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Nuvim Inc (NUVM) SEC Filing 10-Q Quarterly report for the period ending Tuesday, September 30, 2008

Nuvim Inc

CIK: 1170652 Ticker: NUVM

10-Q
1
nv80943.txt

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q
   (Mark One)

   /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  ECHANGE ACT
       OF 1934
                For the quarterly period ended September 30, 2008
                                       or
   / / TRANSITION REPORT UNDER SECTION 13 OR 15(d) of  the  SECURITIES  EXCHANGE
       ACT OF 1934
              For the Transition Period from           to

                          Commission File No. 000-50508
                                              ---------

                                 NUVIM(R), INC.
             (Exact name of registrant as specified in its charter)

                   Delaware                                   13-4083851
       (State or other jurisdiction of                     (I.R.S. Employer
        incorporation or organization)                    Identification No.)

             12 North State Route 17
                  Paramus, NJ                                      07652
    (Address of principal executive offices)                    (Zip Code)

                                 (201) 556-1010
                           (Issuers Telephone Number)

Check  whether  the  registrant  (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter  period  that  the registrant was required  to file such report(s),  and
(2) has  been  subject  to  such  filing  requirements  for  the  past  90 days.
Yes /X/ No / /

Indicate by a check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.


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     Large accelerated filer       / /       Accelerated filer               / /
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     Non-accelerated filer         / /       Smaller reporting company       /X/
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes / / No /X/ At November 1, 2008, 16,361,959 shares of the registrant's Common Stock, par value $0.00001 per share, were outstanding. 1 NUVIM, INC. Quarterly Report on Form 10-Q Quarterly Period Ended September 30, 2008 Table of Contents Part I - Financial Information Item 1. Financial Statements (Unaudited) Balance Sheets - September 30, 2008 (Unaudited) and December 31, 2007 (audited) 3 Statements of Operations - For the three and nine months ended September 30, 2008 and 2007 (Unaudited) 4 Statement of Changes in Stockholders' Deficit for the nine months ended September 30, 2008 (Unaudited) 5 Statements of Cash Flows for the nine months ended September 30, 2008 and 2007 (Unaudited) 6 Notes to Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis or Plan of Operation 11 Item 3. Quantitative and Qualitative Disclosures about Market Risk 23 Item 4T. Controls and Procedures 23 PART II - Other Information Item 1. Legal Proceedings 25 Item 1A. Risk Factors 25 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 30 Item 3. Defaults upon Senior Securities 30 Item 4. Submission of Matters to a Vote of Security Holders 30 Item 5. Other Information 30 Item 6. Exhibits 30 Signatures 31
2 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS NUVIM, INC. BALANCE SHEETS
September 30, December 31, ----------------------------------------- 2008 2007 -------------- -------------- ASSETS (unaudited) (audited) Current Assets: Cash and cash equivalents $ - $ 14,814 Accounts receivable, net 24,171 17,594 Inventory 111,253 205,456 Prepaid expenses and other current assets 12,072 28,620 -------------- -------------- Total Current Assets 147,496 266,484 -------------- -------------- Equipment and furniture, net - 54 Deposits and other assets 6,206 6,206 Distribution rights 90,400 90,400 -------------- -------------- TOTAL ASSETS $ 244,102 $ 363,144 ============== ============== LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Bank line of credit $ 55,863 $ 46,663 Due from related party 65,000 - Current portion of accounts payable 235,363 386,165 Accrued expenses 143,011 117,094 Accrued compensation 139,249 373,533 Rescinded series B offering payable 18,920 18,920 Other notes payable, net of unamortized discount of $1,700 at September 30, 2008 and $5,100 at December 31, 2007 136,600 114,900 Accrued Interest - other notes payable 42,717 35,518 -------------- -------------- TOTAL CURRENT LIABILITIES 836,723 1,092,793 Long-Term Liabilities: Accounts payable, net of current portion 239,430 206,429 Deferred officers compensation 402,283 Senior notes payable - related parties, net of unamortized discount of $0 at September 30, 2008 and $11,619 at Decemer 31, 2007 500,000 488,381 Accrued interest - senior notes payable - related parties 239,160 209,160 Stockholder loans - subordinated covertable promissory notes 150,000 150,000 Accrued interest stockholder loans 42,770 33,770 -------------- -------------- TOTAL OTHER LIABILITIES 1,573,643 1,087,740 -------------- -------------- TOTAL LIABILITIES 2,410,366 2,180,533 Commitments and Contingencies Stockholders' Deficit: Common Stock, 120,000,000 shares authorized, $.00001 par value, 16,361,959 shares issued and outstanding at September 30, 2008 and 14,740,782 shares issued and outstanding at December 31, 2007 163 147 Additional paid-in capital 22,030,624 21,655,862 Accumulated deficit (24,197,051) (23,473,398) -------------- -------------- Total Stockholders' Deficit (2,166,264) (1,817,389) -------------- -------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 244,102 $ 363,144 ============== ==============
See notes to financial statements 3 NUVIM, INC. STATEMENTS OF OPERATIONS
Three Months Ended Septmeber 30, Nine Months Ended September 30, -------------------------------- ------------------------------- 2008 2007 2008 2007 ------------ ------------ ------------ ------------ (unaudited) (unaudited) (unaudited) (unaudited) Gross sales $127,016 $248,818 $467,706 $924,121 Less: discounts, allowances and promotional payments 41,929 68,782 150,412 271,017 ------------ ------------ ------------ ------------ Net sales 85,087 180,036 317,294 653,104 Cost of sales 101,804 108,539 293,258 502,076 ------------ ------------ ------------ ------------ Gross profit (16,717) 71,497 24,036 151,028 Selling, general and administrative expenses 171,371 299,235 700,535 1,309,026 ------------ ------------ ------------ ------------ Loss from operations (188,088) (227,738) (676,499) (1,157,998) Other Income (Expense): Interest expense (15,400) (24,374) (67,035) (65,998) Gain on settlement of accounts payable - - 19,881 13,521 ------------ ------------ ------------ ------------ Total other income (expense) - net (15,400) (24,374) (47,154) (52,477) ------------ ------------ ------------ ------------ Net loss before income tax benefit (203,488) (252,112) (723,653) (1,210,475) ------------ ------------ ------------ ------------ Net loss ($203,488) ($252,112) ($723,653) ($1,210,475) ============ ============ ============ ============ Basic and diluted loss per share ($0.01) ($0.02) ($0.05) ($0.09) ============ ============ ============ ============ Weighted average number of common shares outstanding - basic and diluted 16,361,959 14,604,382 15,523,633 13,893,019 ============ ============ ============ ============
See notes to financial statements 4 NUVIM, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 (unaudited)
Common Stock Additional Total --------------------- Paid-In Accumulated Shareholders' Shares Amount Capital Deficit Deficit ---------- ------- ----------- ------------- ------------- Balance at December 31, 2007 14,740,782 $147 $21,655,862 ($23,473,398) ($1,817,389) Stock sold to accredited investors, net 441,177 4 74,996 - 75,000 Stock issued for services 524,000 5 89,975 - 89,980 Stock issued for accounts payable 656,000 7 131,193 131,200 Employee stock based compensation - - 78,598 - 78,598 Net Loss - - - (723,653) (723,653) ---------- ------- ----------- ------------- ------------- Balance at September 30, 2008 16,361,959 $163 $22,030,624 ($24,197,051) ($2,166,264) ========== ======= =========== ============= =============
See notes to financial statements 5 NUVIM, INC. STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, ------------------------------- 2008 2007 ------------- ------------- (unaudited) (unaudited) Cash Flow From Operating Activities: Net loss $ (723,653) $ (1,210,475) Adjustment to reconcile net loss to net cash used in operating activities: Depreciation 54 498 Amortization of debt discount on notes payable 13,319 19,474 Equity based compensation 168,578 432,044 Gain on settlement of accounts payable (19,881) - Provision for sales returns - 202,235 Changes in Operating Assets and Liabilities: Accounts receivable (6,577) (179,847) Inventory 94,203 (36,125) Prepaid expenses and other assets 16,548 59,960 Accounts payable 33,280 (193,693) Accrued expenses 25,917 108,429 Accrued compensation 167,999 12,008 Accrued interest 46,199 46,200 ------------- ------------- Net Cash Used in Operating Activities (184,014) (739,292) ------------- ------------- Cash Flow From Investing Activities: - - ------------- ------------- Cash Flow From Financing Activities: Related party advance 65,000 - Other borrowing 20,000 - Bank borrowings 9,200 - Net proceeds from issuance of common stock 75,000 683,820 ------------- ------------- Net Cash Provided by Financing Activities 169,200 683,820 ------------- ------------- (Decrease) Increase in Cash and Cash Equivalents (14,814) (55,472) Cash and Cash Equivalents at Beginning of Period 14,814 55,472 ------------- ------------- Cash and Cash Equivalents at End of Period $ - $ - ============= =============
