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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2000
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OR
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from: _________________ to _________________
Commission file number: 000-25855
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CVI Technology, Inc.
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(Exact name of small business issuer as
specified in its charter)
Nevada 91-1696010
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6830 Spencer Street, Las Vegas, Nevada 89119
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(Address of principal executive offices)
(702) 733-7195
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(Issuer's telephone number)
Casinovations Incorporated
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (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 reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
10,746,144 shares of common stock, $.001 par value, as of April 20, 2000
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Transitional Small Business Disclosure Format (check one);
YES [ ] NO [X]
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FORM 10-QSB
TABLE OF CONTENTS
PAGE
NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Balance Sheet 3
Statement of Operations 4
Statement of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURE 15
EXHIBIT INDEX 16
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
CVI TECHNOLOGY, INC.
BALANCE SHEET
<CAPTION>
(UNAUDITED)
March 31, December 31,
2000 1999
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 181,870 $ 1,169,924
Accounts receivable, trade 1,420,072 150,074
Other receivables 26,984 192,794
Inventories 1,727,840 1,642,195
Prepaid expenses 89,611 290,921
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Total current assets 3,446,377 3,445,908
Property and equipment, including revenue producing
equipment, at cost, net of accumulated depreciation
of $718,174 and $532,797 2,703,489 2,851,637
Intangible assets, at cost, net of
accumulated amortization of $67,384 and $60,268 231,318 212,438
Deferred interest 661,833 611,119
Deposits 583,576 507,823
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$ 7,626,593 $ 7,628,925
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of leases payable $ 1,478,587 $ 1,266,631
Accounts payable 1,013,868 853,062
Accrued expenses 429,018 354,865
Accrued interest 78,584 95,209
Current portion of stockholder loans 108,499 105,130
Convertible debt 200,000 -
Customer deposits 168,633 171,068
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Total current liabilities 3,477,189 2,845,964
Leases payable 2,962,444 2,480,394
Convertible debt 1,500,000 1,500,000
Stockholder loans 161,350 190,277
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Total liabilities 8,100,983 7,016,635
Stockholders' equity:
Common stock, $.001 par value,
40,000,000 shares authorized, 10,746,144 shares
and 10,746,144 shares issued and outstanding,
respectively 10,746 10,746
Additional paid-in capital 16,956,363 16,956,363
Deficit accumulated during development stage (17,441,498) (16,354,821)
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Total stockholders' equity (474,389) 612,289
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$ 7,626,593 $ 7,628,925
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</TABLE>
See accompanying notes to unaudited financial statements.
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CVI TECHNOLOGY, INC.
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
Three Months Ended
March 31, March 31,
2000 1999
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Sales $ 1,367,961 $ 15,500
Rental income 323,979 46,520
Other Income 17,894 7,054
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1,709,834 69,074
Cost of sales 1,265,422 5,745
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Gross margin 444,412 63,329
General and administrative 935,646 1,086,838
Research and development 380,970 69,661
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(Loss) from operations (872,201) (1,093,170)
Interest expense, net 171,861 78,448
Interest expense - related parties 42,615 45,262
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214,476 123,710
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(Loss) before income taxes (1,086,677) (1,216,880)
Provision for income taxes - -
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Net income (loss) $ (1,086,677) $ (1,216,880)
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Basic earnings (loss) per share $ (0.10) $ (0.17)
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Weighted average shares outstanding 10,749,144 7,253,547
============= =============
See accompanying notes to unaudited financial statements.
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<TABLE>
CVI TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<CAPTION>
Three Months Ended
--------------------------------
March 31, 2000 March 31, 1999
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<S> <C> <C>
Net (loss) $ (1,086,677) $ (1,216,880)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 192,493 44,527
Amortization of deferred interest 85,968 35,176
Changes in assets and liabilities:
(Increase) decrease in trade accounts receivable (1,269,998) (61,744)
(Increase) decrease in other receivables 165,810 -
(Increase) decrease in inventory (85,645) (354,743)
(Increase) decrease in prepaid expenses 201,310 5,543
(Increase) decrease in other assets - (30,451)
Increase (decrease) in accounts payable 160,806 (297,975)
Increase (decrease) in accrued expenses 57,528 47,288
Increase (decrease) in customer deposits (2,435) -
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Total adjustments (494,163) (612,379)
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Net cash (used in) operating activities (1,580,839) (1,829,259)
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Cash flows from investing activities:
Acquisition of plant and equipment (44,345) (211,569)
Equipment produced and held for rental - -
Increase in patents and trademarks (18,881) (3,550)
Deposits (75,754) -
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Net cash (used in) investing activities (138,980) (215,119)
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Cash flows from financing activities:
Common stock sold for cash - 1,210,523
Repayment of shareholder loans (25,558) (150,000)
Proceeds from leases payable 841,465 295,182
Repayment of leases payable (284,141) (109,111)
Proceeds from convertible debentures 200,000 1,900,000
Repayment of notes payable - (3,375)
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Net cash provided by financing activities 731,766 3,143,219
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Increase (decrease) in cash (988,053) 1,098,841
Cash and cash equivalents, beginning of period 1,169,924 200,749
Cash and cash equivalents,
end of period $ 181,871 $ 1,299,590
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</TABLE>
See accompanying notes to unaudited financial statements.
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CVI TECHNOLOGY, INC.
Notes to Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions incorporated in Regulation 10-SB of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments and accruals) considered necessary for a fair
presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. The accompanying
financial statements should be read in conjunction with the Company's audited
financial statements for the year ended December 31, 1999, as included in the
Company's Annual Report on Form 10-KSB as filed with the Securities and Exchange
Commission on March 30, 2000.
Certain reclassifications have been made to amounts presented in prior periods
for comparability to the current period presentation.
Basic loss per share was computed using the weighted average number of common
shares outstanding.
NOTE 2 - STATEMENT REGARDING COMPUTATION OF LOSS PER SHARE.
Fully diluted loss per share excludes any dilutive effects of options, warrants
and convertible securities. Fully diluted loss per share is not presented
because the effect would be anti-dilutive.
NOTE 3 - CONVERTIBLE DEBT.
The Company received proceeds of $200,000 from the placement of a convertible
note in the first quarter of 2000. The Convertible Note is with VIP's
Industries, Inc., an entity controlled by the Chairman of the Board of the
Company. The debt accrues interest until its maturity on June 1, 2000, at 10%
per annum, and is convertible into restricted shares of Common Stock after May
1, 2000 at a rate of $2.75 per share.
NOTE 4 - EQUIPMENT FINANCING.
For the three months endings March 31, 2000, the Company received proceeds of
$830,000 from a third-party leasing company through which the Company has
financed most of its furniture, equipment, and tooling.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that may be
considered forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such as
statements relating to plans for future expansion, capital spending, future
operations, sources of liquidity and financing sources. 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. These
risks and uncertainties include, but are not limited to, those relating to
liquidity requirements for the Company, the continued growth of the gaming
industry, the success of the Company's product-development, marketing and sales
activities, vigorous competition in the gaming industry, dependence on existing
management, gaming regulations (including actions affecting licensing and
product approvals), leverage and debt service (including sensitivity to
fluctuations in interest rates), issues related to the Year 2000, domestic or
global economic conditions, and changes in federal or state tax laws or the
administration of such laws.
