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, 2000
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)
1999 Lincoln Drive, Suite 202, Sarasota, Florida 34236
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(941) 953-6168
______________________________
(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, 2000, the Registrant has outstanding
7,496,404 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.
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.
<PAGE>
Salient Cybertech, Inc.
Form 10-QSB
Quarterly Report, period ended September 30, 2000.
INDEX PAGE
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>
REPORT ON REVIEW OF PROFORMA
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
AND DECEMBER 31, 1999
Bobbitt, Pittenger & Company, P.A.
SALIENT CYBERTECH, INC.
CONTENTS
PAGE
FINANCIAL STATEMENTS
ACCOUNTANTS' REVIEW REPORT 1
PROFORMA CONSOLIDATED BALANCE SHEETS 2
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS 3
PROFORMA CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY 4
PROFORMA CONSOLIDATED STATEMENTS OF CASH FLOWS 5
<PAGE>
November 10, 2000
TO THE BOARD OF DIRECTORS
Salient Cybertech, Inc.
Sarasota, Florida
ACCOUNTANTS' REVIEW REPORT
We have reviewed the accompanying consolidated balance sheets of Salient
Cybertech, Inc., as of September 30, 2000 and December 31, 1999, the
related proforma consolidated statements of changes in stockholders'
equity for the period then ended, and the proforma consolidated statements
of operations for the three and nine-month periods ending September 30,
2000 and 1999 and proforma consolidated casflows for the nine-month
periods ended September 30, 2000 and 1999, in accordance with Statements
on Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants.
A review consistes principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially
less in scope than an audit in accordance with generally accepted
auditiong standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for
them to be in comformity with generally accepted accountant principals.
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.
Generally accepted accounting principles require that all foreign currency
transactions be revalued in U.S. currency. Management has not valued all
foreign transactions as if they were originated in U.S. dollars.
Certified Public Accountants
<PAGE>
SALIENT CYBERTECH, INC.
PROFORMA CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2000 1999
ASSETS
Cash $ 161,043 $ 356,240
Short-term investments 4,002
Restricted cash 75,358
Accounts receivable - net 407,052 250,255
Inventory 708,614 612,169
Prepaid legal fees - current 187,500 562,500
Prepaid consulting fees 133,488
Deferred syndication costs 100,000
Prepaid expenses 63,416
Other assets 518 2,285
TOTAL CURRENT ASSETS 1,531,729 2,155,711
EQUIPMENT - NET 5,185,260 5,202,886
Research and development 366,769 486,769
Prepaid legal fees - long term 46,875
Goodwill - net 1,599,052 1,654,252
Other assets 5,614 2,285
$8,688,424 $9,548,778
See accountants' review report.
<PAGE>
September 30, December 31,
2000 1999
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Current maturities
of long-term debt $ 529,848 $ 272,731
Accounts payable 886,115 684,645
Accrued expenses 314,543 319,579
Accrued interest 18,096 12,240
Accrued interest -
related party 116,822 79,017
Notes payable 15,000 60,684
Notes payable -
related party 720,912 677,316
TOTAL CURRENT LIABILITIES 2,601,336 2,106,212
Long-term debt, less
current maturities 605,252 553,737
Due to shareholders/
related parties 118,285 108,138
TOTAL LIABILITIES 3,324,873 2,768,087
STOCKHOLDERS' EQUITY
Common stock - authorized
80,000,000 shares;
par value $.001; issued
and outstanding,
7,496,000 and 3,249,900
shares at September 30,
2000 and December 31, 1999,
respectively 7,496 3,250
Additional paid-in capital 9,832,506 8,686,752
Due from officer (33,565)
Accumulated deficit (4,476,451) (1,875,746)
TOTAL STOCKHOLDERS' EQUITY 5,363,551 6,780,691
$ 8,688,424 $9,548,778
See accountants' review report.
<PAGE>
SALIENT CYBERTECH, INC.
