-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B9YcCDt5Bmx5rwBxKPBvNl0IUFn1Ftb35HC65Zrtv6LQHNFKg9ZDvpQGSWRagZ4t tsMnDiHLdoNWIBCP7Hqn3Q== 0000892569-96-001733.txt : 19960830 0000892569-96-001733.hdr.sgml : 19960830 ACCESSION NUMBER: 0000892569-96-001733 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19960829 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELECTROPURE INC CENTRAL INDEX KEY: 0000808015 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 330056212 STATE OF INCORPORATION: CA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-16416 FILM NUMBER: 96623294 BUSINESS ADDRESS: STREET 1: 23251 VISTA GRANDE SUITE A CITY: LAGUNA HILLS STATE: CA ZIP: 91320 BUSINESS PHONE: 7147709187 MAIL ADDRESS: STREET 1: 25231 VISTA GRANDE STREET 2: SUITE A CITY: LAGUNA HILLS STATE: CA ZIP: 92653 FORMER COMPANY: FORMER CONFORMED NAME: HOH WATER TECHNOLOGY CORP DATE OF NAME CHANGE: 19920703 10QSB 1 FORM 10-QSB QUARTERLY REPORT, JULY 31, 1996 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, 1996 ELECTROPURE, INC. (FORMERLY, HOH WATER TECHNOLOGY CORPORATION) - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 33-0056212 - ---------------------------------- ------------------- (State or Other Jurisdiction (IRS Employer of Incorporation or Organization) Identification No.) 23251 Vista Grande, Suite A, Laguna Hills, California 93653 - ----------------------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (714) 770-9187 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 August 28, 1996, 1,896,070 shares of the Registrant's stock were outstanding. - ---------------------------------------------------------------------------- 1 2 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) BALANCE SHEETS
October 31, July 31, 1995 1996 ---------- ---------- (Unaudited) Assets - ------ Current assets: Cash $ 3,743 $ 967 Receivables: Trade accounts 7,278 7,278 Due from related parties 81,198 79,098 Allowance for doubtful receivables (84,480) (84,480) -------- --------- 3,996 1,896 Total Current Assets $ 7,739 $ 2,863 -------- -------- Propery and equipment, at cost: Office equipment -- 539 -------- -------- -- 539 Less accumulated depreciation and amortization -- 22 -------- -------- -- 517 Total Assets $ 7,739 $ 3,380 ======== ========
See accompanying notes to financial statements. 2 3 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) BALANCE SHEETS
October 31, July 31, 1995 1996 ----------- ------------ (Unaudited) Liabilities and Stockholders' Equity (Deficiency) - ------------------------------------------------- Current liabilities: Notes payable to stockholders $ 14,304 $ 15,378 Accounts payable 158,207 158,207 Accrued liabilities 2,828 1,741 Allowance for loss on lawsuit settlements 23,331 23,331 ------------ ------------ Total current liabilities 198,670 198,658 Litigation, claims, commitments and contingencies Redeemable convertible preferred stock, $.01 assigned par value. Authorized 2,600,000 shares; issued and outstanding 2,600,000 shares in 1995 and 1996 26,000 26,000 Stockholders' deficit: Common stock, $.01 assigned par value. Authorized 20,000,000 shares; 1,797,910 shares issued and 1,757,910 shares outstanding in 1995; 1,936,070 shares issued and 1,896,070 shares outstanding in 1996 175,791 18,961 Class B common stock, $.01 assigned par value. Authorized 83,983 shares; issued and outstanding 83,983 shares in 1995 and 1996 8,398 840 Additional paid-in capital 15,485,809 15,812,369 Deficit accumulated in the development stage (15,734,163) (15,900,682) Notes receivable on common stock (152,766) (152,766) ------------ ------------ (216,931) (221,278) ------------ ------------ Total Liabilities and Stockholders' Equity (Deficiency) $ 7,739 $ 3,380 ============ ============
See accompanying notes to financial statements. 3 4 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) STATEMENTS OF OPERATIONS (Unaudited)
Three months ended Nine months ended July 31, July 31, ------------------------ ------------------------- 1995 1996 1995 1996 ---------- --------- --------- --------- License fees received $ 8,250 $ 5,500 $ 63,550 $ 29,969 --------- --------- --------- --------- Costs and expenses: General and administrative 16,893 71,673 32,481 119,127 --------- --------- --------- --------- 16,893 71,673 32,481 119,127 --------- --------- --------- --------- Loss from operations (8,643) (66,173) 31,069 (89,158) --------- --------- --------- --------- Other income and (expense): Interest expense (325) (358) (975) (1,074) Financing costs -- (76,287) (41,070) (76,287) Patent litigation rights -- -- (74,375) -- Miscellaneous income (expense) -- -- -- -- --------- --------- --------- --------- (325) (76,645) (116,420) (77,361) --------- --------- --------- --------- Net loss $ (8,968) $(142,818) $ (85,351) $(166,519) ========= ========= ========= ========= Net income (loss) per share of common stock $ (0.01) $ (0.09) $ (0.05) $ (0.10) --------- --------- --------- --------- Weighted average common shares outstanding 1,591,803 1,667,110 1,591,803 1,667,110 ========= ========= ========= =========
See accompanying notes to financial statements. 4 5 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (Unaudited)
Common Stock Class B Common Stock -------------------------------- ----------------------------- Amount Amount Number ------------------ Number ---------------- of Per of Per shares share Total shares share Total ---------- ----- -------- --------- ----- -------- Balance at October 31, 1995 17,579,097 $ -- $175,791 $ 839,825 $ -- $ 8,398 Issuance of common stock on exercise of options 5,000 0.05 50 -- -- -- exercise of options 83,130 0.15 831 -- -- -- exercise of options 45,832 0.20 458 -- -- -- Issuance of common stock for cash 200,000 0.20 2,000 -- -- -- Issuance of common stock for services rendered 200,000 0.12 2,000 -- -- -- Issuance of common stock for conversion of debt 847,636 0.09 8,476 -- -- -- Reverse Stock Split (one-for-ten) (17,064,625) -- (170,646) (755,842) -- (7,558) Net Loss -- -- -- -- -- -- ----------- -------- --------- ------- Balance at July 31, 1996 1,896,070 $ 18,961 $ 83,983 -- $ 840 =========== ======== ========= =======
Deficit Notes accumulated Additional receivable in the paid-in on common development capital stock stage ----------- ---------- ------------ Balance at October 31, 1995 $15,485,809 $(152,766) $(15,734,163) Issuance of common stock on exercise of options 200 -- -- exercise of options 11,638 -- -- exercise of options 8,708 -- -- Issuance of common stock for cash 38,000 -- -- Issuance of common stock for services rendered 22,000 -- -- Issuance of common stock for conversion of debt 67,811 -- -- Reverse Stock Split (one-for-ten) 178,203 -- -- Net Loss -- -- (166,519) ----------- --------- ------------ Balance at July 31, 1996 $15,812,369 $(152,766) $(15,900,682) =========== ========= ============
See accompanying notes to financial statements. 5 6 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) STATEMENTS OF CASH FLOWS (Unaudited)
