FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT O SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _______ to _______
Commission file number 1-15575
CEVA INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada 22-3113236
(State or other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
75-77 North Bridge Road, Somerville, New Jersey 08876
(Address of Principal Executive Office) (Zip Code)
(908) 429-0030
(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 _____
The number of shares of Registrant's Common Stock, $0.001 par value,
outstanding as of June 30, 2000, was 10,959,415 shares.
CEVA INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART 1 - FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited)
Consolidated Balance Sheet
- June 30, 2000 3
Consolidated Statements of Operations
- Three and six months ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows
- Six months ended June 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6 - 15
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 16 - 17
PART II - OTHER INFORMATION 18
SIGNATURES 20
FINANCIAL DATA SCHEDULE 21
2
PART I - Item 1
CEVA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 2000
ASSETS
Current Assets
Cash .................................................. $ 601,364
Accounts receivable, net of allowance for
doubtful accounts of $314,000 .......................... 929,157
Inventories ............................................ 0
Prepaid expenses ....................................... 12,908
-----------
Total Current Assets ................................ 1,543,429
Property, plant and equipment, net of accumulated
depreciation......................................... 2,522,415
Intangible assets, net of accumulated amortization...... 17,195
Deferred charges, net of accumulated amortization....... 162,500
Goodwill, net of accumulated amortization............... 303,833
-------------
TOTAL ASSETS ................................................ 4,549,372
========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses .................. 1,304,752
Notes/Loans payable .................................... 324,059
Loans payable to stockholders .......................... 200,000
Current maturities of capital leases ................... 965,815
Deferred credit ........................................ 76,439
-------------
Total Current Liabilities ........................... 2,871,065
Capital leasess, less current portion .................. 2,345,748
-------------
TOTAL LIABILITIES ........................................... 5,216,813
STOCKHOLDERS' EQUITY
Preferred Stock, non-voting, $0.001 par value, 25,000,000 shares
authorized; Series A - redeemable, non-dividend, $50,000 stated value per
share, 100 shares authorized, 17 shares issued and outstanding ($850,000
redeemable preference in either cash or convertible into common shares) .. 850,000
Common Stock, voting, $0.001 par value, 100,000,000 shares authorized,
10,959,415 shares are issued and outstanding............. 10,959
Additional paid-in capital ............................... 2,681,527
Accumulated deficit...................................... (4,271,881)
Accumulated other comprehensive income - foreign
Currency translation adjustment ......................... 61,954
-------------
TOTAL STOCKHOLDERS' EQUITY (IMPAIRMENT).......... (667,441)
TOTAL LIABILITIES AND EQUITY ................................. $ 4,549,372
==========
See notes to consolidated financial statements
3
CEVA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
Total Revenues............................. $ 250,067 $ 601,676 $ 434,817 $ 1,203,351
Cost of Goods Sold ................... 392,978 300,838 666,570 601,676
------------- ------------- ------------- -----------
Gross Profit ............................... (142,911) 300,838 (231,753) 601,675
Operating expenses ................... 128,636 234,537 360,799 469,074
----------- ------------ ----------- ------------
Operating income (loss) ................... (271,547) 66,301 (592,552) 132,601
Other income (expense)
Interest expense, net................. (107,444) (74,902) (222,270) (62,443)
Income pursuant to Joint Venture...... 620,000 - 620,000 -
Minority interest in income (loss)
of consolidated subsidiary ........... - (109,982) - (219,964)
------------- ------------- ------------- ---------
Total Other Income (Expense) .............. 512,556 (141,203) 397,730 (282,407)
------------- ------------- ------------- -------------
Income (loss) before provision
for income taxes...................... $ 241,009 (74,902) (194,822) (149,806)
Provision for income taxes................. - - - -
------------- ------------- ------------- -------------
Net income (loss) ......................... $ 241,009 $ (74,902) $ (194,822) $ (149,806)
============ ============= ============= ============
Earnings (loss) per Common Share .......... $ 0.02 $ (0.01) $ (0.02) $ (0.03)
=========== ============= ============ ===========
Weighted Average Number of
Common Shares Outstanding ............ 10,329,415 5,494,296 10,129,861 5,494,296
See notes to consolidated financial statements
4
CEVA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
2000 1999
---- ----
Net Cash Provided (Used) by Operating Activities $ 505,564 $ 239,619
Net Cash Provided (Used) by Investing Activities (16,216) (190,050)
Net Cash Provided (Used) by Financing Activities 26,451 280,871
----------- -----------
Net Increase (Decrease) in Cash ................ 515,799 330,440
Cash at Beginning of Period .................... 85,565 72,621
----------- --------
Cash at End of Period .......................... $ 601,364 $ 403,061
=========== ============
See notes to consolidated financial statements
5
CEVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
BACKGROUND
CEVA International, Inc. (the "Company") was founded as a New Jersey corporation
in 1991 for the purpose of engaging in the environmental services business in
Central and Eastern Europe ("CEE"). Since its inception, the Company's founder,
Herbert G. Case, Jr., its current President and Chief Executive Officer, has
spent most of his time living and working in CEE, residing in Budapest, Hungary.
During this period through the date hereof, Mr. Case has devoted his full time
to establishing the business operations of the Company. In 1998, the Company was
reincorporated in the State of Delaware.
On March 29, 1999, the Company and Oro Bueno, Inc., a Nevada corporation,
entered into an Agreement and Plan of Merger, pursuant to which the shareholders
of the Company were offered the opportunity to exchange their Company common
shares for common shares of Oro Bueno, Inc. On May 10, 1999, the Company merged
with Oro Bueno, Inc., as a result of which the shareholders of the Company
exchanged their holdings for approximately 77% of the common shares of Oro
Bueno, Inc. with the remaining balance of such shares, or approximately 23%,
being retained by the shareholders of Oro Bueno, Inc. As part of that merger,
Oro Bueno, Inc. changed its name to CEVA International, Inc. and the Delaware
corporation was dissolved. Currently, therefore, the Company is incorporated
under the laws of the State of Nevada. The transaction is considered a
re-capitalization of the Company for accounting purposes and all financial
information regarding operations is that of the Company.
The principal offices of the Company are located at 75-77 North Bridge Street,
Somerville, New Jersey 08876. Whenever we refer to "Company" or use the terms
"we", "us" or "our" in this report, we are referring to CEVA International, Inc.
CORPORATE STRUCTURE
Our Company is currently composed of CEVA International, Inc., a Nevada
corporation with its principal offices located in New Jersey, a Czech subsidiary
(CevaTech) and a Hungarian subsidiary (CEVA Hungary Ltd.). Our Hungarian
subsidiary was previously 50% owned by Hungarian partners although our Company
was and remains the managing shareholder. During the second quarter 2000, two of
our Hungarian partners who owned an equity interest in our Hungarian subsidiary,
exchanged their 35% equity ownership interest in the Hungarian subsidiary for
700,000 common shares in our Company. We expect the remaining Hungarian partner
who currently holds 15% to also convey his ownership interests in exchange for
our Company common shares which shall result in the reorganization of this
operation as a wholly owned subsidiary.
Our Czech subsidiary is owned 40% by our Czech partners and we have control and
management authority.
BUSINESS
We are engaged in the business of providing technology and services to public
and private clients in Central and Eastern Europe in the alternative energy and
environmental reclamation industries.
