SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NUMBER 2 TO
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 33761
(Address Of Principal Executive Offices) (Zip Code)
(727) 669-5005
(Registrant's Telephone Number, Including Area Code)
Securities to be Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 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 33761, and its telephone number is (727)
669-5005. 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.
The terms of the Consent and Stipulation for Final Judgment included a
full settlement, without adjudication of any facts or law, in which NVID agreed
to pay a fine and prejudgment interest; all but $25,000 of the fine and interest
was waived following NVID's transfer of certain assets to a court-appointed
receiver for distribution to investors. No other civil penalty was imposed on
NVID. NVID also voluntarily consented to
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the entry of a Final Judgment of Permanent Injunction and Other Equitable
Relief, and waived any rights it might have had to the assets of the two former
officers named as co-defendants. Finally, NVID agreed to cancel any NVID shares
owned by the former officers and a former director.
Company History
When current management took control of the Company in April 1997, the
Company had just been named as a defendant in the civil litigation brought by
the Commission. All Company assets were frozen at this time, and the Company did
no substantive business until August 14, 1998, when current management executed
the Consent and Stipulation for Final Judgment.
Prior to April 4, 1997, when the Company's assets were officially frozen,
the Company's product sales were made through a network of approximately fifteen
independent dealers and distributors, each of which generally carried only one
product line. Despite the existence of a network of independent dealers,
however, the Company's sales prior to April 4, 1997 were insignificant. During
the litigation by the Commission, which lasted over a year, all but two dealers
closed their businesses. Management's focus necessarily remained on resolving
the litigation favorably and bringing the Company forward. During this period,
the total number of Company employees was reduced from fourteen to two. The
Company currently has only two employees, both of whom work for the Company
full-time.
At the time of the litigation, the Company was developing a new product
called Axenohl - a non-toxic, stabilized form of ionic copper concentrate, which
can be used as an additive in hard-surface disinfectants. Tests performed for
the Company by ABC Research, Inc. of Gainesville, Florida showed encouraging
results for copper solutions, but significantly better results when silver
electrodes were used to create the ionic solution, instead of copper electrodes.
In fact, the efficacy produced by the silver ionic solution in Axenohl convinced
the Company to substitute silver for copper in most of its ionization products.
Axenohl's development was a milestone in the Company's history, because it
changed the Company's focus in ionization from copper to silver, and opened an
array of potential markets and applications for the Company's products.
Since the Commission's termination of the litigation, the Company's
principal focus has been testing, researching and developing its water
purification and disinfection product lines. Other than a few pool and spa
products, since April 1997, the Company's minimal revenues have been comprised
of sales incidental to research and testing of the Company's products. The
Company has pursued U.S. and worldwide patent protection for its products, has
sought to qualify for certain government and regulatory certifications and
permits and has nearly completed the infrastructure necessary to bring its
products to market.
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Company's Current Activities
The Company's efforts continue to focus on the research and development of
its water disinfection product lines and the creation of a network of licensed
distributors to sell its products. The Company has focused on a marketing
approach designed to license corporate partners to sell the Company's products
for specific applications, including: (i) pool and spa disinfection, (ii)
industrial and residential water purification and (iii) agricultural aspects of
water disinfection. Currently, the Company has signed license agreements with
three (3) corporate partners. The licenses between the Company and its licensees
usually involve an initial license fee for exclusivity and an ongoing royalty
payment to the Company. The Company is also establishing a distributor network
and expects to sell directly to large institutional and governmental entities
via direct sales and e-commerce. The Company's website www.aquabiotech.com is
currently under construction and is expected to be fully operational by January
31, 2001.
The Company's product lines include (i) three separate ionization water
purification systems: Superior Aqua Systems, Ionic Disinfection Systems, and
Random Metering System, and (ii) the hard-surface disinfectant, Axenohl. All of
these products are fully developed and available for purchase from the Company
or one of its licensed distributors.
The Company has no additional products under development, but it is
conducting further studies aimed at identifying additional market applications
for the Company's existing product lines. Most of these additional applications
focus on the agricultural industry, which the Company believes is one of the
water disinfection and purification markets with the largest growth potential.
For example, the Company is developing a disinfection system for poultry
applications and is researching the application of Axenohl for reducing blight
infection on Agave cactus.
NVID is voluntarily filing this Form 10-SB because it would like to
increase the availability of public information with respect to its operations
and improve its ability to access the capital markets to fund expansion. Upon
the effectiveness of this Registration Statement, the Company intends to apply
for reinstatement of the eligibility of its common stock to be quoted on the
over-the-counter bulletin board.
The Company has a small asset base of $602,302, the majority of which are
intangible assets. 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. Indeed, the Company has
experienced net losses of $578,500 in 1998, $587,699 in 1999 and $735,620 in the
first nine months of 2000. It has an accumulated deficit of $6,569,631 as of
September 30 2000. As noted in the report of its independent certified public
accountants, the Company's operating losses raise substantial doubt about its
ability to continue as a going concern.
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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.
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
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 Axenohl, a non-toxic, environmentally friendly liquid disinfectant,
formulated for initial use as a hard surface cleaner. Axenohl 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 and is
caustic to equipment.
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.
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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 in the bloodstream. 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 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.
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. The
Company believes that 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. Management believes that water contamination is
one of the world's most serious 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,
residential/municipal drinking water and wastewater treatment markets. With the
exception of bottled water, the Company has developed products, which meet the
needs of consumers in each of these market segments. Specifically, the Company
has focused on applications for Le-
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gionella 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
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 through disinfection
by-products called trihalomethanes ("THMs"), 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
lifespan. 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.
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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. The
biggest drawback to ionization is the under or over dosing which may occur with
conventional ionization equipment. The only known ionization systems that can
precisely dose and meter ions are the RMS, IDS and Axenohl concentrate (which is
metered into the process water with a conventional dosing pump). Additionally,
conventional ionization units using a high percentage of copper assayed
electrodes have the potential to stain marcite or plaster pools. For staining to
occur, however, alkalinity, pH, and calcium hardness must be extremely out of
balance, and the copper ion level must be at 1ppm or higher. As a practical
matter, this would only occur if the disinfection system was totally neglected.
Significantly, even at 1ppm, the water would not be a health hazard to humans.
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 AXENOHL, a liquid
disinfectant formulation that employs ionization technology. All of these
products are fully developed and available for purchase from the Company or one
of its licensed distributors.
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 that 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,
unlike competitive technologies such as chlorine. This factor is significant
because high temperatures can reduce the residual disinfection potency of a
particular water purification technology. Similarly, the residual potency of
chlorine is reduced by exposure to ultraviolet light from the sun. Ionization is
unaffected by sunlight. These characteristics enable 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.
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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 that enables the
Company to use 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
RMS systems from the Company and pays a royalty to the Company on each unit IMS
sells.
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 precise doses 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. Federico 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.
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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.
Management believes SAS is 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.
AXENOHL. In addition to developing and marketing ionization water
treatment systems, the Company markets the non-toxic, disinfectant product
Axenohl (formerly Microsafe). Axenohl 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) 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
detergents, dish detergents and surface cleaners. Only surface cleaners are
marketed typically as having disinfectant properties.
Axenohl 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 an organic acid bath, which acts as a stabilizer for the silver.
Axenohl 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. Axenohl 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 Axenohl over a broad geographical area.
The Company licenses the Axenohl technology to corporate partners who
manufacture it and maintain product inventories. IMS has signed an agreement to
manufacture and market Axenohl through the Internet, mass merchandisers,
manufacturer representatives and distributors. The Company has also entered an
Agreement with ETIH20, Inc., to manufacture and distribute Axenohl in the
Southeastern United States, Costa Rica, and the Pacific Basin. Further research
and refinement of the Axenohl product is being conducted by Bio Analytical
Services, Inc., Key Laboratories and ABC Research, Inc.
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Manufacture, Distribution and Sale of Products
The Company distributes its products by licensing them for manufacture,
distribution and sale. Currently, the Company's RMS and IDS products are
manufactured exclusively by Westlund Engineering, Inc. of Clearwater, Florida.
The Company's SAS product line is manufactured by Superior Aqua Enterprises,
Inc. of Sarasota, Florida. Axenohl is manufactured for the Company by ETI-H2O,
Inc. of Lake City, Florida. Current licensing arrangements provide a
distribution network for the Company's products encompassing 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
Axenohl 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.
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 Axenohl.
Furthermore, the few companies that employ ionization are small, local
operations, with sales of less than two million dollars annually. No other
ionization company has the ability to disinfect municipal drinking or
wastewater. Moreover, national and international patents protect the Company's
processes. Management does not consider any of the ionization technology company
competitors significant, when compared to competition from the chemical industry
and from other disinfection technologies.