Nine months ended July 31, --------------------------- 1995 1996 --------- ---------- Cash flows from operating activities: Net loss $(85,351) $(166,519) -------- --------- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 918 22 Financing costs related to issuance of warrants 41,070 -- Financing costs related to issuance of common stock -- 76,287 Change in assets and liabilities, net of noncash transactions: Decrease (increase) in receivables (3,200) 2,100 Decrease (increase) in other assets 4,500 (539) Increase (decrease) in accounts payable and accrued expenses (32,483) (1,087) Increase in interest payable, net -- 1,074 -------- --------- Total adjustments 10,805 77,857 -------- --------- Net cash used in operating activities (74,546) (88,662) Cash flows from investing activities: None Cash flows from financing activities: Proceeds from issuance of common stock 74,375 85,886 -------- --------- Net cash provided by financing activities 74,375 85,886 -------- --------- Net increase (decrease) in cash (171) (2,776) Cash (overdraft) at beginning of period 370 3,743 -------- --------- Cash (overdraft) at end of period $ 199 $ 967 ======== =========
See accompanying notes to financial statements. 6 7 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) Notes to Condensed Financial Statements July 31, 1996 (Unaudited) (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. 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, 1995. In May, 1996, the Company's shareholders approved amendments to the Articles of Incorporation which provided for a corporate name change to "Electropure, Inc." and a one-for-ten reverse stock split of its Class A and Class B common stock. Such name change and reverse stock split became effective on July 25, 1996 at which time the Company's trading symbol on the over-the-counter market was changed to "ELTP". Liquidity --------- As of July 31, 1996, the Company had current liabilities in excess of current assets of $195,795, a deficit accumulated during the development stage of $15,900,682 and a stockholders' deficit of $221,278. The Company has never generated a positive cash flow from operations and, as a result of a severe lack of working capital, in January, 1992 was forced to suspend operations while it sought additional financing. In May, 1992, HOH entered into a Letter of Intent with Panning Enterprises, Inc. (formerly Electropure, Inc.), a California corporation, to grant an exclusive license to manufacture and market the Company's patented Electropure ("EDI") technology. From May, 1992, since entering into such license relationship, through October 31, 1995, the Company has funded its working capital needs from license fees paid by Panning Enterprises totaling $369,995. During the nine months ended July 31, 1996, the Company received an additional $29,969 in license fees and the Company also received net proceeds of $21,886 from the exercise of 133,962 warrants to purchase common stock at prices ranging from $0.05 to $0.20 per share. During the period, the Company also received $40,000 in net proceeds from the sale of 200,000 shares of common stock at $0.20 per share. The one-for-ten reverse stock split effected by the Company on July 25, 1996, resulted in a reduction in capital stock as of such date in the amount of $170,646 for Class A common shares and $7,558 for Class B common shares and an increase of $178,203 in additional paid-in capital. 7 8 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) Notes to Condensed Financial Statements July 31, 1996 (Unaudited) (2) Due from Related Parties The Company has balances remaining due, including interest, on notes receivable from related parties. The balance includes net amounts remaining on a $30,000 loan made to a former shareholder and an $80,000 loan made to a corporation whose significant stockholder was James E. Cruver, a former officer and director of HOH. The Company received partial payments representing principal and/or interest on these loans, however, due to the fact that they are significantly past due and the uncertainty of when or if they will be collected, interest income was not being recognized until received and the balances at July 31, 1996 are offset by an allowance for doubtful accounts. A total of $23,763 remains due as of July 31, 1996 from former officers and directors, Harry M. O'Hare, Sr. and David C. Kravitz. Such amount is secured by 37,565 shares of the Company's common stock resulting in an unsecured receivable in the amount of $17,978, which has been offset by an allowance for doubtful accounts. As of July 31, 1996, there remained $200 principal due and owing from the current officer of the Company on a $5,000 loan made during fiscal 1995 at 6% simple interest. (3) Inventory Inventory, stated at the lower of cost (determined using the first in, first out method) or replacement market, consists of components for water purification systems. As of October 31, 1994, the Company had sold all of its inventory. (4) Commitments and Contingencies The original cost and accumulated depreciation of assets at July 31, 1996 is as follows. Furniture and fixtures $539 Less accumulated depreciation and amortization 22 ---- $517 ==== Commitments ----------- In June, 1992, the Company entered into a sub-lease with Panning Enterprises for the rental of space at its current location in Laguna Hills, California. The Company paid $500 per month through July, 1995 pursuant to such sub-lease agreement, which includes the use of all utilities, equipment and facilities on the premises. Since August 1, 1995, the Company has occupied the premises on a rent-free basis pursuant to an amendment to the license agreements with Panning 8 9 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) Notes to Condensed Financial Statements July 31, 1996 (Unaudited) Enterprises. Consequently, the Company had no sub-lease expense for the fiscal period ended July 31, 1996. (5) Stockholders' Deficit Common Stock Activity --------------------- Between November 1, 1995 and July 31, 1996, the Company received $21,886 in net proceeds from the exercise of 113,962 warrants to purchase common stock at prices ranging from $0.05 to $0.20 per share. In February, 1996, the Company sold 200,000 shares of common stock to two individuals in a private placement offering at $0.20 per share, resulting in net proceeds to the Company in the sum of $40,000. Pursuant to provisions of the July, 1992 agreements with Panning Enterprises, the Company issued 847,636 shares of common stock at $0.09 per share to four individuals to convert a total of $76,287 in loans and interest accrued thereon, resulting in a $76,287 finance expense for the period. The Company has also agreed to issue additional common shares at prices ranging from $0.06 to $0.09 per share to two individuals in exchange for the cancellation of $100,000 and $107,000 in notes payable. Such issuances will be made in the fourth quarter of 1996 and the resulting expense to