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months Three months Nine months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2000 2000 1999 1999
SALES $ 3,281,909 $ 813,629 $ 4,707,892 $1,904,523
COST OF SALES 2,945,584 762,970 3,510,967 1,231,622
GROSS PROFIT 336,325 50,659 1,196,925 672,901
EXPENSES
Selling 40,694 1,723
General and
administrative 3,025,353 1,013,530 2,456,668 1,075,363
Interest 117,919 26,740 79,463 23,120
3,143,272 1,040,270 2,576,825 1,100,206
OPERATING LOSS (2,806,947) (989,611) (1,379,900) (427,305)
OTHER INCOME 206,242 41,044 25,000
LOSS BEFORE
INCOME TAXES (2,600,705) (948,567) (1,354,900) (427,305)
INCOME TAXES
NET LOSS $(2,600,705) $ (948,567) $(1,354,900) $ (427,305)
NET LOSS
PER SHARE $ (.668) $ (.224) $ (.119) $ (.036)
See accountants' review report.
<PAGE>
SALIENT CYBERTECH, INC.
PROFORMA CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Common Paid-in Due from Accumulated
Stock Capital Officer Deficit Total
BALANCE,
January 1,
1999 $10,720 $6,836,722 $(33,565) $(238,923) $6,574,954
Common stock
issued 1,013 1,850,030 1,851,043
Gain from
currency conversion 4,005 4,005
Other (8,483) (8,483)
Net loss (1,640,828) (1,640,828)
Balance,
December 31,
1999 3,250 8,686,752 (33,565) (1,875,746) 6,780,691
Common stock
issued 4,246 1,245,754 1,250,000
Reversal of due
from officer 33,565 33,565
Syndication costs (100,000) (100,000)
Net loss (2,600,705) (2,600,705)
BALANCE,
September 30,
2000 $ 7,496 $9,832,506 $ $(4,476,451) $ 5,363,551
See accountants' review report.
<PAGE>
SALIENT CYBERTECH, INC.
PROFORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
September 30,
2000 1999
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(2,600,705) $(1,354,900)
Adjustments to reconcile
net loss to
net cash (used)
provided in
operating activities:
Depreciation 66,760 66,802
Amortization 175,200
Stock issued for compensation
for legal fees 20,060
Stock issued for services 375,000
(Increase) decrease in
operating assets:
Restricted cash 75,358 687,500
Accounts receivable - net (219,797) (309,469)
Inventory (96,445) (6,636)
Deferred tax asset 2,285
Prepaid expenses 555,363
Prepaid legal and
consulting fees 414,738 (633,334)
Other assets (1,562) 2,613
(Decrease) increase
in operating liabilities:
Accounts payable 201,470 507,512
Accrued expenses (5,036) 83,087
Accrued interest 43,661 33,710
NET CASH (USED) PROVIDED
IN OPERATING ACTIVITIES (1,742,217) 114,358
CASH FLOWS USED BY
INVESTING ACTIVITIES
Purchase of property
and equipment (49,234)
Purchase of short-term
investments (4,002)
NET CASH USED BY INVESTING
ACTIVITIES (53,236)
<PAGE>
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds of loans from
related parties 53,743 15,725
Proceeds of loans 475,071
Proceeds from sale of
common stock 1,250,000 10,000
Repayments from shareholders 33,565 33,565
Repayments of loans (212,123) (234,518)
Repayments to shareholders (47,151)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,600,256 (222,379)
NET DECREASE IN CASH (195,197) (108,021)
CASH, at beginning of period 356,240 226,045
CASH, at end period $ 161,043 $ 118,024
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 74,230 $ 45,160
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)
See accountants' review report.
<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 had designed, manufactured and marketed electronic
monitoring equipment for the criminal justice industry and the long-
term health care industry. It had also marketed house arrest monitoring
equipment through its in-house marketing department and distributed its
products through national service providers. The Company, while
continuing to support existing clients, has ceased to actively engage
in these business endeavers in favor of building its portfolio of
acquisitions and building the businesses of the acquired companies.
