<PAGE>
As filed with the Securities and Exchange Commission on September 27, 1996
Registration No. 33-___________
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------------
SENTO TECHNICAL INNOVATIONS CORPORATION
(Exact name of registrant as specified in its charter)
UTAH 7373 87-0284979
(State or other (Primary standard (I.R.S. employer
jurisdiction of industrial classification identification
incorporation or code number) number)
organization)
----------------------
311 NORTH STATE STREET
OREM, UTAH 84057
(801) 226-3355
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ROBERT K. BENCH
PRESIDENT
SENTO TECHNICAL INNOVATIONS CORPORATION
311 NORTH STATE STREET
OREM, UTAH 84057
(801) 226-3355
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
COPIES TO:
RICHARD G. BROWN, ESQ.
BRIAN G. LLOYD, ESQ.
KIMBALL, PARR, WADDOUPS, BROWN & GEE
185 SOUTH STATE STREET, SUITE 1300
SALT LAKE CITY, UTAH 84111
(801) 532-7840
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective
----------------------
If any of the securities being registered on this Form are being offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box: /X/
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE(1) PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.25 par value . . 647,214 $4.25 $2,750,660 $950.00
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
----------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION
CROSS REFERENCE SHEET
FORM S-1 ITEM
NUMBER AND CAPTION PROSPECTUS CAPTION
------------------ ------------------
1. Forepart of the Registration
Statement and Outside
Front Cover Page of Prospectus. . . Forepart of the Registration
Statement; Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus . . . . . Inside Front Cover Page; Outside Back
Cover Page
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges . . . . . . . . . . . . . . Outside Front Cover Page; Prospectus
Summary; Risk Factors
4. Use of Proceeds . . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price . . . Plan of Distribution
6. Dilution. . . . . . . . . . . . . . . Not Applicable
7. Selling Security Holders. . . . . . . Management; Principal and Selling
Shareholders
8. Plan of Distribution. . . . . . . . . Plan of Distribution
9. Description of Securities to
be Registered . . . . . . . . . . . Description of Capital Stock
10. Interests of Named Experts
and Counsel . . . . . . . . . . . . Legal Matters; Experts
11. Information with Respect
to the Registrant . . . . . . . . . Outside Front Cover Page; Prospectus
Summary; Risk Factors; The Company;
Recent Developments; Dividend Policy;
Capitalization; Price Range of Common
Stock; Selected Condensed
Consolidated Financial Data;
Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management;
Certain Relationships and Related
Party Transactions; Principal and
Selling Shareholders; Description
of Capital Stock; Shares Eligible for
Future Sale; Consolidated Financial
Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities. . . Management
<PAGE>
PROSPECTUS
647,214 SHARES
COMMON STOCK
------------------
This Prospectus relates to 647,214 shares of outstanding common stock,
$0.25 par value (the "Common Stock"), of Sento Technical Innovations Corporation
(the "Company"). All of the shares of Common Stock offered hereby are being
sold by existing shareholders of the Company (the "Selling Shareholders".) See
"Principal and Selling Shareholders." Approximately 405,000 shares offered
hereby were acquired by the Selling Shareholders in connection with a private
placement completed by the Company on June 18, 1996 (the "Private Placement").
See "Recent Developments -- Private Placement." The Company will not receive
any of the proceeds from the sale of such shares by the Selling Shareholders.
The Common Stock is quoted on the National Association of Securities Dealers
("NASD") over-the-counter bulletin board service under the symbol "STIC." On
September 20, 1996, the last reported sale price of the Common Stock, as
reported by the National Quotation Bureau was $4.25 per share. See "Price Range
of Common Stock." The Company has submitted to the NASD an application for
quotation of the Common Stock on the NASDAQ Small Cap Market and the NASD has
reserved the symbol "SNTO" for quotation of the Common Stock if such application
is approved.
------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 5 OF THIS PROSPECTUS.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS ____________, 1996
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), a registration statement Form S-1 (the "Registration Statement") with
respect to the shares of Common Stock offered hereby. This Prospectus, filed as
a part of that Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. For further information regarding the Company
and the shares offered hereby, reference is made to the Registration Statement,
including the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete, and, in each instance, reference is made to
the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in its entirety by such
reference.
The Company is subject to the informational and reporting requirements of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information concerning
the Company may be inspected and copied without charge at the Public Reference
Section of the Commission, 450 5th Street, N.W., Room 1024, Washington, D.C.