the Company will be reflected in its financial statements for the year ended October 31, 1996. Also in February, 1996, the Company issued 200,000 shares of common stock for services rendered by a company for a business plan. The transaction resulted in an increase in common stock and additional paid in capital and a $24,000 general and administrative expense. Option and Warrant Activity --------------------------- Between December, 1995 and January, 1996, the Company issued 25,000 one-year warrants to purchase common stock at $0.05 per share. Such warrants were issued pursuant to the agreements with Panning Enterprises as partial consideration for $50,000 in loans made to that company. On February 23, 1996, the Company and its licensee, Panning Enterprises, entered into a Convertible Loan agreement with a shareholder in both entities, whereby Panning Enterprises was loaned the sum of $500,000 for a period of two years at 10% interest. As additional consideration for the loan, the Company has granted the lender a first security interest in all of the Company's patents and future patents during the term that the loan remains outstanding. As further consideration for the loan, the Company granted the lender 300,000 five-year warrants to purchase 9 10 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) Notes to Condensed Financial Statements July 31, 1996 (Unaudited) Common Stock at $2.25 per share. No adjustment in the number or exercise price of such warrants will be made pursuant to the one-for- ten reverse stock split which the Company's shareholders effected in July, 1996. See Part I - "Plan of Operation." (6) Net Loss per Share of Common Stock Net loss per share of common stock is based on the weighted average number of shares outstanding during each of the respective periods. No effect has been given to common stock equivalents as the effect to loss per share would be anti-dilutive. (7) Subsequent Events In August, 1996, the Company initiated a private placement offering (the "Offering") of up to 40 Units for $25,000 per Unit, each unit consisting of 10,000 shares of common stock and 10,000 redeemable Class A Warrants to purchase common stock at $3.50 per share until August 1, 1998. Such Warrants are redeemable by the Company at $0.05 per Warrant at any time after August 1, 1997 if the bid price of the Company's common stock exceeds $4.00 per share for any thirty consecutive business days. The Offering is scheduled to expire on September 30, 1996 and may be extended at the option of the Company's Board of Directors. The Company has received verbal commitments to purchase Units under the Offering and expects to receive subscriptions for same within the next several weeks. PART I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations --------------------- References to 1995 and 1996 are for the nine months ended July 31, 1995 and 1996, respectively. License fees received for fiscal 1996 decreased by $33,581 compared to 1995. However, the Company received $40,000 and $21,886 in proceeds from the sale of common stock and upon the exercise of warrants, respectively. Consequently, the obligation of Panning Enterprises to pay all necessary expenses was decreased significantly for the period. General and administrative expenses for fiscal 1996 increased by $86,646 as compared to fiscal 1995. The increase is due to an increase in legal and accounting expenses and for outside services for the 1996 period combined with the fact that Company wrote off $33,815 in accrued payable during the 1995 fiscal period. 10 11 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) Notes to Condensed Financial Statements July 31, 1996 (Unaudited) Financing costs for fiscal 1996 increased by $35,217 as compared to fiscal 1995, due to the expense of issuing 847,636 common shares in exchange for loans made by investors in the Company's licensee, Panning Enterprises. Patent litigation rights for 1995 was $74,375 as compared to no activity for 1996. This expense resulted from an agreement to pay the Company's licensee the proceeds from certain warrant exercises and stock purchases during 1995 in exchange for a portion of such licensee's rights to any recovery in the patent infringement action being litigated by the parties. No additional provision for loss on lawsuit settlement has been made in fiscal 1996 as the Company believes that adequate provision has been made to settle pending lawsuits. Loss before extraordinary item of $166,519 for fiscal 1996 represents an increase of $81,168 from the prior year level. This is primarily due to increases in general administrative expense and financing costs related to the issuance of common stock. Liquidity and Capital Resources ------------------------------- At July 31, 1996, the Company had a working capital deficit (total current assets less total current liabilities) of $195,795, representing a decrease of $209,621 from the prior year period, primarily as a result of writing off over $244,000 in accrued liabilities in the fourth quarter of fiscal 1995. All funds have been exhausted and the Company is currently reliant upon license fees from Panning Enterprises for its working capital requirements. The Company believes, however, that sufficient working capital is readily available from its licensee to cover the Company's current administrative-only operations for the next several months. See Part I - "Plan of Operation". During fiscal 1995, the Company received $72,550 in license fees and realized net proceeds of $68,125 on the exercise of 1,362,500 warrants at $0.05 per share. During the nine months ended July 31, 1996, the Company received an additional $29,969 in license fees from Panning Enterprises and had received net proceeds of $40,000 and $21,886 from the sale of common stock and from the exercise of warrants to purchase common stock, respectively. No assurances can be given that the Company will obtain any significant revenues from sales or that the Company can obtain additional working capital through the sale of Common Stock, the sale of 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 dilution to the existing shareholders. 