UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended - September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-28772
Salient Cybertech, Inc.
(Name of Small Business Issuer in its charter)
Delaware 35-1990559
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1715 Stickney Pt,. Rd, Sarasota FL 34231
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(941)349-6583
(Former name, former address and former fiscal year if changed since
last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. YES [x] NO [ ]
As of September 30, 1999, the Registrant has outstanding
11,647,749 shares of Common Stock, $.001 par value.
Documents Incorporated by Reference
Certain exhibits listed in Item 6 of Part II have been incorporated by
reference. An index to exhibits appears with Item 6.
<PAGE>
THIS QUARTERLY REPORT CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995. THESE STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS
QUARTERLY REPORT AND INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR
CURRENT EXPECTATIONS OF THE COMPANY, WITH RESPECT TO (I)THE COMPANY'S
PRODUCT DEVELOPMENT AND FINANCING PLANS, (II) TRENDS AFFECTING THE
COMPANY'S FINANCIAL CONDITION OR RESULTS OF OPERATIONS,(III)THE IMPACT OF
COMPETITION AND (IV)THE EXPANSION OF CERTAIN OPERATIONS. ANY SUCH FORWARD-
LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE
RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.
Salient Cybertech, Inc.
Form 10-QSB
Quarterly Report, period ended September 30, 1999
INDEX page number
PART I Financial Information
Item 1. Financial Statements
Accountants' Compilation Report F1
Statements Of Financial Condition F2
Statements Of Operations F3
Statement Of Changes In Stockholders' Equity F4
Statements Of Cash Flows F5
Item 2. Management's discussion and analysis of
financial conditions and results of operations.
Part II. Other Information
<PAGE>
November 4, 1999
TO THE BOARD OF DIRECTORS
Salient Cybertech, Inc.
(formerly known as Sloan Electronics, Inc.)
Sarasota, Florida
We have compiled the accompanying statements of financial position of
Salient Cybertech, Inc. (formerly known as Sloan Electronics, Inc.) as of
September 30, 1999 and December 31, 1998, the related statements of changes
in stockholders' equity for the period ended September 30, 1999, and the
statements of operations for the three and nine month periods ending
September 30, 1999 and 1998 and cash flows for the nine month periods ended
September 30, 1999 and 1998, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of
Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited
or reviewed the accompanying financial statements and, accordingly, do not
express an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures
required by generally accepted accounting principles. If the omitted
disclosures were included in the financial statements, they might influence
the user's conclusions about the Company's financial position, results of
operations, and cash flows. Accordingly, these financial statements are
not designed for those who are not informed about such matters.
/s/Bobbitt, Pittenger & Company, P.A.
Certified Public Accountants
<PAGE>
SALIENT CYBERTECH, INC.
(FORMERLY KNOWN AS SLOAN ELECTRONICS, INC.)
STATEMENTS OF FINANCIAL CONDITION
Sept 30, December 31,
1999 1998
ASSETS
Cash $ 165 $ 19,792
Accounts receivable - net 15,072 12,126
Inventory 25,605 27,171
Prepaid insurance 6,407 26,422
Prepaid legal fees - current 562,500
Deferred syndication costs 100,000 100,000
-------- --------
TOTAL CURRENT ASSETS 709,749 185,511
EQUIPMENT - NET 1,220 1,892
Prepaid legal fees-long term 187,500
-------- --------
$ 898,469 $ 187,403
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 111,701 $ 79,736
Accrued expenses 196,801 117,442
Accrued interest 10,338 8,650
Accrued interest - related party 73,211 41,189
Notes payable 17,375 41,718
Notes payable - related party 235,000 210,000
-------- --------
TOTAL CURRENT LIABILITIES 644,426 498,735
STOCKHOLDERS' EQUITY
Common stock - authorized 80,000,000
shares; par value $.001; issued and
outstanding, 11,647,749 and 10,635,249
shares in 1999 and 1998, respectively 11,648 10,635
Preferred stock- authorized 20 shares
No par value, no shares issued and
outstanding
Additional paid-in capital 2,444,681 603,134
Due from officer (33,565)
Accumulated deficit (2,202,286) (891,536)
------------ ----------
TOTAL STOCKHOLDERS' EQUITY 254,043 (311,332)
------------ ----------
$ 898,469 $ 187,403
============= ============
F2 See accountants' compilation report.
<PAGE>
SALIENT CYBERTECH, INC.
(FORMERLY KNOWN AS SLOAN ELECTRONICS, INC.)
STATEMENTS OF OPERATIONS
Nine months Three months Nine months Three months
ended ended ended ended
Sept 30, 1999 Sept 30, 1999 Sept 30, 1998 Sept 30, 1998
SALES $ 20,369 $ 6,952 $ 74,892 $ 37,006
COST OF SALES 12,812 4,191 40,596 20,672
---------- ----------- ----------- -----------
GROSS PROFIT 7,557 2,761 34,296 16,334
EXPENSES
Selling 40,694 1,723 1,058 88
General and
administrative 1,268,310 607,983 281,001 97,553
Interest 34,303 10,684 22,133 7,061
---------- --------- --------- ---------
1,343,307 683,390 304,192 104,702
----------- --------- --------- ---------
NET LOSS (1,335,750) (680,629) (269,896) (88,368)
OTHER INCCOME 25,000
LOSS BEFORE
INCOME TAXES (1,310,750) (680,629) (269,896) (88,368)
INCOME TAXES
---------- ---------- ---------- ----------
NET LOSS $(1,310,750) $(680,629) $(269,896) $(88,368)
============== ============= ============= =============
NET LOSS
PER SHARE $ (.115) $ (.058) $ (.027) $ (.008)
============== ============= ============= =============
F3 See accountants' compilation report.
<PAGE>
SALIENT CYBERTECH, INC.
(FORMERLY KNOWN AS SLOAN ELECTRONICS, INC.)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Common Paid-in Due from Accumulated
Stock Capital Officer Deficit Total
BALANCE,
Jan. 1, 1999 $ 10,635 $ 603,134 $(33,565) $(891,536) $(311,332)
Sale of
common stock 13 9,987 10,000
Stock issued
for compensation 20,060 20,060
Stock issued
for services 1,000 1,811,500 1,812,500
Reversal of due
from officer 33,565 33,565
Net loss (1,310,750) (1,310,750)
---------- ---------- --------- ---------- ---------
BALANCE,
Sept 30, 1999 $11,648 $2,444,681) $ $(2,202,286) $ 254,043
========== ========== ========== ========== ==========
F4 See accountants' compilation report.
<PAGE>
SALIENT CYBERTECH, INC.
(FORMERLY KNOWN AS SLOAN ELECTRONICS, INC.)
STATEMENTS OF CASH FLOWS
September 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,310,750) $(269,896)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 873 25,485
Noncash disbursements 11,000
Allowance for doubtful accounts 33,565
Stock issued for legal fee 375,000
Stock issued for consulting fees 687,500
Stock issued for compensation 20,059
Accrued interest converted to stock (2,083)
(Increase) Decrease in operating assets:
Accounts receivable - net (2,946) 43,826
Inventory 1,566 (10,394)
Prepaid insurance 20,015
Increase in operating liabilities:
Accounts payable 31,965 (6,130)
Accrued expenses 79,359 (1,109)
Accrued interest 1,688 1,688
Accrued interest- related parties 32,022 16,247
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (30,284) (191,366)
--------- ---------
CASH FLOWS USED BY INVESTING ACTIVITIES
Purchase of equipment (903)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans 25,000 50,000
Repayments of debt (24,343)
Proceeds from sale of common stock 10,000 165,000
-------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,657 215,000
-------- --------
NET (DECREASE) INCREASE IN CASH (19,627) 22,731
CASH, at beginning of period 19,792 3,936
-------- --------
CASH, at end of period $ 165 $ 26,667
============= ==========
F5 See accountants' compilation report.