ALTERNATIVE FUEL BUSINESS
We recover the energy-content of certain wastes by processing high
concentrations of hydrocarbons contained in petroleum wastes into Alternative
Fuel ("AF"). Our AF business is applicable to the wastes generated by heavy
industries such as the petroleum refining (by-products filter cake, oily filter
media, separator waste, sludges, acid tar, slop and waste oil, tank rail
bottoms), steel (coal tar bottoms), chemical (solvents, chemical tars) mining
(coal tars), manufactured gas and pharmaceutical industries. The processed
alternative fuel then can be used by cement kilns, power plants and other
industrial boilers as a cheaper source of energy.
6
Technology:
Alternative Fuel technology is used to clean up pollutants by converting them
into a reusable fuel form. The alternative fuel ("AF") is derived from either
the liquefaction or solidification of residual petroleum and oily wastes and
by-products. The Company's liquefaction process was developed in the United
States to rejuvenate solidified coal tar. Liquefying the solidified tar enables
this material to be utilized as raw materials or as supplementary fuel. The
liquefied material can be re-used in waste fuel recycling programs in cement
kilns and other industrial furnaces. Using the technology of liquefaction helps
eliminate land disposal-related liability and increases useable/saleable tar
product volume, resulting in environmental and economic benefits. The liquid
fuel is referred to as "liquid AF", or alternative fuel.
Solidification processes were developed to prepare AF into a form to replace
coal in large industrial boilers, power plants and cement kilns.
End Use:
According to the 1992 Portland Cement Association's publication "A Sensible
Solution-Putting Waste to Work", both liquefied and solidified waste derived
fuels can be utilized in cement kilns. The use of cement kilns to recycle
hazardous industrial wastes has become an important component of environmentally
acceptable handling procedures in the Western world
Competitive Technologies:
AF is principally considered a clean-up technology which is an alternative to
other forms of disposal or remediation. The fact that a valuable by-product is
created is important economically because it reduces the net cost of the clean
up. Primary alternatives are:
Hazardous waste landfill: There is limited capacity in Central and Eastern
Europe; because of their generally remote locations, landfills require
transportation and handling resulting in relatively higher costs and expenses
for disposal.
Incineration: There are only a limited number of incinerators in Central and
Eastern Europe; because of this limited capacity and the generally remote
location of these incinerators, transportation and handling costs make
incinerator disposition a very expensive alternative.
SOIL REMEDIATION BUSINESS
Heavy industries often contaminate soil and other solid mixtures by hydrocarbons
in ways where their energy content cannot be directly recovered. In these
instances, we employ Low Temperature Thermal Desorption ("LTTD"), a soil
remediation process. Sites where these sorts of contamination can be found are
often neighboring the sites of wastes processed for AF. Central and Eastern
Europe has large quantities of contaminated soil, which need to be cleaned.
Contaminated soil is found principally in heavy industries including oil and gas
refineries, railways, energy plants, mining sites, as well as in and around
former Soviet military bases.
The LTTD Technology:
We have selected a technology known as "low temperature thermal desorption"
("LTTD") as the method to clean contaminated soil in this marketplace. This
technology has been developed by Astec, Industries, Inc. of Chattanooga,
Tennessee, a leading manufacturer of LTTD equipment The LTTD system was
introduced to the United States market in 1989 and has proved to be a
successful, method of removing light and heavy refinery and hydrocarbon
wastes from all types of soil. Contaminant destruction efficiencies in the
afterburners of these units are greater than 99.99% according to methods
prescribed by United States Environmental Protection Agency stack tests
performed on equipment manufactured by Astec Industries, Inc. Decontaminated
soil retains its physical properties and ability to support biological activity.
7
An LTTD unit of equipment contains several large compartments where at one end,
contaminated soil is fed into the unit on conveyor belts and is treated by heat
processing in various enclosed chambers; once treated, the "clean" soil is
deposited at the other end of the unit. The LTTD equipment heats the soil to
temperatures ranging from 90 to 320 degrees Centigrade (200-600 degrees
Fahrenheit) to vaporize the petroleum, physically separating it from the soil.
The vapor stream is then captured and sent to the afterburner where it is
thermally destroyed.
Service Agreement with Green Globe, LLC:
We partnered with a United States based LTTD operator, Green Globe, LLC, ("Green
Globe") for soil decontamination projects in Central and Eastern Europe. In the
Fall of 1998, we entered into a contract with Green Globe pursuant to the
general terms of which, we agreed to give Green Globe all soil decontamination
projects generated through our business relationships in Central and Eastern
Europe. Green Globe agreed to provide, transport, install an LTTD equipment unit
in the region and train our local workforce to operate the unit. After provision
for costs, profits generated would be shared equally between Green Globe and us.
In order to reduce importation and tariff charges, Green Globe and our Hungarian
subsidiary entered into a lease agreement for the LTTD unit. In connection with
these agreements, Green Globe transported and installed a large LTTD unit to
Budapest, Hungary, in preparation to begin a soil decontamination project,
for which our Hungarian subsidiary was awarded the contract, commissioned by a
municipal subdivision of the City of Budapest known as "District XVIII: we
completed the project in December, 1998 and were required to commence legal
action in order to obtain full payment: see "LEGAL PROCEEDINGS" below.
Applicability and Limitations:
The target contaminant groups for an LTTD system are oil and other organic
compounds (hydrocarbons). Such compounds are generated by the petroleum
refining, chemical, railroads, mining industries and governmental organizations,
such as the military, airports, and state-owned dumpsites. The low temperature
desorption processes are best suited for removal of organics from soil, sand,
gravel, or rock fractions. The high-absorption capacity of clay decreases the
partitioning of organics to the vapor phase.
The following factors may limit the applicability and effectiveness of the LTTD
technology and process:
(i) specific feed size and materials handling requirements that can impact
applicability or cost at specific sites; (ii) high moisture content of the soil
decreases capacity of the LTTD equipment unit; (iii) highly abrasive feed
potentially can damage the LTTD equipment; (iv) heavy metals in the
decontaminated soil may produce a treated solid residue that requires
stabilization and further treatment.
Competitive Technologies:
There are other technologies that compete with our LTTD equipment technology for
the treatment of contaminated soil.
Bioremediation: Although not as capital intensive as the requirements to put an
LTTD equipment unit in operation, is a very time consuming process that does not
always work. In addition, bioremediation is recognized throughout the world as
effective only when treating lightly contaminated soil and requires a large
operating area and space.
8
"Soil washing": Soil washing is a widely used technology in Western Europe. Soil
washing is an effective technology to clean soils contaminated with heavy
metals. However, soil washing is an expensive process and generally does not
neutralize oil and gas residue or hydrocarbon contamination.
Landfills: Another soil remediation technique is to simply transport these soils
to a hazardous waste landfill. However, there are very few licensed and
permitted hazardous waste landfills in Central and Eastern Europe. For example,
the Country of Hungary has only one hazardous waste landfill in Aszod, and it
has an annual capacity of only approximately 5,000 tons.
Incineration: Another method to dispose of decontaminated soil is to burn it in
incinerators. Incineration is the most expensive process to treat contaminated
soil. Because of its high cost, incineration is primarily used to treat the more
hazardous types of wastes. There is a very limited capacity for incinerator
disposal in Central and Eastern Europe.
LTTD technology will process difficult to process materials, such as coal tar,
heavy oils and various refinery tars in soils which cannot be efficiently
removed by bioremediation. Further, LTTD technology is designed to meet US EPA
emissions standards.
9
CEVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 to Item 310 of Regulation S-B. 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 accruals) considered
necessary for a fair presentation have been included. Operating results for the
six months ended June 30, 2000 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2000. The unaudited
financial statements should be read in conjunction with the audited consolidated
financial statements and footnotes thereto for the years ended December 31, 1999
and 1998 which have been filed previously with the Commission.