Salient Cybertech, Inc. is actively seeking acquisition candidates with
interests in technology, Internet, distance learning, and security
industries. During the third quarter 1999, The Company acquired, for
stock, of Gemini Learning Systems, Inc., which will operate as part
of the Internet/technology division of the company. The company filed
a current Report on Form 8K 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,
continues to run the division as President and was named to the board
of directors.
On Tuesday May 23, 2000, Salient Cybertech, Inc. (the "Company") executed
an agreement whereby it acquired Futronix, Inc. ("Futronix"). The
acquisition was accomplished by the Company forming a Delaware subsidiary,
known as Salient Acquisition Corporation, with that corporation merging
with Futronix. The surviving Corporation, continues to carry
on business as Futronix, Inc., a wholly owned subsidiary of the Company.
The transaction is more fully described in the Report on Form 8-K, filed
on May 25, 2000, with the Securities and Exchange Commission. Futronix
operates as part of the High Technology division of the Company.
Established in 1989, Futronix is an ISO 9002-certified consignment and
turnkey contract electronic manufacturer. Futronix offers advanced Surface
Mount Technology capabilities, mixed technology, mechanical assembly,
in-circuit and functional testing, and design and engineering services
for customers. Futronix is part of the FUTRONIX ELECRONICS DIVISION.
Salient Cybertech's revenues are currently primarily from the product
sales of Futronix. 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.
HIGH TECHNOLOGY DIVISION
FUTRONIX, INC. made its entry into the electronic contract manufacturing
industry in March of 1988 providing assembly labor to a consignment base.
Consignment is an industry term where the customers supplied the components
and FUTRONIX provides the equipment and labor to assemble and test the
<PAGE>
products. This concept is a relatively low capital risk because the raw
components typically make up about 70% of the cost of an electronic
assembly. This consignment work continued through 1996, with the exception
of a few small "turn-key" jobs. Turnkey is a concept that requires
components and labor to be provided to complete a finished Printed Circuit
Assembly (PCA) for the customers based on their drawings and specifications.
In 1997, a major transition to "turn-key" was accomplished, resulting
in 35% of sales in 1997 as opposed to less than 10% in 1996. In 1998
turnkey sales accounted for 75% of sales. With turnkey work, Futronix
sets the production schedules based on longer term Purchase Orders.
The transition to turn key work required the development of a purchasing
department, Materials Requirement Planning and related materials tracking,
stocking, and issuing systems. An NT based SQL server with over 30 on line
stations was installed supporting the following control and tracking
databases:
* Shop control that tracks the status of all work-in-process (WIP)
* Purchase order system that verifies and controls all purchases made,
verifies receipt of ordered items and tracks vendor quantity in three
categories.
* Inventory control that logs receipt, and issuance of all materials used
in all value added services.
* Materials Requirement Planning (MRP) that can generate forward looking
reports for future material needs, based on current schedules, orders,
inventory, work-in process.
* Return stock (RTS) and scrap. The MRP system assures that when a job is
scheduled, the components to complete the job are on hand when needed.
* Quality reporting that provides process status, process yield, vendor
status, and other quality reporting as required by ISO9002 policy.
* Schedule control that allows for efficient workload and leveling.
* Bill of material (BOM) control and verification that ensures every
component used in a customer's product is approved and correct.
* Job cost module that utilizes the shop floor tracking system, materials
and labor utilization to feed back costing information to management for
quoting and resource allocation purposes.
The controls enumerated above were implemented to provide full turnkey
services and to meet the requirements for ISO9002 quality standard
certification. The substantial costs to the company to implement this
system resulted in reduced earnings in 1997 and 1998. However, the company
is now poised to facilitate larger turn-key accounts. In the first quarter
of 1998, FUTRONIX received ISO9002 quality standard certification from
Underwriters Laboratories (UL), without a single nonconformance. As a
result of operating in a solid operable quality system, the Company
increased its first pass yield (FPY) from 70% to currently better than
97% for any individual process.