OVERVIEW
The Company's primary business is the development, manufacturing and
marketing of various gaming concepts and products that increase the security,
productivity and profitability for the global gaming industry.
From inception, the Company has been a "Development Stage Company"
performing research and development, product prototyping, field testing of
products, development of manufacturing capabilities, inventory acquisition,
development of distribution channels, staffing and obtaining a building with
sufficient capacity to house future growth. In the first quarter of 2000, the
Company had sufficient sales development and revenue growth such that the
Company is considered an operating company.
As of March 1, 2000, the Company had placed 456 Random Ejection
Shufflers(TM) (the "Shufflers") under rental contracts. The Company has the
majority of the parts required to build an additional 600 Shufflers.
Additionally, the Company has shipped 12,220 units of its SecureDrop(TM)
products. The Company believes that customer interest in both the Shuffler and
SecureDrop(TM) products continues to be very strong.
The following discussion summarizes the Company's results of operations
for the three months ended March 31, 2000 and 1999 and the Company's liquidity
and capital resources.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
REVENUES. For the three months ended March 31, 2000, the Company
generated total revenues of $1,709,834 compared to $69,074 for the three months
ended March 31, 1999. The revenues for the three months ended March 31, 2000,
consisted of Shuffler rentals of $261,377, Shuffler sales of $280,635,
SecureDrop(TM) sales of $1,087,326 table game rentals of $60,442, and other
sales of $20,054. The Company believes revenue will continue to increase through
additional SecureDrop(TM) sales, projected increases in the number of Shuffler
sales through international distributors and continued placement of Shufflers
for rent.
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COST OF SALES. For the three months ended March 31, 2000, the cost of
sales was $1,265,420, compared to $5,745 for the three months ended March 31,
1999. The cost of sales for the three months ended March 31, 2000, consisted of
approximately $676,143 for SecureDrop(TM), $98,560 for depreciation expense
associated with the Shufflers held for rental, $281,338 for costs related to
servicing the Shufflers held for rental, $96,305 for costs related to sales of
the Shuffler, and $113,076 for labor and other manufacturing costs in excess of
the Company's estimated total manufacturing costs. The increase in cost of sales
was due to the increase in Shuffler sales and rentals and SecureDrop(TM) sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the three months
ended March 31, 2000, selling, general and administrative expenses decreased
approximately $151,192, or approximately 14%, to $935,646, compared to
$1,086,838 for the three months ended March 31, 1999. For the three months ended
March 31, 2000, selling, general and administrative expenses included: salaries
and related costs of $390,422; advertising and marketing services of $26,667;
gaming industry show costs of $185,960; travel and entertainment costs of
$72,036; printing and office expenses of $63,877; depreciation and amoritization
of $47,906; office rent and utilities of $84,416; legal expenses of $36,928; and
$27,434 in other miscellaneous expenses.
INTEREST EXPENSE. For the three months ended March 31, 2000, the
Company incurred interest expenses, net of interest income, of $214,476 compared
to $123,710 for the three months ended March 31, 1999. This increase was
primarily attributable to the increased borrowings by the Company.
NET INCOME (LOSS). For the three months ended March 31, 2000, the
Company had a net loss of $1,086,677, compared to a net loss of $1,216,880 for
the three months ended March 31, 1999. The decrease in net loss was primarily
due to continued development of the Company's customer base and the introduction
of the SecureDrop(TM) product line. Basic loss per share was $0.10, based on
10,749,144 weighted average shares outstanding, for the three months ended March
31, 2000, compared to $0.17, based on 7,253,547 weighted shares outstanding, for
the three months ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW. As a result of the Company's efforts to transition from a
development stage company to an operating company, it has generated cash flow
deficits from operations, including cash used in operating activities of
$1,580,839 and $1,829,259 in the three months ended March 31, 2000 and 1999,
respectively. In addition, to fund its development activities, the Company used
cash in investing activities of $138,980 and $215,119 in the three months ended
March 31, 2000 and 1999, respectively. Consequently, the Company has been
substantially dependent on cash from financing activities to fund development
and operating activities, receiving cash from financing activities of $731,766
and $3,143,219 in the three months ended March 31, 2000 and 1999, respectively.
The Company will continue to require cash from financing activities for both its
current operating needs and to fund its anticipated expansion into non-gaming
areas until operations begin to generate sufficient cash flow to provide for
such cash requirements.
WORKING CAPITAL. At March 31, 2000, the Company had cash, cash
equivalents and investments of $181,870, compared to $1,169,924 at December 31,
1999. At March 31, 2000, the Company's working capital was ($30,811), compared
to $599,944 at December 31, 1999. At March 31, 2000, the Company's current
ratio, I.E. the ratio of current assets to current liabilities, was .99 compared
to 1.21 at December 31, 1999. Until the Company's normalized cash flows from
operations are achieved, the Company will be relying upon existing cash
balances, accounts receivables, institutional sources of debt and equity capital
for working capital purposes.
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CASH FLOW. For the three months ended March 31, 2000, net cash used in
operating activities was $1,580,839, compared to $1,829,259 for the three months
ended March 31, 1999. Cash used in operating activities during the three months
ended March 31, 2000, is net of depreciation and amortization of $278,461,
compared to $79,703 for the three months ended March 31, 1999 and reflects
increases in accounts receivable of $290,772, compared to $61,744 for the three
months ended March 31, 1999; increases in inventory of $85,645, compared to
$354,743 for the three months ended March 31, 1999; a decrease in prepaid
expenses of $201,310, compared to a decrease of $5,543 for the three months
ended March 31, 1999; increases in other receivables of $813,416, compared to
none for the three months ended March 31, 1999; increases in accounts payable of
$160,806, compared to a decrease of $297,975 for the three months ended March
31, 1999; increases in accrued expenses of $57,528, compared to an increase of
$47,288 for the three months ended March 31, 1999; and a decrease in customer
deposits of $2,435, compared to none for the three months ended March 31, 1999.
For the three months ended March 31, 2000, the Company used net cash in
investing activities of $138,980, Compared to $215,119 for the three months
ended March 31, 1999. Cash used in investing activities consisted primarily of
the acquisition of equipment and tooling in the amount of $44,345, the
acquisition of patents in the amount of $18,881 and $75,754 for deposits.
For the three months ended March 31, 2000, net cash provided by
financing activities was $731,766, compared to $3,143,219 for the three months
ended March 31, 1999. The decrease is attributable to the company beginning to
generate cash from sales of SecureDrop(TM) and Shufflers and its decreased
reliance on cash from financing. Cash from financing activities consisted of
$200,000 from the placement of convertible notes and proceeds of $841,465 from
leases payable, reduced by the repayment of leases payable of $284,141 and the
repayment of shareholder loans of $25,558.
