SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20540
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 30, 1996 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _________ To ____________
ECOLOGY PURE AIR INTERNATIONAL, INC.
------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-27625 76-0265439
-------- -------- ----------
(State of Incorporation) (Commission File No.) (IRS Employer
identification No.)
45 Rockefeller Plaza, Suite 2000
New York, New York 10111
Registrant's telephone number: (212) 957-3952
MARK FOUR RESOURCES, INC.
-------------------------
(Former Name, if changed since last report)
Indicate by (X) whether 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 and (2) has been subject to such filing requirements for the
past 90 days.
(1) Yes No X
----- ----
(2) Yes X No
----- ----
As of June 15, 1996, there were 25,100,000 shares of Common Stock
issued and outstanding.
Transitional Small Business Disclosure Format:
Yes No X
---- -----
<PAGE>
ECOLOGY PURE AIR INTERNATIONAL, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Consolidated Balance Sheet 1
at April 30, 1996 (Unaudited)
and July 31, 1995
Consolidated Statement of Operations 2
and Deficit for the three months ended
April 30, 1996 and 1995 (Unaudited)
Consolidated Statement of Operations 3
and Deficit for the nine months ended
April 30, 1996 and 1995 (Unaudited)
Consolidated Statement of 4
Change in Financial Position
for the nine months ended
April 30, 1996 (Unaudited)
Notes to Interim Consolidated 5
Financial Statements
Item 2. Management's Discussion and 8
Analysis of Financial Condition
and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote
of Security Holders 13
Item 5. Other Events 13
Item 6. Exhibits and Reports on Form 8-K 13
ii
<PAGE>
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
[in U.S. dollars]
ECOLOGY PURE AIR
INTERNATIONAL, INC.
[formerly Mark Four Resources, Inc.]
Unaudited
April 30, 1996
<PAGE>
Ecology Pure Air International, Inc.
[formerly Mark Four Resources, Inc.]
INTERIM CONSOLIDATED BALANCE SHEET
As at April 30 Unaudited
<TABLE>
<CAPTION>
July 31,
1996 1995
$ $
- -----------------------------------------------------------------------------------------------------
[in U.S. dollars]
<S> <C> <C>
ASSETS
Current
Cash and short term investments 4,237,559 8,044
Prepaid expenses 4,000 --
- -----------------------------------------------------------------------------------------------------
4,241,559 8,044
- -----------------------------------------------------------------------------------------------------
Deferred charges 100,000 --
Fixed assets 70,352 59,079
- -----------------------------------------------------------------------------------------------------
4,411,911 67,123
=====================================================================================================
LIABILITIES, SHARE CAPITAL AND DEFICIT
Current
Accounts payable and accrued charges 641,522 369,554
Due to related parties 1,119,636 1,607,987
Note payable 324,990 --
Bank loan 500,000 --
- -----------------------------------------------------------------------------------------------------
Total current liabilities 2,586,148 1,977,541
- -----------------------------------------------------------------------------------------------------
Share capital and deficit
Capital stock
Authorized (see note 4 [b])
35,000,000 common shares, par value $.001
5,000,000 preferred shares of which 3,600,000 have
been designated as Series A convertible preferred voting shares, par
value $.001, each share convertible into 30 common shares
Issued 29,825 4,000
Contributed surplus 5,383,217 319,750
Subscriptions receivable -- (8,000)
Deficit (3,587,279) (2,226,168)
- -----------------------------------------------------------------------------------------------------
Total share capital and deficit 1,825,763 (1,910,418)
- -----------------------------------------------------------------------------------------------------
4,411,911 67,123
=====================================================================================================
</TABLE>
See accompanying notes
<PAGE>
Ecology Pure Air International, Inc.
[formerly Mark Four Resources, Inc.]
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
Three months ended April 30 Unaudited
<TABLE>
<CAPTION>
1996 1995
$ $
- -----------------------------------------------------------------------------------------------------
[in U.S. dollars]
<S> <C> <C>
EXPENSES
Depreciation and amortization 315 778
Automotive 6,650 7,908
Interest and bank charges 2,222 49
Public relations 28,643 --
Insurance 7,121 8,894
Legal and professional 86,051 11,280
Office and miscellaneous 53,747 (6,223)
Rent 39,629 12,648
Research and development 129,390 278,489
Wages and benefits 431,412 38,555
Travel and promotion 82,148 95,952
Prototype and testing 17,427 49,854
- -----------------------------------------------------------------------------------------------------
Loss for period 884,755 498,184
=====================================================================================================
</TABLE>
See accompanying notes
<PAGE>
Ecology Pure Air International, Inc.
