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Message-ID: <200407210250.i6L2oPsk017626@mailserver2.hushmail.com>
From: vesselen.mironov at hush.ai (vesselen.mironov@...h.ai)
Subject: RE: mi2g - fud, lies and libel
-----BEGIN PGP SIGNED MESSAGE-----
Hash: SHA1
- --Tuesday, Thor Larholm tlarholm@...x.com wrote to full-disclosure@...ts.netsys.com
(EP>>From: Eric Paynter
(EP>>
(EP>>Or maybe it's also a hoax?
(TL>
(TL> http://www.mi2g.com/cgi/mi2g/press/200704.php
,,,its amuzing to notice the biggest liar of him all thor larholm from
the pivx penny stock companies...he who point the fingers at the mig2
to cover his own lyes and fuds hehehehe,,, we notice our norgweign hero
thor in his wunderful press notificacions
**For the last two years, ‘Unpatched’ was the pre-eminent place on the
Internet where system administrators and Independent Third Party Security
Researchers from around the world came to review and share information
about vulnerabilities in Internet Explorer.
muahhaa,,,it is webmaster thor collecion bugtrag notificions that pix
concince our thor to join its penny company in xchange for shares to
promote there pennies not the powerful work of the thor or his masters
and no place to make this impressing visits it claims
**About 1 in 10 potential vulnerabilities that were submitted to PivX
for review actually passed the test for suitable posting on the ‘Unpatched’
page. ‘Unpatched’ achieved its initial purpose says PivX’s Larholm
bwahahaha,,,out trustworthy hero thor claims it must be submmission to
the penny company pivx for put on the webmaster thors collecion page
of bugtraq notifcations, hehehe
**PivX has made a significant investment in time and money on Unpatched
lol,,hear is a beer thor our hero, sit at computer and what the bugtraqs
then see something copy it and past it onto the milion dollars page hehehehe
1 dollar beer of course significant for penny company
**it has become an invaluable resource to system administrators worldwide
who are trying to stay abreast of the heretofore free security research
that PivX
aaah yes it is big big time resources it for system admin everywheres
to see the informacions third time after bugtraqs and other listings
and it all the free researchers of pivx....the thor hero sitting with
his payment beer in one of his hands for the dollar
**Thor Larholm, Senior Security Researcher at PivX and the man who has
been responsible for the establishment and maintenance of the ‘Unpatched’
page on a pro bono basis for the last two years.
but no no no it is now free but we make big investments in to the collecsion
of bugtraqs before,,,hehe we not sure what we are saying or meaning,,
we still just penny company
no money help help
**As of March 31, 2004, the Company had an accumulated deficit of $3,
040,192. At March 31, 2004, the Company had cash on hand of $780,128
and working capital of approximately $307,736. The Company needs additional
capital to market Qwik-Fix Pro and provide necessary infrastructure as
a public company
help help no money
**Revenues $ 24,000
Net income (loss) (435,312)
money plleese pleese
**On September 6, 2003, the Company entered into an employment agreement
with its senior security researcher. Under the terms of the agreement
the Company granted 232,500 shares of Company's common stock. The shares
vest 20% on December 31, 2003, with the remainder 80% vesting equally
over the next two anniversary dates of the agreement. The shares were
valued at $150,000 based on estimated fair market value of the Company's
shares of common stock at the time of grant. The value of the shares
is being expensed ratably over the vesting period. During the three months
ended March 31, 2004, $15,000 was expensed, however the shares have yet
to be issued. The Company has recorded a $45,000 cumulative liability
in accrued liabilities on the accompanying balance sheet at March 31,
2004. At December 31, 2003, the Company accrued $30,000 related to the
future issuance of common stock
**As of March 31, 2004, we had working capital of $307,736. Because of
our exclusive focus on product and market development during the first
quarter of 2004, financial results show a loss of $1,711,035
**We will require additional capital of at least $3,000,000 to execute
on our plan of operations discussed in this report Should we be unable
to raise the required funds, our ability to finance our continued growth
will be materially adversely affected.
no more money in the bank no more money in the ba ha ha ha hank
Security Researchers at PivX Solutions offers a Reprieve to Microsoft
in an effort to increase Internet Security
- ---------------------------------------------------------------------
- -----------
Date posted in ITsecurity.com: 16 October, 2003
October 14, 2003
Newport Beach, CA : Microsoft has just released a new patch MS03-040
, which renders several IE vulns obsolete. “PivX has been extensively
testing the efficacy of the vulns reported to be fixed and we can report
that MS03-040 is doing the job it was intended to. Let’s just hope users
are diligent in applying the patch and implementing other appropriate
layers of security”, says Rob Shively CEO of PivX.
“Recently, we have seen a sea change in Microsoft’s commitment to rid
its IE browser of the vulns that PivX Solutions and other third party
researchers have identified. Given Microsoft’s recent positive actions,
together with the current rise in attacks against IE, we have agreed
to give Microsoft a good faith reprieve and have taken down our ‘Unpatched’
page. (www.pivx.com /larholm/unpatched) This was done in both a spirit
of cooperation and for the good of the Internet as a whole. As the ubiquitous
browser that is utilized to access the Internet, we all depend on IE
too much to have crooks, social deviants, malcontents and crackers messing
with our lifestyles and our livelihoods. ENOUGH IS ENOUGH!” adds Shively
For the last two years, ‘Unpatched’ was the pre-eminent place on the
Internet where system administrators and Independent Third Party Security
Researchers from around the world came to review and share information
about vulnerabilities in Internet Explorer. Information on the page included
the severity of vulnerabilities, temporary fixes and workarounds, test
cases and proof of concepts. About 1 in 10 potential vulnerabilities
that were submitted to PivX for review actually passed the test for suitable
posting on the ‘Unpatched’ page. ‘Unpatched’ achieved its initial purpose
says PivX’s Larholm, “It was created, updated and maintained in an effort
to raise awareness of some of the inherent and dynamic flaws that the
security research community discovered in Internet Explorer. Moreover
its end goal was to provide legitimate parties, including system admins,
the knowledge of where they were vulnerable to attacks and provide some
temporary mitigation actions that they could take until Microsoft released
a patch or a Service Pack.”
PivX has made a significant investment in time and money on Unpatched,
and now that it has served its purpose of raising awareness of a problem
and given that it has helped to usher in many solutions, workarounds
and a review of the status quo, we felt it was time to re-evaluate its
effectiveness. And, based on Microsoft’s communications, which included
their willingness to create meaningful solutions, and their recent actions
to fix the current problems, we have given them this good faith reprieve
It was entirely a PivX management decision to take ‘Unpatched’ down,
says Shively, based on the state of affairs, notably the 25 days it took
to create LovSan/MSBlaster, as compared to the 295+ days or so it took
to create Code Red, the 200+ days for the creation of Nimda, and the
100 days it took to develop Slammer (see a pattern here?) The time that
it takes for people to develop exploits against vulnerabilities has declined
significantly over the last year or two. This gives vendors like MS even
less time to develop and distribute patches and for system admins to
deploy them before the exploit’s attack.
This reprieve will allow MS time to develop and review their test cases,
patches and Service Packs in a more normal, predictable and managable
manner. In addition, PivX Solutions has a two-fold approach to assisting
with the realities of the current situation. First, we are available
to consult with system administrators to assist them in developing and
implementing appropriate security policies and measures to mitigate the
potential of security attacks. Secondly, we are developing a mitigation
utility tool that will act as a “Qwik Fix” to many of the IE vulns that
MS is working on patching presently. “This utility will buy Microsoft
more time to develop, test and release patches.” says Chief Technical
Officer, Geoff Shively.
The industry needs to understand that nobody asked us to take “Unpatched”
down. For the reasons described above, we have taken this proactive step
in an effort to be a larger part of a long-term solution. “After all,
that is a critical part of our business, Solutions...it’s also part
of our company name...so we are putting it into action to see if this
will contribute in a meaningful way towards the solution of a problem.”
opines Thor Larholm, Senior Security Researcher at PivX and the man who
has been responsible for the establishment and maintenance of the ‘Unpatched’
page on a pro bono basis for the last two years.
With as many as 20,000 daily visitors to the ‘Unpatched’ page, it has
become an invaluable resource to system administrators worldwide who
are trying to stay abreast of the heretofore free security research that
PivX and other third party researchers have done. “The bad guys will
have to find other ways to discover vulnerabilities that they think they
can exploit in Internet Explorer. We are here to help make the Internet
and our clients more secure, we are not researching to assist those attempting
to compromise systems and to take the Internet down” says CEO Shively.
PivX hopes that this action will spur others in the security research
community to join with them in being part of the solution and that this
will usher in a new form of collaboration between responsible security
researchers and Microsoft To see the new ‘Unpatched’ go to: www.pivx.com
/larholm/unpatched.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to _______________
000-33625
(Commission file number)
PIVX SOLUTIONS, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 87-0618509
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification
No.)
24 CORPORATE PLAZA, SUITE 180, NEWPORT BEACH, CALIFORNIA 92660
(Address of principal executive offices)
(949) 720-4627
(Issuer's telephone number)
DRILLING, INC., 1981 EAST MURRAY HOLIDAY ROAD, SALT LAKE CITY, UTAH 84117
(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 [ ]
The number of shares of common stock outstanding as of May 24, 2004 was
21,796,260.
Transitional Small Business Disclosure Format (check one): Yes [ ] No
[X]
- ---------------------------------------------------------------------
- -----------
PIVX SOLUTIONS, INC.
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
F-1
Item 1. Financial Statements
F-1
Consolidated Balance Sheet as of March 31, 2004 (unaudited)
F-1
Consolidated Statements of Operations for the
three months ended March 31, 2004 and 2003 (unaudited)
F-2
Consolidated Statement of Stockholders' Equity (deficit) for
the the three months ended March 31, 2004 (unaudited)
F-3
Consolidated Statements of Cash Flows for the
three months ended March 31, 2004 and 2003 (unaudited)
F-4
Notes to Consolidated Financial Statements (unaudited)
F-5
Item 2. Management's Discussion and Analysis or Plan of Operations
14
Item 3. Controls and Procedures
18
PART II. OTHER INFORMATION
19
Item 2. Change in Securities and Small Business Issuer Purchases of
Equity Securites
19
Item 4. Submission of Matters to a Vote of Security Holders
19
Item 6. Exhibits and Reports on Form 8-K
19
SIGNATURES
20
- ---------------------------------------------------------------------
- -----------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PIVX SOLUTIONS, INC. (FORMERLY DRILLING, INC.)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31,
2004
- ---------------------------------------------------------------------
- -----------
ASSETS
Current assets:
Cash $
780,128
Accounts receivable
24,000
Other current assets
5,600
-
- ----------
Total current assets
809,728
Deferred offering costs
25,000
Property and equipment, net accumulated depreciation of $37,500
32,298
-
- -----------
Total assets $
867,026
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $
103,339
Accrued liabilities
130,979
Accrued employment contracts
267,674
-
- -----------
Total current liabilities
501,992
Convertible note due to shareholder
10,000
-
- -----------
Total liabilities
511,992
-
- -----------
Stockholders' equity:
Preferred stock, 10,000,000 shares authorized; none outstanding
--
Common stock, $0.001 par value; 100,000,000 shares authorized;
21,796,260 shares issued and outstanding
21,796
Additional paid-in capital
3,392,180
Deferred compensation
(18,750)
Accumulated deficit
(3,040,192)
-
- -----------
Total stockholders' equity
355,034
-
- -----------
Total liabilities and stockholders' equity $
867,026
============
The accompanying notes are an integral part of these consolidated financial
statements.
