##### Table of Contents



Commission File No. 000-27421

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-KSB

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[X]   |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|     
|      |  | For the Fiscal Year Ended: December 31, 2001                                            
|     
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period Form ________ to_________

EMERGENCY FILTRATION PRODUCTS, INC.

---

(Exact Name of Small Business Issuer as Specified in its Charter)


|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|NEVADA                                                        |  | 87-0561647                         
|                                                              |  |                                    
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification No.)
|                                                              |  |                                    
|4335 South Industrial Road, Suite 440Las Vegas, Nevada        |  | 89103                              
|                                                              |  |                                    
|(Address of principal executive offices)                      |  | (Zip code)                         

Issuers telephone number: (702) 798-4541

Securities to be registered pursuant to Section 12(b) of the Act:

none

Securities to be registered pursuant to Section 12(g) of the Act:

$.001 Common Stock

---

(Title of Class)


Check 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 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 [ ]

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part II of this Form 10-K or any amendments to this Form 10-K [X]

As of December 31, 2001, there were 11,667,425 shares of the Registrants Common Stock, $.001 par value, outstanding.

The aggregate market value of shares of Common Stock held by
non-affiliates of the Registrant is $3,852,702.

State the Registrants revenues for the December 31, 2001 fiscal year: $461,216.





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##### Table of Contents



TABLE OF CONTENTS

|         |  |                                                                                                                 |  |           |    |      |  | 
|-------- |  | --------------------------------------------------------------------------------------------------------------- |  | --------- | -- | ---- |  | 
|         |  |                                                                                                                 |  |           |    | Page
|         |  |                                                                                                                 |  |           |    |     
|Item 1.  |  | Description of Business                                                                                         |  |           | 3  |     
|Item 2.  |  | Description of Property                                                                                         |  |           | 4  |     
|Item 3.  |  | Legal Proceedings                                                                                               |  |           | 4  |     
|Item 4.  |  | Submission of Matter to Vote of
Security Holders                                                                |  |           | 4  |     
|Item 5.  |  | Market for Common Registrant Equity
and Related Stockholder Matter                                              |  |           | 4  |     
|Item 6.  |  | Managements Discussion and Analysis
of Plan of Operation                                                       |  |           | 6  |     
|Item 7.  |  | Financial Statements                                                                                            |  |           | 11 |     
|Item 8.  |  | Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure                            |  |           | 25 |     
|Item 9.  |  | Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act |  |           | 25 |     
|Item 10. |  | Executive Compensation                                                                                          |  |           | 27 |     
|Item 11. |  | Security Ownership of Certain Beneficial Owners and Management                                                  |  |           | 27 |     
|Item 12. |  | Certain Relationships and Related Transactions                                                                  |  |           | 29 |     
|Item 13. |  | Exhibits and Reports on Form 8-K                                                                                |  |           | 29 |     
|         |  |                                                                                                                 |  | Signature





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TABLE OF CONTENTS



|                                       |                                                                                                                          |  |  |  |  |  |  | 
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|                                       | Item 1. Description of Business.                                                                                        
|                                       | Item 2. Description of Property.                                                                                        
|                                       | Item 3. Legal Proceedings.                                                                                              
|                                       | Item 4. Submission of Matter to Vote of Security Holders.                                                               
|                                       | Item 5. Market for Common Company Equity and Related Stockholder Matter.                                                
|                                       | Item 6. Managements Discussion and Analysis of Plan of Operation                                                       
|                                       | Item 7. Financial Statements.                                                                                           
|REPORT ON AUDITED FINANCIAL STATEMENTS
|                                       | Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.                           
|                                       | Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.
|                                       | Item 10. Executive Compensation.                                                                                        
|                                       | Item 11. Security Ownership of Certain Beneficial Owners and Management.                                                
|                                       | Item 12. Certain Relationship and Related Transactions.                                                                 
|                                       | Item 13. Exhibits and Reports on Form 8-K.                                                                              
|SIGNATURES                            



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##### Table of Contents






Item 1. Description of Business.

Emergency Filtration Products, Inc. (the Company) was organized under
the laws of the State of Nevada on November 1, 1991, under the name Lead Creek
Unlimited. Until February 9, 1996, the Company conducted no business. The
Company filed with the Secretary of State of the State of Nevada a Certificate
of Amendment changing its name to Emergency Filtration Products, Inc. on
March 8, 1996.

On February 9, 1996, the Company entered into an Agreement with Douglas K.
Beplate whereby Mr. Beplate granted to the Company all rights, including patent
rights, to the commercial exploitation of RespAide . In consideration of the
assignment of these rights, the Company agreed (i) to pay Mr. Beplate a royalty
of 5% of the Companys and any licensees sales of the RespAide and any
components thereof, payable quarterly; (ii) to compensate Douglas K. Beplate
for consulting services at market value, for which Douglas K. Beplate was to
invoice the company monthly; and (iii) to deliver to Douglas K. Beplate 19% of
the issued and outstanding common stock of the Company as of the date of the
Agreement. On June 18, 1996, Douglas K. Beplate also executed an Assignment of
Invention assigning to the Company all rights to exploit the RespAide
technology.

The Company is a specialty filter products company that has developed a
proprietary dual-filtered technology, 2H Technology, which removes infectious
bacteria and virus from airflow systems at extremely high levels of efficiency.
The Companys introductory product is RespAide, a state of the art
cardiopulmonary resuscitation (CPR) mask. RespAide is uniquely designed to
minimize the potential for transmission of contagious diseases during the
administration of CPR and has been granted FDA 510K approval as a Class II
medical device. The core technology for RespAide is the Vapor Isolation Valve
(VIV), a self-contained filter system combining 2H Technology and a one-way
silicon duckbill valve inside a sonic welded housing. The VIV design forms the
basis for two other products, the 2H Technology Breathing Circuit Filter, which
recently received FDA 510K approval as a Class II medical device, and the
ELVIS, a Bag/Valve/Mask emergency resuscitation system, which is in prototype
development stage. The 2H Technology can be used in a wide range of other
medical and commercial applications including air filtration systems for
semiconductor manufacturing and laboratory clean rooms; and heating,
ventilating, and air conditioning (HVAC) filters for use in commercial and
residential buildings, airplanes and motor vehicles. In addition, the Company
markets Superstat®, a patented, all-natural, modified collagen hemostat for
surgical applications and trauma and burn wound management.





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##### Table of Contents






Item 2. Description of Property.

The Company presently occupies office and warehouse space located at 4335
South Industrial Road, Suite 440, Las Vegas, Nevada 89103. The property
consists of approximately 1,800 square feet of offices and 1,512 square feet of
warehouse space. The property was leased from an unaffiliated party for 3
years, commencing October 15, 1998, at $3,809.95 per month, expiring October
15, 2001. The Company currently leases the
property on a month-to-month basis at $4,306.90 per month and is currently in
negotiations for new office and warehouse space in Henderson, Nevada.




Item 3. Legal Proceedings.

Bruce E. Batchelor, a shareholder and former officer of the Company had
made certain claims for alleged breaches of agreements relating to unpaid
wages, reimbursement for expenses and claimed certain rights in the trademark
of the Company as security for the alleged obligations. The Company had
recorded an initial sum of $135,000, which represented the amount claimed to be
owed to Bruce E. Batchelor. The Company entered into a payment plan during
2000 and agreed to pay the principal sum of $146,500 in monthly installments of
$1,800 or more commencing July, 2000. The Company had not paid the
installments in a timely manner and was in default according to the terms of
the agreement. On September 30, 2001, the Company executed a settlement
agreement and mutual release in which Batchelor accepted 235,000 shares of the
common stock of the Company as payment in full.

There are no legal proceedings threatened or pending, except such ordinary
routine matters which may be incidental to the business currently being
conducted by the Company.




Item 4. Submission of Matter to Vote of Security Holders.

There have been no matters submitted to the Companys security holders.




Item 5. Market for Common Company Equity and Related Stockholder Matter.

(a)  Market Price.

The Companys Common Stock is quoted on the Over-The-Counter Bulletin
Board System.

As of December 31, 2001, the Company had 188 shareholders of record of its
common stock. The Company has not paid cash dividends on its common stock.
The Company anticipates that for the foreseeable future any earnings will be
retained for use in its business, and no cash dividends will be paid on the
common stock. Declaration of common stock dividends will remain within the
discretion of the





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Companys Board of Directors and will depend upon the
Companys growth, profitability, financial condition and other relevant
factors.

The Companys common stock is traded on the bulletin board system under
the symbol EMFP. The table below reflects the high and low bid and ask
quotations for each of the Companys fiscal quarters for the fiscal year
covered by this report. The prices reflect inter-dealer prices, without retail
mark-up, mark-down or commission and do not necessarily represent actual
transactions.