Going Concern Uncertainty
The report from the Company's independent auditors for the year ended December
31, 1999, contains a statement that the financial statements had been prepared
assuming that the Company will continue as a going concern, that the Company had
incurred significant operating losses and had a stockholders' impairment, that
these conditions raised substantial doubt about the Company's ability to
continue as a going concern, and that the financial statements did not include
any adjustments that might result from the outcome of this uncertainty.
Management's plans with regard to those matters are described in the section
"Management's Discussion and Analysis".
Principles of Consolidation
The consolidated financial statements include the accounts of CEVA
International, Inc. and its subsidiaries. All significant inter-company balances
and transactions have been eliminated in consolidation.
Depreciation and Amortization
The cost of equipment is depreciated for financial reporting on a straight-line
basis over the estimated useful lives of such assets, which is between 3 and 7
years. Maintenance and repairs which do not extend the useful lives of the
related assets are charged to operations as incurred. Deferred charges in
connection with LTTD contracts and intangibles are being amortized over 5 years.
Income Taxes
The Company is taxed as a "C" Corporation for federal purposes and deferred
taxes are recognized for operating losses that are anticipated to offset future
federal income taxes.
The basic corporate income tax rate applicable to CEVA Hungary Ltd. is 18% . In
addition, a supplementary tax of up to 35% is payable on dividends from
post-1994 profits. The actual rate of supplementary tax depends on the residence
of the recipient shareholder and the terms of the applicable tax treaty between
Hungary and the relevant foreign country. A rate of 35% applies to Hungarian
shareholders.
Revenue Recognition
Revenue is recognized in accordance with contracts as services are rendered.
Net Loss Per Share
In accordance with the provisions of Financial Accounting Standards Board No.
128, "Earnings Per Share" basic earnings (loss) per common share amounts are
computed by dividing net loss by the weighted average number of shares of Common
Stock outstanding during the period. Common Stock equivalents have not been
included in this computation since the effect would be anti-dilutive.
10
CEVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Securities Issued for Services
The Company accounts for stock and stock purchase warrants issued for services
by reference to the fair market value of the Company's stock on the date of
stock issuance or warrant grant in accordance with Financial Accounting
Standards Board Statement No. 123, "Accounting for Stock-based Compensation".
Compensation /consulting expense is recorded for the fair market value of the
stock and warrants issued.
Foreign Currency Translation
For CEVA Hungary Ltd. whose functional currency is the Hungarian Forint, balance
sheet accounts are translated into U.S. Dollars at exchange rates in effect at
the end of the reporting period and income statement accounts are translated at
average exchange rates for the periods covered. Translation gains and losses are
included as a separate component of stockholders' equity (impairment).
Use of Estimates
The preparation of financial statements in conformity with generally accepted
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
CONCENTRATION OF BUSINESS AND CREDIT RISK
At times throughout the reporting periods the Company may maintain certain bank
accounts in excess of FDIC limits.
The Company conducts its business primarily in Eastern European nations.
The Company has contracts with a small number of customers; the loss of one of
the major ones would have a near-term adverse effect on the Company's financial
condition and operations.
11
CEVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
PROPERTY AND EQUIPMENT
Property and equipment consist of the following at June 30, 2000:
Equipment under capital leases $ 3,029,626
Field and office equipment 847,138
--------------
Subtotal 3,876,764
Less accumulated depreciation 1,354,349
--------------
Total $ 2,522,415
==============
PROFIT SHARING ARRANGEMENT / DEFERRED CHARGES
In 1997 the Company entered into an agreement to share profits with a vendor on
its Low Temperature Thermal Desorption (LTTD) contracts. The vendor also has the
exclusive right to provide equipment and services that might be required under
any LTTD contracts. This agreement has a term of ten years and may be terminated
earlier by mutual consent of the parties. In 1998, the vendor provided for a
$250,000 portion of an agreed upon $500,000 advance, whereby the amount of
$500,000 was included in a lease obligation to be repaid (see "CAPITAL LEASES").
The remaining $250,000 was recorded as a deferred charge, and amortizes over the
repayment term of the 5 year lease. Amortization expense totaled $50,000 and
$12,500 during the years ended December 31, 199 and 1998, respectively, and
$25,000 during the two quarters ended June 30, 2000.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses totaled $1,304,752 at June 30, 2000 and
consisted primarily of trade accounts payable, accrued interest and
compensations and professional fees payable.
NOTES PAYABLE
At June 30, 2000, the Company had borrowings under short term loan
agreements with the following terms and conditions:
Note payable accruing interest at 12% per year, due in full on December 31,
1999. Maturity has been extended to June 30, 2000, with interest $ 200,000
accruing at the rate of 24% per year, starting with January 1, 2000.
The note is guaranteed by the rincipal stockholder. Non-interest
bearing note originally due April 30,2000, subsequently extended, payable 10,000
either in cash or convertible into common shares of the Company at
$0.50 per share. The note was subsequently converted into common shares.
Short-term cash advances by three stockholders, due on demand. 110,000
Other loans payable. 4,059
Total $ 324,059
==============
12
CEVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
LOANS PAYABLE TO STOCKHOLDER
The majority stockholder has advanced working capital to the Company. Such
advances include a $200,000 unsecured loan, due on demand, accruing interest at
10% per year. Repayment may be made either in cash, or, at the option of the
stockholder, the loan may be converted into common shares at a conversion rate
of $0.25 per share, with a 10% dividend rate.
CAPITAL LEASES
The Company leases certain equipment under capital leases expiring in various
years through 2003. The assets and liabilities under capital leases are recorded
at the lower of the present value of the minimum lease payments or the fair
value of the asset at the inception of the lease. The assets are amortized over
the lesser of their related lease terms or their estimated productive lives.
Amortization of assets under capital leases is included in depreciation expense.
Liabilities from capital leases are as follows at June 30, 2000:
Payments due under capital leases $ 3,311,563
Less current portion 965,815
------------
Capital leases, less current portion $ 2,345,748
DEFERRED CREDIT
CEVA Hungary Ltd. sold equipment which was then leased back in a sale-leaseback
transaction. Total profits from the sale amounted to $102,638 at December 31,
1999 and are recognized over the term of the lease.
INCOME TAXES
At December 31, 1999, the Company had approximately $800,000 of federal net
operating loss carryforwards available for income tax purposes which expire on
December 31, 2019.
The Company's total deferred tax asset and valuation allowance at December 31,
1999 are as follows:
Total deferred tax asset $ 225,000
Less valuation allowance 225,000
Net deferred tax asset $ -
============
13
CEVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
RELATED PARTY TRANSACTIONS
During the second quarter 2000, certain fees were incurred by individuals
who also are officers and/or stockholders of the Company. Such fees
amounted to $ 65,653 .
PREFERRED STOCK
There are issued and outstanding 17 shares of redeemable Series A
preferred stock with a stated value of $850,000, held by the Company's
president and CEO. The shares were issued originally pursuant to the
conversion of outstanding loans in the approximate same amount. These
shares have certain redemption rights and liquidation preferences (see
Exhibit 4 of Form 10-QSB for the quarter ended March 31, 2000, as filed
with the Commission, included herein by reference).
CHANGES IN KEY PERSONNEL
On June 1, 2000, James Atkins was appointed Chief Financial Officer, and
Dennis Konnick was appointed Operations Director.