Facilities
FUTRONIX, INC. is located in Suncoast Industrial Park, Homosassa,
Florida and presently occupies two main buildings, and several support
and storage buildings totaling 35,000 sq. ft (MOL). Approximately 40
acres of adjacent industrial property owned by the shareholders is
available for expansion as required. The facilities are leased from the
Company's shareholders. The location easily accessible from Orlando or
Tampa, and provides a plentiful and reliable labor base.
<PAGE>
Products and Services
FUTRONIX INC is a high quality Electronic Contract Manufacturer (ECM)
providing manufacturing, test, prototyping, and product development and
support for a diverse set of market segments. Printed circuit assemblies
and box build products manufactured in medium to high volume supplied
to OEM's for commercial, industrial, medical, and telecommunication
applications. As an ECM, Futronix reviews our customers product
specifications and develops and implements a plan to efficiently and
cost effectively fabricate and test the product (typically a Printed
Circuit Assembly), that meets or exceeds the functional and quality
specifications. This plan typically calls for continual improvement
that will reduce the costs while maintaining quality. A percentage of
the realized cost savings, typically 50%, are passed on to the customer.
Product Description
Printed Circuit Assembly (PCA): Futronix utilizes automated, high speed
assembly equipment that can be used or adapted for most any type of
PCA manufacturing. PCA types include Surface Mount Technology (SMT),
conventional through hole technology, mixed technology, and mechanical
fabrication and assembly. Turnkey, consignment or combinations of these
services are offered.The Company also provides design and product
development, along with design for test and manufacturability services for
customers who do not have the personnel or expertise to fulfill this
requirement.
Box build at multi levels from finished products bulk shipped in retail
dress box packing shipped direct to the distribution center, retail
outlet or even to the end user.
Stocking finished goods, warranty return service, invoicing and payment
processing are additional services Futronix can offer.
Competitive Comparison
FUTRONIX is small to mid size in comparison to the top ECM's with sales
over $100 million. This mid sized atmosphere, coupled with high volume
capabilities gives Futronix an edge in that our responsiveness to our
customers needs can not be achieved through the bureaucracy of a larger
ECM. The Company is able to be competitive in bidding for contracts based
on its capability, reputation and its location in a plentiful and favorable
labor market. The Company has had to turn down substantial contracts in the
past due to limitations in its ability to purchase inventory of components
in advance for large contracts. The excess capacity of our production
facility allows us to immediately respond to increases of current customer
needs as well as the influx of new business. This surplus capacity allows
Futronix to be very competitive when responding to requests for quotations.
Since the fixed overhead is covered by current work, any additional
work will lower our burdened labor rate, thus allowing aggressive quotations
at the same time increasing margins.
<PAGE>
Technology
Technology is the basis of our business and it's growth. Electronic
circuits are becoming more and more prevalent in every day life.
Mechanical products of just a few years ago now have electronic circuits
that control, monitor, indicate, and make the product easier to use.
From toys to automobiles, appliances to computers, consumer, commercial
and industrial products have included technology as a tool to gain a
competitive edge. As technology becomes more specialized Original
Equipment Manufacturers (OEM) are focussing more on leading edge design
and outsourcing the manufacturing to ECMs. In addition, as component
complexity grows, OEMs are finding the capital expense for the specialized
equipment and assembly techniques outweigh the cost to outsource in many
applications. Futronix has been a leader in technology advancement to meet
these needs. Futronix co-developed a process with AIM solderpastes for
intrusive reflow that cut 60% of the assembly costs for a customer's
computer product. The process called Step Soldering Aids "Intrusive"
Reflow was published in the September 1996 issue of SMT magazine.
Future Products
Futronix sees the mutual advantages of consolidating the diversified needs
of an OEM into a "one stop" contract manufacturing enterprise where box
build products are leading the growth in our industry. Expansion plans
to meet these growing requirements include an injection molding facility
and laminated keypad fabrication. Both of these products/services fit well
in our industry and are used in the vast majority of Box build products.