CONVERTIBLE DEBT. The Company received proceeds of $200,000 from the
placement of a convertible note in the first quarter of 2000. The Convertible
Note is with VIP's Industries, Inc., an entity controlled by the Chairman of the
Board of the Company. The debt accrues interest until its maturity on June 1
2000, at 10% per annum, and is convertible into restricted shares of Common
Stock after May 1, 2000, at $2.75 per share.
EQUIPMENT FINANCING. For the three months endings March 31, 2000, the
Company received proceeds of $830,000 from an unrelated leasing company through
which the Company has financed most of its furniture, equipment, and tooling.
OUTLOOK
Based on presently known commitments and plans, the Company believes
that it will be able to fund 2000 operations and required expenditures through
cash on hand, cash flow from operations, cash from private or public placement
of debt or equity or from lease financing sources. In the event that such
sources are insufficient or unavailable, the Company will need to seek cash from
private or public placements of debt or equity, institutional or other lending
sources or change operating plans to accommodate such liquidity issues. No
assurances can be given that the Company will successfully obtain necessary
liquidity sources.
RISK FACTORS AND FORWARD-LOOKING INFORMATION
THIS REPORT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE
ACT. SUCH STATEMENTS REFER TO EVENTS THAT COULD OCCUR IN THE FUTURE AND MAY BE
IDENTIFIED BY THE USE OF WORDS SUCH AS "INTEND," "PLAN," "BELIEVE," CORRELATIVE
WORDS, AND OTHER EXPRESSIONS INDICATING THAT FUTURE EVENTS ARE CONTEMPLATED.
SUCH STATEMENTS ARE SUBJECT TO INHERENT RISKS AND UNCERTAINTIES, AND ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN OF THE RISK FACTORS SET FORTH BELOW AND
ELSEWHERE IN THIS REPORT. IN ADDITION TO THE OTHER INFORMATION CONTAINED HEREIN,
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS.
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LIMITED OPERATING RESULTS; NO INDEPENDENT MARKET RESEARCH OF POTENTIAL
DEMAND FOR CURRENT OPERATIONS. The Company has been in the development stage and
has achieved limited sales of its products. The Company's activities have been
limited to analyzing the gaming industry, consulting with persons in the gaming
industry, negotiating interim financing arrangements, developing products,
establishing a distribution network for its products, marketing its products to
the gaming industry, manufacturing its products and commencing product sales.
Although the Company anticipates significant sales development and revenue
growth during 2000, there is no guarantee that the Company will generate
sufficient revenue to sustain its operations. No independent organization has
conducted market research providing management with independent assurance from
which to estimate potential demand for the Company's business operations.
FOCUS ON NON-GAMING MARKETS. To date, the Company has developed,
manufactured, marketed and sold its products solely to the gaming industry. The
Company has recently begun to explore the expansion of its focus to the
non-gaming application of certain of its products and technology. The expanded
focus to non-gaming markets will have significant risks for the Company,
including, but not limited to, management's lack of experience in non-gaming
markets, the need to hire sales and technical persons with expertise in
non-gaming markets, additional research, development, distribution and marketing
expenses necessary to proceed into non-gaming application of the Company's
products and technology, significant competitive factors and forces applicable
to non-gaming markets and a variety of other factors. There is no assurance that
the Company will be able to successfully execute the strategy to expand a
significant portion of its marketing and product technology strategies to
non-gaming markets.
REGULATION. The gaming industry is a highly regulated industry and is
subject to numerous statutes, rules and regulations administered by the gaming
regulatory authorities of each jurisdiction. Generally, the Company and other
entities which seek to introduce gaming products or concepts into such
jurisdictions may be required to submit applications relating to their
activities or products (including detailed background information concerning
controlling persons within their organization) which are then reviewed for
approval. The Company may incur significant expenses in seeking to obtain
licenses for its gaming products and concepts, and no assurance can be given
that its products will be approved in any particular jurisdiction. The failure
to obtain such approval in any jurisdiction in which the Company may seek to
introduce its products or concepts could have a material adverse effect on the
Company's business.
ADDITIONAL FINANCING WILL BE REQUIRED. Based on presently known
commitments and plans, the Company believes that it will be able to fund its
2000 operations and required expenditures through cash on hand, cash flow from
operations, private placement of debt and stock and cash from lease financing
sources. In the event that such sources are insufficient, the Company will need
to seek cash from private and/or public placements of debt or equity,
institutional or other lending sources or change operating plans to accommodate
such liquidity issues. No assurances can be given that the Company will
successfully locate necessary liquidity sources.
INFLUENCE ON ELECTION OF DIRECTORS AND ALL OTHER MATTERS BY A
CONTROLLING STOCKHOLDER. A certain stockholder of the Company has voting power
over approximately 52.7% of the outstanding shares of common stock. As a result,
this stockholder will be able to influence the election of directors and all
other matters submitted to a vote of the Company's stockholders.
UNCERTAINTY OF MARKET FOR COMPANY'S PRODUCTS. The Company has only
recently completed development and begun distribution of the Shuffler and
SecureDrop(TM). Although the market appears to be receptive to the Company's
products, there is no guarantee that the market will remain receptive and that
the Company's future products will be received by the market in the same manner.
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BENEFIT TO MANAGEMENT. The Company may, in the future, compensate the
Company's management with substantial salaries and other benefits. The payment
of future larger salaries, commissions and the costs of these benefits may be a
burden on the Company and may be a factor in limiting or preventing the Company
from achieving profitable operations in the future. However, the Company would
not continue to compensate management with such substantial salaries and other
benefits under circumstances where to do so would have a material negative
effect on the Company's financial condition.
STOCKHOLDERS MAY BEAR RISK OF LOSS. The capital stock of the Company is
at risk of complete loss if the Company's operations are unsuccessful.
COMPETITION. There is significant competition in the gaming industry.
The Company competes with established companies and other entities (many of
which possess substantially greater resources than the Company). Almost all of
the companies with which the Company competes are substantially larger, have
more substantial histories, backgrounds, experience and records of successful
operations, greater financial, technical, marketing and other resources, more
employees and more extensive facilities than the Company now has, or will have
in the foreseeable future. It is also likely that other competitors will emerge
in the near future. There is no assurance that the Company will continue to
compete successfully with other established gaming product manufacturers. The
Company shall compete on the basis of quality and price. Inability to compete
successfully might result in increased costs, reduced yields and additional
risks to the Company's stockholders.
RISKS OF PROPRIETARY PRODUCTS AND GAMES. The Company places its
proprietary products, except SecureDrop(TM), in casinos under short-term lease
arrangements, making these games susceptible to replacement due to pressure from
competitors, changes in economic conditions, obsolescence, and declining
popularity. The Company intends to maintain and expand the number of installed
proprietary products through enhancement of existing products, introduction of
new products, and customer service, but there can be no assurance that these
efforts will be successful. Introduction of new proprietary products involves
significant risks, including whether the Company will be able to place its
products with casinos and in non-gaming industries, the economic terms on which
these industries will accept the products, and the popularity of the products.
