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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 Report (Date of earliest event reported) June 24, 1999
_______________
Casinovations Incorporated
________________________________________________________________
(Exact name of Registrant as specified in charter)
Nevada
________________________________________________________________
(State or other jurisdiction of incorporation)
000-25855 91-1696010
____________________ ______________________
(Commission File (IRS Employee
Number) Identification No.)
6744 South Spencer Street, Las Vegas, Nevada 89119
___________________________________________________ ___________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702) 733-7195
______________
Not Applicable
_________________________________________________________________
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On June 24, 1999, Casinovations Incorporated, a Nevada
corporation (the "Company"), distributed to all of its
stockholders of record a letter entitled, Stockholder Update, in
which the Company provided an update as to certain matters
concerning the Company, including, without limitation,
appointments to the Company's Board of Directors, appointment of
Timothy Leybold as the Company's Chief Financial Officer,
manufacturing, sales and service, financial condition, product
development and market for the Company's common stock.
The aforementioned summary is not intended to be exhaustive
and is subject to, and qualified in its entirety by, reference to
the Stockholder Update, a copy of which is attached hereto as
Exhibit 99.1.
The Stockholder Update contains statements that may be
considered forward-looking statements within the meaning of
Section 27a of the Securities Act of 1933, as amended, and
Section 21e of the Securities Exchange Act of 1934, as amended,
such as statements relating to future prospects and liquidity
requirements of the Company. The forward looking statements
include those with respect to future working capital
requirements, acceleration of manufacturing capabilities,
continued development of the company's products, future sales of
the Company's products, market maker activities and other
statements regarding events or conditions which have not yet
taken place. Such forward-looking information involves important
risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results
may differ from those expressed in any forward-looking statements
made herein. Those risks and uncertainties include, but are not
limited to, risks relating to gaming regulations (including
actions affecting licensing), leverage and debt service
(including sensitivity to fluctuations in interest rates),
domestic or global economic conditions and changes in federal or
state tax laws or the administration of such laws.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Exhibits.
99.1 Stockholder Update dated June 24, 1999.
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SIGNATURE
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.
CASINOVATIONS INCORPORATED
(Registrant)
Date: July 12, 1999 By: /s/ Steven J. Blad
-----------------------------
Steven J. Blad
President and Chief
Executive Officer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
NUMBER ----------- NUMBER
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99.1 Stockholder Update dated June 24, 1999. 5
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[LOGO]
CASINOVATIONS INCORPORATED
STOCKHOLDER UPDATE
June 24, 1999
Dear Stockholder,
With so much activity underway, I wanted to share several
developments within our Company. This letter will cover a number
of pertinent topics that are currently impacting our Company, and
are divided into various subsections of my letter.
CORPORATE NEWS
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HUSON RESIGNS AS CHAIRMAN; SMITH NAMED TO POSITION...Due to
health issues, Richard "Dick" Huson has resigned his position as
Chairman of the Board of Directors, but remains a director. Bob
Smith has been named Chairman of the Board and Jill Bayless as
Vice Chairman. Mr. Smith, Ms. Bayless and myself form the
Executive Committee for Casinovations.
BAYLESS, JASLOW NAMED TO BOARD OF DIRECTORS... Ms. Jill Bayless
and Dr. Richard Jaslow were named to the Company's Board of
Directors in April 1999. Ms. Bayless has extensive experience in
industrial relations and manufacturing, and is the President of
North Pacific, an Oregon consulting and management firm. Dr.
Jaslow is an orthopedic surgeon in a private practice in
Massachusetts and has been involved with several successful
business enterprises during the past 10 years.
LEYBOLD NAMED CHIEF FINANCIAL OFFICER, VICE PRESIDENT OF
FINANCE...Timothy Leybold, formerly the Chief Financial Officer
for RLC Industries, Inc., a building products manufacturing
company with operations in Oregon and California and revenues in
excess of $800 million, was named CFO and Vice President of
Finance for Casinovations in June 1999. In this capacity, he
will oversee all financial and technology practices within the
company. Mr. Leybold is a Certified Public Accountant (CPA) and
earned his B.B.A. from the University of Portland and his M.B.A.
from the University of Oregon. He is a member of the Financial
Executives Institute, Association for Corporate Growth, and
American Society of Certified Public Accountants.