20549, and the Commission's regional offices located at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies of such materials may also be obtained upon
written request from the Public Reference Section of the Commission upon payment
of prescribed fees.
In addition, the Company intends to furnish its shareholders with annual
reports which include financial statements that have been audited with a report
thereon by its independent accountants and quarterly reports containing
unaudited summary financial information for the first three quarters of each
fiscal year.
PROPRIETARY MARKS
The Company and its subsidiaries offer, sell and utilize many
third-party products represented by registered or common law trademarks,
including the following trademarks: Novell-Registered Trademark- and
UNIX-Registered Trademark- are trademarks of Novell, Inc.
Wordperfect-Registered Trademark-, WP Office-TM- and Groupwise-TM- are
trademarks of Corel Corporation. DEC-Registered Trademark-, VMS-Registered
Trademark-, Open VMS-TM-, VAX,-Registered Trademark- Alpha-TM- and
Pathworks-TM- are trademarks of Digital Equipment Corporation.
Microsoft-Registered Trademark-, MS-DOS-Registered Trademark-, DOS-TM-,
Windows-Registered Trademark-, Windows NT-Registered Trademark- and Windows
95-TM- are trademarks of Microsoft Corporation. Lotus-Registered Trademark-
and Lotus 1-2-3-TM- are trademarks of Lotus Development Corporation.
Apple-Registered Trademark-, Macintosh-Registered Trademark- and
Mac-Registered Trademark- are registered trademarks of Apple Computer, Inc.
OS/2-TM- is a trademark of IBM Corporation. Intel-Registered Trademark- is a
registered trademark of Intel Corporation. SYSMON-TM- is a trademark of
Australian Software Innovations (Services) Pty Ltd. LANutil-Registered
Trademark- and PC-Duo-Registered Trademark- are registered trademarks of
Vector Networks Limited. TAPESYS-Registered Trademark-, THRUway-Registered
Trademark-, THRUnet-Registered Trademark- and StorageCenter-Registered
Trademark- are registered trademarks of Software Partners/32, Inc.
CONTRL-Registered Trademark-, RaxMaster-TM-, ClydeSupport-TM-, UltraDisk-TM-,
and PerfectFile-TM- are trademarks of Raxco, Inc. This Prospectus also
contains trademarks of other companies.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
Sento Technical Innovations Corporation ("Sento" or the "Company")
develops, configures, markets and distributes industry-leading hardware and
software computing solutions, combined with consulting, training and
support services, to business, government and educational organizations world-
wide through direct sales and marketing, channel distribution, and industry
partners.
The Company, through its four wholly-owned subsidiaries, Spire
Technologies, Inc. ("Spire Technologies"), Spire Systems Incorporated ("Spire
Systems"), DewPoint Distributed Solutions Incorporated ("DewPoint") and
Centerpost Innovations Pty. Ltd. ("Centerpost"), develops and implements system
management and office automation solutions for open and proprietary computing
environments, acts as a "service and value-added reseller" and distributor of
software developed by third parties, resells Digital Equipment Corporation
("Digital") network computer systems and components on a value-added basis and
manages value-added reseller ("VAR") and distribution channels in the Americas,
Europe, and Southeast Asia. The Company offers a wide range of desktop,
workstation, client/server and centralized computing software, systems and
peripheral equipment, as well as channel management and support services for
both domestic and international clientele in a wide variety of industries and
computing environments, including UNIX, Windows NT and Digital Open VMS.
In September 1996, the Company obtained an option to acquire the assets
(including all intellectual property) of Australian Software Innovations
(Services) Pty Ltd. ("ASI"), a developer of UNIX-based management and
performance monitoring software and provider of software education and
consulting services based in Sydney, Australia. ASI develops and markets
performance monitoring software and provides related technical consulting
services to customers located in Asia, Europe, the United Kingdom and the United
States. See "Recent Developments -- Australian Software Innovations" and
"Business -- Software."
Unless the context requires otherwise, all references to the "Company" in
this Prospectus refer to the Company and each of its subsidiaries. The
Company's principal executive offices are located at 311 North State Street,
Orem, Utah 84057, and its telephone number is (801)226-3355.