[formerly Mark Four Resources, Inc.]
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
Nine months ended April 30 Unaudited
<TABLE>
<CAPTION>
1996 1995
$ $
- -----------------------------------------------------------------------------------------------------
[in U.S. dollars]
<S> <C> <C>
EXPENSES
Depreciation and amortization 3,112 3,039
Automotive 19,527 17,653
Interest and bank charges 7,569 56
Public relations 44,666 --
Insurance 15,921 13,680
Legal and professional 200,457 13,370
Office and miscellaneous 114,728 (1,673)
Rent 160,267 27,648
Research and development 143,831 546,086
Wages and benefits 574,246 117,638
Travel and promotion 371,086 101,660
Prototype and testing 30,144 176,179
- -----------------------------------------------------------------------------------------------------
Loss for period 1,685,554 1,015,336
=====================================================================================================
</TABLE>
See accompanying notes
<PAGE>
Ecology Pure Air International, Inc.
[formerly Mark Four Resources, Inc.]
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
Nine months ended April 30 Unaudited
<TABLE>
<CAPTION>
1996 1995
$ $
- -----------------------------------------------------------------------------------------------------
[in U.S. dollars]
<S> <C> <C>
OPERATING ACTIVITIES
Loss for the period (1,685,554) (1,015,336)
Add items not involving cash 3,112 237,189
Changes in components of working capital (206,648) 382,142
- -----------------------------------------------------------------------------------------------------
Cash used in operating activities (1,889,090) (396,005)
- -----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of fixed assets (14,385) (28,221)
- -----------------------------------------------------------------------------------------------------
Cash used in investing activities (14,385) (28,221)
- -----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Decrease in loans receivable -- 424,170
Issue of common shares 4,900,000 --
Issue of notes payable 824,990 --
Collection of share subscription receivable 8,000 --
Payment of deferred financing fee (100,000) --
Increase in bank loan 500,000 --
- -----------------------------------------------------------------------------------------------------
Cash provided by financing activities 6,132,990 424,170
- -----------------------------------------------------------------------------------------------------
Increase (decrease) in cash 4,229,515 (56)
Cash, beginning of period 8,044 115
- -----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period 4,237,559 59
=====================================================================================================
Represented by
Short term investments 4,192,689 --
Cash 44,870 8,044
- -----------------------------------------------------------------------------------------------------
4,237,559 8,044
=====================================================================================================
</TABLE>
See accompanying notes
<PAGE>
Ecology Pure Air International, Inc.
[formerly Mark Four Resources, Inc.]
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
[in U.S. dollars]
April 30, 1996 Unaudited
1. BASIS OF PRESENTATION
The unaudited interim financial statements presented herein have been prepared
by management in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-QSB and Rule 10-01
of Regulation S-X (as amended by Regulation S-B). Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The accompanying
interim financial statements have not been audited by independent certified
public accountants, but in the opinion of management, such financial statements
include all adjustments consisting only of normal recurring accruals, necessary
to summarize fairly the results of operations, and are not necessarily
indicative of the results to be expected for the full year.
On November 17, 1995, Ecology Pure Air International, Inc. [formerly Mark Four
Resources, Inc.] ["International"] entered into a series of transactions [the
"Transactions"], whereby International obtained the worldwide manufacturing and
distribution rights to the CEM Catalyst Technology ["Technology"] and control of
International was transferred to a group of individuals herein referred to as
the "Founders". Prior to the Transactions, the Canadian manufacturing and
distribution rights to the Technology were held by E.P.A. Enterprises Inc., a
public company incorporated in Canada ["Enterprises"], the remaining worldwide
manufacturing rights to the Technology were held by Ecology Pure Air
International Inc., a company incorporated in Indiana ["Manufacturing"], and the
worldwide distribution rights were held by Rotello Technology and Marketing
Inc., a company incorporated in Barbados ["Rotello"]. The Founders have acquired
from Rotello the technology owned by Rotello. Certain of the Founders own 100%
of Manufacturing and certain other of the Founders control the Board of
Directors of Enterprises. Each of Rotello, Enterprises and Manufacturing have
participated directly in the development of the Technology, with Enterprises and
Manufacturing also contributing financial support through a series of advances
and loans to Rotello.