Our success depends to a material and significant extent on the services
of Herbert G. Case, Jr., our President and Chief Executive Officer as well
as our ability to attract and retain additional key personnel with the
skills necessary to manage our existing business and strategic plans. The
loss of Mr. Case or other key personnel could have a material adverse
effect on our business, results of operations, liquidity and financial
condition. We do not have an employment agreement with Mr. Case. If we
cannot retain Mr. Case or hire and retain qualified personnel, our
business, results of operations, financial condition and prospects could
be adversely affected.
INVESTMENT IN JOINT VENTURE
In May 2000, the Company entered into a joint venture covering the
Country of Romania with one of the world's largest cement producers
known as "Holderbank Cement" whereby the Company will receive a 49%
ownership interest by contributing, during the third quarter 2000, a
portion of its proprietary production equipment and intellectual property.
Additionally, the Company will assign its existing contracts with certain
cement producers for delivery of alternate fuels to the joint venture. In
consideration of the Company's agreement to accept a minority shareholder
position in the joint venture, the 51% partner agreed to and has paid a
one-time signing fee during the quarter ended June 30, 2000 .
14
CEVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
INCREASE OF OWNERSHIP INTEREST IN CEVA HUNGARY LTD.
In April 2000, the Company acquired an additional 35% ownership interest
from two minority shareholders in its Hungarian subsidiary, bringing the
Company's share in CEVA Hungary Ltd. to 85%. In exchange, the Company
issued 700,000 shares of its common stock valued at $0.50 per share, or
$350,000. As this amount exceeds the fair value of net assets of CEVA
Hungary on April 1, 2000, the Company has recognized an amount of $303,833
in Goodwill in its consolidated balance sheet at June 30, 2000, which will
be amortized over a period of 10 years.
15
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
CEVA International, Inc. specializes in the application of waste-to-energy
alternative fuel and environmental remediation technologies. Its primary target
market and current operations focus on Central- and Eastern Europe, specifically
Hungary, Romania, and the Czech Republic. These countries not only have rapidly
growing energy needs but at the same time are burdened with a legacy of
significant problems in the areas of environmental pollution coupled with a
scarcity of technical and managerial know-how in trying to address these
problems, even though the region has started developing and implementing a
regulatory, socio-economic and judicial infrastructure on par with Western
standards that can effectively deal with the legacy of decades of centrally
controlled state owned economies. CEVA during the last several years has
succeeded in establishing a presence and creating a wide ranging network of
business contacts and working relationships which facilitates the day-to-day
management of the Company's operations and which management expects will bear
fruit in the years to come. Despite this progress, however, and although basing
its projects and operations on traditional and proven technologies, timing and
success of individual projects often depend on factors beyond the control of the
Company and the resulting uncertainties make reliable projections difficult.
Except where the processing of oil and tar contaminated soil and water
depositories results in the manufacture of alternate fuels that produce tangible
cost savings when utilized in industrial processes such as cement plants, a
general relative scarcity of public or private funding for remedial projects
addressing environmental contamination has until now limited the revenue
potential for the Company.
Economic Conditions
Our business in Central and Eastern Europe is sensitive to the local financial
condition of the economies in which we work, government environmental regulation
as well as the condition of worldwide financial markets. We have extensively
discussed these topics above. A downturn in economic conditions in one or more
of our Central and Eastern European markets, a governmental failure to develop
and enforce environmental regulations as well as unforeseen governmental
legislation could have a material adverse effect on our results of operations,
financial condition, business and prospects. Although we attempt to stay
informed of economic and market conditions, government environmental
initiatives, changing permit requirements, any continuing failure on our part to
identify potentially adverse developments and to respond to such trends would
have a material adverse effect on our results of operations, financial
condition, business and prospects. Political and economic imperatives, however,
are dictating a gradual improvement in this area, and management expects that
the Company will be a primary beneficiary in view of its rapidly growing
physical presence and investments in the region.
Results of Operations for the Three and Six Months Periods Ended June 30, 2000
compared to Six Months Ended June 30, 1999
For the three and six months periods ended June 30, 2000, the Company had gross
revenues of $250,067 and $434,817 respectively (compared to $601,676 and
$1,203,351 during the same periods a year ago), most of which was generated by
its subsidiary CEVA Hungary. The decrease in revenues during both quarters is
attributable to the fact that a major project involving soil remediation for a
municipality in Budapest that accounted for most of the revenues during the
first half of 1999 did not extend into 2000. While the Company is in advanced
stages of negotiation for a number of larger soil remediation projects and AF
contracts with other clients it has not yet derived any revenues therefrom
during the period.
Gross profits for the quarter ended June 30, 2000, amounted to negative $142,911
(positive $300,838 in 1999). A large portion of period costs-of-goods-sold are
incurred from level amortization expenses in connection with capitalized
equipment leases for plant and equipment used in the treatment of contaminated
soils and depositories. The effect of unused processing capacities is therefore
a significant factor influencing operating margins. In addition, margins
16
fluctuate from project to project depending upon local factors and individually
negotiated terms, and any given reporting period's overall results are affected
by the mix and timing of such projects. This volatility represents a major risk
factor in predicting the Company's future performance and will relatively
diminish only upon the Company achieving its revenue goals during the next two
years when a larger number of projects are in progress and in combination
contribute to a more level gross margin profile. After deducting operating
expenses of $128,636 which decreased from $234,537 during the same period last
year, substantially due to lesser personnel expenses, the Company incurred an
operating loss of $271,547 for the quarter (compared to an operating profit of
$66,301 in 1999). This loss was more than offset, however, by an amount of
$620,000 representing a one-time signing fee paid to CEVA International, Inc. in
May in connection with the finalization of a joint venture agreement (see
"Investment in Joint Venture") Non-operating expenses in form of interest
charges totaled $107,444, incurred primarily in connection with capital leases.
The quarter concluded with a net profit of $241,009 or $0.02 per share, bringing
the first six months' result to a net loss of $194,822 or $0.02 per share,
compared to losses of $74,902 or $0.01 per share and $149,806 or $0.03 per share
for the three and six months periods in 1999.
The Hungary revenues are attributable primarily to one customer, MOL, in
connection with soil remediation projects involving Low Temperature Thermal
Desorption technology at Nyirbogdany and Szazhalombatta. MOL, RT., the Hungarian
Oil and Gas Company ("MOL"). The Company has constructed a processing facility
jointly with MOL at the Nyirbogdany site where we converted material into a
liquid AF fuel.. Prior to that, we completed a trial-processing project in 1997
with MOL that successfully produced an AF solid fuel. We are now working jointly
with MOL to obtain permits for cement kilns, and other outlets so that we can
supply them with our processed AF solid and liquid fuel. We expect to be able to
significantly increase our revenues in Hungary, based on further cooperation
with MOL.
In Romania we have a contract with S.C. CIMUS S.A., a cement company located in
Campulung, Romania, to process and supply supplemental fuels derived from
refinery wastes. The contract, initially entered into in August, 1998, is
exclusive and runs for a 20-year period. This contract will be assigned to the
new joint venture (see "Investment in Joint Venture"). On May 24, 2000, we
signed an agreement to jointly develop a regional AF processing facility to
produce fuel and raw material replacements to other cement plants in Romania.
.
Liquidity and Capital Resources
Through the date of this submission, the Company has not yet been able to obtain
payment for a past due receivables position of approximately $1 Million in
connection with the project involving a municipality in Budapest (see "Legal
Proceedings"). A cash shortage, evident throughout most of 2000, has been
somewhat ameliorated by the receipt of the $620,000 fee payment in connection
with the joint venture project. However, the Company's overall liquidity remains
strained because the level of operations and revenues is still not adequate to
finance ongoing operations and the required infrastructure. In addition, the
projects pursued by the Company necessitate significant investments in capital
equipment that the Company largely financed through capital lease agreements
with resulting fixed payment obligations which total in excess of $4 Million
between the years 2000 to 2003. At June 30, 2000, the working capital deficit
amounted to $1,327,636 as compared with a deficit of $2,041,625 at December 31,
1999. Cash flow from operations during the six months in 2000 was positive, at
$505,564, but would have been negative were it not for the joint venture
payment.