The Company has filed trademark and patent applications to protect its
intellectual property rights in certain of its trademarks and innovations on
certain of its proprietary products, respectively. At this time, however, the
United States Patent and Trademark Office has not acted upon all of these
applications. There can be no assurance that the pending patent or trademark
applications will actually issue as patents or trademark registrations or that
any of these rights will not be infringed by others. Certain of the Company's
products and games do or may have independent protection of the products and
games themselves, and it is possible that competitors could produce a similar
product or game without violating any legal rights of the Company. The Company
intends to aggressively promote its trademarks to build goodwill and customer
loyalty. There can be no assurance, however, that the Company will be successful
in these efforts, that innovations will be subject to legal protection, or that
the innovations will give a competitive advantage to the Company.
LACK OF DIVIDENDS. There can be no assurance that the operations of the
Company will become profitable. At the present time, the Company intends to use
any earnings which may be generated to finance the growth of the Company's
business.
DEPENDENCE ON KEY INDIVIDUALS. The future success of the Company is
highly dependent upon the management skills of its key employees and the
Company's ability to attract and retain qualified key employees. The inability
to obtain and employ these individuals would have a serious effect upon the
business of the Company. The Company has entered into an employment agreement
with Steven J. Blad, its President and Chief Executive Officer. There can be no
assurance that the Company will be successful in retaining its key employees or
that it can attract or retain the additional skilled personnel required.
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VULNERABILITY TO FLUCTUATIONS IN THE ECONOMY. Demand for the Company's
products is dependent on, among other things, general economic conditions and
international currency fluctuations which are cyclical in nature.
Prolonged recessionary periods may be damaging to the Company.
"PENNY" STOCK REGULATION OF BROKER-DEALER SALES OF COMPANY SECURITIES.
The Company does not presently meet the requirements for a NASDAQ Small Cap
Market listing. The OTC Bulletin Board has no quantitative written standards and
is not connected with the NASD. Until the Company obtains a listing on the
NASDAQ Small Cap Market, if ever, the Company's securities may be covered by
Rule 15g-9 under the Exchange Act which imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with his or
her spouse). For transactions covered by the rule, the broker-dealer must
furnish, to all investors in penny stocks, a risk disclosure document required
by Rule 15g-9 of the Exchange Act, make a special suitability determination of
the purchaser and have received the purchaser's written agreement to the
transaction prior to the sale. In order to approve a person's account for
transactions in penny stock, the broker or dealer must (i) obtain information
concerning the person's financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on the information
required by paragraph (i), that transactions in penny stock are suitable for the
person and that the person has sufficient knowledge and experience in financial
matters so that the person may reasonably be expected to be capable of
evaluating the risks of transactions in penny stock; and (iii) deliver to the
person a written statement setting forth the basis on which the broker or dealer
made the determination required by paragraph (ii) of this section, stating in a
highlighted format that it is unlawful for the broker or dealer to effect a
transaction in a designated security subject to the provisions of paragraph (ii)
of this section unless the broker or dealer has received, prior to the
transaction, a written agreement for the transaction from the person, which
states in a highlighted format immediately preceding the customer signature line
that the broker or dealer is required to provide the person with the written
statement and the person should not sign and return the written statement to the
broker or dealer if it does not accurately reflect the person's financial
situation, investment experience and investment objectives and obtain from the
person a manually signed and dated copy of the written statement. A penny stock
means any equity security other than a security (i) registered, or approved for
registration upon notice of issuance on a national securities exchange that
makes transaction reports available pursuant to 17 CFR 11Aa3-1; (ii) authorized
or approved for authorization upon notice of issuance, for quotation in the
NASDAQ system; (iii) that has a price of five dollars or more; or (iv) whose
issuer has net tangible assets in excess of $2,000,000 demonstrated by financial
statements dated less than fifteen months previously that the broker or dealer
has reviewed and has a reasonable basis to believe are true and complete in
relation to the date of the transaction with the person. Consequently, the rule
may affect the ability of broker-dealers to sell the Company's securities.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On August 8, 1998, Pinnacle Performance, Inc. ("Pinnacle") filed a
complaint in the District Court of the Fourth Judicial District of the State of
Idaho, Ada County, Idaho (Case No. CV OC 9705098D) against the Company and a
former employee of Pinnacle (who is now an employee of the Company). The
complaint alleged claims for breach of contract and tortious interference with
contract. The Court granted summary judgment in favor of the Company and vacated
the trial. Plaintiff has appealed the granting of summary judgment in favor of
the Company.
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On November 22, 1999, Moll Industries, Inc. ("Moll") filed a complaint
(Case No. 817296) against the Company in the Superior Court of the State of
California for the County of Orange, California. The second amended complaint
alleges claims for breach of contract, quantum meruit, an accounting, and
declaratory relief, and arises from a dispute between the parties regarding the
manufacture of parts for the Shuffler. The Company is preparing a response to
Moll's Second Amended Complaint.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
0n March 21, 2000, through a written consent of stockholders,
stockholders holding approximately 68.4% of the outstanding shares of the
Company's common stock voted to approve, among other things, the amendment and
restatement of the Company's Articles of Incorporation providing for a change in
the Company's name from "Casinovations Incorporated" to "CVI Technology, Inc."
and the amendment and restatement of the Company's Bylaws.
ITEM 5. OTHER INFORMATION.
REGULATORY APPROVALS. As of May 10, 2000, the Company had installed the
equipment to begin a field trial of the SecureDrop(TM) 3000 System at the Jokers
Wild Casino in Henderson, Nevada. The Company is awaiting final approval from
the Nevada Gaming Control Board to begin the field trial for the SecureDrop(TM)
3000 System and the SecureDrop(TM) Mobile Count System. On August 4, 1999, the
Company received approval from the Nevada Gaming Control Board to sell its
SecureDrop(TM) 2000 System in the State of Nevada. The Company already has
approval in several other gaming jurisdictions to sell the SecureDrop(TM) 2000
and 3000 series and the Mobile Count System of SecureDrop(TM). The Company is
continuing its development of the SecureDrop(TM) 4000 System and the
SecureDrop(TM) 5000 System.
COMPANY'S NAME CHANGE. On May 2, 2000, the corporate name change of
Casinovations Incorporated to CVI Technology, Inc. (the "Company") became
effective, as the Company filed with the Nevada Secretary of State a Certificate
of Amendment and Restatement of Articles of Incorporation. The change in
corporate name reflects the expansion of the Company's business to industries
outside the gaming industry.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
---------
Exhibit Number Description
-------------- -----------
3.01 Amended and Restated Bylaws of CVI Technology, Inc.
27.01 Financial Data Schedule
(b) Reports on Form 8-K.