F-1
- ---------------------------------------------------------------------
- -----------
PIVX SOLUTIONS, INC. (FORMERLY DRILLING, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
Three Months Ended
March 31, 2004
March 31, 2003
-------------
- - --------------
Consulting revenue $ 24,000
$ 331,453
------------
- - -------------
Selling, general, and administrative expenses 421,093
250,727
Research and development 26,814
15,900
------------
- - -------------
Total operating expenses 447,907
266,627
------------
- - -------------
Operating income (loss) (423,907)
64,826
Merger-related fees (1,287,490)
--
Other income 362
23
------------
- - -------------
Net income (loss) $ (1,711,035)
$ 64,849
=============
=============
Basic earnings (loss) per share:
Net income (loss) per common share $ (0.10)
$ 0.00
=============
=============
Basic weighted average number of common shares
Outstanding 16,726,901
14,505,092
=============
=============
Diluted earnings (loss) per share:
Net income (loss) per common share $ (0.10)
$ 0.00
=============
=============
Diluted weighted average number of common shares
Outstanding 16,726,901
15,285,092
=============
=============
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
- ---------------------------------------------------------------------
- -----------
PIVX SOLUTIONS, INC. (FORMERLY
DRILLING, INC.)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY (DEFICIT)
THREE MONTHS ENDED MARCH
31, 2004
(UNAUDITED)
Common Stock
------------ Additional
Deferred Accumulated
Shares Amount Paid-
in Capital Compensation Deficit Total
------------ ------------ ---
- --------- ------------ ------------ ------------
Balances at January 1, 2004 15,216,868 $ 15,217 $ 1,
146,412 $ -- $(1,329,157) $ (167,528)
Stock issued for cash, net of
offering costs (see Note 4) 733,642 734
916,623 -- -- 917,357
Stock issued for services 54,250 54
57,446 -- -- 57,500
Allocation of deferred
offering costs -- --
(25,000) -- -- (25,000)
Fair value of options issued
to directors -- --
25,000 (25,000) -- --
Amortization of options
issued to directors -- --
-- 6,250 -- 6,250
Value of stock retained for
merger- related expenses -- -- 1,
277,490 -- -- 1,277,490
Common stock retained by
Drilling shareholders 5,791,500 5,792
(5,792) -- -- --
Net loss -- --
-- -- (1,711,035) (1,711,035)
------------ ------------ ---
- --------- ------------ ------------ ------------
Balances at March 31, 2004 21,796,260 $ 21,796 $ 3,
392,180 $ (18,750) $(3,040,192) $ 355,034
============ ============ ============
============ ============ ============
The accompanying notes are
an integral part
of these consolidated financial
statements.
F-3
- ---------------------------------------------------------------------
- -----------
PIVX SOLUTIONS, INC. (FORMERLY DRILLING,
INC.)
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31, 2004 March 31, 2003
-------------- --------------
Cash flows from operating activities:
Net income (loss)
$(1,711,035) $ 64,849
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation expense
3,901 4,677
Non-cash merger-related expenses
1,277,490 --
Stock issued for services
57,500 --
Amortization of deferred compensation
6,250 20,000
Changes in operating assets and liabilities:
Accounts receivable
8,000 (65,144)
Prepaid and other
4,200 27,330
Accounts payable
64,297 (12,129)
Accrued liabilities
44,029 (158,610)
Accrued employment contracts
9,922 23,241
------------ ------------
Net cash used in operating activities
(235,446) (95,786)
------------ ------------
Cash flows from investing activities-
Purchases of property and equipment
(4,366) (19,320)
Cash flows from financing activities-
Proceeds from issuance of common stock
917,357 25,000
Net change in cash
677,545 (90,106)
Cash, beginning of period
102,583 125,946
------------ ------------
Cash, end of period
$ 780,128 $ 35,840
============ ============
Supplemental disclosures for cash flow information
Cash paid during the year for:
Income taxes
$ 800 $ --
Non-cash financing activity:
Value of stock and warrants issued in connection with private
placement
$ 425,206 $ --
Value of shares retained for merger-related expenses
$ 1,277,490 $ --
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
- ---------------------------------------------------------------------
- -----------
PIVX SOLUTIONS, INC. (FORMERLY DRILLING, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Basis of Presentation and Significant Accounting Policies
BASIS OF ACCOUNTING AND CHANGE IN REPORTING ENTITY
PivX Solutions, Inc. ("PivX"), acquired by Drilling, Inc. ("Drilling")
on March 10, 2004, is a network security solutions company providing
security consulting services and security software products to a variety
of businesses and governmental agencies, including but not limited to
Microsoft, Boeing, GMAC, NIST and Sony. PivX is in the Beta stage of
development of a security software tool Qwik-Fix Pro(TM), which will
enable businesses to maintain proactive security on Microsoft Windows-
based computers and servers. Management expects to release a commercial
version of Qwik-Fix Pro(TM) in June 2004. On May 10, 2004, Drilling,
Inc. changed its name to PivX Solutions, Inc. PivX and Drilling will
be collectively known as the "Company".
On March 10, 2004, PivX completed the initial closing of a reverse acquisition
of Drilling, pursuant to which Drilling will acquire all of the outstanding
membership interests of PivX in exchange for a controlling interest in
Drilling. Pursuant to the Securities Purchase Agreement and Plan of Reorganization
dated March 10, 2004 by and among Drilling, PivX and the members of the
PivX, Drilling issued 1.55 shares of its common stock for each of PivX's
membership interests transferred to Drilling by each member at the initial
closing. As of the initial closing, PivX's members transferred 9,898,
250 membership interests (representing approximately 99.0% of PivX's
total membership interests outstanding) to Drilling in exchange for 15,
342,289 shares of common stock of Drilling. The remaining 101,750 will
be exchanged with approximately 157,712 shares of Drilling's common stock
upon the remaining members consenting to the issuance.
In connection with the acquisition of PivX by Drilling, the PivX shareholders
will obtain approximately 73% of the outstanding common stock of Drilling.
For accounting purposes the acquisition was accounted for as a reverse
acquisition, whereby the assets of PivX are reported at their historical
cost. The assets and liabilities of Drilling would have been recorded
at fair value, but no assets or liabilities existed at the date of acquisition.
No goodwill was recorded in connection with the reverse acquisition.
The reverse acquisition resulted in a change in reporting entity of Drilling
for accounting and reporting purposes to that of PivX.
FINANCIAL STATEMENT PREPARATION
The accompanying unaudited condensed consolidated financial statements
have been prepared by the Company pursuant to the rules and regulations
of the Securities Exchange Commission ("SEC") regarding interim financial
reporting. Accordingly, they do not include all of the information and
notes required by accounting principles generally accepted in the United
States of America. The financial statements and related notes of PivX
for the years ended December 31, 2003 and 2002 are expected to filed
with the SEC on form 8-K filed by June 8, 2004.
F-5
- ---------------------------------------------------------------------
- -----------
PIVX SOLUTIONS, INC. (FORMERLY DRILLING, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited condensed consolidated financial statements reflect all
adjustments, consisting of normal recurring adjustments, which are, in
the opinion of management, necessary for a fair presentation of results
for the interim periods presented. Preparing financial statements requires
management to make estimates and assumptions that affect the amounts
that are reported in the condensed consolidated financial statements
and accompanying disclosures. Although these estimates are based on management's
best knowledge of current events and actions that the Company may undertake
in the future, actual results may be different from the estimates. The
results of operations for the three months ended March 31, 2004, are
not necessarily indicative of the results to be expected for any future
period or the full fiscal year.
QUARTERLY PRO FORMA INFORMATION
The required quarterly pro forma financial results are displayed as if
the acquisition between the Company and Drilling took place at January
1, 2003. The pro forma results for the three months ending March 31,
2004 and March 31, 2003 are listed below:
2004
2003
----
----
Revenues $ 24,000 $
331,453
Net income (loss) (435,312)
62,974
Earnings (loss) per share (0.02)
0.00
Weighted average shares outstanding 21,118,258
20,034,092
LIQUIDITY AND CAPITAL RESOURCES
The accompanying condensed consolidated financial statements have been
prepared in conformity with accounting principles generally accepted
in the United States of America, which contemplate continuation as a
going concern. The Company incurred a net loss of $1,711,035, of which
$1,277,490 was a non-recurring, non-cash transaction related to reverse
acquisition, for the three months ended March 31, 2004. As of March 31,
2004, the Company had an accumulated deficit of $3,040,192. At March
31, 2004, the Company had cash on hand of $780,128 and working capital
of approximately $307,736. The Company needs additional capital to market
Qwik-Fix Pro and provide necessary infrastructure as a public company.
These conditions raise substantial doubt as to our ability to continue
as a going concern. During the three months ended March 31, 2004, the
Company raised net proceeds of $917,357 through the sale of 733,642 shares
of common stock. Total proceeds raised for the period ended May 4, 2004
net of costs are $1,566,865 on sales of 890,264 shares of common stock.
The Company requires additional capital and management has no firm commitments
for financing. There are no assurances that management will be successful
in its plans. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts
of the Company. All significant inter-company accounts and transactions
have been eliminated.
CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at a financial institution in excess
of the $100,000 FDIC insurance level.
F-6
- ---------------------------------------------------------------------
- -----------
PIVX SOLUTIONS, INC. (FORMERLY DRILLING, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SOFTWARE DEVELOPMENT COSTS
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting
for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,
" states that all costs incurred in connection with the development of
software subsequent to technological feasibility should be capitalized
until such time that the software is available to customers. The Company
believes its current process for developing software is essentially completed
concurrent with the establishment of technological feasibility and, as
such, no costs have been capitalized to date.
DEFERRED OFFERING COSTS
Direct costs incurred in connection with the Company's private placement
offering are capitalized (see Note 4). The Company is netting these expenses
ratably against the proceeds over the period in which the proceeds are
received. In the event the private placement offering is unsuccessful,
the Company will charge these costs to operations.
PATENTS AND TRADEMARKS
Patents and trademarks are recorded at cost and amortized using the straight-
line method over the estimated useful lives of the related assets ranging
from three years. To date amounts incurred were not significant.
PROPERTY, PLANT AND EQUIPMENT
Property and equipment are recorded at cost. Significant renewals and
betterments, which extend the life of the related assets, are capitalized.
Maintenance and repairs are charged to expense as incurred. Property
and equipment are depreciated using the straight-line method over the
estimated useful lives of the related assets, ranging from three to seven
years. Assets, which have a separable life, are depreciated over the
life of those assets. At the time of retirement or other disposition
of property and equipment, the cost and accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected
in operations.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company adopted SFAS 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets." SFAS 144 supersedes SFAS 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." SFAS 144 requires that if events or changes in circumstances indicate
that the cost of long-lived assets or asset groups may be impaired, an
evaluation of recoverability would be performed by comparing the estimated
future undiscounted cash flows associated with the asset to the asset's
carrying value to determine if a write-down to market value would be
required. Long-lived assets or asset groups that meet the criteria in
SFAS 144 as being held for disposal by sale are reflected at the lower
of their carrying amount or fair market value, less costs to sell.
F-7
- ---------------------------------------------------------------------
- -----------
PIVX SOLUTIONS, INC. (FORMERLY DRILLING, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has financial instruments whereby the fair value of the financial
instruments could be different than that recorded on a historical basis
in the accompanying balance sheet. The Company's financial instruments
consist of accounts receivable, accounts payable and accrued liabilities.
The carrying amounts of the Company's financial instruments generally
approximate their fair values as of March 31, 2004.
REVENUE RECOGNITION
For the periods presented, the Company's revenues were derived under
consulting contracts. The revenues from the contracts are recognized
as the services are completed. In cases whereby the Company did not track
the hours under the project, revenues were recorded at the completion
of the contract. Upon the Company's release of its software in 2004,
the Company will recognize software license fee revenue in accordance
with the provisions of Statement of Position SOP 97-2 "Software Revenue
Recognition," as amended by SOP 98-9, "Software Revenue Recognition,
With Respect to Certain Transactions." Software license fees will be
charged for licenses for security software to be delivered to customers
for in-house applications. Revenues from single-element software license
agreements will be recognized upon installation and acceptance of the
software. Revenues from software arrangements involving multiple elements
will be allocated to the individual elements based on their relative
fair values. If services are considered essential to the functionality
of the software product, both the software product revenue and service
revenue will be recognized using the percentage of completion method
in accordance with the provisions of SOP 81-1, "Accounting for Performance
of Construction Type and Certain Production Type Contracts." Maintenance
and rights to unspecified upgrades to licenses will be reported ratably.