See notes to financial statements 6 NUVIM, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - BUSINESS AND BASIS OF PRESENTATION A. BUSINESS NuVim, Inc. (the "Company") markets and distributes ready to drink dietary supplement beverages and powder mixes, which enhance the immune system, promote sturdy joints and muscle flexibility and helps the body absorb calcium. The Company distributes its products through supermarkets in approximately 14 states in the eastern United States. B. Going Concern The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company incurred net losses of $203,488 and $723,653 for the three and nine months ended September 30, 2008 and $252,112 and $1,210,475 for the three and nine months ended September 30, 2007, respectively. Management also expects operating losses to continue in 2008. The Company's continued existence is dependent upon its ability to secure adequate financing to fund future operations and commence profitable operations. To date, the Company has supported its activities through borrowings and equity investments. During 2007, the Company raised net proceeds of $683,000 through the sale of equity securities. During 2008, the company has raised approximately $75,000 from the sale of its equity securities. It is the Company's intention to raise additional capital through additional sales of its common stock. No assurance can be given that these funding strategies will be successful in providing the necessary funding to finance the operations of the Company. Additionally, there can be no assurance, even if successful in obtaining financing, the Company will be able to generate sufficient cash flows to fund future operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or amounts and classification of liabilities that might be necessary related to this uncertainty. C. BASIS OF PRESENTATION The unaudited financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The unaudited interim financial statements as of September 30, 2008 7 and 2007 reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are considered necessary for a fair presentation of its financial position as of September 30, 2008 and as of the result of its operations and its cash flows for the periods ended September 30, 2008 and 2007. The Unaudited Statements of Operations for the three and nine months ended September 30, 2007 and 2008 are not necessarily indicative of results for the full year. While the Company believes that the disclosures presented are adequate to make the information not misleading, these financial statements should be read in conjunction with the financial statements and accompanying notes included in the Company's Current Report on Form 10KSB for the year ended December 31, 2007. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES A. Net Loss Per Share Basic loss per share has been calculated using the weighted average number of common shares outstanding in accordance with FASB 128 "Earnings Per Share." All potentially dilutive securities, including options, convertible notes, convertible preferred stock and warrants have been excluded as common stock equivalents and diluted loss per share has not been presented as such securities are antidilutive due to the Company's net loss for all periods presented. At December 31, 2007 and September 30, 2008, the Company had warrants to purchase 7,013,800 and 6,999,398 shares of common stock, respectively, and employee stock options to purchase 3,746,147 and 4,296,147 shares of common stock outstanding which are not included in the calculation. B. USE OF ESTIMATES The preparation of the 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 disclosures of contingent assets and liabilities at the date of the financial statements and the recorded amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. C. Reclassifications Certain reclassifications were made to the presentation of the 2008 financial statements in order to conform to the 2007 financial statements. Such reclassifications had no effect on the prior year's results of operations. 8 D. Stock-Based Compensation In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123R (revised 2004), "Share- Based Payment" which revised Statement of Financial Standards No. 123, "Accounting for Stock-Based Compensation" This statement supersedes Opinion No. 25, "Accounting for Stock Issued to Employees." The statement addresses the accounting for share-based payment transactions with employees, eliminates the ability to account for share-based compensation transactions using the intrinsic value method pursuant to APB 25 and requires that the compensation costs relating to such transactions be recognized at fair value in the statement of operations. The revised statement has been implemented by the Company effective January 1, 2006. The Company continued to account for stock awards issued to non-employees under the fair value method as described in EITF 96-18 "Accounting for Equity Investments that are issued to Other than Employees for Acquiring or in Conjunction with Selling Goods or Services." The Company recorded approximately $78,598 in expenses related to stock options for the nine months ended September 30, 2008. Such amount is included in General and administrative expenses at September 30, 2008. E. Recent Accounting Pronouncements FASB 161 - Disclosures about Derivative Instruments and Hedging Activities -------------------------------------------------------------------------- In March 2008, the FASB issued FASB Statement No. 161, which amends and expands the disclosure requirements of FASB Statement No. 133 with the intent to provide users of financial statements with an enhanced understanding of; how and why an entity uses derivative instruments, how the derivative instruments and the related hedged items are accounted for and how the related hedged items affect an entity's financial position, performance and cash flows. This Statement is effective for financial statements for fiscal years and interim periods beginning after November 15, 2008. Management believes this Statement will have no impact on the financial statements of the Company once adopted. NOTE 3 - STOCKHOLDERS' DEFICIT A. Sales for Cash In March 2008, the Company issued 294,118 shares of common stock and 147,059 warrants to purchase shares of common stock at $.25 each to an individual for $50,000 in cash. In April 2008, the Company issued 147,059 shares of common stock and 7,029 warrants to purchase shares of common stock at $.25 each to an individual for $25,000 in cash. 9 B. Stock Issued for Services In February and March 2008, the Company issued 410,000 shares of common stock and 25,000 warrants to purchase shares of common stock at $.25 each. These shares and warrants were issued for services and were expensed at the then fair market value of the shares issued or the value of the services tendered. The amount expensed at March 31, 2008 was $82,000. In May 2008, the Company issued 114,000 shares of common stock for services with a fair value of $7,980. C. Stock Issued for Accounts Payable In April 2008, the Company entered into an agreement to issue 656,000 shares of common stock and a $20,000 note payable due on January 15th, 2009 for the satisfaction of a $151,081 trade payable. The Company recorded a gain of $19,881 on the transaction, representing the excess of the amount of the accounts payable retired over the fair value of the note and stock. NOTE 5 - RELATED PARTY TRANSACTIONS Included in selling, general and administrative expenses are salaries to immediate family members of an executive officer of the Company of approximately $9,000 and $27,000 for the three and nine month periods ended June 30, 2008 and $9,000 and $30,000 for the three and nine month periods ended June 30, 2007. In May 2008, an officer of the Company loaned the Company $25,000. The loan bears interest at 8% per annum and is due on March 31, 2009. In August 2008, an officer and a director of the Company each loaned the Company $20,000. The loans bear interest at 8% per annum and are due on March 31, 2009. In March 2008 an officer of the Company deferred $402,283 of accrued compensation to be paid no earlier than January 2011. NOTE 5 - COMMITMENTS AND CONTINGENCIES In August 2008, NuVim signed a letter of intent to merge with Innovative Technologies Corp. of America. At closing, the shareholders of Innovative will receive $2,300,000 and 4,250,000 shares of NuVim common stock. NuVim is now conducting its due diligence review and will execute a merger agreement upon satisfactory completion of its review. The merger is contingent upon NuVim receiving satisfactory financing for the purchase price and working capital. 