The Company has focused on specific market applications for its products.
For example, the RMS is targeted for industrial and large-scale water
disinfection projects, including hospitals, municipal wastewater treatment
facilities and large hotels. IDS represents the "mid-range" applications,
typically light-industrial/commercial and residential. Specific IDS applications
may include small hotels, schools and restaurants. The Company's SAS product
line is a circulation system designed for pools and spas,
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as well as agricultural sprayers, irrigation and greenhouses. These three
distinct ionization product lines can meet the needs of all types of consumers
in the water purification marketplace.
The Company's final product line is Axenohl, a stabilized, ionic silver
concentrate, which can be used as an additive for an array of disinfection
products, including hard-surface disinfectant, water treatment and veterinary
applications. The Company has applied for and expects to receive EPA
certification for Axenohl by January 31, 2001. Once it receives EPA
certification, the Company will submit Axenohl to the U.S. Department of
Agriculture (USDA) and the Food and Drug Administration (FDA) for certification
for human topical and human internal use. The Company believes that if it
receives FDA certification, Axenohl's market may enlarge to include such diverse
products as soaps, shampoos, acne medicine, athlete's foot treatment and
mouthwash.
The Company believes that its products - all environmentally friendly
alternatives to conventional chemical water treatment technologies - are
well-positioned to benefit from a general decline in the use of chlorine. The
Company's philosophy and its products are tied to the general message of
reducing or eliminating toxic chemicals and improving the environment. This
philosophy distinguishes the Company from more conventional chemical water
treatment companies. The Company believes that while other environmentally
friendly alternatives including ultra-violet, ozone and reverse osmosis, will
also gain market share, ionization is well suited for use in conjunction with
these alternative technologies.
The Company recognizes that some of its competitors, such as United States
Filter Corporation and Culligan, are multi-line companies with substantially
greater resources than the Company. The Company believes, however, that its
focus on specific market applications and its environmentally friendly
philosophy will allow it to compete in both domestic and global markets.
License Agreements
The Company has a Royalty Agreement with Mr. Andrew Arata for the Axenohl
product line. Mr. Arata is the inventor of Axenohl. 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 in perpetuity 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.
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recently assigned its RMS technology rights to an affiliated company, GWR, Ltd.
To date, the Company has earned no revenue under this agreement.
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 agreement expires in January, 2001. To date, the Company has
earned no revenue under this agreement.
The Company has entered a five-year manufacturing and distribution
agreement with ETI-H2O to produce and sell the Axenohl 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. The agreement
expires in 2004. To date, the Company has earned no revenue under this
agreement.
ETI-H2O, Inc. has also signed a two-year commitment for exclusive
manufacture and non-exclusive marketing of the Axenohl 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. The
agreement expires in 2001. To date, the Company has earned no revenue under this
agreement.
The Company has entered a License Agreement with IMS for Axenohl on a
worldwide basis for dental waterline applications and point of use applications.
Under the agreement, the Company receives fifty percent (50%) of any up-front
license fee received by IMS in the course of sub-licensing to third party
distributors and a 15% royalty based on the manufactured cost of Axenohl sold by
IMS. The agreement expires in December 2002. To date, the Company has earned no
revenue under this agreement.
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
Axenohl patent application, and expects United States Letters Patent will be
issued by March 31, 2001. The Company has also sought patent protection for
Axenohl under international treaty. The Company owns the property rights to
Axenohl under an assignment from Axenohl's inventor, Andrew Arrata.
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Trade Secrets. Three of the four product lines carried by the Company use
trade secrets involving ionization: RMS, IDS and Axenohl. 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 in excess of 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 Company's
business.
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. Axenohl is being
tested for certain agricultural and horticultural applications, municipal
drinking water systems and veterinary medicine. The Company has also applied for
and expects to receive EPA certification of Axenohl by January 31, 2001.
Assuming the Company receives EPA certification, it intends to test Axenohl for
hard surface disinfectants and for use in direct food contact (for instance,
poultry and seafood) and, as noted previously, the Company plans to apply for
FDA certification of Axenohl. The Company believes that if it receives FDA
certification of Axenohl, the market for Axenohl has the potential to increase
significantly due to Axenohl's use in products for human consumption, including
shampoo, acne medicine and mouthwash.
Government Regulation
The RMS technology has received the necessary government approvals for use
in drinking water disinfection in Mexico. Axenohl formulations have been
submitted to the EPA for approval. EPA certification is expected by January 31,
2001. Upon EPA approval, Axenohl will be submitted to the USDA and the FDA for
their approval. The Company is presently working with both the USDA and the FDA
in related laboratory and field studies. For example, 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 Axenohl in replacing toxic
disinfectants used in poultry production. This study is ongoing and is expected
to be completed by July 1, 2001. Until completion, the study's results will not
be available to the general public.
Additionally, at the request of the FDA, the Company submitted samples of
Axenohl for testing against the Vancomycin Resistant Enterococcus virus. The
Company submitted samples and a report from an independent laboratory detailing
Axenohl's effi-
14
<PAGE>
cacy against the virus. Both studies concluded the Axenohl formulations were
99.9999% effective against the subject virus strains.
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. Management expects that the EPA will drop silver eventually
from its secondary standards.
The EPA is reducing the amount of THMs 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 THMs is a greater emphasis on
technologies that reduce or eliminate the use of chlorine. The Company expects
to gain market share in all of its product lines as a result of a reduction in
THM levels allowed in drinking water.
Business Plan
The next phase of the Company's development is establishing a significant
revenue stream and achieving profitability. The Company seeks to increase its
gross sales to $8,000,000 by 2003. To do so, it must position its ionization
technologies at the forefront of the water disinfection industry. The keys to
the Company's success include improvements in:
o Marketing and sales.
o Manufacturing.
o Product development, testing and licensing approvals.
o Administration.
Marketing and Sales. The Company's marketing plan calls for the creation
of "flagship" accounts or specific field tests to showcase the economic
feasibility and efficacy of the products in various applications. Once
completed, the Company intends to
15
<PAGE>
license 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. The Company's
marketing and sales success depends on the success of its corporate partners.
Currently, it has signed licensing agreements with three (3) corporate partners.
The Company plans to expand its marketing and sales operations by the addition
of the following corporate partners and acquisitions:
-------------------------------------------------------------------
Event Expected Completion
Date
-------------------------------------------------------------------
Licensing agreement with Innovative January 15, 2001
Medical Systems, Inc. (worldwide
distribution for Axenohl)
-------------------------------------------------------------------
Acquisition of an interest in January 15, 2001
Watertronics, Ltd., a subsidiary of LaPorte
Industries, Ltd. (RMS and Axenohl technology
and distribution in the EU)
-------------------------------------------------------------------
Agreement with Rotoplas, S.A. de C.V. January 31, 2001
(licensing Axenohl for residential drinking
water in Mexico and Brazil)
-------------------------------------------------------------------
Agreement with Adams Healthcare, Ltd. February 28, 2001
(licensing Axenohl for hospital disinfection
in the United Kingdom)
-------------------------------------------------------------------
Agreement with Blacke Lyon, Ltd. March 15, 2001
(Axenohl's veterinary applications in the
United Kingdom)
-------------------------------------------------------------------
Agreement with Speedling, Inc., the June 1, 2001
world's largest grower of seedlings (licensing
Axenohl for the hydroponic growing industry)
-------------------------------------------------------------------
Agreement with Vivendi Environmental, the June 20, 2001
world's largest water company. (licensing
RMS for cooling towers and Legionella con-
trol in hospital settings and large municipal
water systems).
-------------------------------------------------------------------
16
<PAGE>
Manufacturing. The Company does not manufacture its own products.
Currently, the Company's RMS and IDS products are manufactured exclusively by
Westlund Engineering, Inc. of Clearwater, Florida. The Company's SAS product
line is manufactured by Superior Aqua Enterprises, Inc. of Sarasota, Florida.
Axenohl is manufactured for the Company by ETI-H2O, Inc. of Lake City, Florida.
In order to meet the anticipated increased demand for its products, the
Company plans to expand its manufacturing operations by March 1, 2001. The
Company has also signed a Letter of Intent to acquire Superior Aqua Enterprises,
Inc., thereby bringing the manufacturer of the SAS systems under its control.