Contract revenues will be recognized based on labor hours incurred to
date compared to total estimated labor hours for the contract. Contract
costs will include all direct labor, direct material and indirect costs
related to contract performance. Selling, general and administrative
costs are charged to expense as incurred. Provisions for estimated losses
on uncompleted contracts are recorded in the period in which such losses
become probable based on the current contract estimates.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has not adopted a fair value-based method of accounting for
stock-based compensation plans for employees and non-employee directors.
The Company will use the intrinsic value-based approach, and supplement
disclosure of the pro forma impact on operations and per share information
using the fair value-based approach as required by SFAS No. 148 "Accounting
for Stock-Based Compensation - Transition and Disclosure". Stock-based
compensation issued to non-employees and consultants are measured at
fair value in accordance with SFAS No. 123. Common stock purchase options
and warrants issued to non-employees and consultants will be measured
at fair value using the Black-Scholes valuation model.
The following table compares the net income (loss) and income (loss)
per share as reported to the pro forma amounts that would be reported
had compensation expense been recognized for our stock-based compensation
plans on a fair value basis for the quarterly periods ended March 31,
2004 and 2003:
F-8
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PIVX SOLUTIONS, INC. (FORMERLY DRILLING, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31,
March 31,
---------
---------
2004
2003
----
----
Net income (loss) as reported $ (1,711,
035) $ 64,849
Add: Stock based employee compensation expense
included in reported net income, net of tax (6,
250) -
Deduct: Stock-based employee compensation expense
determined under fair value based on method for all
awards, net of tax 15,
156 4,500
Pro forma net income (loss) $ (1,719,
941) $ 60,349
=================
=================
Earnings per share, as reported:
Basic $ (0.10)
$ 0.00
=================
=================
Diluted $ (0.10)
$ 0.00
=================
=================
Pro forma earnings per share:
Basic $ (0.10)
$ 0.00
=================
=================
Diluted $ (0.10)
$ 0.00
=================
=================
The fair value of the options at the date of grant was estimated using
the Black-Scholes option pricing model with the following assumptions:
the three months ended March 31, 2004, expected life of six years, interest
rate of 3.10%, volatility of 75% and zero dividend yield; the three months
ended March 31, 2003, expected life of six years, interest rate of 3.13%,
volatility of 69% and zero dividend yield. The estimated fair value
of the options granted is subject to the assumptions made and if the
assumptions changed, the estimated fair value could be significantly
different.
SIGNIFICANT CUSTOMERS
During the quarter ended March 31, 2004, revenues from one customer accounted
for 100% of total revenues. During the quarter ended March 31, 2003,
revenues another customer accounted for 100% of total revenues.
PER SHARE INFORMATION
The Company presents basic earnings (loss) per share ("EPS") and diluted
EPS on the face of all statements of operations. Basic EPS is computed
as net income
(loss) divided by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could
occur from common shares issuable through stock options, warrants, and
other convertible securities which are exercisable during or after the
reporting period. In the event of a net loss, such incremental shares
are not included in EPS since their effects are anti-dilutive. Effects
of outstanding options, which were excluded in weighted average dilutive
shares outstanding because of the net loss during the three months ended
March 31, 2004, were 824,815 shares. Incremental shares included in dilutive
EPS for the three months ended March 31, 2003 resulting from outstanding
options during the reporting period were 780,000 shares.
NEW ACCOUNTING PRONOUNCEMENTS
In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 45, GUARANTORS' ACCOUNTING AND DISCLOSURE REQUIREMENTS
FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS
("FIN 45"). FIN 45 elaborates on the existing disclosure requirements
for most guarantees, including loan guarantees such as standby letters
of credit. It also requires that at all times a company issues a guarantee,
a company must recognize an initial liability for the fair market value
of the obligations it assumes under that guarantee and must disclose
that information in its interim and annual financial statements. The
initial recognition and measurement provisions of FIN 45 apply on a prospective
basis to guarantees issued or modified after December 31, 2002. The FIN
45 effect on the Company's condensed consolidated financial statement
is insignificant as of March 31, 2004.
F-9
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PIVX SOLUTIONS, INC. (FORMERLY DRILLING, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In December 2002, the FASB issued SFAS No. 148, ACCOUNTING FOR STOCK-
BASED COMPENSATION-TRANSITION AND DISCLOSURE ("SFAS 148") which addresses
financial accounting and reporting for recording expenses for the fair
value of stock options. SFAS 148 provides alternative methods of transition
for a voluntary change to fair value-based method of accounting for stock-
based employee compensation. Additionally, SFAS No. 148 requires more
prominent and more frequent disclosures in financial statements about
the effects of stock-based compensation. The provisions of SFAS No. 148
are effective for fiscal years ending after December 15, 2002, with early
application permitted in certain circumstances. The interim disclosure
provisions are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002. The Company has
elected to continue to apply the intrinsic value-based method of accounting
as allowed by APB No. 25 for employee stock-based compensation.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" ("SFAS 149"). SFAS
149 amends SFAS 133 to clarify the definition of a derivative and incorporate
many of the implementation issues cleared as a result of the Derivatives
Implementation Group process. This statement is effective for contracts
entered into or modified after June 30, 2003 and should be applied prospectively
after that date. SFAS No. 149 will have an insignificant effect on the
Company's condensed consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY, ("SFAS
150"). SFAS No. 150 establishes standards for how an issuer classifies
and measures in its statement of financial position certain financial
instruments with characteristics of both liabilities and equity. In accordance
with SFAS No. 150, financial instruments that embody obligations for
the issuer are required to be classified as liabilities. SFAS No. 150
shall be effective for financial instruments entered into or modified
after May 31, 2003. SFAS No. 150 had no significant effect on the Company
during the three months ended March 31, 2004.
Note 2 - Commitments
EMPLOYMENT CONTRACTS
In previous years the Company entered into employment agreements with
four of its employees. Under the terms of these agreements, the Company
is obligated to pay a combined yearly salary of $624,000. Two of these
agreements are subject to a 6% cost of living increase. Two of the agreements
have a term of five years and include a severance pay of two years based
on the current salary. The agreements issued 852,500 shares of common
stock which have vesting periods from one to three years. In addition,
one of the employees was granted options to purchase 930,000 shares
of common stock. The options are exercisable at approximately $0.32 and
vest over a three-year period. As of March 31, 2004, amounts due on these
employment agreements were $267,674 and are included on the accompanying
condensed consolidated balance sheet.
INVESTMENT BANKING AGREEMENT
On October 6, 2003, the Company entered into an agreement with an investment-
banking firm. The services performed under the agreement were for assisting
the Company in identifying and negotiating the acquisition of a public
shell and to assist the Company in raising up to $5 million in equity
capital in a private placement. In connection with the agreement, the
Company issued the
F-10
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PIVX SOLUTIONS, INC. (FORMERLY DRILLING, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
investment bankers 155,000 shares of common stock valued at $100,000
upon the execution of the agreement as compensation. The shares were
non-refundable. The value of the shares were allocated evenly between
the two major services performed. In connection with the $50,000 allocated
to obtaining the shell company, the amount was expensed upon the issuance
of the shares. In connection with the $50,000 allocated to assisting
the Company in raising capital, the amount was capitalized as a deferred
offering cost as it was a direct cost of the private placement described
in Note 4. The private placement began in March 2004 and will probably
complete by the end of June 2004. The deferred offering costs will be
charged against additional paid-in-capital equally in the 1st and 2nd
quarter of 2004 as that is the period when the proceeds are expected
from the private placement. At March 31, 2004, the Company has $25,000
in deferred offering costs recorded on the balance sheet. In addition,
the Company was required to issue the investment banker 3% of the fully
diluted common stock post merger. Subsequent to March 31, 2004, the investment
banker waived the 3% fee due to the time delays and resulting hardship
to the company . Since the merger was effected, management recorded the
fair value of the shares that were waived in the amount of $1,277,490
as a merger-related expense.
In addition under the investment banking contract, the Company is required
to issue to the investment banker a 10% funding fee and warrants to purchase
common stock 10% of the common stock sold under any private placements
or fundings while the contract is in effect. These fees are due unless
the fees paid to another placement agent are in excess of the 10%.
OPERATING/CAPITAL LEASE
Subsequent to March 31, 2004, the Company entered into a new lease agreement
in an adjacent building. Upon entering into the new lease the Company
terminated the previous agreement, which had been month to month. The
new lease requires the Company to make monthly rental payments between
$14,792 and $20,339 and is for a period of three and a half years expiring
on approximately November 30, 2007. Included in the new lease agreement
was furniture and fixtures that the Company was taking possession of.
The Company has yet to determine the fair value of the furniture and
fixtures. Upon determination of the fair value of the furniture and fixtures,
the Company will allocate the total payments under the lease between
the furniture and fixtures and the rental of the building. The portion
allocated to the furniture and fixtures will be capitalized and treated
as a capital lease. The Company plans on occupying the new space between
June 1 and June 15 of 2004.
Note 3 - Convertible note
In July 2003, the Company issued a $20,000 note payable to an investor
to fund operations. Initially the note was due on demand and beared interest
at 15%. Effective October 20, 2003, the investor and the Company agreed
the note would be due on April 20, 2004. Under the terms of the agreement
the investor had the option to convert the note into common stock at
prices ranging from $0.52 to $0.65 per share of common stock based on
certain criteria. In addition, if the investor converted the note to
shares of common stock the investor would receive options to purchase
31,000 shares of common stock for prices ranging from $0.52 to $0.65.
If the investor did not convert the note by April 20, 2004, the Company
was liable to pay the $20,000, any accrued interest and issue 15,500
shares of common stock as additional interest compensation. In December
2003, the Company paid $10,000 toward the note and interest of $1,000.
In accordance with Emerging Issued Task Force No 00-27, the Company accounted
for the value of the options and the fair value of the deemed beneficial
conversion feature as a reduction to the face value of the convertible
note with the offset to additional paid in capital. This amount was amortized
as
F-11
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PIVX SOLUTIONS, INC. (FORMERLY DRILLING, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
additional interest expense upon the issuance of the convertible note
as the holder had the option to convert the note into common stock immediately.
The options and beneficial conversion feature were valued at $20,000
and expensed during the year ended December 31, 2003.
At March 31, 2004, total amounts due to this investor including accrued
interest were $10,625. Around April 20, 2004 the investor demanded payment
of the note, accrued interest and the issuance of 7,750 shares. Subsequent
to that demand an employee of the Company obtained the note from the
shareholder in a private transaction. The employee immediately converted
the note at $0.65 per share resulting in the issuance of approximately
16,346 shares of common stock. In addition the Company issued the employee
warrants to purchase 31,000 shares of common stock at $0.65. The warrants
vest immediately and expire in one year from the date of the amended
contract which is October 20, 2003.
Note 4 - Shareholder's Equity
PREFERRED STOCK
Subsequent to March 31, 2004, the Company was authorized to issue 10,
000,000 shares of preferred stock. The preferred stock will be available
in an amount adequate to provide for the Company's future needs. The
additional shares will be available for issuance from time to time by
the Company at the discretion of the board of directors with such rights,
preferences and privileges as the board may determine.
STOCK ISSUED FOR SERVICES
>From time to time the Company issued common stock to consultants and
directors for services performed. During the period ending March 31,
2004, the Company issued a total of 54,250 shares of common stock valued
at $57,500. The Company did not issue any shares of common stock for
services during the period ending March 31, 2003.
On September 11, 2002, the Company entered into an employment agreement
with its president and chief operating officer. Under the terms of the
agreement, the Company issued 620,000 shares of Company's common stock,
which vest over the period of one year. The shares were valued at $80,
000 based on estimated fair market value of the Company's common stock
at the time of grant. The value of the shares were recorded as compensation
expense and expensed ratably over the vesting period of one year. During
the three months ended March 31, 2003, $20,000 was expensed.
On September 6, 2003, the Company entered into an employment agreement
with its senior security researcher. Under the terms of the agreement
the Company granted 232,500 shares of Company's common stock. The shares
vest 20% on December 31, 2003, with the remainder 80% vesting equally
over the next two anniversary dates of the agreement. The shares were
valued at $150,000 based on estimated fair market value of the Company's
shares of common stock at the time of grant. The value of the shares
is being expensed ratably over the vesting period. During the three months
ended March 31, 2004, $15,000 was expensed, however the shares have yet
to be issued. The Company has recorded a $45,000 cumulative liability
in accrued liabilities on the accompanying balance sheet at March 31,
2004. At December 31, 2003, the Company accrued $30,000 related to the
future issuance of common stock.