Prior to the Transactions, International was a public shell company. The
transfer of Rotello's technology rights to International has been accounted for
as a reverse takeover of International by the Founders. Therefore, the transfer
has been reflected in the proforma condensed financial information as a capital
transaction with the technology transferred recorded at its carrying value of
nil prior to the Transactions.
Given the relationship between certain of the Founders and Manufacturing, the
assets, liabilities and equity of Manufacturing have been combined on a
retroactive basis with International using their carrying values, in a manner
similar to a pooling of interests. All assets, liabilities, capital stock,
deficit, revenues and expenses for periods prior to November 17, 1995, represent
the consolidated assets, liabilities, capital stock, deficit, revenues and
expenses of International and Manufacturing as if the companies had always been
combined.
<PAGE>
International will continue the development of CEM Catalyst Technology and other
technologies. No significant revenues have been earned to date from technologies
under development International's ability to realize the carrying value of its
assets and discharge its liabilities is dependent on successfully bringing its
new technologies to the market and achieving future profitable operations, the
outcome of which cannot be predicted at this time. It will be necessary for
International to obtain additional financing in the coming year, in order to
fund the continuing development of its technologies.
2. THE TRANSACTIONS
During the nine month period ended April 30, 1996, the company completed the
following transactions:
[a] Rotello sold the exclusive worldwide rights [excluding Canada] to market,
sell and manufacture the Technology to a group of individuals [the"
Founders]" for debt consideration plus an annual royalty of 3.5% of the
net worldwide sales of products manufactured under the agreement.
The Founders then assigned the rights and royalty obligation of the above
agreement to International in exchange for 3,000,000 preferred shares and
18,000,000 warrants to purchase common shares. Each preferred share is
convertible into thirty common shares and has voting rights equal to
thirty common shares ["Preferred Shares"]. The warrants are exercisable
into common shares of the company at a price of $3.334 per share on or
prior to September 30, 1997 ["Warrants"].
[b] Concurrently, the company exchanged 600,000 common shares of International
for all of the outstanding shares of Manufacturing as held by certain of
the Founders. In conjunction with the purchase, International entered into
employment contracts with the Manufacturing shareholders which provided
for the issuance of 1,125,000 common shares and options to purchase
15,000,000 common shares at $1.667 per share on or before November 17,
2000.
[c] As consideration for consulting services rendered in connection with the
above transactions, International issued 12,000,000 common shares, 600,000
Preferred Shares and 6,000,000 Warrants to certain consultants. These
consulting services and the compensation arrangements with certain of the
Founders have been recorded as compensation expense at the par value of
International shares.
[d] International received $824,990 of advances under 6% convertible
promissory notes payable to Main Square. Notes payable totaling $500,000
were converted into 2,000,000 common shares of International. The balance
of the advances due to Main Square are convertible into common shares at
$.91667 per share.
<PAGE>
[e] The company has entered into an arrangement agreement to purchase all of
the outstanding shares of Enterprises and its wholly owned subsidiaries,
Trendset Worldwide Engineering Corp. and Ecology Pure Air Systems, Inc. in
exchange for 12,411,672 common shares and 12,411,672 Warrants of
International. Completion of this transaction is subject to regulatory
approval.
3. PRIVATE PLACEMENT
On March 26, 1996, the company completed a private placement of 6,600,000 common
shares at $.9167 per share for net proceeds of $4,900,000. Commissions paid
include 10% of gross proceeds plus 600,000 common shares.
4. SUBSEQUENT EVENTS
[a]The acquisition of Enterprises and its wholly-owned subsidiaries
received approval of the shareholders of Enterprises on February 23, 1996.
The British Columbia Supreme Court was scheduled to rule on the fairness
of the transaction on May 6, 1996. The Court has reserved ruling on this
matter and has rescheduled another hearing for July 16, 1996.
(b) On June 18, 1996, the company filed a Certificate of Amendment of the
Certificate of Incorporation in order to:
(i) change the name of the company to Ecology Pure Air International,
Inc.;
(ii) increase the authorized common shares from 35,000,000 to
100,000,000 with a par value of $.001 per share and;
(iii) effect a 3 for 1 reverse stock split for common shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Background
From its inception in 1988 through November, 1995, Mark Four Resources,
Inc. (the "Company") engaged in no active business operations other than to seek
to enter into strategic business combinations that would capitalize on its
status as a public company. In November, 1995, the Company completed certain
acquisition transactions described below, that resulted in a change of the
business and in the control of the Company.
