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 - March 31, 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
1715 Stickney Pt,. Rd, Sarasota FL 34231
(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 March 31, 2000, the Registrant has outstanding
3,989,900 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 March 31, 2000.
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.
<PAGE>
Part II. Other Information
May 12, 2000
TO THE BOARD OF DIRECTORS
Salient Cybertech, Inc.
Sarasota, Florida
We have compiled the accompanying statements of financial position of
Salient Cybertech, Inc. (formerly known as Sloan Electronics, Inc.) as
of March 31, 2000 and December 31, 1999, the related statements of
changes in stockholders' equity for the periods then ended,
and the statements of operations and cash flows for the three
period ending March 31, 2000 and the year ended December 31, 1999,
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
March 31, December 31,
2000 1999
ASSETS
Cash $ 570,053 $ 3,650
Accounts receivable - net 27,385 8,873
Inventory 19,410 19,566
Prepaid legal fees - current 468,750 562,500
Prepaid consulting fees 133,488
Deferred syndication costs 100,000
Prepaid expenses 63,416
Deferred tax assets 2,285
-------- --------
TOTAL CURRENT ASSETS 1,085,598 893,778
EQUIPMENT - NET 21,133 26,909
Research and development 486,769 486,769
Prepaid legal fees-long term 46,875
Other assets 8,844 2,285
-------- --------
$ 1,602,344 $ 1,456,616
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Bank loan $ $ 2,731
Accounts payable 96,093 103,360
Accrued expenses 269,851 250,587
Accrued interest 14,423 12,240
Accrued interest - related party 93,116 79,017
Notes payable 25,687 15,000
Notes payable - related party 385,506 300,053
-------- --------
TOTAL CURRENT LIABILITIES 884,676 762,988
Notes payble- related party long-term 35,577
Due to others 45,684
Due to shareholders 72,561
TOTAL LIABILITIES 884,676 916,810
STOCKHOLDERS' EQUITY
Common stock - authorized 80,000,000
shares; par value $.001; issued and
outstanding, 3,989,900 and 3,164,900
shares at March 31, 2000 and
December 31, 1999, respectively 3,990 3,165
Additional paid-in capital 3,177,346 2,453,171
Due from officer (33,565)
Accumulated deficit (2,463,668) (1,882,965)
------------ ----------
TOTAL STOCKHOLDERS' EQUITY 717,668 539,806
------------ ----------
$ 1,602,344 $ 1,456,616
============= ============
F2 See accountants' compilation report.
<PAGE>
SALIENT CYBERTECH, INC.
(FORMERLY KNOWN AS SLOAN ELECTRONICS, INC.)
STATEMENTS OF OPERATIONS
Three months
ended Year ended
March 31, 2000 December 31, 1999
SALES $ 1,867 $ 112,554
COST OF SALES 157 11,386
---------- -----------
GROSS PROFIT 1,710 101,168
EXPENSES
Selling 45,434
General and
administrative 565,075 1,509,585
Interest 17,350 48,114
Capitalization
of research
and development
expenditure (80,326)
---------- -----------
582,425 1,522,807
---------- -----------
OPERATING LOSS (580,715) (1,421,639)
Interest income 12
Other income 25,000
Recovery of
scientific research
tax credit 31,305
LOSS BEFORE
INCOME TAXES (580,703) (1,365,334)
INCOME TAXES
---------- -----------
NET LOSS $ (580,703) $(1,365,334)
=========== ============
NET LOSS
PER SHARE $ (.176) $ (.0314)
=========== ============
See accountants' compilation report.
F3
<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) $(521,636) $ 58,575
Common stock
issued 1,013 1,850,030 1,851,043
Gain for
currency conversion 4,005 4,005
Other (8,483) (8,483)
Net loss (1,365,334) (1,365,334)
---------- --------- -------- ----------- -----------
BALANCE,
Dec. 31, 1999 3,165 2,453,171 (33,565) (1,882,965) 539,806
Common stock
issued 825 824,175 33,565 33,565
Syndication costs (100,000) (100,000)
Net loss (580,703) (580,703)
---------- --------- -------- ----------- -----------
BALANCE,
Mar. 31, 2000 $ 3,990 $3,177,346) $ - $(2,463,668) $ 717,668
========== =========== ========== ============ ==========
F4 See accountants' compilation report.
