SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
NVID INTERNATIONAL, INC.
(Name Of Small Business Issuer In Its Charter)
DELAWARE 59-3458195
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
28163 U.S. Highway 19 North, Suite 302,
Clearwater, Florida 34621
(Address Of Principal Executive Offices) (Zip Code)
(727) 669-5256
(Registrant's Telephone Number, Including Area Code)
Securities to be Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
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PART I
ITEM 1. - BUSINESS.
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General
NVID International, Inc. (the "Company") is a holding company the sole
material asset of which is the stock of its subsidiary, Aqua Bio Technologies,
Inc. References to the Company in this registration statement include the
activities of its subsidiary. The Company is in the business of researching,
developing and marketing water purification and disinfection products using a
technology known as ionization.
The Company was incorporated on August 20, 1984 under Delaware law as
Network Video, Inc., for the purpose of franchising video specialty stores. In
1986, it completed an initial public offering pursuant to a Registration
Statement under the Securities Act of 1933 on Form S-18. On February 17, 1988,
the Company filed Form 15, terminating its obligation to file periodic reports
with the United States Securities and Exchange Commission (the "Commission").
The Company discontinued its video business in 1988 because of intense
competition.
The Company conducted no business until 1994, when it entered into an
agreement with Superior Aqua Products, Inc., a Florida corporation ("Superior").
Under that agreement, the Company acquired all of the outstanding shares of
Superior in exchange for the issuance of 18,281,500 shares of its common stock.
At the same time, the Company's shareholders authorized its name change to NVID
International, Inc.
The Company's administrative office is located at 28163 U.S. Highway 19
North, Suite 302, Clearwater, Florida 34621, and its telephone number is (727)
669-5256. The Company's fiscal year end is December 31.
On April 4, 1997, the Company was named as a defendant in civil litigation
brought by the Commission stemming from the actions of two Company officers
arrested for misappropriation of stockholder funds and fraud. On April 5, 1997,
the two officers and two additional members of the Company's board of directors
resigned from their positions with the Company. On April 15, 1998, following
negotiations between the Company's new management and the Commission, the
Company executed a Consent and Stipulation for Final Judgment, which was
approved on August 14, 1998, and which terminated the Commission's proceedings
against the Company.
Overview of Business
The Company develops water disinfection systems using "ionization." These
systems are based on a process that emits precise amounts of copper and silver
ions into water systems to control and remove bacteria, viruses, fungi, yeast
and algae. Uses for the Company's products include industrial, commercial and
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residential water systems, cisterns, hospitals, agriculture, marine habitats,
pools, fountains, spas and cooling towers. From simple applications like pools,
spas or fountains, to more complicated hospital infection control systems, the
Company's products are designed to meet a broad spectrum of water disinfection
requirements. In addition to water disinfection systems, the Company owns the
rights to AXEN, a non-toxic, environmentally friendly liquid disinfectant,
formulated for initial use as a surface cleaner. AXEN is also produced with
proprietary ionization technology.
There are various technologies used for disinfecting water. The
conventional technologies include chlorine, reverse osmosis, filtration,
ultraviolet light, ozone and chlorine dioxide. While all of these technologies
have beneficial attributes, they also possess significant drawbacks in terms of
cost, ease of handling and use, maintenance and long-term disinfecting
capability (commonly referred to as "residual effect"). In addition,
conventional water treatment systems often use significant amounts of chlorine,
a highly toxic and caustic chemical. Repeated studies have shown that the
toxicity of chlorine creates dangerous health and environmental hazards.
The benefits of the Company's ionization products include reduced
operating and maintenance costs resulting from a reduction of chlorine and
increased life of operating equipment.
Silver and copper have long been known for their biocidal properties -
copper for its ability to kill algae, and silver for its ability to kill a wide
range of bacteria and viruses. In fact, the characteristics of the process now
known as "ionization" were recognized in ancient Greece, where copper cups and
silver chalices were the preferred way to store drinking water. During the 19th
century, pioneers in the United States placed copper and silver coins in the
water casks attached to their wagons. The constant rocking and rolling of the
wagons released ions of copper and silver, which killed bacteria, yeast and
viruses, and helped maintain a clean water supply. More recently, NASA used
ionization technology to control bacteria for the Apollo space missions.
Ionization begins when an electric charge is applied to specially
formulated alloys of copper or silver. When electricity contacts the alloy, an
electrically charged atom called an "ion" is released. Ions, which have a
positive charge, attach to algae walls, bacteria and other particles, which have
a negative charge. The ions penetrate the foreign substances' membranes, and
eventually the foreign substances die. In killing the algae or bacteria, the
ions function much the same way as white corpuscles. They attack and kill by
attaching themselves to the cells' membranes. The dead matter then clumps
together and is carried away and filtered out of the water. Ionization is
recognized as a safe and effective method of removing bacteria and algae from
water, while avoiding the harmful side effects caused by large doses of chlorine
or other conventional water treatment chemicals.
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All water systems are susceptible to growth of microorganisms. Colonies of
microorganisms, including bacteria, viruses, protozoa and fungi, usually grow
within pipes, plants and tanks. Algae may also be present if the microorganisms
are exposed to sunlight. Sloughing, water pressure and grazing by protozoa
release the microorganisms into the water, where they can damage pipes and, more
seriously, expose water users to harmful - even fatal - bacteria (such as the
bacteria known as Legionella Pneumophila ("Legionella"), responsible for
Legionnaire's Disease). Chemical treatments, dosed at "safe" levels, are often
unable to cope with the freed bacteria in the time available for treatment.
Ionization is gaining recognition as the most successful and cost-effective
method of preventing the proliferation of microorganisms with minimal
environmental impact.
Industry Overview
Water purification and disinfection is a multi-billion dollar global
industry because of an increasingly limited supply of drinkable water, global
economic expansion, the increasing need for high-quality or ultra pure water by
commercial and industrial companies, heightened public health and safety
concerns relating to drinking water, and the promulgation of numerous government
regulations for water quality. The Science Advisory Board of the United States
Environmental Protection Agency (the "EPA") has cited water contamination as one
of the highest ranking environmental risks.
The Company believes that it has benefited from, and will benefit from,
several existing and emerging market trends, including increased consumer
emphasis on health and safety concerns relating to drinking water and water
supplies, growing demand for alternatives to chlorine-based systems and
continued promulgation of government regulations relating to water purification
and treatment.
Principal components of the water purification and disinfection industry
include the consumer, bottled water, commercial and industrial, municipal and
wastewater treatment markets. With the exception of bottled water, the Company
has products in each of these market segments. Specifically, the Company has
focused on applications for Legionella control within hospital hot water
systems, cooling tower disinfection, industrial and residential drinking water
disinfection and purification, horticultural aspects of disinfection, pool and
spa disinfection, dental waterline disinfection and hard surface disinfection
within the food processing industry.
Disinfection/Purification Technologies
The principal technologies used in the water disinfection and purification
industry include:
Filtration. Filtration is a process typically used for separating solids
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from a liquid by means of a porous substance, layers of inert material (e.g.
sand, gravel) or a membrane. The most significant drawback to filtration is the
lack of a residual effect and the limitations imposed by the size of the
filters, which can be ineffective for controlling the growth of microorganisms.
Reverse Osmosis. Reverse osmosis is a water treatment process that removes
undesirable materials from the water by using water pressure to force the water
molecules through a semi-permeable membrane. Reverse osmosis, like filtration,
has no residual effect and can be extremely expensive because of the replacement
cost of a membrane.