11 12 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) Notes to Condensed Financial Statements July 31, 1996 (Unaudited) Plan of Operation ----------------- In May, 1995, the Company and its licensee, Panning Enterprises (formerly, Electropure, Inc.), entered into a Technology License Agreement with Polymetrics, Inc. Such agreement is similar to the license agreement entered into with Glegg Water Conditioning in fiscal 1994, wherein Polymetrics was granted a non-exclusive worldwide license to use and commercially exploit the Electropure ("EDI") electrodeionization technology owned by the Company. The Company is currently negotiating with its licensee, Panning Enterprises, Inc. (formerly, Electropure, Inc.) to reacquire the rights licensed to it in May, 1992 in exchange for the issuance of certain common stock in an amount equal to the original purchase price of $2,750,000 and up to $35,000 (plus accrued interest) in loans made to the licensee by various individuals. Such common stock is planned to be issued in four increments as follows: 1. Shares with an aggregate value of $725,000 to be issued at $2.30 per share (Market Value on the date upon which the Company's shareholders approved the one-for-ten reverse stock split of its outstanding classes of Common Stock); 2. Shares with an aggregate value of up to $725,000, $700,000 and $600,000 to be issued at Market Value upon the Common Stock of the Company first having a per share Market Value for thirty consecutive trading days equal to or in excess each of $3.75, $5.00 and $7.00 per share, respectively. Generally, Market Value per share of Common Stock of the Company shall be the mean of the last reported bid and asked prices reported by the Electronic Bulletin Board or National Quotation Bureau, Inc. on each trading day. The Company will grant a security interest in all of its patents, current and future, until all of the above shares have been issued. Such security interest will be subordinate to a security interest granted to the individual who loaned Electropure $500,000 in February, 1996. See Note (5) - "Stockholders' Deficit - Option and Warrant Activity". Once the licensed rights are reacquired, Electropure will return all assets leased to it by the Company, including all cash reserves and will dissolve its operations. The Company intends to hire Electropure's current management as well as its technical and clerical staff. The Company believes that, during the period that Electropure has been in existence, it has established a good reputation in the business community and its name has become associated with the Company's EDI product. For this reason, the Company has received approval from shareholders and, effective July 25, 1996, 12 13 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) Notes to Condensed Financial Statements July 31, 1996 (Unaudited) has changed its corporate name to Electropure, Inc. in order to capitalize on the good will which Electropure has established in the business community. During the license relationship with Electropure, Inc. and until the licensed rights are reacquired, the Company's primary operations have been and will continue to be solely administrative. Once the Company has reacquired the licensed rights, it intends to initiate operations with a view toward implementing a production and marketing program. However, no assurances can be given that production and sales will begin in significant quantities since such sales may be dependent on obtaining additional working capital through the sale of common stock or other securities. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which adopts significant changes that apply to all taxable companies. Although the ultimate impact is unknown, it is the opinion of the Company's management that adoption of this Statement will not have a material effect on financial results in the year of adoption. The Company adopted the new Standard for the fiscal year beginning November 1, 1993. PART II - OTHER INFORMATION Item 1. In April, 1996, the Company and its licensee settled the 1993 lawsuit brought against Millipore and its licensee, Ionpure Technologies, for infringement of HOH's EDI patent. While, the terms of the license (issued to Millipore) and settlement are confidential, Millipore and US Filter/Ionpure agreed to the entry of a consent judgment of patent validity which has been entered by the U.S. District Court for the Central District (Los Angeles) of California. In March, 1996, the Company and its licensee, Electropure, Inc., filed a lawsuit for declaratory judgment to invalidate and hold unenforceable two patents held by Massachusetts-based Millipore Corporation relating to electrodeionization technology. The lawsuit was filed in the United States Central District Court in Los Angeles and alleged that the two patents covering Millipore's CDI products were each obtained by fraud on the U.S. Patent Office in that Millipore "misrepresented material facts to the U.S. Patent and Trademark Office which, if known, would not have resulted in their issuance [U.S. Patent No. 4,632,745, issued on December 30, 1986, and U.S. Patent No. 4,925,541, issued on May 15, 1990. The Court had been requested to determine whether Millipore's conduct posed a reasonable apprehension on the part of the Company and its customers of threatened patent infringement. In July, 1996, Judge John Davis rules that there is no threat of patent infringement and, accordingly, dismissed the lawsuit between the parties. 13 14 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) Notes to Condensed Financial Statements July 31, 1996 (Unaudited) In December, 1993, a default judgment was rendered against the Company in the sum of $20,270 for unpaid corporate credit card charges the majority of which accrued from 1989. The lawsuit was brought in the Los Angeles County Municipal Court. During the fiscal year ended October 31, 1994, the Company paid $250 on this judgment, however, the Company has made no arrangements to satisfy this obligation as of this writing. In June, 1996, the Company negotiated an arrangement with its former lawfirm to pay $25,000 over a four month period, beginning July 1, 1996, to settle over $125,000 in accounts payable for past services rendered. The Company's licensee has agreed to make the payments required by this agreement. As disclosed in the Company's Form 10-KSB for the fiscal year ended October 31, 1995, the Company is party to three other lawsuits claiming a total of $38,889 of past due payments. The status of these matters has not materially changed from that which was previously reported and the Company and its counsel expect the Company to prevail in these lawsuits. No assurances can be given as to the ultimate outcome of any such litigation or legal proceeding. Item 4. Submission of Matters to a Vote of Security Holders. The shareholders, by written consent, have approved a name change to "Electropure, Inc." by a vote of 9,982,310 for and 283,707 against, and a one-for-ten reverse stock split by a vote of 9,983,080 for and 283,707 against. Items 2, 3, 5 and 6 omitted as not applicable. 