--------------------
During the three month period ended March 31, 2000, the Company filed
with the Securities and Exchange Commission Forms 8-K: (i) on March 16, 2000,
reporting the termination of its relationship with Timpano Gaming, Inc. for the
Company's distribution of the Wild Jackpot Poker and Twin Baccarat table games,
the termination of its relationship with T&P Gaming, Inc. for the Company's
distribution of the Wild Hold 'em Fold `em table game, and the termination of
its relationship with Bonus Blackjack, Inc. for the Company's distribution of
the Bonus Blackjack table game; and (ii) on March 24, 2000, reporting the
approval by the Company's Board of Directors of the change in the the name of
the Company from "Casinovations Incorporated" to "CVI Technology, Inc." and the
creation of two wholly-owned subsidiaries.
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CVI Technology, Inc.
-----------------------------------------
(Registrant)
Date: May 12, 2000 By: /S/ Michael C. McDonald
-----------------------------------------
Michael C. McDonald
Its: Chief Financial Officer and Treasurer
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EXHIBIT INDEX
Exhibit Number Description Page Number
- -------------- ----------- -----------
3.01 Amended and Restated Bylaws of CVI Technology, Inc. 17
27.01 Financial Data Schedule 30
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AMENDED AND RESTATED
BYLAWS
OF
CVI TECHNOLOGY, INC.
A NEVADA CORPORATION
ARTICLE I
OFFICES
Section 1.1. Principal Office. The principal office of this corporation
shall be in the County of Clark, State of Nevada.
Section 1.2. Other Offices. The corporation may also have offices at
such other places both within and without the State of Nevada as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meetings. Annual meetings of the stockholders shall
be held each year on a date and at a time designated by the Board of Directors.
At the annual meeting of stockholders, the stockholders shall elect by vote a
Board of Directors and transact such other business as may properly be brought
before the meeting.
Section 2.2. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation may be called by the Chairman of the Board of
Directors, by the President or the Secretary by resolution of the Board of
Directors or at the request in writing of one or more stockholders owning shares
in the aggregate entitled to cast not less than fifty percent (50%) of the votes
at the meeting. Such request shall state the purpose of the proposed meeting and
shall be personally delivered or sent by registered mail or by telegraph or
other facsimile transmission to the Chairman of the Board, the President,
Vice-President or the Secretary of the Corporation. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Section 2.4 of this Article II. If
notice is not given within sixty days (60) days of the request, the person or
persons requesting the meeting may, subject to any applicable federal or state
law including but not limited to federal securities laws, give the notice.
Nothing contained in this paragraph of this Section 2.2 shall be construed as
limiting, fixing or affecting the time when a meeting of stockholders called by
action of the Board of Directors may be held. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
Section 2.3. Place of Meeting. All annual meetings of the stockholders
shall be held at the principal office of the corporation or at such other place
within or without the State of Nevada as the directors shall determine. Special
meetings of the stockholders may be held at such time and place within or
without the State of Nevada as shall be stated in the notice of the meeting, or
in a duly executed waiver of notice thereof.
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Section 2.4. Notices. Notices of meetings shall be in writing and
signed by the President or a Vice-President or the Secretary or an Assistant
Secretary or by such other person or persons as the directors shall designate.
Such notice shall state the purpose or purposes for which the meeting is called
and the time and the place, which may be within or without this State, where it
is to be held. The notice of any meeting at which directors are to be elected
shall include the name of any nominee or nominees whom, at the time of the
notice, management intends to present for election. A copy of such notice shall
be either delivered personally to or shall be mailed, postage prepaid, to each
stockholder of record entitled to vote at such meeting not less than ten nor
more than sixty days before such meeting. If mailed, it shall be directed to a
stockholder at his address as it appears upon the records of the corporation and
upon such mailing of any such notice, the service thereof shall be complete and
the time of the notice shall begin to run from the date upon which such notice
is deposited in the mail for transmission to such stockholder. Personal delivery
of any such notice to any officer of a corporation or association, or to any
member of a partnership shall constitute delivery of such notice to such
corporation, association or partnership. In the event of the transfer of stock
after delivery of such notice of and prior to the holding of the meeting it
shall not be necessary to deliver or mail notice of the meeting to the
transferee.
Section 2.5. Affidavit of Mailing. An affidavit of the mailing or other
means of giving any notice of any stockholders' meeting may be executed by the
Secretary, Assistant Secretary, or any Transfer Agent of the Corporation giving
the notice, and shall be filed and maintained in the minute book of the
Corporation.
Section 2.6. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Articles of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders or if the voting power necessary
to approve a matter for which the meeting has been noticed has not voted in
favor of such matter, the stockholders entitled to vote thereat, present in
person or represented by proxy, the Chairman of the Board of Directors, or a
majority of the Board of Directors shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented or until the voting power necessary to
approve the matter for which the meeting has been noticed has been voted in
favor of such matter.
Section 2.7. Adjournment. When any meeting of stockholders, either
annual or special, is adjourned to another time or place, notice may not be
given of the adjourned meeting if the time and place are announced at a meeting
at which the adjournment is taken, unless a new record date for the adjourned
meeting is fixed, or unless the adjournment is for more than 45 days from the
date set for the original meeting, in which case the Board of Directors shall
set a new record date. Notice of any such adjourned meeting, if required, shall
be given to each stockholder of record entitled to vote at the adjourned meeting
in accordance with the provisions of Section 2.4 of this Article II. At any
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 2.8. Voting. When a quorum is present or represented at any
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall be sufficient to elect directors
or to decide any question brought before such meeting, unless the question is
one upon which by express provision of the statutes or of the Articles of
Incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question. Each stockholder of
record of the corporation shall be entitled at each meeting of stockholders to
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one vote for each share of stock standing in his name on the books of the
corporation. Upon the demand of any stockholder, the vote for directors and the
vote upon any question before the meeting shall be by ballot.
Section 2.9. Proxies; Inspectors of Election. At any meeting of the
stockholders any stockholder may be represented and vote by a proxy or proxies
appointed by an instrument in writing. In the event that any such instrument in
writing shall designate two or more persons to act as proxies, a majority of
such persons present at the meeting, or, if only one shall be present, then that
one shall have and may exercise all of the powers conferred by such written
instrument upon all of the persons so designated unless the instrument shall
otherwise provide. No proxy or power of attorney to vote shall be used to vote
at a meeting of the stockholders unless it shall have been filed with the
secretary of the meeting when required by the inspectors of election. All
questions regarding the qualification of voters, the validity of proxies and the
acceptance or rejection of votes shall be decided by three inspectors of
election who shall be appointed by the Board of Directors, or if not so
appointed, then by the presiding officer of the meeting.
The inspectors of election shall:
(a) Determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum,
and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the results; and
(g) Do any other acts that may be proper to conduct the election or
vote with fairness to all stockholders.