Business Transactions
On November 17, 1995, the Company secured and entered into agreements
regarding the acquisition of the worldwide rights to manufacture, sell and
distribute the Combustion Efficiency Management Catalyst (the "C.E.M. Catalyst")
- -- a pre-combustion device intended for the purpose of reducing the emission of
pollutants in automobiles, motorcycles, lawn mowers and other vehicles and
machinery, all as more fully described in the Current Report on Form 8-K of the
Company filed with the Securities and Exchange Commission on November 27, 1995
(the "Form 8-K") which is incorporated herein by reference. Furthermore, as a
result of the Company issuing shares of its Common Stock, Preferred Stock and
warrants to acquire Common Stock as consideration for such acquisitions, the
Company underwent a change in control as more fully set forth in the Form 8-K.
Subsequent to the quarter ended April 30, 1996, the Company effected
certain corporate changes including an increase in the authorized common stock,
a three for one reverse stock split of the issued and outstanding common stock
and a corporate name change as discussed in Note 4 of the Notes to Interim
Consolidated Financial Statements under Item 1. The discussion below and the
information contained in this Report do not give effect to these corporate
changes which occurred on June 18, 1996.
8
<PAGE>
Acquisition of the C.E.M. Catalyst Manufacturing Rights
The Company acquired the exclusive right to manufacture the C.E.M.
Catalyst by acquiring all of the outstanding shares of capital stock of E.P.A.
Manufacturing, Inc. (f/k/a Ecology Pure Air International, Inc.), an Indiana
corporation ("EPA Manufacturing") pursuant to a Stock Purchase Agreement by and
among the Company, Teodosio Pangia and Gianni D'Alessandro (collectively, the
stockholders of EPA Manufacturing) (the "Stock Purchase Agreement"). In
accordance with the Stock Purchase Agreement, the Company acquired all of the
outstanding shares of stock of EPA Manufacturing in exchange for 600,000 Common
Shares of the Company. Messrs. Pangia and D'Alessandro, being the sole
stockholders of EPA Manufacturing, each received 300,000 Common Shares as a
result of this transaction. Messrs. Pangia and D'Alessandro are both currently
principal stockholders, officers and directors of the Company.
EPA Manufacturing owns the rights to manufacture the C.E.M. Catalyst
and certain C.E.M. Catalyst inventories located in Elkhart, Indiana.
Acquisition of the Worldwide Marketing Rights
(Excluding Canada) to the C.E.M. Catalyst
Additionally, on November 17, 1995, the Company acquired the worldwide
rights (excluding Canada) to market, sell and distribute the C.E.M. Catalyst
from a group of eleven individuals (such group, which includes members of the
Company's current management as more fully described below, to be collectively
referred to herein as the "EPA Founders"), who had in turn acquired such rights
from Rotello Technology and Marketing, Inc., ("Rotello"), the original developer
of these technologies.
As consideration for these rights, the Company issued to the EPA
Founders an aggregate of 3,000,000 shares of Series A Convertible Voting
Preferred Stock (the "Preferred Shares") and Common Stock Purchase Warrants (the
"Warrants") to acquire 18,000,000 Shares of Common Stock. The Company also
issued to a group of five investment banking consultants who were instrumental
in arranging the transaction (collectively referred to herein as the
"Consultants") an aggregate of 12,000,000 Shares of Common Stock, 600,000
Preferred Shares and Warrants to acquire an additional 6,000,000 Shares of
Common Stock.
Each Preferred Share is convertible into thirty (30) Shares of Common
Stock in accordance with a Certificate of Designation of Terms of Preferred
Stock approved by the Board of Directors of the Company and filed with the
Secretary of State of the State of Delaware on November 15, 1995. The Warrants
are exercisable at U.S. $3.334 per Share on or before September 30, 1997.
In addition, the Company also agreed to pay a three and one half
percent (3 1/2%) royalty on all sales of the C.E.M. Catalyst to Rotello in
perpetuity.