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: August 28, 1996 HOH WATER TECHNOLOGY CORPORATION By /s/ 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 15 ELECTROPURE, INC. (Formerly, HOH Water Technology Corporation) INDEX TO EXHIBITS PAGE SEQUENTIALLY NUMBERED ------------ 3.1 Articles of Incorporation of the Registrant, as amended 27 Financial Data Schedule EX-3.1 2 ARTICLES OF INCORPORATION OF THE REGISTRATION 1 EXHIBIT 3.1 RESTATED ARTICLES OF INCORPORATION OF HOH WATER TECHNOLOGY CORPORATION FLOYD PANNING and CATHERINE PATTERSON certify that: A. They are the President and the Secretary, respectively, of HOH WATER TECHNOLOGY CORPORATION., a California corporation. B. The Articles of Incorporation of the Corporation, as amended to the date of filing of this Certificate, including amendments set forth herein but not separately filed (and with the omissions required by Section 910 of the Corporations Code) are restated as follows: ONE: The name of the Corporation is ELECTROPURE, INC. TWO: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. THREE: (a) The Corporation is authorized to issue four classes of shares designated "Convertible Preferred Stock,""Preferred Stock," "Common Stock," and "Class B Common Stock, respectively. The number of shares of Convertible Preferred Stock authorized to be issued is 2,600,000 shares of $0.01 par value, the number of shares of Preferred Stock authorized to be issued is 1,000,000 shares, $1.00 par value, the number of shares of Common Stock authorized to be issued is 20,000,000 shares of $0.01 par value, and the number of shares of Class B Common Stock authorized to be issued is 83,983 shares of $0.01 par value. The rights, preferences, provisions and restrictions imposed upon the four classes of shares are set forth in the succeeding Sections of Article THREE. Effective upon filing of these Restated Articles of Incorporation each outstanding shares of Common Stock and Class B Common Stock shall be reverse split into 1/10 (one-tenth) of a share of Common Stock and Class B Common Stock, respectively. Any shareholder of the Common Stock or Class B Common Stock, who, after aggregating all Common Stock and Class B Common Stock, respectively, owned by such person resulting from such reverse split would own a fractional share of Common Stock or Class B Common Stock, respectively, shall have such fractional share rounded up to a whole share of Common Stock or Class B Common Stock, respectively. 1 2 (b) Convertible Preferred Stock. (1) Dividend Rights. The holders of the Convertible Preferred Stock shall not be entitled to receive dividends. Dividends shall be paid to the holders of the Common Stock and Class B common Stock subject to the rights of the holders of Preferred Stock, when and as declared by the Board of Directors. If the Corporation is required to redeem the Convertible Preferred Stock pursuant to Articles THREE(b)(3)(i) or THREE(b)(4)(viii) hereof, the Corporation shall not pay any dividends on the Common Stock or the Class B Common Stock until all shares of Convertible Preferred Stock is so redeemed. (2) Liquidation. In the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Common Stock, Class B Common Stock and Convertible Preferred Stock, subject to the rights of the holders of Preferred Stock, shall be entitled to receive, from the assets of this Corporation, whether such assets are capital or surplus and out of funds legally available therefore, an equal amount per share of Common Stock and Convertible Preferred Stock, provided, however, in no case shall each share of Convertible Preferred Stock receive more than an amount equal to one Cent ($0.01) per share of Convertible Preferred Stock and in no case shall each share of Class B Common Stock receive an amount greater than eighty percent (80%) of the amount each share of Common Stock receives. A reorganization shall not be considered to be a liquidation, winding up or dissolution within the meaning of this Section 2 and the Common Stock, Class B Common Stock and Convertible Preferred Stock shall be entitled only to the rights provided in the plan of reorganization and Chapters 12 and 13 of the California General Corporation Law and elsewhere herein. (3) Redemption. (i) This Corporation shall, on January 31, 1991, redeem all of the outstanding shares of Convertible Preferred Stock for one Cent ($0.01) per share (the "redemption price"). If redemption cannot occur on January 31, 1991, because there is not legally available funds to redeem all of the shares of Convertible Preferred Stock, the shares of Convertible Preferred Stocks shall be redeemed as soon as possible from legally available funds and the Corporation shall thereafter redeem as many shares of Convertible Preferred Stock, on a pro rata basis, each time it has funds legally available until all shares of Convertible Preferred Stock are redeemed. (ii) Any share of Convertible Preferred Stock shall be redeemed by the Corporation out of funds legally available therefor, at the redemption price of one Cent ($0.01) per share (the "redemption price"), if any transfer of a share of convertible Preferred Stock is made or attempted to be made in violation of the provisions of Article THREE (b)(7) hereof. Such redemption shall be deemed to have occurred simultaneously with such transfer in violation of the provisions of Article THREE (b)(7) hereof and on and after such deemed redemption, the shares so redeemed will no longer be outstanding and the holder thereof shall then have ceased to be a holder of such shares after such date and shall be entitled only to receive the redemption price without interest upon surrendering the certificate or certificates representing the redeemed shares. (iii) For redemptions pursuant to Article THREE (b) (3) (i) hereof and Article THREE (b)(4)(viii), the Corporation shall mail a notice of redemption to each holder of record of 2 3 the shares of Convertible Preferred stock to be redeemed addressed to the holder at the address of such holder appearing on the books of the Corporation or given by the holder to the Corporation for the purposes of notice or, if no such address appears or is given at the place where the principal executive office of the Corporation is located, not earlier than sixty (60) days nor later than thirty (30) days before the date fixed for redemption. The notice of redemption shall include (I) the identification of the shares to be redeemed, (II) the date fixed for redemption, (III) the redemption price, and (IV) the place at which shareholders may obtain payment of the redemption price upon surrender of their share certificate. If funds are available on the date fixed for the redemption, then whether or not the share certificates are surrendered for payment of the redemption price, the shares designated for redemption shall no longer be outstanding and the holders thereof shall cease to be shareholders of the Corporation with respect to such shares on and after the date fixed for redemption and shall be entitled only to receive the redemption price without interest upon surrender of the certificate or certificates representing the redeemed shares. If less than all shares represented by one share certificate are to be redeemed, the Corporation shall issue a new share certificate for the shares not redeemed. (4) Conversion. (i) On or after the time the first condition in Article THREE (b)(4)(iv) hereof has been determined by the Board of Directors to have been met (but on or before the Company is required to redeem a share of Convertible Preferred Stock pursuant to Article THREE (b)(3) hereof), each share of Convertible Preferred stock will be automatically