<PAGE>
September 30,
1999 1998
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 593 $ 562
============ ========
Non cash financing activity - 500,000 shares of
Common stock issued for legal services $(1,125,000) $
============ ========
Non cash financing activity - 500,000 shares of
Common stock issued for consulting services $ (687,500) $
============ ========
Non cash financing activity - 30,000 shares of
Common stock granted under stock option plan $ (20,060) $
============ ========
Non cash financing activity - conversion of note
Payable to common stock $ $ 52,083
============ ========
Non cash financing activity - 110,000 shares of
Common stock issued for investment
banking services $ $ 11,000
============ ========
<PAGE>
Part I. Item 2. Description of business and management's discussion
Salient Cybertech, Inc. (the "Company") is the new name for Sloan
Electronics, Inc. authorized by the shareholders at the Annual
Shareholders' Meeting on May 22, 1999 and approved by the Board of
Directors on May 22, 1999. The company, through the Sloan Electronics
division will continue to design, manufacturer and market electronic
monitoring equipment for the criminal justice industry and the long-term
health care industry. It will market house arrest monitoring equipment
through its in-house marketing department and currently distributes its
products through national service providers. The Sloan Electronics
division has a distribution agreement with Response USA, a distributor
of personal emergency response systems.
Salient Cybertech, Inc. is actively seeking acquisition candidates with
interests in technology, Internet, distance learning, and security
industries. During the third quarter 1999, acquisition discussions were
held with several companies and resulted in the acquisition for stock of
Gemini Learning Systems, Inc., which will operate as a division of the
company. The company filed an 8K current report on September 28, 1999 and
an 8K/A report on October 29, 1999 that more fully discuss the acquisition
and are incorporated herein by reference. Gemini Learning Systems developed
and markets SWIFT (tm) (SoftWare Intelligent Freeform Training) distance
learning software and courseware. Ms. Kim Adolphe, founder of Gemini, will
continue to run the division as President and has been named to the board
of directors to fill the seat vacated by Mr. Richard Brooks in May of 1999.
Salient Cybertech's revenues are currently primarily from product sales.
With the addition of Gemini Learning Systems, management hopes to add SWIFT
licensing fees, courseware sales and recurring revenue from per use course
fees to its revenues in the next fiscal year. Based on a written agreement,
the Sloan Electronics division is to receive recurring payments from
Response USA based on a percentage of their service revenue. The Company
received recurring revenue from Response USA for the first and second
quarter of 1999, and will receive recurring revenue for the third quarter
of 1999. Response USA has recently modified its business focus and has sold
several divisions. Management is unsure of their ability to successfully
market the Wander Watch products, and there is uncertainty as to the growth
or continuance of recurring payments from Response USA.
SLOAN ELECTRONICS DIVISION
Information sheets and video clips of some of the company's products are
available from the company web site at salientcyber.com.
The Company's electronics business strategy is based on establishing a
market share within the criminal justice house arrest industry and within
the healthcare industry. By incorporating better, more cost-effective
technology into its SEI Alert 24 product line and its Wander Watch
products, we believe that our products are among the best currently
available in these two industries.
<PAGE>
Criminal Justice:
The Sloan Electronics division offers a range of electronic monitoring
equipment for the criminal justice house arrest corrections programs. We
believe our equipment strikes a balance between solid, state-of-the-art,
high-quality products and competitive price.
The concept behind the product line is that each product is able to stand
alone, without additional equipment such as door sensors or custom
wiring, yet each product is integratable with a number of pre-existing
computer software programs. This philosophy of integration makes the
SEI Alert products as well as Wander Watch products more attractive to
institutional consumers.
The SEI Alert 24 Single Offender Based System. A tamper-proof transmitter
is fitted and attached to an offender's ankle. This anklet is
waterproof and designed to be worn at all times. A home-based receiver is
placed in a central location within a residence, and a range setting is
selected. In the event that the anklet is removed, or that the person
wearing it strays outside the predetermined range, the event is recorded,
time and date stamped, and sent by modem to an outside monitoring station
within 4 minutes. The current industry average time window is over 8
minutes.
The SEI Alert 24 Half-Way House Multi-Residence System. Each person
paroled to a half-way house is fitted with an anklet transmitter. The
receiver then monitors the movements of each client within the
predetermined parameter of the half-way house and records any and all
violations. This system can work as a stand-alone measure with the current
data sent via a telephone line to monitoring station, or can also work as
an in-house employee monitoring station. The system is designed to monitor
from 1 to 50 offenders.
The SEI Alert 24 Drive-By Transmitter Detector. This device is designed
for use by parole officers, probation officers or security officers. This
mobile surveillance system allows an officer to check on a house arrest
client simply by driving past the offender's residence, work place or
school. The system detects and displays the ID of a particular offender by
interfacing with that person's anklet transmitter. The receiver unit time
an date stamps the information collected, and it can also upload this
information to a central computer.
The SEI Alert 24 Chain Gang / Work Release Departure Alert System. Each
inmate is fitted with an anklet transmitter. A single guard monitors the
portable programmable receiver unit which alerts the officer in the event
that an offender, or group of offenders, leaves the general area.
The SEI Alert 24 Automated Check In System. A kiosk for the criminal
justice industry to facilitate the "day reporting" of offenders on
probation or parole. Client is verified using hand print technology,
listens to a specific message from the parole officer and replies using a
telephone handset and tone pad. The system can collect restitution money
and issues a receipt to the offender showing check-in details and payments.
The system interfaces with a computer that can generate various reports. As
a case management tool it improves a parole officer's efficiency in
managing the growing number of inmates released into supervision programs.
It has been used in field trial in Washington state for the Department of
Corrections
<PAGE>
Medical Monitoring:
The Wander Watch Single Patient System. An adjustable, tamper-proof anklet
is fitted to a patient's leg. It is completely waterproof and designed to
be worn at all times, including bathing and swimming. The micro-
transmitter in the anklet sends a coded silent radio signal to the home
receiver, which in turn determines the proximity of the patient to the base
unit. An alarm will sound when the patient travels beyond the selected
range or if the anklet is removed. This alarm can be transmitted by
telephone to a central station using industry standard alarm protocols.
Dispatchers at the central station can then take the appropriate responses,
such as calling the caregiver, notifying a neighbor, or calling emergency
services. Management is disappointed with the sales of this product and is
reassessing the use of company assets to further develop and promote the
single patient system.
The Wander Multi-Patient Wander Alert System. A computer-based system for
placement within a medical facility, the Multi-Patient Alert System is able
to notify a caregiver in the event of a patient departure from a long-term
healthcare facility. It can monitor up to 25 patients. Unlike most wander
alert systems installed in a medical facility, the Wander Watch system
stands alone and does not require custom electrical wiring, installation
of door sensors or the use of door barrier detection equipment.
Nurse Call Alert 24. A wireless nurse call system with a 500 resident
capacity, which can be installed in less than 30 minutes. This system
utilizes fail-safe technology, provides coverage of any sized facility,
outputs usage reports and provides for a complete audit trail. The system's
advanced features include an automatic signal check, low battery reporting
and an optional range extender. The system can function as a nurses' call
network or it can complement an optional paging system to direct staff to
medical emergencies in a more timely and efficient manner. This system is
currently available for field trials.
Other products:
Fleet Watch Alert 24. This radio frequency reporting system allows a
company to passively keep tract of its fleet vehicle traffic. Every time a
fleet vehicle drives onto or off the company property, the event is date
and time stamped automatically. This enables a company to keep track of
employee hours, vehicle use and vehicle status instantly. The Fleet Watch
computerized base unit is fully integratable with other computer software,
allowing the unit to generate vehicle status reports on demand. No longer
is it necessary for a company to assign an employee the duty of physically
counting each vehicle on the lot. This system is available for field
trials.
<PAGE>
Industry Background
The Corrections Industry. The United States currently locks up a greater
share of its residents than other nations. According to the US Department
of Justice there were 3.5 million people on probation or parole at year
end 1995, and the estimated 5.5 million total in the correctional
population equals 2.8% of US adults and is growing at 4.5% per year. As of
June 30, 1995, there were 1,004,608 state prison inmates, up 9.1%, and
99,466 federal inmates, up 6.1%. The annual average increase in the prison
population since 1980 has been 8.7% per year.
The Criminal Justice System regards house arrest as an acceptable
alternative to incarceration for the nonviolent segment of the prison
population, and as a better way to monitor criminals once they are paroled
to a half-way house facility. The public's insistence on increased law
enforcement along with their reluctance to fund additional prisons also
makes house arrest using electronic assisted monitoring systems an
increasingly attractive alternative to incarceration.
The Medical Industry. A patient's compulsive desire to wander about is a
symptom of dementia, which often accompanies Alzheimer's Disease.