BROWN NAMED TO CORPORATE COUNSEL POSITION... Stacie Brown,
formerly in private practice with Dickerson, Dickerson, Consul
and Pocker, will join Casinovations on July 8th as the Company's
in-house legal counsel. In this capacity, she will oversee all
legal issues regarding corporate transactions, gaming compliance,
patent issues, and human resource matters. Brown graduated summa
cum laude from Ball State University and earned her J.D. from the
University of Michigan.
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MANUFACTURING ADDITION COMPLETED... A 2,300 square foot
administrative facility for the manufacturing/production division
has enabled your Company to centralize Random Ejection Shuffler(TM)
(Shuffler) testing and service/repair work under one roof, and
provides the necessary work environment for the manufacturing
management team.
SALES & SERVICE
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SHUFFLER INSTALLATIONS, COMMITMENTS INCREASE... The Company
continues to add jurisdictions where Casinovations is approved,
and orders for the Random Ejection Shuffler(TM) are accelerating.
Currently, more than 30 casinos in Nevada, along with others in
Mississippi and Washington, the countries of Columbia,
Czechoslovakia, Hong Kong and South Korea, and two cruise ships
have installed the automatic card shufflers. Another 45 casinos
have committed to lease or purchase an additional 290 shufflers,
and contracts are in the works for another 1,000 shufflers for
1999 delivery.
100 TABLE GAMES PLACED, COMMITTED... The Company's Bonus
Blackjack and Wild Hold 'Em Fold 'Em Stud Poker games can be
found on casino tables in Mississippi, Nevada, and Iowa.
Currently 44 casinos have installed 100 games.
COMPANY OPENS FOUR NEW SERVICE CENTERS... Casinovations has
established service centers in Reno and Tahoe, NV, Seattle, WA,
and Biloxi and Tunica, MS, to better serve our customers' needs.
INTERNATIONAL SALES DEVELOPMENT... Our executives and sales team
are traveling throughout the United States and abroad to exhibit
and educate casino operators about Casinovations' products. We
have capitalized upon our distribution network by utilizing space
in their booths at international shows, rather than hosting our
own exhibit. Trade shows attended to date include the
International Casino Exhibition in London, the American Gaming,
Lodging & Leisure Summit in Las Vegas, the National Indian Gaming
Association in Tuscon, AZ, the Southern Gaming Summit in Biloxi,
MS, the Asian Pacific Gaming Conference in Manila, the
Philippines, and the Caribbean Gaming & Tourism Convention in
Puerto Rico. Plans are also underway to participate during trade
shows in Australia and Las Vegas later this year.
MANUFACTURING
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MANUFACTURING FOR SECUREDROP(TM) SLOT ACCOUNTING SYSTEM
UNDERWAY... Ten thousand new SecureDrop buckets and bases have
arrived, and 1,000 complete systems are being built. The second
SecureDrop bucket design, developed for Slant Top slot machines,
has been prototyped and approved, with an additional 10,000
buckets and bases on order and due by late July. The SecureDrop
Mobile Count System is undergoing engineering modifications
required by Nevada Gaming Control. We are reaching the end of the
journey for regulatory approval there and in a number of
jurisdictions, which enable the Company to proceed with sales.
The carts have also generated tremendous interest during their
exhibition at recent trade shows.
RANDOM EJECTION SHUFFLER MANUFACTURING UPDATE... Our current
production rate is exactly "per plan" at 10 Random Ejection
Shufflers per day with almost no overtime expense. Our May
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objectives were also realized. Our Shuffler performance has
improved substantially based on reliable field reports, and
quality workmanship continues to improve. A new production line
is being developed exclusively for the eight-deck units. The
Company has also added a mechanical engineer to the staff for
production fixtures and prototypes, as well as a purchasing
manager to ensure high quality strategic materials planning.
SHUFFLEMASTER LITIGATION SETTLEMENT... As of the date of this
letter, we have agreed to settle the pending litigation with
ShuffleMaster for a total of $20,000.00, essentially a nominal
payment covering certain out-of-pocket expenses for the
relocation of one of our employees. We believe that this
settlement will allow us to go forward and conduct business
without unnecessary distractions of defending a nuisance lawsuit.