THE OFFERING
Common Stock offered by the Selling
Shareholders . . . . . . . . . . . . . . . . . . 647,214 shares
Common Stock outstanding prior to and
after this offering . . . . . . . . . . . . . . . 4,337,373 shares(1)
Use of Proceeds . . . . . . . . . . . . . . . . . . . The proceeds of the
offering will be
received by the
Selling Shareholders.
See "Use of Proceeds."
Over-the-counter Bulletin Board symbol . . . . . . . STIC(2)
____________________
(1) Excludes 879,209 shares issuable upon the exercise of outstanding
stock options and warrants granted by the Company.
(2) The Company has submitted to the NASD an application for quotation of
the Common Stock on the NASDAQ Small Cap Market and the NASD has reserved
the symbol "SNTO" for trading of the Common Stock if such application is
approved.
3
<PAGE>
<TABLE>
SUMMARY FINANCIAL DATA(1)
STATEMENTS OF INCOME DATA: YEAR ENDED APRIL 30, THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------------ ----------------------------
1996 1995 1994 1993 1992 1996(2) 1995
----------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues.............. $13,873,401 $9,674,683 $6,043,411 $5,949,072 $4,164,044 $4,518,439 $3,302,858
Gross profit................ 5,421,358 3,060,608 2,076,382 1,875,527 1,437,778 1,568,834 1,385,743
Operating income............ 547,928 133,527 43,869 27,691 11,884 64,020 250,980
Net income.................. 339,555 98,735 18,233 10,951 (8,109) 51,975 153,462
Net income per common
share(3)................. .08 .03 -- -- -- .01 .04
Weighted average common
shares outstanding(3).... 3,992,768 3,346,274 3,612,328 3,547,861 3,547,861 4,269,140 3,949,750
BALANCE SHEET DATA: JUNE 30,1996 APRIL 30,1996
------------ -------------
(UNAUDITED)
Cash and Cash Equivalents... $2,459,938 $ 1,552,806
Working Capital............. 2,692,590 943,332
Total Assets................ 6,755,007 4,544,825
Total Long-term Debt........ 222,169 223,412
Total stockholders' equity.. 3,103,490 1,480,907
</TABLE>
__________________
(1) The consolidated financial statements of the Company as of and for the
year ended April 30, 1996 include the financial statements of the Company
and the three subsidiaries of the Company owned during such year (Spire
Technologies, Spire Systems and DewPoint). The financial statements of the
Company as of April 30, 1995, and for each of the years in the two-year
period then ended are the combined financial statements of Spire
Technologies and Spire Systems prior to the consummation of the share
exchange transaction completed by the Company in April 1996. See "Recent
Developments -- Share Exchange." All significant intercompany balances and
transactions have been eliminated in consolidation or combination.
(2) In June 1996, the Company changed its fiscal year end from April 30 to
March 31 of each year, commencing with the fiscal year ending March 31,
1997. The consolidated financial statements set forth in the
Prospectus are based upon the Company's former fiscal year end
of April 30.
(3) Per share amounts are computed by dividing net income by the weighted
average number of common shares and common share equivalents resulting from
options outstanding. There were 3,992,768, 3,346,274 and 3,612,328
weighted average common shares and common share equivalents outstanding
for the years ended April 30, 1996, 1995 and 1994, respectively, and
there were 3,547,861 weighted average common shares and common share
equivalents outstanding for the years ended April 30, 1993 and 1992,
respectively. Income per share for the 1995 and 1994 prior years has
been restated to give effect to the share exchange completed by the
Company in April 1996. See "Recent Developments -- Share Exchange."
4
<PAGE>
RISK FACTORS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS
MAY BE FOUND IN THE MATERIAL SET FORTH UNDER "PROSPECTUS SUMMARY," "RISK
FACTORS," "USE OF PROCEEDS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS," AS WELL AS
WITHIN THE PROSPECTUS GENERALLY. THE FOLLOWING RISK FACTORS CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS, INCLUDING CERTAIN
RISKS AND UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED
IN SUCH FORWARD-LOOKING STATEMENTS. IN ADDITION, ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS
AS A RESULT OF THE MATTERS SET FORTH IN THE PROSPECTUS GENERALLY. THE
COMPANY CAUTIONS THE READER THAT THIS LIST OF FACTORS MAY NOT BE
EXHAUSTIVE. AN INVESTMENT IN THE SHARES OF COMMON STOCK BEING OFFERED
HEREBY INVOLVES A HIGH DEGREE OF RISK. BEFORE MAKING A DECISION TO
PURCHASE ANY OF THE SHARES OF COMMON STOCK DESCRIBED IN THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK
FACTORS AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS.