Product Development, Testing and Licensing. To maximize the Company's
sales, it has focused its research and development on identifying additional
market applications for its existing products. Current research and development
includes product testing for a number of different industry applications,
including municipal drinking water, agriculture, wastewater treatment and
Axenohl's use for veterinary, human topical and internal consumption. The
Company is pursuing necessary government and regulatory approval for key
products. The material goals that the Company is pursuing in this area, together
with their expected completion dates, are set forth in the following table:
---------------------------------------------------------------
Event Expected
Completion Date
---------------------------------------------------------------
Testing Axenohl for use in citrus canker January 15, 2001
and fungus control, San Jose, Costa Rica.
---------------------------------------------------------------
Acueductos Y Alcantarillados testing January 15, 2001
Axenohl for drinking water use, San Jose,
Costa Rica
---------------------------------------------------------------
Testing IDS for municipal wastewater January 15, 2001
treatment in Cincinnati, Ohio
---------------------------------------------------------------
EPA Certification for Axenohl. January 31, 2001
---------------------------------------------------------------
Axenohl testing on Agave plant for the March 7, 2001
tequila industry.
---------------------------------------------------------------
Testing Axenohl as a fruit wash and April 15, 2001
fungus control, San Jose, Costa Rica.
---------------------------------------------------------------
17
<PAGE>
---------------------------------------------------------------
Testing Axenohl for poultry applications June 30, 2001
by the USDA.
---------------------------------------------------------------
USDA Certification for Axenohl. August 1, 2001
---------------------------------------------------------------
Testing RMS and Axenohl for municipal August 23, 2001
drinking water in Mexico City, Mexico
---------------------------------------------------------------
Testing RMS for bio-film reduction in December 15, 2001
Mexico City's Hospital General.
---------------------------------------------------------------
FDA Certification for Axenohl's use as a September 15, 2002
human topical disinfectant.
---------------------------------------------------------------
FDA Certification for Axenohl's use October 15, 2004
internally by humans.
---------------------------------------------------------------
Administration. The Company's administration is handled currently by its
executive officers. The Company plans to expand its office and administrative
staff in 2001 to accommodate and better serve both stockholders and the
Company's distributors and corporate partners. Currently, the Company plans to
hire five (5) new employees in 2001. The Company is developing and will complete
by the first quarter of 2001 new marketing materials and the Company's website.
Finally, the Company is seeking international patent protection for its
ionization technology and products.
Risk Factors
The Company likely will require additional financing. The Company has very
limited funds, and the funds may not be adequate to take advantage of all
available business opportunities. The ultimate success of the Company may depend
upon its ability to raise additional capital. The Company has not ascertained
the availability, source, or terms that might govern the acquisition of
additional capital and will not do so until it determines a need for additional
financing. If additional capital is needed, there is no assurance that funds
will be available from any source or, if available, that they can be obtained on
terms acceptable to the Company. If additional financing is not available, the
Company's operations will be limited to those that can be financed with its
modest capital.
The Company's stock is regulated. The Company's securities are subject to
a Commission rule that imposes special sales practice requirements upon
broker-dealers who sell such securities to persons other than established
customers or accredited investors. For purposes of the rule, the phrase
"accredited investors" means, in general
18
<PAGE>
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect broker-dealers' ability to sell the Company's securities and also may
affect the ability of purchasers to sell their securities in any market that
might develop for them.
In addition, the Commission has adopted a number of rules to regulate
"penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4,
15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act of 1934, as
amended. Because the securities of the Company may constitute "penny stocks"
within the meaning of the rules, the rules would apply to the Company and to its
securities. The rules may further affect the ability of shareholders to sell the
Company's securities in any market that might develop for them.
Shareholders should be aware that, according to the Commission, the market
for penny stocks has suffered in recent years from patterns of fraud and abuse.
Such patterns include (i) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (ii)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (iii) "boiler room" practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (iv) excessive and undisclosed bid-ask differentials and markups
by selling broker-dealers; and (v) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. The Company's management is aware of the abuses that
have occurred historically in the penny stock market. Although the Company does
not expect to be in a position to dictate the behavior of the market or of
broker-dealers who participate in the market, management will strive within the
confines of practical limitations to prevent the described patterns from being
established with respect to the Company's securities.
The Company has no operating history. The Company has been engaged in its
current business only since 1994. During the last five years the Company has
focused on developing and refining its products and expanding the applications
for those products. Due to the lack of an operating history, specifically the
absence of substantial sales volume, the Company must be regarded as a new or
start-up venture with all of the unforeseen costs, expenses, problems, and
difficulties to which such ventures are subject.
The Company is not diversified. Because of the Company's limited financial
resources, it is unlikely that the Company will be able to diversify its
acquisitions or operations.
19
<PAGE>
That means the Company's operations and products will only focus on the water
purification and disinfection market. The Company's inability to diversify its
activities into more than water purification and disinfection will subject the
Company to economic fluctuations and regulatory changes within its particular
business or industry and therefore increase the risks associated with the
Company's operations.
The Company is obligated to indemnify its officers and directors. Delaware
law and the Company's Certificate of Incorporation provide for the
indemnification of the Company's directors, officers, employees, and agents,
under certain circumstances against attorney fees and other expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on behalf of the Company. The Company will also
bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company, if it is
ultimately determined that any such person was not entitled to indemnification.
This indemnification policy could result in substantial expenditures by the
Company that it will be unable to recoup.
The Company's directors have limited liability under Delaware law.
Delaware law and the Company's Certificate of Incorporation exclude the personal
liability of directors to a company and its stockholders for monetary damages or
for breach of fiduciary duty except in certain specified circumstances.
Accordingly, the Company will have a much more limited right of action against
its directors than otherwise would be the case. This provision does not affect
the liability of any director under federal or applicable state securities laws.
The Company does not anticipate paying dividends in the foreseeable
future. The Company has not paid dividends on its common stock and does not
anticipate paying such dividends in the foreseeable future.
The Company's limited operating history makes forecasting difficult.
Although the Company was founded in August 1984, it did not enter the water
purification and disinfection business until 1994. From 1994 until 1997 the
Company had minimal sales. When current management took control of the Company
in 1997, it had just been named as a defendant in a civil action brought by the
SEC stemming from the actions of two Company officers arrested for
misappropriation of stockholder funds and fraud. After settling the SEC
litigation and following the resignation of culpable former management, the
Company's operations focused on the development of Axenohl and the RMS, SAS and
IDS water purification systems. To date, almost all of the Company's efforts
have focused on product development and applications. The Company has very
limited, meaningful historical financial data on which to base projected
revenues and planned operating expenses and upon which investors may evaluate
the Company and its prospects. In addition, the Company's operating expenses are
largely based on anticipated revenue trends. You should consider the risks and
difficulties frequently encountered by companies like NVID in a new and rapidly
evolving market.
20
<PAGE>
The Company's ability to sell products, and the level of success, if any, it
achieves, depends, among other things, on the level of demand for water
purification and disinfection products and the success of the Company's licensed
corporate partners and distributors. If the Company does not achieve the
Company's expected revenue, its operating results will be below expectations and
the expectations of its investors, which could cause the price of the Company's
common stock to decline.
Failure to increase revenue would prevent the Company from reaching
profitability. The Company has a history of losses and hopes to achieve
profitability for the first time in 2001. There is no assurance that the
Company's revenue will grow or that it will generate sufficient revenue to
become profitable. The Company expects to continue to incur significant and
increasing sales and marketing, product development, administrative and other
expenses. Although the Company's revenue has grown in recent quarters, there is
no certainty that revenue growth will continue or increase in the future or that
the Company will realize sufficient revenue to sustain profitability on an
annual or quarterly basis.
The Company is entirely dependent on its ionization line of water
purification and disinfection products, and future revenue depends on their
commercial success. The Company's future growth depends on the commercial
success of its ionization products, including Axenohl. To date, the IDS, SAS and
RMS product lines have been sold on a limited basis, primarily in connection
with testing and research. Axenohl has also been sold in limited quantities and
for testing purposes. The Company intends to develop enhancements and to refine
existing products, and to expand the applications for existing products in the
future. The Company cannot assure that it will successfully complete the
development or introduction of new products, or successfully identify
alternative applications for existing products. Failure of current or planned
products to operate as expected could delay or prevent their adoption. If target
customers do not purchase and successfully deploy current and planned products,
the Company's revenue will not grow significantly.
The Company will not be successful if its customer base does not grow. The
Company's future success depends on attracting additional customers. The growth
of the Company's customer base could be adversely affected by:
o customer unwillingness to install or utilize the Company's products;
o customer inability to devote capital to acquire the Company's products;
o any delays or difficulties incurred in completing the development,
licensing and introduction of planned products or product enhancements;
o new product introductions by competitors;
21
<PAGE>
o any failure of the Company's products to perform as expected; or
o any difficulty incurred in meeting customers' delivery requirements
or servicing expectations.
o changes to laws, regulations or licensing requirements applicable to
the Company's products.