converted into one share of Common Stock on the date the Board of Directors issues the "Conversion Notice" as provided for in Article THREE (b)(4)(vii) hereof. Upon conversion, no fractional shares of Common Stock shall be issued and the Corporation shall in lieu thereof pay in cash the fair value of the fractional share. The Corporation shall reserve and keep reserved out of its authorized but unissued shares of Common Stock sufficient shares to effect the conversion of all shares outstanding from time to time. The Corporation shall mail promptly a Conversion Notice to each record holder of the Convertible Preferred Stock after the first condition in Article THREE (b)(4)(iv) hereof shall have been met, informing them that such condition has been met. From and after the date of any automatic conversion each share of Convertible Preferred Stock shall represent the number of shares of Common Stock the share of Convertible Preferred Stock was converted into. (ii) A holder of a share of Convertible Preferred Stock desiring to convert and obtain certificates for Common Stock shall deliver the relevant share certificate or certificates to the Corporation, accompanied by a written request to convert, specifying the number of shares of Convertible Preferred Stock to be converted. The endorsement of the share certificate of Convertible Preferred Stock and the request to convert, if applicable, shall be in form satisfactory to the Corporation. (iii) The number of shares of Common Stock into which the shares of Convertible Preferred Stock may be converted shall be subject to adjustment from time to time in certain cases as set forth below: (A) In case the Corporation shall after the issuance of any shares of Convertible Preferred Stock (i) pay a dividend in shares of Common Stock or securities convertible or exchangeable for Common Stock, or (ii) make a distribution in shares of 3 4 Common Stock or other securities by way of stock-split, spin-off, reclassification, combination or subdivision of shares or other corporate rearrangement, or (iii) be a party to any other event or transaction, the result of which could be to have an effect similar to any one or more of the aforesaid, then, and in each such case, the holder of the shares of Convertible Preferred Stock shall be entitled to receive upon any conversion of the shares of Convertible Preferred Stock the kind and number of shares or other securities which the holder of the shares of Convertible Preferred Stock would have owned or have been entitled to receive on the effective date of any of the events described above, had the shares of Convertible Stock been converted immediately prior to the effective date of such event or any record date with respect thereto. (B) In case of the consolidation or merger of the Corporation with or into another corporation or the sale or conveyance of all or substantially all of the assets of the Corporation to another corporation (any such consolidation, merger, sale or conveyance is hereinafter referred to as "Reorganization"), the shares of Convertible Preferred Stock shall thereafter be convertible into the same kind and amount of securities (including shares of stock) or other assets, or both, which were issuable or distributable to the holders of outstanding shares of Common stock of the Corporation upon such Reorganization, in respect of that number of shares of Common Stock into which the shares of Convertible Preferred Stock might have been converted immediately prior to such Reorganization; and in any such case, appropriate adjustments (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holder of the shares of Convertible Preferred Stock, to the end that the provisions set forth herein shall thereafter be applicable, as nearly as reasonably may be practicable, in relation to any securities or other assets thereafter deliverable upon the conversion of the shares of Convertible Preferred Stock. (iv) The shares of Convertible Preferred Stock shall be convertible into Common Stock as provided in Article THREE (b)(4)(i) hereof upon the first to occur of any of the following events: (A) The Daily Market Price per share of the Corporation's Common Stock for thirty (30) consecutive trading days shall have equaled or exceeded $5.00 per share during the fiscal year ending October 31, 1988; $6.50 per share during the fiscal year ending October 31, 1989; or $8.00 per share during the fiscal year ending October 31, 1990. (The Daily Market Price of the Company's Common Stock shall he determined by the Company in the manner set forth in Article THREE (b)(4)(vi) hereof as of the end of each trading day (or, if no trading occurred in the Company's Common Stock on such day, as of the end of the immediately preceding trading day in which trading occurred). (B) The "Net Earnings Per Share" for the Common Stock of the Corporation shall equal or exceed $0.41 per share for the fiscal year ending October 31, 1988; $0.85 per share for the fiscal year ending October 31, 1989; or $1.36 per share for the fiscal year ending October 31, 1990. ("Net Earnings Per Share" shall be computed by dividing the consolidated net income after taxes, but before any extraordinary earnings or losses, by the 4 5 number of shares of Common Stock outstanding and the maximum number which are issuable upon the exercise, conversion or exchange of all rights, options, warrants or convertible securities then outstanding (whether or not then exercisable, convertible or exchangeable), including all shares of Common Stock issuable upon conversion of the Convertible Preferred Stock or the Class B Common Stock, at the end of the fiscal year of the Corporation. For purposes of this computation, the consolidated net income of the Corporation hall be determined according to generally accepted accounting principles consistently applied.) (v) Appropriate adjustment shall be made to the Daily Market Price Per Share and Net Earnings Per Share as set forth in Article THREE (b)(4)(iv) hereof to take account of stock dividends, stock splits, reverse stock splits, recapitalizations, mergers, sales of all or substantially all of the Company's assets and similar transactions. (vi) For purposes of Article THREE (b)(4)(iv)(A) hereof, the term "Daily Market Price" shall mean (x) if the Common Stock is traded in the over-the-counter market and not in the NASDAQ National Market System nor on any national securities exchange, the closing bid price of the Common Stock on the trading day in question, as reported by NASDAQ or an equivalent generally accepted reporting service, or (y) if the Common Stock is traded in the NASDAQ National Market System or on a national securities exchange, the daily per share closing sale price of the Common stock in the NASDAQ National Market System or on the principal stock exchange on which it is listed on the trading day in question, as the case may be. For purposes of clause (x) above, if trading in the Common Stock is not reported by NASDAQ, the