F-12
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PIVX SOLUTIONS, INC. (FORMERLY DRILLING, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
COMMON STOCK OFFERINGS
During the periods ending March 31, 2004 and 2003, the Company issued
733,642 and 50,000 shares of common stock for net cash proceeds of $917,
357 and $25,000, respectively. See below for discussion of private placement
during the period ended March 31, 2004 and subsequent.
During the three months ended March 31, 2004, the Company offered up
to 2,500,000 shares of post acquisition common stock of Drilling at $2.00
or up to $5 million. This offering was initially open from February 17,
2004 to April 30, 2004 but has been extended to May 31, 2004. Through
March 31, 2004, the Company issued 698,510 shares of common stock resulting
in proceeds of $888,378, net cash payments of $121,142 to the placement
agent; issuance of 193,750 shares of common stock fairly valued at $387,
500 and the granting of warrants to purchase 50,476 shares of common
stock fairly valued at $37,706. The Company has issued 890,264 shares
of common stock since the inception of the offering through May 4, 2004
resulting in proceeds of $1,566,865, net of cash payments to the placement
agent of $213,663; issuance of 193,750 share of common stock fairly valued
at $387,500, granting of warrants to purchase 89,026 shares of common
stock valued at $66,503. As of March 31, 2004, amounts due to the placement
agreement included in accrued liabilities were $19,454.
The Company entered into an agreement with a placement agent where as
the placement agent receives 12% of proceeds directly generated, 5% of
common shares placed by the placement issued as restricted common stock
and warrants to purchase the equivalent of 10% of common stock placed
by the placement agent. The warrants will be exercisable at $2.00 per
share, vest immediately and expire in five years.
In addition to the above offering, the Company issued 22,666 pre-acquisition
membership interests (48,222 shares post-acquisition) for cash totalling
$28,979.
STOCK OPTION/STOCK ISSUANCE PLAN
On April 23, 2003, the Company entered into an amended and restated Stock
Option/Stock Issuance Plan (the "Plan"). Under the terms of the Plan
employees, non-employee members of the board of directors and consultants
are eligible. The maximum number of shares that can be issued under the
Plan are1,395,000. As of March 31, 2004, there have been no options issued
under the Plan. The Plan terminates upon the earliest; (i) the expiration
of the ten-year period measured from the date of the Board of Directors
acceptance; (ii) the date on which all shares available for issuance
under the Plan shall have been issued as vested shares; (iii) or the
termination of all outstanding options in connection with a corporate
transaction.
OPTIONS
During the three months ended March 31, 2004, the Company issued options
to purchase a total of 77,500 shares of common stock to two non-employee
directors. The options are exercisable at $0.65, vest in one year and
expire in five years from the vesting date. In connection with these
grants, the Company recorded compensation expense of $25,000, which will
be amortized over the vesting period of the options. During the three
months ended March 31, 2004, the Company expensed $6,250 and the remaining
$18,750 is recorded on the accompanying condensed consolidated balance
sheet as deferred compensation.
As of March 31, 2004, the Company has other options to purchase 978,387
shares of common stock at prices ranging from $0.32 to $0.65 and warrants
to purchase 21,505 shares of common stock at an exercise price of $1.61.
Subsequent to March 31, 2004, the Company entered employment agreements
with certain key personnel, which provide for grant of an aggregate of
384,000 shares, which vest on each anniversary date, over three (3) years.
The options have an exercise price of $2.000 expire five (5) years from
the vesting date.
F-13
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
OVERVIEW
We are a network security solutions company providing security software
and consulting services to a variety of businesses and governmental agencies.
We offer software and consulting services specifically tailored to meet
the individual needs of our customers as well as classroom seminars for
coding engineers and managers focused on developing secure software.
Our primary security software is called Qwik-Fix(TM). Qwik-Fix(TM) is
designed to pro-actively prevent known and unknown software vulnerabilities
in Microsoft Windows and Internet Explorer from being exploited by hackers,
virus writers and worm writers. Qwik-Fix(TM) is simple to use, easy
to download and install. Qwik-Fix(TM) is dynamic in that it serves as
a proactive fix to known and unknown vulnerabilities until Microsoft
releases a periodic monthly cumulative patch or a new Service Pack. Qwik-
Fix(TM) is currently offered to subscribers for personal use at no charge.
Qwik-Fix Pro(TM) is currently in beta stage, being tested for commercial
use. To date, we have not generated revenues from software licenses.
We expect to release Qwik-Fix Pro(TM) in June 2004.
We were incorporated under the laws of the State of Nevada on April 24,
1975. Prior to the reverse acquisition described below, our corporate
name was Drilling, Inc. Other than seeking and investigating potential
assets, properties or businesses to acquire, we had no business operations
since inception and were considered a development stage company as defined
in Statement of Financial Accounting Standards No. 7. Pursuant to a Securities
Purchase Agreement and Plan of Reorganization dated March 10, 2004 by
and among Drilling, Inc., Pivx Solutions, LLC, a California limited liability
company ("Pivx Sub") and the members of Pivx Sub, Drilling, Inc. has
acquired 99% of the total membership interests of Pivx Sub outstanding.
We expect to acquire the remaining Pivx Sub membership interests outstanding
in subsequent closings. Drilling issued 1.55 shares of its common stock
for each Pivx membership interest transferred to Drilling. Since the
members of Pivx Sub acquired a majority of the issued and outstanding
shares of Drilling, Inc. and the Pivx Sub management team and board of
directors became the management team and board of directors of Drilling,
Inc., according to FASB Statement No. 141 - "Business Combinations,"
this acquisition has been treated as a recapitalization for accounting
purposes, in a manner similar to reverse acquisition accounting. In accounting
for this transaction:
o Pivx Sub is deemed to be the purchaser and surviving company for accounting
purposes. Accordingly, its net assets are included in the balance sheet
at their historical book values and the results of operations of Pivx
Sub have been presented for the comparative prior period;
o Control of the net assets of Drilling, Inc. was acquired effective
March 25, 2004. This transaction has been accounted for as a purchase
of the assets and liabilities of Drilling, Inc. by Pivx Sub. The historical
cost of the net liabilities assumed was $0.
o Because Drilling, Inc. had no business at the date of acquisition,
no goodwill was recorded in connection with the transaction.
o Merger-related expenses were charged to operations since the excess
of fair value of the merger services provided exceeded the fair value
of the net assets acquired of Drilling, Inc.
The above is considered a one-time critical accounting policy.
As a result of the transaction described above we changed our name from
Drilling, Inc. to PivX Solutions, Inc.
14
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CRITICAL ACCOUNTING POLICIES
REVENUE RECOGNITION
Upon the release of our Qwik-Fix Pro software expected in June 2004,
we will recognize software license fee revenue in accordance with the
provisions of Statement of Position SOP 97-2 "Software Revenue Recognition,
" as amended by SOP 98-9, "Software Revenue Recognition, With Respect
to Certain Transactions." Software license fees will be charged for licenses
for security software to be delivered to customers for in-house applications.
Revenues from single-element software license agreements will be recognized
upon installation and acceptance of the software. Revenues from software
arrangements involving multiple elements will be allocated to the individual
elements based on their relative fair values. If services are considered
essential to the functionality of the software product, both the software
product revenue and service revenue will be recognized using the percentage
of completion method in accordance with the provisions of SOP 81-1, "Accounting
for Performance of Construction Type and Certain Production Type Contracts."
Maintenance and rights to unspecified upgrades to licenses will be reported
ratably. Provisions for estimated losses on uncompleted contracts will
be recorded in the period in which such losses become probable based
on the contract estimates. We will evaluate our revenue recognition practices
carefully to ensure compliance with accounting principles generally accepted
in the United States.
STOCK-BASED COMPENSATION
We issue common stock, and common stock purchase options and warrants
for compensation in the normal course of our business. We estimate the
value of services rendered based on the fair value of the equity consideration
issued to service providers. Historically, we used cash proceeds from
private placements as a determination of the fair value of common stock
issued for services. Prior to becoming a public company, we used the
minimum value method of for stock options and warrants, since there is
stock volatility as a private company. For common stock issued for services,
we will use market quotations after the completion of our current private
placement, which offered at $2.00 per share. We have not adopted SFAS
No. 123, fair value accounting for employee stock options. For options
issued to employees, we will continue to use APB No. 25, with complementary
disclosure of pro forma effects. Options and warrants issued to non-employees
will be accounted for using the fair value method, using the Black Scholes
valuation model. Warrants issued in connection of our private placement,
will reported net of the proceeds received. During the three months
ended March 31, 2004, we fairly valued merger-related expenses resulting
from common stock which was to be issued by us to our investment banker.
The investment banking firm waived its 3% merger fee in connection with
the reverse acquisition. We determined that since the reverse acquisition
transaction had closed, a charge to operations equal to the original
agreed upon fee of 3% was appropriate at a price of $2.00 per share was
necessary to comply with accounting principles generally accepted in
the United States.
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements, included
elsewhere in this Quarterly Report on Form 10-QSB, have been prepared
in conformity with accounting principles generally accepted in the United
States of America, which contemplate continuation as a going concern.
We have incurred a net loss of $1,711,035 for the three months ended
March 31, 2004 of which $1,287,490 consisted of a non-recurring, non-
cash transaction related to the above-described reverse acquisition.
As of March 31, 2004, we had an accumulated deficit of $3,040,192. At
March 31, 2004, we had cash on hand of $780,128. We need additional capital
to market Qwik-Fix Pro and provide necessary infrastructure as a public
company These conditions raise substantial doubt as
15
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to our ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty. The consolidated financial statements do
not include any adjustments relating to the recoverability and classification
of recorded asset amounts, or amounts and classification of liabilities
that might be necessary should we be unable to continue as a going concern.
PLAN OF OPERATIONS
Since our inception, our revenues have primarily been generated from
our security consulting services. In the last quarter of 2003, we elected
to change the primary focus of our business model from a purely professional
services-oriented firm to a product-oriented firm, with a focus on providing
Proactive Threat Mitigation(TM) software products and services to the
enterprise, government, education and end user markets. We have yet to
generate revenues from the licensing of our software, but by providing
proactive solutions which protect computer users from worms, viruses
and malware before they are attacked (rather than reactively in the manner
of AntiVirus, Firewall and Intrusion Detection solutions), we believe
our software products will have a competitive advantage in the network
and desktop security market. We are leveraging our expert domain knowledge
to create proactive solutions that effectively address today's increasing
and omni-present problems of worms and viruses.
Qwik-Fix Pro(TM), our flagship software product, is currently in beta
test and is expected to be available for shipment to the market in July,
2004. An earlier version of the product, called Qwik-Fix, was tested
in a free download beta release starting in October, 2003 and was downloaded
by thousands of users around the world. This product successfully demonstrated
the concept behind Proactive Threat Mitigation software by protecting
against many worms and viruses well before they were developed and released
on the Internet. A brief list of worms and viruses that were protected
against during the beta period included: Bagle, Bizex, MyDoom, Doom Juice,
Netsky, Blaster and the recent Sasser and it many variants. Qwik-Fix
Pro is an engineered and tested software product which extends that concept
with a breadth of additional protections, improved user interface, and
a management console which provides tools for management and reporting
of an enterprise installation of the product. Qwik-Fix Pro also provides
significant benefit to enterprises by reducing the urgency of distributing
software patches across the network, allowing IT staff the extra time
necessary to thoroughly regression test releases from Microsoft in order
to ensure that they do not interfere with the performance of their network
or applications. Qwik-Fix Pro will be sold on a subscription basis, with
discounts based on numbers of seats, and length of contract. We will
also provide discounts to educational institutions. While industry trends
are highly favorable, we have no revenue history for a product of Qwik-
Fix Pro's type. Therefore, market acceptance of our software remains
untested.
In addition to Qwik-Fix Pro, additional revenues will result from our
service offerings in the areas of computer forensics, security quality
assurance, vulnerability alerts and network scans. We expect that approximately
20% of our revenues will result from services. These services will serve
both to provide a revenue stream, and an on-going source of access to
real-world business problems, resulting in continued critical input into
our product development plans.