Biologically, this is caused by physical changes in the brain. Oftentimes
the patient acts out of routine, such as the repetitive action of getting
ready to leave for work every day. Sometimes the patient just feels tense
or trapped and wants to escape his environment. Until recently, a common
medical practice was to heavily sedate these patients, or to restrain a
patient to a chair or bed to keep them from wandering. Today, hospitals
and institutions maintain separate facilities to enable them to better deal
with patients who demonstrate a compulsive desire to wander. However, the
huge costs associated with institutionalized care, along with its
impersonal nature, make at-home care an important option for many families.
Of the 4 million currently diagnosed with Alzheimer's, 3 million live at
home, cared for by family, visiting aides, and nurses supplied by the
estimated 18,000 at-home care agencies which are projected to grow 30%
every two years. The Wander Watch Alert 24 systems are designed to help
at-home caregivers and institutions safeguard patients prone to wandering.
The US Administration on Aging projects as many as 14.3 million Alzheimer's
cases by 2040. The Company believes that the long-term healthcare segment
of the medical industry is growing at an increasing rate. The Sloan
Electronics Wander Watch Alert 24 Multi-Patient system is designed for long
term care facilities. The Company also believes that the home-care segment
of the healthcare market is growing at a steady rate. The Wander Watch
Alert 24 Single Patient System is specifically designed to meet the needs
of the more than 3 million Alzheimer's patients and patients with related
medical disorders, who are cared for at home. These systems not only help
protect the patient, but they also give the at-home caregiver peace of mind
that their loved one will not wander off at night or when the caregiver is
momentarily distracted. Recently, medical researchers have announced
results that further the understanding of the chemical mechanisms
associated with Alzheimer's and which may lead to methods to prevent or
treat the disease. While management hopes such treatments will be
developed, we are aware that they could decrease the need for the Wander
Watch products.
<PAGE>
Sloan Electronics Business Strategy
High-Quality Image. We believe that within the house arrest and medical
monitoring industries, the Company has built a reputation for developing
and manufacturing some of the best, cost-effective and user-friendly
systems on the market. The Wander Watch products and the SEI Alert 24
products reflect our commitment to quality; the highest standards in
design, assembly and appearance of products. We recognize that product
dependability and reliability are highly significant to success.
Therefore, quality control and customer satisfaction play an important
role in our business strategy.
Focus on Private Residence. The Wander Watch product line and the SEI Alert
24 product lines are both specifically designed to be used in a private
home, apartment or townhouse. Ease-of-use and stand-alone features inherent
to both products give them a competitive advantage in these areas. The
Wander Watch Single Patient System is both affordable and easy to install.
The receiver unit plugs into a standard outlet. Unlike most competitive
products, this is all that is required to install and operate the
products; doors do not need to be wired with sensors. There are no wires
or barriers associated with the products.
Product Design And Development
The Sloan Electronics division is continuously engaging in electronic
component research, design, experimentation and development, all of
which are essential to maintaining a competitive advantage in the
market place. The overall product development is managed and directed by
Paul Sloan, President. In addition, on project-by-project basis, a
product development team is assembled from personnel within the
Company and may include personnel outside the Company as well.
The product development team is responsible for developing working designs
of all approved product concepts using computer-aided design systems, and
for coordinating all modeling and initial prototyping. The in-house testing
department evaluates all prototypes. We then create full documentation and
design all circuitry artwork. Complete product specifications and designs
are then sent to Kimchuk Inc., which prints the circuit-boards, assembles,
tests, performs quality control inspections to rigid standards, packages
and finally drop-ships the products to distributors or directly to
customers.
Sales And Marketing
The marketing strategy varies based upon each product line. With regard
to the criminal justice house arrest market, we continue to market SEI
Alert 24 products to independent service providers and to municipalities
which monitor and administer their own house arrest programs. The company
is seeking strategic associations with other companies to develop and
market enhanced products for the criminal justice industry. The Company
has licensed its Wander Watch Alert 24 single patient departure alert
system for exclusive distribution to the long-term health care industry to
Response USA, a major company in the PERS (Personal Emergency Response
System) industry. Response USA leases Wander Watch Alert 24 single patient
systems on a monthly basis to individual users and to home care agencies.
<PAGE>
Management is disappointed with unit sales by Response USA and is
evaluating its options for the sale and marketing of Wander Watch Alert 24
systems. We also sell directly to independent security companies who
distribute to end users. Marketing strategies and distribution decisions
concerning other products are handled on a product-by-product basis.
SEI Alert 24 Products. The criminal justice house arrest market is
dominated by several manufacturers who, along with retailing their
products, are also contract service providers who compete in the security
industry. These manufacturers have developed proprietary software which is
not currently integratable with standard, existing security company
protocol. Their software is not as effective or user-friendly as security
industry software. However, these manufacturers look upon this proprietary
software as a way to shut small security companies out of a lucrative
market.
Based on current trends, management believes that within 5 years, 80% of
the municipalities who currently monitor their own house arrest program
will get out of the business. Independent security contractors will be
competing directly against these other equipment manufacturers for service
contracts. The Company is in the position to market its fully integratable
home incarceration system to these security providers, thus leveling the
playing field within the house arrest industry.
The Wander Watch Products. We view our role in the medical monitoring
industry as that of developer, designer and manufacturer. To that end,
we have negotiated and signed contracts with Response USA for them to
distribute Wander Watch single patient systems. Response USA leases the
systems to individuals and home care agencies and offers central station
monitoring of the Wander Watch Alert 24 units for an additional monthly
fee. The company has a recurring revenue sharing arrangement with
Response USA, and received income from recurring monthly fees for the first
and second quarter of 1999, and will receive payments for the third quarter
of 1999. Response USA has four regional offices servicing all 50 states and
markets to home care agencies, hospitals, adult day care facilities, as
well as individuals. Response USA receives payment for the Wander Watch
system both from end users and various state and local agencies. There is
no assurance that other reimbursements will be obtained or those in place
will continue. Response USA also receives referrals from the National
Alzheimer Association and participates in their Safe Return program.
Management is disappointed with sales of the single patient system by
Response USA and recognizes the need to either develop an alternative
distribution arrangement or to stop marketing the product.
Advertising. The Company has in the past advertised in trade publications
specific to the markets it manufacturers products for, and in journals
which publish company-by-company product comparisons. Sales from these
efforts have been disappointing, and management is evaluating the
expenditure of resources advertising the Wander Watch patient monitoring
systems and SEI Alert 24 offender monitoring systems. However, we are
continue to seek out innovative ways to build name recognition within the
industries in which we compete, as well as to create public awareness for
the product line. The Company maintains a web site at www.salientcyber.com.
<PAGE>
Competition
The Company competes in a number of niche markets.
House Arrest Market. Competitors within the criminal justice market
include BI Incorporated, Strategic Technologies, Inc., and Elmo-Tech Ltd.
Although all of the companies manufacturing house arrest products base
their products on the same principals, management believes that the
Company has competitive advantages over its competitors within this
industry.
1. The SEI Alert 24 product line uses a 900 MHz spread spectrum radio
frequency. This technology is similar to the technological differences that
exist between cordless phones. Phones using 900 MHz radio frequencies are
far superior to those less expensive models that experience interference
problems due to the fact that they operate at a lower frequency.
2. The SEI Alert 24 products have an exclusive low range setting on the
receiver unit, which ensures that house arrest means house arrest and not
neighborhood arrest. With other systems, an offender could wander the
neighborhood and still not trip the distance setting on the base unit. The
industry standard low range setting is a 150 foot perimeter. SEI's low
range setting is between 40 and 60 feet.
3. With competitors' equipment, the "window" from the time an offender
steps outside the range setting until he is detected as being outside the
range setting varies from 6 to 30 minutes. With some systems, an offender
is able to leave his residence for that period of time and return
undetected. The SEI Alert 24 system greatly improves performance and offers
an exclusive 4 minute radio frequency window.
4. The SEI Alert 24 anklet transmitter is tamper resistant. No tamper
system currently available is 100% tamper proof or false alarm proof.
However, the SEI Alert 24 system is the most reliable on the market when it
comes to false alarms. A false alarm necessitates a physical inspection of
the anklet transmitter by a monitoring officer. Therefore, this fact is
viewed as a major selling point among security providers.
5. The SEI Alert 24 product line has been designed to allow independent
security companies access to a growing segment of the industry, electronic
home incarceration. The competitors' use of abusive pricing policies and
proprietary non-compatible software have worked together to keep
independents out of the market. Using the Company's products, these
security companies are now able to compete with BI Incorporated, Strategic
Technologies, and Elmo-Tech for municipal contracts on an even footing.