Market Analysis Summary
According to Manufacturing Market Insider (MMI) September 1997, the ECM
market is estimated to be nearly $90 billion in 1998. The article sited
the trend of OEM's to outsource manufacturing to the ECM industry:
"Electronics contracting manufacturing should continue it's growth of
nearly 20 percentage points more than the overall electronic equipment
industry growth". According to Contracting Manufacturing from a Global
Perspective, a recent report from Technology Forecasters, based on a
study of 149 electronic contract manufacturers and their customers.
"There's no holding back in evidence - OEM's demand for manufacturing
cost reduction, new assembly techniques, global manufacturing, and
outsourcing of complete systems contributes to the 25 percent global
compound annual growth rate from 1996 through 2001," said Pamila J.
Gordon, management consultant and president of Technology Forecasters.
Strategy and Implementation Summary
Futronix Inc. strategy for growth consists these key elements:
* To maintain focus on key competencies such SMT and mixed technology
PCA assembly, and expand our involvement in box build products, which
represents the ECM markets fastest growing segment.
* To build and maintain long term relationships with our customers.
To become a partner, not a vendor to OEM's by providing not only a
product delivered on time, but include a service that will continually
provide cost reduction actions and product improvements.
<PAGE>
* To continually improve our internal systems to provide our customers
the highest quality in the industry. Quality not only in the products
we manufacture, but also in communications, information, and all other
services offered.
Sales Strategy
The key to growth is an effective marketing plan utilizing qualified,
experienced marketing personnel. As a concurrent effort, we are putting
emphasis on key vendor relations to provide quick response to Requests
For Quotation (RFQ). This not only takes coordination with vendors regarding
component pricing, but also our internal labor costing estimates based on
acquiring the new work. We have budgeted for several internal cost tracking,
forecasting and compilation programs and systems. These will be continually
upgraded to maintain the capability to provide a "snapshot" of what
operations would be if the quotation were accepted. This is a very valuable
tool as with the additional work that is within our production window,
will be, we can provide the most competitive quotations.
Additionally, we will be directing our marketing efforts towards a network
of Futronix representatives throughout the US and other regions. These
Independent representatives are well versed in the industry and have focused
local knowledge of prospective customers. We will be focusing on our core
competencies which are medium to high volume PCA's with an emphasis on SMT.
Management
Nevin C. Jenkins (42), PRESIDENT and CEO: Mr. Jenkins has a born-in
leadership ability that is evidenced by the success of previous companies
he has owned or managed. In 1976, a Vice President of Diversified Industries,
Mr. Jenkins headed up the national marketing effort that grew from less than
a $1M in 1976 to over $10M by 1978. He sold his interest in Diversified in
1979 to form his own company, Med-E-Lert. Based on his knowledge of both
security system electronic capabilities and market demands, he developed
the Personal Emergency Response System (PERS) which became nationally famous
with the slogan "Help, I've fallen and can't get up". In 1985 Mr. Jenkins
sold the marketing rights for the PERS to Life Call Systems. He retained
the manufacturing rights for the PERS and in 1986 moved the production
facilities from Clearwater, Florida to Homosassa, Florida, where he built a
manufacturing plant for high volume production of the PERS base units and
supporting devices. His passion became manufacturing and automation. In 1988
he partnered with Rande Newberry and formed the electronic manufacturing
company - FUTRONIX, INC. Mr. Jenkins philosophy, "I know that no one
person can be successful alone, it takes a team, working together, to learn
and grow, I've been successful because I surround myself with experts"
is largely responsible for his success. The PERS manufacturing plant was
sold and the company's operations were moved to the larger facilities where
FUTRONIX, INC. is today. In addition to his leadership successes, he has
creative concepts with the ability to "identify what the market wants".
Many patents on various inventions that he holds is evidence of this. Mr.
Jenkins holds interest in two other companies, Sports Radar, Ltd. and
Fashion Nails, Inc.