RELIANCE ON SUPPLIERS. The Company is solely dependent on Digital
Equipment Corporation ("Digital") and authorized distributors of Digital
products for its supply of hardware. In addition, the Company obtains
and resells software from various third-party vendors, many of whom are
the Company's sole sources for such software. Over 70% of the combined
revenues of the Company are derived from products it obtains from three
suppliers: Digital, Corel Corporation ("Corel") and Lotus Development
Corporation ("Lotus"). If one of the third-party vendors of such
hardware or software products were to become unavailable, the Company
would be required to seek other sources for alternative products. There
can be no assurance that the Company would be able to obtain competitive
alternate sources of supply for such products. The failure of such
suppliers to deliver such items on a timely basis, or the necessity that
the Company obtain replacement products for unavailable suppliers, could
adversely affect the operating results of the Company until alternative
sources of supply, if any, could be arranged. Should these suppliers
select a different distribution channel or fail to renew existing
distribution agreements with the Company, the profitability and ability
of the Company to continue in business could be significantly compromised.
These suppliers could fail to supply hardware or software to the
Company for reasons including but not limited to the following:
- the supplier could go out of business or sell its product line;
- the supplier could change its distribution methods and channels and
cancel agreements with third parties such as the Company or otherwise
fail to renew its agreement with the Company;
- the supplier could increase its product price to the Company thereby
adversely affecting profit margins for such products and the desire
of the Company to continue to represent such products; or
- the Company could fail to meet performance quotas or other standards
contained in certain of its agreements with suppliers, resulting in
termination of the agreements.
Many of the agreements between the Company and third-party suppliers
are verbal agreements and have not been reduced to writing.
CHANGING MARKET. The market for computer products and services is
continually changing. The Company anticipates that the market for office
automation products on server applications will decrease as those
functions move to desk-top computers. Company management has identified
the markets for UNIX and Windows NT operating systems as promising growth
potential for the Company; however, such potential is not yet proven and
may not evolve or prove sufficiently profitable. Company management
anticipates that there will be significant competition for products in
the Windows NT market, resulting in lower margins.
COMPETITION. The market for computer products is competitive, evolving
and subject to rapid technological change. Many of the current and potential
competitors of the Company have longer operating histories, greater name
recognition, larger installed customer bases, and significantly greater
financial, technical and marketing resources than the Company. The methods
of competition in the computer products industry include marketing, product
performance, price, service, technology and compliance with various industry
standards, among others. It is possible for companies to be at various times
competitors, customers and collaborators of the Company in different markets.
There can be no assurance that additional products will not be developed in
competition with those
5
<PAGE>
sold by the Company. If developed, such products may be more effective
than those sold by the Company. Although the Company continues to seek
new products to complement its existing product lines and, as necessary,
to replace existing products with newer and better products, there can be
no assurance that the Company will be able to do so.
PRODUCT DEVELOPMENT RISK. The information technology industry is
characterized by rapid changes, including frequent new product
introductions, continuing advances in technology and changes in customer
requirements and preferences. The introduction of new technologies could
render the Company's existing products obsolete or unmarketable or
require the Company to invest resources in products that may not become
profitable. The development cycle for the Company's new products may be
significantly longer than the Company's historical product development
cycle, resulting in higher development costs or a loss in market share.
There can be no assurance that (i) the Company will be able to counter
competition to its current products; (ii) the Company's future product
offerings will keep pace with the technological changes implemented by
competitors; (iii) the Company's products will satisfy evolving
preferences of customers and prospects; or (iv) the Company will be
successful in developing and marketing products for any future
technology. Failure to develop and introduce new products and product
enhancements in a timely fashion could have a material adverse effect on
the Company's financial condition and results of operations.
SALES AND DISTRIBUTION RISKS. As of September 20, 1996, the Company
had 40 employees in its direct sales organization and 5 employees in its
marketing organization, many of whom have been employed by the Company
for less than a year. In order to support sales growth, if any, the
Company will need to maintain the size of its sales and marketing staff,
increase the staff's productivity and continue to develop indirect
distribution channels. There can be no assurance that the Company will
be able to leverage successfully its sales force or that the Company's
sales and marketing organization will successfully compete against the
sales and marketing organizations of the Company's current and future
competitors. The Company is in the early stages of developing its
indirect distribution channels in North America, Europe and Southeast
Asia. There can be no assurance that the Company will be able to attract
third parties that will be able to market the Company's products
effectively and will be qualified to provide timely and cost-effective
customer support and service. The Company's distributors and resellers
may carry competing product offerings. There can be no assurance that any
distributor or reseller will continue to represent the Company's
products. The inability to recruit, or the loss of, important sales
personnel, distributors or resellers could materially adversely affect
the Company's financial condition and results of operations.