Management expects to be able to alleviate the cash shortage by the anticipated
liquidation of approximately $1 Million tied up in the dispute with District
XVIII in Budapest as described above, to the benefit of operations in Hungary,
and, in the short term, by private borrowings and equity placements. In the
medium term, the joint venture described above is expected to not only introduce
substantial new funding into operations in Rumania and elsewhere but also create
the basis for a rapid expansion of customer base and on-going soil remediation
and alternate fuel processing activities which will accelerate cash flows from
operations and make for more efficient utilization of plant capacity.
17
PART II - OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings except as follows: on
January 5, 2000, we commenced litigation against a political subdivision of
the City of Budapest known as District XVIII in the Hungarian court known as the
Economic College of the Metropolitan Court, Budapest, 2nd District Varsanyui
u.40-44, to obtain approximately $1,000,000 U.S. for contract payments due us.
In 1998, together with our soil remediation technology partner, Green Globe,
LLC, we entered into a contract with District XVIII to remove contamination from
approximately 32,000 tons of soil. Utilizing its low temperature thermal
desorption unit or "LTTD" unit, Green Globe, LLC completed this soil remediation
project in December, 1998. Since that time, we have attempted to obtain the
payment due to us under our District XVIII contract through negotiations which
were unsuccessful. Accordingly, we commenced a lawsuit to collect the monies due
us in January, 2000 in the above identified Hungarian Court. At the first trial
date on April 20, 2000, the Hungarian Court awarded us a judgment in the
approximate amount of $65,700 U.S. for late contract payments against District
XVIII and recognized our principal claim of approximately $1,000,000 for the
contract payments due us. Our next trial date is in October 2000. We intend to
vigorously prosecute our claim against District XVIII in the Hungarian courts.
Item 2 CHANGES IN SECURITIES - None
c) Issuance of unregistered Securities
During the first quarter of 2000, the Company issued the following
unregistered securities:
(i) 700,000 shares of the common stock of the Company to two former
shareholders of CEVA Hungary Ltd. in return for their aggregate
35% interest in that subsidiary.
(ii) 30,000 shares of the common stock of the Company to one former creditor
in return for cancellation of a $15,000 promissory note.
Item 3 DEFAULTS ON SENIOR SECURITIES - None
-----------------------------
Item 4 SUBMISSION OF MATTERS TO A VOTE OF
SECURITIES' HOLDERS - None
Item 5 OTHER INFORMATION - None
18
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1* - Agreement and Plan of Merge, dated March 29, 1999;
2.2* - Articles of Merger, dated April 23, 1999;
2.3* - Certificate of merger, dated April 26, 1999;
(3)(i)* - Articles of Incorporation and Amendments;
(3)(ii)* - By-laws of the Company;
(4)* - Instruments defining the Rights of Holders
Designation of Series A Preferred Stock;
10.1* - Loan and Master LTTD Services Agreement with Green Globe LLC,
dated December 6, 1997;
10.2* - Lease Agreement between Green Globe LLC and CEVA Hungary,
dated June 5, 1998;
10.7 - Employment Agreement between the Company and Dennis Konnick,
dated May 15, 2000;
10.8 - Employment Agreement between the Company and James Atkins,
dated June 1, 2000.
(27) - Financial Data Schedule - attached hereto.
(b) Reports on Form 8-K: - None
*Previously filed via EDGAR with the Securities and Exchange Commission on
December 23, 1999 as Exhibits to the Company's Form 10-SB Registration
Statement.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CEVA INTERNATIONAL, INC.
Date: October 5, 2000 By:/s/ Herbert G. Case
---------------------
Herbert G. Case, Jr.
President and Chief Executive Officer
20
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 15th day of May, 2000 by and between CEVA INTERNATIONAL, INC., a Nevada
corporation (the Company), having its principal offices located at 75-77 North
Bridge Street, Somerville, New Jersey 08876 and DENNIS KONNICK, an individual,
having an address at 621 State Street, Pottstown, Pennsylvania 19464
("Executive").
BACKGROUND:
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to employ the Executive as its Operations Director and the
Executive desires to accept such appointment and to make his services available
to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto hereby agree as
follows:
1. EMPLOYMENT. Effective as of the date hereof, the Company hereby
employs Executive as its Operations Director, and Executive hereby accepts such
employment, upon the terms and conditions hereinafter set forth. Executive
shall, as Operations Director, be a member of the Company Executive Committee.
2. TERM. The term ("Term") of Executive's employment hereunder shall
commence on the date hereof and shall end at the close of business three (3)
years thereafter ("Expiration Date"), unless sooner terminated in accordance
with this Agreement.
3. DUTIES AND SERVICES. For the duration of the Term, Executive agrees
to serve the Company as its Operations Director faithfully and diligently under
the direction of the Chief Executive Officer of the Company, and to perform from
time to time such additional executive duties as the Chief Executive Officer
shall reasonably request, provided that such duties shall be consistent with
those normally required of an officer with Executive's position. Initially,
Executive shall be based in Ploiesti, Romania; Executive hereby acknowledges
that the Company shall have the right to relocate him to another site in Europe
or in the United States at any time throughout the Term. The Executive's duties
shall consist primarily of directing operations, including, but not limited to,
the development and implementation of technologies, start up, staffing, and
training operating personnel of the Company's projects throughout Western,
Central and Eastern Europe. The Company agrees that the Executive shall not be
required or asked to engage in any activity that would or may constitute a
violation of the laws of any of the jurisdictions in which he is performing his
duties, and that the Company shall provide Executive with reasonable access to
qualified legal counsel to advise Executive about the applicable laws of such
jurisdictions.
4. COMPENSATION.
(a) Salary. As partial compensation for the services to be
rendered hereunder by Executive, the Company agrees to pay Executive, and
Executive agrees to accept an annual salary in the amount of One Hundred
Thousand ($100,000) Dollars U.S. ("Salary"). The Company shall pay the Salary to
the Executive during each year of the Term hereof as follows: One Hundred
Thousand ($100,000) Dollars U.S. shall be paid to the Executive annually in
regular intervals throughout the Term in accordance with its salary payment
procedures currently in effect for its executive management.
(b) Company Shares. As partial compensation for the services
to be rendered hereof by the Executive, the Company agrees to issue to the
Executive 25,000 shares of the Company's Common Stock (the "Compensation
Shares"). The Compensation Shares shall be deemed earned by and deliverable to,
the Executive as follows: 6,250 Compensation Shares each shall be deemed earned
and payable to the Executive on each of the last business days of the third,
sixth, ninth and twelfth months of each consecutive quarter of the Term of this
Agreement, provided, however, that this Agreement is then in full force and
effect. The Executive expressly acknowledges that he understands that the
Compensation Shares to be received under this Agreement are deemed "restricted
securities" as such term is defined in Rule 144 of the Securities Act of 1933,
as amended (the "1933 Act") and may not be sold or otherwise transferred except
pursuant to an exemption from the registration requirements of the 1933 Act and
that a legend designating such securities as restricted securities shall be
placed on the certificate or certificates representing all of the Compensation
Shares earned pursuant to the terms of this Agreement.
