
Preferred shares to a major shareholder of the Company. The Company also sold
1,020,000 shares of Common Stock and 510,000 warrants to purchase Common Stock
in a private placement offering between April and July, 1999 for net proceeds of
$620,000 and a note receivable of $400,000. See Item 2 - "Changes in
Securities."
- ---------------------
PLAN OF OPERATION
- ---------------------
In the opinion of management, available funds will satisfy the Company's working
capital requirements through January, 2000. The Company intends to fund its
working capital requirements by establishing strategic alliances with potential
joint venture partners for specific products under development or now being
produced by the Company. The Company is currently in the preliminary stage of
discussions with a potential strategic partner regarding further development and
use of the membrane technology acquired by the Company from Hydro Components in
February, 1998. The Company further believes that similar opportunities will
become available for other potential products, i.e., the Laserpure monitoring
technology, as successful development efforts are achieved. In an effort to
conserve available working capital, the Company intends to also utilize leasing
arrangements and/or debt financing where available in order to continue its
development programs. This approach has permitted the Company to acquire capital
equipment which will allow for lower production costs of various EDI module
components, particularly, the
10
<PAGE> 11
membranes utilized therein. The Company's management believes that, if
necessary, the Company will be able to raise additional working capital by the
private sale of its securities.
No assurances can be given that currently available funds will satisfy the
working capital needs of the Company for the period estimated, or; that the
Company can obtain additional working capital through the sale of Common Stock
or other securities, the issuance of indebtedness or otherwise or on terms
acceptable to the Company. Further, no assurances can be given that any such
equity financing will not result in a further substantial dilution to the
existing shareholders or will be on terms satisfactory to the Company.
The Company will be required to raise substantial amounts of new financing, in
the form of additional equity investments, loan financing, or from strategic
partnerships, in order to carry out its business objectives. There can be no
assurance that the Company will be able to obtain such additional financing on
terms that are acceptable to the Company and at the time required by the
Company, or at all. Further, any such financing may cause dilution of the
interests of the current shareholders in the Company. If the Company is unable
to obtain such additional equity or loan financing, the Company's financial
condition and results of operations will be materially adversely affected.
Moreover, the Company's estimates of its cash requirements to carry out its
current business objectives are based upon certain assumptions, including
certain assumptions as to the Company's revenues, net income (loss) and other
factors, and there can be no assurance that such assumptions will prove to be
accurate or that unbudgeted costs will not be incurred. Future events, including
the problems, delays, expenses and difficulties frequently encountered by
similarly situated companies, as well as changes in economic, regulatory or
competitive conditions, may lead to cost increases that could have a material
adverse effect on the Company and its plans. If the Company is not successful in
obtaining loans or equity financing for future developments, it is unlikely that
the Company will have sufficient cash to continue to conduct operations,
particularly research and development programs, as currently planned. The
Company believes that in order to raise needed capital, it may be required to
issue debt or equity securities that are significantly lower than the current
market price of the Company's Common Stock.
11
<PAGE> 12
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
In July, 1999, the Company entered into an agreement to settle the February,
1999 lawsuit it brought against Wyatt Technology Corporation ("Wyatt
Technology") for breach of the October, 1997 Technology Transfer Agreement by
which Electropure obtained a license to use and develop certain laser-based
technology and patents held by Wyatt Technology. The lawsuit, brought in the
Orange County Superior Court of California, Case No. 805529, alleged that Wyatt
had failed and refused to provide the technical support indicated under the
original agreement in an attempt to bring about a rescission of the license.
The settlement provided that each party has the right to utilize the licensed
technology as developed through Phase I of the Company's research program which
proved, in principle, that the instrument under development can perform
instantaneous microbe identification by measuring the light scattered by
particles as they pass through a laser beam. The settlement also provided for
the return by Wyatt Technology of 1.95 million of the 2.1 million common shares
it received from the Company under the original license agreement. Warrants to
purchase 10,000 shares of Common Stock at $1.38 per share issued to Clifford
Wyatt, an officer of Wyatt Technology, were also cancelled pursuant to the
settlement. Mr. Clifford Wyatt resigned as a director of the Company in April,
1999.
In August, 1999, a Cross Complaint for breach of contract, misrepresentation and
negligence was filed against the Company and other unaffiliated defendants by
Douglas B. Platt d/b/a East-West Technic Group ("Platt"), the defendant in a Los
Angeles Superior Court action, Case No. GC 023410, brought by Starr Surgical
Company, Inc. The cross-complaint charges Electropure with breach of contract,
misrepresentation and negligence in connection with the sale to Platt of an EDI
module subsequently provided by Platt to Starr Surgical. The cross-complaint
seeks unspecified damages. The Company intends to vigorously defend this matter.