Unlike other manufacturers, we do not directly compete against our
customers in the contract monitoring business. However, we are seeking
strategic associations with other companies in the criminal justice
monitoring industry to vertically integrate business and maximize market
share.
<PAGE>
Long-Term Healthcare Market. Competition in this market includes
WanderGuard, Code Alert, Watchmate and Secure Care Products. All of these
companies utilize proximity sensing technology, which requires that a
patient wear a low powered transmitter that sends a weak signal. A
receiver is mounted at each door. When a patient approaches a door, an
alarm sounds and the door magnetically locks. Our Wander Watch Alert 24
technology has a competitive advantage over proximity-sensing systems
since it requires no additional wiring of door sensors and provides a
higher level of patient security.
1. With competitive products, the transmitter attached to a patient has no
removal alert (an inherent part of the Wander Watch systems). These
transmitters are attached with a hospital ID type band. Common behavior for
an Alzheimer's patient, or other patients suffering from dementia, is to
try to remove everything from their bodies. The Wander Watch anklet, if
removed, activates an alarm at the receiver unit.
2. Proximity-sensing technology requires the installation of barriers,
door sensors and magnetic locks. Prices per door range from $2,500 to over
$5,000, with the average facility having anywhere between four and ten
doors. Automatic door locks also create problems with existing fire alarms
and fire regulations, for in the event of a fire, the proximity technology
and magnetic door locks need to be deactivated.
3. The Wander Watch system utilize 900 MHz spread spectrum radio frequency
technology, a tamper-resistant anklet transmitter with a tamper alarm, and
sells its products at a price below that charged by the competition.
The Fleet Watch Alert 24. The Fleet Watch system is able to monitor
vehicles and generate status reports on demand, confirm employee hours of
vehicle operation and continuously monitor the comings and goings of fleet
vehicles. This tamper resistant monitoring system installs in less than 30
minutes, ends unapproved vehicle use, and provides a complete audit trail
and other necessary usage reports for each vehicle in a company's fleet.
This unit has been successfully tested on a fleet of concrete trucks, and
is available for field trials.
The Nurse Call Alert 24. A fully supervised 900 MHz spread spectrum
wireless nurse call system is yet another innovation by the Company. The
Company believes that this system is among the best wireless security
system available, with unique features such as automatic signal check and
low battery reporting. With the systems optional range extenders, any
sized facility may be monitored. Another unique integratable option is the
paging system which assists in quicker response times by staff. This system
is available for field trials.
Manufacturing And Assembly
All of our electronic products are currently made in the USA. Kimchuk
Inc., the Company's primary contract manufacturer, has many years of
experience as an electronics manufacturer and designer. Kimchuk
manufacturers over 500 different products at its four plants located
through out the East Coast.
<PAGE>
The Company's relationship with Kimchuk allows it to reduce its production
costs, to reduce its final testing costs and to reduce its personnel costs.
The Company designs all of its products with automatic insertion, surface
mount technology, and automatic testing in mind. This attention to detail
enables Kimchuk to manufacture and assemble the Company's products in the
most cost-efficient manner, while maintaining accuracy in circuit board
production and error-free transfer and component connections.
Product Warranties. The Company supports its products with a limited one
year warranty, which covers all defects in materials or workmanship. The
Company will repair or replace defective units without charge to the
consumers for labor or materials. The Company's service department acts
as liaison between the customer and Kimchuk and works aggressively to
resolve any and all problems a customer may have with any of its products.
The Company has not experienced a material level of product warranty claims
for breakage or other defects.
Future Products
We continue to look for new ideas for development of new products, and
believe that new products could represent substantial new business for the
Company.
GEMINI LEARNING SYSTEMS DIVISION
Information about Gemini, and product demos can be seen by visiting the web
site at www.gemini.com.
Gemini is a software applications development company, specializing in
distance education and training solutions. The company created and markets
software technology called SWIFT(tm) (SoftWare Intelligent Freeform
Training). The Company is emerging from its development phase, having
created an entire product line based on the SWIFT(tm) technology. The
company has already begun to establish clients and a distribution network
in Canada, the United States, the United Kingdom and Europe.
Management's primary objective is for Gemini to become a leader in the
emerging internet/intranet distance education and training industry by
establishing SWIFT(TM) as the de facto standard delivery environment.
Management believes that it can obtain this objective through its strategic
alliances and by utilizing its staff of outside consultants, most of whom
are the top professionals in their field.
Background Information
Gemini Learning Systems, Inc. began business in the Canadian City of
Calgary in 1990. The corporate aim was to develop a delivery environment
for the emerging internet/intranet distance education and training
industry. The corporation expended over $3,000,000 in developing its
SWIFT(TM) technology, and a distribution network. During the past two years
management believes Gemini spent approximately $300,000 on R&D, none of
which will be directly borne by Gemini's customers, but all of which will
be indirectly borne by the customer as reflected in the price of the
products of Gemini, a portion of which will be allocated to the amortized
<PAGE>
cost of development. Gemini was purchased by the company on September 24,
1999, and will operate as a division of Salient Cybertech. Gemini is an
emerging company, having emerged from its development phase this past
quarter.
Gemini has 4 full time employees, and no part time employees. Gemini
currently rents approximately 2,104 square feet for its staff, at Suite
605, 839 - 5th Avenue SW, Calgary, Alberta, Canada T2P 3C8. Management is
of the opinion that its current facilities are adequate for its immediate
needs. As the Company's business increases, additional facilities may be
required, however the current facilities are expected to suffice until
after December 31, 2000.
The fixed assets of Gemini as valued for accounting purposes have a
depreciated book value of $21,208, and an non-depreciated book value of
$55,000. The assets are principally comprised of computers, computer
equipment, and software, along with office furniture.
Gemini, management believes, is ready to become the industry leader in the
delivery of distance education systems, to be utilized in an intra-company
setting (intranet), over the internet, as well as by CD-ROM distribution.
The students may be individuals or complex organizations with diverse
training and educational needs to be delivered worldwide to their various
locations. Gemini has developed and markets SWIFT(tm) software, a "Cyber
Learning" engine which allows existing curricula to be quickly and easily
adapted to internet and new media distribution, thereby making it available
worldwide. Gemini products are unique and offer the only commercially
available adaptive learning environment and adaptive testing solution that
has proven to be more effective than traditional training methods. Unlike
many other distance learning models, the Gemini learning paradigm does not
require the downloading of courseware, thereby minimizing pirating and
security concerns.
Business Development
Ms. Kim Adolphe was the founding president of Gemini Learning Systems,
Inc., and will continue the day to day operations of Gemini as President
and CEO. For the past ten years she has been responsible for taking
SWIFT(tm) software from a concept to an industry leader in distance
learning.
Patrick Brackett, Vice President Product Development, currently oversees
SWIFT(tm) software implementation and the development of enhancements. Mr.
Brackett has been with Gemini since 1993 as a senior member of the
SWIFT(tm) development team. His role is to oversee new software design and
implementation and is responsible for all aspects of R&D. He is also
responsible for evaluating current and emerging technologies and ensuring
that Gemini continues to be well positioned as a distance education and
training solution leader. He has co-authored an international award-winning
paper on the SWIFT(tm) methodology.
Ms. Pam Hirtle has been with Gemini since 1993 as a senior member of he
SWIFT(tm) development team. She is involved in SWIFT(tm) development,
particularly as it pertains to the SWIFT(tm) Development Environment. Her
responsibilities include liaison with clients, particularly in the areas of
<PAGE>
training and support. She works with various strategic partners in specific
projects related to the enhancement of the SWIFT Development Environment
and the SWIFT DTD.
Ms. Janet Werstroh has been with Gemini since 1991 overseeing office
administration, and in more recent years has become involved in beta
testing SWIFT(tm) and SWIFT(tm) courses, liaison with distributors and
clients, web site maintenance, and assisting the President in the
coordination of all marketing related activities.
SWIFT(tm) technology took eight years to develop and utilized the talents
of many professionals. The SWIFT(tm) project leaders were Elliot Kimber,
Sr. Consultant, ISOGEN Corp., and Dr. Marlene Jones. Eliot Kimber has over
10 years of experience designing and building industrial strength
publishing systems based on the principles of generic markup and
information reuse. He has developed systems for customers in a variety of
industries including: IBM, Intel, Tandem Computers, Ameritech,
International Correspondence Schools (ICS), and Cisco Systems. Dr. Jones
was a Senior Scientist with Alberta Research Council's (ARC) Advanced
Computing and Engineering Department since 1987. She had more than a
decade of experience in applied research in the field of Adaptive Learning
Environments and is internationally recognized as an expert in the field.