If the Company does not respond rapidly to technological changes, its
products could become obsolete. The market for water purification and
disinfection products is likely to continue to be characterized by change and
development, new products and technologies, and changes in customer
requirements. The Company may be unable to respond quickly or effectively to
these developments. The Company may experience design, manufacturing, marketing
and other difficulties that could delay or prevent development, introduction or
marketing of products and product enhancements. The introduction of new products
by competitors, market acceptance of products based on new or alternative
technologies or the emergence of new industry standards or technologies could
render existing or future products obsolete.
In developing products, the Company has made, and will continue to make,
assumptions about the standards that may be adopted by customers and
competitors. If the standards adopted are different from those the Company has
chosen to support, market acceptance of products may be significantly reduced or
delayed and the Company's business will be seriously harmed. In addition, the
introduction of products incorporating new technologies and the emergence of new
industry standards could render the Company's existing products obsolete.
The Company may not become profitable unless Corporate Partners and
distributors successfully expand sales, service support operations. The
Company's product sales depend upon the successful efforts of its corporate
partners and distributors. The Company has existing license agreements with over
half a dozen corporate partners and distributors. Current licensing arrangements
provide a distribution network for the Company's products encompassing both
domestic and international markets, including North America, Europe, Mexico,
Central and South America and the Pacific Basin. The Company is building a sales
network and plans to license additional partners as needed. If distributors and
corporate partners are unable to expand their sales operations or service
effectively the Company's existing customers, the Company may not be able to
increase market awareness or product sales, which may prevent the Company from
reaching and maintaining profitability.
The Company depends upon contract manufacturers, and any disruption in
these relationships may cause the Company to fail to meet the demands of its
customers and damage customer relationships. The Company does not manufacture
its own products. It relies on several contract manufacturers to manufacture
products in accordance with
22
<PAGE>
the Company's specifications, and to fill orders on a timely basis. Currently,
the Company's RMS and IDS products are manufactured exclusively by Westlund
Engineering, Inc. of Clearwater, Florida. The Company's SAS product line is
manufactured by Superior Aqua Enterprises, Inc. of Sarasota, Florida. Axenohl is
manufactured for the Company by ETI-H2O, Inc. of Lake City, Florida.
The Company may be unable to manage its relationships with its
manufacturers effectively, and these manufacturers may not meet future
requirements for timely delivery. Each contract manufacturer builds products for
other companies, and cannot assure the Company that they will always have
sufficient quantities of inventory available to fill orders placed by the
Company's customers, or that they will allocate internal resources to fill these
orders on a timely basis. -Qualifying new contract manufacturers and commencing
volume production is expensive and time consuming and could result in a
significant interruption in the supply of products. If required to change
contract manufacturers, the Company may lose revenue and damage its customer
relationships.
The Company's failure to continually improve internal controls and systems
and hire needed personnel, could impair future growth. The Company's operations
have expanded considerably since 1997, and the Company continues to increase the
scope of its operations. Growth has placed, and anticipated growth will continue
to place, a significant strain on management systems and resources. The
Company's ability to offer products and implement a business plan successfully
in a rapidly evolving market requires an effective planning and management
process. The Company expects that it will need to continue to improve its
financial, managerial and manufacturing controls and reporting systems, and will
need to continue to expand, train and manage relationships with corporate
partners and distributors worldwide. The Company may not be able to implement
adequate control systems in an efficient and timely manner. Any failure to
attract, assimilate or retain qualified personnel to fulfill current or future
needs could impair The Company's growth.
The Company depends on key personnel to manage its business effectively
and if unable to retain key employees, ability to compete could be harmed.
Future success depends upon the continued services of the Company's executive
officers and other key, sales, marketing and support personnel, who have
critical industry experience and relationships that are crucial to implement the
business plan successfully. None of the officers or key employees is bound by an
employment agreement for any specific term. The Company does not have "key
person" life insurance policies covering any of its employees. The loss of the
services of any key employee could delay the development and introduction of,
and negatively impact the Company's ability to sell, its products.
The Company's ability to compete successfully could be jeopardized if it
is unable to protect its intellectual property rights from third-party
challenges. The Company relies or expects to rely on a combination of patent,
copyright, trademark and trade secret laws and restrictions on disclosure to
protect its intellectual property rights. The
23
<PAGE>
Company also enters into confidentiality or license agreements with employees,
consultants and corporate partners, and controls access to and distribution of
documentation, product specifications and other proprietary information. Despite
efforts to protect proprietary rights, however, unauthorized parties may attempt
to copy or otherwise obtain and use the Company's products or technology.
Monitoring unauthorized use of products is difficult and the Company cannot be
certain that the steps it has taken will prevent unauthorized use of technology,
particularly in foreign countries, where the laws may not protect proprietary
rights as fully as in the United States. If competitors are able to use the
Company's technology, its ability to compete effectively could be harmed.
If necessary licenses of third-party technology are not available or are
very expensive, the Company's products could become obsolete. From time to time
the Company may be required to license technology from third-parties to develop
new products or product enhancements. The Company cannot assure that third-party
licenses will be available on commercially reasonable terms, if at all. The
inability to obtain a third-party license required to develop new products and
product enhancements, could require the Company to obtain substitute technology
of lower quality or performance standards or at greater cost, either of which
could seriously harm the Company's competitiveness.
The Company could become involved in litigation regarding intellectual
property rights, which could seriously harm its business and require it to incur
significant costs. In recent years, there has been significant litigation in the
United States involving patents and other intellectual property rights. Although
the Company has not been involved in any intellectual property litigation, it
may be a party to litigation in the future to protect its intellectual property
or as a result of an allegation that it infringes others' intellectual property.
Any parties asserting that the Company's products infringe upon their
proprietary rights would force the Company to defend itself and possibly its
customers or manufacturers against the alleged infringement. These claims and
any resulting lawsuit, if successful, could subject the Company to significant
liability for damages and invalidation of proprietary rights. These lawsuits,
regardless of their success, would likely be time-consuming and expensive to
resolve and would divert management time and attention. Any potential
intellectual property litigation also could force the Company to do one or more
of the following:
o stop selling, incorporating or using products that use the challenged
intellectual property;
o obtain from the owner of the infringed intellectual property right a
license to sell or use the relevant technology, which license may
not be available on reasonable terms, or at all; or
o redesign those products that use such technology.
24
<PAGE>
If forced to take any of the foregoing actions, the Company's business may be
seriously harmed.
The Company may face risks associated with its international expansion
that could impair its ability to grow abroad. The Company intends to continue to
expand its sales into international markets. This expansion will require
significant management attention and financial resources to develop successfully
international distribution, sales and support channels and to support customers
in international markets. The Company may not be able to develop international
market demand for its products.
The Company has limited experience in marketing, distributing and
supporting its products internationally and to do so successfully, it expects
assistance and support from its licensed corporate partners. Specifically, the
Company will look to local partners and distributors for guidance in developing
versions of the Company's products that comply with local standards.
Additionally, international operations are subject to other inherent risks,
including:
o greater difficulty in accounts receivable collection and longer collection
periods;
o difficulties and costs of staffing and managing foreign operations;
o the impact of recessions in economies outside the United States;
o unexpected changes in regulatory requirements;
o certification requirements;
o currency fluctuations;
o reduced protection for intellectual property rights in some countries;
o potentially adverse tax consequences; and
o political and economic instability.
Any acquisitions made by the Company could disrupt its existing business
and seriously harm its financial condition. As part of the Company's ongoing
business development strategy, it considers acquisitions and strategic
investments in complementary companies, products or technologies. The Company
may also evaluate other potential transactions and transaction prospects. In the
event of any purchases, the Company could:
o issue stock that would dilute current stockholders' percentage ownership;
25
<PAGE>
o incur debt;
o assume liabilities;
o incur amortization expenses related to goodwill and other intangible
assets; or
o incur large and immediate write-offs.
Operation of any acquired business and achieving the benefits of any
acquisition, involves numerous risks, including:
o problems combining the purchased operations, technologies or products;
o unanticipated costs;
o diversion of management's attention from the Company's core business;
o adverse effects on existing business relationships with suppliers and
customers;
o risks associated with entering markets in which the Company has no or
limited prior experience; and
o problems with integrating employees and potential loss of key employees,
particularly those of the purchased organizations.