Expense growth will be primarily in the areas of sales and marketing,
security research, product development and customer service. We have
started building a direct sales effort in North America in addition to
developing channel partners and alliances. We have added senior staff
to direct these efforts. Significant additional resources will be devoted
to both hiring new staff and to marketing programs to support both direct
sales and partner channels. We will pursue revenue opportunities outside
of North America through partners and distributors in those regions.
We are currently in discussions related to distribution opportunities
in China, Japan, Europe and Latin and South America. We will also continue
an aggressive investment in security research, expanding on our existing
research capabilities, which provide the core of the value of Qwik-Fix
Pro. We also expect this investment to lead to future product development
opportunities. We believe our product development staff will grow, but
more slowly than sales and marketing or research. Customer service personnel
will grow in number as the penetration of Qwik-Fix Pro increases.
16
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We recognize that the market pressures which validate the opportunity
for Qwik-Fix Pro are apparent to others and therefore we expect to experience
direct competition in the marketplace, though we are not aware of any
product in the market today which delivers the same or similar capability
as Qwik-Fix Pro. We also expect to compete to some extent with anti-virus
vendors, as they also claim to provide desktop computer security protection.
We will move into new offices on June 1, 2004. The 7,200 square foot
fully furnished space in an office park in Newport Beach, CA is subleased
over a term of 30 months. In addition to leasing the space, we have taken
sole legal possession of the furnishings with a replacement cost of approximately
$100,000 as a condition of the sublease. We are also in the process of
acquiring computer equipment and a new telephone system that will cost
us approximately $250,000. We expect to pay for this new equipment by
obtaining lease lines of credit at market rates.
LIQUIDITY AND CASH RESOURCES
As of March 31, 2004, we had working capital of $307,736. Because of
our exclusive focus on product and market development during the first
quarter of 2004, financial results show a loss of $1,711,035, which includes
$1,287,490 consisting of a non-recurring, non-cash transaction related
to the above-described reverse acquisition.
During the first quarter of 2004, we raised $1,009,520 in gross proceeds
from a private placement sale of 504,760 shares of our common stock.
We have used the net proceeds of the offering to hire additional product
developers and engineers and for working capital.
We will require additional capital of at least $3,000,000 to execute
on our plan of operations discussed in this report. We plan to use this
capital to hire additional developers and security researchers and to
increase our sales and marketing efforts. We plan to obtain the additional
working capital through additional private placement sales of our equity
securities. However, as of the date of this report, we have no commitments
for the sale of our securities nor can there be any assurance that such
funds will be available on commercially reasonable terms, if at all.
Should we be unable to raise the required funds, our ability to finance
our continued growth will be materially adversely affected.
CASH POSITION AND USES OF CASH
Our cash and cash equivalents position as of March 31, 2004 was $780,
128.
During the three months ended March 31, 2004, we used $235,446 in cash
in our operating activities, as compared to $95,786 for the three months
ended March 31, 2003. We continue to use cash in operations, and we have
increased our expenditures compared to the prior year as we continue
to grow.
During the three months ended March 31, 2004, our financing activities
provided cash in the amount of $917,357, as compared to $25,000 for the
three months ended March 31, 2003. The significant increase is due to
the sale of our common stock in private placement offerings in the first
quarter of 2004.
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OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet financing arrangements.
FORWARD LOOKING STATEMENTS
We make written and oral statements from time to time in this Quarterly
Report regarding our business and prospects, such as projections of future
performance, statements of management's plans and objectives, forecasts
of market trends, and other matters that are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Statements containing the
words or phrases "will likely result," "are expected to," "will continue,
" "is anticipated," "estimates," "projects," "believes," "expects," "anticipates,
" "intends," "target," "goal," "plans," "objective," "should" or similar
expressions identify forward-looking statements, which may appear in
documents, reports, filings with the Securities and Exchange Commission,
news releases, written or oral presentations made by officers or other
representatives made by us to analysts, stockholders, investors, news
organizations and others, and discussions with management and other representatives
of us. For such statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. Our future results, including results related to
forward-looking statements, involve a number of risks and uncertainties
including our ability to obtain development financing as and when need;
the market's acceptance of our products; the successful development and
deployment of our software; changes in government regulation; our present
financial condition; increased competition and overall economic conditions.
No assurance can be given that the results reflected in any forward-looking
statements will be achieved. Any forward-looking statement made by or
on behalf of us speaks only as of the date on which such statement is
made. Our forward-looking statements are based upon assumptions that
are sometimes based upon estimates, data, communications and other information
from suppliers, government agencies and other sources that may be subject
to revision. Except as required by law, we do not undertake any obligation
to update or keep current either (i) any forward-looking statement to
reflect events or circumstances arising after the date of such statement,
or (ii) the important factors that could cause our future results to
differ materially from historical results or trends, results anticipated
or planned by us, or which are reflected from time to time in any forward-
looking statement which may be made by or on behalf of us.
ITEM 3. CONTROLS AND PROCEDURES
As required by SEC rules, we have evaluated the effectiveness of the
design and operation of our disclosure controls and procedures at the
end of the period covered by this report. This evaluation was carried
out under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer.
Based on this evaluation, these officers have concluded that the design
and operation of our disclosure controls and procedures are effective.
There were no changes in our internal control over financial reporting
or in other factors that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Our disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SEC's rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us in
the reports that we file under the Exchange Act is accumulated and communicated
to our management, including principal executive officer and principal
financial officer, as appropriate, to allow timely decisions regarding
required disclosure.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF
EQUITY SECURITIES
During the three months ended March 31, 2004, we sold unregistered shares
of our securities in the following transactions:
On March 25, 2004, we issued 15,342,289 shares of our common stock to
the members of Pivx Sub in connection with the reverse acquisition. These
issuances were made pursuant to the exemption from registration provided
by Section 4(2) of the Securities Act of 1933 (the "Securities Act")
and Rule 506 of Regulation D.
During the first quarter of 2004, we sold 504,760 shares of common stock
in a private placement financing for gross proceeds of $1,009,520. Falcon
Capital acted as a placement agent for this offering and received a finders
fee of $121,142, 193,750 shares of our common stock and a warrant to
purchase 50,476 shares of our common stock. These issuances were made
only to "accredited investors" residing in Europe pursuant to the exemption
from registration provided by Section 4(2) of the Securities Act of 1933
(the "Securities Act") and Rule 506 of Regulation D.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Effective March 26, 2004, our board of directors approved a resolution
authorizing us to seek stockholder approval to amend and restate our
articles of incorporation. Effective April 20, 2004, the holders of a
majority of the outstanding shares of our common stock entitled to vote
thereon executed a written consent in accordance with Section 78.320(2)
of the Nevada Revised Statutes and Section 10 of Article II of our Bylaws,
as amended, approving and adopting an amendment to our articles of incorporation
regarding: (i) the change of our corporate name from "Drilling, Inc."
to "PivX Solutions, Inc.;" (ii) the authorization of 10,000,000 shares
of preferred stock, whereby our board of directors is authorized to establish,
from the authorized shares of preferred stock, one or more classes or
series of shares, to designate each such class and series, and to fix
the rights and preferences of each such class and series, and
(iii) the update of the address for the Corporation's agent for service
of process in Nevada and the removal of provisions not otherwise required
to be located in the articles of incorporation under Nevada law. This
amendment to our articles of incorporation became effective on May 10,
2004.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
REGULATION
S-B NUMBER EXHIBIT
3.1 Certificate of Amended and Restated Articles of Incorporation
of PivX Solutions, Inc. (formerly known as Drilling, Inc.)
3.2 Amended and Restated Bylaws of PivX Solutions, Inc. (formerly
known as Drilling, Inc.)
31.1 Rule 13a-14(a) Certification of Chief Executive Officer
31.2 Rule 13a-14(a) Certification of Chief Financial Officer
32.1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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(b) Reports on Form 8-K
On April 9, 2004, we filed a Current Report on Form 8-K under Items 1,
2,5, 7 and 9 announcing that on March 25, 2004, we were the subject of
a reverse acquisition by Pivx Solutions, LLC, a California corporation.
On April 20, 2004, we filed a Current Report on Form 8-K under Item 4
announcing that on April 16, 2004, our Board of Directors approved a
change in auditors. Our Board of Directors approved the dismissal of
Pritchett Siler & Hardy PC as our independent public accountants and
the selection of McKennon Wilson & Morgan, LLP. as their replacement.
SIGNATURES
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.
PIVX SOLUTIONS, INC.
May 24, 2004 By: /s/ Robert N.
Shively
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Robert N. Shively
Chief Executive
Officer
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Exhibit 3.1
CERTIFICATE
OF
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
DRILLING, INC.
Pursuant to the provisions of Sections 78.385 and 78.403 of the Nevada
Revised Statutes, as amended, the undersigned does hereby declare and
certify that:
1. He is the duly elected and acting President of Drilling, Inc., a corporation
duly organized and existing under the laws of the State of Nevada (the
"Corporation."), and he has been authorized to execute this certificate
by resolution of the Corporation's board of directors.
2. The Articles of Incorporation of the Corporation were originally filed
by the Secretary of State on the 24th day of April, 1975 under the name
Domi Associates, Inc.
3. The board of directors of this Corporation duly adopted resolutions
on March 26, 2004, proposing to amend and restate the Articles of Incorporation,
declaring said amendment and restatement to be advisable and in the
best interests of this Corporation and its stockholders and authorizing
the appropriate officers of this Corporation to solicit the consent of
the stockholders therefore, which resolution setting forth the proposed
amendment and restatement is as follows:
RESOLVED, that the Articles of Incorporation of this Corporation be amended
and restated as follows:
ARTICLE I
The name of the Corporation is: PivX Solutions, Inc.
ARTICLE II
The name of the corporation's resident agent is GKL Resident Agents/Filings,
Inc., and the street address of the said resident agent where process
may be served is 1000 East William Street, Suite 204, Carson City, Nevada
89701.
ARTICLE III
The nature of the business and the objects and purposes proposed to be
transacted, promoted or carried on by the Corporation to engage in any
lawful activity. To do any and all things necessary, suitable and proper
for the accomplishment of any of the purposes, the fulfillment of any
of the obligations, or the furtherance of any of the powers hereinbefore
set forth, either alone or in association, partnership, or joint venture
with other persons, firms, or corporations, and to do every other act
or acts, thing or things, incidental or appurtenant to, growing out of,
or connected with, the aforesaid business or powers, any part or parts
thereof, provided the same be not inconsistent with the laws under which
Corporation is organized.
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The above and foregoing statement of purposes shall be construed as a
statement of both purposes and powers and shall not be construed as limiting
in any way the powers conferred upon corporations generally by the laws
of the State of Nevada.
ARTICLE IV
The aggregate number of shares which the corporation shall have authority
to issue is 100,000,000 shares of common stock, $0.001 par value per
share (the "Common Stock"), and 10,000,000 shares of preferred stock,
$0.001 par value per share, undesignated as to series (the "Preferred
Stock"). To the furthest extent allowed by Sections 78.195 and 78.1955
of the Nevada Revised Statutes, as amended, the Board of Directors is
authorized to establish, from the authorized shares of Preferred Stock,
one or more classes or series of shares, to designate each such class
and series, and to fix the rights and preferences of each such class
and series. Without limiting the authority of the Board of Directors
granted hereby, each such class or series of Preferred Stock shall have
such voting powers (full or limited or no voting powers), such preferences
and relative, participating, optional or other special rights, and such
qualifications, limitations or restrictions as shall be stated and expressed
in the resolution or resolutions providing for the issue of such class
or series of Preferred Stock as may be adopted from time to time by the
Board of Directors prior to the issuance of any shares thereof.
All stock when issued shall be deemed fully paid and non-assessable.
No cumulative voting, on any matter to which Stockholders shall be entitled
to vote, shall be allowed for any purpose. Unless authorized by the Corporation's
board of directors, stockholders shall not have pre-emptive rights to
acquire unissued shares of the stock of this Corporation.
ARTICLE V
The number of directors of the Corporation shall be established in accordance
with the Bylaws of the Corporation.