<PAGE>
SALIENT CYBERTECH, INC.
(FORMERLY KNOWN AS SLOAN ELECTRONICS, INC.)
STATEMENTS OF CASH FLOWS
Three months
ended Year ended
March 31, 2000 December 31, 1999
CASH FLOWS FROM
OPERATING
ACTIVITIES
Net loss $(580,703) $(1,365,334)
Adjustments to
reconcile net
loss to net cash
used in operating
activities:
Depreciation 1,120 47,533
Gain for currency
conversion 4,005
Loss on disposal
of equipment 4,656
(Increase) Decrease
in operating assets:
Accounts receivable-
net (18,512) 40,046
Inventory 156 7,605
Deferred tax asset 63,416 (63,416)
Prepaid insurance 26,422
Prepaid legal and
consulting fees 274,113 (842,911)
Deferred syndication
costs 100,000
Other assets (4,274) (2,352)
(Decrease) increase
in operating
liabilities:
Accounts payable (7,267) (19,159)
Accrued expenses 19,264 134,121
Accrued interest 16,282 37,828
--------- ----------
NET CASH USED
IN OPERATING
ACTIVITIES (231,749) (1,895,612)
--------- -----------
CASH FLOWS USED
BY INVESTING
ACTIVITIES
Purchase of equipment (54,762)
Expenditure for
research and
development (78,334)
--------- -----------
NET CASH USED BY
INVESTING
ACTIVITIES (133,096)
CASH FLOWS FROM
FINANCING
ACTIVITIES
Proceeds from
loans 196,724
Proceeds from
sale of common
stock 825,000 1,842,560
Repayments of
loans (26,848) (26,718)
-------- ----------
NET CASH PROVIDED
BY FINANCING
ACTIVITIES 798,152 2,012,566
-------- ----------
NET (INCREASE)
DECREASE IN CASH 566,403 (16,142)
CASH, at beginning
of period 3,650 19,792
-------- ----------
CASH, at end of
period $ 570,053 $ 3,650
========== ============
F5 See accountants' compilation report.
<PAGE>
Three months
ended Year ended
March 31, 2000 December 31, 1999
SUPPLEMENTAL
DISCLOSURES:
Interest paid $ - $ -
============ ============
<PAGE>
Part I. Item 2. Description of business and management's discussion
Background
MAS Acquisition I Corp. ("MAS"), was incorporated on July 31, 1996 in the
State of Delaware, to engage in any lawful corporate undertaking, including,
but not limited to, selected mergers and acquisitions. On December 5, 1997,
pursuant to the terms of an Agreement of Merger (the "Agreement") between
MAS and Sloan Electronics, Inc. ("Sloan Electronics"), Sloan Electronics
merged into MAS and MAS changed its name to Sloan Electronics, Inc.
Sloan Electronics, Inc., through its Sloan Electronics Division (Sloan)
designs, manufacturers and markets electronic monitoring equipment primarily
for the criminal justice industry and the long-term health care industry.
Sloan markets its house arrest monitoring equipment through its in-house
marketing department and currently distributes its products through national
service providers. Sloan's medical division has distribution agreements with
Response USA, a distributor of personal emergency response systems and with
King Alarm, a security product distributor.
In May, 1999, Sloan Electronics decided to actively seek acquisition
candidates in the high technology, Internet, distance learning, and security
industries. To this end, and to reflect the change in the company philosophy,
Sloan changed its name to Salient Cybertech, Inc. (the "Company") in
May, 1999.
During the third quarter 1999, acquisition discussions were held with
several companies and resulted, on September 24, 1999, in the acquisition
for stock of Gemini Learning Systems, Inc. ("Gemini"), which operates as a
division of the company. 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.
