UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Earliest Reported Event: September 1, 2008
INNOVA PURE WATER, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-29746 59-2567034
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
8528 Davis Boulevard
Suite 134-210
North Richland Hills, Texas 76180
(Address of Principal Executive Offices) (Zip Code)
(520) 742-0007
(Registrant's telephone number, including area code)
ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT
On February 26, 2009, the Board of Directors terminated for cause the employment
contracts of John "JT" Thatch as the CEO and President, and Michael D. Brown as
the Chief Operating Officer.
The Company's employment agreement with Mr. Thatch began on November 1, 2007 and
was scheduled to continue through October 31, 2010. The agreement provided for a
compensation package of $150,000 in year one, $180,000 in year two, and $240,000
in year three. In addition, Mr. Thatch was to receive approximately 1.2 million
shares of the Company's common stock for each year of service.
The Company's employment agreement with Mr. Brown began on November 1, 2007 and
was scheduled to continue through October 31, 2010. The agreement provided for a
compensation package of $150,000 in year one, $180,000 in year two, and $240,000
in year three. In addition, Mr. Brown was to receive approximately 1.2 million
shares of the Company's common stock for each year of service.
Mr. Thatch and Mr. Brown were hired by the Company based on the recommendations
of Mr. Michael Cronin, the Company's former legal counsel, as well as the
covenants of Mr. Thatch and Mr. Brown to raise from $1.5 million to $2.5 million
in new equity, to liquidate the Company's debt, substantially increase sales
revenues and profits, and re-organize and update the Company's SEC filings. Due
to the failure of Mr. Thatch and Mr. Brown to perform any of the agreed
services, the Company has cancelled the employment contracts for cause, and
plans to seek legal counsel to determine if the Company is entitled to
restitution or compensation for damages caused by the failure to perform as
agreed. In addition, because of the failure of Mr. Thatch and Mr. Brown to
perform as agreed, the Company has cancelled all common stock of the Company
issued or to be issued to Mr. Thatch and Mr. Brown.
The Company also cancelled any other employment or consulting contracts which
were entered into by Mr. Thatch and Mr. Brown, and specifically any agreements
with Mr. David McGurk, who was appointed as Vice President of the Company by Mr.
Thatch or Mr. Brown in contravention of the By-laws of the Company, which state
that all officers must be appointed by the Board of Directors.
The Company has reason to believe that Mr. Thatch and/or Mr. Brown may have
executed other agreements without the knowledge or consent of the Board of
Directors, and that the nature of those agreements required the consent of
either the Board of Directors or the Shareholders of the Company. Consequently,
the Company plans to investigate all such contracts, and to take steps to cancel
those contracts which are determined not to be in the best interest of the
Company.
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ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 2008, due primarily to the failure of Mr. Thatch and Mr. Brown
to generate new equity funds and liquidate the corporate debt as agreed, the
Company defaulted in the payment of its principal indebtedness, an operating
loan from FilmBanc Properties, LLC. in the amount of $430,492.59. On October 30,
2008, the Company was notified that FilmBanc Properties, LLC. was accepting the
collateral for the loan in full settlement of the indebtedness, as agreed to by
the Company in the loan documents.
This transaction has resulted in the reduction of the Company's liabilities in
the amount of $430,492.59, and the transfer of the Intellectual Property Rights,
consisting of several patents related to water filtration, and Personal
Property, consisting of a number of injection molds, blow molds, and carbon
block molds, to FilmBanc Properties, LLC. The book value of these assets as of
March 31, 2007, the latest financial statement to be reported by the Company,
was $27,170.
Although the Company's book value will be increased by $403,322.59 as a result
of this involuntary disposition of assets, the actual value of the patents and
molds is difficult to determine, but is estimated by the current management to
be significantly more than the book value and possibly more than the amount of
the indebtedness. The loss of these assets is expected to cause a significant
negative impact on the Company's ability to compete in the water filtration
industry.
The current management expects to mitigate this loss by negotiating an agreement
with FilmBanc Properties LLC. whereby the Company will continue to market and
sell the products as before under the terms of a favorable distribution
agreement currently under negotiation with FilmBanc.
FilmBanc has filed a lawsuit in the State of Texas against the Company asking
the court for a public affirmation of FilmBank's ownership of the foreclosed
property. The Company has filed a motion challenging the jurisdiction of the
Texas courts, and will continue to pursue this and other defenses. There can be
no assurance, however, that the Company can recover this property.
ITEM 2.04 TRIGGERING EVENTS THAT ACCELERATE OR INCREASE A DIRECT FINANCIAL
OBLIGATION OR AN OBLIGATION UNDER AND OFF-BALANCE SHEET ARRANGEMENT
During the calendar quarter ending December 31, 2008, the Internal Revenue
Service filed a Federal Tax Lien against the Company in Dallas, Texas, in the
approximate amount of $35,000.00. This lien represented withheld and accrued
payroll taxes that had not been paid by the Company for an extended period of
time. The amounts and status of this Federal Tax Lien has not been disclosed
completely by Mr. Thatch, the former President and CEO to the directors of the
Company, and therefore the current management, Mr. Zich, the current President
and CEO and Mr. Davisson, the Secretary and Treasurer, are unable to report the
specific details and status of this lien, pending receipt of the Company's books
and records from Mr. Thatch. Although Mr. Thatch was informed of this Federal
Tax Lien, the existence of the lien has not been previously disclosed to the
public.