10 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that are based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements include, but are not limited to, statements regarding: o possible or assumed future results of operations, including statements regarding revenue mix, cost of revenues, promotion of our products through advertising, sampling and other programs, changes to our internal financial controls, trends in our operating expenses and provision for income taxes, increased costs as a result of becoming a public company and expenses related to stock-based compensation; o financing plans, including the adequacy of financial resources to meet future needs; o business strategies, including any expansion into new products; o our industry environment, including our relationships with our significant customers and suppliers; o potential growth opportunities; and o the effects of competition. Some of our forward-looking statements can be identified by use of words such as "may," "will," "should," "potential," "continue," "expects," "anticipates," "intends," "plans," "believes" and "estimates." Forward-looking statements involve many risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements for a number of reasons, including those appearing under the caption "Factors Affecting Operating Results" and elsewhere in this Quarterly Report on Form 10-Q. The cautionary statements contained or referred to in this report should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our three quarters. We undertake no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Overview We produce, market, and distribute NuVim(R) beverage dietary supplements in refrigerated and shelf stable ready-to-drink beverages and powder mixes. NuVim utilizes the prebiotic fiber NutraFlora(R), minerals, vitamins and whey protein to provide important health benefits to its consumers. Whey protein, NuVim(R)'s largest ingredient, other than water, enhances physical 11 performance, enhances cardiovascular health, and promotes well being. NutraFlora(R), a prebiotic fiber is uniquely capable of promoting health supported by clinical studies by supporting the growth of beneficial (probiotic) bacteria which in turn provide health benefits such as an enhanced immune system and improved calcium and mineral absorption for better bone health. Studies also show that NutraFlora(R) helps improves digestive functions, contributes to a healthy cholesterol, and metabolism. In addition NuVim contains 100% of the recommended daily requirements of vitamin C, E, B12, and Zinc and 60% of the recommended daily requirement for vitamin A. NuVim products contain no fat, cholesterol, lactose, caffeine, artificial flavors or colors or high fructose corn syrup. As we move forward each year, we try to discover additional ingredients that can deliver health benefits and not compromise the NuVim great taste to help us make NuVim the best thing you can drink. Proposed Merger --------------- In August 2008 NuVim has executed a Letter of Intent for a merger with Innovative Technologies Corp. of America ("Innovative"), another manufacturer and distributor of health related beverages. Innovative's flagship product, Glacial Milk Complete Nutrition, is formulated to help provide overall wellness through the 120 nutrients in each serving including 16 essential vitamins, 72 sea source ionic minerals, 17 amino acids, 8 herbs, 3 essential fatty acids. Glacial Milk Complete Nutrition has been sold to Sam's clubs nationally since late 2006. Other Innovative products include Glacial Milk Joint Care, Glacial Milk Noni Complete, Glacial Milk All-In-One Complete Nutrition for Kids, Glacial Milk Complete Nutrition Black Cherry, and Petamins. These products are all sold on the Innovative web site, but the majority of the sales come from everyday sales at the 565 Sam's club's nationally and the Sam's Club Roadshow program. The Sam's Roadshow is a structured program which allows manufacturers to set up kiosks in a Sam's club and sell items that are not on the shelf everyday. The program produces additional profits at Sam's Club without the warehousing, store stocking and shipping costs. This merger will also bring ownership of Carb Crusher(R) (which is a tea product that helps block the absorption of calories and carbohydrates). In addition the merger will bring distribution rights to Hair of the Dog(R) (which, taken either at night or in the morning, helps mitigate the physiological effects of alcohol). Carb Crusher(R) has just been authorized for the Sam's Roadshow program and is expected to increase sales by a minimum of $1.5 million next year. Hair of the Dog(R) is just beginning to be introduced to the market. NuVim will merger Innovative into a wholly owned subsidiary. Prior to the merger, Innovative will reorganize itself to free itself of all long term debt, all administrative costs not related to the continuing business, and have positive working capital. In addition to owning two brands, Glacial Milk(R) and Carb Crusher(R), the merged company will own the distribution rights for Hair of the Dog(R), excluding internet sales. 12 When the merger is consummated, the owners of ITCA will receive $2.3 million and 4,250,000 shares of restricted NuVim common stock. Since signing the letter of intent, NuVim has conducted its due diligence, including an audit of Innovative's financial reports and records, sought up to $3.5 million net in financing to pay the cash portion of the purchase price and the expenses of the transaction as well as providing adequate working capital for the combined venture, and reach a formal agreement merger document. The Innovative acquisition provides significant synergies in manufacturing, sales, distribution and administration which should result in increased revenues and operational efficiencies. NuVim should be able to capitalize on its relationships with Wal-Mart and the military by offering Innovative's expanded range of technologically advanced products to these accounts. Innovative's national distribution of its Glacial Milk at Sam's Club provides the relationship to help increase total Sam's Club sales by adding both the new Glacial Milk Joint product and NuVim beverages to the Sam's Clubs. Sam's has been presented with a fourth quarter 2008 marketing program to insure the success of the Innovative products authorized. NuVim will continue to advance its and Innovative's product lines through internal development and possibly other synergistic acquisitions. NuVim's Existing Activities --------------------------- In the first quarter 2008 we commercially produced hot filled products and began to offer them for sale in test market. Sold in single serve 12 ounce bottles, distribution is targeted primarily to, K through 12 school systems, colleges, and hospital and business cafeterias. Since then we have put further production on hold until post merger. In the fourth quarter 2008 we plan to produce these products in the same co-packer location as the Innovative products. Selected convenience store groups will be a secondary target. NuVim(R)'s breakthrough in the hot fill products is the result of three years work to develop a shelf stable product which duplicates the great taste of the refrigerated products and brings the consumer the same wonderful health benefits. As the products are introduced to the schools, colleges, and business/hospital cafeterias it is expected that they will be met with high acceptance as a contribution to curbing obesity and diabetes, conditions that have reached epidemic proportions. Because the limited number of beverages selections offered in these points of distribution the ability for NuVim to gain consumer awareness and trial is much higher and at less marketing costs then it would be in outlets where the number of single serve beverages offered is much, much greater. For instance in a large convenience store the number of beverages offered could exceed 300 versus a school, college or hospital/business cafeteria where the total number of beverages in the cooler would be only 10 or 12. The US has over 5,500 hospitals with 5 million employees including 700,000 physicians. There are 41 million students in K through 12 and over 35 million students in high schools and 13 colleges. These institutions are the initial targets on which NuVim(R) will focus its network of commissioned sales representatives. We focus on developing the NuVim(R) brand through a mix of advertising and promotional programs that build consumer awareness, trial and repeat purchases. The marketing consists of television advertising newspaper advertising/advertorials, product sampling, coupon distribution, promotional price discounts, and a newly formed consumer NuVim(R) e-mail health newsletter that is distributed to consumers throughout the US every three weeks. NutraFlora(R) through their public relations firm also develops and airs news segments