Chlorine. A long-standing technology for water treatment first used at the
beginning of the 20th century, chlorine remains the most widely adopted form of
water treatment in the United States. Chlorine is a relatively inexpensive gas,
which at appropriate levels, destroys most water-borne pathogens. The drawbacks
of chlorine include its high toxicity to human health, storage and handling
problems, limited residual effect, susceptibility to heat and light, and
environmental concerns.
Chlorine Dioxide. Though more expensive than chlorine, chlorine dioxide is
also more stable and retains a longer disinfecting residual than chlorine.
Chlorine dioxide, however, suffers the same logistical and handling problems as
chlorine and is also highly unstable under temperature and heat fluctuations.
Ozone. Ozone, a pale, light blue gas, has been used to treat drinking
water since the end of the 19th century. Significantly more expensive than
chlorine, ozone has highly effective germicidal properties. In addition to its
cost, however, ozone cannot be stored or transported because of its short life.
It has no residual effect.
Ultraviolet Light. Ultraviolet light is nominally more expensive than
chlorine, though it has no residual effect. It is effective against most forms
of viruses, though the equipment necessary for its use reduces its applications.
Ionization. Ionization disinfection systems were developed to overcome the
disadvantages and hazards associated with disinfection by chlorine and other
conventional water treatment systems. The contact time of silver, aided by the
synergistic effects of copper, will kill bacteria and viruses within minutes and
are completely unaffected by temperature and sunlight. Ionization is
cost-effective, non-corrosive, non-toxic, easily regulated and has a long-term
residual effect. As important, ionization technology is environmentally friendly
and creates no human health hazards. Ionized water produced by the Company's
systems is odorless, tasteless and, perhaps most importantly, ultra pure.
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The Company's Products
The selection of a particular Company water disinfection system depends on
the consumer's end-use and application. The Company's product lines include
Superior Aqua Systems, Ionic Disinfection Systems and the Random Metering
System. The Company has also developed and markets AXEN, a liquid disinfectant
formulation that employs ionization technology.
Random Metering System. Traditional ionization equipment produces the same
output rate of ions, regardless of the demands placed on the water system. The
Random Metering System ("RMS") expands the application of ionization
disinfection systems by creating a separate water source to create ions outside
of the treated water stream. RMS is the only known ionization water disinfection
system which can treat large volumes of drinking water. By controlling the
off-line water flow, ions can be concentrated and injected into the treated
water based on actual demand and flow rates.
Ions produced by the RMS product do not dissipate in high temperatures.
This characteristic enables RMS products to be used specifically to prevent and
control Legionella. The Legionella organism thrives within colonies of
microorganisms, which adhere to the inside of piping distribution networks that
transport water for domestic and drinking water use. Because RMS can treat even
large volumes of water effectively, it can be used in health care and hospital
settings.
In 1998, the Company formed an alliance with EHPC Ionization, Ltd. of
London, England, ("EHPCI, Ltd.") a company with similar interests in ionization
technology. EHPCI, Ltd. holds the exclusive license from the inventors of the
RMS system to commercialize that system. EHPCI, Ltd. has entered into a
distribution and exclusive license agreement with the Company which enables the
Company to utilize RMS technology to assemble, sell, distribute and service the
RMS product line in North America.
Subsequently, with the Company's consent, EHPCI, Ltd. and Wallace &
Tiernan, a subsidiary of United States Filter Corporation, executed an agreement
allowing Wallace & Tiernan to manufacture, market and distribute the RMS
technology on a non-exclusive, global basis. Because this arrangement would
infringe on the Company's North American territory, the Company is entitled to
one-half of all licensing fees and royalties paid by Wallace & Tiernan to EHPCI,
Ltd. EHPCI Ltd. recently assigned its RMS technology rights to an affiliated
company, GWR, Ltd.
The Company has sublicensed the RMS technology to Innovative Medical
Services, Inc. ("IMS") of El Cajon, California for North American hospital
applications, including hot water disinfection and control of Legionella.
Pursuant to its license agreement with the Company, IMS will also market and
distribute RMS products to the healthcare markets in Australia, South and
Central America and Mexico. Under the terms of the license, IMS purchases the
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RMS systems from the Company and pays a royalty to the Company on each unit
sold.
Ion Disinfection System. The Ion Disinfection System ("IDS") was designed
to augment the Company's RMS product line. IDS uses ionic silver in much the
same way as the RMS system. The differences between the RMS and IDS systems are
size and dosing capabilities. While the RMS product line is designed to treat
large volumes of water with adjustable injection of ionic silver, the IDS unit
doses directly into the treated water at a constant rate depending on water
flow. The compact size of the IDS units makes them preferable for residential
and light commercial use. Target markets include cisterns, water wells,
restaurants and small to medium sized hotels. Because of the size and
performance capabilities of the IDS product line, IDS products have also been
used in emergency situations requiring potable drinking water.
Based on the operational success of the IDS system in Mexico, the Company
has entered into a distributor agreement with Mr. Frederico Rodriguez, the owner
of Aqua Bio Technologies, S.A. de C.V. Aqua Bio Technologies, S.A. de C.V. has
been incorporated under the laws of Mexico to perform distribution and marketing
functions through its dealership arrangements with Mexican distributors in the
potable wastewater and filtration industries.
Superior Aqua Systems. The Company's Superior Aqua Systems ("SAS") product
line operates in conjunction with the existing circulation system of a pool,
spa, cooling tower or hot water system. SAS products use a flow cell, which is
simply inserted into the existing water circulation system, and a control unit,
which electronically regulates the output of ions into the water. The release of
the ions maintains a long-term disinfecting residual effect regardless of heat,
sunlight or evaporation. A simple testing kit may be used to monitor subsequent
water quality. When low levels of chlorine are used with SAS, a synergistic
residual effect produces near pristine water quality at a very low cost.
SAS is proven beneficial for use in indoor and outdoor pools, fountains,
decorative ponds, cooling towers and a wide range of mid-level industrial and
agricultural applications. It is cost effective, environmentally safe and user
friendly.
AXEN. In addition to developing and marketing ionization water treatment
systems, the Company manufactures and markets the non-toxic, disinfectant
product AXEN (formerly Microsafe). AXEN formulations have been developed for
five separate market groups: (1) veterinary medicine, (2) healthcare, including
dental applications, (3) drinking water, (4) cooling towers, and (5) as a hard
surface disinfectant.
The world market for cleaning compounds is a multi-billion dollar
industry. Cleaning products may be classified broadly as household cleaners or
industrial/institutional cleaners. Household cleaners include laundry
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detergents, dish detergents and surface cleaners. Only surface cleaners are
marketed typically as having disinfectant properties.
AXEN uses ionization stabilization technology to create a liquid
disinfectant suitable for many applications, including prevention of
contamination by bacteria and viruses. The product is formulated by generating
silver ions in a citrate bath, which acts as a stabilizer for the silver. AXEN
can be produced in a liquid concentrated form and used on surfaces in food
processing plants, homes, hospitals, restaurants and public facilities to kill
bacteria, viruses, and other microorganisms. AXEN is cost effective to ship long
distances by container because of the high concentration levels achieved in the
manufacturing process. As a result, this allows the Company to market AXEN over
a broader geographical area.
The Company licenses the technology to corporate partners who manufacture
AXEN and maintain product inventories. IMS has signed an Agreement to
manufacture and market AXEN through the Internet, mass merchandisers,
manufacturer representatives and distributors. The Company has also entered an
Agreement with ETIH20, Inc., to manufacture and distribute AXEN in the
Southeastern United States, Costa Rica, and the Pacific Basin. Further research
and refinement of the AXEN product is being conducted by Bio Analytical
Services, Inc., Key Laboratories and ABC Research, Inc.