The Company, through the Sloan Electronics Division, will continue to service
its current clients, and to identify new markets for its product line, as
well as seek acquisitions in the area of high technology industry.
The Company will also develop the Internet based business, of which
Gemini is the first acquisition.
The business of the Company will be broken into two sections, one
section dealing with the Sloan Electronics Division High Technology
Division), and the second with the Internet Technology Division (Gemini).
A. Sloan Electronics Division:
Sloan'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.
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
<PAGE>
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.
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. Sloan 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. Sloan 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.
<PAGE>
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.
Sloan Electronics Business Strategy
High-Quality Image. We believe that within the house arrest and medical
monitoring industries, Sloan 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 Sloan and may include personnel
outside Sloan 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. Sloan 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. Management is
disappointed withunit 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
<PAGE>
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.
Sloan 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. Sloan 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. Sloan maintains a
web site at www.salientcyber.com.
Competition
Sloan 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 Sloan 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.
<PAGE>
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 Sloan'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.
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 Sloan. Sloan 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.,
Sloan'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.
Sloan's relationship with Kimchuk allows it to reduce its production costs,
to reduce its final testing costs and to reduce its personnel costs. Sloan
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 Sloan's products in the most cost-
<PAGE>
efficient manner, while maintaining accuracy in circuit board production and
error-free transfer and component connections.
Product Warranties. Sloan supports its products with a limited one year
warranty, which covers all defects in materials or workmanship. Sloan will
repair or replace defective units without charge to the consumers for labor
or materials. Sloan'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. Sloan 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 Sloan.
Government Regulation
Sloan's facilities are subject to numerous federal, state and local laws and
regulations designed to protect the environment from waste emissions and
hazardous substances. Sloan is 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 its
facilities. Sloan believes that is in compliance in all material aspects
with all applicable environmental and occupational safety regulations.
Sloan's radio frequency anklet transmitter is subject to FCC (Federal
Communications Commission) regulations, as are all radio frequency
devices. Sloan has obtained type approval #HCQ3B6WWT for the anklet
transmitter and its products are in compliance with FCC rules Part 15.
B. Internet Technology Division (Gemini Learning Systems, Inc.):
Gemini Learning Systems, Inc. ("Gemini"), organized under the laws of the
Canadian Province of Alberta in June, 1990, has never been a party to any
material reclassification, merger, consolidation, or purchase or sale of a
significant amount of assets not in the ordinary course of its business.
Gemini was purchased by the Company on September 24, 1999.
Gemini is a software applications development company, specializing in
distance education and training solutions. The company created and markets
software technology called SWIFT (SoftWare Intelligent Freeform Training).
The Company is emerging from its development phase, having created an entire
product line based on the SWIFT 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 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 (See "Business Development").
<PAGE>
Background Information
Gemini began business in the Canadian City of Alberta 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 technology, and a
distribution network.
Gemini, management believes, is ready to become the industry leader
in the delivery of distance education systems, to be utilized both in an
intra-company setting (intranet) and by students over the internet. The
students may be individuals or complex organizations with diverse
training and educational needs to be delivered worldwide to their various
locations.
Business Development
The development of the SWIFT technology, eight years in the making,
is, management believes, its primary competitive edge in the business world.
The technology was developed utilizing the talents of many
professionals, aside from the current Gemini Staff ( See Significant
Employees). The SWIFT 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. Marlene 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 steady input into
the development of Gemini's product line.
Day to day management of the SWIFT 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 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 interface and
multimedia support requirements.
Dr. Tom Keenan, is the leading consultant for the Post-Secondary
Interface Design Project for SWIFT. 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 Honour 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. He led the design and wrote most of the code for the unique
SWIFT course compiler. Stuart also provides valuable technical input and
feedback to the technical team.
Ruby Loo, who, in addition to a M.Math Computer Science has ten
years of technical experience in a variety of computer science areas,
including computer graphics, color usage, animation, human-computer
interaction, and graphical interface design, was responsible for
coordinating all human-computer interactions aspects of the SWIFT project
including usability studies, mock-ups, evaluations of mock-ups, and the
design of the Graphical User Interfaces.