that include NuVim(R)'s health benefits. The television program Eye On America hosted by Greg Gumbel featuring NuVim products and their health benefits has aired nationally and regionally during the May and September and will have repeat airings in the fourth quarter. The NuVim segment on Eye on America includes interviews from nationally known nutritional experts Ruth Carey and Coni Francis Each marketing program adds to building the brand and these expenditures are essential to maintain the distribution and build the NuVim(R) brand. We continue to test various ways to find the most cost efficient means to use our marketing funds to increase consumer awareness, trial and repeat purchases. We believe that these advertising and promotional activities are critical to the long term growth of our business and expect to continue these programs in the future. We have distributed our refrigerated beverages since the year 2000 and are in over 900 Supermarkets in the Eastern United States. In late 2003 we began a test program with a single Wal-Mart supercenter. We are now in distribution in approximately 120 Wal-Mart supercenters in Florida. In the second quarter of 2008 we began distribution of our 64 ounce refrigerated beverage in US Military Base Commissaries. There are approximately 168 commissaries in the United States, each serving a US Military Base. In April 2008, we made our first shipments to two distribution centers serving 35 commissaries. These commissaries serve as the supermarket for our active and retired military personnel and their families. In November 2008 we received additional Commissary authorizations which now put NuVim into 27% of the total US commissaries. These commissaries are located from New Jersey to Florida. We have and will continue to support the commissary business with on site sampling and couponing. Our goal is to gain distribution in all 167 US commissaries and the approximately 80 commissaries overseas. We continue to sell to high potential retailers like Wal-Mart and regional supermarket chains and seek other avenues of high volume and profitable business like the military troop feeding, army hospitals, Veteran's hospitals, military Post Exchanges, schools, colleges and hospital and business cafeterias. We have produced a 30 second television commercial for the refrigerated products, a 60 second television commercial for the powder product and a 5 minute educational video for the product and will air these commercials throughout 2008 through Platinum Television Group headquartered in Deerfield Beach Florida. The commercials run every week in selected 14 markets on tightly targeted television programs. Platinum Television airs these commercials as part of our 2005 stock deal and our on going relationship with them. We have a commitment from PTG to air approximately 1,100 of these commercials during 2008. In 2008 we have had very limited funds to support any marketing activities especially the essential product sampling and advertising programs, which we believe are critical to maintain and increase sales of our products. Therefore, we used the small amount of funds available on promotions in accounts that we believe will offer the greatest potential for sales growth and expansion opportunities until we are able to raise funding for additional marketing programs. For this reason sales have fallen in 2008 as we adjust our distribution system in the Northeast to improve per case profitability and we have also reduced the marketing area we are serving for Wal-Mart. Despite the reductions we have a solid footprint in the military, Wal-Mart, several supermarket chains and now have been able to launch the single serve 12 ounce products. We also expect that we will enter the lemonade and tea categories to move the company from a strictly nutracuetical beverage company to one that also is in the higher volume thirst quenching categories of tea and lemonade. These new products will deliver the same health benefits of our refrigerated products with the exception of the whey protein. Our focus is to push forward in eight areas: > Increase the sales per store in existing Wal-Mart supercenters. > Increase the number of Wal-Mart distribution centers/stores stocking the NuVim(R) 64 ounce size. > Increase the business with the current profitable supermarket chain store groups. > Expand from the military commissary base of now 45 to all 168 commissaries in the United States and further expand commissary distribution to the US bases worldwide > Begin a 2008 test with the Department of Defense for using NuVim in troop feeding, army hospitals, veterans hospitals, field troops and the post exchange stores. > Introduce our new shelf stable 12 ounce beverages in three varieties to the K through 12 school systems, colleges and universities, hospital/business cafeterias, health clubs, and very selected convenience stores. > Sell the shelf stable 12 ounce from the NuVim web-site store at a delivered price of approximately $2.75 per bottle (currently selling at www.nuvim.com) > Increase sales of the powder mixes through the Company web-site, nutritional supplement retail chains, infomercials, and home shopping networks. > Gain accesses to the food service markets with the shelf stable products through beer distributors and the independent non-alcoholic distributors. > Open the export market with the 12 ounce shelf stable products. We have produced a 30 second television commercial for the refrigerated products, a 60 second television commercial for the powder product and a 5 minute powder infomercial for the product and plan to air these commercials in 2008 in selected programs like Eye on America, The Health Forum, The Competitive Edge and Today's Family. The 30 second commercials are aired monthly and will continue throughout the year 1,100 times. Eye on America will also run a 5 minute segment featuring NuVim(R). The segment aired on CNN Headline news and Region News Networks beginning in the second quarter. Exclusive interviews with nutrition experts 15 Ruth Carey R.D. LD and Coni Francis Ph.D. will discuss the lifetime benefits of drinking NuVim. Sales Results The table set forth below discloses selected data regarding sales for the quarter and the nine months ended September 30, 2008 and 2007. The data is not necessarily indicative of continuing trends. Sales of beverages are expressed in unit case volume. A "unit case" means a unit of measurement equal to 512 U.S. fluid ounces of finished beverage (eight 64-ounce containers). Unit case volume means the number of unit cases (or unit case equivalents) of beverages directly or indirectly sold by us. Gross cases sold to the customer represent the number of cases shipped to the customer prior to any returned cases containing product that has not been sold by its expiration date. Unit Case Volume/Case Sales
Three Months Ended Nine Months Ended September 30, September 30, ------------------------- ------------------------- 2008 2007 2008 2007 ---- ---- ---- ---- Gross Cases Sold 6,780 12,857 24,417 48,878 Gross Sales $ 127,016 $ 248,818 $ 467,706 $ 924,121 Net Sales $ 85,087 $ 180,036 $ 317,294 $ 653,104
Case shipments of our refrigerated product decreased by 6,077 and 24,416 or 47% and 50%, respectively, during the third quarter and the first nine months of 2008 compared with the same periods in the prior year. The reasons for the three month and nine month declines were the elimination of accounts that did not offer the possibility of future profits, a reduction in the number of Wal-Mart stores serviced and less promotional spending. The new military commissary business has begun to show the improvement in the trend of declining sales. We expect this improvement to continue at a much increased rate in the and fourth quarter with the increased number of commissaries authorized. We have experienced a substantial restructure of our business in the nine months of this year to prepare the company to focus on the merger with Innovative Technologies of America, military sales Sam's Club and Wal-Mart. This is the future of our company. It is certainly a bright note that we increased military commissary authorization. in the same store sales on the same varieties basis in the Wal-Mart Acradia distribution center we increased store sales by 16% and through the stores through the Winterhaven distribution center same store sales per variety increased 10%. Results of Operations Results of operations for the three months ended September 30, 2008 compared to the three months ended September 30, 2007 Gross Sales. For the three months ended September 30, 2008, gross sales were $127,016, a decrease of $121,802 or 49% over gross sales of $248,818 for the three months ended September 16 30, 2007. The decrease in gross sales is primarily attributable to NuVim's decision to close marginal accounts and the decrease in the number of Wal-Mart stores serviced offset somewhat in this quarter by the new military commissary business. Discounts, Allowances and Promotional Payments. For the three months ended September 30, 2008, promotional allowances and discounts were $41,929 a decrease of $26,852 or 39% from the promotional allowances and discounts of $68,782 for the three months ended September 30, 2007. This decrease is primarily attributable to lower returns of product after expiration date and less price based promotion, as well as lower sales. We record the price reductions, which are reimbursed by us to the retailers, in accordance with Financial Accounting Standards Board Emerging Issues Task Force, No. 01-09, Accounting for Consideration Given by a Vendor to a Customer. We expect to continue to use price promotions and coupon distribution selectively as a means to promote consumer sampling and trial of our product into the foreseeable future. As the product matures and a higher percentage of users of our product are repeat purchasers, we expect coupon expense, relative to gross sales, to decline although we will continue to use these marketing programs when needed. Product returned after its expiration date increased primarily due to the lower sales volume discussed above. Total Discounts, Allowances and Promotional payments as a percentage of gross sales increased from 28% for the three months ended September 30, 2007 to 33% for the three months ended September 30, 2008.