Distribution and Sale of Products
The Company distributes its products by licensing them for manufacture,
distribution and sale in certain geographic and niche markets to strategic
partners. The Company's products reach both domestic and international markets,
including North America, Europe, Mexico, Central and South America and the
Pacific Basin.
The Company's water disinfection systems are segmented into two general
categories: commercial and consumer. Consumer applications include potable water
supplies, pools, spas and fountains. Commercial applications include pools, spas
and fountains, as well as cooling towers, health care facilities, agriculture,
marine mammal habitats and industrial use. In addition, the Company sells AXEN
through license agreements as a household and commercial hard surface
disinfectant, for veterinary medicine applications and for dental applications.
The Company's strategy is to license its products for specific
applications in geographic areas. To date, the Company has licensed product
applications in municipal drinking water and wastewater applications, point of
entry/point of use drinking water applications, dental water lines, food
processing and health care applications.
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Competitors
The markets in which the Company competes are highly competitive and most
are fragmented, with numerous regional and local participants. The Company,
however, believes it has a competitive advantage because few, if any, of its
competitors have the ionization technology found in RMS and AXEN. The Company
believes its focus on certain geographic and niche markets, and the breadth and
range of its products, will allow it to compete successfully in both domestic
and global markets. Many of the Company's competitors, such as U.S. Filter, Inc.
and Culligan, are multi-line companies with substantially greater resources than
the Company.
License Agreements
The Company has a Royalty Agreement with Mr. Andrew Arata for the AXEN
product line. Mr. Arata is the inventor of AXEN. Under the terms of the
agreement, he is paid 5% of gross revenues in perpetuity.
Wallace & Tiernan, Ltd. (UK), a subsidiary of United States Filter
Corporation, entered into an agreement with EHPCI, Ltd. for non-exclusive
worldwide manufacturing and distribution rights for the RMS system. Since the
Company held the exclusive North American license from EHPCI, Ltd. it became a
party to the agreement between EHPCI, Ltd. and Wallace & Tiernan, Ltd. Under the
terms of the worldwide agreement, the Company receives a royalty of 12 1/2% of
the gross selling price for all units sold in North America, and has the option
to purchase any RMS systems produced under private label by Wallace & Tiernan,
Ltd. for cost plus 28%. EHPCI, Ltd. recently assigned its RMS technology rights
to an affiliated company GWR, Ltd.
Under the terms of the Company's RMS License Agreement with IMS (under
which EHPCI, Ltd. is a co-licensor), the Company and EHPCI, Ltd. collectively
receive a flat license fee and a royalty of 16 1/2% of the gross manufacturing
cost for all RMS units sold by IMS. The Company is entitled to 62.5% of this
consideration.
The Company has entered a five-year manufacturing and distribution
agreement with ETIH2O to produce and sell the AXEN product line exclusively in
the country of Costa Rica and on a non-exclusive basis in the southeastern
United States, including Florida, Georgia, Alabama, Mississippi, Louisiana,
South Carolina, North Carolina, Virginia, Tennessee and Kentucky.
ETIH2O, Inc. has also signed a two-year commitment for exclusive
manufacture and non-exclusive marketing of the AXEN product for New Zealand,
Australia, Thailand, Philippines, Singapore and Malaysia. Under the terms of the
agreement, the Company receives an escalating royalty on each sale.
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Circle P Products, Inc. signed a Manufacturer's Representation Agreement
with the Company for representation of the AXEN veterinary product line. The
Company has also pursued further development of the AXEN product line through a
Licensing Agreement with EHPCI, Ltd.
The Company has entered a License Agreement with IMS for AXEN on a
worldwide basis for dental waterline applications and point of use applications.
Under the agreement, the Company receives a fifty percent (50%) flat license fee
and a 15% royalty based on the manufactured cost of AXEN sold by IMS.
Intellectual Property
Patents. All of the products developed by the Company are protected by
U.S. and PCT country patents pending. As a result, the Company has very few
direct competitors using the same technology. The Company has competitors who
use different, more conventional technologies, including chlorine, ultraviolet,
ozone, chlorine dioxide, reverse osmosis, copper and silver.
The Company has received an Official Notice of Allowance for its pending
AXEN patent application, and expects United States Letters Patent will be issued
in four to six weeks. The Company has also sought patent protection under
international treaty. The Company owns the property rights to AXEN under an
assignment from AXEN's inventor, Andrew Arrata.
Trade Secrets. Three of the four product lines carried by the Company use
trade secrets involving ionization: RMS, IDS and AXEN. Each of these products
uses the stabilization of silver ions, which normally have a shelf life of only
three to four hours. By utilizing the Company's discoveries, however, silver
ions can be stabilized for periods up to six months.
These trade secrets are significant because although there are several
alternatives to chlorine in water disinfection applications, the Company's
process is the only solution with a long-term disinfecting residual. The loss of
these trade secrets could have a material, adverse effect on the business of the
Company.
Research & Development
The Company's current research and development focuses on expanding the
applications for the Company's existing product line and licensing additional
corporate partners. Current research and development projects include RMS
applications for Legionella control in hospital settings. AXEN is being tested
for use in dental water lines, certain agricultural and horticultural
applications, municipal drinking water systems and veterinary medicine. After
EPA certification is received, the Company intends to test AXEN for hard surface
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disinfectants and for use in direct food contact (for instance, poultry and
seafood).
Government Regulation
The RMS technology has received the necessary government approvals for use
in drinking water disinfection in Mexico. AXEN formulations have been submitted
to the EPA for approval. EPA certification is expected prior to the end of the
year 2000. Upon EPA approval, AXEN will be submitted to the U.S. Department of
Agriculture (USDA) and the Food and Drug Administration (FDA) for their
approval. It should be noted that the Company is presently working with both the
USDA and the FDA in related laboratory and field studies.
The USDA and the Company have entered a Trust Fund Cooperative Agreement
for a field study at the USDA facility in Athens, Georgia. The study is funded
and commenced July 1, 2000. The subject of the study is to determine the
efficacy of AXEN in replacing toxic disinfectants used in poultry production.
Additionally, at the request of the FDA, the Company submitted samples of AXEN
for testing against the Vancomycin Resistant Enterococcus virus. The Company
submitted samples and a report from an independent laboratory detailing AXEN's
efficacy against the virus. Both studies concluded the AXEN formulations were
99.9999% effective against the subject virus strains. FDA approval for AXEN as a
topical disinfectant is expected prior to the end of the year 2000.
Environmental Issues
The Company's product lines produce pesticides to treat a variety of
bacteria, viruses, fungi and pathogenic organisms. The primary biocide used in
ionization is ionic silver with trace amounts of other metals. The Company has
never received a notice or demand from any environmental authority regarding its
products. In addition, the Company has licensed the manufacture of its products
to other companies, and therefore does not require any environmental permits
itself.
Prior to 1993, the EPA set the amount of silver recommended for drinking
water at 100 parts per billion. In 1993, the EPA dropped silver from the EPA's
primary water standards, though it was retained at 100 parts per billion for the
secondary water standards that are used as guidelines by states for setting
their own standards. The EPA is expected to drop silver eventually from its
secondary standards.
The EPA is also expected to reduce the amount of Trihalomethanes allowed
in drinking water from 100 parts per billion to 80 parts per billion.