ARTICLE VI
The capital stock of Corporation, after the fixed consideration thereof
has been paid or performed, shall not be subject to assessment, and Stockholders
of Corporation shall not be individually liable for the debts and liabilities
of Corporation, and the Articles of Incorporation shall never be amended
as to the aforesaid provisions.
ARTICLE VII
This Corporation shall have perpetual existence.
ARTICLE VIII
The Board of Directors shall have the power and authority to make, alter,
or amend the Bylaws; to fix the amount, in cash or otherwise, to be
reserved as working capital; and to authorize and cease to be executed
the mortgages and liens upon the property and franchises of Corporation.
ARTICLE IX
Except as otherwise provided in Sections 35.230, 90.660, 91.250, 452.200,
452.270, 668.045 and 694A.030 of the Nevada Revised Statutes, as amended,
a director or officer shall not be individually liable to the Corporation
or its stockholders or creditors for any damages as a result of any act
or failure to act in his capacity as a director or officer unless it
is proven that: (a) his act or failure to act constituted a breach of
his fiduciary
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duties as a director or officer; and (b) his breach of those duties involved
intentional misconduct, fraud or a knowing violation of the law.
ARTICLE X
This Corporation shall not be governed by, nor shall the provisions of
Sections 78.378 through and including 78.3793 and Section 78.411 through
and including 78.444 of the Nevada Revised Statutes, as amended, in any
way whatsoever affect the management, operation or be applied to Corporation.
This Article X may only be amended by a majority vote of not less than
90% of the then issued and outstanding shares of Corporation. A quorum
of outstanding shares for voting on an Amendment to this Article X shall
not be met unless 95% or more of the issues and outstanding shares are
present at a properly called and noticed meeting of the Stockholders.
The super-majority set forth in this Article X only applies to any attempted
amendment to this Article.
4. The vote by which the stockholders holding shares in the Corporation
entitling them to exercise at least a majority of the voting power, or
such greater proportion of the voting power as may be required in the
case of a vote by classes or series, or as may be required by the provisions
of the articles of incorporation have voted in favor of the foregoing
amendment is at least a majority.
5. This Certificate of Amended and Restated Articles of the Corporation
shall become effective on May 10, 2004.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amended and Restated Articles of Incorporation this 6th day of May, 2004.
/S/ ROBERT SHIVELY
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Robert Shively, President
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Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
DRILLING, INC.
A NEVADA CORPORATION
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The principal office shall be in the City
of Newport Beach, State of California.
Section 2. OTHER OFFICES. The board of directors may at any time establish
branch or subordinate offices at any place or places where the corporation
is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall be held
at any place within or without the State of Nevada designated by the
board of directors. In the absence of any such designation, stockholders'
meetings shall be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETINGS. The annual meetings of stockholders shall
be held at a date and time designated by the board of directors. At such
meetings, directors shall be elected and any other proper business may
be transacted by a plurality vote of stockholders.
Section 3. SPECIAL MEETINGS. A special meeting of the stockholders, for
any purpose or purposes whatsoever, unless prescribed by statute or by
the articles of incorporation, may be called at any time by the president
and shall be called by the president or secretary at the request in writing
of a majority of the board of directors, or at the request in writing
of stockholders holding shares in the aggregate entitled to cast not
less than a majority of the votes at any such meeting.
The request shall be in writing, specifying the time of such meeting,
the place where it is to be held and the general nature of the business
proposed to be transacted, and shall be delivered personally or sent
by registered mail or by telegraphic or other facsimile transmission
to the chairman of the board, the president, any vice president or the
secretary of the corporation. The officer receiving such request forthwith
shall cause notice to be given to the stockholders entitled to vote,
in accordance with the provisions of Sections 4 and 5 of this Article
II, that a meeting will be held at the time requested by the person or
persons calling the meeting, not less than thirty-five (35) nor more
than sixty (60) days after the receipt of the request. If the notice
is not given within twenty (20) days after receipt of the request, the
person or persons requesting the meeting may give the notice. Nothing
contained in this paragraph of this Section 3 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.
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Section 4. NOTICE OF STOCKHOLDERS' MEETINGS. All notices of meetings
of stockholders shall be sent or otherwise given in accordance with Section
5 of this Article II not less than ten (10) nor more than sixty (60)
days before the date of the meeting being noticed. The notice shall specify
the place, date and hour of the meeting and (i) in the case of a special
meeting the general nature of the business to be transacted, or (ii)
in the case of the annual meeting those matters which the board of directors,
at the time of giving the notice, intends to present for action by the
stockholders. The notice of any meeting at which directors are to be
elected shall include the name of any nominee or nominees which, at the
time of the notice, management intends to present for election.
If action is proposed to be taken at any meeting for approval of (i)
contracts or transactions in which a director has a direct or indirect
financial interest, (ii) an amendment to the articles of incorporation,
(iii) a reorganization of the corporation, (iv) dissolution of the corporation,
or (v) a distribution to preferred stockholders, the notice shall also
state the general nature of such proposal.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of stockholders shall be given either personally or by first-
class mail or telegraphic or other written communication, charges prepaid,
addressed to the stockholder at the address of such stockholder appearing
on the books of the corporation or given by the stockholder to the corporation
for the purpose of notice. If no such address appears on the corporation's
books or is given, notice shall be deemed to have been given if sent
by mail or telegram to the corporation's principal executive office,
or if published at least once in a newspaper of general circulation in
the county where this office is located. 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. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent
by telegram or other means of written communication. In the event of
the transfer of stock after delivery or mailing of the 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.
If any notice addressed to a stockholder at the address of such stockholder
appearing on the books of the corporation is returned to the corporation
by the United States Postal Service marked to indicate that the United
States Postal Service is unable to deliver the notice to the stockholder
at such address, all future notices or reports shall be deemed to have
been duly given without further mailing if the same shall be available
to the stockholder upon written demand of the stockholder at the principal
executive office of the corporation for a period of one year from the
date of the giving of such notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting shall be executed by the secretary, assistant secretary
or any transfer agent of the corporation giving such notice, and shall
be filed and maintained in the minute book of the corporation.
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Business transacted at any special meeting of stockholders shall be limited
to the purposes stated in the notice.
Section 6. QUORUM. The presence in person or by proxy of the holders
of a majority of the shares entitled to vote at any meeting of stockholders
shall constitute a quorum for the transaction of business, except as
otherwise provided by statute or the articles of incorporation. The stockholders
present at a duly called or held meeting at which a quorum is present
may continue to do business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum, if any action taken
(other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 7. ADJOURNED MEETING AND NOTICE THEREOF. Any stockholders' meeting,
annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of the majority of the shares represented
at such meeting, either in person or by proxy, but in the absence of
a quorum, no other business may be transacted at such meeting.
When any meeting of stockholders, either annual or special, is adjourned
to another time or place, notice need not be given of the adjourned meeting
if the time and place thereof are announced at a meeting at which the
adjournment is taken. At any adjourned meeting the corporation may transact
any business which might have been transacted at the original meeting.
Section 8. VOTING. Unless a record date set for voting purposes be fixed
as provided in Section 1 of Article VIII of these bylaws, only persons
in whose names shares entitled to vote stand on the stock records of
the corporation at the close of business on the business day next preceding
the day on which notice is given (or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting
is held) shall be entitled to vote at such meeting. Any stockholder entitled
to vote on any matter other than elections of directors or officers,
may vote part of the shares in favor of the proposal and refrain from
voting the remaining shares or vote them against the proposal, but, if
the stockholder fails to specify the number of shares such stockholder
is voting affirmatively, it will be conclusively presumed that the stockholder's
approving vote is with respect to all shares such stockholder is entitled
to vote. Such vote may be by voice vote or by ballot; provided, however,
that all elections for directors must be by ballot upon demand by a
stockholder at any election and before the voting begins.
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 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. Every stockholder of record of the corporation
shall be entitled at each meeting of stockholders to one vote for each
share of stock standing in his name on the books of the corporation.
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Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT STOCKHOLDERS. The transactions
at 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, 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 thereof. The waiver of notice or consent
need not specify either the business to be transacted or the purpose
of any regular or special meeting of stockholders, except that if action
is taken or proposed to be taken for approval of any of those matters
specified in the second paragraph of Section 4 of this Article II, the
waiver of notice or consent shall state the general nature of such proposal.
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall also constitute a waiver of
notice of such meeting, except when the person objects, at the beginning
of the meeting, to the transaction of any business because the 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
not included in the notice if such objection is expressly made at the
meeting.
Section 10. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Any action which may be taken at any annual or special meeting of stockholders
may be taken without a meeting and without prior notice, if a consent
in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted.
All such consents shall be filed with the secretary of the corporation
and shall be maintained in the corporate records. Any stockholder giving
a written consent, or the stockholder's proxy holders, or a transferee
of the shares of a personal representative of the stockholder of their
respective proxy holders, may revoke the consent by a writing received
by the secretary of the corporation prior to the time that written consents
of the number of shares required to authorize the proposed action have
been filed with the secretary.
Section 11. PROXIES. Every person entitled to vote for directors or on
any other matter shall have the right to do so either in person or by
one or more agents authorized by a written proxy signed by the person
and filed with the secretary of the corporation. A proxy shall be deemed
signed if the stockholder's name is placed on the proxy (whether by manual
signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney in fact. A validly executed
proxy which does not state that it is irrevocable shall continue in full
force and effect unless revoked by the person executing it, prior to
the vote pursuant thereto, by a writing delivered to the corporation
stating that the proxy is revoked or by a subsequent proxy executed by,
or attendance at the meeting and voting in person by the person executing
the proxy; provided, however, that no such proxy shall be valid after
the expiration of six (6) months from the date of such proxy, unless
coupled with an interest, or unless the person executing it specifies
therein the length of time for which it is to continue in force, which
in no case shall exceed seven (7) years from the date of its execution.
Subject to the above and the provisions of Section 78.355 of the Nevada
General Corporation Law, any proxy duly executed is not revoked and continues
in full force and effect until an instrument revoking it or a duly executed
proxy bearing a later date is filed with the secretary of the corporation.
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Section 12. INSPECTORS OF ELECTION. Before any meeting of stockholders,
the board of directors may appoint any persons other than nominees for
office to act as inspectors of election at the meeting or its adjournment.
If no inspectors of election are appointed, the chairman of the meeting
may, and on the request of any stockholder or his proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall
be either one (1) or three (3). If inspectors are appointed at a meeting
on the request of one or more stockholders or proxies, the holders of
a majority of shares or their proxies present at the meeting shall determine
whether one (1) or three (3) inspectors are to be appointed. If any person
appointed as inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment by the board of directors before
the meeting, or by the chairman at the meeting.
The duties of these inspectors shall be as follows:
(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 the election result; and
(f) Do any other acts that may be proper to conduct the election or vote
with fairness to all stockholders.
ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to the provisions of the Nevada General Corporation
Law and any limitations in the articles of incorporation and these bylaws
relating to action required to be approved by the stockholders or by
the outstanding shares, the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised by or under the
direction of the board of directors.
Without prejudice to such general powers, but subject to the same limitations,
it is hereby expressly declared that the directors shall have the power
and authority to:
(a) Select and remove all officers, agents, and employees of the corporation,
prescribe such powers and duties for them as may not be inconsistent
with law, with the articles of incorporation or these bylaws, fix their
compensation, and require from them security for faithful service.
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(b) Change the principal executive office or the principal business office
from one location to another; cause the corporation to be qualified to
do business in any other state, territory, dependency, or foreign country
and conduct business within or without the State; designate any place
within or without the State for the holding of any stockholders' meeting,
or meetings, including annual meetings; adopt, make and use a corporate
seal, and prescribe the forms of certificates of stock, and alter the
form of such seal and of such certificates from time to time as in their
judgment they may deem best, provided that such forms shall at all times
comply with the provisions of law.
(c) Authorize the issuance of shares of stock of the corporation from
time to time, upon such terms as may be lawful, in consideration of money
paid, labor done or services actually rendered, debts or securities cancelled,
tangible or intangible property actually received.
(d) Borrow money and incur indebtedness for the purpose of the corporation,
and cause to be executed and delivered therefor, in the corporate name,
promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, or other evidences of debt and securities therefor.