The Company cannot assure that it will be able to achieve the benefits of
any such acquisition or successfully integrate any acquired businesses,
products, technologies or personnel, and any failure to do so could disrupt the
Company's business and seriously harm the Company's financial condition.
The Company's stock price may be volatile. An active public market for the
Company's common stock may not be sustained. The following factors could cause
the market price of the Company's common stock to fluctuate significantly:
o loss of a major corporate partner or distributor;
o significant changes or slowdowns in the funding and spending patterns of
current and prospective customers;
o the addition or departure of key personnel;
26
<PAGE>
o variations in quarterly operating results;
o announcements by the Company or its competitors of significant
contracts, new technologies, new products or product enhancements;
o failure to meet the Company's product milestones;
o acquisitions, distribution partnerships, joint ventures or capital
commitments;
o changes in financial estimates by securities analysts;
o sales of common stock or other securities in the future;
o changes in market valuations of water purification technology companies;
o fluctuations in overall stock market prices and volumes.
In addition, the stock market in general has experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of individual companies. These broad market and industry
factors may materially adversely affect the market price of the Company's common
stock, regardless of its actual operating performance. In the past, following
periods of volatility in the market price of a company's securities, securities
class action litigation has often been instituted against such companies. Such
litigation, if instituted, could result in substantial costs and a diversion of
management's attention and resources.
The Company's business is subject to governmental regulations and
licensing requirements. The water purification and disinfection industry is
subject to local, state and federal regulations and licensing requirements
governing water quality and the sale of water purification and disinfection
products. Although the Company makes every effort to comply with such
regulations and licensing requirements, doing so can be an expensive, time
consuming process. Moreover, laws and regulations may change. A change in laws,
regulations or licensing requirements may require the Company to incur
additional, unexpected expenses.
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
-------------------------------------------------------------------
The following discussion should be read in conjunction with the financial
data appearing elsewhere in this registration statement.
RESULTS OF OPERATIONS
27
<PAGE>
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. The following discussion of the Company`s historical financial results
should be read against that background.
Fiscal 1999 vs. Fiscal 1998
At this stage of its development, the Company's revenues consist of sales
of products incidental to research and testing activities.. For the year ended
December 31, 1999, revenues decreased from $51,794 to $49,336, a decrease of
$2,458, or 4.75%. The decrease was a result of a slight decline in consumption
of Company products at test sites. For the same period, cost of sales declined
from $43,103 to $35,301, a decline of 18.1%, resulting in an increased gross
profit margin of 28.45%, as compared to 16.78% for fiscal 1998. Management
believes that a change in product mix caused the increase in margin.
Nevertheless, because of the small sales volume and its dependence on the type
of testing conducted in a particular period, these results are not indicative of
the margins that the Company may attain if its sales goals are achieved.
The largest component of the Company's operating expenses is personal
services, which consist of salaries, payroll taxes and other employment-related
costs. Personal services expense declined from 1998 to 1999 by $111,597, or
32.91%. Personal services as a percentage of sales declined from 654.71% to
461.13%. Another significant component of the Company's operating expenses is
professional services. This component consists of legal and accounting fees.
Professional services expense increased from 1998 to 1999 by $31,354, or 48.47%.
Management believes that the increase in professional services expense resulted
from (i) legal fees associated with the Company's patent activities and its
preparation of this registration statement, and (ii) accounting fees associated
with preparing the audited financial statements contained in this registration
statement.
An additional operating expense that the Company believes is nonrecurring
is the expense for penalties and fines. This expense results from the fine
imposed in the Commission litigation (see "Item 1 - BUSINESS - General") and
penalties imposed by the Internal Revenue Service for late filing of employment
tax returns and payment of employment taxes. The Company does not anticipate a
recurrence of either situation.
The Company's overall operating expenses increased from 1998 ($547,570) to
1999 ($580,764). This increase resulted from substantial increases in
professional
28
<PAGE>
service fees, marketing expenses and other expenses arising from the Company's
increased marketing efforts as well as its efforts to register its common stock
under the Securities Exchange Act of 1934.
Interest expense increased from $38,298 to $112,970 as a result of the
Company's extensive use of debt financing in 1999, much of which was converted
to equity at December 31, 1999.
Nine months ended September 30, 2000 vs. Nine months ended September 30, 1999
-----------------------------------------------------------------------------
During the first three quarters of 2000, the Company's revenues increased
from $9,186 in the comparable period of 1999 to $16,042, an increase of $6,856,
or 74.64%. The increase was a result of increased consumption of Company
products at test sites. For the same period, cost of sales exceeded revenue
because of the Company's occasional policy of donating or significantly
discounting products in order to induce persons to conduct testing.
Nevertheless, because of the small sales volume, these results may not be
indicative of the margins that the Company may attain if its sales goals are
achieved.
Personal services expense declined by $109,478, or 39.43% on increased
sales, as the Company continued implementation of its cost cutting measures.
Professional services expense increased by $202,063, or 487.98%. The increase in
professional services expense resulted from (i) legal fees associated with the
Company's patent activities and its preparation of this registration statement,
and (ii) accounting fees associated with obtaining the audited financial
statements contained in this registration statement.
The Company's overall operating expenses increased from $494,650 to
$717,539, an increase of $222,889, or 45.06%. This increase resulted from
substantial increases in professional service fees, marketing expenses and other
expenses arising from the Company's increased marketing efforts as well as its
efforts to register its common stock under the Securities Exchange Act of 1934.
Interest expense decreased from $102,711 to $5,000 as a result of the
conversion of a large portion of the Company's outstanding debt into common
stock.
Future Periods
The Company's expenses, other than rent and personnel costs, are variable
in nature. The Company's personnel costs have been reduced to the costs of its
two executive officers. In fact, management expects that personnel costs will
increase substantially in 2001 and future years as the Company expands its
marketing efforts. Most of the Company's other operating expenses, however, are
expected to decline with time. Management believes that the level of
professional fees paid by the Company in
29
<PAGE>
1999 and 2000 will decline substantially. It will also require less testing to
establish the efficacy of its products as its current research and development
matures and as its products are exposed to the marketplace through the efforts
of its licensees. Management expects to see the results of these efforts
beginning in 2001.
LIQUIDITY AND CAPITAL RESOURCES
General
The Company's operating requirements have regularly exceeded its cash flow
from operations as it continues to engage in testing and development of its
products. The Company's cash used in operating activities for 1999 was $519,620,
compared to $222,419 for 1998. The Company also invested in assets of
approximately $74,841 in 1999, as compared to $17,000 in 1998. The resulting
cash shortfall was financed through the issuance of debt instruments and through
the private offering of common stock.
Based upon the Company's current plans, the Company anticipates that it
will need to seek additional financing. 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. The Company has engaged
in discussions with several investment banking firms who have expressed interest
in assisting the Company in such a private offering. Management is confident
that private equity financing will be available to fund it until revenues from
licensing operations are sufficient to fund operations.
Capital Expenditures
Management does not expect to incur any significant capital expenditures
in the foreseeable future.
30
<PAGE>
Staffing
The Company must increase its work force. Currently, the Company has two
full-time employees. 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 five employees in 2001. The expected cost of these additional
employees is $250,000 in 2001.
ITEM 3. - DESCRIPTION OF PROPERTY.
---------------------------------
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.
------------------------------------------------------------------------
The following table sets forth certain information regarding the holders
of the Company's Common Stock, par value $0.001 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
Title Of Address Of Nature Percent Of
Class Beneficial Beneficial Class
Owner Owner
--------------------------------------------------------------------------
Common EHPC Ionisation Limited (1) 0 0%
87A Newington Causeway
London
SE1 6DH
England
31
<PAGE>
Common David Larson, CEO, President, 420,000 0.0075%
1792 Lago Vista Blvd.
Palm Harbor, Florida 34685
Common Michael Redden, CFO, Secretary, 95,000 0.0017%
5153 Sandy Cove Avenue
Sarasota, Florida 34242
------------------------
Common Directors and Officers as a Group 515,000 0.0092%
(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
32
<PAGE>
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
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.
33
<PAGE>
ITEM 6. - EXECUTIVE COMPENSATION.
--------------------------------
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.
34
<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 currently owes approximately $35,000 in
principal on 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.
35
<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
1998-2000
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
3rd Quarter 2000 0.26 0.17
---------------------------------------------------------------------------
4th Quarter 2000 0.19 0.13
---------------------------------------------------------------------------
(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.
36
<PAGE>
Management does not expect to declare dividends until at least the last quarter
of 2002, if ever.
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 name of each purchaser, the
amount of securities sold, the consideration received by the Company and the
date of the transaction.