Mr. Kimder continues to provide input into the development of Gemini's
product line.
Day to day management of the project was by Terry Yasui, Mr. Yasui brought
with him over fifteen years experience in the design, development, and
management of high-technology projects. He was responsible for the overall
management of the SWIFT(tm) project including the preparation,
implementation, tracking and updating of all project plan documents through
weekly and monthly progress reports following the IEEE standards.
John Moore, who holds a B.Sc., B.Ed., and an M.A. in Educational Psychology
specializing in "Instructional Design for Higher Education", provided his
expertise in the overall development of the SWIFT(tm) interface and
multimedia support requirements.
Dr. Tom Keenan, was the leading consultant for the Post-Secondary Interface
Design Project for SWIFT(tm). Tom is a Professor and Dean in the Faculty
of Continuing Education at the University of Calgary. He holds an Ed.D. in
Higher and Adult Education, an M.A. in Higher and Adult Education, a M.Sc.
in Mathematical Methods and Operations Research, and a B.A. in Mathematics
(Dean's Honor List).
Stuart Williams, who holds a B.Sc. in Physics, a B.Sc. in Mathematics/
Computer Science, and a M.S. in Computer Science and has several years of
programming experience, including extensive work in object-oriented
language design and SGM, implemented the SGML DTD (Document Type
Definition) for SWIFT(tm). He led the design and wrote most of the code
for the unique SWIFT(tm) course compiler. Stuart also provides valuable
technical input and feedback to the technical team.
Ruby Loo, was responsible for coordinating all human-computer interactions
aspects of the project including usability studies, mock-ups, evaluations
of mock-ups, and the design of the Graphical User Interfaces. In addition
<PAGE>
to a M.Math Computer Science she has ten years of technical experience,
including computer graphics, color usage, animation, human-computer
interaction, and graphical interface design.
Jim Tubman, who holds a M.Math Computer Science degree and has extensive
experience in the area of software engineering, object oriented design, and
system development, was involved in the High-Level and Low-Level Design of
SWIFT(tm) and the implementation of certain features.
These dedicated individuals were augmented by part time consultants who
were hired as their input in specific areas was required. While many of the
original development team have left the company, Mssrs. Kimber, Kenan, and
Williams have remained as consultants, working with Gemini in its
continual efforts to update the technology and product line.
Management feels that the technology assembled by this team is, at present
unchallenged, and that as the market is penetrated, development costs and
resistance to new products once a benchmark standard is set will provide an
almost monopolistic arena in which to grow.
Current Clients Distribution Partners and Strategic Alliances
Management has always felt that a basic key to the success of any venture
is the development of a local distribution network, sensitive to the needs
of the local clientele and at the same time providing a local presence for
support and service.
As different companies have specific strengths and areas of expertise,
Gemini, in developing SWIFT(tm) and maintaining and enhancing its product
line, has always made use of individual consultants and companies and with
specific areas of expertise. To this end, Gemini has, over the years,
formed some especially advantageous strategic alliances, some of which are
listed below:
BCS Learning Systems, based in the Netherlands; works closely with Ideals,
a consortium of 16 European Institutes dedicated to advanced training
linked to small and medium sized enterprises and Institutes of higher
education. They represent SWIFT(tm) in Europe and were a valuable partner
during the implementation of international functionality.
CamAxys Limited is Europe's leading supplier of environment, health, and
safety software management systems. They are developing courses
independently and in partnership with Excel (see below) for the
environment, health, and safety industry and have just launched the first
course entitled EnviroDiscovery in partnership with Excel for ISO 14001
compliance. The Corporation acts as a distribution agent for Gemini's
product line.
CCI Learning Solutions Inc. specializes in providing high quality training
services offering over 150 course titles to over 25,000 students per year;
they are Microsoft Certified. They are a SWIFT CCP. Gemini is currently
converting many of CCI's courses for delivery in SWIFT(tm). The courses
will be offered in the SWIFT(tm) Library some time in 2000.
<PAGE>
Diskover Office Software Ltd. Diskover specializes in content development
using the SWIFT(tm) Kit. They have created the entire Office 97 Suite,
Level 1 and 2, Windows 95/98 in the SWIFT(tm) format, and are continuing to
produce courses in SWIFT, which are sold through the SWIFT Library.
GST Technology Limited, a worldwide provider of Desktop Publishing and
Graphics Software Technology, has licensed millions of copies of their
software to well known publishers worldwide, including Fuji and Canon. The
company is launching a new brand name called "getwise" which Gemini is
currently negotiating to include the Office 97 and 2000 suite, Windows 98,
and other courses created in SWIFT(tm).
Excel Partnership is an international leader in environmental management
and systems training and consulting, and the first EARA (Environmental
Auditors Registration Association) approved trainers for Advanced
Environmental Management Systems Auditors. They are a CCP and have
released two environmental courses in conjunction with CamAxys utilizing
SWIFT(tm).
Interactive Advantage Corporation, an Atlanta based company has built a
name and reputation for producing products for an impressive client base
including NCR, Home Depot, and Sterling Software. Their expertise includes
development of CBT, software simulations, certification testing, online
references, multimedia presentations, and information kiosks. They are a
CAR and SWIFT(tm) Distributor.
JOT is a registered Trade School with registered Engineering status. Over
the past ten years, Jot has built a solid reputation for developing high
quality course content for a wide range of training solutions. They have
an extensive library of courses with wide market potential and are a Course
Content Provider.
Open Learning Agency is a unique, fully accredited, publicly funded
educational leader providing a wide range of formal and informal
educational and training opportunities for learners around the world. They
use SWIFT(tm) for internal development. They have also partnered with
Gemini in an R&D project (see R&D Projects) to enhance various components
of SWIFT specific to SGML Standards.
RAND Worldwide, the world's largest Value Added Reseller of mechanical
design automation tools and services, have launched their first course in
SWIFT(tm) for internal use and to resell to their corporate clients.
Current clients also include HYPROTECH Ltd. Of Calgary, Canada and Albeda
College a consortium of 50 colleges in Rotterdam.
The following companies have purchased SWIFT(tm) courseware:
AMEC Construction plc, UK
Amoco UK Exploration, UK
BPB Paperboard, UK
Bridgewater Paper Company, UK
British Biotech Pharmaceuticals, UK
<PAGE>
BTR Automotive, UK
Burmah Castrol, UK
C&C Marshall Limited, UK
Caledonian Paper PLC, UK
Centre for Quality Assurance, Egypt
Devonport Royal Dockyard, UK
Engineering Employers Federation, UK
Geest Foods PLC, UK
Ivo Generation Services (UK) Ltd, UK
Kay-Metzeler Ltd, UK
Liverpool John Moores University, UK
Prestige Veneers Ltd., UK
Proctor and Gamble, UK
Solvay S.A., Belgium
South Staffordshire Water PLC, UK
The Marshall Group, UK
Thurrock Council, UK
Transco PLC, UK
Management feels that the current group of Strategic and distribution
partners will greatly enhance Gemini's ability to penetrate its target
markets, and grow at a far faster rate than would be possible if Gemini had
tried to develop its markets without the said distributors and alliance
partners. The SWIFT(tm) interface can be readily branded for OEM and
Corporate identities with little expense required on Gemini's part.
Principal Products and Services and their Markets
Currently, Gemini has over 400 course titles available to convert into
SWIFT(tm), and has, in the current fiscal year, launched its own online
SWIFT(tm) library of over 30 popular course titles.
The SWIFT Kit provides a Development Environment (DE), Adaptive Learning
Environment (ALE), Adaptive Testing Algorithms, Interface, extensive
testing, tracking and certification capabilities, and Enterprise Learning
Manager (ELMer). Additional SWIFT Kits can be purchased for as many sites
as the client wishes, with a price range of $1995.00 for one license to
$1595.00 each, for more than twenty licenses. Annual Support Fees are
$3,000.00. There is also a licensing fee per learner for delivering courses
in the ALE.