The prices were obtained from the internet, the source of the information
is believed to be reliable.

|            |  |      |      |     |  |   |      | 
|----------- |  | ---- | ---- | --- |  | - | ---- | 
|            |  | 2001 |      |     |  |  
|            |  |      |      |     |  |  
|            |  | HIGH |      | LOW
|            |  |      |      |    
|1st Quarter |  | $    | 0.78 |     |  | $ | 0.31 | 
|2nd Quarter |  | $    | 0.56 |     |  | $ | 0.35 | 
|3rd Quarter |  | $    | 0.74 |     |  | $ | 0.35 | 
|4th Quarter |  | $    | 0.82 |     |  | $ | 0.30 | 

The Securities and Exchange Commission adopted Rule 15g-9, which
established the definition of a penny stock, for purposes relevant to the
Company, as any equity security that has a market price of less that $5.00 per
share or with an exercise price of less that $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: (i) that a broker or dealer approve a persons
account for transactions in penny stocks; and (ii) the broker or dealer receive
from the investor a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased. In order to approve
a persons account for transactions in penny stocks, the broker or dealer must
(i) obtain financial information and investment experience and objectives of
the person; and (ii) make a reasonable determination that the transactions in
penny stocks are suitable for that person and that person has sufficient
knowledge and experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks. The broker or dealer must also deliver,
prior to any transaction in a penny stock, a disclosure schedule prepared by
the Commission relating to the penny stock market, which, in highlight form,
(i) sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transactions. Disclosure also has to
be made about the risks of investing in penny stocks in both public offering
and in secondary trading, and about commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally,





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monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.

For the initial listing on the NASDAQ SmallCap market, a company must have
net tangible assets of $4 million or market capitalization of $50 million or a
net income (in the latest fiscal year or two of the last fiscal years) of
$750,000, a public float of 1,000,000 shares with a market value of $5 million.
The minimum bid price must be $4.00 and there must be 3 market makers. In
addition, there must be 300 shareholders holding 100 shares or more, and the
company must have an operation history of at least one year or a market
capitalization of $50 million.

For continued listing in the NASDAQ SmallCap market, a company must have
net tangible assets of $2 million or market capitalization of $35 million or a
net income (in the latest fiscal year or two of the last fiscal years) of
$500,000, a public float of 500,000 shares with a market value of $1 million.
The minimum bid price must be $1.00 and there
must be 2 market makers. In addition, there must be 300 shareholders holding
100 shares or more.

Management intends to strongly consider undertaking a transaction with any
merger or acquisition candidate which will allow the Companys securities to be
traded without the aforesaid limitations. However, there can be no assurances
that, upon a successful merger or acquisitions, the Company will qualify its
securities for listing on NASDAQ or some other national exchange, or be able to
maintain the maintenance criteria necessary to insure continued listing. The
failure of the Company to qualify its securities or to meet the relevant
maintenance criteria after such qualification in the future may result in the
discontinuance of the inclusion of the Companys securities on a national
exchange. In such events, trading, if any, in the Companys securities may
then continue in the non-NASDAQ over-the-counter market. As a result, a
shareholder may find it more difficult to dispose of , or to obtain accurate
quotations as to the market value of, the Companys securities.

(b)  Holders.




Item 6. Managements Discussion and Analysis of Plan of Operation

Financial Condition

Since the Companys inception, the Company has been involved in the
development of its technology. During this time, revenues have been minimal
and expenditures primarily attributed to research and development and, more
recently, a marketing driven sales effort. Without adequate revenues to offset
expenditures, the Company has reported a loss in each of its years of
existence. To date, the Company has funded itself by way of a series of
private equity sales. As of the end of fiscal 2001, the Company had offset its
accumulated deficit in this manner and has therefore not found it necessary to
incur any long-term debt. The most valuable asset of the





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Company is its
intellectual property and technology. The Company has acquired the rights to
certain intellectual property, which property includes title to the patent on a
component of an emergency CPR assistance device, called a dual-filtered vapor
isolation valve. Rights pertaining thereto include the right to maintain, sell
and improve the device, and to license those rights. Although the Company
believes its technology to be very valuable in the real sense, this value is
not quantified as such on the Companys Balance Sheet.

Operational Results

During 2001, the Company reported revenues of $461,216. This is a
substantial increase of approximately 180% over revenues of $163,497 for the
year ended December 31, 2000. This increase is due to the Companys increased
marketing efforts and its success in the military sector.

During 2001, the Company reported cost of sales of $301,935 compared to
$83,504 during 2000. This represents an increase of approximately 260%. The
Companys costs for the Superstat product have caused the Companys costs as a
percentage of sales in 2001 to increase compared to 2000. The Companys gross
profit margin decreased from
49% in 2000 to 35% in 2001 primarily as a result of increased percentage of
sales of Superstat.

Total expenditures increased in 2001 as compared to 2000. The primary
reasons for this occurrence are:

Cost of sales increased from $83,504 to $301,935 during the fiscal years
ended December 31, 2000 and 2001 respectively, as a result of increased sales
and those conditions described above.

Depreciation and amortization expense increased from $28,399 to $31,450
during the fiscal year ended December 31, 2000 and 2001, respectively.

General and administrative costs increased from $1,138,520 to $1,218,135
during the fiscal years ended December 31, 2000 and 2001, respectively,
primarily as a result of increased expenditures for consulting and other
professional services as well as additional compensation expense pursuant to
the granting of stock options.

Research and development costs increased from $10,615 to $15,797 during
the years ended December 31, 2000 and 2001, respectively, due to the increased
costs associated with the development of the Companys future products.

During the year ended December 31, 2001, the Company recorded expenses
associated with the granting of options of $312,846. Included in that amount
was an expense of $161,390 for an option provided in an agreement the Company





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entered into with Pacific Investors, Ltd., an unrelated investment firm, for
financial advising and placement agent services. On October 24, 2001, the
Company executed a separate agreement in which the parties agreed to vacate the
original agreement. In the terms of the new agreement, the option was
cancelled and the Company agreed to issue to Pacific Investors, Ltd. 60,000
shares of the common stock of the Company as the remaining compensation due for
consulting services. The remaining amount of $151,456 recorded in 2001 was
additional expense as a result of options granted in 2000.

Capital Funding

The Company currently is unable to generate sufficient cash from
operations to sustain its business efforts as well as to accommodate its growth
plans. Until it is able to generate sufficient cash flow, the Company will
seek capital funding from outside resources. The Company presently has no
commitment for such funding and has not concluded what form, whether debt or
equity, such funding will be derived through.

The Companys cost-efficient business model emphasizes: (1) in-house
research and development; (2) accumulation of intellectual property assets;
(3) ownership of key production equipment; and (4) outsourcing of all
manufacturing, distribution, warehousing, and order fulfillment. Accordingly,
the Company benefits from low overhead, as well as the pricing advantages
inherent in proprietary specialty products.

The Companys management is now completing transformation from a
technology-driven research and development business to a marketing-driven
proprietary products company. Product development efforts remain an important
priority, but are now balanced by an increasing focus on elements of production
and sales.

Company Products

The Companys current product line includes:



| |  |  | RespAide CPR Isolation Mask. The company has received
Federal Drug Administration (FDA) approval for its RespAide  CPR
isolation mask incorporating the VIV filter, and recently commenced
volume manufacturing and distribution of complete units and
replacement filters (the RespAide filter needs to be replaced after
each use). In tests by Nelson Laboratories, RespAide was found to
be greater than 99.9% effective against bacterial and viral
transmission  the highest rating testing labs will issue for
medical devices, and believed by management of the Company to be
superior to any competing product on the market.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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| |  |  | Disposable Filters for BVMs. The same filter used in the
RespAide product is ideal for preventing contamination of bag
valve masks, which are single-use ventilators. The disposable
filter keeps the equipment contaminant-free, thereby allowing a BVM
to be safely reused with a new filter  a considerable economic
benefit due to the lower replacement and disposal costs of the
filter versus discarding the entire BVM unit. The Company has
received FDA approval.                                         
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Breathing Circuit Filters. To extend its market reach from
emergency response sites to the vast number of respiratory
procedures conducted within medical facilities, the Company has
introduced a new configuration of its VIV technology: a two-way
breathing circuit filter for applications where ambient air flow
must pass evenly in both directions while still protecting equipment
and hoses. This is suitable for use in anesthesia and general
respiratory procedures. The Company has received FDA approval.

In addition, the Company has designed another configuration of the
technology for the BVM market that incorporates a self-contained nebulizer, a
filter, and a bag with built-in CO2 monitoring capabilities. A patent has been
granted for this product and the Company has executed an agreement whereby it
acquired the rights for commercial exploitation of the patent. The Company is
currently conducting prototype development and expects to launch the product
during 2002.