bid price referred to in said clause shall be the lowest bid price as reported in the "pink sheets" published by National Quotation Bureau, Incorporated. The closing price referred to in clause (y) above shall be the last reported sales price or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, in either case, in the NASDAQ National Market system or on the national securities exchange on which the Common Stock is then listed. (vii) Within sixty (60) days of the date in which the Board of Directors could first determine whether a condition of Article THREE (b)(4)(iv) hereof is met, the Board of Directors shall meet to determine to issue a "Conversion Notice." The Board of Directors shall issue a Conversion Notice within such sixty (60) day period only if both the following conditions are met: (A) The Board of Directors determines that one of the conditions in Article THREE (b)(4)(iv) hereof has been met; and (B) The Board of Directors of the Company shall have received a favorable report of the Corporation's independent public accountants that the automatic conversion of Convertible Preferred Stock into Common Stock will not, under generally accepted accounting principles or under Regulations S-X as promulgated by the Securities and Exchange Commission (or any other public announcement of the Securities and Exchange Commission) require a charge against the income of the Corporation. (viii) Notwithstanding any other provisions of this Article THREE (b)(4), if the independent public accountants cannot render a report as provided for in Article THREE 5 6 (b)(4)(vii)(B) hereof, then all of the outstanding shares of the Convertible Preferred Stock will not be automatically converted into Common Stock, but shall instead be redeemed for Ten Cents ($0.10) per share (the "redemption price") as soon as funds are legally available to consummate such redemption. If such redemption cannot occur because there is not legally available funds to redeem all of the share of Convertible Preferred Stock, the shares of Convertible Preferred Stock shall be redeemed as soon as possible from legally available funds and the Corporation shall redeem thereafter as many shares of Convertible Preferred Stock, on a pro rata basis, each time it has funds legally available until all shares of Convertible Preferred Stock are redeemed. (5) Voting Rights. The holder of each share of Common Stock, Class B Common Stock and Convertible Preferred Stock shall be entitled to vote on all matters and each share of Common Stock shall have one vote per share, each share of Class B Common Stock shall have eight votes per share, and each share of Convertible Preferred Stock shall have one vote per share. Except as otherwise may be required by law and in Article THREE (3)(d)(4) hereof, the holders of the shares of Common Stock, Class B Common Stock and the Convertible Preferred Stock shall vote together as one class and not as separate classes. (6) Preemptive Right. Except as otherwise specifically provided herein, no holder of the shares of Convertible Preferred Stock shall be entitled as of right to subscribe for, purchase, or receive any part of any new or additional shares of any class, whether now or hereafter authorized, or of bonds, debentures, or other evidences of indebtedness convertible into or exchangeable for shares of any class, but all such new or additional shares of any class, or bond, debentures, or other evidences of indebtedness convertible into or exchangeable for shares, may be issued and disposed of by the Board of Directors on such terms and for such consideration (to the extent permitted by law), and to such person or persons as the Board of Directors in their absolute discretion may deem advisable. (7) Transfer Restrictions. Except upon death of the holder thereof, or as otherwise agreed to by a majority of the directors of the Corporation not owning any Convertible Preferred Stock, the shares of Convertible Preferred Stock or any interest therein may not be transferred, assigned, pledged, encumbered, sold, hypothecated or otherwise transferred, whether by operation of law or not and whether upon marriage dissolution, divorce or separation. Any attempted transfer in violation of this Article THREE (b)(7) is void and upon such an attempted transfer the Corporation shall automatically redeem the shares so attempted to be transferred as set forth in Article THREE (b)(3)(ii) hereof. (c) Preferred Stock. The Preferred Stock may be divided into such number or series as the Board of Directors may determine. The Board of Directors is authorized to determine and alter the rights, preferences, privileges and restrictions granted to and imposed upon the Preferred Stock or any series thereof with respect to any wholly unissued class of series of Preferred Stock and the designation of any such series of Preferred Stock. The Board of Directors, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series. 6 7 (d) Common Stock and Class B Common Stock. The Common Stock and the Class B Common Stock shall have the same rights, preferences, privileges and restrictions except as follows: (1) Dividend Rights. The holders of the Common Stock and Class B Common Stock shall be entitled to receive non-stock dividends; provided, however, that the Class B Common Stock shall receive non-stock dividends in the amount of only eighty percent (80%) of the value of the cash or other property paid to each share of Common Stock. No stock dividend shall be declared on the Common Stock in shares of Common Stock unless an equal percentage dividend is simultaneously declared on the Class B Common Stock in shares of Class B Common Stock. No reverse stock split or stock split of the Common Stock shall be effected unless an equal percentage stock split is effected in the Class B Common Stock. The provisions of this paragraph do not apply to any stock dividend, reverse stock split or stock split approved by the holders of a majority of the shares of the Class B Common Stock at the time the stock dividend is declared or the reverse stock split or stock split is approved by the shareholders. (2) Liquidation. In the event of voluntary or involuntary liquidation, dissolution or winding up of this Corporation, the holders of the Common Stock, Class B Common Stock and Convertible Preferred Stock shall have the rights set forth in Article THREE (b)(3) hereof. (3) Conversion. (i) Simultaneously with an attempt to transfer a share of Class B Common Stock in violation of the transfer restrictions of Article THREE (d)(6) hereof, such share of Class B Common Stock shall automatically, and without any action of the holder thereof, be converted into one share of Common Stock. Each share of Class B Common Stock shall automatically, and without any action of the holder thereof, be converted into one share of Common Stock upon the death of Harry M. O'Hare, Sr. Upon such automatic conversion, no fractional shares of Common Stock shall be issued and the Corporation