All course content can be developed externally to SWIFT(tm) using word-
processors and other software programs of the client's choice. Existing
traditional courses can also be a starting point for conversion to
SWIFT(tm) courseware. The course content is "tagged" with computer
instructions using the international Standard Generalized Markup Language
(SGML) in the SWIFT Development Environment. After tagging it is compiled
into the Adaptive Learning Environment using the SWIFT(tm) compiler. The DE
includes a course structure known as a Document Type Definition (DTD). The
course structure is a three level hierarchy that promotes courseware
consistency and effective instructional design.
<PAGE>
SWIFT(tm) version 5.0, currently in development and expected to be released
in the next fiscal year, will provide the capability to map the SWIFT DTD
to other DTDs and vice versa. SWIFT(tm) clients and SGML users alike will
be able to easily reuse course content for other applications, thus further
leveraging their investment in SWIFT and SGML.
SWIFT(tm) provides what management believes to be the only Adaptive
Learning Environment commercially available in the world. The ALE adapts
each course to each learner's individual requirements, based on the chosen
goals by completion of a pretest. The pedagogical effectiveness of ALEs
have been proven by years of research conducted by educational institutions
and government organizations around the world.
One of the problems with traditional exams is that they are of fixed
length. A learner must complete a long series of questions in order for the
system to determine how well they know a subject. This characteristic can
cause frustration for both novices and experts, who may know after a few
questions that the subject matter is either bewildering or trivial.
Adaptive testing uses statistical techniques to allow exams to be
significantly shorter than traditional tests, without losing any predictive
power about a learner's master of the material. SWIFT's unique testing
power allows for seven types of questions, including "must ask, must know"
questions, short answer questions, and multiple-choice questions.
Another Gemini breakthrough is ELMer(tm), an advanced Internet/Intranet
delivery, management, and analysis system for SWIFT(tm) courses. ELMer
allows for the tracking and documentation of students' progress and
provides billing information for fee structures based on per student
charges. ELMer is required for administering Intranet and Internet courses
and can be purchased separately for $7,000.00 per license. The ELMer(tm) is
an important feature for an organization that must certify a student's
having taken and mastered a course such as diver safety, emergency
procedures, human resources guidelines or environmental issues.
Course Delivery
Although SWIFT(tm) courses can be delivered on standard CD-ROM disks, its
real power is the ability to deliver courses on demand over the Internet or
corporate internal intranet using existing server hardware. The SWIFT
Server is a component of ELMer that runs on Windows(TM) 95//98/NT or UNIX
platforms. It can deliver and manage large numbers of courses to large
numbers of learners simultaneously. Learners are able to access highly
interactive SWIFT(tm) courses over the Internet running a 28.8 or greater
modem, with full multimedia functionality. The SWIFT Server is controlled
either locally or remotely and manages billing and accreditation. It adjust
resource consumption, determines average transmission rates and identifies
fault occurrences.
A wide variety of learner-based data is automatically gathered and stored
by the Server. The Server can provide grading and progress reports,
progress and content analysis, item analysis, pathways and billing
<PAGE>
information. Data can be exported to external applications and used, for
example, in statistical analysis.
E-commerce
Gemini has, in the current quarter, launched an E-commerce solution and can
offer server-hosting or connect to third party E-commerce sites for SWIFT
Library Distribution through portals, ISP's and web sites.
The customer simply selects a course(s) from the SWIFT Library list, then
submits their credit card information once they have placed an order.
Approval takes 26 to 36 seconds. Once the customer has been approved they
can access their course(s) from the SWIFT LE.
Market For Products
Gemini's market opportunity is diversified across a number of market
segments, including multimedia CBT (computer bases training) authoring
tools, web authoring tools, IT (information technology) education and
training, courseware development services, internet software, e-commerce,
on-line training.
Gemini operates in a high growth environment. The IT Education and Training
market is a $3.1 Billion established market experiencing moderate growth of
approximately 15% annually through the year 2000. The Multimedia CBT market
is currently growing at the rate of 31% per annum, while the Internet
software market is showing a growth rate of 50% per annum, and the packaged
internet software market is currently growing at the rate of 127% per
annum.
Gemini, management believes, is well positioned to take advantage of the
rapidly growing Internet/Intranet Software market. Gartner Group research
indicates that Interactive Training will make up 20% of corporate Intranet
applications. The overall market for Internet/Intranet software projected
to be $12 billion by 2000. The market for Internet services is projected
to be $14 billion by 2000. In addition, the SWIFT SGML Development
Environment (with its multimedia extensions) will enter the CBT Market
Projections multimedia authoring tool market, expected to exceed $165
million by 2000.
In the following table are presented the expected market size for the
markets Gemini specifically targets with its products and marketing
efforts:
All data is in Millions of dollars
Market Segments 1999 2000 2001 2002
Multimedia Authoring Tools
CBT Tools 129.6 165.9 187.0 220.0
IT Education and Training
Network-delivered 1,566.0 1,695.0 1,830.0 1,960.0
Desktop-delivered 3,133.0 3,495.0 3,901.0 4,290.0
Total 4,699.0 5,189.0 5,731.0 6,251.0
<PAGE>
Internet/Intranet
Internet Software 5,575.0 8,000.0 8,800.0 9,680.0
Packaged Internet Software 2,730.0 4,000.0 4,400.0 4,840.0
Internet Services 10,205.0 14,000.0 15,400.0 16,940.0
Total 18,509.0 26,000.0 28,600.0 31,460.0
Training segment (20%) 3,702.0 5,200.0 5,720.0 6,292.0
Sources: IDC, Dataquest, Gartner Group.
The table presented above, is a 4 year top-down revenue model. What the
model shows is that there is tremendous potential for rapid revenue growth
based on very modest penetration into the various market segments. For
example, in the CBT Authoring Tools segment, where the SWIFT Kits will be
marketed, achieving a modest 4.0% share of this market would result in $1.9
million in revenue.
As IDC has stated, the packaged Internet software market should reach $4
billion by 2000. SWIFT(tm) courses delivered over the Internet and
corporate Intranets represent a distinct opportunity for the company. This
area will become the focus of a great deal of the company's resources in
the year 2000, and will likely be the primary area to which investment
capital from any public offering or private placement is directed.
Competitive Advantage
SWIFT(tm) overcomes the two primary drawbacks of multimedia training, the
high cost and initial deployment/updates and lack of interactivity, which
were identified by Dataquest in the 1996 end-user survey (The Role of
Digital Multimedia in Training in Business, Dataquest, August 1996). In
another Dataquest survey (Education and Training: Market Analysis and
Outlook 1996, Dataquest, February 1997) respondents identify time and cost
experiences in producing conventional CBT and TBT multimedia courseware
using conventional tools or custom programming as the key drawback. The
table below summarizes these findings:
Courseware Type Development Hours Cost per Hour of Development Time
per Hour of Instruction ($US) Per Instruction
Hour
- ------------------------------------------------------------------------
CBT
(Conventional) 150 to 300 hours $10,000 to 13 to 20 weeks
$45,000
TBT Multimedia 250 to 500 hours $14,000 to 10 to 26 weeks
$55,000
Management believes that Gemini addresses these concerns, and delivers a
solution that is both unique in the industry, and provides a user/developer
friendly environment that is at the same time cost effective.
<PAGE>
A key advantage of SWIFT(tm) is that it reduces development time by upwards
of 70% as compared to other technologies. Using SWIFT(tm), an existing
traditional three-day course can typically be converted into an internet
delivered course in two to three weeks. SWIFT(tm) is easy for course
developers to use. It delivers consistent, highly interactive courses and
requires the course developer to provide only content, no computer
programmers or software teams are needed. In addition to internet delivery
the SWIFT System allows the same course to be delivered as a CD-ROM or in
an Intranet delivery environment, without additional developmental costs.
Other competitive advantages are:
SWIFT(tm) is the only SGML technology-based training solution that provides
an efficient method for managing, updating and re-purposing existing course
content, resulting in leveraged investment over time.
SWIFT(tm) has full multi byte character functionality.
SWIFT(tm) incorporates an intelligent tutoring system (ITS) and is,
management believes, the only commercially available Adaptive Learning
Environment (ALE) in the world.
SWIFT(tm) has an included management system (ELMer), which offers a
competitive edge over other delivery systems in that the management systems
of other products start at $50,000 U.S. plus licensing fees.
SWIFT(tm) features extensive testing capabilities including adaptive
testing, mandatory questions, and fixed-length testing for online
certification, as well as having the ability to set seven different
question types, including short answer, and feedback specific to learner
interaction.
