-----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, TypkYMvbtR0w8qWvPVeka+VGqf27BDodeFhwoNGlWXb42ORSMhqK7ZdmshCoEi9W d2XFsJzBs2bTromo9HrEVw== 0000950115-96-000971.txt : 19960710 0000950115-96-000971.hdr.sgml : 19960710 ACCESSION NUMBER: 0000950115-96-000971 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960709 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARK FOUR RESOURCES INC /DE/ CENTRAL INDEX KEY: 0000847389 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 760265439 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-27623 FILM NUMBER: 96592540 BUSINESS ADDRESS: STREET 1: 45 ROCKEFELLER PLAZA STREET 2: SUITE 2000 CITY: NEW YORK STATE: NY ZIP: 10111 BUSINESS PHONE: 7059459700 MAIL ADDRESS: STREET 1: 500 BAY STREET STREET 2: BOX 23110 SAULT STE CITY: MARIE ONTARIO CANADA STATE: A6 10QSB 1 QUARTERLY REPORT 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 ---- ----- 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 INTERIM CONSOLIDATED FINANCIAL STATEMENTS [in U.S. dollars] ECOLOGY PURE AIR INTERNATIONAL, INC. [formerly Mark Four Resources, Inc.] Unaudited April 30, 1996 Ecology Pure Air International, Inc. [formerly Mark Four Resources, Inc.] INTERIM CONSOLIDATED BALANCE SHEET As at April 30 Unaudited
July 31, 1996 1995 $ $ - ----------------------------------------------------------------------------------------------------- [in U.S. dollars] 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 =====================================================================================================
See accompanying notes Ecology Pure Air International, Inc. [formerly Mark Four Resources, Inc.] INTERIM CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT Three months ended April 30 Unaudited
1996 1995 $ $ - ----------------------------------------------------------------------------------------------------- [in U.S. dollars] 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 =====================================================================================================
See accompanying notes Ecology Pure Air International, Inc. [formerly Mark Four Resources, Inc.] INTERIM CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT Nine months ended April 30 Unaudited
1996 1995 $ $ - ----------------------------------------------------------------------------------------------------- [in U.S. dollars] 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 =====================================================================================================
See accompanying notes Ecology Pure Air International, Inc. [formerly Mark Four Resources, Inc.] INTERIM CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION Nine months ended April 30 Unaudited
1996 1995 $ $ - ----------------------------------------------------------------------------------------------------- [in U.S. dollars] 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 =====================================================================================================
See accompanying notes 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. 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. [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. 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 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 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 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 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 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 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 EX-27 2 FDS FOR 3RD QUARTER 10-Q
5 1 9-MOS JUL-31-1996 APR-30-1996 44,870 4,192,689 0 0 0 4,241,559 70,352 0 4,411,911 2,588,148 0 0 3,600 26,225 5,383,217 4,411,911 0 0 0 0 1,685,554 0 0 (1,685,554) 0 (1,685,554) 0 0 0 (1,685,554) (0.064) (0.013)
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