<PAGE>
Rande W. Newberry (43), VICE PRESIDENT and Secretary/Treasurer: Mr. Newberry
brought the electronic knowledge needed for the expansion in the electronic
contract manufacturing business. Mr. Newberry holds a BSEE from the
University of South Florida, in addition associate degrees in Business
Administration (ASBA) and Electronic Engineering Technology (ASEET). From
1983 to 1987 he worked from Senior Engineering Technician to Engineer at
Honeywell's Tampa, Florida operations. In 1988 he became an independent
contractor for Honeywell until joining with FUTRONIX, INC. Mr. Newberry also
holds interest in Sports Radar, Ltd. and Fashion Nails, Inc.
Robert Garrett, CFO: Mr. Garrett has 35 years experience in accounting,
along with continued teaching at USF for tax accounting. Mr. Garrett's
accounting firm, W.R. Garrett CPA was utilized by Futronix since
incorporation. Mr. Garrett is a certified public accountant and holds a
Master Degree in accounting from Nova Southeastern University.
Mark Nichols, General Manager: Mr. Nichols has 15 years experience in
electronic manufacturing with a unique common sense approach to problem
solving. Mr. Nichols was part of the founding Principals of Futronix and
is a graduate of the Franklyn (NY) School of Engineering.
Jim Wilson, Quality Assurance Manager: Mr. Wilson has 25 years experience
in quality systems auditing with private and governmental agencies.
Positions include Lead Assessor for the DOD at the NASA facility in Florida.
INTERNET TECHNOLOGY DIVISION
Information about Gemini Learning Systems, Inc. (Gemini), as well as
product demos can be seen by visiting Gemini's 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 cost of development. Gemini was
<PAGE>
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 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.
<PAGE>
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.
Elliot 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. Kimber 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 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.
<PAGE>
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.
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.
<PAGE>
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
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
<PAGE>
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
$1,995.00 for one license to $1,595.00 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.
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.
<PAGE>
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 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.
<PAGE>
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
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
$4 billion by 2000. SWIFT(tm) courses delivered over the Internet and
corporate Intranets represent a distinct opportunity for the company.
This area will become the focus of a great deal of the company's
resources in the year 2000, and will likely be the primary area to
which investment capital from any public offering or private placement
is directed.
<PAGE>
Competitive Advantage
SWIFT(tm) overcomes the two primary drawbacks of multimedia training,
the high cost and initial deployment/updates and lack of interactivity,
which were identified by Dataquest in the 1996 end-user survey (The
Role of Digital Multimedia in Training in Business, Dataquest, August
1996). In another Dataquest survey (Education and Training: Market
Analysis and Outlook 1996, Dataquest, February 1997) respondents
identify time and cost experiences in producing conventional CBT and
TBT multimedia courseware using conventional tools or custom
programming as the key drawback. The table below summarizes these
findings:
Courseware Type Development Hours Cost per Hour of Development Time
per Hour of Instruction ($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.
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.
<PAGE>
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.
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
<PAGE>
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.
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.
<PAGE>
- 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.
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.
<PAGE>
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:
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
<PAGE>
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.
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
<PAGE>
library, user custom code and data interfaces. The Company's Sloan
Electronics division products and operations are year 2000 compliant.
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, 1999 and Income Statement for
the year ended December 31, 1999 contained in the Company's Annual
Report 10-KSB, and in conjunction with the quarterly 10-QSB reports
for the periods ended 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
Futronix, Inc. Sales revenues are recognized when the products are
shipped.
Operating revenues decreased by $1.47 million (28%) for the nine
months ended September 30, 2000 as compared to the nine months ended
September 30, 1999. Revenues for the period ending September 30, 2000
were $3,281,909 as compared to $4,707,892 for the period ending
September 30, 1999.
Gross profit for the first three quarters of 2000 decreased to
$336,325, as compared to $1,196,925 for nine months ended September
30, 1999. The decrease was due the loss of a major client, which was
bought out and commenced to do its manufacturing "in house". Futronix
has since replaced this client with other clients, and the impact of
these additional revenues should begin to make an impact in the next
quarter.