Trihalomethanes are known carcinogens formed when chlorine is combined with
organic matter found in nature. The anticipated effect of the reduction in
Trihalomethanes is a greater emphasis on technologies that reduce or eliminate
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the use of chlorine. The Company expects to gain market share in all of its
product lines as a result of a reduction in Trihalomethane levels allowed in
drinking water.
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
-------------------------------------------------------------------
Although the Company has been in existence for a number of years,
management's efforts to develop the Company's business have not yet resulted in
generation of significant revenues. To date, management's efforts have focused
on developing licensing relationships and promoting and conducting research and
development to demonstrate the feasibility and efficacy of the Company's
products. Until potential customers are convinced of the viability of the
Company's technology, it is unlikely that the Company will generate significant
revenue.
Assuming that the Company can raise sufficient capital to maintain its
operations, over the next 12 months the Company expects that it will continue
development of licensing relationships and will continue research and
development. In addition, the Company will need to expand its staffing
considerably over this period of time.
Cash Requirements
The Company has engaged in a number of tests and demonstrations and has
entered into license agreements with entities for the distribution of its
products. These licensing relationships are in their early stages, however, and
it is difficult to predict what revenue stream, if any, they will generate. If
the Company's licensees meet performance criteria contained in the agreements in
all respects, the Company would be receiving royalty income of approximately
$250,000 per month by the end of the year 2001.
Nevertheless, the Company does not expect its royalty stream to be
sufficient to cover costs of operations in the immediate future. The Company
expects that it will continue to be required to raise capital to fund operations
at least through the second quarter of 2001. The Company will attempt to raise
this capital by borrowing, but no lender has issued a binding commitment to the
Company. Therefore, the Company expects to engage in one or more private
placements of common stock to fund its operating needs. At present, the Company
has sufficient cash to sustain the Company for approximately five (5) months.
Therefore, the Company anticipates engaging in one or more capital raising
transactions in the immediate future.
Licensing
The Company's marketing plan calls for the creation of "flagship" accounts
and/or specific field tests to showcase the economic feasibility and efficacy of
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the products in various applications. Once completed, the Company intends to
license numerous corporate partners for specific applications. The licensing
generally will involve an initial license fee for exclusivity and an ongoing
royalty in perpetuity.
As the Company emerges from its current stage, it expects to license
entities in a broad spectrum of applications. Generally, these licenses will be
for specific applications and geographic areas and will contain mandatory
performance criteria for the licensee to maintain the license. To date, the
Company has licensed applications in municipal drinking water and wastewater
applications, point of entry/point of use drinking water applications, dental
water lines, food processing and healthcare applications. Most of the license
fees received have been and will be used to expand the scope of applications and
the geographic area for the Company's products.
Research and Development
The Company's requirements for research and development will continue into
the foreseeable future. Research and development is expected to expand the
spectrum of product applications and allow the Company to increase the number of
licenses. Current research and development is focused on specific product
applications, including Legionella control in hospital settings, dental water
lines, cut flowers, pythium control, hydroponics, cooling tower applications,
municipal drinking water systems, and veterinary applications.
Future research and development will focus on expanding specific product
applications for the AXEN and RMS product lines. These tests will be ongoing
over the next few years.
Capital Expenditures
Management does not expect to incur any significant capital expenditures
in the foreseeable future.
Staffing
The Company must increase its work force. The Company's marketing plan
does not call for building a sale force to sell to end-users but instead to
license the technology to market segment leaders with existing sales forces. The
Company will train these sales forces to sell the Company's products and to
provide technical assistance through quarterly service to the systems.
Nevertheless, the Company requires an increased sales force to sell technology
licensing agreements. Management expects to add one (1) employee during 2000 and
four (4) employees in 2001. The expected cost of these additional employees is
$50,000 in 2000 and $250,000 in 2001.
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ITEM 3. - DESCRIPTION OF PROPERTY.
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The Company leases its principal offices at 28163 U.S. 19 North, Suite 302
Clearwater, Florida, 33761, pursuant to a three (3) year Executive Suite Lease
Agreement between Klein & Heuchan, Inc. and the Company dated July 18, 2000.
The Company owns no real property.
ITEM 4. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
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The following table sets forth certain information regarding the holders
of the Company's Common Stock, par value $0.01 as of August 31, 2000 for each of
the Company's directors, and all executive officers and directors as a group. No
individual or group known to the Company holds beneficial ownership of more than
five percent of any class of the Company's voting securities. There are no
arrangements in effect which would result in a change of control of the Company.
As of August 31, 2000, there were 55,733,571 shares of Common Stock outstanding.
NVID INTERNATIONAL, INC.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT
(1) (2) (3) (4)
Name And Amount And
And Nature
Title Of Address Of Of Percent Of
Class Beneficial Beneficial Class
Owner Owner
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Common EHPC Ionisation Limited (1) 0 0%
87A Newington Causeway
London
SE1 6DH
England
Common David Larson, CEO, President,
Director 420,000 0.0075%
1792 Lago Vista Blvd.
Palm Harbor, Florida 34685
Common Michael Redden, CFO, Secretary,
Director 95,000 0.0017%
5153 Sandy Cove Avenue
Sarasota, Florida 34242
------------------------
Common Directors and Officers as a Group 515,000 0.0092%
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(1) Pursuant to the Distribution and License Agreement dated August 26, 1998
among EHPCI, Ltd., EHPC, Ltd., the Company and its wholly-owned
subsidiary, EHPCI, Ltd. may be entitled as of August 26, 1999 to such
number of shares of the Company's common stock as would result in its
owning 20% of the outstanding shares of common stock after issuance of
such shares. Under the same Agreement, EHPCI, Ltd. may be entitled, on the
grant of the U.S. Patent for RMS to the Company, to issuance of an
additional number of shares of common stock that would increase EHPCI,
Ltd.'s holding to 25% of the total number of shares outstanding
immediately after the issuance of such shares. The Company and EHPCI, Ltd.
are engaged in discussions to determine how much stock, if any, will be
issued pursuant to the Agreement.
ITEM 5. - DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
-------------------------------------------------------------------------
The following table sets forth the names, positions with the Company and
ages of the executive officers and directors of the Company. Directors of the
Company are elected at the Company's annual meeting of stockholders and serve
until their successors are elected and qualify. Officers are elected by the
Board and their terms of office are at the Board's discretion, or until their
successors are elected and qualify.
Name Age Position Director Since
David Larson 49 President April 7, 1997
Michael Redden 52 Secretary July 10, 1997
Dr. Robert Edelson 65 Director November 21, 1997
David Larson. Prior to coming to the Company in July 1996, Mr. Larson
served for 4 years as the director of marketing for Pinch-A-Penny, Inc., a
company specializing in pool and patio supplies sold through 117 franchised
retail stores in Florida. Prior to joining Pinch-A-Penny, Mr. Larson held sales
management positions with a division of PPG Industries that sold disinfectants
to many of the same markets that the Company now targets. Mr. Larson started
with the Company as Vice President of Sales of Aqua Bio Technologies, Inc. and
later became its President. Mr. Larson was appointed to the Board of Directors
on April 7, 1997. In June 1997, Mr. Larson was named President of NVID, which
was approved by the shareholders in November 1997.
Michael Redden. Mr. Redden was named Director of Foreign Development for
Aqua Bio Technologies, Inc. in August 1995 and has served as President for Aqua
Bio Technologies, Inc. since June 1997. Mr. Redden is currently the Company's
Secretary. Prior to working for the Company, Mr. Redden owned a yacht brokerage
and charter business on the west coast of Florida and started Caribe Star
15
<PAGE>
Seafood, Ltd., a Nicaraguan-based corporation engaged in fish processing and
export to the United States and the Far East. Mr. Redden was appointed to the
Company's Board of Directors on July 10, 1997.