The market for air purification filters for protection against
communicable diseases has grown rapidly since the mid-1980s    from
practically nil, to an estimated $1,460,000,000 in 1997. Demand has been
driven largely by such factors as the spread of AIDS and Hepatitis C, the
resurgence of Tuberculosis in many urban settings, and growing concerns in the
medical community about new drug-resistant strains of bacteria. Such concerns
are clearly evident in the results of recent independent surveys indicating
that approximately 45% of doctors, 57% of EMTs, 80% of nurses, and
substantially all paramedics surveyed would refuse to perform mouth-to-mouth
resuscitation on an adult stranger without barrier protection. Indeed, many of
the respondents indicated that they
had already walked away from situations in the community requiring
mouth-to-mouth resuscitation.

In addition to emergency ambulance services, police departments,
firefighters, hospitals, doctors, the military, and major CPR training
organizations such as the American Heart Association, management believes that
the market also includes government and private sector entities that will
choose, or may be required by law to keep CPR isolation masks on hand.

The Company currently holds military national stocking numbers for the
RespAide CPR isolation mask and replacement filters and for Superstat. These
stocking numbers make the products acceptable for inventory in all four
branches of the military and the U.S. Coast Guard. The Company received and
fulfilled orders





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from the Defense Supply Center Philadelphia for the RespAide
device and its replacement parts and for Superstat during 2001, which account
for a significant percentage of sales for the fiscal year.

To reach the market, the Company has entered into contractual arrangements
with a number of U.S. and international medical product distributors.
Additionally, the Company is actively pursuing agreements with other companies
that have market penetration.

The Company intends to firmly establish its reputation for supplying the
best medical air filters available, and then begin aggressively commercializing
the technology in the enormous HVAC category. The Company estimates that the
addition of HVAC applications will increase the total addressable market for
dual-filtered (2H) technology.

Competition

The medical device industry is a highly competitive sector of the health
care industry and there are a large number of established and well-financed
entities with significantly greater financial resources, technical expertise
and in depth managerial capabilities than the Company. Although the Company
has achieved patent protection for the RespAide, there is no assurance that
other entities may not compete in or enter the medical and commercial market in
competition with the Company.





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Item 7. Financial Statements.

EMERGENCY FILTRATION PRODUCTS, INC.




REPORT ON AUDITED FINANCIAL STATEMENTS



FOR THE YEAR ENDED DECEMBER 31, 2001

Table of Contents

|                                    |  |      |      | 
|----------------------------------- |  | ---- | ---- | 
|                                    |  | Page
|                                    |  |     
|Report of Independent Accountants   |  |      | 1    | 
|                                   
|                                   
|                                   
|                                   
|Balance Sheet                       |  |      | 2    | 
|                                   
|                                   
|                                   
|                                   
|Statements of Operations            |  |      | 3    | 
|                                   
|                                   
|                                   
|                                   
|Statements of Stockholders Deficit |  |      | 4    | 
|                                   
|                                   
|                                   
|                                   
|Statements of Cash Flows            |  |      | 5    | 
|                                   
|                                   
|                                   
|                                   
|Notes to the Financial Statements   |  |      | 6-13 | 





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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
Emergency Filtration Products, Inc.

In our opinion, the accompanying balance sheet and the related statements of operations,
stockholders deficit and cash flows present fairly, in all material respects, the financial position
of Emergency Filtrations Products, Inc. at December 31, 2001, and the results of its operations
and its cash flows for each of the two years in the period ended December 31, 2001 in conformity
with accounting principles generally accepted in the United States of America. These financial
statements are the responsibility of the Companys management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 1 to the financial statements, the Company has
not generated revenues sufficient to cover its operating costs, which raises substantial doubt about
its ability to continue as a going concern. Managements plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.

PricewaterhouseCoopers LLP

Las Vegas, Nevada
February 8, 2002





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EMERGENCY FILTRATION PRODUCTS, INC.
Balance Sheet
As of December 31, 2001

|                                      |                                                                                                          |                              |   |            |          |  
|------------------------------------- | -------------------------------------------------------------------------------------------------------- | ---------------------------- | - | ---------- | -------- | -
|ASSETS                                |                                                                                                          |                              |   |           
|                                     
|                                     
|                                     
|                                     
|Current assets:                       |                                                                                                          |                              |   |           
|                                     
|                                     
|                                     
|                                     
|                                      | Cash                                                                                                     |                              | $ |           |         
|                                     
|                                     
|                                     
|                                     
|                                      | Accounts receivable, net                                                                                 |                              |   | 8,882      |         
|                                     
|                                     
|                                     
|                                     
|                                      | Prepaid expenses                                                                                         |                              |   | 68,776     |         
|                                     
|                                     
|                                     
|                                     
|                                      | Inventory                                                                                                |                              |   | 79,962     |         
|                                      |                                                                                                          |                              |   |            |         
|                                      |                                                                                                          | Total current assets         |   |            | 157,620  |  
|                                      |                                                                                                          |                              |   |            |         
|Property and equipment:               |                                                                                                          |                              |   |           
|                                     
|                                     
|                                     
|                                     
|                                      | Molds                                                                                                    |                              |   | 112,850    |         
|                                     
|                                     
|                                     
|                                     
|                                      | Furniture and office equipment                                                                           |                              |   | 43,003     |         
|                                     
|                                     
|                                     
|                                     
|                                      | Accumulated depreciation                                                                                 |                              |   | (89,945    | )       
|                                      |                                                                                                          |                              |   |            |         
|                                      |                                                                                                          | Total property and equipment |   |            | 65,908   |  
|                                      |                                                                                                          |                              |   |            |         
|Other assets                          |                                                                                                          |                              |   |           
|                                     
|                                     
|                                     
|                                     
|                                      | Deposits                                                                                                 |                              |   | 4,141      |         
|                                     
|                                     
|                                     
|                                     
|                                      | Patents, net                                                                                             |                              |   | 145,533    |         
|                                      |                                                                                                          |                              |   |            |         
|                                      |                                                                                                          | Total other assets           |   |            | 149,674  |  
|                                      |                                                                                                          |                              |   |            |         
|                                      | Total assets                                                                                             |                              | $ | 373,202    |         
|                                      |                                                                                                          |                              |   |            |         
|LIABILITIES AND
STOCKHOLDERS DEFICIT |                                                                                                          |                              |   |           
|                                     
|                                     
|                                     
|                                     
|Current liabilities:                  |                                                                                                          |                              |   |           
|                                     
|                                     
|                                     
|                                     
|                                      | Accounts payable                                                                                         |                              | $ | 167,793    |         
|                                     
|                                     
|                                     
|                                     
|                                      | Accounts payable  related parties                                                                       |                              |   | 550,303    |         
|                                     
|                                     
|                                     
|                                     
|                                      | Accrued expenses                                                                                         |                              |   | 30,624     |         
|                                     
|                                     
|                                     
|                                     
|                                      | Note payable                                                                                             |                              |   | 20,412     |         
|                                      |                                                                                                          |                              |   |            |         
|                                      |                                                                                                          | Total current liabilities    |   |            | 769,132  |  
|                                      |                                                                                                          |                              |   |            |         
|Commitments and contingencies         |                                                                                                          |                              |   |           
|                                     
|                                     
|                                     
|                                     
|Stockholders deficit                 |                                                                                                          |                              |   |           
|                                     
|                                     
|                                     
|                                     
|                                      | Common
stock, par value $0.001; authorized 50,000,000 shares and11,667,425 shares
issued and outstanding |                              |   | 11,667     |         
|                                     
|                                     
|                                     
|                                     
|                                      | Additional paid in capital                                                                               |                              |   | 5,928,062  |         
|                                     
|                                     
|                                     
|                                     
|                                      | Accumulated deficit                                                                                      |                              |   | (6,335,659 | )       
|                                      |                                                                                                          |                              |   |            |         
|                                      |                                                                                                          | Total stockholders deficit  |   |            | (395,930 | )
|                                      |                                                                                                          |                              |   |            |         
|                                      | Total liabilities and stockholders deficit                                                              |                              | $ | 373,202    |         
|                                      |                                                                                                          |                              |   |            |         

The accompanying notes are an integral part of these financial statements.