5. OTHER COMPENSATION AND BENEFITS.
(a) Housing/Transportation. Throughout the Term of this
Agreement and as long as the Executive is stationed in Europe, the Company shall
provide Executive a fully furnished apartment equivalent in size and rental
expense to that currently utilized by the Company at 1056 Budapest mfszl,
Perczel Mor ut. 4 in Budapest, Hungary as well as an automobile and a cellular
phone for his business use; in addition, the Company shall pay for six (6)
round-trip airfares each year of the Term between New York airports and
Budapest, Hungary.
(b) Medical Insurance Coverage. Throughout the Term of this
Agreement, the Company shall provide and pay for medical health insurance for
the Executive and his spouse as follows: the Company shall have the option to
pay the premiums for Executive's existing medical insurance under the "Cobra"
laws now in effect for as long as such coverage is available to Executive, or,
provide and pay for medical insurance coverage that provides Executive with the
level of benefits materially equal to those benefits currently provided to the
Executive.
(c) Stock and Other Benefit Plans. Executive shall be eligible
to participate, on the same basis and subject to the same qualifications as the
other executives of the Company, in any employee benefit plan, stock option plan
and the like generally made available to executives of the Company, as, when and
if adopted by the Company.
(d) Vacation. The Executive shall be entitled to three (3)
weeks paid vacation for each twelve-month period during the Term of this
Agreement.
6. TERMINATION OF EXECUTIVE'S EMPLOYMENT BY COMPANY
(a) The Company may terminate Executive's employment without
"Cause" (defined below) at any time during the first 120 days of the Term by
giving Executive written notice thereof, and provided that, prior to the
expected date of such termination, the Company (i) pays Executive all salary and
other compensation and benefits through the date of termination; (ii) permits
Executive to retain the unearned portion of any Salary he has received, and;
(iii) pays Executive a severance payment of Eight Thousand Eight Hundred Thirty
Three($8,333) Dollars U.S.
(b) The Company shall have the right to terminate the
employment of Executive under this Agreement prior to the expiration of the Term
only in the manner set forth in this Section 6 and only if Executive shall have
committed any of the following acts (any such act being hereinafter referred to
as Cause):
substantial and continuing neglect or inattention of the duties of
his employment, other than as a result of death or disability, which remains
unremedied after receiving at least thirty (30) days prior written notice of
such conduct; or
willful misconduct or gross negligence in connection with the
performance of such duties; or
the conviction of a felony, either in connection with the performance
of his obligations to the Company or which shall adversely affect the Company
or the Executive's ability to perform his obligations; or
the commission of an act of embezzlement, fraud, dishonesty, breach
of fiduciary duty, unfair competition or deliberate disregard of the written
rules and policies of the Company which results in material loss, damage or
injury to the Company.
(c) The Company shall have the right to terminate Executive's
employment and this Agreement in the event that the Executive is disabled and
unable to perform his duties hereunder for a period of ninety (90) consecutive
days; the determination of disability shall be made in accordance with the
standards and procedures utilized by the medical profession in the United
States.
(d) Any termination by the Company of Executive's employment,
other than by mutual written agreement with the Executive or in accordance with
Sections 6(a) or 6(b), shall be deemed a termination without Cause.
7. TERMINATION OF EXECUTIVE'S EMPLOYMENT BY EXECUTIVE.
Executive may terminate his employment hereunder prior to the
expiration of the Term upon written notice to the Company: in the event the
Company shall have failed to cure a breach of any of its material obligations
under this Agreement within thirty (30) days of written notice thereof by
Executive.
8. DEDUCTIONS AND WITHHOLDING. Executive agrees that the Company shall
have the right to withhold from any and all payments required to be made to
Executive pursuant to this Agreement all Federal, state, local and/or other
taxes which are required to be withheld in accordance with applicable law.
9. CONFIDENTIAL INFORMATION AND NONCOMPETITION COVENANT.
(a) Executive hereby acknowledges that in connection with the
performance of his duties hereunder, he has and will be making use of, acquiring
and adding to confidential information and technology of a special and unique
nature and value affecting and relating to the Company and its financial
operations, including, but not limited to, their customers, operations and
techniques (all of the foregoing being hereinafter referred to collectively as
Confidential Information). Accordingly, Executive hereby covenants and agrees
that he will not at any time, directly or indirectly, either during his
employment or thereafter, divulge, reveal or communicate any Confidential
Information or use any Confidential Information for his benefit or for the
benefit of others.
(b) In view of the Confidential Information retained by or
disclosed to Executive as hereinabove set forth, and as a material part of the
consideration upon which the Company is relying upon in order to induce it to
enter into this Agreement, Executive hereby covenants and agrees that, during
the term of Executive's employment with the Company and for a period of twelve
(12) months after the termination of his employment hereunder, unless the
Company shall otherwise agree in writing, Executive shall not, directly or
indirectly, operate, organize, maintain, establish, manage, own or participate
in, or in any manner whatsoever, through any company, firm or organization of
which he shall be affiliated in any manner whatsoever, have any interest in,
whether as owner, operator, partner, stockholder (excluding ownership of five
percent (5%) or less of the stock of a publicly traded company), director,
trustee, officer, lender, employee, principal, agent, consultant or otherwise,
any other business or venture which is engaged in the services and technologies
now or at any time during the Term of this Agreement that may be provided by the
Company in Central and Eastern Europe.
(c) In view of the irreparable harm and damage which would
occur to the Company as a result of a breach or a threatened breach by Executive
under Sections 9(a) or 9(b) hereof, and in view of the lack of an adequate
remedy at law to protect the Company, the Company shall have the right to
receive, and Executive hereby consents to the issuance of, a permanent
injunction enjoining Executive from any violation of Sections 9(a) or 9(b)
hereof. Executive acknowledges that a permanent injunction is an appropriate
remedy for such a breach or threatened breach. The foregoing remedy shall be in
addition to, and not in limitation of, any other rights or remedies to which the
Company is or may be entitled at law or in equity under this Agreement.
(d) The provisions of this Section 9 shall survive the
termination of this Agreement and the Term.
10. ASSIGNABILITY AND BINDING EFFECT. The rights and obligations
arising under this Agreement shall inure to the benefit of and shall be binding
upon the heirs, executors, administrators, successors, and legal representatives
of Executive, and shall inure to the benefit of and be binding upon the Company
and its respective successors and assignees. The Company shall not assign its
rights or delegate its duties hereunder without the prior written consent of
Executive, and Executive shall not assign his rights or delegate his duties
hereunder without the prior written consent of the Company.
11. Notices. All notices of request, demand and other communications
hereunder shall be addressed to the parties as follows:
To Company: CEVA INTERNATIONAL, INC.
c/o Joseph Tomasek, Esq.
75-77 N. Bridge Street
Somerville, NJ 08876
To Executive: DENNIS KONNICK
621 State Street
Pottstown, Pennsylvania 19464
unless the address or telephone number is changed by the party by like notice
given to the other parties. Except as otherwise provided herein, notice shall be
in writing and shall be deemed delivered: (a) when mailed certified mail, return
receipt requested, postage prepaid, or upon hand delivery to the address
indicated or (b) one (1) day after acceptance for delivery by Federal Express or
other nationally recognized over night delivery service for delivery at the
address indicated or (C) when received by telephonic facsimile transmission at
the number indicated. Notice sent by counsel for either of the parties shall be
deemed to be notice sent by such party. Facsimile transmission of the signatures
of any party or their counsel to this Agreement, any amendment to this Agreement
or notice contemplated by this Agreement shall be deemed to be an original
signature and binding on such party for purposes of the document for which it
relates.