Dr. Robert Edelson. Dr. Edelson was elected to the Company's Board of
Directors on November 12, 1997, after retiring from 27 years in the water
treatment business as a transition metal chemist. He was past President of the
Minnesota Environmental Health Association, teacher of the year for the National
Swimming Pool Foundation in 1997 and is an active member on the Chemical
Treatment and Process Committee of the National Spa and Pool Institute.
16
<PAGE>
ITEM 6. - EXECUTIVE COMPENSATION.
--------------------------------
NVID INTERNATIONAL, INC & SUBSIDIARIES
SUMMARY COMPENSATION TABLE
Annual Compensation
--------------------------------------------------------------------------------
Name Other
And Annual
Principal Compen-
Position Year Salary Bonus sation
($) ($) ($)
(a) (b) (c) (d) (e)
--------------------------------------------------------------------------------
David Larson, CEO 1997 $61,524 $600 0
--------------------------------------------------------------------------------
1998 $72,047 $4,000 0
--------------------------------------------------------------------------------
1999 $94,550 $5,000 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Michael J. Redden, CFO, Secretary 1997 $21,650 $600 0
--------------------------------------------------------------------------------
1998 $38,902 $5,000 0
--------------------------------------------------------------------------------
1999 $72,735 $5,000 0
--------------------------------------------------------------------------------
FOOTNOTES
(1) The annual salary for David Larson was set by Shareholders vote at the
Annual Shareholder's Meeting in 1997. The annual salary was fixed at $87,500 per
year, but the amount reported in column (c) was all that was paid to Mr. Larson.
With no long-term plan in effect, all deferred compensation will be submitted to
a proposed Compensation Committee comprised of shareholders appointed at the
Annual Shareholder's Meeting, which will make recommendations to the Board. The
final authority on disposition shall rest with the Board of Directors.
(2) The annual salary for Michael Redden was set by Shareholders vote at the
Annual Shareholder's Meeting in 1997. The annual salary was fixed at $ 62,500
per year, but the amount reported in column (c) was all that was paid to Mr.
Redden. With no long-term plan in effect, all deferred compensation will be
submitted to a proposed Compensation Committee comprised of shareholders
appointed at the Annual Shareholder's Meeting, which will make recommendations
to the Board. The final authority on disposition shall rest with the Board of
Directors.
(3) No other employees were compensated over $50,000 per year during the
reporting period.
(4)No other cash or non-cash compensation was received by the named individuals.
17
<PAGE>
ITEM 7. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------------------------------------------------------
On May 18, 1998, the Company executed a Promissory Note in the amount of
$25,000 payable to Ms. Lilly Lee Lucas and Ms. Kristina C. Burgess, and on June
12, 1998, the Company executed a Promissory Note in the amount of $50,000
payable to Ms. Lilly Lee Lucas, Ms. Kristina C. Burgess, and Mr. Burt Lucas
(collectively, the "Notes"). The Company issued 110,000 shares of common stock
to Ms. Burgess in partial repayment for the Notes. The principal balance of the
Notes, after deducting the value of the issued stock, is $55,901.77. The holders
of the Notes have expressed to the Company's management a desire to receive
additional Company stock in lieu of cash for the Notes. Michael Redden, a
director and officer of the Company was formerly married to Ms. Burgess. Ms.
Burgess holds 841,000 shares of the Company's common stock.
The Company owes Mr. Redden $112,063 in accrued salary.
The Company owes Mr. Larson $89,012 in accrued salary.
ITEM 8. - DESCRIPTION OF SECURITIES.
-----------------------------------
The Company's common stock is quoted in the "Pink Sheets," an electronic
quotation service operated by Pink Sheets, LLC. The Company has one class of
equity securities, its common stock, authorized, issued and outstanding. The par
value of the Company's common stock is $0.001 per share.
The Company is currently authorized to issue up to 100 million shares of
Common Stock. Holders of shares of Common Stock are entitled to share, on a
ratable basis, such dividends as may be declared by the Board of Directors out
of funds, legally available therefor. Upon liquidation, dissolution or winding
up of the Company, after payment to creditors that may be outstanding, the
assets of the Company will be divided pro-rata on a per share basis among the
holders of the Common Stock.
Each share of Common Stock entitles the holders thereof to one vote. The
By-Laws of the Company require that a majority of the issued and outstanding
shares of the Company need be represented to constitute a quorum and to transact
business at a Stockholders' Meeting.
18
<PAGE>
PART II
ITEM 1. - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
--------------------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS.
-----------------------------
SUMMARY OF QUARTERLY HIGH & LOW PRICE OF COMMON STOCK
1998-1999
---------------------------------------------------------------------------
QUARTER HIGH BID LOW BID
------- -------- -------
1st Quarter 1998 0.0775 0.025
---------------------------------------------------------------------------
2nd Quarter 1998 0.16 0.08
---------------------------------------------------------------------------
3rd Quarter 1998 0.185 0.08
---------------------------------------------------------------------------
4th Quarter 1998 0.105 0.04
---------------------------------------------------------------------------
1st Quarter 1999 0.20 0.05
---------------------------------------------------------------------------
2nd Quarter 1999 0.20 0.0425
---------------------------------------------------------------------------
3rd Quarter 1999 0.13 0.055
---------------------------------------------------------------------------
4th Quarter 1999 0.0825 0.07
---------------------------------------------------------------------------
1st Quarter 2000 0.42 0.19
---------------------------------------------------------------------------
2nd Quarter 2000 0.58 0.18
---------------------------------------------------------------------------
(1) The above table is based on Over-The-Counter quotations. These quotations
reflect inter-dealer prices, without retail mark-up, markdown or
commissions, and may not represent actual transaction.
(2) All historical data was obtained from OTC:BB web site or the Pink Sheets web
site.
As of September 13, 2000, there were 447 owners of record of the Company's
common stock.
The Company is just emerging from a developmental stage and as such has
not declared a dividend to date. As the Company's royalty agreements come into
play during the first and second quarter of year 2001, the Company hopes to
become profitable for the first time. The nature of the Company's products
dictates a continued and increasing research and development expenditure to
expand the number of markets. Additionally, the patent expense for numerous
international patents and the certification process (EPA, FDA, USDA) in numerous
countries will continue to tax revenues. Management does not expect to declare
dividends until at least the last quarter of 2002, if ever.
19
<PAGE>
ITEM 2. - LEGAL PROCEEDINGS.
---------------------------
None.
ITEM 3. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
-------------------------------------------------------
None.
ITEM 4. - RECENT SALES OF UNREGISTERED SECURITIES.
-------------------------------------------------
The following table sets forth information with respect to sales by the
Company of its securities during the past three years without registration under
the Securities Act of 1933. The table sets forth the time periods and amounts of
securities sold, as well as the consideration received by the Company.
With respect to sales of 2,729,999 shares of stock for an aggregate
consideration of $221,000, the Company retained Jack Augsback & Company (an
affiliate of Angel Investments, LLC) as placement agent, for which the Company
paid compensation of $28,000.
All other transactions described in the table were sales of the Company's
common stock for cash. None of the other sales involved a public offering, and
none of the other sales were underwritten.
All sales were made to persons the Company believes to be accredited
investors. The Company believes that such sales are exempt from registration
pursuant to Sections 3(b) and 4(2) of the Securities Act of 1933.