<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 and 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
HYPROTECH Ltd. Calgary, Canada
Albeda College Rotterdam*
*Consortium of 50 colleges
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 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.
The key distribution partners and strategic alliances 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 in Europe and were a valuable partner
during the implementation of the international functionality in SWIFT.
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. The courses
will be offered in the SWIFT Library some time in 2000.
Diskover Office Software Ltd. Diskover specializes in content development
using the SWIFT Kit. They have created the entire Office 97 Suite, Level 1
and 2, Windows 95/98 in the SWIFT 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.
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.
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
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 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 for
internal use and to resell to their corporate clients.
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.
BUSINESS
Principal Products and Services and their Markets
SWIFT Library
Currently, Gemini offers over 400 course titles available to convert into
SWIFT, and has, in the current fiscal year, launched its own online SWIFT
library (over 30 popular course titles).
SWIFT Kit
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.
The DE
All course content can be developed externally to SWIFT using software
programs of the client's choice. The course content is then tagged in SGML
in the DE and compiled into the LE using the SWIFT compiler. The DE includes
<PAGE>
a DTD (Document Type Definition) or course structure. The course structure
is a three level hierarchy that promotes consistency and effective
instructional design.
SWIFT 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 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.
The ALE
SWIFT provides what management believes to be the only Adaptive Learning
Environment commercially available in the world. The pedagogical
effectiveness of ALEs have been proven by years of research conducted by
educational institutions and government organizations around the world.
The ALE adapts each course to each learner's individual requirements, based
on the goals they choose and by completing a pretest.
Adaptive Testing
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
allows exams to be significantly shorter than traditional tests, without
losing any predictive power about a learner's master of the material.
SWIFT Branding
The SWIFT interface can be readily branded for OEM and Corporate identities
with little effort required on Gemini's part.
ELMer
ELMer is an advanced Internet/Intranet delivery, management, and analysis
system for SWIFT courses. ELMer is required for administering Intranet and
Internet courses and can be purchased separately for $7,000.00 per license.
Delivery
The Server, which runs on Windows 95//98/NT or UNIX platforms, can deliver
and manage large numbers of courses to large numbers of learners
simultaneously. Learners are able to access highly interactive SWIFT courses
over the Internet running a 28.8 or greater modem , with full multimedia
functionality.
Management of System
The Server is controlled either locally or remotely and manages:
- - billing,
- - accreditation,
- - adjust resource consumption,
- - determine average transmission rates,
- - identify fault occurrences.
Analysis of Student Progress
A wide variety of statistical information of learner-based data is
automatically gathered and stored by the Server. The Server can provide:
- - grading and progress reports,
<PAGE>
- - progress and content analysis,
- - item analysis,
- - pathways.
Data can also be exported to external applications.
Ecommerce
Gemini has, in the current quarter, launched an Ecommerce solution and can
offer server-hosting or connect to third party Ecommerce 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 financial 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 authoring tools, web authoring tools, IT
education and training, courseware development services, internet software,
ecommerce, on-line training.
Gemini operates in a high growth environment. The IT Education & 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 anum, while the Internet
software market is showing a growth rate of 50% per anum, and the
packaged internet software market is currently growing at the rate of 127%
per anum.
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***.
________________________________
- - * IT Symposium presentation, October 1996.
- - ** DC, Capturing the Top 10 IT Opportunities, July 1997.
- - *** IDC, Capturing the Top 10 IT Opportunities, July 1997.
________________________________
<PAGE>
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 129.6 165.95 187.0 220.0
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 $4
billion by 2000. SWIFT courses delivered over the Internet and corporate
Intranets represent a distinct opportunity for Gemini. This area will become
the focus of a great deal of the company's resources in the year 2000, and
will likely be the primary area to which investment capital from any public
offering or private placement is directed.