General and administrative expenses were $3,024,353 for the nine
months ended September 30, 2000, compared to $2,456,668 for the same
period in 1999. This large increase in general and administrative expenses
for the period in 2000 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. 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, 2000 was
$2,600,705 or $0.668 per share based on 4,499,900 shares outstanding,
as compared to a net loss for the first nine months of 1999 of
$1,354,900, or $0.1197 per share. The net loss for the period is primarily
attributed to insufficient level of revenue generated by the Company.
LIQUIDITY AND CAPITAL RESOURCES.
Net cash provided from financing activities was $1,812,379 for the
nine months ended September 30, 2000, raised through private placement
of common stock and borrowing.
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The Company has acquired Gemini Learning Systems Inc. and Futronix, Inc.
for stock and made a cash funding commitment to both companies 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.
CURRENT ACTIVITIES:
Gemini has, in the current quarter, commenced an expansion of markets
into the U.S. West Coast and has named John Wendel as Senior Vice
President to lead this initiative. John Wendel brings a 2O-year business
career in marketing, sales and business development to the Gemini team.
He has worked with industry leaders such as Microsoft, Unisys and Sento
Training and has held senior positions in various organizations. He
will be based out of Utah.
Gemini has also signed a multi-year licensing agreement with RAND
Worldwide (TSE: RND) to deliver e-learning solutions to clients.
The contract moves Gemini beyond its suite of e-learning software
products based upon their hallmark SWIFT technology into the role
of an e-learning Application Service Provider (ASP).
RAND Worldwide( (TSE: RND) is the world's leader in providing knowledge-
based solutions to organizations with engineering design and information
technology requirements. The Company provides mechanical design automation
("MDA") solutions to companies around the globe. In addition to MDA tools,
RAND Worldwide( also offers technical education and support, hardware with
network integration, and a comprehensive list of engineering related
solutions. RAND Worldwide( offers companies in every industry the advantage
of purchasing a total solution. Currently, RAND Worldwide( employs
1,200 individuals in more than a 100 sales and client service centers
around the globe. The RAND Worldwide( corporate head office is located
in Mississauga, Ontario, Canada.
Futronix, Inc., has hired Peter Lavalle as its Contract Manufacturing
Marketing Director. Since his arrival, Mr. Lavalle's contribution to
new business development has brought the company's potential RFQ total
to approximately $30 million. (A RFQ, or Request for Quotation,
represents a bid for contract work but does not guarantee the award of
the contract.).
Mr. Lavalle has several years' experience in the contract manufacturing
industry, most recently as Business Manager for K-Byte Manufacturing and
as Manufacturing Product Line Manager for Jabil Circuit.
Futronix also estimates an additional $500,000-600,000 in orders from
current client Linvatec Corp., who recently brought in a new line from
3M. Another client, Infineer (formerly Tritheim) has recently increased
their sales efforts and has approved purchase orders for more than
$500,000 in the first quarter of 2001.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Senger vs Salient and Paul Sloan. This action involves the plaintiff's
claim to entitlement to securities within the company. The company believes
the claims are without merit, and will vigorously defend the action.
Acquisition of Futronix, Inc. As part of the acquisition of Futronix, Inc.,
the company attempted to have the Futronix' lenders consent to the
transaction, and the accompanying change of ownership. To date, not all
lenders have consented, and the possibility of future litigation exists,
although no lender has shown any sign of commencing litigation. Based on
the recently completed audit, there remain certain issues stemming from the
purchase agreement with Futronix. While no litigation is anticipated, and
these matters should resolve amicably, nevertheless, there is a chance
that litigation may be required at some future date to resolve the
outstanding issues.
The company resolved potential Section 16 violations of the Securities
and Exchange Act of 1934. A claim for attorney fees in the sum of
approximately $7,000 has been advanced as a result of the matter.
The company believes this to be without merit, and the claim will be
vigorously defended.
Item 2. Changes in Securities
None.
Item 3. Defaults.
None
Item 4. Submission Of Matters To A Vote Of Security Holders.