9
<PAGE>
Agreement to Acquire Canadian Marketing Rights
to the C.E.M. Catalyst
The Company completed its business transactions with regard to the
C.E.M. Catalyst when, pursuant to an Arrangement Agreement dated November 17,
1995, it agreed to acquire the rights to market, sell and distribute the
C.E.M. Catalyst in Canada by acquiring all of the outstanding shares of
capital stock of E.P.A. Enterprises Inc., a British Columbia corporation
("Enterprises") in exchange for 12,411,672 Shares of Common Stock and Warrants
to acquire an additional 12,411,672 Shares of Common Stock of the Company.
Enterprises is the parent corporation of Ecology Pure Air Systems, Inc., an
Ontario corporation ("EPA Systems") which owns the exclusive right to market
and sell the emissions control technology developed by Rotello in Canada.
The consummation of the transactions contemplated by the Arrangement
Agreement was subject to obtaining (i) the approval of the shareholders of
Enterprises, which approval was obtained on February 23, 1996 and (ii) the
approval of the British Columbia Supreme Court as to the fairness of the
entire transaction, which transaction was presented to the British Columbia
Supreme Court on May 6, 1996. The Court reserved ruling and scheduled a
further hearing on July 16, 1996. Although shareholder approval was obtained
for the transaction, no closing thereon will occur until the fairness thereof
is approved by the British Columbia Supreme Court. Although management of the
Company is optimistic that such approvals will be forthcoming either on July
16, 1996, or shortly thereafter, there can be no assurance to this effect.
Approval of this transaction by the shareholders was also conditioned upon the
Company increasing its authorized common stock to a number sufficient to
encompass the issuance of the Shares and Warrants under the Arrangement
Agreement. Management undertook the steps necessary to increase its authorized
common stock and such increase occured at the end of the second calendar
quarter of 1996. Upon consummation of the transactions as contemplated by the
Arrangement Agreement, Enterprises and EPA Systems will become wholly-owned
subsidiaries of the Company.
Results of Operations
For the quarter ended April 30, 1996, the Company remained in the
development stage. During this quarter, management's efforts were substantially
devoted toward organizational and management issues associated with, among other
things: completion of the acquisitions that occurred on November 17, 1995; a
continuing restructuring of management and personnel responsibilities in view of
the recent change in the nature and scope of the Company's business; organizing
and conducting the shareholder meeting associated with the acquisition of
Enterprises and preparation for the British Columbia Supreme Court reviews
scheduled for May 6, 1996 and July 16, 1996; and developing a coordinated plan
for financing the Company's initial and continued anticipated development
activities.
During the quarter, the Company also continued its fundamental
efforts in connection with the further development and marketing of its
core product, the C.E.M. Catalyst.
10
<PAGE>
For the quarter ended April 30, 1996, the Company incurred a net loss
of $863,131. This compares to a net loss of $498,184 for the equalivent prior
year quarter, restated to reflect the transactions that occurred on November 17,
1995 that have been accounted for as a pooling of interests.
The Company's loss during the quarter is comprised entirely of
operating and other expenses incurred in connection with the activities of the
Company as they relate to the manufacture, sale and distribution of the C.E.M.
Catalyst.
Although product development and marketing activities were sustained,
no revenues were realized by the Company during the quarter. Based upon its
anticipated sales and marketing plans, management does not expect material
revenues will be realized by the Company within the near term. Accordingly, it
is likely that the Company's operating losses will continue, and that these
losses may increase as the Company's manufacturing, marketing and sales efforts
increase.
Although the Company completed a private placement for net proceeds of
$4,900,000 on March 26, 1996, the Company's capital resources still remain
relatively limited. Without further significant infusions of capital from
financing transactions or from operations, the Company's ability to remain in
operation as a going concern for more than the next twelve months remains
subject to doubt.
Liquidity and Capital Resources
Following its acquisition on November 17, 1995 of the rights to
manufacture, market and sell the C.E.M. Catalyst, the Company's plan of
operation for the next twelve months and thereafter is to: (i) conduct
sufficient additional testing necessary to evidence validation of the properties
of the C.E.M. Catalyst to certain regulatory agencies and for certain strategic
potential customers; (ii) identify and establish customer relationships within
the retrofit market on a global basis; in particular, (a) develop distribution
and servicing arrangements within North American chains of automobile parts and
service retailers and (b) develop strategic alliances in foreign markets,
particularly Southeast Asia, with companies and/or governmental entities
relating to the sale of the C.E.M. Catalyst on a wholesale basis; (iii) identify
and establish customer relationships with manufacturers of internal combustion
engine powered vehicles and/or machinery, including automobiles, motorcycles,
lawn mowers and tractors, among others; (iv) develop consumer awareness by
promoting the favorable environmental effects resulting from use of the C.E.M.