2



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##### Table of Contents



EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Operations
For the Years Ended December 31, 2001 and 2000

|                                              |                               |                              |            |           |           |      |            |           |           | 
|--------------------------------------------- | ----------------------------- | ---------------------------- | ---------- | --------- | --------- | ---- | ---------- | --------- | --------- | 
|                                              |                               |                              |            | 2001      |           | 2000
|                                              |                               |                              |            |           |           |     
|Net sales                                     |                               | $                            | 461,216    |           |           | $    | 163,497    |          
|                                             
|                                             
|                                             
|                                             
|Expenses                                      |                               |                              |            |           |           |      |            |          
|                                             
|                                             
|                                             
|                                             
|                                              | Cost of sales                 |                              |            | 301,935   |           |      |            | 83,504    |          
|                                             
|                                             
|                                             
|                                             
|                                              | Depreciation and amortization |                              |            | 31,450    |           |      |            | 28,399    |          
|                                             
|                                             
|                                             
|                                             
|                                              | Bad debt expense              |                              |            | 8,623     |           |      |            | 2,030     |          
|                                             
|                                             
|                                             
|                                             
|                                              | Research and development      |                              |            | 15,797    |           |      |            | 10,615    |          
|                                             
|                                             
|                                             
|                                             
|                                              | General and administrative    |                              |            | 1,218,135 |           |      |            | 1,138,520 |          
|                                              |                               |                              |            |           |           |      |            |          
|                                              |                               | Total expenses               |            |           | 1,575,940 |      |            |           | 1,263,068 | 
|                                              |                               |                              |            |           |           |      |            |          
|Loss from operations                          |                               |                              | (1,114,724 | )         |           |      | (1,099,571 | )        
|                                              |                               |                              |            |           |           |      |            |          
|Other income (expense)                        |                               |                              |            |           |           |      |            |          
|                                             
|                                             
|                                             
|                                             
|                                              | Interest expense              |                              |            | (8,250    | )         |      |            | (1,084    | )        
|                                             
|                                             
|                                             
|                                             
|                                              | Other, net                    |                              |            |          |           |      |            | 8,867     |          
|                                              |                               |                              |            |           |           |      |            |          
|                                              |                               | Total other income (expense) |            |           | (8,250    | )    |            |           | 7,783     | 
|                                              |                               |                              |            |           |           |      |            |          
|                                             
|                                             
|                                             
|                                             
|Net loss                                      |                               | $                            | (1,122,974 | )         |           | $    | (1,091,788 | )        
|                                              |                               |                              |            |           |           |      |            |          
|Basic loss per share                          |                               | $                            | (0.10      | )         |           | $    | (0.13      | )        
|                                              |                               |                              |            |           |           |      |            |          
|Weighted average number of shares outstanding |                               |                              | 10,748,364 |           |           |      | 8,700,138  |          
|                                              |                               |                              |            |           |           |      |            |          

The accompanying notes are an integral part of these financial statements.

3



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##### Table of Contents



EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Stockholders Deficit
For the Years Ended December 31, 2001 and 2000

|                                                                                 |  |              |            |        |            |                 |             |         |  |       |           |  |  |   |            |   |  |   |            |  
|-------------------------------------------------------------------------------- |  | ------------ | ---------- | ------ | ---------- | --------------- | ----------- | ------- |  | ----- | --------- |  |  | - | ---------- | - |  | - | ---------- | -
|                                                                                 |  | Common Stock |            |        |            |                 |             |         |  |      
|                                                                                 |  |              |            |        | Additional |                 | Accumulated |         | 
|                                                                                 |  | Shares       |            | Amount |            | Paid-In Capital |             | Deficit |  | Total
|                                                                                 |  |              |            |        |            |                 |             |         |  |      
|Balance, December 31, 1999                                                       |  |              | 7,823,765  |        |            | $               | 7,824       |         |  | $     | 3,920,647 |  |  | $ | (4,120,897 | ) |  | $ | (192,426   | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Common stock issued for cash
at prices ranging from $0.18
to $0.75 per share     |  |              | 853,835    |        |            |                 | 854         |         |  |       | 254,967   |  |  |   |           |   |  |   | 255,821    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Common stock issued for services
at prices ranging from $0.40
to $1.05 per share |  |              | 782,158    |        |            |                 | 782         |         |  |       | 518,091   |  |  |   |           |   |  |   | 518,873    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Common stock issued through
the exercise of options at $0.75
per share           |  |              | 88,000     |        |            |                 | 88          |         |  |       | 65,912    |  |  |   |           |   |  |   | 66,000     |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Common stock issued for patents
at $1.00 per share                               |  |              | 20,000     |        |            |                 | 20          |         |  |       | 19,980    |  |  |   |           |   |  |   | 20,000     |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Additional expense recorded from
granting of options                             |  |              |           |        |            |                 |            |         |  |       | 151,457   |  |  |   |           |   |  |   | 151,457    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Net loss                                                                         |  |              |           |        |            |                 |            |         |  |       |          |  |  |   | (1,091,788 | ) |  |   | (1,091,788 | )
|                                                                                 |  |              |            |        |            |                 |             |         |  |       |           |  |  |   |            |   |  |   |            |  
|Balance, December 31, 2000                                                       |  |              | 9,567,758  |        |            |                 | 9,568       |         |  |       | 4,931,054 |  |  |   | (5,212,685 | ) |  |   | (272,063   | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Common stock issued for cash,
net of issuance costs                              |  |              | 1,291,202  |        |            |                 | 1,291       |         |  |       | 212,731   |  |  |   |           |   |  |   | 214,022    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Common stock issued for services
at prices ranging from $0.43
to $0.77 per share |  |              | 573,465    |        |            |                 | 573         |         |  |       | 313,749   |  |  |   |           |   |  |   | 314,322    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Common stock issued in lieu
of debt at $0.68 per share                           |  |              | 235,000    |        |            |                 | 235         |         |  |       | 158,921   |  |  |   |           |   |  |   | 159,156    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Additional expense recorded from
granting of options                             |  |              |           |        |            |                 |            |         |  |       | 311,607   |  |  |   |           |   |  |   | 311,607    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Net loss                                                                         |  |              |           |        |            |                 |            |         |  |       |          |  |  |   | (1,122,974 | ) |  |   | (1,122,974 | )
|                                                                                 |  |              |            |        |            |                 |             |         |  |       |           |  |  |   |            |   |  |   |            |  
|Balance, December 31, 2001                                                       |  |              | 11,667,425 |        |            | $               | 11,667      |         |  | $     | 5,928,062 |  |  | $ | (6,335,659 | ) |  | $ | (395,930   | )
|                                                                                 |  |              |            |        |            |                 |             |         |  |       |           |  |  |   |            |   |  |   |            |  

The accompanying notes are an integral part of these financial statements.

4



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##### Table of Contents



EMERGENCY FILTRATION PRODUCTS, INC.
Statements of Cash Flows
For the Years Ended December 31, 2001 and 2000

|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |         |         |          |  
|---------------------------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------------------- | ------- | ------- | -------- | ---------- | ------- | ------- | -------- | -
|                                                     |                                                                             |                                                                              |                                                         |                                           |         | 2001    |          | 2000      
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |           
|Cash flows from operating activities:                |                                                                             |                                                                              |                                                         |                                           |         |         |          |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net loss                                                                    |                                                                              | $                                                       | (1,122,974                                | )       |         | $        | (1,091,788 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net loss to net
cash used by operating activities: |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Depreciation and amortization                           |                                           |         | 31,450  |          |            |         | 28,399  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Loss on disposal of assets                              |                                           |         |        |          |            |         | 250     |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Gain on forgiveness of debt                             |                                           |         |        |          |            |         | (9,117  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Bad debts                                               |                                           |         | 8,623   |          |            |         | 2,030   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Common stock issued for services                        |                                           |         | 267,229 |          |            |         | 518,873 |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Expense from options granted                            |                                           |         | 311,607 |          |            |         | 151,457 |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Changes in operating assets and liabilities:                                |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Accounts receivable                                     |                                           |         | 50,457  |          |            |         | (60,387 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Prepaid expenses                                        |                                           |         | (4,758  | )        |            |         | (555    | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Inventory                                               |                                           |         | 4,432   |          |            |         | 6,543   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Accounts payable and accounts payable  related parties |                                           |         | 214,171 |          |            |         | 144,471 |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Cash overdraft                                          |                                           |         |        |          |            |         | (1,176  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             |                                                                              | Accrued expenses                                        |                                           |         | 14,821  |          |            |         | 6,844   |         
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                     |                                                                             |                                                                              |                                                         | Net cash used by operating activities     |         |         | (224,942 | )          |         |         | (304,156 | )
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|Cash flows from investing activities:                |                                                                             |                                                                              |                                                         |                                           |         |         |          |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisition of property and equipment                                       |                                                                              |                                                         | (12,214                                   | )       |         |          | (815       | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash received on disposal of fixed assets                                   |                                                                              |                                                         |                                          |         |         |          | 2,329      |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Patent costs                                                                |                                                                              |                                                         | (2,263                                    | )       |         |          | (11,650    | )      
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                     |                                                                             |                                                                              |                                                         | Net cash used by investing activities     |         |         | (14,477  | )          |         |         | (10,136  | )
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|Cash flows from financing activities:                |                                                                             |                                                                              |                                                         |                                           |         |         |          |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from issuance of stock                                             |                                                                              |                                                         | 214,022                                   |         |         |          | 321,821    |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Advances from shareholders                                                  |                                                                              |                                                         | 36,400                                    |         |         |          |           |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from note payable                                                  |                                                                              |                                                         |                                          |         |         |          | 22,296     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payment on notes payable                                                    |                                                                              |                                                         | (17,988                                   | )       |         |          | (22,840    | )      
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                     |                                                                             |                                                                              |                                                         | Net cash provided by financing activities |         |         | 232,434  |            |         |         | 321,277  |  
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|Net increase (decrease) in cash and cash equivalents |                                                                             |                                                                              | (6,985                                                  | )                                         |         |         | 6,985    |           
|                                                    
|                                                    
|                                                    
|                                                    
|Cash at beginning of period                          |                                                                             |                                                                              | 6,985                                                   |                                           |         |         |         |           
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|Cash at end of period                                |                                                                             | $                                                                            |                                                        |                                           |         | $       | 6,985    |           
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|Supplemental cash flow information:                  |                                                                             |                                                                              |                                                         |                                           |         |         |          |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash paid for interest                                                      |                                                                              | $                                                       | 15,114                                    |         |         | $        | 1,084      |        
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                     | Non-cash investing and financing activities:                                |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                             | Common stock issued for services                                             |                                                         | $                                         | 267,229 |         |          | $          | 518,873 |        
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                     |                                                                             | Common stock issued for prepaid expenses                                     |                                                         | $                                         | 42,093  |         |          | $          |        |        
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                     |                                                                             | Common stock issued for accounts payable                                     |                                                         | $                                         | 5,000   |         |          | $          |        |        
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                     |                                                                             | Common stock issued for patent costs                                         |                                                         | $                                         |        |         |          | $          | 20,000  |        
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                     |                                                                             | Note payable issued for prepaid expenses                                     |                                                         | $                                         | 20,412  |         |          | $          |        |        
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        
|                                                     |                                                                             | Common stock issued for notes payable  related parties
and accrued expenses |                                                         | $                                         | 159,156 |         |          | $          |        |        
|                                                     |                                                                             |                                                                              |                                                         |                                           |         |         |          |            |        