SWIFT(tm) is upwardly compatible, ensuring that clients benefit over time
from Gemini's ongoing R&D. This last feature is of the utmost significance
as the technology is continually undergoing development and upgrades.
Distribution Methods
Gemini intends to distribute the SWIFT(tm) course library worldwide and
grow by writing as many titles as possible for the SWIFT Library, and
marketing them directly from its web site and through distribution and
alliance partners. This will be accomplished by partnering with Course
Content Providers for building the SWIFT Library and marketing the SWIFT
Library through Portals (Specialized Web Sites), Internet Service Providers
(ISPs), ASPs, OEMs, and Retail Distributors. Sales of SWIFT(tm) courses
over the Internet or corporate intranet have an attractive profit margin
because, once developed and uploaded onto a server, they can be sold an
unlimited number of times without additional costs for manufacturing,
packaging, warehousing, or shipping.
<PAGE>
Large Corporate Accounts
SWIFT(tm) is, to the best of management's knowledge, the only SGML aware
distance education and training solution in the world. SGML users are
typically medium to large corporations and government bodies with
significant training requirements. These organizations have made large
investments to transfer their training content and documents into SGML and
appear very interested in leveraging their investment further. By
concentrating on the SGML market, where we have a significant competitive
advantage, Gemini can quickly qualify and target potential clients through
SGML trade shows, publications and conferences that draw only interested
SGML clients. Gemini has already made several strategic alliances within
the SGML industry (See above, Distribution Partners and Strategic
Alliances).
Fortune 1000 Companies
Large Information Technology deployments within Fortune 1000 companies
necessitate a major user training effort and hence an opportunity for
SWIFT(tm). These projects usually have a lengthy development cycle with
significant up-front investments and are often behind schedule. There is
usually significant pressure on IT departments to expedite deployment so
that the organization can realize the promised benefits. Inevitably, the
budget and time-frame for developing end-user training is tight. This
scenario plays well for the SWIFT(tm) technology; IT groups can avoid the
lengthy and expensive development associated with other solutions.
Course Content Providers
Course Content Providers (CCPs) are made up of both private and public
training and education organizations. This industry sector is in
transition due to the rapid growth of the distance education and training
industry resulting in the need to become competitive in a global economy.
The development costs, consistency and course content re-use SWIFT,
providing compelling value to this industry sector. To further entice
CCPs, Gemini also offers a partnering program to selected CCPs that does
not involve purchasing SWIFT(tm).
Course Content Partnering (CP) Program
Gemini launched the CP program in January, 1999 and now has well over 400
courses available for conversion, with over 30 already converted. The
programs entails Gemini (or a Gemini Partner) converting course content for
delivery in SWIFT(tm), and take a higher percentage of the recurring
revenues.
Product Positioning
The SWIFT(tm) product line is ideally positioned to target the fast growing
Internet/Intranet market, as well as packaged internet software for the
retail market. SWIFT(tm) products offer low cost to both developers and end
users as well as many pedagogical distinguishing features.
<PAGE>
The SWIFT(tm) product line fits into the following fast growing market
segments:
- - Turn-key Internet Distance Education and Training solution
- - Online Library
- - E-business
- - Application Service Provider software
- - Internet Software
- - Packaged Internet Software
- - IT Education and Training
Marketing Plan
Direct Sales
Gemini plans to hire a team of sales people to address the target markets
defined above that will consist of Distributor Sales, Inside Sales and
Large Account Sales.
Distributor Sales
Gemini will hire sales people to build upon the distribution channels
already in place. The target market, as defined above, includes Retail,
OEM, ISPs, Portals and ASPs).
Marketing will be accomplished through investment in four specific areas:
- - Direct sales - Gemini plans to establish an inside sales team to focus on
the SGML market. This team will have a telemarketing orientation and will
consist of salespeople with 2 to 5 years' experience. Gemini has created
two new product and service "packagings" of SWIFT(tm) to support a "try and
buy" selling model without compromising longer term revenue potential.
- - Distribution recruitment - establishment of a distribution sales team to
recruit distributors and Courseware Authorized Resellers. This team will
consist of more senior sales personnel who possess the skills and
experience to work with prospective distribution partners to develop their
business models around the SWIFT(tm) technology.
- - Marketing - conduct direct mail, advertising, conference, and industry
partner marketing, as well as trade show activities, to raise brand
awareness and generate sales and distribution leads. These efforts will be
targeted towards the SGML market, the content developer market and the
training groups within Fortune 1000 companies, government and educational
institutions.
- - R&D - expand the R&D staff to further develop the technology, focusing on
Internet/Intranet delivery. The SWIFT(tm) technology will be enriched
through additional authoring functionality and the product line will be
broadened with new modules.
- -In addition, executive business development resources will be focused on
industry partnerships, key distribution prospects and large reference
account opportunities.
<PAGE>
SWIFT Library Distributors (SLD)
SLDs can re-sell SWIFT(tm) courses directly from their Internet of Intranet
web site. SLD's must install and the online library on their server at
minimal up front costs. Gemini can provide the hosting services providing
a turn key solution with virtually no administration required, or set it up
remotely. All SLDs receive the same discount based on the suggested retail
price, ensuring a level playing field.
Gemini has designed the distribution program on a sliding scale based on
sales to further motivate marketing efforts by SLDs. Courses are priced
slightly below competitor pricing. We have also provided a multi level
marketing approach for third party Gemini partners to receive royalties for
establishing SLD's. Gemini will hire a direct sales force to establish
distribution channels for the SWIFT(tm) library.
Strategic Alliances and Industry Partners
Gemini has had significant success partnering with Course Content Providers
with access to hundreds of titles already available and in conversion.
Likewise, the company has recently signed a number of high profile
distributors for Internet/Intranet, OEM and Retail CD-ROM delivery.
The marketing strategy outlined above, management believes, should build a
broader awareness of the SWIFT(tm) technology, creating a pull strategy
for the SWIFT Kit into the lucrative corporate market. As well, Gemini's
strategy should provide a huge incentive for CPs to convert their courses
into SWIFT(tm), help build upon multiple recurring revenue streams, create
healthy cash flow, shorten sales cycles, and build more strategic partners
and alliances.
Gemini is emerging from its development stage, and as such the products
employing the SWIFT(tm) technology are new products. However, as described
above, both the products and the technology have been available since 1998,
have been thoroughly market tested, and are ready for rollout into the
general marketplace.
Competition
SWIFT(tm) uses an entirely different approach in design and licensing than
its closest competitors, products such as Authorware, Toolbook, CBT Express
and Icon Author. The primary areas of divergence between the competitors
and SWIFT(tm) is outlined in the table below:
<PAGE>
SWIFT Authoring tools
===== ===============
SGML-based, leverage investment HTML-based
over time
Designed for use by course content Development is from scratch
creators, requires content only
CBT interface (Learning Requires expertise in HCI,
Environment) is built-in - virtually no programming, project mgmt,
learning curve, no software teams or pedagogy...
programmers required
Reduces development time and Averages 200 - 250 hours of
costs by about 70%. development for every hour of
finished product.
Provides delivery on CD-ROM, Requires development from
Intranet and Internet scratch for each delivery
format
Utilizes ELMer Expensive mgmt systems
International utilization built in Limited internationalization
(if at all)
The primary areas of divergence between the competitors and SWIFT LE is
outlined in the table below:
SWIFT LE Other Learning Environment
======== ==========================
Adaptive learning environment and No adaptivity
adaptive testing algorithms
Internationally awarded intelligent Virtually no pedagogy
tutoring system (Ed Media '95;
World Conference on Educational
Multi-Media and Hypermedia)
Effectiveness backed by years of Lead by the nose training
international R&D and usability
studies
Management feels that the SWIFT(tm) technology effectively gives Gemini a
differentiable new technology that has no direct competition. As can be
seen from the table presented above, SWIFT and SWIFT LE bear little
resemblance to the competition in the marketplace except for the fact that
the end user product is somewhat similar. What must be remembered is that
Gemini is primarily marketing a delivery system, not a particular product.
Indeed, most competitors in the industry could market their products using
the SWIFT(tm) system for product delivery. In this respect one is drawn to
the logical conclusion that Gemini, with respect to its base technology,
has no direct competitors.
<PAGE>
Trademarks and Licenses
Gemini has registered the trademark "SWIFT" in Canada, and uses the mark
throughout the world. Management plans, in the next quarter, to register
the said mark in the United States and in Europe. All of Gemini's software
is believed subject to common law but unregistered copyrights. Management
intends to make protection of its intellectual property rights a priority.