Section 2.10. Action by Written Consent. Any action which may be taken
by the vote of the stockholders at a meeting may be taken without a meeting if
authorized by the written consent of stockholders holding at least a majority of
the voting power, unless the provisions of the statutes or of the Articles of
Incorporation require a greater proportion of voting power to authorize such
action in which case such greater proportion of written consents shall be
required.
Section 2.11. Waiver of Notice. The transactions of any meeting of
stockholders, either annual or special, however called and noticed, and wherever
held, shall be as valid as though had at a meeting duly held after regular call
and notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each person entitled to vote, who was not present
in person or by proxy, signs a written waiver of notice or a consent to a
holding of the meeting, or an approval of the minutes. The waiver of notice of
consent need not specify either the business to be transacted or the purpose of
any annual or special meeting of stockholders. All such waivers, consents, or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance by a person at a meeting shall also
constitute a waiver of notice of that meeting, except when the person objects,
at the beginning of the meeting, to the transaction of any business because the
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meeting is not lawfully called or convened, and except that attendance at a
meeting is not a waiver of any right to object to the consideration of matters
required by law to be included in the notice of the meeting, but not so
included, if that objection is expressly made at the meeting.
ARTICLE III
DIRECTORS
Section 3.1. General Powers. The business of the corporation shall be
managed by its Board of Directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the stockholders.
Section 3.2. Number. The number of directors which shall constitute the
whole board shall be six (6). The number of directors may from time to time be
increased or decreased by action of the Board of Directors to not less than one
(1) nor more than ten (10). Directors need not be stockholders.
Section 3.3. Tenure and Qualification. The corporation shall have three
(3) categories of Directors entitled "A", "B" and "C." At the first meeting of
the Board of Directors, the Board shall designate the directors to be in each
category. The first term of office for each director in each category shall be
as follows:
CATEGORY TERM NUMBER OF DIRECTORS
A Three (3) Year Two (2)
B Two (2) Years Two (2)
C One (1) Years Two (2)
After the term of office of each category of directors expires, the replacement
directors (or the same directors, if re-elected) shall each have a term of three
(3) years. Each category of Directors shall be elected at the annual meeting of
stockholders for the year in which the term of each respective category expires.
Except as provided in Section 3.4, each Director shall serve until his successor
shall have been elected or qualified, provided that in the event of failure to
hold the annual meeting of stockholders or to hold such elected at such annual
meeting of stockholders, the election may be held at any special meeting of the
stockholders called for that purpose. From time to time, as the number of
Directors is increased or decreased, the Board of Directors shall designate the
category to which Directors are assigned in such a manner that at least
one-fourth of the entire Board of Directors is elected annually.
Section 3.4. Vacancies. Vacancies in the Board of Directors including
those caused by an increase in the number of directors, may be filled by a
majority of the remaining directors, though less than a quorum, or by a sole
remaining director, and each director so elected shall hold office until his
successor is elected at an annual or a special meeting of the stockholders. The
holders of two-thirds (2/3) of the outstanding shares of stock entitled to vote
may at any time peremptorily terminate the term of office of all or any of the
directors by vote at a meeting called for such purpose or by a written statement
filed with the secretary or, in his absence, with any other officer. Such
removal shall be effective immediately, even if successors are not elected
simultaneously and the vacancies on the Board of Directors resulting therefrom
shall be filled only by the stockholders.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist in case of the death, resignation or removal of any directors, or if the
authorized number of directors be increased, or if the Board of Directors by
resolution declares vacant the office of director who has been declared of
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unsound mind by an order of the court or if the stockholders fail at any annual
or special meeting of stockholders at which any director or directors are
elected to elect the full authorized number of directors to be voted for at that
meeting.
The stockholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. If the Board of Directors
accepts the resignation of a director tendered to take effect at a future time,
the Board or the stockholders shall have power to elect a successor to take
office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1. Regular Meetings. Regular meetings of the Board of
Directors shall be held at any place within or without the State which has been
designated from time to time by resolution of the Board or by written consent of
all members of the Board. In the absence of such designation regular meetings
shall be held at the principal office of the corporation. Special meetings of
the Board may be held either at a place so designated or at the principal
office. Any meeting, regular or special, may be held by conference telephone
network or similar communications method by which all persons participating in
the meeting can hear each other. Regular meetings of the Board of Directors may
be held without call or notice at such time and at such place as shall from time
to time be fixed and determined by the Board of Directors.
Section 4.2. Initial Meeting. The first meeting of each newly elected
Board of Directors shall be held at any place within or without the State which
has been designated from time to time by resolution of the Board or by written
consent of all members of the Board. In the event such meeting is not so held,
the meeting may be held at such time and place as shall be specified in a notice
given as herein provided for special meetings of the Board of Directors.
Section 4.3. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman or the President or by any
Vice-President or by any two (2) directors. Written notice of the time and place
of special meetings shall be delivered personally to each director, or sent to
each director by mail or by other form of written communication, charges
prepaid, addressed to him at his address as it is shown upon the records or is
not readily ascertainable, at the place in which the meetings of the directors
are regularly held. In case such notice is mailed or telegraphed, it shall be
deposited in the United States mail or delivered to the telegraph company at
least forty-eight (48) hours prior to the time of the holding of the meeting. In
case such notice is delivered as above provided, it shall be so delivered at
least twenty-four (24) hours prior to the time of the holding of the meeting.
Such mailing, telegraphing or delivery as above provided shall be due, legal and
personal notice to such director.
Section 4.4. Adjournment. Notice of the time and place of holding an
adjourned meeting need not be given to the absent directors if the time and
place be fixed at the meeting adjourned and unless the meeting is adjourned for
more than twenty-four (24) hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting, in the manner specified
in Section 4.3, to the directors who were not present at the time of the
adjournment.
Section 4.5. Validity of Transactions. The transactions of any meeting
of the Board of Directors, however called and noticed or wherever held, shall be
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as valid as though had at a meeting duly held after regular call and notice, if
a quorum be present, and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, or a consent to holding
such meeting, or an approval of the minutes thereof. All such waivers, consents
or approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 4.6. Quorum. A majority of the authorized number of directors
shall be necessary to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. Every act or decision done or made by
a majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors, unless a greater
number be required by law or by the Articles of Incorporation. Any action of a
majority, although not at a regularly called meeting, and the record thereof, if
assented to in writing by all of the other members of the Board shall be as
valid and effective in all respects as if passed by the Board in regular
meeting. A quorum of the directors may adjourn any directors meeting to meet
again at a stated day and hour; provided, however, that in the absence of a
quorum, a majority of the directors present at any directors meeting, either
regular or special, may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 4.7. Written Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed by all members
of the Board of Directors or of such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the Board or
committee.
Section 4.8. Compensation. The directors may be paid their expenses of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like reimbursement and
compensation for attending committee meetings.