On Saturday, May 13, 2000 at 2 p.m. the Company held its annual meeting,
followed by a meeting of the Board of Directors. At the annual meeting, the
items, as disclosed in the Report on Schedule 14-A filed with the Securities
and Exchange Commission on March 30, 2000, were voted upon:
1. The election of two Class I directors to serve until the 2003 Annual
Meeting of Stockholders and until their respective successors are elected
and qualified. Nominees were:
1-Kim Adolphe
2-James Marquis
2. The ratification of the appointment of Stan J.H. Lee and Company, to
audit the company's financial statements.
3. The ratification of the appointment of Melanie Meer as the Company's
Secretary.
4. The approval by the shareholders of options issued to officers, directors
and consultants of the company under the 1998 Stock Option Plan.
<PAGE>
Each Item above was duly brought before the shareholders and voted upon.
Kim Adolphe and James Marquis were elected directors, to serve until the
annual meeting to be held in 2003. Items 2 and 3 above were duly ratified,
and the options to be issued pursuant to Item 4 was approved.
The current Officers of the Company were re-elected to serve for another
year, and the annual report including the audited financial statements for
the year ended December 31, 1999 was approved.
At the meeting of the Board of Directors, immediately following the annual
meeting, Paul Sloan, the Company's President and CEO, was elected as Chairman
of the Board of Directors. By unanimous vote it was resolved that an Audit
Committee be formed with a one year term of office for Committee members, and
Michael Solomon and Melanie Meer were elected to serve on the said committee.
By unanimous vote it was resolved that an Executive Compensation Committee be
formed, with a one year term of office for Committee members, and a committee
was formed to search for suitable candidates. It was agreed that the candidates
be presented to the Board of Directors for nomination to the Committee, and any
ensuing vote be effected by teleconference, the Board members having
unanimously voted to waive notice of the said meeting.
The Board of Directors voted unanimously to form a subsidiary, Salient
Acquisition, Inc., a Delaware corporation, to acquire and merge with Futronix,
Inc. The President was directed to do all things necessary and execute all
documents required to give effect to this resolution. The Board voted
unanimously to waive notice of meeting and meet via telephonic conference call
to ratify the acquisition.
Item 5. Other Information
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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(13) Incorporated by reference:
Quarterty and annual Reports on Form 10-QSB and 10-KSB, respectively, as
timely filed with the Securities and Exchange Commission pursuant to the
Securities and Exchange Act of 1934.
(27) Financial Data Schedule for electronic filing.
(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.
<PAGE>
2. Form 8-K/A filed with the Securities and Exchange Commission on
October 29, 1999 regarding the acquisition of Gemini Learning Systems, Inc.
3. Form 8-K filed with the Securities and Exchange Commission on
November 1, 1999 regarding the reverse stock split.
4. Report on Form 8-K filed on May 27, 1999 reporting the change of
name from Sloan Electronics, Inc. to Salient Cybertech, Inc.
5. Current Report on Form 8-K, reporting the purchase of Gemini Learning
Systems, Inc. by the Company, filed on September 28, 1999.
6. First Amendment to Current Report on Form 8-K, providing the details
of the purchase of Gemini Learning Systems, Inc. by the Company, filed
on October 28, 1999.
7. Second Amendment to the Current Report on Form 8-K, providing the
financial details of the purchase of Gemini Learning Systems, Inc.,
filed on December 28, 1999.
8. Report on Form 8-K filed on February 22, 2000, reporting the
resignation of a director.
9. Report on Form 8-K filed on March 29, 2000 (amended on April 8,
2000), reporting the change of Accountants.
10. Report on Form 8-K filed on May 1, 2000, reporting the change of
address.
11. Report on Form 8-K filed on May 5, 2000, reporting the executive
employment agreement.
12. Report on Form 8-K filed on May 23, 2000, reporting the purchase of
Futronix, Inc.
13. Report on Form 8-K filed on September 21, 2000, reporting the
termination of consulting agreement.
Signatures
In accordance with the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Salient Cybertech, Inc.
Dated: November 15, 2000
By: /s/ Paul Sloan
Paul Sloan
President and CEO
<PAGE>