No other patents, trademarks, licenses, franchises, or concessions are used
by Gemini.
Gemini generally grants clients licenses for the non-exclusive use of its
products. No one licensee accounts for more than 5% of Gemini's current
business, and there are no outstanding or impending claims under any
current licenses, or to the best of management's knowledge, are any such
claims likely.
GOVERNMENT REGULATION
The Company's US facilities are subject to numerous federal, state and
local laws and regulations designed to protect the environment from
waste emissions and hazardous substances. We are also subject to the
Federal Occupational Safety and Health Act and other laws and regulations
effecting the safety and health of employees in the administrative and
manufacturing areas of facilities. We believe that we are in compliance
in all material aspects with all applicable environmental and occupational
safety regulations. The Sloan Electronics division radio frequency anklet
transmitter is subject to FCC (Federal Communications Commission)
regulations, as are all radio frequency devices. The Company has obtained
type approval #HCQ3B6WWT for the anklet transmitter and its products are in
compliance with FCC rules Part 15. Regarding the Gemini Learning Systems
division, to the best of management's knowledge there are no special
requirements for government approval of its principal products or services
which are not generally applicable to normal business operations.
Management is unaware of any probable regulation of its business, other
than as will apply to businesses in general.
YEAR 2000
The Company's accounting and database systems are year 2000 compliant. The
Company's Gemini Learning Systems division SWIFT(tm) products have been
analyzed at the application layer for two digit date storage, leap year
calculations, and special meanings for dates for Y2K compliance and have
met all criteria for Year 2000 compliance. However, certain applications
out of the company's control and for which the SWIFT(tm) product line is
not responsible may be incompliant in the remaining layers of exposure,
which includes hardware, operating system, runtime library, user custom
code and data interfaces. The Company's Sloan Electronics division products
and operations are year 2000 compliant.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS.
The following discussion should be read in conjunction with the
information contained in the financial statements of the Company, and the
Notes thereto appearing elsewhere herein, and in conjunction with the
Balance Sheet at December 31, 1998 and Income Statement for the year ended
December 31, 1998 contained in the Company's Annual Report 10-KSB and in
conjunction with the quarterly 10-QSB reports for the periods ended March
31, 1998 and June 30, 1998, September 30, 1998, and March 31, 1999 and June
30, 1999 incorporated herein by reference, and is qualified in its
entirety by reference to such financial statements and reports.
RESULTS OF OPERATIONS
A majority of the Company's revenues are derived from sales of electronic
monitoring devices to the long term health care and criminal justice
industry. Sales revenues are recognized when the products are shipped.
Operating revenues decreased by $54,523 (73%) for the nine months
ended September 30, 1999 as compared to the nine months ended September 30,
1998.
Gross profit for the first three quarters of 1999 decreased to $7,557
compared to $34,295 for the nine months ended September 30, 1998. The
decrease is due in part to lower sales.
General and administrative expenses were $1,268,310 in the nine
months ended September 30, 1999, compared to $281,001 for the period in
1998. This large increase over general and administrative expenses for
period in 1998 is mostly due to legal and consulting fees paid for with
stock and in part due to increased insurance costs, professional fees, and
contract services and expenses. Sales and marketing expenses increased to
$40,694 for nine months ended September 30, 1999. Sales and marketing
expenses increased partly due to the management fees of VP Sales, Don
Grimes. Management is concerned with the sales performance and attributes
poor results as partially due to lack of funding for inventory for the
house arrest products. The commitment to hire a full time sales
representative was made to maintain industry contacts in anticipation of
obtaining funds to build inventory. Interest expenses increased, and are
expected to continue to increase as interest accrues and future debt is
incurred.
The net loss for the nine months ended September 30, 1999 was
$1,310,750 or $0.115 per share based on 11,647,749 shares outstanding, as
compared to a net loss for the first nine months of 1998 of $269,896, or
$0.027 per share. The net loss for the period is primarily attributed to
insufficient level of revenue generated by the Company.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES.
Net cash provided from financing activities was $10,657 for the nine months
ended September 30, 1999, raised through private placement of common
stock and borrowing.
The Company has acquired Gemini Learning Systems Inc. for stock and made a
cash funding commitment to Gemini for the next three quarters. The current
cash and working capital position and future income from operations will
require sufficient additional capital to meet company cash and working
capital needs.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities
None.
Item 3. Defaults.
None
Item 4. Submission Of Matters To A Vote Of Security Holders.
None
Item 5. Other Information
Subsequent to the end of the third quarter 1999, subject to the terms of
the closing document with Gemini Learning Systems, Inc., and in accordance
with the company's By-laws, an additional seat on the company's Board of
Directors was created and Mr. Todd Finch, President of Netscape Canada and
President, Canada of the Sun-Netscape Alliance, was named to that seat as
a "class III" director, to serve until the shareholders' meeting in the
year 2002. Since this caused the Board to have an even number of members,
the board voted to amend the By-laws of the company to allow the Chairman
to cast a tie breaking vote if necessary.
Effective November 1, 1999 and in accordance with resolutions passed at
the May 22, 1999 Shareholders' Meeting and Board of Directors' Meeting, the
company announced a 1 for 10 reverse split of its common stock. Fractional
shares will be rounded up to a full share.
The Company is continuing discussions concerning the possible acquisition
of a company in the criminal justice monitoring industry, but has not as of
yet signed a letter of intent. This acquisition, if realized, will allow
for vertical integration of our equipment manufacturing and management
capabilities with municipal contract service providers and client central
monitoring facilities.
The Company currently is discussing the formation of a joint venture with
an Internet company with business in children's learning and entertainment
web sites and in Internet-based approved driver's license testing and
driver safety education courses. If realized, the joint venture provides
for funding to the company to grow the business, as well as for revenue
sharing from the use of SWIFT(tm) technology.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(13) Incorporated by reference: Quarterly reports for 1998 filed as 10-QSB
on May 14,1998, 10-QSB/A on August 20, 1998 and 10-QSB on November 13,
1998. Annual Report 10K-SB for the period ended December 31, 1998 as filed
on March 30, 1999. Quarterly report 10QSB for the period ended March 31,
1999 as filed on May 14, 1999. Quarterly report 10QSB for the period ended
June 30, 1999 as filed on August 13, 1999,
(27) Financial data schedule for electronic filing.
(99.1) Board Resolution regarding creation of Board Seat
(b) Reports on Form 8-K
1. Form 8K filed with the Securities and Exchange Commission on
September 28,1999 regarding the acquisition of Gemini Learning Systems,
Inc.
2. Form 8K/A filed with the Securities and Exchange Commission on
October 29,1999 regarding the acquisition of Gemini Learning Systems, Inc.
3. Form 8K filed with the Securities and Exchange Commission on
November 1,1999 regarding the reverse stock split.
Signatures
In accordance with the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SLOAN ELECTRONICS, INC.
Dated November 11, 1999
By: /s/ Paul Sloan
Paul Sloan
President and CEO
Dated November 11, 1999 By: /s/ Larry Provost
Larry Provost
Chairman and CFO
<PAGE>
BOARD OF DIRECTORS' RESOLUTION
Salient Cybertech, Inc.
The resolution that follows below was duly adopted by the directors who
RESOLVED, that the following be approved:
The creation of a "Class III" Board of Director seat to expire at the
Shareholder's Meeting in the year 2002 , the naming of Todd Finch to that
seat on the Board of Directors and the amendment of the By laws of Salient
Cybertech, Inc. adding the following to the last sentence of Article II
part 2 Quorum and Action : "... and in case of an equality of votes the
Chairman shall be entitled to cast a tie breaking vote."
The undersigned, Larry Provost, certifies that I am the duly
appointed Secretary of Salient Cybertech, Inc. Corporation and that the
above is a true and correct copy of a resolution duly adopted on October
20, 1999 by the directors thereof, in accordance with law and the Bylaws of
said Corporation.
IN WITNESS THEREOF, I have affixed my name as Secretary of Salient
Cybertech, Inc. Corporation and have attached the seal of Salient
Cybertech, Inc. Corporation to this resolution.
Dated: October 20. 1999
/s/Larry Provost
__________________
Secretary
(SEAL)
<PAGE>
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This schedule contains summary financial information extracted from
the Balance Sheet at June 30, 1998 and Income Statement for the
quarter ended June 30, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
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