Three Months Ended Increase Percentage September 30, (Decrease) ------------------------------------------------------- 2008 2007 ---- ---- Discounts for timely payment $ 473 $ 1,562 $ (1,089) (70%) Product returned after its expiration date 11,695 31,169 (19,474) (63%) Promotional price allowances, coupons and other incentives 29,761 32,051 (2,290) (7%) Slotting fees 4,000 (4,000) (100%) ---------- ---------- ---------- -------- Total Discounts, Allowances and Promotional Payments $ 41,929 $ 68,782 $ (26,852) (39%) ========== ========== ========== ========
Net Sales. Net sales for the three months ended September 30, 2008 were $85,087, a decrease of $94,949, or 53% below net sales of $180,036 for the three months ended September 30, 2007. The decrease in net sales is primarily attributable to the elimination of unprofitable accounts offset by reduced price discounting. Cost of Sales. For the three months ended September 30, 2008, cost of sales was $101,804, a decrease of $6,735 or 6.2% from the cost of sales of $108,539 for the three months ended September 30, 2007. This reduction is much lower than the percentage reduction in both Gross and Net Sales because this quarter's Cost of Sales includes several batches with a cost of approximately $28,000 which had to be discarded because of supplier and producer errors. We have made claims against both which, when received, will be treated as Other Income in the period received. 17 Gross Profit. Gross profit was a loss of $(16,717) for the three months ended September 30, 2008, a decrease of $88,214 from the gross profit of $71,497 for the three months ended September 30, 2007. Gross Loss as a percentage of gross sales was (13)% for the three months ended September 30, 2008 compared to 28% for the three months ended September 30, 2007. Both Gross Profit amount and percentage decreased because of both the reduction in Gross Sales and the increase in Cost of Sales because of the supplier and producer errors. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $171,371 for the three months ended September 30, 2008, a decrease of $127,864, or 43% from selling, general and administrative expenses of $299,235 for the three months ended September 30, 2007. This is the result of continued economies in the executive suite. Loss from Operations. Loss from operations was $188,088 for the three months ended September 30, 2008 compared to $227,738 for the three months ended September 30, 2007, a reduction of 17%. The decreased loss despite the reduction of Sales and the production errors is due to continuing operating improvements and reduced administrative expenses offset by decreased Gross Profit,. Other Expense. Other Income for the three months ended September 30, 2008 was $15,400 consisting of Interest Expense. Net Loss. Net loss was $203,488 for the three months ended September 30, 2008 compared to $252,112 for the three months ended September 30, 2007. The $48,624 decrease in net loss despite reduced sales and the production and supplier errors is due to the sharp reduction of Selling, General, and Administrative Expense offset by reduced Gross Profit. Results of operations for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007 Gross Sales. For the nine months ended September 30, 2008, gross sales were $467,706, a decrease of $456,415, or 49% lower than gross sales of $924,121 for the nine months ended September 30, 2007. The decrease for the year to date is primarily due to NuVim's decision of close out marginal accounts and reduction of the number of Wal-Marts served during the second quarter offset by an increase in gross sales for nine months primarily attributable the increases at the new commissary business. Discounts, Allowances and Promotional Payments. For the nine months ended September 30, 2008, promotional allowances and discounts were $150,412, a decrease of $120,605 or 45%, from the promotional allowances and discounts of $271,017 for the nine months ended September 30, 2007. This decrease is primarily attributable to decreased promotional activities during the first nine months of the year arising from reduced volume and fewer returns. We record the price reductions, which are reimbursed by us to the retailers, in accordance with Financial Accounting Standards Board Emerging Issues Task Force, No. 01-09, Accounting for Consideration Given by a Vendor to a Customer. We expect to continue to use price 18 promotions and coupon distribution selectively as a means to promote consumer sampling and trial of our product into the foreseeable future. As the product matures and a higher percentage of users of our product are repeat purchasers, we expect coupon expense, relative to gross sales, to decline. Total Discounts, Allowances and Promotional payments as a percentage of gross sales increased from 29% for the nine months ended September 30, 2007 to 32% for the nine months ended September 30, 2008, reflecting the lower volume of sales and our increased efforts to market our beverages in the markets in which we are concentrating.
Nine months Ended Increase Percentage September 30, (Decrease) ------------------------------------------------------- 2008 2007 ---- ---- Discounts for timely payment $ 1,926 $ 6,777 $ (4,851) (72%) Product returned after its expiration date 56,985 90,655 (33,670) (37%) Promotional price allowances, coupons and other incentives 91,500 169,585 (78,085) (46.0%) Slotting fees 4,000 (4,000) (100.%) ---------- ---------- ----------- -------- Total Discounts, Allowances and Promotional Payments $ 150,412 $ 271,017 $ (120,605) (45%) ========== ========== =========== ========
Net Sales. Net sales for the nine months ended September 30, 2008 were $317,294 a decrease of $325,810, or 51% lower than net sales of $653,104 for the nine months ended September 30, 2007. The decrease in net sales is a combination of the elimination of marginal accounts and concentration of Wal-Mart distribution centers offset by a decrease in promotional activities. Cost of Sales. For the nine months ended September 30, 2008, cost of sales was $293,258, a decrease of $208,818, or 41% lower than cost of sales of $502,076 for the nine months ended September 30, 2007. Cost of sales as a percentage of gross sales was 63% for the nine months ended September 30, 2008, compared with 54% for the nine months ended September 30, 2007. During the third quarter NuVim experienced production losses valued at approximately $28,000 due to producer and supplier errors. We have begun claims against both. Any recoveries will be reflected as Other Income in the period received. Gross Profit. Gross profit was $24,035 for the nine months ended September 30, 2008, a decrease of $126,993 from the $151,028 gross profit for the nine months ended September 30, 2007. Gross profit as a percentage of gross sales was 5% for the nine months ended September 30, 2008, about one third of the gross profit percentage of approximately 16% for the nine months ended September 30, 2007. This change largely reflects the production loss incurred in the third quarter. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $700,535 for the nine months ended September 30, 2008, a decrease of $608,491, or 46% from selling, general and administrative expenses of $1,309,026 for the nine months ended September 30, 2007. Selling, general and administrative expenses exceeded net sales in 19 both periods as we change our business as discussed above. The decrease in selling, general and administrative expenses is due to decreases in payroll and related expenses, elimination of royalty, and reductions in insurance premiums and office related expenses. Loss from Operations. Loss from operations was $676,499 for the nine months ended September 30, 2008 compared to $1,157,998 for the nine months ended September 30, 2007. The $481,499 decrease in loss from operations was primarily attributable to the reduction in administrative expenses offset by the decline in Gross Profit. Other Expense. Other Expense for the nine months ended September 30, 2008 was $47,154 consisting of Interest expense of $67,035 (an $1,037 increase from the $65,998 recorded in the same period in 2007) partially offset by gains on accounts payable settlements (which increased from $13,521 in the first nine months of 2007 to 19,881 in the same period in 2008). Overall, Other Expenses decreased by $5,323 for the first nine months of 2008 compared with the same period in 2007. Net Loss. Net loss was $723,653 for the nine months ended September 30, 2008 compared to $1,210,475 for the nine months ended September 30, 2007. The $486,822 or 40% decrease in net loss was primarily attributable to the factors discussed above. Liquidity and Capital Resources Liquidity and Capital Resources Our operations to date have generated significant operating losses that have been funded through the issuance of common stock and external borrowings. We will require additional sources of outside capital to continue our operations. Through September 30, 2008, NuVim has raised a net of $75,000 in new working capital through the sale of common stock and has obtained services valued at approximately $168,573 in exchange for 524,000 shares of its common stock. In addition, NuVim received loans aggregating $65,000 from related parties. In addition, NuVim settled $164,000 of charges for accounting services by issuing 656,000 shares of its common stock. We have participated in the New Jersey Economic development Authority Tax Transfer program for the past 5 years and will again this year. Approximately $175,000 was received from this program in December of 2007. We have already applied for the 2008 program and anticipate receiving approximately $70,000 by December of this year. As NuVim continues to cut its losses, the amount received each year will decrease. We will need to raise additional financing to pay down our obligations, fund operating losses and to support sales and marketing programs to increase sales of our products. If we are not able to identify additional sources of financing, we may not be able to continue operations beyond 2008. Net cash used in operating activities for the nine months ended September 30, 2008 was 20 $184,014 compared to cash used in operating activities of $739,292 during the same period in 2007. The decrease in cash used by operating activities during the first nine months of $548,778 was primarily attributable to reduced Net Losses arising primarily from lower administrative expense. $169,200 was provided by financing activities during the nine months ended September 30, 2008 compared with $683,820 provided during the nine months ended September 30, 2007. In 2007, we conducted a private placement of our common stock. Application of Recent and Critical Accounting Policies and Pronouncements Recent Accounting Pronouncements Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements. Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure on contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions. Stock-Based Compensation The Company adopted SFAS No. 123R, "Share Based Payments." SFAS No. 123R requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards. In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company's stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company's forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company's actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. The impact of applying SFAS No. 123R approximated 21 $78,598 in compensation expense during the nine months ended September 30, 2008. Such amount is included in general and administrative expenses on the statement of operations. Critical accounting policies are defined as those that are reflective of significant judgments, estimates and uncertainties and potentially result in materially different results under different assumptions and conditions. For a detailed discussion on the application of these and other accounting policies, see Note 2 to our annual financial statements for the year ended December 31, 2007. Placement and Promotional Allowances and Credits for Product Returns As an inducement to our customers to promote our products in preferred locations of their stores, we provide placement and promotional allowances to certain customers. We also provide credits for customer coupon redemptions, consumer price reductions, and product which has not been sold by its expiration date. These allowances and credits are reflected as a reduction of revenue in accordance with Emerging Issues Task Force ("EITF") No. 01-9, which requires certain sales promotions and customer allowances previously classified as selling, general and administrative expenses to be classified as a reduction of sales or as cost of goods sold. Provisions for promotional allowances are recorded upon shipment and are typically based on shipments to the retailer during an agreed upon promotional period. We expect to offer promotional allowances at historical levels in the near future as an incentive to our customers. One time per account slotting or placement fees are deducted from revenue in the period paid. Provisions for coupon redemptions and product returned that has reached its expiration date are based on historical trends. Information such as the historical number of cases returned per unit shipped, product shelf life, current sales volume, and coupons distributed during the period are used to derive estimates of the required allowance. As we expand production and introduce new products, we may incur increased levels of returned goods. Also, our estimates assume we will continue as a going concern and maintain distribution with wholesalers and supermarkets that currently carry our product. If a supermarket or wholesaler discontinues our product, we may experience return rates in excess of our historical trend. This could result in material charges to future earnings for reimbursements to our customers for returned, unsold product. Accounts Receivable We evaluate the collectibility of our trade accounts receivable based on a number of factors. Accounts receivable are unsecured, non-interest bearing obligations that are typically due from customers between 10 and 30 days of the invoice date. We apply collections in accordance with customer remittance advices or to the oldest outstanding invoice if no remittance advice is presented with payment. Our overall receivables are approximately 17 days outstanding. We estimate an allowance for doubtful accounts and revenue adjustments based on historical trends and other criteria. We have had only one account that could not be collected since the inception of the company in 2000. The amount was less than $10,000. Further, as accounts receivable outstanding are deemed uncollectible or subject to adjustment, these allowances are adjusted accordingly. In circumstances where we become aware of a specific customer's inability to meet its financial obligations to us, a specific reserve for bad debts is 22 estimated and recorded which reduces the recognized receivable to the estimated amount we believe will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on our recent past history and an overall assessment of past due trade accounts receivable outstanding. We also estimate the amount of credits for product placement, promotion and expired product that are expected to be issued for product sold based on an evaluation of historical trends and record an allowance when the sale is recorded. Inflation We do not believe that inflation had a significant impact on our results of operations for the periods presented. Off-Balance Sheet Transactions At September 30, 2008, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Item 3. Quantitative and Qualitative Disclosures about Market Risk NuVim's business does not subject it to these types of risks. Item 4T. Controls and Procedures. (a) Evaluation of Disclosure Controls and Procedures Mr. Kundrat, NuVim's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the Exchange Act) means controls and other procedures of a company that are designed to ensure that this information is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based upon their evaluation of its disclosure controls and procedures, NuVim's chief executive and the chief financial officer have concluded that, as of September 30, 2008 and as of the date of filing, the controls, and procedures were effective at a reasonable assurance level and will continue to operate as designed. NuVim maintains certain internal controls over financial reporting that are appropriate, consistent with cost-benefit considerations, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes 23 in accordance with generally accepted accounting principles. (b) Management's Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Our management has concluded that, as of September 30, 2008, our internal control over financial reporting is effective based on these criteria. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report. (c) Changes in Internal Control over Financial Reporting No change effecting NuVim's internal controls occurred during the fourth quarter has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 24 PART II. OTHER INFORMATION Item 1. Legal Proceedings. There are at present no legal proceedings pending against the Company. Item 1A. Rick Factors Investing in our shares involves a high degree of risk. You should carefully consider the following risks, as well as the other information in this report, before deciding whether to invest in our shares. If any of the following risks actually occur, our business, financial condition, results of operations and liquidity could suffer. In that event, the trading price of our shares could decline and you might lose all or part of your investment. We Will Need to Raise Additional Capital. We are currently operating at a loss and expect our expenses to continue to increase as we expand our product line as well as our geographic presence throughout the United States. To date, we have relied primarily on financing transactions to fund operations. We could face unforeseen costs such as an increase in transportation costs resulting from the recent significant increases in the cost of fuel; or our revenues could fall short of our projections because retail outlets discontinue ordering our products or for reasons unrelated to our products, such as a revenue decline due to changes in consumer habits and preferences or we may achieve lower margins than planned on our products due to cost increases or competitive pricing pressure. During 2008, NuVim raised a net total of about $75,000 from accredited investors and obtained an additional $168,578 of services in exchange for common stock. We will still continue to need additional funds to continue our operations. New sources of capital may not be available to us when we need it or may be available only on terms we would find unacceptable. If such capital is not available on satisfactory terms, or is not available at all, we will be unable to continue to fully develop our business and our operations and our financial condition will be materially and adversely affected. Such a lack of additional funding could force us to cease operations altogether. Debt financing, if obtained, could increase our expenses and would be required to be repaid regardless of operating results. In addition, if we raise additional funds through the issuance of equity, equity-related or convertible debt securities, these securities may have rights, preferences or privileges senior to those of the rights of our ordinary shares and our shareholders may experience additional dilution. Any such developments can adversely affect your investment in our company, harm our financial and operating results, and cause our share price to decline. Our Auditors Have Substantial Doubt About Our Ability To Continue As A Going Concern. 25 In their report in connection with our 2007 and 2006 financial statements, both our auditors included an explanatory paragraph stating that, because we have incurred net losses and have a net capital deficiency for the years ended December 31, 2006 and 2007, there is substantial doubt about our ability to continue as a going concern. The extension of $650,000 of debt and interest thereon to a payable date of January 15, 2011 does alleviate the immediate debt concerns. Our continued existence will depend in large part upon our ability to successfully secure additional financing to fund future operations. Our initial public offering was not sufficient to completely alleviate these concerns; the proceeds have been adequate to fund operations to date, but we will need to raise additional funding to continue operations. If we are not able to achieve positive cash flow from operations or to secure additional financing as needed, we will continue to experience the risk that we will not be able to continue as a going concern. Our Limited Operating History Makes Evaluation Of Our Business Difficult. We have a limited operating history and have encountered, and expect to continue to encounter, many of the difficulties and uncertainties often faced by early stage companies. We commenced our business operations in 1999 and began marketing our initial products in 2000 on a limited basis. Accordingly, we have only a limited operating history with which you can evaluate our business and prospects. An investor in our units must consider our business and prospects in light of the risks, uncertainties and difficulties frequently encountered by early stage companies, including limited capital, delays in product development, possible marketing and sales obstacles and delays, inability to gain customer acceptance or to achieve significant distribution of our products to customers and significant competition. We cannot be certain that we will successfully address these risks. If we are unable to address these risks, our business may not grow, our stock price may suffer and/or we may be unable to stay in business. We Have A History Of Losses And We Expect To Continue To Operate At A Loss For The Foreseeable Future. Since our inception in 1999, we have incurred net losses in every year, including net losses of $1,449,378 for the year ended December 31, 2007 and $723,653 for the nine months ended September 30, 2008. We had a working capital deficit of $689,227 at September 30, 2008 and have negative cash flows from operations. As a result of ongoing operating losses, we also had an accumulated deficit of $24,197,051 and a stockholders' deficit of $2,166,264 at the same date. We expect to incur losses until at least through 2008 and may never become profitable. We also expect that our expenses will not increase substantially for the foreseeable future as we seek to expand our product line and sales and distribution network, implement internal systems and infrastructure and comply with the legal, accounting and corporate governance requirements imposed upon public companies. Our Continued Progress Depends Of Consumer Acceptance of the Reformulated Beverage In the first quarter of 2007, NuVim introduced a reformulated beverage and began producing it at a new plant. Although the new formulation maintains the same taste, reduces calories per serving from 70 to 45, eliminates High Fructose Corn Syrup, as an ingredient, and 26 introduces NutraFlora(R) an active ingredient with more, and more recent, clinical support for its improvement of mineral absorption, particularly the calcium and magnesium necessary for bone strength, reinforcing the immune system, our consumers may not all continue to enjoy the NuVim(R) beverages and new customers attracted by the reduced sugar and calories and the improved health benefits may not replace all the old customers lost because of the changes. Our Business Depends On The Acceptance Of Our Products In Both Existing And New Marketing Areas. We intend to expand into new geographic areas and broaden our product offerings to generate additional sales. Our refrigerated beverage products are currently available from southern Connecticut to Miami and as far West as Pittsburgh though military commissaries and some units of such supermarket chains as ShopRite, Pathmark, A&P, Gristedes, Food Emporium, Key Foods, Associated Foods, Walbaums, Giant, Giant Eagle, and Wal-Mart. Although marketing funds have been limited, we have been able to maintain distribution due to our loyal consumer base who have felt the NuVim difference and continue to buy NuVim on a regular basis. The supermarket chain accounts see NuVim as a one of a kind product that offers the consumer a healthily choice to high sugar and high caffeine carbonated and non-carbonated beverages. We do not know whether the level of market acceptance we have received in our current markets for our products will be matched or exceeded in the geographic locations we are newly serving or in other areas of the country as we expand our distribution in the future. We also will need to raise additional financing to support this expansion. We can give no assurance that we will expand into new geographic areas. It is unlikely that we will achieve profitability in 2008, but possibly could achieve profitability on a monthly basis toward the end of next year. Consumers Who Try Our Products May Not Experience The Health Benefits We Claim, Which May Cause Them To Discontinue Using Our Products. Although there is substantial clinical evidence showing that NuVim(R)'s ingredients produce the desired results, there have been no studies of our specific formulation. Therefore, we currently cannot confirm that the health benefits of our products will be evident to casual consumers of our products. Consumers may determine that drinking 12 ounces of NuVim per day for a minimum of 30 days requires more discipline and expense than they are willing to devote. If consumers do not use our product in the quantity or for the duration we recommend, they may not achieve the health benefits we claim, which may cause them to make alternative nutritional beverage and/or dietary supplement