Catalyst; (v) through lobbying and consumer awareness programs, encourage the
adoption of policies by domestic and foreign governmental units which would
require or provide incentives for the use of emission controlling devices; and
(vi) explore the adaptation of the C.E.M. Catalyst technology to other uses,
particularly in the fuel refining process.
The Company remains, however, in the development stage, and has
continued to incur operating losses through the quarter ended April 30, 1996.
However, as of April 30, 1996, the Company had a net worth of $1,825,763 which
was primarily due to the infusion of capital of net proceeds of $4,900,000 from
a private placement which was completed on March 26, 1996.
11
<PAGE>
In the absence of revenues, operating expenses will for the foreseeable
future remain a significant draw upon the Company's liquidity and capital
resources. For the quarter ended April 30, 1996, operating expenses were
principally consumed by variable expenses, such as professional fees, business
development, utility costs and travel and promotion. Rental expenses are
expected to remain between $15,000 and $20,000 per month for the short term. The
Company's only long-term commitments requiring the use of significant capital
resources involves the employment of its executive officers. The Company has
entered into long-term employment agreements with its Chairman and Chief
Executive Officer and its President and Chief Operating Officer. Each of these
contracts requires the payment of approximately $350,000 per annum through
December 1, 2000. In addition, the Company has entered into a long-term
employment agreement with its Chief Financial Officer requiring the payment of
approximately $250,000 per annum until December 1, 2000 and certain consulting
agreements which require varying amounts of payment based upon the degree of
services performed by the consultant.
In order to achieve any of its strategic goals, the Company will need
to significantly enhance its liquidity and capital resources. Since material
revenues are not expected within the near term, the Company's principal
short-term objective is to secure funding through financing transactions which
may either involve the sale by the Company of debt or equity securities in
private placement transactions. The proceeds from such transactions would likely
permit the Company to more fully develop its manufacturing facilities, expand
its base of inventories, parts and equipment, continue and expand its scope of
scientific testing and research and development program, hire additional
scientific personnel, as well as implementing its sales and marketing programs
through, among other things, the development of targeted advertising and
marketing programs and the hiring of marketing and sales personnel.
The Company made significant progress in its efforts to enhance its
liquidity and capital resources when on March 26, 1996 it completed a private
placement transaction involving the sale of 6,600,000 shares of its common stock
for total gross proceeds of approximately $5.5 million (net proceeds of $4.9
million) and is currently undertaking a private offering of its securities to
raise an aggregate $15 million with such placement anticipated to be completed
in July, 1996, although there can be no assurances to the raising of any capital
or the completion of such offering. Additionally, the Company is currently
contemplating other potential private placement offerings of its securities in
order to raise additional capital and further enhance its near term liquidity. A
longer-term inability to secure adequate sources of capital will likely subject
the Company to the risk that it will be unable to continue its operations as a
going concern.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
12
<PAGE>
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of security Holders
None.
Item 5. Other Events
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On April 24, 1996, the Company filed Amendment No. 1 to its Current
Report on Form 8-K, dated November 17, 1995 (Filed November 27, 1995) reporting
the financial statements of the acquisitions which occurred on November 17,
1995.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on behalf of the
undersigned thereunto duly authorized.
ECOLOGY PURE AIR INTERNATIONAL, INC.
Date: June 28, 1996 By: /s/ Teodosio Pangia
-------------------------------
Chief Executive Officer
By: /s/ Paul Mazza
--------------------------------
Principal Accounting
Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> APR-30-1996
<CASH> 44,870
<SECURITIES> 4,192,689
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,241,559
<PP&E> 70,352
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,411,911
<CURRENT-LIABILITIES> 2,588,148
<BONDS> 0
0
3,600
<COMMON> 26,225
<OTHER-SE> 5,383,217
<TOTAL-LIABILITY-AND-EQUITY> 4,411,911
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,685,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,685,554)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,685,554)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,685,554)
<EPS-PRIMARY> (0.064)
<EPS-DILUTED> (0.013)
</TABLE>