--------------------------------------------------------------------------------
Period of Issuance Number of Shares Aggregate Consideration
--------------------------------------------------------------------------------
Second Quarter 1998 1,065,730 $ 94,500
--------------------------------------------------------------------------------
Third Quarter 1998 1,482,500 77,000
--------------------------------------------------------------------------------
Fourth Quarter 1998 1,666,666 75,000
--------------------------------------------------------------------------------
First Quarter 1999 2,571,740 175,450
--------------------------------------------------------------------------------
Second Quarter 1999 1,512,595 87,077
--------------------------------------------------------------------------------
Third Quarter 1999 1,939,870 120,450
--------------------------------------------------------------------------------
Fourth Quarter 1999 3,643,999 170,548
--------------------------------------------------------------------------------
First Quarter 2000 815,000 51,850
--------------------------------------------------------------------------------
Second Quarter 2000 7,605,776 600,240
--------------------------------------------------------------------------------
20
<PAGE>
In addition, in 1998, the Company issued 150,000 shares of common stock to
two independent contractors as bonuses in exchange for services rendered on
behalf of the Company.
ITEM 5. - INDEMNIFICATION OF DIRECTORS AND OFFICERS.
---------------------------------------------------
Section 145 of the Delaware General Corporation Law (the "GCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in right of the corporation - a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification if the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, by-laws, disinterested director vote, stockholder vote, agreement or
otherwise. Article VII, Section 7 of the Company's Bylaws requires the Company
to indemnify its officers and directors to the fullest extent permitted under
the GCL.
21
<PAGE>
PART F/S
NVID INTERNATIONAL, INC.
AND SUBSIDIARY
JUNE 30, 2000 AND 1999
CONTENTS
Page
FINANCIAL STATEMENTS:
Consolidated Balance Sheets 23
Consolidated Statements of Operations 24
Consolidated Statements of Changes in Stockholders' Deficit 25
Consolidated Statements of Cash Flows 26
Notes to Consolidated Financial Statements 27
22
<PAGE>
NVID INTERNATIONAL, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(Unaudited)
Assets
Current Assets
Cash $ 100,555
Accounts receivable 19,066
Inventory 40,429
-----------
Total current assets 160,050
-----------
Property and equipment, net 16,947
-----------
Other Assets
Note receivable from Stockholder 5,000
Patents pending 245,651
License agreements 69,000
Deposits 3,145
-----------
Total other assets 322,796
-----------
Total Assets $ 499,793
===========
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable $ 20,909
Patent costs payable 118,151
Accrued salaries and benefits 205,062
Debentures payable -
Notes payable 63,726
-----------
Total current liabilities 407,848
-----------
Stockholders' Equity (Deficit)
Common stock, $.001 par value,
100,000,000 shares authorized;
54,258,570 shares issued and outstanding 54,259
Additional paid-in capital 6,122,587
Accumulated deficit (6,084,901)
-----------
Total stockholders' equity (deficit) 91,945
-----------
Total Liabilities and Stockholders' Equity (Deficit) $ 499,793
===========
23
<PAGE>
NVID INTERNATIONAL, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
June 30, June 30,
2000 1999
Sales $ 1,936 $ 1,686
Cost of sales 33,901 16,176
------------- -------------
Gross profit (loss) (31,965) (14,490)
Operating expenses
Personal services 100,621 164,837
Travel 39,870 55,006
Professional services 121,946 20,566
Penalties and fines - 28
Research and development - -
Rent 4,798 5,421
Depreciation and amortization 13,937 9,660
Office expense 67,295 22,200
Telecommunications 8,875 6,165
Bad debt expense - 17,706
Commissions 34,593 15,000
Marketing and promotions 36,848 11,200
------------- -------------
Total operating expenses 428,783 327,789
------------- -------------
Operating loss (460,748) (342,279)
Other income (expense)
Licensing fees 79,983 -
Interest expense (5,000) (2,700)
------------- -------------
Total other income (expense) 74,983 (2,700)
------------- -------------
Net loss $ (385,765) $ (344,979)
============= =============
Net loss per share $ (0.01) $ (0.006)
============= =============
24
<PAGE>
NVID INTERNATIONAL, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Total
Additional Stockholders'
Common Stock Paid-In Accumulated Equity
Shares Amount Capital Deficit (Deficit)
<S> <C> <C> <C> <C> <C>
Balances - December 31, 49,108,295 $ 49,108 $ 5,428,773 $ (5,699,136) $ (221,255)
1999
Common stock issued:
For interest on debt 50,000 50 4,950 5,000
For convertible debt 350,000 350 39,650 40,000
For services 246,666 247 29,269 29,516
For cash 7,674,110 7,674 617,952 625,626
For broker fees - - (1,177) (1,177)
Common stock cancelled (3,170,500) (3,170) 3,170
Net loss - - - (385,765) (385,765)
----------- --------- ---------- ----------- ------------
Balances - June 30, 2000 54,258,571 $ 54,259 $ 6,122,587 $ (6,084,901) $ 91,945
=========== ========= ========== =========== ============
</TABLE>
25
<PAGE>
NVID INTERNATIONAL, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30, June 30,
2000 1999
Cash Flows From Operating Activities
Net loss $ (385,765) $ (344,979)
Adjustments to reconcile net loss to cash
used in operating activities
Depreciation and amortization 13,937 9,660
Bad Debt Expense - 17,706
Common stock issued for operating expenses 34,515 2,700
Decrease (increase) in operating assets
Accounts receivables 1,844 -
Notes Receivable from Shareholder - (5,000)
Inventory (350) -
Increase (decrease) in operating liabilities
Accounts payable (27,296) -
Patent costs payable (11,875) -
Accrued salaries and benefits (41,330) 54,751
License Fee Payable - (20,000)
Total adjustments (30,555) 59,817
------------- -------------
Net cash used in operating activities (416,320) (285,162)
------------- -------------
Cash Flows From Investing Activities
Purchase of Fixed Assets - (1,904)
Purchase of intangible assets (125,000) (14,393)
------------- -------------
Net cash used in investing activities (125,000) (16,297)
------------- -------------
Cash Flows From Financing Activities
Proceeds from Notes and Debentures - 150,000
Payments on Notes - (15,000)
Proceeds from issuance of common stock 624,449 167,450
------------- -------------
Net cash provided by financing activities 624,449 302,450
------------- -------------
Net increase (decrease) in cash
83,129 991
Cash at beginning of year 17,426 4096
------------- -------------
Cash at end of year $ 100,555 $ 5,087
============= =============
Non-cash Transactions:
Stock issued to pay debt $ 40,000 $ 105,000
============= =============
Stock issued to pay interest $ 5,000 $ 2,700
============= =============
26
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include those of NVID International, Inc.
(NVID) and its wholly owned subsidiary, Aqua Bio Technologies, Inc. (Aqua Bio),
hereafter collectively referred to as the Company. All significant intercompany
accounts and transactions have been eliminated.
Basis of Presentation
The accompanying unaudited financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-SB and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the footnotes required
by generally accepted accounting principles. In the opinion of management, all
adjustments (consisting of normal and recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
six months ended June 30, 2000 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2000. The accompanying
unaudited financial statements and the notes should be read in conjunction with
the Company's audited financial statements as of December 31, 1999 contained
herein.
Use of 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 periods
presented. Actual results could differ from those estimates.
NOTE 2 - GOING CONCERN
The accompanying unaudited financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has incurred
significant cumulative net operating losses. The Company continues to raise
capital and market its technologies in order to meet operational expenses.
Nevertheless, its ability to continue as a going concern is dependent on
obtaining capital and financing. These factors among others may indicate that
the Company will be unable to continue as a going concern for a reasonable
period of time.