Competitive Advantage
SWIFT overcomes the two primary drawbacks of multimedia training
quoted by Dataquest in the 1996 end-user survey (The Role of Digital
Multimedia in Training in Business, Dataquest, August 1996), the high cost
and initial deployment/updates and lack of interactivity. In another
Dataquest survey (Education and Training: Market Analysis and Outlook 1996,
Dataquest, February 1997) respondents identify time and cost experiences in
producing conventional CBT and TBT multimedia courseware using conventional
tools or custom programming as the key drawback. The table below summarizes
these findings:
Courseware Type
DEVELOPMENT Cost per Hour of Elapsed Time per
HOURS Instruction ($US) Hour of Instruction
PER HOUR
OF
INSTRUCTION
CBT (Conventional) 150 to 300 hours $10,000 to $45,000 13 to 20 weeks
TBT Multimedia 250 to 500 hours $14,000 to $55,000 10 to 26 weeks
<PAGE>
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. The
SWIFT System provides the same course delivered in a CDROM, Internet, and
Intranet delivery environment, as well as being the only SGML-technology-
based training solution that provides an efficient method for managing,
updating and re-purposing course content, resulting in leveraged investment
over time.
SWIFT has full multi byte character functionality, and is,
management believes, the only commercially available Adaptive Learning
Environment in the world. SWIFT 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 offers an intelligent tutoring system and has upwardly
compatible versions, 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.
SWIFT has an included management system, 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.
A key advantage of SWIFT is that SWIFT reduces development time,
management believes, by upwards of 70% as compared to other technologies,
offering a consistent, highly interactive learning environment requiring
only content. SWIFT requires no programmers and software teams, and exhibits
virtually no learning curve for developers.
Distribution Methods of the Products or Services
SWIFT Library Distribution
Gemini intends to meet its corporate and marketing objectives by building as
many titles as possible for the SWIFT Library and marketing those worldwide,
directly, as outlined below, and through distribution and alliance partners,
as previously discussed. 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.
Large Corporate Accounts
SWIFT 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 content into SGML and appear very interested
in leveraging their investment further. By concentrating on the SGML
market, where Gemini has, as discussed earlier, a significant competitive
advantage, Gemini can quickly qualify and target potential clients through
SGML trade shows, publications, conferences, etc. which 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 to sell
SWIFT. 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 technology; IT groups can avoid the
lengthy and expensive development associated with other tools.
<PAGE>
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.
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, and take a higher percentage of the royalties.
Product Positioning
The SWIFT product line is ideally positioned to target the fast growing
Internet/Intranet market, as well as packaged internet software for the
retail market. SWIFT products offer low cost to both developers and end
users as well as many pedagogical distinguishing features.
The SWIFT product line fits into the following fast growing market segments:
- - Turn-key Internet Distance Education and Training solution
- - Online Library
- - Ebusiness
- - 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
- - Large Acct. 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 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 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 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 must purchase ELMer - a total investment of $7,000,00 U.S.D. which
includes the entire online library. 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 library.
Strategic Alliances and Industry Partners
Strategic alliances are defined as course content companies and content
distributors. 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) (See Distribution Partners and Strategic Alliances, above).
The marketing strategy outlined above, management believes, should build a
broader awareness of the SWIFT 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,
help build upon multiple recurring revenue streams, create healthy
cash flow, shorten sales cycles, and build more strategic partners and
alliances.
Status of any Publicly Announced New Product or Service
As outlined herein, Gemini is emerging from its development stage,
and as such the products employing the SWIFT technology, which Gemini plans
to introduce into the general worldwide marketplace, are, by definition, 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 (See also, Distribution
Methods of the Products or Services; and, Products and Services and their
Markets, above).
Competitive Business Conditions, Competitive Position in the Industry, and
Methods of Competition
See, Market for Products, above, for a discussion of the Marketplace
in general.
SWIFT 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 is outlined in the table below:
<PAGE>
SWIFT Authoring Tools
SGML-based, leverage investment over HTML-based
time
Designed for use by course content Development is from scratch
creators, requires content only
CBT interface (Learning Environment) is Requires expertise in HCI,
built-in - virtually no learning curve, no programming, project mgmt,
software teams or programmers required pedagogy.