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In the third quarter of 2008, a lawsuit was filed against the Company by Jones
and Davis, the attorney's who represented the company, for failure to pay legal
fees. Although properly served through its registered agent in the State of
Texas, the Company, represented by Mr. Thatch as president and CEO, did not
respond to the lawsuit. On December 1, 2008, a default judgement was entered
against the Company in the approximate amount of $10,000, including court costs
and fees. The complete specifics of this judgement are not available to the
current management pending receipt of the Company's books and records from the
former management. Although Mr. Thatch was informed of this , the existence of
the lien has not been previously disclosed to the public
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT
Shareholders of the Company representing in excess of 10% of the voting shares
of the Company, in accordance and compliance with the provisions of the
Company's By-laws, on February 1, 2009 requested in writing that Mr. David Zich
and Mr. Jim Davisson call a meeting of the Shareholders of the Company. Pursuant
to this request, on February 1, 2009, Mr. David Zich and Mr. Jim Davisson called
a legal and valid meeting of the Shareholders for February 26, 2009 by issuing a
Notice of Meeting. In what was perceived by the Shareholders as an attempt to
circumvent this duly called meeting of the Shareholders, Mr. Thatch, the
Company's President and CEO called a meeting of the Board of Directors of the
Company for February 25, 2009.
The February 25, 2009 meeting of the Board of Directors was attended by Mr. John
"JT" Thatch, President and CEO, Mr. Randal McClanahan, the Chairman of the
Board, Mr. Michael D. Brown, the Chief Operating Officer, Mr. Jim Davisson, the
Secretary and Treasurer, and Mr. David Zich, the final director. At this
meeting, the Board of Directors of the Company, at the request of Mr. Thatch,
approved the issuance of approximately Thirty Million, Five Hundred thousand
(30,500,000) shares of the common stock of the Company at a price of One Cent
($0.01) per share.
The beneficiaries of these proposed stock issuances included Mr. Michael D.
Brown, Mr. John "JT" Thatch, Mr. Mike Cronin, Mr. John Nohren, and Mr. Dave
Mcgurk. This list my not be complete at the time of this filing. This stock was
supposedly to be issued to these individuals not for cash but as payment for
debts allegedly owed to them by the Company. Mr. Zich and Mr. Davisson, as
directors, were not aware of any valid or approved debts owed to these
individuals by the Company, and no documentation was offered by the officers.
This transaction was approved and passed by Mr. Thatch, Mr. Brown, and Mr.
McClanahan over the objections of Mr. Zich and Mr. Davisson. Mr. Zich and Mr.
Davisson dissented on the grounds that this would be a dramatic dilution of the
Shareholders' equity relative to the investment price of most shareholders and
was not in the best interest of the shareholders in general. Mr. Zich and Mr.
Davisson also objected to the issuance of stock based on the officers refusal to
provide verifiable documentation for the transactions for which they were
issuing stock.
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Also at the request of Mr. Thatch, the Board of Directors passed a resolution to
dismiss the Company's share transfer agent and for the Company to act as its own
transfer agent.
The Board of Directors also passed a resolution to declare the Shareholders'
meeting scheduled for February 26 to be declared invalid. Mr. Zich and Mr.
Davisson opposed this resolution on the grounds that the meeting was duly called
by Shareholders of the Company as provided by the Company's By-laws, and that
the Board of Directors did not have the authority to cancel a meeting called by
the Shareholders.
As the meeting of the Board of Directors of the Company was scheduled by Mr.
Thatch and held on the day before the duly scheduled meeting of the Shareholders
of the Company, and common shares were voted to be issued to the officers and
others which would give the holders of the new shares voting control of the
Company, and the discharge of the Company transfer agent could make possible the
issuance of the shares so they could be voted immediately, the actions of the
Board of Directors on February 25, 2009 were perceived by the Shareholders as an
attempt to gain control of the Company without adequate consideration or due
process.
On February 26, 2009, the Shareholders of the Company met in a meeting duly,
validly, and legally called by Mr. David Zich and Mr. Jim Davisson pursuant to a
request in writing from Shareholders of record holding in excess of 10% of the
Company's voting shares. In the absence of the President, who was notified of
the meeting but failed to appear, Mr. Zich was designated as Chairman of the
meeting. Mr. Davisson was designated Secretary of the meeting.
Mr. Davisson and Mr. Zich confirmed that Shareholders holding in excess of 50%
of the voting stock of the Company as of February 1, 2009, the record date
designated in the notice of the meeting, were present in person or by proxy, and
the meeting was called to order.