The accompanying notes are an integral part of these financial statements.

5



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##### Table of Contents



EMERGENCY FILTRATION PRODUCTS, INC.
Notes to Financial Statements
For the Year Ended December 31, 2001



|1. |  | ORGANIZATION AND GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Organization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | Emergency Filtration Products, Inc. (the Company) was incorporated in the State of Nevada on
November 1, 1991 as Lead Creek Unlimited. In March 1996, pursuant to a Plan of Reorganization,
the Company changed its name to Emergency Filtration Products, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | Between November 1, 1991 and February 9, 1996, the Company had no line of business. As of the
latter date, the Company entered into an agreement to acquire title to a technology in the emergency
respiration equipment filed. The Company is currently engaged in the development, production and
sale of this equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | The Companys financial statements are prepared using generally accepted accounting principles
applicable to a going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has incurred significant losses, which have
resulted in an accumulated deficit of $6,335,659 at December 31, 2001, which raises substantial
doubt about the Companys ability to continue as a going concern. The accompanying financial
statements do not include any adjustments relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities that might result from the outcome of
this uncertainty. It is the intent of management to create additional revenues through the development
and sales of its emergency respiration equipment and to rely upon additional equity financing if
required to sustain operations until revenues are adequate to cover the costs. Management can offer
no assurance with respect to its ability to create additional revenues or obtain additional equity
financing.
|  
|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | Accounting Method                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | The Companys financial statements are prepared using the accrual method of accounting. The
Company has elected a December 31 year-end.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | The company considers all highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | Accounts Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | The Company does not hold collateral to secure payment of its accounts receivable resulting from
sales. Management performs ongoing credit evaluations of its customers and provides allowances as
deemed necessary. Accounts receivable are shown net of an allowance for doubtful accounts of
$8,990 at December 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | Provision for Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | At December 31, 2001, the Company had net operating loss carryforwards for federal income tax
purposes of approximately $3,971,000 that may be offset against future taxable income. These
operating loss carryforwards expire in the years 2009 through 2021. No tax benefit has been
reported in the financial statements because the potential tax benefits of the net operating loss
carryforwards are offset by a valuation allowance of the same amount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

6



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##### Table of Contents



EMERGENCY
FILTRATION PRODUCTS, INC.
         Notes to the Financial Statements
         For the Year Ended December 31, 2001



|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                                                                                                                                                      
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Provision for Taxes (continued)                                                                                                                                                                                             
|  
|   |  | In addition, the Company is incorporated in the State of Nevada, which has no corporate state income
tax. Accordingly, no provision for state income tax expense or benefit has been recorded in these
financial statements.
|  
|   |  | The income tax benefit differs from the amount computed at federal statutory rates of approximately
38% as follows:                                                                                                         




|                                                          |  |                     |          |      |  |   |          |  
|--------------------------------------------------------- |  | ------------------- | -------- | ---- |  | - | -------- | -
|                                                          |  | For the Years Ended
|                                                          |  | December 31,       
|                                                          |  |                    
|                                                          |  | 2001                |          | 2000
|                                                          |  |                     |          |     
|Income tax benefit at statutory rate                      |  | $                   | 426,730  |      |  | $ | 414,879  |  
|                                                         
|                                                         
|                                                         
|                                                         
|Adjustment
for common stock issued for services           |  |                     | (119,442 | )    |  |   | (144,802 | )
|                                                         
|                                                         
|                                                         
|                                                         
|Adjustment
for expenses recorded from granting of options |  |                     | (118,411 | )    |  |   | (57,554  | )
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |  |                     |          |      |  |   |          |  
|                                                          |  |                     | 188,877  |      |  |   | 212,523  |  
|                                                         
|                                                         
|                                                         
|                                                         
|Change
in valuation allowance                             |  |                     | (188,877 | )    |  |   | (212,523 | )
|                                                          |  |                     |          |      |  |   |          |  
|                                                          |  | $                   |         |      |  | $ |         |  
|                                                          |  |                     |          |      |  |   |          |  






| |  | Deferred tax assets (liabilities) are comprised of the following at December 31, 2001:
| |  | --------------------------------------------------------------------------------------

|                             |                         |   |            |   | 
|---------------------------- | ----------------------- | - | ---------- | - | 
|Operating loss carryforwards |                         | $ | (1,509,000 | )
|                            
|                            
|                            
|                            
|Less: valuation allowance    |                         |   | 1,509,000  |  
|                             |                         |   |            |  
|                             | Net deferred tax assets |   | $          |  | 
|                             |                         |   |            |  



| |  | Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss
carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a
change in ownership occur, net operating loss carryforwards may be limited as to use in future years.              
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Property and Equipment                                                                                                                                                                                                                                                                                             
|
| |  | Property and equipment are stated at cost. Expenditures for small tools, ordinary maintenance and
repairs are charged to operations as incurred. Major additions and improvements are capitalized.
Depreciation is computed using the straight-line and accelerated methods over estimated useful lives
as follows:

|                               |  |              |  | 
|------------------------------ |  | ------------ |  | 
|Molds                          |  | 7 years     
|                              
|                              
|                              
|                              
|Furniture and office equipment |  | 5 to 7 years



| |  | Depreciation expense for the years ended December 31, 2001 and 2000 was $20,530 and $21,795,
respectively.                                                                                                       
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Inventory                                                                                                                                                                                                        
|
| |  | Inventory is stated at the lower of cost (computed on a first-in, first-out basis) or market. The
inventory consists of raw materials used in the assembly and production of the emergency respiration
equipment.

7



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##### Table of Contents



EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
For the Year Ended December 31, 2001



|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                           
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
|  
|   |  | Basic Loss Per Share                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | The computation of basic loss per share of common stock is based on the weighted average number of
shares outstanding during the period of the financial statements. Common stock equivalents,
consisting of stock options, have not been included in the calculation as their effect is antidilutive for
the periods presented. Basic loss per share is computed as follows:                                                                    

|                                    |  |                     |            |      |  |   |            |  
|----------------------------------- |  | ------------------- | ---------- | ---- |  | - | ---------- | -
|                                    |  | For the Years Ended
|                                    |  | December 31,       
|                                    |  |                    
|                                    |  | 2001                |            | 2000
|                                    |  |                     |            |     
|Net loss                            |  | $                   | (1,122,974 | )    |  | $ | (1,091,788 | )
|                                    |  |                     |            |      |  |   |            |  
|Weighted average shares outstanding |  |                     | 10,748,364 |      |  |   | 8,700,138  |  
|                                    |  |                     |            |      |  |   |            |  
|Loss per share, basic and dilutive  |  | $                   | (0.10      | )    |  | $ | (0.13      | )
|                                    |  |                     |            |      |  |   |            |  



| |  | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In July 2001, the Financial Accounting Standards Board issued Statement No. 141, Business
Combinations and Statement No. 142, Goodwill and Other Intangible Assets. SFAS 141 is
effective as follows: (a) use of the pooling-of-interest method is prohibited for business combinations
initiated after June 30, 2001; and (b) the provisions of SFAS 141 also apply to all business
combinations accounted for by the purchase method that are completed after June 30, 2001. There
are also transition provisions that apply to business combinations completed before July 1, 2001, that
were accounted for by the purchase method. SFAS 142 is effective for fiscal years beginning after
December 15, 2001 and applies to all goodwill and other intangible assets recognized in an entitys
statement of financial position at that date, regardless of when those assets were initially recognized.
|
| |  | In August 2001, the Financial Accounting Standards Board issued Statement No. 143, Accounting
for Obligations Associated with the Retirement of Long-Lived Assets. The objectives of SFAS 143
are to establish accounting standards for the recognition and measurement of an asset retirement
obligation and its associated asset retirement cost. SFAS 143 is effective for fiscal years beginning
after June 15, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | In October 2001, the Financial Accounting Standards Board issued Statement No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. SFAS 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS 144 is effective for fiscal years
beginning after December 15, 2001 and, generally, is to be applied prospectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | The Company is currently evaluating the provisions of SFAS 141, SFAS 142, SFAS 143 and SFAS
144 and has not yet determined the effects of these changes, but does not expect them to have a
significant impact on the Companys financial position, results of operations or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