MARKETING. The Company markets its products and services through a
direct sales force of approximately 40 persons operating from locations
in Utah and North Carolina. In addition, arrangements with third
parties, including hardware manufacturers, software developers, resellers
and authorized distributors, are becoming an increasingly important part
of the Company's focus on providing solutions to its customers and
expanding distribution of its products and services through indirect
channels domestically and internationally. The loss of services of
certain of such third-party distributors or resellers could have a
material adverse effect on the business, financial condition and results
of operations of the Company.
POTENTIAL SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
AND LENGTHY SALES CYCLE. The value of individual transactions as a
percentage of quarterly revenues can be substantial, and particular
transactions may generate a substantial portion of the operating profits
for a quarter. The sales of the Company's system management products
generally involve significant education of prospective customers as well
as a commitment of resources by both parties. For these and other
reasons, the sales cycle associated with the sales of these products is
typically between six and twelve months and subject to a number of
significant risks over which the Company has little or no control.
Because the Company's staffing and other operating expenses are based on
anticipated revenue levels, and a high percentage of the Company's
expenses are fixed, delays in the receipt of orders can cause significant
variations in operating results from quarter to quarter. In addition,
the Company may expend significant resources pursuing potential sales
that will not be consummated. The Company also may choose to reduce
prices or to increase spending in response to competition or to pursue
new market opportunities, which may adversely affect the Company's
operating results. Accordingly, the Company believes that
period-to-period comparisons of its results of operations may not be
meaningful and should not be relied upon as an indication of future
performance. Furthermore, there can be no assurance that the Company
will be able to grow and sustain profitability on a quarterly basis.
POSSIBLE VOLATILITY OF STOCK PRICE. The trading price of the Common
Stock could fluctuate widely in response to variations in quarterly
operating results, announcements by the Company or its competitors,
industry trends, general economic conditions or other events or factors.
Among other factors, as described in the preceding paragraph, it is
likely that in some future quarters the Company's operating results will
be below the expectations of public market analysts and investors.
Regardless of the general outlook for the Company's business, the
announcement of quarterly operating results below analyst and investor
expectations could have a material and adverse effect on the market price
of the Common Stock.
6
<PAGE>
COLLECTION OF ACCOUNTS. The Company's business of selling hardware
and software products involves certain account collection risks. In the
event a hardware purchaser defaults on its payment obligation, the
Company would file a credit insurance claim; however, the insurer may
deny coverage or otherwise fail to pay. With respect to software sales,
a customer who has ordered and received software from the Company may
fail to pay timely for the software, thus creating a collection problem
for the Company. In addition, a distributor may default in timely
payment of amounts owing to the Company.
DEPENDENCE ON KEY PERSONNEL. The success of the Company depends, in
large part, on its ability to attract and retain highly-qualified
managerial, sales, marketing, technical support, and product development
personnel. The Company has not entered into employment agreements that
require the services of its key personnel to remain with the Company for
any specified period of time. The loss of the current key personnel of
the Company could have a material adverse effect on the Company.
Competition for such personnel is intense, and there can be no assurance
that the Company will be able to attract and maintain all personnel
necessary for the development and operation of its business. The loss of
the services of key personnel or an inability to attract, retain and
motivate qualified personnel could have a material adverse effect on the
business, financial condition and results of operations of the Company.
ACQUISITION RISKS. The Company plans to evaluate opportunities for
the license or acquisition of additional software products as well as the
possible acquisition of, or development of strategic relations with,
other companies who may have products or distribution channels that are
compatible with the business objectives of the Company. The Company must
compete for the acquisition of attractive acquisition or strategic
alliance candidates with numerous other companies, many of whom have
significantly greater financial resources than the Company. There can be
no assurance that the Company will be able to successfully identify
acquisition and strategic alliance opportunities that are appropriate for
the Company. Such acquisitions and alliances could involve the
incurrence of additional debt, amortization expenses related to goodwill
and intangible assets or the dilutive issuance of equity securities, all
of which could adversely affect the Company's operating results.