ARTICLE V
COMMITTEES OF DIRECTORS
Section 5.1. Committees. The Board of Directors may, by resolution
adopted by a majority of the whole Board of Directors, designate one or more
committees of the Board of Directors, each committee to consist of one or more
of the directors of the corporation which, to the extent provided in the
resolution, shall have and may exercise the power of the Board of Directors in
the management of the business and affairs of the corporation and may have power
to authorize the seal of the corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may be
determined from time to time by the Board of Directors. The members of any such
committee present at any meeting and not disqualified from voting may, whether
or not they constitute a quorum, unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any absent or disqualified
member. At meetings of such committees, a majority of the members or alternate
members shall constitute a quorum for the transaction of business, and the act
of a majority of the members or alternate members at any meeting at which there
is a quorum shall be the act of the committee.
Section 5.2. Minutes. The committees shall keep regular minutes of
their proceedings and report the same to the Board of Directors.
Section 5.3. Meetings and actions of the committee shall be governed
by, and held and taken in accordance with, the provisions of Article IV of these
Bylaws, Section 4.1 (regular meetings), Section 4.2 (place of meetings), Section
4.3 (special meetings and notice), Section 4.4 (adjournment and notice of
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adjournment), Section 4.6 (quorum), Section 4.7 (action without a meeting) and
Section 6.2 (waiver of notice), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the Board of
Directors and its members, except that the time of regular meetings of
committees may be determined either by resolution of the Board of Directors or
by resolution of the committee; special meetings of committees may also be
called by resolution of the Board of Directors; and notice of special meetings
of committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The Board of Directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these bylaws.
ARTICLE VI
NOTICES
Section 6.1. Notices to directors and stockholders shall be in writing
and delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram.
Section 6.2. Whenever all parties entitled to vote at any meeting,
whether of directors or stockholders, consent, either by a writing on the
records of the meeting or filed with the secretary, or by presence at such
meeting and oral consent entered on the minutes, or by taking part in the
deliberations at such meeting without objection, the doings of such meeting
shall be as valid as if had at a meeting regularly called and noticed, and at
such meeting any business may be transacted which is not excepted from the
written consent or to the consideration of which no objection for want of notice
is made at the time, and if any meeting be irregular for want of notice or of
such consent, provided a quorum was present at such meeting, the proceedings of
said meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all parties having
the right to vote at such meeting; and such consent or approval of stockholders
may be by proxy or attorney, but all such proxies and powers of attorney must be
in writing.
Section 6.3. Whenever any notice whatever is required to be given under
the provisions of the statutes, of the Articles of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE VII
OFFICERS
Section 7.1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a President, a Secretary and a Treasurer. Any
person may hold two or more offices.
Section 7.2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a Chairman of the Board and a
President, both of whom shall be directors, and shall choose a Secretary and a
Treasurer, none of whom need be directors.
Section 7.3. The Board of Directors may appoint a Chairman of the
Board, Vice-Chairman of the Board, Vice Presidents and one or more Assistant
Secretaries and Assistant Treasurers and such other officers and agents as it
shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors.
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Section 7.4. The salaries and compensation of all officers of the
Corporation shall be fixed by the Board of Directors.
Section 7.5. The officers of the Corporation shall hold office at the
pleasure of the Board of Directors. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors. Any officer may
resign at any time by giving written notice to the Corporation.
Section 7.6. Chairman of the Board. The Chairman of the Board shall
preside at meetings of the stockholders and the Board of Directors, and shall
see that all orders and resolutions of the Board of Directors are carried into
effect.
Section 7.7. Vice-Chairman. The Vice-Chairman shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties as the
Board of Directors may from time to time prescribe.
Section 7.8. President. The President shall be the chief executive
officer of the corporation and shall, subject to the control of the Board of
Directors, have active management of the business of the corporation. He shall
execute on behalf of the corporation all instruments requiring such execution
except to the extent the signing and execution thereof shall be expressly
designated by the Board of Directors to some other officer or agent of the
corporation. The President may appoint such other officers as the business of
the Corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in the bylaws or as
the Board of Directors may from time to time determine.
Section 7.9. Vice Presidents. The Vice-President(s) shall act under the
direction of the President and in the absence or disability of the President
shall perform the duties and exercise the powers of the President. They shall
perform such other duties and have such other powers as the President or the
Board of Directors may from time to time prescribe. The Board of Directors may
designate one or more Executive Vice Presidents or may otherwise specify the
order of seniority of the Vice Presidents. The duties and powers of the
President shall descend to the Vice Presidents in such specified order of
seniority.
Section 7.10. Chief Financial Officer. The Chief Financial Officer, if
any, shall be an Executive Vice President and shall act in an executive
financial capacity. He shall assist the Chairman of the Board and the President
in the general supervision of the Corporation's financial policies and affairs.
Section 7.11. Secretary. The Secretary shall act under the direction of
the President. Subject to the direction of the President he shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record the proceedings. He shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the President or the Board of
Directors.
Section 7.12. Assistant Secretaries. The Assistant Secretaries shall
act under the direction of the President. In order of their seniority, unless
otherwise determined by the President or the Board of Directors, they shall, in
the absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary. They shall perform such other duties and have such
other powers as the President or the Board of directors may from time to time
prescribe.
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<PAGE>
Section 7.13. Treasurer. The Treasurer shall act under the direction of
the President. Subject to the direction of the President he shall have custody
of the corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the President or the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
Section 7.14. Assistant Treasurer. The Assistant Treasurer in the order
of their seniority, unless otherwise determined by the President or the Board of
Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer. They shall perform such other
duties and have such other powers as the President or the Board of Directors may
from time to time prescribe.
ARTICLE VIII
CERTIFICATES OF STOCK
Section 8.1. Certification. Every stockholder shall be entitled to have
a certificate signed by the President or a Vice-President and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by him in the corporation. If
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the designations, preferences and relative
participating, optional or other special rights of the various classes of stock
or series thereof and the qualifications, limitations or restrictions of such
rights, shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such stock.
Section 8.2. If a certificate is signed (1) by a transfer agent other
than the corporation or its employees or (2) by a registrar other than the
corporation or its employees, the signatures of the officers of the corporation
may be facsimiles. In case any officer who has signed or whose facsimile
signature has been placed upon a certificate shall cease to be such officer
before such certificate is issued, such certificate may be issued with the same
effect as though the person had not ceased to be such officer. The seal of the
corporation, or a facsimile thereof, may, but need not be, affixed to
certificates of stock.
Section 8.3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
Section 8.4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation, if it is satisfied that all provisions of the laws
and regulations applicable to the corporation regarding transfer and ownership
-25-
<PAGE>
of shares have been complied with, to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
Section 8.5. The Board of Directors may fix in advance a date not
exceeding sixty (60) days nor less than ten (10) days preceding the date of any
meeting of stockholders, or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining the consent of stockholders for any purpose, as a record date for the
determination of the stockholders entitled to notice of and to vote at any such
meeting, and any adjournment thereof, or entitled to receive payment of any such
dividend, or to give such consent, and in such case, such stockholders, and only
such stockholders as shall be stockholders of record on the date so fixed, shall
be entitled to notice of and to vote at such meeting, or any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
any such record date fixed as aforesaid.