8



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##### Table of Contents



EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
For the Year Ended December 31, 2001



|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Advertising                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | Advertising is expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | Revenue is recognized upon shipment of goods to the customer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | Equity Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | Equity securities issued for services rendered have been accounted for at the fair value of the
securities on the date of issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | The Company accounts for stock-based employee compensation arrangements in accordance with
provisions of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to
Employees, and FASB Interpretation (FIN) No. 44, Accounting for Certain Transactions
Involving Stock-based Compensation, an Interpretation of APB No. 25 and complies with the
disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Under APB
No. 25, compensation expense is based on the difference, if any, on the date of grant between fair
value of the Companys stock and the exercise price. The Company accounts for stock issued to
non-employees in accordance with the provisions of SFAS No. 123 and the Emerging Issues Task Force
(EITF) Issue No. 96-18.                           
|  
|   |  | SFAS No. 123 requires the Company to provide proforma information regarding net income (loss)
and net income (loss) per share as if compensation costs for the Companys stock option plans and
other stock awards had been determined in accordance with the fair value based method prescribed in
SFAS No. 123. The Company estimates the fair value of each stock award at the grant date by using
the Black-Scholes options pricing model using the following weighted average assumptions: (i) the
U.S. Treasury rate of 6.22% for the period equal to the expected life of the options was used as the
risk-free interest rate; (ii) the expected life of the options is three years; (iii) the volatility used was
1.2246% based upon the historical price per share of shares sold, and (iv) there are no expected
dividends.
|  
|   |  | Under the accounting provisions of SFAS No. 123, the Companys net loss for the years ended
December 31, 2001 and 2000 would have changed from the reported net loss as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

|                                 |             |  |      |            |      |  |   |            |  
|-------------------------------- | ----------- |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                 |             |  | 2001 |            | 2000
|                                 |             |  |      |            |     
|Net loss:                        |             |  |      |            |      |  |   |           
|                                
|                                
|                                
|                                
|                                 | As reported |  | $    | (1,122,974 | )    |  | $ | (1,091,788 | )
|                                
|                                
|                                
|                                
|                                 | Pro forma   |  |      | (1,782,420 | )    |  |   | (1,416,952 | )
|                                
|                                
|                                
|                                
|Weighted average loss per share: |             |  |      |            |      |  |   |           
|                                
|                                
|                                
|                                
|                                 | As reported |  | $    | (0.10      | )    |  | $ | (0.13      | )
|                                
|                                
|                                
|                                
|                                 | Pro forma   |  |      | (0.17      | )    |  |   | (0.16      | )

9



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##### Table of Contents



EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
For the Year Ended December 31, 2001



|3. |  | PATENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company entered into an agreement to acquire the rights to certain intellectual property, which
property includes title to the patent on a component of an emergency CPR assistance device, called a
dual filtered rotary isolation valve. Rights pertaining thereto include the right to maintain, sell and
improve the device, and to license those rights. The Company has agreed to pay a 5% royalty on any
sales related to the patented intellectual property. Royalty expense on this patent for the years ended
December 31, 2001 and 2000 was $14,862 and $8,014, respectively. Additional costs related to the
patent were capitalized during the years ended December 31, 2001 and 2000, which consist of legal
and filing fees incurred to maintain the patent throughout the world. Amortization is computed over
an estimated life of 15 years. Impairment of the patent is analyzed annually. The patent was
published by the U.S. Patent Office on November 15, 1996; the U.S. Patent number is 5,575,279.
|  
|   |  | On June 28, 2000, the Company entered into a Contract for Assignment of the rights to a BVM Bag
invention. The BVM Bag is a portable emergency safety resuscitator, subject to U.S. Patent number
6,062,217. The Company acquired the rights, title and interest in the BVM Bag for the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            



| | 1) |  | Issuance of 120,000 shares of restricted common stock. At December 31, 2001, only 20,000 of
the 120,000 shares had been issued (valued at $1.00 per share), thus, a $100,000 liability was
recorded until the remaining 100,000 shares are issued.                                                                                                       
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2) |  | In the event the Company is sold or merged with another entity, the seller shall receive an
additional 50,000 share of restricted shares or participate as a member of the negotiating team
concerning the sale or merger for the purpose of negotiating a royalty on the Patent that shall
not be less than 2.5% of gross sales of the patented product.



| |  | Patent costs at December 31, 2001 are as follows:
| |  | -------------------------------------------------



|                         |  |   |         |  
|------------------------ |  | - | ------- | -
|Capitalized costs        |  | $ | 167,151 |  
|                        
|                        
|                        
|                        
|Accumulated amortization |  |   | (21,618 | )
|                         |  |   |         |  
|Net patent costs         |  | $ | 145,533 |  
|                         |  |   |         |  



|   |  | Amortization expense for the years ended December 31, 2001 and 2000 was $10,920 and $6,604,
respectively.
|-- |  | ---------------------------------------------------------------------------------------------------------
|  
|4. |  | RELATED PARTY TRANSACTIONS                                                                               
|  
|   |  | Accounts Payable  Related Parties                                                                       
|  
|   |  | Accounts payable  related parties is comprised of the following at December 31, 2001:                   

|                                                                                                                                      |  |   |         | 
|------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- | 
|Patent acquisiton costs (Note 3)                                                                                                      |  | $ | 100,000 | 
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      |  |   |         | 
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Advances from shareholders, employees and officers and
accrued wages and expense reimbursements due to various officers and employees |  |   |        | 
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Amounts are non-interest bearing, unsecured
and due on demand                                                                         |  |   | 450,303 | 
|                                                                                                                                      |  |   |         | 
|                                                                                                                                      |  | $ | 550,303 | 
|                                                                                                                                      |  |   |         | 

10



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##### Table of Contents



EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
For the Year Ended December 31, 2001



|4. |  | RELATED PARTY TRANSACTIONS (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Note Payable  Related Party                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | At December 31, 1999, $135,000 was recorded by the Company, which represented an amount
claimed to be owed to a shareholder and former officer of the Company for unpaid wages and
reimbursements. The shareholder also claimed that he had legal rights to certain trademarks of the
Company until he was paid in full. On June 2, 2000, the Company entered into a settlement
agreement and mutual release with the shareholder, settling on an amount of $146,500. The amount
accrued interest at 10% per annum. Principal and interest were to be paid in monthly installments of
$1,800 beginning on July 1, 2000 until paid. However, the Company made only one monthly interest
payment under the agreement during 2000, and defaulted on the remaining interest payments. At
December 31, 2000, the Company had $146,500 presented as a related party note payable under this
agreement. In addition, accrued interest under this agreement of $6,844 was included in accrued
expenses at December 31, 2000. The Company executed a second settlement agreement and mutual
release on September 30, 2001 in which the shareholder accepted 235,000 shares of the common
stock of the Company as payment in full.
|  
|5. |  | NOTE PAYABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | A note was signed by the Company to an insurance company for product liability insurance for a one
year period from October 2001 to October 2002. The remaining amount due at December 31, 2001
was $20,412.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|6. |  | COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | The Company is subject to certain claims and lawsuits arising in the normal course of business. In
the opinion of management, uninsured losses, if any, resulting from the ultimate resolution of these
matters will not have a material effect on the Companys financial position, results of operations, or
cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|7. |  | STOCK OPTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | A summary of the status of the Companys stock options as of December 31, 2001 and 2000, and
changes during the years then ending, are presented below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|                                               |                  |  |           |            |                |  |                  |      |            |  |                  |      | 
|---------------------------------------------- | ---------------- |  | --------- | ---------- | -------------- |  | ---------------- | ---- | ---------- |  | ---------------- | ---- | 
|                                               |                  |  |           |            |                |  |                  |      |            |  | Weighted Average
|                                               |                  |  |           |            |                |  | Weighted Average |      | Grant Date
|                                               |                  |  | Options   |            | Exercise Price |  | Fair Value      
|                                               |                  |  |           |            |                |  |                 
|Outstanding, December 31, 1999                 |                  |  | 3,838,000 |            |                |  | 1.04             |      |            |  |                 |     
|                                              
|                                              
|                                              
|                                              
|                                               | Granted          |  |           | 4,000,000  |                |  |                  | 0.75 |            |  |                  | 0.12 | 
|                                              
|                                              
|                                              
|                                              
|                                               | Exercised        |  |           | (88,000    | )              |  |                  | 0.75 |            |  |                  |     | 
|                                               |                  |  |           |            |                |  |                  |      |            |  |                  |     
|Outstanding and exercisable,
December 31, 2000 |                  |  | 7,750,000 |            |                |  | 0.89             |      |            |  |                 |     
|                                               |                  |  |           |            |                |  |                  |      |            |  |                  |     
|                                               | Granted          |  |           | 1,948,424  |                |  |                  | 0.44 |            |  |                  | 0.26 | 
|                                              
|                                              
|                                              
|                                              
|                                               | Expired/Canceled |  |           | (2,793,424 | )              |  |                  | 0.66 |            |  |                  |     | 
|                                               |                  |  |           |            |                |  |                  |      |            |  |                  |     
|Outstanding and exercisable,
December 31, 2001 |                  |  | 6,905,000 |            |                |  | 0.83             |      |            |  |                 |     
|                                               |                  |  |           |            |                |  |                  |      |            |  |                  |     