By a unanimous vote of the Shareholders present at the meeting in person or by
proxy, it was confirmed that the meeting of the Shareholders was valid, legal,
and duly called, and that a quorum was present, in accordance with the Bylaws of
the Company, and that the Board of Directors had no authority under the Bylaws
or otherwise to cancel, invalidate, or otherwise attempt to prevent the meeting.
By a unanimous vote of the Shareholders present at the meeting in person or by
proxy, it was confirmed that the inclusion of the word "Annual" in the heading
of the notice of the shareholders meeting was a clerical error which had no
effect on the perception of the meeting or the purposes therefor by the
Shareholders, and consequently no effect on the validity and legality of the
actual meeting. The Shareholders further confirmed that the meeting was called
and held as a "Special" meeting, and ordered that the minutes of the meeting so
reflect.
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By a unanimous vote of the Shareholders present at the meeting in person or by
proxy, it was ordered that Mr. Thatch, Mr. Brown, and Mr. McClanahan be
dismissed as directors of the Company and that Mr. David Zich and Mr. Jim
Davisson be elected as the sole directors of the Company.
By a unanimous vote of the Shareholders present at the meeting in person or by
proxy, it was ordered that the issuance of the Company's stock proposed by the
Board of Directors on February 25, 2009 be declared to be without adequate
consideration, not in the best interest of the Company or the Shareholders, and
a breach of the fiduciary responsibility of the Directors approving such
issuance.
By a unanimous vote of the Shareholders present at the meeting in person or by
proxy, it was ordered that the termination of the Company's transfer agent by
the Board of Directors be declared to be without sound business reason and not
in the best interest of the Company.
On February 26, 2009, immediately following the meeting of the Shareholders, the
Board of Directors, consisting of Mr. Zich and Mr. Davisson, met and elected Mr.
Zich President and CEO and elected Mr. Davisson Secretary and Treasurer. The
Board of Directors also reversed and cancelled the resolutions of the Board made
on February 25 regarding the issuance of stock and the termination of the
transfer agent, reinstated the Company's valid transfer agent, and ordered that
the transfer agent be directed not to issue such shares. The Board of Directors
also voided, cancelled, and reversed the previous Board's resolution to cancel
the duly called meeting of the Shareholders.
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS
On February 1, 2008, Don Harris resigned from the Board of Directors in order to
meet the requirements of a new employment opportunity. This resignation was not
previously reported by Mr. Thatch.
On June 5, 2008, Rose Smith resigned from the Board of Directors. This
resignation was not previously reported by Mr. Thatch.
On February 26, 2009, pursuant to a duly called meeting of the Shareholders, at
which a quorum of the qualified voting shares appeared in person or by proxy,
the Shareholders of the Company re-elected Mr. David Zich and Mr. Jim Davisson
to serve as the Board of Directors of the Company, replacing the previous Board
of Directors. Mr. Davisson has previously served on the Board of Directors and
as Secretary of the Company from July, 2005 to the present. Mr. Zich has served
on the Board of Directors from July, 2005 to the present, and served as CEO and
President of the Company from July, 2005 to January, 2007.
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Mr. J. T. Thatch, the former CEO and President of the Company, and Mr. Michael
Brown, the former COO of the Company, were not re-elected to the Board of
Directors, due to the termination of their employment contracts by the Company
for non-performance. Mr. Randal McClanahan, the former Chairman of the Board of
Directors of the Company, was not re-elected to the Board of Directors due to a
personal bankruptcy filing which was not previously disclosed by the management
of the Company.
On February 26, 2009, following the election by the shareholders of a new Board
of Directors of the Company, the new Board of Directors, consisting of Mr. David
Zich and Mr. Jim Davisson, met at a duly constituted meeting for the election of
officers. Mr. David Zich was elected Chairman of the Board, Chief Executive
Officer, and President. Mr. Jim Davisson was elected Secretary and Treasurer of
the Company.
Mr. Zich, as Chief Executive Officer and President of the Company will assume
the responsibility to oversee all functions of the company, including day-to-day
operations. Mr. Zich has over 20 years of entrepreneurial business experience
that includes executive management positions in various companies. Mr.Zich has
previously served as CEO and President of the Company from July, 2005 to
January, 2007. He brings leadership, marketing and strong management skills to
the Company.
Mr. Davisson, Secretary and Treasurer of the Company, will continue to direct
the administrative and financial affairs of the Company. Mr. Davisson has
garnered over 25 years in business, banking, and management. Mr. Davisson is
continuing in the role of Secretary and Treasurer that he has held since July,
2005. He brings strong administrative and management skills to his position.
In conjunction with this change in management, the principal office of the
Company has been moved to:
8528 Davis Boulevard
Suite 134-210
North Richland Hills, Texas 76180
Telephone (214) 628-3788
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INNOVA PURE WATER, INC.
March 4, 2009 By: /s/ David L. Zich
---------------------------------
David L. Zich, President,
Chief Executive Officer, Director
By: /s/ Jim Davisson
---------------------------------
Jim Davisson, Secretary,
Treasurer, Director
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