Reduces development time and costs by Averages 200 - 250 hours of
about 70%. development for every hour of
finished product.
Provides delivery on CD-ROM, Intranet and Requires development from scratch
Internet 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 tutor- Virtually no pedagogy
ing 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 Technology effectively gives Gemini
a differentiable new technology which 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 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.
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.
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 is qualified
in its entirety by reference to such financial statements and reports.
RESULTS OF OPERATIONS
During the current operating quarter, the Company had sales of $1,867.
This can be compared to $112,554 in sales for the fiscal year
ended December 31, 1999. Net gross revenue for the current quarter was
$1,710, as compared to $101,168 for the last fiscal year.
Total operating expenses were $582,425 for the quarter ended March 31, 2000,
as compared to $1,522,807 for the period ended December 31, 1999.
<PAGE>
The cash and investment certificate position of the Company was $570,053 on
March 31, 2000 as compared to $3,650 on December 31, 1999.
Current assets, as a whole, increased by about 15%, from $893,778 on
December 31, 1999 to $1,085,598 on March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES.
Net cash provided from financing activities was $798,152 for the
three months ended March 31, 2000, raised through private placement
of common stock and borrowing.
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 Plans
The Company has a threefold plan for the current fiscal year;
(1) The Company plans to continue to service its current clientele in the
Sloan Electronics Division (High Technology Division), and examine potential
areas of growth in the electronic monitoring industry.
(2) During the first quarter of 2000, Gemini hired sales and support staff in
its new offices in Sarasota, Florida in preparation for a major marketing
thrust planned for the last 3 quarters of 2000. Gemini anticipates the
additional staff coupled with the marketing plan outlined above will
significantly impact the company's bottom line.
(3) The Company plans to actively seek acquisition targets for both
divisions, to develop a strong vibrant Company with two active profitable
divisions. The Company would like to acquire at least one successful,
operating business for each division over the next year. The Company is
currently finalizing negotiations with Futronix, Inc., with a view of
purchasing the Company. Futronix specializes in the manufacture of
Surface Mount Device Assembly, with sales in excess of $5,000,000 annually.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is currently not a party to any pending or threatened
litigation of a meritorious or material nature or that could result in
a significant financial impact. From time to time the Company may be
involved in lawsuits in the normal course of its business, that do not
have a material impact upon the Company.
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
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule for electronic filing.
(b) Reports
1. Form S-8 filed with the Securities and Exchange Commission on
Ferbruary 1, 2000 regarding the issuance of shares to Marc Sporn.
2. Form 8K filed with the Securities and Exchange Commission on
February 22, 2000 regarding the retirement of Larry Provost, director.
3. Form DEF 14-A filed with the Securities and Exchange Commission
March 30, 2000 regarding Proxy material sent to shareholders.
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 May 15, 2000
By: /s/ Paul Sloan
Paul Sloan
President and CEO
Dated May 15, 2000 By: /s/ Paul Sloan
Paul Sloan
Chairman
[TYPE] EX-27
[ARTICLE]
This schedule contains summary financial information extracted from
the Balance Sheet at March 31, 2000 and Income Statement for the
quarter ended March 31, 2000 and is qualified in its entirety by
reference to such financial statements.
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-2000
[PERIOD-END] MAR-31-2000
[CASH] 570,053
[SECURITIES] 0
[RECEIVABLES] 27,385
[ALLOWANCES] 0
[INVENTORY] 19,410
[CURRENT-ASSETS] 1,085,598
[PP&E] 21,133
[DEPRECIATION] 672
[TOTAL-ASSETS] 1,602,344
[CURRENT-LIABILITIES] 884,676
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 3,990
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 713,678
[SALES] 1,867
[TOTAL-REVENUES] 1,8679
[CGS] 157
[TOTAL-COSTS] (582,425)
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 17,350
[INCOME-PRETAX] (580,703)
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (580,703)
[EPS-BASIC] (0.176)
[EPS-DILUTED] (0.176)