27
<PAGE>
AUDIT REPORT
NVID INTERNATIONAL, INC.
AND SUBSIDIARY
DECEMBER 31, 1999 AND 1998
CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1 (29)
FINANCIAL STATEMENTS:
Consolidated Balance Sheets 2 (30)
Consolidated Statements of Operations 3 (31)
Consolidated Statements of Changes in Stockholders' Deficit 4 (32)
Consolidated Statements of Cash Flows 5 (33)
Notes to Consolidated Financial Statements 6-9 (34)
28
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
NVID International, Inc. and Subsidiary
Sarasota, Florida
We have audited the accompanying consolidated balance sheets of NVID
International, Inc. and Subsidiary (the Company) as of December 31, 1999 and
1998, and the related consolidated statements of operations, changes in
stockholders' deficit, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to this matter are also described in Note 9. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Davis, Monk & Company
June 28, 2000
Gainesville, Florida
-1-
29
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
---- ----
CURRENT ASSETS
Cash $ 17,426 $ 4,096
Accounts Receivable 20,910 45,366
Inventory 40,079 38,633
----------- ----------
TOTAL CURRENT ASSETS 78,415 88,095
PROPERTY AND EQUIPMENT 21,883 31,299
OTHER ASSETS
Note Receivable from Stockholder 5,000 --
Patents Pending 170,651 --
See accompanying notes.
-2-
30
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
SALES $ 49,336 $ 51,794
COST OF SALES 35,301 43,103
-------- --------
GROSS PROFIT 14,035 8,691
OPERATING EXPENSES
Personal Services 195,501 339,098
Travel 93,839 64,071
Professional Services 87,829 29,806
Penalties and Fines 29,661 26,641
Research and Development 28,220 20,356
Rent 9,812 18,020
Depreciation and Amortization 19,319 16,345
Office Expenses 26,543 11,598
Telecommunications 14,374 10,863
Bad Debt Expense 40,206 7,780
Commissions 20,850 2,992
Marketing and Promotions 22,610 --
--------- --------
TOTAL OPERATING EXPENSES 588,764 547,570
--------- --------
OPERATING LOSS (574,729) (538,879)
OTHER INCOME (EXPENSE)
Miscellaneous Income -- 7,079
Interest Expense (12,970) (38,298)
Loss on Sale of Assets -- (8,402)
--------- ---------
TOTAL OTHER INCOME (EXPENSE) (12,970) (39,621)
--------- ---------
NET LOSS $(587,699) $(578,500)
========= =========
BASIC NET LOSS PER SHARE $ (.01) $ (.01)
========= =========
DILUTED NET LOSS PER SHARE $ (.01) $ (.01)
========= =========
See accompanying notes.
-3-
31
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTALS
------ ------ -------- ----------- ------
Balance,
January 1, 1998 44,258,435 $ 44,258 $4,638,510 $(4,532,937) $ 149,831
Common Stock Issued:
For Services 150,000 150 5,850 -- 6,000
For Rent 61,500 62 9,813 -- 9,875
For Debt Service 440,898 441 14,785 -- 15,226
For Cash 3,368,053 3,368 147,785 -- 151,153
Net Loss -- -- -- (578,500) (578,500)
----------- ------- --------- ----------- --------
Balance,
December 31, 1998 48,278,886 48,279 4,816,743 (5,111,437) (246,415)
Common Stock Issued:
For Interest on Notes 20,000 20 2,680 -- 2,700
For Convertible Debt 4,704,374 4,704 259,111 -- 263,815
For Cash 7,367,563 7,368 387,080 -- 394,448
Broker's Fees and
Costs of
Convertible Debt -- -- (48,104) -- (48,104)
Common Stock
Cancelled (11,262,528) (11,263) 11,263 -- --
Net Loss -- -- -- (587,699) (587,699)
---------- -------- ---------- ----------- ---------
Balance,
December 31, 1999 49,108,295 $ 49,108 $5,428,773 $(5,699,136) $(221,255)
=========== ======== ========== =========== =========
See accompanying notes.
-4-
32
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(587,699) $(578,500)
Adjustments to Reconcile Net Loss to Net
Cash Used by Operating Activities:
Depreciation and Amortization 19,319 16,345
Loss on Sale of Assets -- 8,402
Bad Debt Expense 40,206 7,780
Common Stock Issued for Operating Expenses 6,515 26,101
Interest Expense Added to Note -- 27,271
Changes in:
Accounts Receivable (15,750) (21,760)
Inventory (1,446) 38,429
Note Receivable From Shareholder (5,000) --
Accounts Payable (14,874) 27,177
Patent Costs Payable 8,689 10,356
Accrued Salaries and Benefits 30,412 215,980
--------- ----------
NET CASH USED BY OPERATING ACTIVITIES (519,628) (222,419)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Received From Sale of Equipment -- 500
Purchase of Intangible Assets (72,938) (17,500)
Purchase of Fixed Assets (1,903) --
--------- ----------
NET CASH USED BY INVESTING ACTIVITIES (74,841) (17,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From Notes and Debentures 259,500 60,000
Payments on Notes (38,545) --
Proceeds From Issuance of Stock 386,844 151,153
--------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 607,799 211,153
--------- --------
INCREASE (DECREASE) IN CASH 13,330 (28,266)
CASH AT BEGINNING OF YEAR 4,096 32,362
--------- ---------
CASH AT END OF YEAR $ 17,426 $ 4,096
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Year for Interest $ 6,455 $ 1,242
Noncash Investing and Financing Activities:
Accounts Payable Incurred for Intangible Assets $ 31,175 $ 48,802
Note Created From Payment of License Fee $ -- $ 20,000
Stock Issued as Payment For:
Services $ -- $ 6,000
Rent $ -- $ 9,875
Interest $ 6,515 $ 10,226
Debt $ 260,000 $ 5,000
See accompanying notes.
-5-
33
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include those of NVID International, Inc.
(NVID) and its wholly owned subsidiary, Aqua Bio Technologies, Inc. (Aqua Bio),
hereafter collectively referred to as the Company. All significant intercompany
accounts and transactions have been eliminated.
Nature of Operations
NVID was incorporated on August 26, 1984 under the state laws of Delaware. Aqua
Bio (formerly d.b.a. Superior Aqua Products) was incorporated in the state of
Florida on November 7, 1991. Effective November 14, 1994, NVID issued 18,281,500
shares of its common stock in exchange for 100 percent of the issued and
outstanding common stock of Aqua Bio.
The Company is in the business of marketing and distributing electronic water
purification systems. The system contains specially designed electrodes inside
an "ion chamber". A safe, low, electronic charge is sent to the electrodes by a
solid state control unit. This produces positive charged atoms called "ions" of
copper and silver, which are ve or extend the life of the respective assets are
charged to expense as incurred. Major renewals and betterments are treated as
capital expenditures and depreciated accordingly.
When assets are retired or otherwise disposed of, the cost of the assets and the
related accumulated depreciation are removed from the accounts with any gain or
loss on disposition reflected in the statement of operations.
Intangible Assets
Intangible assets are stated at cost less accumulated amortization. Amortization
of the license agreement is computed using the straight-line method over the
estimated useful life of five years. Amortization of patent costs will begin
after the patents are issued.
Income Taxes
No provision for taxes has been made due to cumulative operating losses at
December 31, 1999. The Company has net operating loss carryforwards of
approximately $4,600,000 which will expire in 2009 through 2014. No tax benefit
has been reported in the financial statements and the potential tax benefits of
the loss carryforwards are offset by a valuation allowance of the same amount.