As indicated in the following table (+), 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. In
addition, as indicated in the table (&), the Company issued 150,000 shares of
common stock to two independent contractors in exchange for services rendered on
behalf of the Company.
All other transactions described in the table were sales of the Company's
common stock for cash, none of which were underwritten. None of the sales
involved a public offering.
All sales were made to persons the Company believes to be accredited
investors (indicated by *), or to unaccredited investors the Company believes
are sophisticated enough to understand the merits and risks of purchasing the
Company's stock (indicated by **). In connection with such transactions, the
Company complied with the information requirements of Rule 502(b), to the extent
applicable, the manner of offering restrictions of Rule 502(c), and as required
by Rule 502(d), the Company exercised reasonable care to assure that the
purchasers of the securities were not underwriters. The Company believes that
all such sales qualify for exemption from registration under all of Rules 504,
505 and 506 promulgated by the Commission under the Securities Act of 1933.
37
<PAGE>
Name No. Shares Price Date Notes
--------------------------------------------------------------------------------
Thomas H. and Peggy Pearson 253,333 $38,000 7/7/98 *
Lillie Lee Lucas 227,272 $22,727 7/7/98 *
Kristina C. Burgess
Lillie Lee Lucas 113,626 $11,362 7/7/98 *
Bert Lucas
C & P Trust Company 61,500 $9,875 7/7/98 *
Jeff P. Hower 300,000 $15,000 7/7/98 *
Will Corder 300,000 $15,000 7/7/98 *
Colin B. Campbell 55,555 55,555 7/7/98 *
David and Victoria Campbell 55,555 $3,000 7/7/98 *
Coffee House Investment Club 7,777 $500 7/7/98 *
Israel Santiago 21,429 $3,000 7/7/98 *
Robert Hall 50,000 $5,000 7/7/98 **&
Jeff P. Hower 250,000 $20,000 8/14/98 *
John Dickens 250,000 $20,000 8/14/98 *
Karen Lynn Stromsted 10,000 $1,000 10/14/98 *
Thor Stromsted 100,000 $5,000 10/14/98 **&
William H. Neal 10,000 $1,000 10/14/98 *
George Duren 112,500 $5,000 10/14/98 **
38
<PAGE>
Jeff P. Hower 250,000 $10,000 10/14/98 *
John Dickens 250,000 $10,000 10/14/98 *
Will Corder 250,000 $10,000 10/14/98 *
Fairway Associates 300,000 $13,500 11/4/98 *
Fairway Associates 200,000 $9,500 11/13/98 *
David Campbell 16,666 $1,000 11/13/98 *
Kristina C. Burgess 50,000 $3,500 11/13/98 *
Bert Lucas 50,000 $3,500 11/13/98 **
Fairway Associates 200,000 $9,500 11/20/98 *
Fairway Associates 250,000 $13,500 12/4/98 *
Fairway Associates 300,000 $9,000 12/23/98 *
Fairway Associates 300,000 $9,000 1/6/99 *
Fairway Associates 250,000 $9,325 1/7/99 *
Fairway Associates 250,000 $12,500 1/15/99 *
Fairway Associates 300,000 $15,000 1/20/99 *
Amram Rothman 126,984 $10,000 2/19/99 *
Fairway Associates 250,000 $23,750 1/27/99 *
Robert Zola 19,230 $2,500 1/27/99 **
Richard Lynch 300,000 $21,000 1/27/99 *
Jeff P. Hower 300,000 $21,000 1/27/99 *
39
<PAGE>
John Filak 110,000 $11,000 1/27/99 *
Kristina C. Burgess 10,000 $1,350 1/27/99 *
Bert R. Lucas 10,000 $1,350 1/27/99 *
Fairway Associates 300,000 $17,500 2/19/99 *
Amram Rothman 126,984 $10,000 2/19/99 *
Robert W. Geiger 20,000 $1,000 2/23/99 *
Fairway Associates 275,000 $12,375 3/1/99 *
Amram Rothman 210,526 $10,000 3/19/99 *
Fairway Associates 400,000 $14,000 3/27/99 *
Fairway Associates 175,000 $6,500 4/5/99 *
Amram Rothman 266,667 $10,000 4/12/99 *
Amram Rothman 439,216 $20,000 5/11/99 *
Sholem Liebenthal 246,184 $10,000 5/11/99 *
Amram Rothman 125,000 $10,000 5/25/99 *
Sholem Liebenthal 129,032 $10,000 5/25/99 *
Mary and John Bagnato 100,000 $10,000 5/25/99 *
Steven R. Haligas Trust 35,000 $1,000 6/6/99 *
Sholem Liebenthal 106,667 $10,000 6/21/99 *
Amram Rothman 64,829 $6,077 6/21/99 *
40
<PAGE>
Maria Staymates 145,000 $12,325 7/2/99 *
Doyal F. Plank Jr. 30,000 $2,250 7/2/99 *
William W. Knicley 25,000 $2,125 7/2/99 *
David Campbell 33,333 $3,000 7/2/99 *
Sholem Liebenthal 140,351 $10,000 8/11/99 *
Sholem Liebenthal 135,593 $10,000 8/26/99 *
Edmund D. Wright 25,000 $1,000 8/26/99 **
Waterford Enterprises, LLC 320,000 $21,000 9/10/99 *
Manoj Associates, LLC 250,000 $13,750 9/14/99 *
Manoj Associates, LLC 300,000 $15,000 9/23/99 *
HLKT Holding, LLC 400,000 $20,000 9/27/99 *
Manoj Associates, LLC 300,000 $11,250 10/5/99 *
Manoj Associates, LLC 350,000 $14,000 10/12/99 *
Manoj Associates, LLC 300,000 $9,000 10/21/99 *
Manoj Associates, LLC 300,000 $11,250 10/29/99 *
Manoj Associates, LLC 300,000 $15,000 11/4/99 *
Amram Rothman 253,968 $10,000 11/10/99 *
Manoj Associates, LLC 250,000 $10,000 11/12/99 *
Manoj Associates, LLC 250,000 $10,000 11/19/99 *
HLKT Holding, LLC 231,884 $10,000 11/22/99 *
41
<PAGE>
Sholem Liebenthal 231,884 $10,000 11/22/99 *
Manoj Associates, LLC 330,000 $13,860 11/30/99 *
Manoj Associates, LLC 175,000 $16,188 12/17/99 *
Nancy Lutz 100,000 $10,000 12/21/99 *
Sholem Liebenthal 110,942 $10,000 12/21/99 *
HLKT Holding, LLC 160,321 $10,000 12/21/99 *
Manoj Associates, LLC 140,000 $12,600 1/4/00 *
Manoj Associates, LLC 175,000 $15,750 1/7/00 *
Manoj Associates, LLC 150,000 $13,500 1/28/00 *
HLKT Holding, LLC 300,000 $10,000 1/28/00 *
HLKT Holding, LLC 50,000 $1,500 3/1/00 *
Sr. Federico Rodriguez 416,666 $50,000 4/20/00 *
Mr. Bert Lucas 200,000 $20,000 4/20/00 **
Ms. Kristina Burgess 200,000 $20,000 4/20/00 *
David & Victoria Campbell 200,000 $20,000 4/20/00 *
Mr. Robert Stahlschmidt 225,000 $27,000 4/20/00 *
Mr. Del Welker 200,000 $18,182 4/20/00 *
Mr. Peter S. Gibson 200,000 $20,000 4/20/00 *
Nancy Lutz 100,000 $10,000 4/20/00 *
42
<PAGE>
Mr. Will Corder 500,000 $30,000 4/20/00 *
Manoj Associates, LLC 100,000 $15,000 4/20/00 *
HLKT Holding, LLC 50,000 $13,500 4/22/00 *
Manoj Associates, LLC 120,000 $15,000 5/8/00 *
Manoj Associates, LLC 160,000 $14,400 5/12/00 *
Mr. Thomas Sweeney 100,000 $12,000 5/13/00 *
Mr. Gary Wiegele 24,111 $4,340 5/13/00 *
Mr. Craig Sheffield 150,000 $29,000 5/13/00 *
Mr. Jeff Hower 800,000 $32,889 5/13/00 *
Mr. John Dickens 200,000 $20,000 5/13/00 *
The Chelverton Fund 2,533,333 $211,000 6/7/00 *
Mr. Jeff Hower 550,000 $22,611 6/7/00 *
Mr. John Dickens 300,000 $20,000 6/7/00 *
Mr. James Grandquest 46,666 $4,666 6/7/00 *
Mr. Del Welker 20,000 $1,818 6/7/00 *
William Neal 10,000 $1,000 6/7/00 *
Joanna Urchism 50,000 $5,000 6/7/00 *+
Joanna Urchism 50,000 $5,000 6/28/00 *+
Thomas Sidoti 50,000 $5,000 6/28/00 *+
Augsback & Associates 200000 $18,000 7/13/00 *+
43
<PAGE>
Manoj Associates, LLC 100,000 $10,000 7/19/00 *
Beverly Lewis 80,000 $8,000 7/20/00 +
Philip Lewis 290,000 $29,000 7/20/00 *
Jon W. & M. Catherine Urchisin 50,000 $5,000 7/27/00 *+
Manoj Associates, LLC 120,000 $12,000 8/2/00 *
Thomas Sidoti 50,000 $5,000 8/3/00 *+
Jack Augsback 30,000 $3,000 8/3/00 *+
Tammy Augsback 50,000 $5,000 8/3/00 *+
Dr. Stephen Mazer 100,000 $10,000 8/3/00 *+
Thor Stromsted 150,000 $7,500 8/3/00 **
Manoj Associates, LLC 125,000 $11,250 8/11/00 *
Jack Augsback 100,000 $10,000 8/16/00 *
Betty Lou Brinkman 70,000 $7,000 8/17/00 *+
Gerald & Geraldine Bargonzi 50,000 $5,000 8/17/00 *+
Robert & Ellen Mulcahey 30,000 $3,000 8/17/00 *+
Betty Lou Brinkman 70,000 $7,000 9/3/00 *+
Tammy Augsback 70,000 $7,000 9/3/00 *+
Dr. Stephen Mazer 100,000 $10,000 9/3/00 *+
Jack Augsback 110,000 $13,200 9/19/00 *+
44
<PAGE>
The Chelverton Fund, Ltd. 414,583 $49,750 9/28/00 *+
* Accredited investor
** Unaccredited, sophisticated investor
+ Commission paid
& Issued for services
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.