12. ENTIRE AGREEMENT. Except as otherwise provided herein, this
Agreement supersedes and replaces any and all prior agreements and
understandings between the parties hereto respecting the employment of Executive
by the Company, whether oral or written, and constitutes the complete
understanding between the parties with respect to the employment of Executive
hereunder, and no statement, representation, warranty or covenant has been made
by any party with respect thereto except as expressly set forth herein.
13. AMENDMENT. The parties hereby irrevocably agree that no attempted
amendment, modification, termination, discharge or change (collectively,
Amendment) of this Agreement shall be valid and effective, unless the Company
and Executive shall unanimously agree in writing to such Amendment.
14. NO WAIVER. No waiver of any provision of this Agreement shall be
effective unless it is in writing and signed by the party against whom it is
asserted, and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
15. HEADINGS. The headings set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement in any
respect nor shall they in any way affect the substance of any provisions
contained in this Agreement.
16. FURTHER ASSURANCES. The parties hereto will execute and deliver
such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
17. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New Jersey, and any
proceeding arising between the parties in any manner pertaining or related to
this Agreement shall, to the extent permitted by law, be held in Somerset
County, State of New Jersey.
18. SEVERABILITY. If any clause or provision hereof shall be held
invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or provision, or
part thereof, in such jurisdiction, and shall not in any manner affect such
clause or provision in any other jurisdiction, or any other clause or provision
of this Agreement in any jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
COMPANY:
CEVA INTERNATIONAL, INC.,
a Nevada corporation
By:/s/ Herbert G. Case, Jr.
---------------------------
Herbert G. Case, Jr.
President
EXECUTIVE:
By:/s/ Dennis Konnick
----------------------
Dennis Konnick
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 1st day of June, 2000 by and between CEVA INTERNATIONAL, INC., a Nevada
corporation (the "Company"), and James Atkins and Rochester Financial Advisory
Services, Ltd., ("Executive"), and .
BACKGROUND
WHEREAS, subject to the term and conditions set forth herein, the
Company desires to employ the Executive as its Chief Financial Officer and the
Executive is willing to make his services available to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto hereby agree as
follows:
1. EMPLOYMENT. Effective as of the date hereof, the Company hereby
employs Executive as its Chief Financial Officer, and Executive hereby accepts
such employment, upon the terms and conditions hereinafter set forth. Executive
shall, as Chief Financial Officer, be a member of the Company's Management
Committee. In addition Executive will supply
2. TERM. The term ("Term") of Executive's employment hereunder shall
commence on the date hereof and shall end at the close of business six (6)
months thereafter ("Expiration Date"), unless sooner terminated in accordance
with this Agreement.
3. DUTIES AND SERVICES. For the duration of the Term, Executive agrees
to serve the Company as its Chief Financial Officer faithfully and diligently
under the direction of the Chief Executive Officer of the Company, and to
perform from time to time such additional executive duties as the Chief
Executive Officer shall reasonably request, provided that such duties shall be
consistent with those normally required of an officer with Executive's position.
Executive shall be based in Hungary throughout the Term, and his duties shall
consist primarily of developing the Company's strategic plan, business
development, conducting related contract negotiations, general management of
day-to-day financial affairs of the business, including compliance with SEC
reporting requirements, compliance with statutory and fiscal reporting
requirements, financial accounting and reporting, management information
systems, risk management and management control systems, raising capital, and
banking relationships. The Company agrees that the Executive shall not be
required or asked to engage in any activity that would or may constitute a
violation of the laws of any of the jurisdictions in which he is performing his
duties, and that the Company shall provide Executive with reasonable access to
qualified legal counsel to advise Executive about the applicable laws of such
jurisdictions. Executive will provide the services of an Executive Assistant
Diana Pacsorasz, or a person with equivalent skills, to furnish support for
Executive to carry out his duties and services.
The Company recognises that the Executive has disclosed a prior on-going
commitment of up to half his time as CFO of a third entity BioFutura Kft. and
that the performance of his duties with CEVA is limited in time to a minimum
half-time basis.
4. COMPENSATION. As payment for the services to be rendered hereunder
by Executive, the Company agrees to pay Executive, and Executive agrees to
accept, monthly Compensation ("Compensation") of Seven Thousand Eight Hundred
Dollars ($7,800), including the cost of the Executive's Assistant. Compensation
for the first month shall be paid on the date hereof, and Compensation for each
subsequent month shall be paid on the first payday (in accordance with the
Company's standard payroll practices) of each month, but in no event later than
the last business day of the first week of such month.
The method of allocation and payment of the Compensation will be agreed
separately.
5. STOCK.
(a) Upon the execution of the Agreement, the Company shall
issue to Executive 25,000 shares of the Company's Common Stock.
6. OTHER COMPENSATION AND BENEFITS.
1. Throughout the Term, the Company shall pay all business
related out of pocket expenses associated with the foregoing. The Company shall
also pay for all Executive's business travel. The Company agrees to reimburse
Executive in full for all other reasonable, ordinary and necessary business,
entertainment and other related expenses, incurred or expended by him incident
to the performance of his duties hereunder. All expenses to be paid by the
Company hereunder shall be paid directly by the Company if Executive so
requests. Otherwise, they shall be reimbursed to Executive by the Company within
ten (10) days after submission by Executive to the Company of such vouchers or
expense statements evidencing such expenses.
2. Executive shall be eligible to participate, on the same
basis and subject to the same qualifications as the other executives of the
Company, in any employee benefits generally made available to executives of the
Company, including any pension, profit-sharing, bonus, or stock option plan,
life, health, medical, dental, hospitalization or surgical insurance plan or
policy, and any vacation or fringe benefit plans or programs, whether now
existing or hereafter established.
3. Nothing contained herein shall be deemed to be a waiver by
Executive of, or to diminish or modify, any vested rights which Executive may
have or may hereafter acquire under any employee benefit plan of the Company.
7. TERMINATION OF EXECUTIVE'S EMPLOYMENT BY COMPANY
(a) The Company may terminate Executive's employment with or
without Cause (as hereinafter defined) at anytime during the first ninety (90)
days of the term ("Initial Period") by giving Executive written notice thereof,
and provided that, prior to the expected date of such termination, the Company
(i) pays Executive all Compensation and other benefits through the date of
termination; (ii) permits Executive to retain the unearned portion of any
Compensation he has received; and (iii) pays Executive a severance payment of
Three Thousand Five Hundred Dollars ($3,500). The foregoing amount shall not be
subject to offset by the Company.
.
(b) After the "Initial Period," the Company shall have the
right to terminate the employment of Executive under this Agreement prior to the
expiration of the Term only in the manner set forth in this Section 7 and only
if Executive shall have committed any of the following acts (any such act being
hereinafter referred to as "Cause"):
1. substantial and continuing neglect or
inattention of the duties of his employment, other than as a result of
death or disability, which remains unremedied after receiving at least
thirty (30) days prior written notice of such conduct;
2. willful misconduct or gross negligence in
connection with the performance of
such duties;
3. the conviction of a felony, either in
connection with the performance of his obligations to the Company or which
shall adversely affect the Company or the Executive's ability to perform his
obligations; or
4. the commission of an act of embezzlement,
fraud, dishonesty, breach of fiduciary duty, unfair competition or deliberate
disregard of the written rules and policies of the Company which results in
material loss, damage or injury to the Company.
(c) Any termination by the Company of Executive's employment,
other than by mutual written agreement with the Executive or in strict
accordance with Sections 7(a) or 7(b) hereof, shall be deemed a termination
"without Cause."