11



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##### Table of Contents



EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
For the Year Ended December 31, 2001



|7. |  | STOCK OPTIONS (CONTINUED)               
|-- |  | ----------------------------------------
|  
|   |  | During the year ended December 31, 2001:



| |  |  | The Company granted 328,424 options at an exercise price of $0.01 per share to an unrelated  party
under a professional services agreement in February 2001. The options vested
immediately and a charge to expense of $161,390 was included in general and administrative
expenses for 2001, representing the fair value of the options on the date of grant. The
weighted average grant date fair value of these options was $0.49. The related professional
services agreement was terminated during October 2001 and the options cancelled.                                                                                                                                                                                                                                                                                                                                  
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company modified 600,000 vested options of various officers and directors of the
Company originally accounted for as fixed stock options and originally expiring on various
dates between December 2001 and December 2003 to (i) reduce the exercise price to $0.49
per share (a price above the current market price of the Companys stock on the date of
modification), and (ii) extend the expiration date to June 28, 2004. Accordingly, these
options will be accounted for as variable stock options from the date of the modification. The
Company did not incur any compensation expense during 2001 under these variable stock
options. Under variable stock options, the Company could incur additional compensation
expense in the future arising from the excess of the fair market value of the Companys stock
over the exercise price of the related options.
|
| |  |  | The Company granted 1,620,000 stock options, which vested immediately to various
employees, officers and directors of the Company, at an exercise price of $.53 per share. The
weighted average grant date fair value of these options was $0.21.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | No options were exercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



| |  | During the year ended December 31, 2000:
| |  | ----------------------------------------



| |  |  | The Company granted 4,000,000 stock options, which vested immediately to various
employees, directors and officers of the Company, at exercise prices ranging from $0.37 to
$0.75 per share.                                                     
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company modified 300,000 vested options of various officers and directors of the
Company to extend their expiration date to December 31, 2003. The Company did not incur
any compensation expense during 2000 arising from this modification.
|
| |  |  | 88,000 options were exercised at $0.75 per share for total proceeds of $66,000.                                                                                                                                                                  

12



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##### Table of Contents



EMERGENCY FILTRATION PRODUCTS, INC.
Notes to the Financial Statements
For the Year Ended December 31, 2001



|7. |  | STOCK OPTIONS (CONTINUED)                                                                   
|-- |  | --------------------------------------------------------------------------------------------
|  
|   |  | The total amount of outstanding stock options at December 31, 2001 is summarized as follows:

|               |               |                   |        |                       |                  |                  |  |      |  |  |   |      | 
|-------------- | ------------- | ----------------- | ------ | --------------------- | ---------------- | ---------------- |  | ---- |  |  | - | ---- | 
|               |               |                   | Number |                       | Weighted
Average |                  |  |      | 
|Range of       |               | Outstanding as of |        | Remaining
Contractual |                  | Weighted
Average
|Exercise
Price |               | December
31, 2001 |        | Life
(Years)          |                  | Exercise
Price  
|               |               |                   |        |                       |                  |                 
|               | $0.37 - $1.00 |                   |        | 6,555,000             |                  |                  |  | 1.57 |  |  | $ | 0.69 | 
|              
|              
|              
|              
|               | $2.50 - $5.00 |                   |        | 350,000               |                  |                  |  | 0.06 |  |  | $ | 3.57 | 
|               |               |                   |        |                       |                  |                  |  |      |  |  |   |      | 
|               | $0.37 - $5.00 |                   |        | 6,905,000             |                  |                  |  | 1.49 |  |  | $ | 0.83 | 
|               |               |                   |        |                       |                  |                  |  |      |  |  |   |      | 



| |  | Additional expense of $311,607 and $151,457 was recorded during the years ended December 31,
2001 and 2000, respectively, arising from options granted to non-employees.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13



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##### Table of Contents






Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

On January 10, 2002, the Company dismissed HJ & Associates LLC (HJ) as
its independent public accountants. The Company engaged PricewaterhouseCoopers
LLP as its new independent public accountants. The decision to change the
Companys accounting firm was recommended and approved by the Companys Board
of Directors.



| | (a) |  | During the two fiscal years ended December 31, 1999 and 2000 and
the subsequent interim reporting period from the last audit date of
December 31,
2000, through and including the termination date of January 10, 2002,
there were no disagreements between the Company and HJ on any matter of
accounting principles or practices, financial statement disclosure, or
accounting scope or procedure. Additionally, there were no reportable
events (as defined in Item 304(a)(1)(v) of Regulation S-K) during such
periods.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | The report of HJ on the financial statements of the Company for
each of the past two fiscal years ended December 31, 1999 and 2000
contained no adverse opinion or disclaimer of opinion, and was not
qualified or modified as to uncertainty, audit scope, or accounting
principles, except that the report of HJ on the financial statements of
the Company for each of the past two fiscal years ended December 31,
1999 and 2000 was modified as to the uncertainty related to the
Companys ability to continue as a going concern.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (c) |  | The Company had not consulted with PricewaterhouseCoopers LLP
during the two fiscal years ended December 31, 1999 and 2000 or during
the subsequent interim reporting period from the last audit date of
December 31, 2000, through and including the termination date of
January 10, 2002, on either the application of accounting principles or
the type of opinion PricewaterhouseCoopers LLP might issue on the
Companys financial statements.                                                                                     
|
| | (d) |  | The Company requested HJ to furnish a letter addressed to the
Securities and Exchange Commission stating whether HJ agrees with the
above statements made by the Company. A copy of this letter addressed
to the SEC, dated January 15, 2002, is filed as Exhibit 16 in the Form
8-K filed on January 10, 2002.                                                                                                                                                                                                                         




Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.

The members of the Board of Directors of the Company serve until the next
annual meeting of the stockholders, or until their successors have been
elected. The officers serve at the pleasure of the Board of Directors.
Information as to the directors and executive officers of the Company is as
follows:

|                      |  |     |    |          |  |                               
|--------------------- |  | --- | -- | -------- |  | ------------------------------
|Name                  |  | Age |    | Position
|                      |  |     |    |         
|Douglas K. Beplate    |  |     | 47 |          |  | President, Director           
|Peter Clark           |  |     | 50 |          |  | Secretary, Treasurer, Director
|Dr. Raymond C.L. Yuan |  |     | 58 |          |  | Director                      
|Sherman Lazrus        |  |     | 68 |          |  | Interim CEO, Director         

The principal occupation and business experience during the last five
years for each of the present directors and executive officers of the Company
are as follows:





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##### Table of Contents





| |  | Douglas K. Beplate, President, signed an agreement with the Company in
1996 whereby he provided consulting services and was subsequently
appointed to his present position and elected to the Board of Directors
in July, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Peter Clark, Vice President, Sales and Marketing, joined the Company in
1995 and was subsequently appointed Secretary/Treasurer and elected to
the Board of Directors in 1997.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Dr. Raymond C.L. Yuan, Director, was elected to the Board in December,
1997. Since 1993, Dr. Yuan has served as Managing Director of AsiaWorld
Medical Technology Limited, an exclusive master distributor of advanced
medical and healthcare products in South East Asia, including the
Peoples Republic of China. In addition, Dr. Yuan currently serves in
the following positions: President of the MedNet Group located in Hong
Kong, a group of healthcare education and communications companies;
Managing Director of Bio-health Consultancy Limited (Hong Kong), a
consulting firm specializing in bio-health and biotechnology consulting
to medical institutions; and Executive Director of Financial Resource
International, Limited located in Hong Kong, an international investment
banking firm.
|
| |  | Sherman Lazrus, Director, Interim CEO, was elected to the Board in
December 1998, and appointed as Interim Chief Executive Officer in June
2001. Mr. Lazrus has nearly 40 years experience in government and
private sector health care and health care finance. Mr. Lazrus presently
also serves as President of American Medical Capital, a division of
American Medical Enterprises, LLC located in Bethesda, Maryland, a
financial services and investment banking company specializing in the
healthcare industry, a position he has held since 1991.                                                                                                                                                                                                                                                      

On June 4, 2001, the Companys Board of Directors held a special meeting.
At the meeting, Sherman Lazrus was appointed Interim Chief Executive Officer to
replace Michael J. Crnkovich.