45
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
SEPTEMBER 30, 2000 AND 1999
CONTENTS
Page
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Balance Sheets 47
Consolidated Statements of Operations 48
Consolidated Statements of Changes in Stockholders' Deficit 49
Consolidated Statements of Cash Flows 50
Notes to Consolidated Financial Statements 51
46
<PAGE>
NVID INTERNATIONAL, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND 1999
(Unaudited)
Assets
2000 1999
Current Assets
Cash $ 145,559 $ 14,269
Accounts receivable 2,132 5,160
Inventory 78,849 38,633
----------- -----------
Total current assets 226,540 58,062
----------- -----------
Property and equipment, net 34,168 24,713
----------- -----------
Other Assets
Note receivable from Stockholder 5,000 5,000
Patents pending 311,449 138,769
License agreements 22,000 30,000
Deposits 3,145 3,145
----------- -----------
Total other assets 341,594 176,914
----------- -----------
Total Assets $ 602,302 $ 259,689
=========== ===========
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable $ 17,634 $ 61,196
Patent costs payable 183,949 90,162
Accrued salaries and benefits 219,545 290,974
Debentures payable - 115,000
Notes payable 33,726 57,271
----------- -----------
Total current liabilities 454,854 614,603
----------- -----------
Stockholders' Equity (Deficit)
Common stock, $.001 par value,
100,000,000 shares authorized;
57,595,237 shares issued and outstanding 57,595 53,572
Additional paid-in capital 6,659,484 5,350,925
Accumulated deficit (6,569,631) (5,759,411)
----------- -----------
Total stockholders' equity (deficit) 147,448 (354,914)
----------- -----------
Total Liabilities and Stockholders' Equity
(Deficit) $ 602,302 $ 259,689
=========== ===========
See accompanying notes.
47
<PAGE>
NVID INTERNATIONAL, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
2000 1999
Sales $ 16,042 $ 9,186
Cost of sales 29,123 24,924
---------- ----------
Gross profit (loss) (13,081) (15,738)
Operating expenses
Personnel costs 168,160 277,638
Broker Fees - 4,675
Travel 42,422 81,144
Professional services 243,471 41,408
Penalties and fines 564 228
Research and development 3,500 -
Rent 11,361 7,549
Depreciation and amortization 13,405 14,489
Office expense 94,121 32,912
Telecommunications 16,942 8,407
Bad debt expense - -
Commissions 63,093 15,000
Marketing and promotions 60,500 11,200
---------- ----------
Total operating expenses 717,539 494,650
---------- ----------
Operating loss (730,620) (510,388)
Other income (expense)
Licensing fees - -
Interest expense (5,000) (102,711)
---------- ----------
Total other income (expense) (5,000) (102,711)
---------- ----------
Net loss $ (735,620) $ (613,099)
========== ==========
Net loss per share $ (0.013) $ (0.011)
========== ==========
See accompanying notes.
48
<PAGE>
NVID INTERNATIONAL, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Additional Stockholders'
Common Stock Paid-In Accumulated Equity
Shares Amount Capital Deficit (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances - December 31, 1999 49,108,295 $ 49,108 $ 5,563,648 $ (5,834,011) $ (221,255)
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 396,666 397 68,119 68,516
For cash 10,860,776 10,860 981,124 991,984
For broker fees (1,177) (1,177)
Common stock cancelled (3,170,500) (3,170) 3,170
Net loss (735,620) (735,620)
---------- --------- ----------- ----------- ----------
Balances - Seotember 30, 2000 57,595,237 $ 57,595 $ 6,659,484 $ (6,569,631) $ 147,448
=========== ========= =========== =========== ==========
</TABLE>
See accompanying notes.
49
<PAGE>
NVID INTERNATIONAL, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SEPTEMBER 30, 2000 AND 1999
(Unaudited)
2000 1999
--------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net loss $ 0 $ 0
----------- -----------
Adjustments to reconcile net loss to cash
used in operating activities
Depreciation and amortization 7,549 0
Common stock issued for operating expenses 73,516 0
Decrease (increase) in operating assets 102,700
Accounts receivables 18,778
Inventory (38,770) 0
Increase (decrease) in operating liabilities
Accounts payable (30,571) 0
Patent costs payable 53,923 0
Accrued salaries and benefits (26,848) 0
----------- -----------
Total adjustments 57,577 102,700
----------- -----------
Net cash used in operating activities 57,577 102,700
----------- -----------
Cash Flows From Investing Activities
Purchase of fixed assets (19,689) (1,904)
Purchase of intangible assets (140,798) 0
----------- -----------
Net cash used in investing activities (160,487) (1,904)
----------- -----------
Cash Flows From Financing Activities
Proceeds from notes and debentures 0 280,000
Proceeds from issuance of common stock 990,807 236,900
Payments on notes (30,000) (45,000)
----------- -----------
Net cash provided by financing activities 960,807 471,900
----------- -----------
Net increase in cash 857,897 572,696
Cash at beginning of year $ 17,426 4,096
----------- -----------
Cash at end of year 875,323 $ 576,792
=========== ===========
Non-cash Transactions:
Stock issued to pay debt $ 40,000 $ 105,000
----------- -----------
Stock issued to pay interest $ 5,000 $ 102,700
----------- -----------
Supplemental Cash Flow Information:
Cash paid for interest $ -
===========
For purposes of the statement of cash flows, management considers all deposits
and financial instruments with original maturities of less than three months to
be cash and cash equivalents.
Material non-cash transactions not reflected in the statement of cash flows
include:
TheCompany issued common stock for the payment of debt in the $40,000 and
issued common stock for the payment of interest in the amount of $5,000 as
of September 30, 2000.
See accompanying notes.
50
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(Unaudited)
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
nine months ended September 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.
51
<PAGE>
AUDIT REPORT
NVID INTERNATIONAL, INC.
AND SUBSIDIARY
DECEMBER 31, 1999 AND 1998
CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 53
FINANCIAL STATEMENTS:
Consolidated Balance Sheets 54
Consolidated Statements of Operations 55
Consolidated Statements of Changes in Stockholders' Deficit 56
Consolidated Statements of Cash Flows 57
Notes to Consolidated Financial Statements 58-63
52
<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 2 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 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
June 28, 2000
Gainesville, Florida
53
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
---- ----
(RESTATED)
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 --
Patent Pending 170,651 86,538
License Agreement 28,000 36,000
Deposits 3,145 3,145
----------- -------
TOTAL OTHER ASSETS 206,796 125,683
----------- ----------
TOTAL ASSETS $ 307,094 $ 245,077
=========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts Payable $ 48,205 $ 63,079
Patent Costs Payable 130,026 90,162
Accrued Salaries and Benefits 246,392 215,980
License Fee Payable -- 20,000
Debentures Payable 40,000 --
Notes Payable 63,726 102,271
----------- ----------
TOTAL LIABILITIES 528,349 491,492
STOCKHOLDERS' DEFICIT
Common Stock; 50,000,000 Shares Authorized
at $.001 Par Value, 49,108,295 and 48,278,886
Shares Issued and Outstanding 49,108 48,279
Additional Paid-In Capital 5,563,648 4,851,618
Accumulated Deficit (5,834,011) (5,146,312)
----------- ----------
TOTAL STOCKHOLDERS' DEFICIT (221,255) (246,415)
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 307,094 $ 245,077
=========== ==========
See accompanying notes.