purchasing decisions. Our Business May Suffer From Lack Of Diversification. Our business is centered on nutritional beverages. The risks associated with focusing on a limited product line are substantial. If consumers do not accept our products or if there is a general decline in market demand for, or any significant decrease in, the consumption of nutritional beverages, we are not financially or operationally capable of introducing alternative products within a short time frame. As a result, such lack of acceptance or market demand 27 decline could cause us to cease operations. The addition of our new shelf stable products offers us a broader base of outlets to distribute our products decreasing our total dependence on the refrigerated distribution network. Expansion Of Our Business Is Dependent On Our Ability To Expand Production. We currently manufacture our refrigerated product line at Mountainside Farms in Roxbury, New York We are in negotiation with several companies to manufacture the shelf stable products. Our ability to expand beyond our current marketing areas depends on, among other things, the ability to produce our product in commercial quantities sufficient to satisfy the increased demand. Although our present production capacity is sufficient to meet our current and short-term future production needs, production capacity may not be adequate to supply future needs. If additional production capacity becomes needed, it will be necessary to engage additional co-packers or to expand production capacity at our present co-packer facility. If we expand production at Mountainside Farms, we risk having to pay significantly greater transportation costs to transport our products to warehouses in other regions of the United States. Any new co-packing arrangement raises the additional risk of higher marginal costs than we currently enjoy since we would be required to negotiate new terms with any new co-packer. We may not be able to pass along these higher costs to our customers. If we are unable to pass along the higher production costs imposed by new co-packers to our customers, we either will suffer lower gross margins and lower profitability, once achieved, or we may be unable to expand our business as we have planned, which could disappoint our stockholders. Our Business Contains Risks Due To The Perishable Nature Of Our Product. Our current refrigerated product is a perishable beverage that has a limited shelf-life of approximately 83 days. This restricted shelf life means that we do not have any significant finished goods inventory and our operating results are highly dependent on our ability to accurately forecast near term sales in order to adjust our raw materials sourcing and production needs. When we do not accurately forecast product demand, we are either unable to meet higher than anticipated demand or we produce excess inventory that cannot be profitably sold. Additionally, our customers have the right to return products that are not sold by their expiration date. Therefore, inaccurate forecasts that either mean that we are unable meet higher than anticipated demand or that result in excess production, or significant amounts of product returns on any of our products that are not sold by the expiration date could cause customer dissatisfaction, unnecessary expense and a possible decline in profitability. We have recently begun producing limited quantities of a shelf stable product with a shelf life of approximately 180 days. This should address some of these problems. Government Regulation May Adversely Affect Our Business. Our business is subject to government regulation, principally the United States Food and Drug Administration (the "FDA"), which regulates the processing, formulation, packaging, labeling and advertising of dietary products, and to a lesser extent, state governments, where state attorneys general have authority to enforce their state consumer 28 protection acts. Specifically, we are subject to the Dietary Supplement and Health Education Act ("DSHEA"). Under DSHEA, dietary supplements are permitted to make "statements of nutritional support" with notice to the FDA, but without FDA pre-approval. The FDA does not allow claims that a dietary product may mitigate, treat, cure or prevent disease. There can be no assurance that at some future time the FDA will not determine that the statement of nutritional support we make on our packaging is a prohibited claim rather than an acceptable nutritional support statement. Such a determination by the FDA would require deletion of the treatment, cure or prevention of disease claim, or, if it is to be used at all, submission by our company and the approval by the FDA of a new drug application, which would entail costly and time-consuming clinical studies, or revision to a health claim, which would require demonstration of substantiated scientific evidence to support such claim and would also consume considerable management time and financial resources. Our advertising of dietary supplement products is also subject to regulation by the Federal Trade Commission (the "FTC") under the Federal Trade Commission Act, which prohibits unfair or deceptive trade practices, including false or misleading advertising. The FTC in recent years has brought a number of actions challenging claims made by companies that suggest that their products are dietary supplements. No assurance can be given that actions will not be brought against us by the FTC or any other party challenging the validity of our product advertising claims. Our Business May Be Subject To Product Liability Claims Relating To Consumer Use Of Our Products. As a marketer of beverages that are ingested by consumers, we face an inherent risk of exposure to product liability claims if the use of our products results in injury or our labeling contains inadequate warnings concerning potential side effects. With respect to product liability claims, we have obtained a $2.0 million liability insurance policy ($2.0 million per occurrence), which we believe is adequate for our kind of business activity. The policy contains certain exclusions that would pertain to food products such as the additional products exclusion for bodily injury or property damage arising out of the manufacture, handling, distribution, sale, application or use of certain specified products (e.g., silicone, latex, and dexfenfluramine, among others), the intended injury and the willful and intentional acts exclusions. There can be no assurance that such insurance will continue to be available at a reasonable cost, or, if available, that it will be adequate to cover potential liabilities. If we are found liable for product liability claims that exceed our coverage or are subject to a policy exclusion, such liability could require us to pay financial losses for which we have not budgeted and may not have adequate resources to cover. If the uninsured losses were significantly large enough to impact our ability to continue our then-existing level of operations, we might experience a decline in net income and earnings per share, and our stock price might suffer. In an effort to limit any liability, we generally obtain contractual indemnification from parties supplying raw materials or marketing our products. Such indemnification is limited, however, by the terms of each related contract and, as a practical matter, by the creditworthiness of the indemnifying party. Despite the insurance coverage that we plan on maintaining, it is possible that we may be 29 sued if one or more consumers believe our products have caused them harm. While no such claims have been made to date, the results of any such suit could result in significant financial damages to us, as well as serious damage to the reputation and public perception of our company, even if we are ultimately found not to be at fault. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Sales for Cash None Common Stock Issued for Services None Item 3. Defaults Upon Senior Securities None Item 4. - Submission of Matters to Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits (a) Current Reports on Form 8-K: None (b) The following exhibits are filed as part of this report:
Exhibit No. Description 31.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of the Chief Executive pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
30 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NUVIM, INC. Date: November 13, 2008 By: /s/ RICHARD P. KUNDRAT Richard P. Kundrat Chief Executive Officer and Chairman of the Board (Principal Executive Officer) Date: November 13, 2008 By: /s/ RICHARD P. KUNDRAT Richard P. Kundrat, Chief Financial Officer (Principal Financial and Accounting Officer) 31

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Ticker: NUVM
CIK: 1170652
Form Type: 10-Q Quarterly Report
Accession Number: 0001133796-08-000327
Submitted to the SEC: Thu Nov 13 2008 12:00:14 PM EST
Accepted by the SEC: Thu Nov 13 2008
Period: Tuesday, September 30, 2008
Industry: Wholesale Groceries And Related Products

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