From: SEC Government Archives
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Legal Proceedings Reitz Litigation: A legal proceeding in the Circuit Court of Pinellas County, Florida was filed by Zedburn Corporation, against us for breach of contract in October 1997. The breach of contract alleged was for payment of fees for Mr. David Reitz's and Mr. Steven Durland's services of arranging a public offering of our common stock. We has filed counterclaims based upon the Racketeer Influenced and Corrupt Organization (RICO) Act against David Reitz, Zedburn Corporation, Capital Development Group, Steven Durland and other defendants. It is our position that Mr. Reitz and others perpetrated a scheme to defraud us of cash fees and securities in connection with purported services of arranging a public offering of our common stock. In October 1997, Mr. Reitz and Zedburn filed for protection under the Federal bankruptcy laws. In August 1998, Mr. Reitz voluntarily dismissed his bankruptcy and as a result thereof we named Mr. Reitz as a defendant to our counterclaims. We believe that the defendants had perpetrated similar schemes against other parties. We also believe it has substantially completed discovery and complied compelling evidence to prove its claims. Several of the Defendants filed Motions to Dismiss our counterclaims. A hearing on the Motions was held on October 1, 1998. Certain of the Motions were granted pending our amendment of its Counterclaim. We amended our Counterclaims in accordance with the judge's rulings. Certain Defendants filed second Motions to Dismiss the amended Counterclaims. A hearing on these latest motions was held in March 1999, before a different judge than the judge who ruled on the first motions. On April 20,1999, Orders were entered granting the Defendants' Motions to Dismiss. However these Orders did not state the basis for the Orders, nor was our legal counsel provided notice of the Orders or a copy of the new judge's correspondence offering a "formal ruling" upon request. In May 1999 we filed an Appeal of the Orders and Motions for Reconsideration based upon inconsistency of the Orders with the previous judge's rulings and the lack of notice to us. We believe that our Appeal and Motions have merit and will be granted. In any event we intend to pursue a trial as soon as possible. As of September 6, 2001 no ruling has been received on our Appeal. We has neither accrued a liability in its financial statements regarding this litigation nor disclosed the matter in the footnotes thereof. We have not done so because we do not believe there is any merit to Mr. Reitz's claims and that the likelihood that we will realize a loss from these matters is believed remote. In addition, we believe that in the unlikely event that we settle, the amount of any such settlement would not be material to our financial statements. Fresh Water Systems Litigation: We filed an action against John Woodard, our former Vice President of Sales, in Superior Court in the State of California in April 2000. We alleged Mr. Woodard violated his non-competition/non-disclosure agreement and provided proprietary information, including information regarding our Fillmaster line of products and Fillmaster customer base, to Fresh Water Systems, Inc. We alleged the misappropriation of customer lists, equipment service and maintenance schedules, equipment data, business plans and research and development secrets. We are seeking monetary damages and injunctive relief. We have also filed an action against Fresh Water Systems, Inc., Steven Norvell, Brian Folk and Eric Norvell in Superior Court in the State of California. The action was filed in August 2000 and amended in October 2000. We allege Fresh Water Systems and it's officers and directors misappropriated our trade secrets obtained from our former employees, engaged in unfair competition in violation of the California Unfair Practices Act, tortious interference with contractual relations, tortious interference with prospective business advantage, fraud, trade libel and conspiracy with regard to the Fillmaster line of products and Fillmaster customer base. We are seeking monetary damages and injunctive relief. NVID Litigation: On April 12, 2001, NVID, International, Inc. filed a declaratory judgment action in the Circuit Court of Pinellas County, Florida against Innovative Medical Services and ETI-H2O, Inc. The lawsuit seeks a judicial declaration that the Manufacturing, Licensing and Distribution Agreement, dated March 26, 2000 between us, NVID, International, Inc. and ETI-H2O does not constitute a binding contract and seeks unspecified damages. The lawsuit does not challenge the binding effect of the Standard Manufacturing Agreements dated November 30, 1998 and September 17, 1999 between NVID, International, Inc. and ETI-H2O and the November 24, 1999 License Agreement between us and NVID, International, Inc. On May 17, 2001, we and ETI-H2O removed NVID'S declaratory judgment action from Pinellas County Circuit Court to the United States District Court for the Middle District of Florida. We and ETI-H2O has filed a Motion To Dismiss, which is currently pending. On May 7, 2001, we and EIT-H2O filed a separate action, a Petition to Compel Arbitration, in the United States District Court for the Southern District of California based on arbitration clauses contained in the March 26, 2000 and November 24, 1999 agreements. Contemporaneously with filing the Petition, we and ETI-H2O filed a demand for arbitration against NVID, International, Inc. with the American Arbitration Association ("AAA") in San Diego, California. NVID, International, Inc. has notified AAA that it objects to the arbitration demand. The Company's Petition to compel Arbitration was granted in July 2001.