FINANCIAL NEWS
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VOLUNTARY ACCELERATION OF CONVERSION DATE OF CERTAIN 9.5%
CONVERTIBLE NOTES DUE 2004 AND EXERCISE OF CERTAIN CLASS E
WARRANTS... Pursuant to notices distributed by the Company to
holders of the Company's 9.5% Convertible Notes Due 2004 (the
"Convertible Notes"), the Company offered to provide a one-time
two week window that expired on May 31, 1999 for the conversion
of the Convertible Notes into shares of the Company's common
stock at the stated conversion rate of $2.60 per share. Pursuant
to its terms, the Convertible Notes may be converted beginning on
the later of six (6) months from the date of issuance or
September 1, 1999.
Additionally, pursuant to notices distributed by the Company to
holders of the Company's Class E Warrants, the Company issued a
voluntary call of the Class E Warrants that expired on May 31,
1999 at the stated exercise price of $3.00 per share. In exchange
for the conversion of the Convertible Notes and the exercise of
the Class E Warrants, the Company offered to issue an additional
set of warrants equal to the number of and on similar terms and
conditions as the Class E Warrants exercised. At the expiration
of the one-time conversion window and call period, holders of the
Convertible Notes converted $400,000 of Convertible Notes into
153,843 shares of common stock and exercised 72,800 Class E
Warrants into 72,800 shares of common stock for an aggregate of
226,643 shares of common stock.
In exchange for the conversion and exercise, the Company issued
72,800 warrants to the persons who converted their Convertible
Notes and exercised their Class E Warrants. As a result,
$1,500,000 of the Convertible Notes and 273,000 of the Class E
warrants issued to holders of the Convertible Notes remain
outstanding. Through the conversion of the Convertible Notes and
the exercise of the Class E Warrants, the Company converted
$400,000 of indebtedness into common stock and received proceeds
of $218,400. The Company intends to use such proceeds for general
working capital purposes.
CASINOVATIONS ANNOUNCES PLACEMENT OF SHARES AND CONVERSION OF
INDEBTEDNESS... Casinovations has entered into a subscription
agreement with James E. Crabbe, a stockholder of the Company, for
the sale of 2,000,000 shares of the Company's common stock and a
subscription agreement with Richard S. Huson, a director and
controlling stockholder of the Company, for the conversion of
$999,999 of outstanding indebtedness into shares of the Company's
common stock.
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Pursuant to the subscription agreement dated May 28, 1999 by and
between the Company and Mr. Crabbe; Mr. Crabbe will purchase
2,000,000 shares of the Company's common stock for $2.60 per
share for an aggregate subscription amount of $5,200,000.
Pursuant to the terms of the subscription agreement, Mr. Crabbe
delivered $1,300,000 upon execution of the subscription agreement
and agreed to pay the balance of $3,900,000, in no more than
three equal installments of not less than $1,300,000 each, by
July 10, 1999. Upon receipt of such payment or payments, the
Company will immediately cause the correct number of the Shares
(based upon $2.60 per share) to be issued to Mr. Crabbe. The
Company granted Mr. Crabbe piggyback registration rights as part
of this transaction. After the complete funding of the
subscription agreement and issuance of 2,000,000 shares of common
stock, Mr. Crabbe will become the second largest stockholder of
the Company and filed a Schedule 13D in June 1999.
Pursuant to the subscription agreement dated May 28, 1999 by and
between the Company and Mr. Huson, Mr. Huson agreed to convert a
certain portion of that certain Promissory Note dated December
31, 1998 in the original principal amount of $1,235,000 issued by
the Company in favor of Mr. Huson for shares of the Company's
common stock at a conversion rate of $2.60 per share. Pursuant
to the terms of the this subscription agreement, Mr. Huson will
have converted $999,999 of outstanding indebtedness under the
promissory into 384,615 shares of common stock and received a
replacement promissory note.
The sale of shares of common stock to James Crabbe and the
conversion of outstanding indebtedness owed to Richard Huson into
shares of common stock had positive impacts on the balance sheet
of Casinovations. Through the infusion of Mr. Crabbe's
subscription amount and the elimination of $999,999 from the
Company's liabilities, Casinovations will be in a position to
continue its growth and meet its working capital requirements for
the foreseeable future. Casinovations will use the proceeds from
the issuance of the Shares to Mr. Crabbe for the acceleration of
the Company's manufacturing capabilities to meet the increasing
demand for its products, the international expansion of the
Company's intellectual property rights, the continued development
of the Company's SecureDrop TM Slot Accounting System, and
general working capital purposes.