Earnings (Loss) Per Share
The computation of earnings (loss) per share of common stock is based on the
weighted average number of shares outstanding during the period.
Reclassifications
Certain amounts presented for 1998 have been reclassified to conform to the 1999
presentation.
-6-
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NVID INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
1999 1998
Useful ---- ----
Lives
------
Manufacturing Equipment 5 years $ 8,005 $ 8,005
Trade Show Displays 7 years 13,685 13,685
Demo Units 7 years 14,617 14,617
Computer Equipment 5 years 29,067 27,164
-------- --------
Total 65,374 63,471
Less Accumulated Depreciation (43,491) (32,172)
-------- --------
Property and Equipment, Net $ 21,883 $ 31,299
======== ========
Depreciation expense for the years ended December 31, 1999 and 1998 was $11,319
and $12,345 respectively.
NOTE 3 - INTANGIBLE ASSETS
Intangible assets consist of the following:
1999 1998
---- ----
Patents Pending $170,651 $ 86,538
Less Accumulated Amortization -- --
-------- --------
Patents Pending, Net $170,651 $86,538
======== =======
License Agreement $ 40,000 $40,000
Less Accumulated Amortization (12,000) (4,000)
-------- -------
License Agreement, Net $ 28,000 $36,000
======== =======
Amortization expense for the years ended December 31, 1999 and 1998 was $8,000
and $4,000 respectively.
NOTE 4 - PATENT COSTS PAYABLE AND STOCK WARRANT
The Company retains the services of a patent attorney (the attorney) to whom it
owes $130,026 and $90,162 at December 31, 1999 and 1998, respectively. At
December 30, 1998, the Company issued a warrant agreement providing the attorney
the option to purchase 750,000 shares of stock at an exercise price of $.10 per
share. The warrant may be exercised from December 31, 1999 to December 30, 2003.
The warrant agreement gives the attorney the right to apply any portion of the
outstanding balance owed by the Company for payment of the exercise price.
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NVID INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 5 - NET LOSS PER SHARE
Net Loss Shares Per Share
1999 (Numerator) (Denominator) Amount
---- ---------- ----------- ---------
Basic Net Loss per Share:
Net Loss Attributable to
Common Stockholders $(587,699) 48,693,590 $(.01)
======
Effect of Dilutive Securities Warrants -- 750,000
--------- ----------
Diluted Net Loss per Share:
Net Loss Attributable to
Common Stockholders Plus
Assumed Conversions $(587,699) 49,443,590 $(.01)
========= ========== ======
1998
----
Basic Net Loss per Share:
Net Loss Attributable to
Common Stockholders $(578,500) 46,268,660 $(.01)
======
Effect of Dilutive Securities Warrants -- 4,110
--------- ----------
Diluted Net Loss per Share:
Net Loss Attributable to
Common Stockholders Plus
Assumed Conversions $(578,500) 46,272,770 $(.01)
========= ========== ======
NOTE 6 - NOTES PAYABLE
Notes payable were due in June of 1999. However, the notes include options for
the holders to extend the repayment terms or to require issuance of the
Company's stock at the date of maturity. The notes have been extended without a
specified due date. Interest accrues at 20%.
NOTE 7 - DEBENTURES PAYABLE
The Company sold convertible debentures with a face amount of $300,000 during
1999. These debentures entitle the holder, at any time, to convert all or any
principal amount above $10,000 into common stock at a conversion price of 75% of
the average closing bid price of the common stock as reported on the National
Association of Securities Dealers Electronic Bulletin Board for the 3 trading
days immediately preceding the date of receipt by the Company of a Notice of
Conversion. The Company received $259,500 in cash, which is the net of the face
value and $40,500 of fees and commissions. Holders converted $260,000, of these
debentures to common stock, leaving $40,000 payable at December 31, 1999.
-8-
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<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 7 - DEBENTURES PAYABLE (concluded)
The balance bears interest and matures as follows:
Maturity Interest Rate Amount
-------- ------------- ------
April, 2000 8% $10,000
July, 2000 2% 30,000
-------
Total $40,000
=======
Fees and commissions were charged to additional paid-in capital since the
debentures were convertible at 75% of the closing bid price for the day before
the date of receipt of Notice of Conversion.
NOTE 8 - FINAL JUDGEMENT
On August 7, 1998, the Tampa Division of the U.S. District Court entered a final
judgement against the Company. The judgement required transfer of title to
$256,500 of receivables and payment of $25,000 to a receiver for distribution to
defrauded investors. The $256,500 had been transferred in 1997, in anticipation
of the final order, and the $25,000 was paid in 1998 and is included in
Penalties and Fines.
NOTE 9 - GOING CONCERN
The Company has incurred significant cumulative net operating losses. The
Company continues to raise capital and market its technologies in order to meet
operational expenses. Management expects revenue to increase significantly once
patent applications are finalized and U.S. Department of Environmental
Protection approvals are received.
NOTE 10 - SUBSEQUENT EVENTS
On February 29, 2000, the Securities and Exchange Commission delisted the
Company's shares due to noncompliance with filing requirements.
On March 27, 2000, the number of shares of common stock of the Company
authorized to be issued increased to 100,000,000 shares.
-9-
37
<PAGE>
PART III
DESCRIPTION OF EXHIBITS.
-----------------------
3.(I)a Certificate of Incorporation dated August 20, 1984.
3.(I)b Certificate of Amendment of Certificate of Incorporation dated
March 31, 1985.
3.(I)c Certificate of Correction of Certificate of Amendment of Certificate
of Incorporation dated October 15, 1985.
3.(I)d Certificate for Renewal and Revival of Charter dated October
19, 1994.
3.(I)e Certificate of Amendment of Certificate of Incorporation filed
October 24, 1994.
3.(I)f Certificate of Amendment of Certificate of Incorporation filed
May 26, 1995.
3.(I)g Certificate for Renewal and Revival of Charter dated December 9, 1996.
3.(I)h Certificate of Amendment of Certificate of Incorporation dated
February 5, 1999.
3.(I)I Certificate of Amendment of Certificate of Incorporation dated May 12,
2000.
3.(II) By-Laws.
10.1 Distribution and License Agreement dated August 26, 1998 between EHPC
Ionization, Ltd., ABT, NVID International, Inc. & EHPC, Ltd.
10.2 Licensing Agreement dated November 10, 1998 between EHPC Ionization,
Ltd., and Wallace & Tiernan, Ltd.
10.3 Non-Exclusive License Agreement dated November 10, 1998 between EHPC
Ionization, Ltd. and Wallace & Tiernan, Ltd.
10.4 Supplemental Letter Agreement dated November 10, 1998 between EHPC
Ionization, Ltd. and Wallace & Tiernan, Ltd.
10.5 Standard Manufacturing Agreement dated November 30, 1998 between NVID
International, Inc. and ETIH20.
10.6 Standard Manufacturing Agreement (Pacific Rim Countries) dated
September 17, 1999 between NVID International, Inc. and ETIH20.
38
<PAGE>
10.7 Royalty Letter Agreement and Affirmation dated September 23, 1999
between NVID International, Inc., ABT and Andrew B. Arata.
10.8 License Agreement dated November 12, 1999 between NVID International,
Inc., EHPC Ionization, Ltd. and Innovative Medical Services.
10.9 License Agreement dated November 24, 1999 between NVID International,
Inc. and Innovative Medical Services.
21 List of Subsidiaries.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on September 25,
2000.
NVID INTERNATIONAL, INC.
By:/s/ David Larson
David Larson, President
39
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