Section 8.6. The Corporation shall be entitled to recognize the person
registered on its books as the owner of shares to be the exclusive owner for all
purposes including voting and dividends, and the Corporation shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Nevada.
ARTICLE IX
RECORDS AND REPORTS
Section 9.1. Stock Ledger. The Corporation shall either maintain at its
principal office a record of its stockholders, giving the names and addresses of
all stockholders and the number and class of shares held by each stockholder, or
in lieu thereof maintain at its principal office a statement setting out the
name of the custodian of the stock ledger.
Section 9.2. Accounting Books and Records. The accounting books and
records and minutes of proceedings of the stockholders and the Board of
Directors and any committee or committees of the Board of Directors shall be
kept at such place or places designated by the Board of Directors. The minutes,
accounting books, and the records shall be kept either in written form or in any
other form capable of being converted into written form. Subject to NRS 78.257,
as amended, the minutes and accounting books and records shall be open to
inspection by the stockholders.
Section 9.3. Inspection. Every director shall have the absolute right
at any reasonable time to inspect all books, records, and documents of every
kind, and the physical properties of the Corporation and each of its subsidiary
corporations. This inspection by a director may be made in person or by an agent
or attorney, and the right of inspection includes the right to copy and make
extracts of documents.
ARTICLE X
GENERAL PROVISIONS
Section 10.1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the Articles of Incorporation, if any,
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property or in shares of the
capital stock, subject to the provisions of the Articles of Incorporation.
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<PAGE>
Before payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends or for repairing or maintaining
any property of the corporation or for such other purpose as the directors shall
think conducive to the interest of the corporation, and the directors may modify
or abolish any such reserve in the manner in which it was created.
Section 10.2. Checks or Demands. All checks or demands for money and
notes of the corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 10.3. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
Section 10.4. Corporate Seal. The corporation may or may not have a
corporate seal, as may from time to time be determined by resolution of the
Board of Directors. If a corporate seal is adopted, it shall have inscribed
thereon the name of the corporation and the words "Corporate Seal" and "Nevada".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or in any manner reproduced.
Section 10.5. Authority. The Chairman of the Board, the President, or
any Vice-President, or any other person authorized by resolution of the Board of
Directors or by any of the foregoing designated officers, is authorized to vote
on behalf of the Corporation any and all shares of any other corporation or
corporations, foreign or domestic, standing in the name of the Corporation. The
authority granted to these officers to vote or represent on behalf of the
Corporation any and all shares held by the Corporation in any other corporation
or corporations may be exercised by any of these officers in person or by any
person authorized to do so by a proxy duly executed by these officers.
Section 10.6. Governing Law. Unless the context requires otherwise, the
general provisions, rules of construction, and definitions in the Nevada Revised
Statutes shall govern the construction of these bylaws. Without limiting the
generality of these provisions, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both the
Corporation and a natural person.
ARTICLE XI
AMENDMENTS
Section 11.1. Amendment by Stockholders. The Bylaws may be amended by a
two-thirds (2/3) vote of all the stock issued and outstanding and entitled to
vote at any annual or special meeting of the stockholders, provided notice of
intention to amend shall have been contained in the notice of the meeting.
Section 11.2. Amendment by Board of Directors. The Board of Directors
by a majority vote of the whole Board at any meeting may amend these Bylaws,
including Bylaws adopted by the stockholders, but the stockholders may from time
to time specify particular provisions of the Bylaws which shall not be amended
by the Board of Directors.
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<PAGE>
ARTICLE XII
INDEMNIFICATION
Every person who was or is a party or is threatened to be a party to or
is involved in any action, suit or proceedings, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director, officer, legal spouse
(whether such status is derived by reason of statutory law, common law or
otherwise of any applicable jurisdiction) of a director or officer, employee,
agent, or other person of this corporation, or is or was serving at the request
of this corporation or for its benefit as a director, officer, employee or other
person of another corporation, partnership, joint venture, trust or other
enterprise, shall be indemnified and held harmless to the fullest extent legally
permissible under the law of the state of Nevada as it may be amended from time
to time against all expenses, liability and loss (including attorneys' fees,
judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. The indemnification of a
legal spouse of a director or officer shall not extend to any claim for any
actual or alleged wrongful act of the spouse, but shall apply only to actual or
alleged wrongful acts of a director or officer as provided in this Article. The
expenses of a director, officer or legal spouse of a director or officer,
incurred in defending a civil or criminal action, suit or proceeding must be
paid by this corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the director, officer, or legal spouse of a director or officer,
to repay the amount if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by this corporation. Such
right of indemnification shall be a contract right which may be enforced in any
manner desired by such person. Such right of indemnification shall not be
exclusive of any other right which such a director, officer, legal spouse of a
director or officer, agent or other person may have or hereafter acquire and,
without limiting the generality of such statement they shall be entitled to
their respective rights of indemnification under the Articles of Incorporation,
any agreement, vote of stockholders, provision of law or otherwise, as well as
their rights under this Article.
Without limiting the application of the foregoing, the Board of
Directors may cause this corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, legal spouse of a
director or officer, employee, agent or other person of this corporation or is
or was serving at the request of this corporation as a director, officer,
employee, agent or other person of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred in any such capacity or arising out of such status, whether
or not this corporation would have the power to indemnify such person.
APPROVED AND ADOPTED this 22nd day of March 2000.
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<PAGE>
CERTIFICATE OF SECRETARY
I hereby certify that I am the Secretary of CVI Technology, Inc. and
that the foregoing Bylaws, consisting of 12 pages, constitute the Code of Bylaws
of CVI Technology, Inc. as duly adopted and amended by resolution of the Board
of Directors of CVI Technology, Inc. dated March 22, 2000
IN WITNESS WHEREOF, I have hereunto subscribed my name this 22nd day of
March 2000.
/s/ Stacie L. Brown
--------------------------
Stacie L. Brown, Secretary
-29-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and statements of operations of the Company as of and for the quarter
ended March 31, 2000, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 181,870
<SECURITIES> 0
<RECEIVABLES> 1,465,973
<ALLOWANCES> 18,917
<INVENTORY> 1,727,840
<CURRENT-ASSETS> 3,446,377
<PP&E> 3,421,663
<DEPRECIATION> 718,173
<TOTAL-ASSETS> 7,626,593
<CURRENT-LIABILITIES> 3,477,188
<BONDS> 0
0
0
<COMMON> 10,746
<OTHER-SE> (485,135)
<TOTAL-LIABILITY-AND-EQUITY> 7,626,593
<SALES> 1,367,961
<TOTAL-REVENUES> 1,709,834
<CGS> 676,143
<TOTAL-COSTS> 1,265,422
<OTHER-EXPENSES> 1,316,616
<LOSS-PROVISION> 23,593
<INTEREST-EXPENSE> 214,476
<INCOME-PRETAX> (1,086,677)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,086,677)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,086,677)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