Section 2. NUMBER OF DIRECTORS. The number of directors which shall constitute
the whole board shall not be less than one (1) nor more than nine
(9). The exact number of authorized directors shall be set by resolution
of the board of directors, within the limits specified above. The maximum
or minimum number of directors cannot be changed, nor can a fixed number
be substituted for the maximum and minimum numbers, except by a duly
adopted amendment to the articles of incorporation or by an amendment
to this bylaw.
Section 3. QUALIFICATION, ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors
shall be elected at each annual meeting of the stockholders to hold office
until the next annual meeting, but if any such annual meeting is not
held or the directors are not elected at any annual meeting, the directors
may be elected at any special meeting of stockholders held for that purpose,
or at the next annual meeting of stockholders held thereafter. Each
director, including a director elected to fill a vacancy, shall hold
office until the expiration of the term for which elected and until a
successor has been elected and qualified or until his earlier resignation
or removal or his office has been declared vacant in the manner provided
in these bylaws. Directors need not be stockholders.
Section 4. RESIGNATION AND REMOVAL OF DIRECTORS. Any director may resign
effective upon giving written notice to the chairman of the board, the
president, the secretary or the board of directors of the corporation,
unless the notice specifies a later time for the effectiveness of such
resignation, in which case such resignation shall be effective at the
time specified. Unless such resignation specifies otherwise, its acceptance
by the corporation shall not be necessary to make it effective. The board
of directors may declare vacant the office of a director who has been
declared of unsound mind by an order of a court or convicted of a felony.
Any or all of the directors may be removed without cause of such removal
is approved by the affirmative vote of a majority of the outstanding
shares entitled to vote. No reduction of the authorized number of directors
shall have the effect of removing any director before his term of office
expires.
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Section 5. VACANCIES. Vacancies in the board of directors, may be filled
by a majority of the remaining directors, though less than a quorum,
or by a sole remaining director. Each director so elected shall hold
office until the next annual meeting of the stockholders and until a
successor has been elected and qualified.
A vacancy in the board of directors exists as to any authorized position
of directors which is not then filled by a duly elected director, whether
caused by death, resignation, removal, increase in the authorized number
of directors or otherwise.
The stockholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
by written consent shall require the consent of a majority of the outstanding
shares entitled to vote. If the resignation of a director is effective
at a future time, the board of directors may elect a successor to take
office when the resignation becomes effective.
If after the filling of any vacancy by the directors, the directors then
in office who have been elected by the stockholders shall constitute
less than a majority of the directors then in office, any holder or holders
of an aggregate of five percent or more of the total number of shares
at the time outstanding having the right to vote for such directors may
call a special meeting of the stockholders to elect the entire board.
The term of office of any director not elected by the stockholders shall
terminate upon the election of a successor.
Section 6. PLACE OF MEETINGS. Regular meetings of the board of directors
shall be held at any place within or without the State of Nevada that
has been designated from time to time by resolution of the board. In
the absence of such designation, regular meetings shall be held at the
principal executive office of the corporation. Special meetings of the
board shall be held at any place within or without the State of Nevada
that has been designated in the notice of the meeting or, if not stated
in the notice or there is not notice, at the principal executive office
of the corporation. Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in such meeting can hear one another, and all such directors
shall be deemed to be present in person at such meeting.
Section 7. ANNUAL MEETINGS. Immediately following each annual meeting
of stockholders, the board of directors shall hold a regular meeting
for the purpose of transaction of other business. Notice of this meeting
shall not be required.
Section 8. OTHER REGULAR MEETINGS. Other regular meetings of the board
of directors shall be held without call at such time as shall from time
to time be fixed by the board of directors. Such regular meetings may
be held without notice, provided the notice of any change in the time
of any such meetings shall be given to all of the directors. Notice of
a change in the determination of the time shall be given to each director
in the same manner as notice for special meetings of the board of directors.
Section 9. SPECIAL MEETINGS. Special meetings of the board of directors
for any purpose or purposes may be called at any time by the chairman
of the board or the president or any vice president or the secretary
or any two directors.
Notice of the time and place of special meetings shall be delivered personally
or by telephone to each director or sent by first-class mail or telegram,
charges prepaid, addressed to each director at his or her address as
it is shown upon the records of the corporation. In case such notice
is mailed, it shall be deposited in the United States mail at least four
(4) days prior to the time of the holding of the meeting. In case such
notice is delivered
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personally, or by telephone or telegram, it shall be delivered personally
or by telephone or to the telegraph company at least forty-eight (48)
hours prior to the time of the holding of the meeting. Any oral notice
given personally or by telephone may be communicated to either the director
or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director.
The notice need not specify the purpose of the meeting nor the place
if the meeting is to be held at the principal executive office of the
corporation.
Section 10. QUORUM. A majority of the authorized number of directors
shall 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,
subject to the provisions of
Section 78.140 of the Nevada General Corporation Law (approval of contracts
or transactions in which a director has a direct or indirect material
financial interest), Section 78.125 (appointment of committees), and
Section 78.751 (indemnification of directors). A meeting at which a quorum
is initially present may continue to transact business notwithstanding
the withdrawal of directors, if any action taken is approved by at least
a majority of the required quorum for such meeting.
Section 11. WAIVER OF NOTICE. The transactions of any meeting of the
board of directors, however called and noticed or wherever held, shall
be 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,
a consent to holding the meeting or an approval of the minutes thereof.
The waiver of notice of consent need not specify the purpose of the meeting.
All such waivers, consents and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Notice of a meeting
shall also be deemed given to any director who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice
to such director.
Section 12. ADJOURNMENT. A majority of the directors present, whether
or not constituting a quorum, may adjourn any meeting to another time
and place.
Section 13. NOTICE OF ADJOURNMENT. Notice of the time and place of holding
an adjourned meeting need not be given, unless the meeting is adjourned
for more than twenty-four (24) hours, in which case notice of such time
and place shall be given prior to the time of the adjourned meeting,
in the manner specified in Section 8 of this Article III, to the directors
who were not present at the time of the adjournment.
Section 14. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the board of directors may be taken without a meeting,
if all members of the board shall individually or collectively consent
in writing to such action. Such action by written consent shall have
the same force and effect as a unanimous vote of the board of directors.
Such written consent or consents shall be filed with the minutes of the
proceedings of the board.
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Section 15. FEES AND COMPENSATION OF DIRECTORS. Directors and members
of committees may receive such compensation, if any, for their services,
and such reimbursement of expenses, as may be fixed or determined by
resolution of the board of directors. Nothing herein contained shall
be construed to preclude any director from serving the corporation in
any other capacity as an officer, agent, employee, or otherwise, and
receiving compensation for such services. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF DIRECTORS. The board of directors may, by resolution
adopted by a majority of the authorized number of directors, designate
one or more committees, each consisting of one or more directors, to
serve at the pleasure of the board. The board may designate one or more
directors as alternate members of any committees, who may replace any
absent member at any meeting of the committee. Any such committee, to
the extent provided in the resolution of the board, shall have all the
authority of the board, except with regard to:
(a) the approval of any action which, under the Nevada General Corporation
Law, also requires stockholders' approval or approval of the outstanding
shares;
(b) the filing of vacancies on the board of directors or in any committees;
(c) the fixing of compensation of the directors for serving on the board
or on any committee;
(d) the amendment or repeal of bylaws or the adoption of new bylaws;
(e) the amendment or repeal of any resolution of the board of directors
which by its express terms is not so amendable or repealable;
(f) a distribution to the stockholders of the corporation, except at
a rate or in a periodic amount or within a price range determined by
the board of directors; or
(g) the appointment of any other committees of the board of directors
or the members thereof.
Section 2. MEETINGS AND ACTION BY COMMITTEES. Meetings and action of
committees shall be governed by, and held and taken in accordance with,
the provisions of Article III, Sections 6 (place of meetings), 8 (regular
meetings), 9 (special meetings and notice), 10 (quorum), 11 (waiver of
notice), 12 (adjournment), 13 (notice of adjournment) and 14 (action
without meeting), 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 or regular meetings
of committees may be determined by resolutions 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.
The committees shall keep regular minutes of their proceedings and report
the same to the board when required.
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ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a president,
a secretary and a treasurer. The corporation may also have, at the discretion
of the board of directors, a chairman of the board, one or more vice
presidents, one or more assistant secretaries, one or more assistant
treasurers, and such other officers as may be appointed in accordance
with the provisions of
Section 3 of this Article V. Any two or more offices may be held by the
same person.
Section 2. ELECTION OF OFFICERS. The officers of the corporation, except
such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article V, shall be chosen by the board
of directors, and each shall serve at the pleasure of the board, subject
to the rights, if any, of an officer under any contract of employment.
The board of directors at its first meeting after each annual meeting
of stockholders shall choose a president, a vice president, a secretary
and a treasurer, none of whom need be a member of the board. The salaries
of all officers and agents of the corporation shall be fixed by the board
of directors.
Section 3. SUBORDINATE OFFICERS, ETC. The board of directors may appoint,
and may empower the president to 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 4. REMOVAL AND RESIGNATION OF OFFICERS. The officers of the corporation
shall hold office until their successors are chosen and qualify. Subject
to the rights, if any, of an officer under any contract of employment,
any officer may be removed, either with or without cause, by the board
of directors, at any regular or special meeting thereof, or, except in
case of an officer chosen by the board of directors, by any officer upon
whom such power or removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the corporation.
Any such resignation shall take effect at the date of the receipt of
such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary
to make it effective. Any such resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer
is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these bylaws for regular appointments to
such office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such
an officer be elected, shall, if present, preside at all meetings of
the board of directors and exercise and perform such other powers and
duties as may be from time to time assigned to him by the board of directors
or prescribed by the bylaws. If there is no president, the chairman of
the board shall in addition be the chief executive officer of the corporation
and shall have the powers and duties prescribed in Section 7 of this
Article V.
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Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the board of directors to the chairman of the board,
if there be such an officer, the president shall be the chief executive
officer of the corporation and shall, subject to the control of the board
of directors, have general supervision, direction and control of the
business and the officers of the corporation. He shall preside at all
meetings of the stockholders and, in the absence of the chairman of the
board, of if there be none, at all meetings of the board of directors.
He shall have the general powers and duties of management usually vested
in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or the
bylaws. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted
by law to be otherwise signed and executed and except where the signing
and execution thereof shall be expressly delegated by the board of directors
to some other officer or agent of the corporation.
Section 8. VICE PRESIDENTS. In the absence or disability of the president,
the vice presidents, if any, in order of their rank as fixed by the
board of directors or, if not ranked, a vice president designated by
the board of directors, shall perform all the duties of the president,
and when so acting shall have all the powers of, and be subject to all
the restrictions upon, the president. The vice presidents shall have
such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors or
the bylaws, the president or the chairman of the board.
Section 9. SECRETARY. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and shall record,
keep or cause to be kept, at the principal executive office or such
other place as the board of directors may order, a book of minutes of
all meetings of directors, committees of directors and stockholders,
with the time and place of holding, whether regular or special, and,
if special, how authorized, the notice thereof given, the names of those
present at directors' and committee meetings, the number of shares present
or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent or registrar,
as determined by resolution of the board of directors, a share register,
or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the
number and date of certificates issued for the same, and the number and
date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of stockholders and of the board of directors required by the bylaws
or by law to be given, and he shall keep the seal of the corporation
in safe custody, as may be prescribed by the board of directors or by
the bylaws.
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Section 10. CHIEF FINANCIAL OFFICER/TREASURER. Unless otherwise provided
by the board of directors, the chief financial officer shall be the treasurer
of the Corporation. The treasurer shall keep and maintain, or cause to
be kept and maintained, adequate and correct books and records of accounts
of the properties and business transactions of the corporation, including
accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings and shares. The books of account shall
at all reasonable times be open to inspection by any director.
The treasurer shall deposit all moneys and other valuables in the name
and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of
the corporation as may be ordered by the board of directors, shall render
to the president and directors, whenever they request it, an account
of all of his transactions as treasurer and of the financial condition
of the corporation, and shall have other powers and perform such other
duties as may be prescribed by the board of directors or the bylaws.