On October 30, 2001, the Companys Board of Directors held a special
meeting. At the meeting, the resignation of Michael J. Crnkovich from the
Board of Directors was accepted.

On March 20, 2002, the Companys Board of Directors held a special
meeting. At the meeting, the resignation of J. Thomas Burns from the Board of
Directors was accepted.

The officers and directors may be deemed parents and promoters of the
Company as those terms are defined by the Securities Act of 1933, as amended.
All directors hold office until the next annual stockholders meeting or until
their death, resignations, retirement, removal, disqualification, or until
their successors have been





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##### Table of Contents



elected and qualified. Officers of the Company
serve at the will of the Board of Directors.

There are no agreements or understandings for any officer or director of
the Company to resign at the request of another person and none of the officers
or directors are acting on behalf of or will act at the direction of any other
person.

The Company has checked the box provided on the cover page of this Form to
indicate that there is no disclosure in this form of reporting person
delinquencies in response to Item 405 of Regulation S-B.




Item 10. Executive Compensation.

The following table sets forth the cash compensation, which was paid by
the Company for services rendered to the Company. During fiscal years
indicated, the following payments were made:

|                    |  |      |      |              |  |         |        |       |  |       |         |     |  |   |   | 
|------------------- |  | ---- | ---- | ------------ |  | ------- | ------ | ----- |  | ----- | ------- | --- |  | - | - | 
|                    |  |      |      |              |  |         |        |       |  | Stock |         | All
|Name & Position     |  | Year |      | Remuneration |  | Options |        | Other
|                    |  |      |      |              |  |         |        |      
|Sherman Lazrus      |  |      | 2001 |              |  | $       | 43,000 |       |  | $     | 0       |     |  | $ | 0 | 
|Interim CEO         |  |      | 2000 |              |  | $       | 0      |       |  | $     | 0       |     |  | $ | 0 | 
|                   
|                   
|                   
|                   
|                   
|                   
|Douglas K. Beplate  |  |      | 2001 |              |  | $       | 0      |       |  | $     | 0       |     |  | $ | 0 | 
|President           |  |      | 2000 |              |  | $       | 65,480 |       |  | $     | 141,114 |     |  | $ | 0 | 
|                   
|                   
|                   
|                   
|                   
|                   
|Peter Clark         |  |      | 2001 |              |  | $       | 0      |       |  | $     | 0       |     |  | $ | 0 | 
|Secretary/Treasurer |  |      | 2000 |              |  | $       | 6,000  |       |  | $     | 75,834  |     |  | $ | 0 | 




Item 11. Security Ownership of Certain Beneficial Owners and Management.

(a)  Security Ownership of Certain Beneficial Owners.

The following table sets forth the security and beneficial ownership for
each class of equity securities of the Company for any person who is known to
be the beneficial owner of more than five percent of the Company:





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##### Table of Contents



|               |  |                                                                                |  |                  |           |          |  |  |       |  
|-------------- |  | ------------------------------------------------------------------------------ |  | ---------------- | --------- | -------- |  |  | ----- | -
|               |  | Name and                                                                       |  | Amount and       |           |          |  | 
|               |  | Address of                                                                     |  | Nature of        |           | Percent 
|Title of Class |  | Beneficial Owner                                                               |  | Beneficial Owner |           | of Class
|               |  |                                                                                |  |                  |           |         
|Common         |  | Douglas K. Beplate
2254 Candlestick Avenue
Henderson, NV 89052                 |  |                  | 619,591   |          |  |  | 5.37  | %
|Option         |  | Douglas K. Beplate
2254 Candlestick Avenue
Henderson, NV 89052                 |  |                  | 1,600,000 |          |  |  |      |  
|Common         |  | China Bridge Holdings
The Creque Bldg
216 Main Street Road Town,
Tortola B.V.I |  |                  | 744,425   |          |  |  | 6.45  | %
|               |  |                                                                                |  |                  |           |          |  |  |       |  
|               |  | Total                                                                          |  |                  | 2,964,016 |          |  |  | 11.82 | %

The total of the Companys outstanding Common Shares are held by 188
shareholders of record.

(b)  Security Ownership of Management.

The following table sets forth the beneficial ownership for each class of
equity securities of the Company beneficially owned by all directors and
officers of the Company.

|               |  |                                                                   |  |            |                   |          |  |        
|-------------- |  | ----------------------------------------------------------------- |  | ---------- | ----------------- | -------- |  | -------
|               |  | Name and                                                          |  | Amount and |                   |         
|               |  | Address of                                                        |  | Nature of  |                   | Percent 
|Title of Class |  | Beneficial Owner                                                  |  | Securities |                   | of Class
|               |  |                                                                   |  |            |                   |         
|Common         |  | Peter Clark
2251 Wigwam Pkwy #1823
Henderson, NV 89014            |  |            | 525,126
1,300,000 | (2)      |  | 4.55%

|Common         |  | Dr. Raymond C.L. Yuan
4335 S. Industrial Road
Las Vegas, NV 89103 |  |            | 10,000
100,000    | (2)      |  | 0.08%

|Common         |  | Sherman Lazrus
4335 S. Industrial Road.
Las Vegas, NV 89103       |  |            | 100,000
100,000   | (2)      |  | 0.87%

|Common         |  | Douglas K. Beplate
2254 Candlestick Avenue
Henderson, NV 89052    |  |            | 619,591
1,600,000 | (2)      |  | 5.37%

|               |  |                                                                   |  |            |                   |          |  |        
|               |  | Total Shares                                                      |  |            | 1,254,717         |          |  | 10.87% 





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##### Table of Contents





---

|(1) |  | Beneficial, including options.                                                                                  
|--- |  | ----------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | The following options of the Company are owned by the directors and
officers and control persons of the Company:

|                                |  |             |           |       |  |            |      |  |  |  |          | 
|------------------------------- |  | ----------- | --------- | ----- |  | ---------- | ---- |  |  |  | -------- | 
|                                |  | # of Shares |           | Price |  | Expiration
|                                |  |             |           |       |  |           
|Peter Clark                     |  |             | 300,000   |       |  | $          | 0.75 |  |  |  | 01/03/03 | 
|                                |  |             | 400,000   |       |  | $          | 0.75 |  |  |  | 10/01/03 | 
|                                |  |             | 500,000   |       |  | $          | 0.53 |  |  |  | 01/08/04 | 
|                                |  |             | 100,000   |       |  | $          | 0.49 |  |  |  | 06/28/04 | 
|                               
|Douglas K. Beplate              |  |             | 500,000   |       |  | $          | 0.75 |  |  |  | 01/03/03 | 
|                                |  |             | 500,000   |       |  | $          | 0.75 |  |  |  | 10/01/03 | 
|                                |  |             | 500,000   |       |  | $          | 0.53 |  |  |  | 01/08/04 | 
|                                |  |             | 100,000   |       |  | $          | 0.49 |  |  |  | 06/28/04 | 
|                               
|Raymond C.L. Yuan               |  |             | 100,000   |       |  | $          | 0.49 |  |  |  | 06/28/04 | 
|                               
|Sherman Lazrus                  |  |             | 100,000   |       |  | $          | 0.49 |  |  |  | 06/28/04 | 
|                                |  |             |           |       |  |            |      |  |  |  |          | 
|Total shares subject to options |  |             | 3,100,000 |       |  |            |      |  |  |  |          | 




Item 12. Certain Relationship and Related Transactions.

There have been no related party transactions, or any other transactions
or relationships required to be disclosed pursuant to Item 404 of Regulation
S-B.




Item 13. Exhibits and Reports on Form 8-K.

The following reports on Form 8-K are incorporated herein by reference:

(1)  Form 8-K filed January 10, 2002.

The following documents are filed as part of this report:

(1)  Financial Statements. See Item 7. Financial Statements.





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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.

|                     |                                     | 
|-------------------- | ----------------------------------- | 
|Date: March 29, 2002 | Emergency Filtration Products, Inc.
|                    
|                     | By:  /s/   DOUGLAS K. BEPLATE      
|                     |                                    
|                     | Douglas K. Beplate
President