The Company and its counsel believe that it will prevail on the merits if this
matter should go to trial.
- --------------------------------------------------------------------------------
ITEM 2. CHANGES IN SECURITIES
- --------------------------------------------------------------------------------
In May, 1999, the Company granted an additional 235,000 warrants to four
employees, exercisable at $1.00 per share. The warrants vest over a five year
period commencing one year from the grant date. An additional 50,000 warrants,
vesting over five years, were granted at $1.00 per share for future consulting
services.
In May, 1999, the Company authorized the issuance of 100,000 shares of Common
Stock, with a fair market value of $100,000, as a retainer against which fees
and expenses for new patent related work are to be charged by its patent
law firm.
12
<PAGE> 13
Between April and July 1999, the Company received $620,000 in net proceeds and a
note receivable in the sum of $400,000 on the sale of 1,020,000 shares of Common
Stock and 510,000 three-year warrants to purchase Common Stock at $2.00 per
share in a private placement offering. The warrants are redeemable by the
Company, unless exercised, at $0.05 per warrant at any time that the Common
Stock shall equal or exceed $4.00 per share for thirty consecutive trading days.
On July 19, 1999, pursuant to the terms of a lawsuit settlement, the Company
cancelled 1,950,000 shares of Common Stock held by Wyatt Technology Corporation
and fully depreciated the value of the intangible asset acquired from Wyatt in
October, 1997. See Item 1 - "Legal Proceedings."
The issuance of securities was exempt from registration under the Securities Act
of 1933, as amended (the "Act"), by virtue of Sections 3(b) and 4(2) of the Act,
including Regulation D promulgated thereunder. The Company believes that the
recipient acquired the securities for investment only and not with a view to the
distribution thereof and legends were affixed to the stock certificates. Except
as noted, no underwriters or brokers were involved in any transaction.
- --------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- --------------------------------------------------------------------------------
a. The Annual Meeting of the Shareholders of the Company was held
on June 26, 1999 at the Company's offices located at 23456 South
Pointe Drive, Laguna Hills, California 92653 at 10:00 A.M.
pursuant to notice to the shareholders. The following matters
were submitted to the vote of shareholders:
Proposal 1. The election of five directors to hold office until
the Annual Meeting of the Shareholders at which their term
expires or until their successors have been duly elected.
Proposal 2. A proposal to adopt the Company's 1999 Stock Option
Plan.
Proposal 3. A proposal to approve an Agreement with Harry
O'Hare.
b. The following named persons received the number of votes set
opposite their respective names for election to the Board of
Directors:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
DIRECTORS VOTES FOR VOTES AGAINST
-------------------------------------------------------------------------
<S> <C> <C>
William F. Farnam 8,405,510 123,704
Randall P. Frank 8,409,741 123,909
Randolph S. Heidmann 8,414,532 123,554
Arthur Lipper III 8,414,532 123,554
Floyd H. Panning 8,414,532 123,554
</TABLE>
13
<PAGE> 14
c. The following propositions received the number of votes set
opposite its respective number:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
VOTES FOR VOTES AGAINST ABSTENTIONS
-------------------------------------------------------------------------
<S> <C> <C> <C>
Proposal 2 7,853,408 143,039 20,091
Proposal 3 6,271,781 135,813 1,608,944
</TABLE>
- --------------------------------------------------------------------------------
ITEMS 3 AND 5 OMITTED AS NOT APPLICABLE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
(b) Report on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, as amended, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: September 9, 1999
ELECTROPURE, INC.
By /s/ CATHERINE PATTERSON
--------------------------------------
Catherine Patterson
(Secretary and Chief Financial Officer
with responsibility to sign on behalf
of Registrant as a duly authorized
officer and principal
financial officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1998
<PERIOD-END> JUL-30-1999
<CASH> 386,397
<SECURITIES> 0
<RECEIVABLES> 115,103
<ALLOWANCES> 0
<INVENTORY> 185,152
<CURRENT-ASSETS> 873,228
<PP&E> 346,028
<DEPRECIATION> 44,268
<TOTAL-ASSETS> 1,421,933
<CURRENT-LIABILITIES> 368,302
<BONDS> 0
0
1,026,000
<COMMON> 77,889
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,421,933
<SALES> 557,240
<TOTAL-REVENUES> 557,240
<CGS> 1,142,600
<TOTAL-COSTS> 841,081
<OTHER-EXPENSES> 67,127
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,393)
<INCOME-PRETAX> (1,482,175)
<INCOME-TAX> (800)
<INCOME-CONTINUING> (1,483,975)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,483,975)
<EPS-BASIC> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