DEVELOPMENT/NEW PRODUCT/NEW SHUFFLER RELEASE... "CVI UNIVERSAL
SHUFFLER(TM)"... The Company plans on premiering the "CVI
UNIVERSAL SHUFFLER" at the World Gaming Conference in September
1999. This shuffler shall use the patented Random Ejection
Shuffler platform. This shuffler is designed to operate as a
continuous, batch or specialty shuffler. Our major competitor
manufactures at least five completely different shuffler models
to accomplish what our "CVI UNIVERSAL SHUFFLER" can do in one
unit. The "CVI UNIVERSAL SHUFFLER" will feature a convenient
keypad that will electronically display important information to
the dealer. This keypad will allow the dealer to change speciality
games, vertify card counts, and perform diagnostics.
Bill O'Hara, Senior Vice President says, "After a decade of being
personally involved with the development and marketing of one of
the first two automatic shufflers, along with the involvement and
familiarization of over 18 other shuffler models, I truly feel
this is a great day for the casinos. They will now be able to
place an order for the number of tables they want shufflers on,
and not be concerned with what the game is or what type of
shufflers they need or
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want, at a price that is extremely affordable." Dean Barnett,
Vice President of Sales states, "The genius of the "CVI UNIVERSAL
SHUFFLER" is that it will be applicable to almost every type of
table game, which means that we can enter the vast untapped
markets of specialty games and casinos desiring continuous
shufflers." Jesse Gonzalez, Vice President of Manufacturing and
Production believes, "The development of a multi-operational
shuffler represents an outstanding logistical material control
and technical process advantage."
TRADING STATUS UPDATE... We have met with several potential market
makers that are considering acting as the first market maker for
the Company's common stock. Your Board felt that the Company
should affiliate only with credible market makers and has refused
to deal with those who do not meet the Board's scrutiny. A
concern expressed by some of the better quality market makers was
the condition of the Company's balance sheet. As a result of the
positive developments discussed above, we believe that the
Company's improved balance sheet will greatly enhance the
willingness of one or more quality market makers to begin quoting
the Company's shares.
Within the next few weeks, I believe we will be able to
communicate with you again and give you a more specific time
frame.
In closing, let me assure each of you that the delays caused by
the processes which we have gone through are intended to enhance
our stock value and performance. If you have additional
questions we will be happy to talk to you on an individual basis
and will answer all of your questions to the best of our ability.
Sincerely,
/s/ Steven J. Blad
Steven J. Blad
President & Chief Executive Officer
THIS LETTER CONTAINS STATEMENTS THAT MAY BE CONSIDERED FORWARD-
LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, SUCH AS STATEMENTS
RELATING TO FUTURE PROSPECTS AND LIQUIDITY REQUIREMENTS OF THE
COMPANY. THE FORWARD LOOKING STATEMENTS INCLUDE THOSE WITH
RESPECT TO FUTURE WORKING CAPITAL REQUIREMENTS, ACCELERATION OF
MANUFACTURING CAPABILITIES, CONTINUED DEVELOPMENT OF THE
COMPANY'S PRODUCTS, FUTURE SALES OF THE COMPANY'S PRODUCTS,
MARKET MAKER ACTIVITIES AND OTHER STATEMENTS REGARDING EVENTS OR
CONDITIONS WHICH HAVE NOT YET TAKEN PLACE. SUCH FORWARD-LOOKING
INFORMATION INVOLVES IMPORTANT RISKS AND UNCERTAINTIES THAT COULD
SIGNIFICANTLY AFFECT ANTICIPATED RESULTS IN THE FUTURE AND,
ACCORDINGLY, SUCH RESULTS MAY DIFFER FROM THOSE EXPRESSED IN ANY
FORWARD-LOOKING STATEMENTS MADE HEREIN. THOSE RISKS AND
UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, RISKS RELATING TO
GAMING REGULATIONS (INCLUDING ACTIONS AFFECTING LICENSING),
LEVERAGE AND DEBT SERVICE (INCLUDING SENSITIVITY TO FLUCTUATIONS
IN INTEREST RATES), DOMESTIC OR GLOBAL ECONOMIC CONDITIONS AND
CHANGES IN FEDERAL OR STATE TAX LAWS OR THE ADMINISTRATION OF
SUCH LAWS.
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