If required by the board of directors, the treasurer shall give the corporation
a bond in such sum and with such surety or sureties as shall be satisfactory
to the board of directors for the faithful performance of the duties
of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession
or under his control belonging to the corporation.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
Section 1. ACTIONS OTHER THAN BY THE CORPORATION. The corporation may
indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation, by reason of the fact that
he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or proceeding if
he acted in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, has no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, does not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation,
and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
Section 2. ACTIONS BY THE CORPORATION. The corporation may indemnify
any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was
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serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses, including amounts paid in settlement
and attorneys' fees, actually and reasonably incurred by him in connection
with the defense or settlement of the action or suit if he acted in good
faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be
made for any claim, issue or matter as to which such a person has been
adjudged by a court of competent jurisdiction, after exhaustion of all
appeals therefrom, to be liable to the corporation or for amounts paid
in settlement to the corporation, unless and only to the extent that
the court in which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity
for such expenses as the court deems proper.
Section 3. SUCCESSFUL DEFENSE. To the extent that a director, officer,
employee or agent of the corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to
in Sections 1 and 2, or in defense of any claim, issue or matter therein,
he must be indemnified by the corporation against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
with the defense.
Section 4. REQUIRED APPROVAL. Any indemnification under Sections 1 and
2, unless ordered by a court or advanced pursuant to Section 5, must
be made by the corporation only as authorized in the specific case upon
a determination that indemnification of the director, officer, employee
or agent is proper in the circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal counsel
in a written opinion.
Section 5. ADVANCE OF EXPENSES. The articles of incorporation, the bylaws
or an agreement made by the corporation may provide that the expenses
of officers and directors incurred in defending a civil or criminal action,
suit or proceeding must be paid by the 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 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 the corporation.
The provisions of this section do not affect any rights to advancement
of expenses to which corporate personnel other than directors or officers
may be entitled under any contract or otherwise by law.
Section 6. OTHER RIGHTS. The indemnification and advancement of expenses
authorized in or ordered by a court pursuant to this Article VI:
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(a) Does not exclude any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under the articles of incorporation
or any bylaw, agreement, vote of stockholders or disinterested directors
or otherwise, for either an action in his official capacity or an action
in another capacity while holding his office, except that indemnification,
unless ordered by a court pursuant to Section 2 or for the advancement
of expenses made pursuant to Section 5, may not be made to or on behalf
of any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
Section 7. INSURANCE. The corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise for any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the corporation would have
the power to indemnify him against such liability under the provisions
of this Article VI.
Section 8. RELIANCE ON PROVISIONS. Each person who shall act as an authorized
representative of the corporation shall be deemed to be doing so in reliance
upon the rights of indemnification provided by this Article.
Section 9. SEVERABILITY. If any of the provisions of this Article are
held to be invalid or unenforceable, this Article shall be construed
as if it did not contain such invalid or unenforceable provision and
the remaining provisions of this Article shall remain in full force and
effect.
Section 10. RETROACTIVE EFFECT. To the extent permitted by applicable
law, the rights and powers granted pursuant to this Article VI shall
apply to acts and actions occurring or in progress prior to its adoption
by the board of directors.
ARTICLE VII
RECORDS AND BOOKS
Section 1. MAINTENANCE OF SHARE REGISTER. The corporation shall keep
at its principal executive office, or at the office of its transfer agent
or registrar, if either be appointed and as determined by resolution
of the board of directors, a record of its stockholders, giving the names
and addresses of all stockholders and the number and class of shares
held by each stockholder.
Section 2. MAINTENANCE OF BYLAWS. The corporation shall keep at its principal
executive office, or if its principal executive office is not in this
State at its principal business office in this State, the original or
a copy of the bylaws as amended to date, which shall be open to inspection
by the stockholders at all reasonable times during office hours. If the
principal executive office of the corporation is outside this state and
the corporation has no principal business office in this state, the secretary
shall, upon the written request of any stockholder, furnish to such stockholder
a copy of the bylaws as amended to date.
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Section 3. MAINTENANCE OF OTHER CORPORATE 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,
or, in the absence of such designation, at the principal executive office
of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or
in any other form capable of being converted into written form.
Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records and documents of every kind and to
inspect the physical properties of this corporation and any subsidiary
of this corporation. Such inspection by a director may be made in person
or by agent or attorney and the right of inspection includes the right
to copy and make extracts. The foregoing rights of inspection shall extend
to the records of each subsidiary of the corporation.
Section 4. ANNUAL REPORT TO STOCKHOLDERS. Nothing herein shall be interpreted
as prohibiting the board of directors from issuing annual or other periodic
reports to the stockholders of the corporation as they deem appropriate.
Section 5. FINANCIAL STATEMENTS. A copy of any annual financial statement
and any income statement of the corporation for each quarterly period
of each fiscal year, and any accompanying balance sheet of the corporation
as of the end of each such period, that has been prepared by the corporation
shall be kept on file in the principal executive office of the corporation
for twelve
(12) months.
Section 6. ANNUAL LIST OF DIRECTORS, OFFICERS AND RESIDENT AGENTS. The
corporation shall, on or before December 31st of each year, file with
the Secretary of State of the State of Nevada, on the prescribed form,
a list of its officers and directors and a designation of its resident
agent in Nevada.
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. RECORD DATE. For purposes of determining the stockholders
entitled to notice of any meeting or to vote or entitled to receive payment
of any dividend or other distribution or allotment of any rights or entitled
to exercise any rights in respect of any other lawful action, the board
of directors may fix, in advance, a record date, which shall not be more
than sixty
(60) days nor less than ten (10) days prior to the date of any such meeting
nor more than sixty (60) days prior to any other action, and in such
case only stockholders of record on the date so fixed are entitled to
notice and to vote or to receive the dividend, distribution or allotment
of rights or to exercise the rights, as the case may be, notwithstanding
any transfer of any shares on the books of the corporation after the
record date fixed as aforesaid, except as otherwise provided in the Nevada
General Corporation Law.
If the board of directors does not so fix a record date:
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(a) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business
on the day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding
the day on which the meeting is held.
(b) The record date for determining stockholders entitled to give consent
to corporate action in writing without a meeting, when no prior action
by the board has been taken, shall be the day on which the first written
consent is given.
(c) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board adopts
the resolution relating thereto, or the sixtieth (60th) day prior to
the date of such other action, whichever is later.
Section 2. CLOSING OF TRANSFER BOOKS PROHIBITED. In connection with the
determination of stockholders entitled to notice of any meeting or to
vote or entitled to receive payment of any dividend or other distribution
or allotment of any rights or entitled to exercise any right in respect
of any other lawful action, the board of directors shall not close the
stock transfer books of the corporation for any reason but shall instead
fix a record date for such determination in the manner provided in Section
1 of Article VIII of these bylaws.
Section 3. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner,
and to hold liable for calls and assessments a person registered on
its books as the owner of shares, and 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.
Section 4. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts
or other orders for payment of money, notes or other evidences of indebtedness,
issued in the name of or payable to the corporation, shall be signed
or endorsed by such person or persons and in such manner as, from time
to time, shall be determined by resolution of the board of directors.
Section 5. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The board
of directors, except as in the bylaws otherwise provided, may authorize
any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation,
and such authority may be general or confined to specific instances;
and, unless so authorized or ratified by the board of directors or within
the agency power or authority to bind the corporation by any contract
or engagement or to pledge its credit or to render it liable for any
purpose or to any amount.
Section 6. STOCK CERTIFICATES. A certificate or certificates for shares
of the capital stock of the corporation shall be issued to each stockholder
when any such shares are fully paid, and the board of directors may authorize
the issuance of certificates or shares as partly paid provided that such
certificates shall state the amount of the consideration to be paid therefor
and the amount paid thereon. All certificates shall be signed in the
name of the corporation by the president or vice president and by the
treasurer or an
16
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assistant treasurer or the secretary or any assistant secretary, certifying
the number of shares and the class or series of shares owned by the stockholder.
When the corporation is authorized to issue shares of more than one class
or more than one series of any class, there shall be set forth upon the
face or back of the certificate, or the certificate shall have a statement
that the corporation will furnish to any stockholders upon request and
without charge, a full or summary statement of the designations, preferences
and relatives, participating, optional or other special rights of the
various classes of stock or series thereof and the qualifications, limitations
or restrictions of such rights, and, if the corporation shall be authorized
to issue only special stock, such certificate must set forth in full
or summarize the rights of the holders of such stock. Any or all of the
signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if such person were
an officer, transfer agent or registrar at the date of issue.
No new certificate for shares shall be issued in place of any certificate
theretofore issued unless the latter is surrendered and cancelled at
the same time; provided, however, that a new certificate may be issued
without the surrender and cancellation of the old certificate if the
certificate thereto fore issued is alleged to have been lost, stolen
or destroyed. In case of any such allegedly lost, stolen or destroyed
certificate, the corporation may require the owner thereof or the legal
representative of such owner to give the corporation a bond (or other
adequate security) sufficient to indemnify it against any claim that
may be made against it (including any expense or liability) on account
of the alleged loss, theft or destruction of any such certificate or
the issuance of such new certificate.
Section 7. 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.
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
reserves in the manner in which it was created.
Section 8. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 9. SEAL. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its incorporation and the words
"Corporate Seal, Nevada."
Section 10. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman
of the board, the president, or any vice president, or any other person
authorized by resolution of the board of directors 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 herein
granted to said 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 such officer in person or by any
person authorized to do so by proxy duly executed by said officer.
17
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Section 11. CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions
in the Nevada General Corporation Law shall govern the construction of
the bylaws. Without limiting the generality of the foregoing, the singular
number includes the plural, the plural number includes the singular,
and the term "person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY STOCKHOLDERS. New bylaws may be adopted or these
bylaws may be amended or repealed by the affirmative vote of a majority
of the outstanding shares entitled to vote, or by the written assent
of stockholders entitled to vote such shares, except as otherwise provided
by law or by the articles of incorporation.
Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the stockholders
as provided in Section 1 of this Article, bylaws may be adopted, amended
or repealed by the board of directors.
18
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C E R T I F I C A T E O F S E C R E T A R Y
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting secretary of Drilling, Inc.,
a Nevada corporation; and
2. That the foregoing Amended and Restated Bylaws, comprising eighteen
(18) pages, constitute the Bylaws of said corporation as duly adopted
by the board of directors of said corporation by a Unanimous Written
Consent dated as of March 26, 2004.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said corporation this 26th day of March 2004.
/S/ KENNETH DILL
- ------------------------
Kenneth Dill, Secretary
19
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EXHIBIT 31.1
CERTIFICATIONS
I, Robert N. Shively, Chief Executive Officer of PivX Solutions, Inc.,
certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of PivX Solutions,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
small business issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) for the small business issuer
and have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the small business issuer, including
its consolidated Subsidiary, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report; and
c) disclosed in this report any changes in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee
of small business issuer's board of directors (or persons performing
the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: May 24, 2004 /S/ ROBERT N. SHIVELY
-----------------------
- -----------
Robert N. Shively
Chief Executive Officer
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EXHIBIT 31.2
CERTIFICATIONS
I, Kenneth Dill, Chief Financial Officer of PivX Solutions, Inc., certify
that:
1. I have reviewed this Quarterly Report on Form 10-QSB of PivX Solutions,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
small business issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the small business issuer, including
its consolidated Subsidiary, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report; and
c) disclosed in this report any changes in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee
of small business issuer's board of directors (or persons performing
the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: May 24, 2004 /S/ KENNETH DILL
------------------
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Kenneth Dill
Chief Financial
Officer
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PivX Solutions, Inc. (the
"Company") on Form 10-QSB for the quarter ending March 31, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
Robert N. Shively, as Chief Executive Officer, and Kenneth Dill, as
Chief Financial Officer of the Company, each hereby certifies, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of his knowledge, that:
(1) The report fully complies with the requirements of Section 13(a)
or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
May 24, 2004 By: /S/ ROBERT N. SHIVELY
-----------------------
- -----------
Robert N. Shively
Chief Executive Officer
By: /S/ KENNETH DILL
-----------------------
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Kenneth Dill
Chief Financial Officer
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