(d) Upon any termination pursuant to this Section 7(b), the
Company shall pay to the Executive any unpaid Compensation accrued through the
effective date of termination specified in such notice. In addition, the Company
shall pay any other Compensation and benefits owed to Executive under Section 6
hereof.
The foregoing amount shall not be subject to offset by the Company.
8. TERMINATION OF EXECUTIVE'S EMPLOYMENT BY EXECUTIVE.
(a) Executive may terminate his employment hereunder at any
time during the Initial Period by giving Company not less than thirty (30) days
prior written notice thereof.
(b) After the Initial Period, Executive may terminate his
employment hereunder prior to the expiration of the Term upon written notice to
the Company: (i) in the event the Company shall have failed to cure a breach of
any of its material obligations under this Agreement within thirty (30) days of
written notice thereof by Executive; (ii) in the event the Company materially
reduces Executive's authority, responsibilities or position with the Company.
9. CONFIDENTIAL INFORMATION AND NONCOMPETITION COVENANT.
(a) Executive hereby acknowledges that in connection with the
performance of his duties hereunder, he has and will be making use of, acquiring
and adding to confidential information and technology of a special and unique
nature and value affecting and relating to the Company and its financial
operations, including, but not limited to, their customers, operations and
techniques (all of the foregoing being hereinafter referred to collectively as
"Confidential Information"). Accordingly, Executive hereby covenants and agrees
that he will not at any time, directly or indirectly, either during his
employment or for two (2) years afterward, divulge, reveal or communicate any
Confidential Information or use any Confidential Information for his benefit or
for the benefit of others.
(b) In view of the Confidential Information
retained by or disclosed to Executive as hereinabove set forth, and as a
material consideration and inducement to the Company to enter into this
Agreement, Executive hereby covenants and agrees that, during the term of
Executive's employment with the Company and for a period of twelve (12)
months after the termination of his employment hereunder, unless the Company
shall otherwise agree in writing, Executive shall not, directly or indirectly,
operate, organize, maintain, establish, manage, own or participate in, or in
any manner whatsoever, through any company, firm or organization of which
it shall be affiliated in any manner whatsoever, have any interest in, whether
as owner, operator, partner, stockholder (excluding ownership of five
percent (5%) or less of the stock of a publicly-traded company), director,
trustee, officer, lender, employee, principal, agent, consultant or
otherwise, any other business or venture which is engaged in like
businesses of the Company, specifically , the sourcing, treatment and processing
of hydrocarbon-based and other industrial residuals into alternative fuels and
raw materials for utilization in the manufacture of cement in the cement
industry; and Low Temperature Thermal Treatment of contaminated soil in any of
the countries in which the Company engages in such business during Executive's
employment with the Company.
(c) In view of the irreparable harm and damage which would
occur to the Company as a result of a breach or a threatened breach by Executive
under Sections 9(a) or 9(b) hereof, and in view of the lack of an adequate
remedy at law to protect the Company, the Company shall have the right to
receive, and Executive hereby consents to the issuance of, a permanent
injunction enjoining Executive from any violation of Sections 9(a) or 9(b)
hereof. Executive acknowledges that a permanent injunction is an appropriate
remedy for such a breach or threatened breach. The foregoing remedy shall be in
addition to, and not in limitation of, any other rights or remedies to which the
Company is or may be entitled at law or in equity under this Agreement.
(d) The provisions of this Section 9 shall survive the
termination of this Agreement and the Term.
10. INDEMNIFICATION; ADVANCEMENT OF FEES. The Company shall indemnify
Executive to the full extent permitted by Nevada law. The Company shall advance
fees and expenses to Executive to the full extent permitted by Nevada law,
provided that Executive provides an undertaking reasonably acceptable to the
Company's Board of Directors to repay such advancement if Executive is
ultimately determined not to be entitled to indemnification. The provisions of
this Section 10 shall survive the termination of this Agreement.
11. ASSIGNABILITY AND BINDING EFFECT. The rights and obligations
arising under this Agreement shall inure to the benefit of and shall be binding
upon the heirs, executors, administrators, successors, and legal representatives
of Executive, and shall inure to the benefit of and be binding upon the Company
and its respective successors and assignees. The Company shall not assign its
rights or delegate its duties hereunder without the prior written consent of
Executive, and Executive shall not assign his rights or delegate his duties
hereunder without the prior written consent of the Company.
12. Notices. All notices of request, demand and other communications
hereunder shall be addressed to the parties as follows:
To Company: CEVA INTERNATIONAL, INC.
c/o Joseph Tomasek, Esq.
77 N. Bridge Street
Somerville, NJ 08876
To Executive: JAMES ATKINS
c/o Rochester Kft.
1051 Budapest
Nador u. 32
Hungary
unless the address or telephone number is changed by the party by like notice
given to the other parties. Except as otherwise provided herein, notice shall be
in writing and shall be deemed delivered: (a) when mailed certified mail, return
receipt requested, postage prepaid, or upon hand delivery to the address
indicated or (b) one (1) day after acceptance for delivery by Federal Express or
other nationally recognized over night delivery service for delivery at the
address indicated or (c) when received by telephonic facsimile transmission at
the number indicated. Notice sent by counsel for either of the parties shall be
deemed to be notice sent by such party. Facsimile transmission of the signatures
of any party or their counsel to this Agreement, any amendment to this Agreement
or notice contemplated by this Agreement shall be deemed to be an original
signature and binding on such party for purposes of the document for which it
relates.
13. ENTIRE AGREEMENT. Except as otherwise provided herein, this
Agreement supersedes and replaces any and all prior agreements and
understandings between the parties hereto respecting the employment of Executive
by the Company and constitutes the complete understanding between the parties
with respect to the employment of Executive hereunder, and no statement,
representation, warranty or covenant has been made by any party with respect
thereto except as expressly set forth herein.
14. AMENDMENT. The parties hereby irrevocably agree that no attempted
amendment, modification, termination, discharge or change (collectively,
"Amendment") of this Agreement shall be valid and effective, unless the Company
and Executive shall unanimously agree in writing to such Amendment.
15. NO WAIVER. No waiver of any provision of this Agreement shall be
effective unless it is in writing and signed by the party against whom it is
asserted, and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
16. HEADINGS. The headings set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement in any
respect nor shall they in any way affect the substance of any provisions
contained in this Agreement.
17. FURTHER ASSURANCES. The parties hereto will execute and deliver
such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
18. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New Jersey, and any
proceeding arising between the parties in any manner pertaining or related to
this Agreement shall, to the extent permitted by law, be held in Somerset
County, New Jersey.
19. LITIGATION. If any party hereto is required to engage in litigation
against any other party hereto, either as plaintiff or as defendant, in order to
enforce or defend any of its or his rights under this Agreement, and such
litigation results in a final judgment in favor of such party ("Prevailing
Party"), then the party or parties against whom said final judgment is obtained
shall reimburse the Prevailing Party for all direct, indirect or incidental
expenses incurred by the Prevailing Party in so enforcing or defending its or
his rights hereunder, including, but not limited to, all reasonable attorneys'
fees and court costs and other expenses incurred throughout all negotiations,
trials or appeals undertaken in order to enforce the Prevailing Party's rights
hereunder.
20. SEVERABILITY. If any clause or provision hereof shall be held
invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or provision, or
part thereof, in such jurisdiction, and shall not in any manner affect such
clause or provision in any other jurisdiction, or any other clause or provision
of this Agreement in any jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
COMPANY:
CEVA INTERNATIONAL, INC.,
a Nevada corporation
By: /s/ Herbert G. Case, Jr.
-------------------------
Its: President
EXECUTIVE:
/s/ James Atkins
-----------------
JAMES ATKINS