Accordingly, future acquisitions and alliances may have an adverse effect
on the Company's operating results, particularly in the fiscal quarters
immediately following the consummation of such transactions, while the
operations of the acquired or combined business are being integrated into
the Company's operations. There can be no assurance that capital sought
by the Company to pursue such opportunities can be obtained on terms
favorable to the Company, if at all. The failure of the Company to
obtain such financing could restrict its ability to pursue such business
opportunities. Further, there can be no assurance that any particular
acquisition or alliance will be successfully integrated into the
Company's operations or will achieve profitability.
CONCENTRATION OF SHARE OWNERSHIP. The current officers and directors of
the Company own beneficially approximately 50.6% of the issued and
outstanding shares of Common Stock and, upon the sale of the shares offered
hereby, such persons will own beneficially approximately 49.6% of the issued
and outstanding shares of Common Stock. As a result, the current officers
and directors of the Company possess voting power sufficient to influence
significantly the affairs of the Company. Such concentration of ownership
may have the effect of delaying, deferring or preventing a change in control
or management of the Company. See "Management -- Executive Officers and
Directors," "Principal and Selling Shareholders" and "Description of Capital
Stock." Future sales by current officers and directors of the Company of
substantial amounts of Common Stock, or the potential for such sales, could
adversely affect the prevailing market price for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of
Common Stock or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock. As of
September 20, 1996, the Company had 4,337,373 shares of Common Stock
outstanding, of which 1,036,656 shares, including 647,214 of the shares
offered hereby, will be eligible under applicable securities laws for
immediate sale in the public market without restriction, except for any
shares purchased by an "affiliate" of the Company (as that term is
defined under the rules and regulations of the Securities Act) which will
be subject to the resale limitations of Rule 144 under the Securities Act
("Rule 144"). The remaining approximately 3,300,717 outstanding shares
are "restricted securities," as that term is defined under Rule 144, and
may be eligible for sale, subject to certain restrictions, in the open
market pursuant to Rule 144.
ANTI-TAKEOVER CONSIDERATIONS. The Company's Articles of
Incorporation, as amended (the "Articles"), the Company's Bylaws, as
amended (the "Bylaws"), and the Utah Revised Business Corporation Act
contain certain provisions that may have the effect of inhibiting a
non-negotiated merger or other business combination. These provisions
may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of the Company, including
transactions in which shareholders might otherwise receive a premium for
their shares over the then-current market prices. In addition, these
provisions may limit the ability of shareholders to approve transactions
that they may deem to be in their best interests. See "Description of
Capital Stock."
7
<PAGE>
THE COMPANY
The Company, through its wholly-owned subsidiaries, Spire
Technologies, Inc. ("Spire Technologies"), Spire Systems Incorporated
("Spire Systems"), DewPoint Distributed Solutions Incorporated
("DewPoint") and Centerpost Innovations Pty Limited ("Centerpost"),
develops and implements system management and office automation solutions
for open and proprietary computing environments, acts as a "service and
value-added reseller" and distributor of software developed by third
parties, resells Digital network computer systems and components on a
value-added basis and manages VAR and distribution channels in the
Americas, Europe, and Southeast Asia. The Company offers a wide range of
desktop, workstation, client/server and centralized computing software,
systems and peripheral equipment, as well as channel management and
support services for both domestic and international clientele in a wide
variety of industries and computing environments, including UNIX, Windows
NT and Digital OpenVMS.
The Company was incorporated in the State of Utah in May 1969 for
the purpose of mineral exploration and development. From 1974 until
April 1996, the Company was engaged almost exclusively as a participant
with others in oil and gas exploration and development. On April 18,
1996, the Company consummated a share exchange transaction with Spire
Technologies and Spire Systems (the "Spire Companies"), by which the
Company acquired all the issued and outstanding capital stock of the
Spire Companies in exchange for the issuance to the holders of the
capital stock of the Spire Companies of a number of shares of Common
Stock equal to approximately 90% of the number of issued and outstanding
shares of Common Stock immediately after the consummation of the exchange
transaction. See "Recent Developments -- Share Exchange." Effective May
1, 1996, the Company divested itself of all oil and gas interests. The
Company does not intend to participate in any oil and gas operations in
the future. See "Business -- Oil and Gas Operations." The Company
changed its name from Spire International Corp. to Sento Technical
Innovations Corporation on September 10, 1996. Prior to August 17, 1996,
Spire Systems operated under the name Spire Technologies Systems
Division, Inc.