54
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
(RESTATED)
SALES $ 49,336 $ 51,794
COST OF SALES 35,301 43,103
-------- --------
GROSS PROFIT 14,035 8,691
OPERATING EXPENSES
Personal Services 227,501 339,098
Travel 93,839 64,071
Professional Services 96,035 64,681
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 -- 7,780
Commissions 20,850 2,992
Marketing and Promotions 22,610 --
--------- --------
TOTAL OPERATING EXPENSES 588,764 582,445
--------- --------
OPERATING LOSS (574,729) (573,754)
OTHER INCOME (EXPENSE)
Miscellaneous Income -- 7,079
Interest Expense (112,970) (38,298)
Loss on Sale of Assets -- (8,402)
--------- ---------
TOTAL OTHER INCOME (EXPENSE) (112,970) (39,621)
--------- ---------
NET LOSS $(687,699) $(613,375)
========= =========
BASIC NET LOSS PER SHARE $ (.01) $ (.01)
========= =========
DILUTED NET LOSS PER SHARE $ (.01) $ (.01)
========= =========
See accompanying notes.
55
<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
Value of Warrant
Issued -- -- 34,875 -- 34,875
Net Loss -- -- -- (613,375) (613,375)
----------- ------- --------- ----------- --------
Balance,
December 31, 1998
As Restated 48,278,886 48,279 4,851,618 (5,146,312) (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
Value of Embedded
Beneficial Conversion
Features of Convertible
Debt -- -- 100,000 -- 100,000
Broker's Fees and
Costs of
Convertible Debt -- -- (48,104) -- (48,104)
Common Stock
Cancelled (11,262,528) (11,263) 11,263 -- --
Net Loss -- -- -- (687,699) (687,699)
---------- -------- ---------- ---------- ---------
Balance,
December 31, 1999 49,108,295 $ 49,108 $5,563,648 $(5,834,011) $(221,255)
=========== ======== ========== ========== =========
See accompanying notes.
56
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
(RESTATED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(687,699) $(613,375)
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
Value of Warrant included in Professional Services -- 34,875
Interest Expense from Beneficial Conversion
Feature of Convertible Debt 100,000 --
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-Patents and Licenses (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.
57
<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 concentrated to 60 ppb and injected into the
process water where they attach and kill algae, bacteria, fungus, yeast, etc.
The charged, dead microorganisms attach, forming larger particles which are
removed by the existing filtration system. The system use is directed towards
residential, commercial, industrial, and municipal applications.
The Company maintains corporate offices in Clearwater and Sarasota, Florida.
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 period.
Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.
Accounts Receivable
Accounts receivable are reported at net realizable value. There was no allowance
for doubtful accounts at December 31, 1999 or 1998 since all receivables are
deemed fully collectible. There are no identifiable concentrations of credit
risk related to receivables.
58
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Inventory
The inventory of product held for sale is carried at the lower of cost or market
value using the first-in-first-out method.
Property and Equipment
Property and equipment is recorded at its acquisition cost. Depreciation is
provided using the straight-line method over the estimated useful lives of five
to seven years.
Maintenance and repairs of property and equipment that do not improve 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.
Revenue and Cost Recognition
The Company utilizes the accrual method of accounting whereby revenue is
recognized when earned and expenses are recognized when incurred. The earnings
process is considered complete when products have been delivered or, for license
fees, over the term of the license agreement.
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.
59
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)
Reclassifications
Certain amounts presented for 1998 have been reclassified to conform to the 1999
presentation.
NOTE 2 - 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 3 - 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 4 - INTANGIBLE ASSETS
Intangible assets consist of the following:
1999 1998
---- ----
Patent Pending $170,651 $ 86,538
Less Accumulated Amortization -- --
-------- --------
Patent 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
======== =======
60
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 4 - INTANGIBLE ASSETS (concluded)
Patent pending costs are being incurred to secure the patent on Axenol. The
patent is expected to be received in 2000. The costs incurred include
professional fees of the Company's patent attorney, who began working with the
Company in 1995, and the costs of product testing, incurred all in 1999.
The license agreement gives the Company the rights to commercialize the random
metering system (RMS). RMS products incorporate technologies to treat large
volumes of water. The agreement has an initial term of two years with provisions
for continuous renewal. However, management estimates that the Company will
benefit from the agreement for no more than five years.
Amortization expense for the years ended December 31, 1999 and 1998 was $8,000
and $4,000 respectively.
NOTE 5 - 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. Of these
amounts, $103,712 and $72,537 were capitalized as patent pending at December 31,
1999 and 1998, respectively. The balance was expensed as professional fees since
the related projects are no longer active.
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. The value of the warrant was recorded as additional paid-in
capital and professional fees at the date of issuance.
NOTE 6 - NET LOSS PER SHARE
Net Loss Shares Per Share
1999 (Numerator) (Denominator) Amount
---- ---------- ----------- ---------
Basic Net Loss per Share:
Net Loss Attributable to
Common Stockholders $(687,699) 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 $(687,699) 49,443,590 $(.01)
========= ========== ======
61
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 6 - NET LOSS PER SHARE (concluded)
1998
----
Basic Net Loss per Share:
Net Loss Attributable to
Common Stockholders $(613,375) 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 $(613,375) 46,272,770 $(.01)
========= ========== ======
NOTE 7 - EQUITY TRANSACTIONS
The Company issues common stock 1) for cash, 2) in exchange for goods or
services received, and 3) for debt conversions. Sales of stock for cash are
comprised of a series of smaller transactions throughout both years. The typical
purchase is not more than $20,000. When common stock is issued as payment for
goods and services, the transaction is measured at the fair value of the goods
or services received. Common stock is issued for convertible debt in accordance
with the terms of the debt instrument.
Common stock issued on behalf of a former employee was cancelled when employment
terminated prior to earning the right to ownership of the stock.
NOTE 8 - 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 9 - 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 up to 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.
62
<PAGE>
NVID INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 9 - 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 price of the shares.
NOTE 10 - FINAL JUDGEMENT
On April 7, 1997, the Company was named as a defendant in civil litigation
brought by the United States Securities Exchange Commission ("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 ("Consent Judgment"), which was approved on
August 14, 1998. The Consent Judgment, which terminated the Commission's
proceedings against the Company, included a full settlement, without
adjudication of any facts or law, in which the Company agreed to transfer to the
Commission $256,500.00 of the Company's receivables and pay $25,000.00 to a
receiver for distribution to defrauded investors. The $256,500.00 was
transferred in 1997, in anticipation of the Consent Judgment, and the $25,000.00
was paid in 1998 and is included in penalties and fines.
NOTE 11 - 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.
NOTE 12 - PRIOR PERIOD ADJUSTMENT
The financial statements as of and for the year ended December 31, 1998 were
restated to reflect professional fees of $34,875 for the issuance of a stock
warrant.
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PART III
DESCRIPTION OF EXHIBITS.
-----------------------
2.1 Certificate of Incorporation dated August 20, 1984. *
2.2 Certificate of Amendment of Certificate of Incorporation dated March 31,
1985. *
2.3 Certificate of Correction of Certificate of Amendment of Certificate of
Incorporation dated October 15, 1985. *
2.4 Certificate for Renewal and Revival of Charter dated October 19, 1994. *
2.5 Certificate of Amendment of Certificate of Incorporation filed October 24,
1994. *
2.6 Certificate of Amendment of Certificate of Incorporation filed May 26,
1995. *
2.7 Certificate for Renewal and Revival of Charter dated December 9, 1996. *
2.8 Certificate of Amendment of Certificate of Incorporation dated February 5,
1999.*
2.9 Certificate of Amendment of Certificate of Incorporation dated May 12,
2000. *
2.10 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. *
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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. *
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.*
* Previously filed.
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 December 21,
2000.
NVID INTERNATIONAL, INC.
By:/s/ David Larson
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David Larson, President
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