shall in lieu thereof pay in cash the fair value of the fractional share. The Corporation shall reserve and keep reserved out of its authorized but unissued shares of Common Stock sufficient shares to effect the conversion of all shares of Class B Common Stock outstanding from time to time. On and after an automatic conversion of the Class B Common Stock into Common Stock, the certificate, or part thereof, for such former shares of Class B Common Stock shall represent a certificate for an equal number of shares of Common Stock. Upon such an automatic conversion, the conversion shall be deemed to have occurred and the person entitled to receive share certificates for Common Stock shall be regarded for all corporate purposes from and after such date as the holder of the number of shares of Common Stock to which he is entitled upon such conversion. (ii) The number of shares of Common Stock into which the shares of Class B Common Stock may be converted shall be subject to adjustment from time to time in certain cases as set forth below: 7 8 (A) In case the Corporation shall after the issuance of any share of Class B Common Stock (i) pay a dividend in shares of Common Stock or securities convertible or exchangeable for Common Stock, or (ii) make a distribution in shares of Common Stock or other securities by way of stock-split, spin-off, reclassification, combination or subdivision of shares or other corporate rearrangement, or (iii) be a party to any other event or transaction, the result of which could be to have an effect similar to any one or more of the aforesaid, then, and in each such case, the holder of the shares of Class B Common Stock shall be entitled to receive upon any conversion of the shares of Class B Stock the kind and number of shares or other securities which the holder of the shares of Class B Stock would have owned or have been entitled to receive on the effective date of any of the events described above, had the shares of Class B Stock been converted immediately prior to the effective date of such event or any record date with respect thereto. (B) In case of the consolidation or merger of the Corporation with or into another corporation or the sale or conveyance of all or substantially all of the assets of the Corporation to another corporation (any such consolidation, merger, sale or conveyance is hereinafter referred to as "Reorganization"), the shares of Class B Stock shall thereafter be convertible into the same kind and amount of securities (including shares of stock) or other assets, or both, which were issuable or distributable to the holders of outstanding shares of Common Stock of the Corporation upon such Reorganization, in respect of that number of shares of Common Stock into which the shares of Class B Stock might have been converted immediately prior to such Reorganization; and in any such case, appropriate adjustments (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holder of the shares of Class B Stock, to the end that the provisions set forth herein shall thereafter be applicable, as nearly as reasonably may be practicable, in relation to any securities or other assets thereafter deliverable upon the conversion of the shares of Class B Stock. (4) Voting Rights. The holder of each share of Common Stock, Class B Common Stock and Convertible Preferred Stock shall be entitled to voting rights set forth in Article THREE (b)(5) and Article THREE (d)(1) hereof. (5) Preemptive Right. Except as otherwise specifically provided herein, no holder of the shares of Common Stock or Class B Common Stock shall be entitled as of right to subscribe for, purchase, or receive any part of any new or additional shares of any class, whether now or hereafter authorized, or of bonds, debentures, or other evidences of indebtedness convertible into or exchangeable for shares of any class, but all such new or additional shares of any class, or bond, debentures, or other evidences of indebtedness convertible into or exchangeable for shares, may be issued and disposed of by the Board of Directors on such terms and for such consideration (to the extent permitted by law), and to such person or persons as the Board of Directors in their absolute discretion may deem advisable. (6) Transfer Restrictions. A share of Class B Common Stock or any interest therein may not be transferred, assigned, pledged, encumbered, sold, hypothecated or otherwise transferred, whether by operation of law or not and whether upon marriage, dissolution, divorce or separation, death 8 9 or revocation of a trust or transfer to a beneficiary of a trust. Any attempted transfer in violation of this Article THREE (d)(6) is void and upon such an attempted transfer, the shares of Class B Common Stock shall be automatically converted into a share of Common Stock as set forth in Article THREE (d)(3)(i) hereof. FOUR: The liability of the directors of the Corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. FIVE: The Corporation is authorized to provide indemnification of agents (as defined in Section 317 of the Corporations Code) for breach of duty to the Corporation and its shareholders through bylaw provisions, through agreements with the agents, or both, or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the Corporations Code, subject to the limits of such excess indemnification set forth in Section 204 of the Corporations Code. C. The amendments herein set forth have been duly approved by the Board of Directors. D. The amendments herein set forth have been duly approved by the required vote of the shareholders in accordance with Sections 902 and 903 of the Corporations Code. The total number of outstanding shares of the Corporation entitled to vote on the foregoing amendments is Eighteen Million Nine Hundred Sixty Thousand Six Hundred Ninety Five (18,960,695) shares of Common Stock and Eight Hundred Thirty Nine Thousand Eight Hundred Twenty Five (839,825) shares of Class B Common Stock. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required for the approval of the amendment herein set forth was more than 50%. /s/ FLOYD PANNING --------------------------------- Floyd Panning, President /s/ CATHERINE PATTERSON ---------------------------------- Catherine Patterson, Secretary FLOYD PANNING and CATHERINE PATTERSON declare under penalty of perjury that they have read the foregoing Restated Articles of Incorporation and know the contents thereof and that the same are true of their own knowledge. EXECUTED at Laguna Hills, California on July 11, 1996. /s/ FLOYD PANNING ---------------------------------- Floyd Panning /s/ CATHERINE PATTERSON ---------------------------------- Catherine Patterson 9 EX-27 3 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 9-MOS OCT-31-1995 NOV-01-1995 JUL-31-1996 1 967 0 86,376 84,480 0 2,863 539 22 3,380 198,658 0 0 26,000 19,801 0 3,380 0 29,969 0 119,127 76,287 0 1,074 (166,519) 0 (166,519) 0 0 0 (166,519) (0.10) (0.10)
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