Spire Technologies and Spire Systems were incorporated in the State
of Utah in 1986 and 1992, respectively, and, until the completion of the
share exchange transaction with the Company in April 1996, conducted the
business operations now conducted by the Company. In 1991, Amacan
Industries, Inc. was incorporated in the State of Utah for the purpose of
pursuing business opportunities. In September 1996, Amacan Industries,
Inc. changed its name to DewPoint Distributed Solutions Incorporated and
began its current operations providing worldwide distribution, reseller,
and channel management for a number of leading software manufacturers,
including Corel Corporation, Trend Micro, Inc., and Secure Computing,
Inc. Centerpost was organized in July 1996 as a limited company under
the laws of the State of New South Wales, Australia. Centerpost conducts
the Company's business operations in Australia, Japan and Southeast Asia.
For purposes of this Prospectus, unless the context indicates
otherwise, the term "Company" includes the Company and its subsidiaries.
The Company's principal offices are located at 311 North State Street,
Orem, Utah 84057, and its telephone number is (801) 226-3355.
8
<PAGE>
RECENT DEVELOPMENTS
SHARE EXCHANGE
Pursuant to an Agreement and Plan of Reorganization dated January
23, 1996 (the "Exchange Agreement") among the Company (formerly known as
Amacan Resources Corporation or "Amacan"), the Spire Companies and the
holders of all of the capital stock of the Spire Companies (collectively,
the "Spire Stockholders"), the Company acquired all of the issued and
outstanding stock of the Spire Companies in exchange for the issuance of
3,502,223 shares of Common Stock to the Spire Stockholders (together with
its related transactions, the "Share Exchange"). The Exchange Agreement
also provided for, among other things, a one-for-seven reverse split of
the shares of Common Stock issued and outstanding at the effective time
of the Share Exchange (the "Effective Time") (excluding the shares issued
to the Spire Stockholders), an amendment of the Company's Articles of
Incorporation to change the Company's name to Spire International Corp.,
adoption of the Amacan Resources Corporation Stock Incentive Plan, which
was subsequently renamed the Sento Technical Innovations Corporation
Stock Incentive Plan (the "Option Plan"), and the substitution of options
to purchase shares of Common Stock under the Option Plan for outstanding
options to purchase shares of the common stock, par value $.01 per share,
of Spire Technologies (the "Spire Technologies Common Stock") issued
pursuant to the Spire 1995 Stock Option and Award Plan (the "Spire Option
Plan"). As a result of the Share Exchange, the Spire Companies became
wholly-owned subsidiaries of the Company and the Spire Option Plan was
terminated.
At the Effective Time, in accordance with the terms of the Exchange
Agreement, each issued and outstanding share of the Spire Technologies
Common Stock was exchanged for 35.4786 shares of Common Stock, and each
issued and outstanding share of the common stock, no par value, of Spire
Systems (the "Spire Systems Common Stock") was exchanged for 4.0155
shares of Common Stock. After giving effect to the Share Exchange, the
shares of Common Stock owned by the shareholders of the Company
immediately prior to the Share Exchange represented approximately 10% of
the outstanding shares of Common Stock, and the shares of Common Stock
acquired in the Share Exchange by the Spire Stockholders represented
approximately 90% of the outstanding shares of Common Stock.
PRIVATE PLACEMENT
On June 18, 1996, the Company completed a private offering (the
"Private Placement") of 223,024 units (the "Units"), at $7.00 per Unit,
with each Unit consisting of two shares of Common Stock plus one warrant
(each, a "Warrant") to purchase one share (each, a "Warrant Share") of
Common Stock for $3.50 at any time prior to or on April 30, 1998. The
Units sold in the Private Placement consisted of 446,048 Shares and
warrants exercisable for the purchase of 223,024 Warrant Shares, from
which $1,561,168 of cash proceeds were received. The Company intends to
use the proceeds of the Private Placement to acquire additional software
licenses and technology, to fund additional research and development, and
for additional working capital. As of the date of this Prospectus, no
Warrants have been exercised and no Warrant Shares have been issued by
the Company pursuant thereto.
AUSTRALIAN SOFTWARE INNOVATIONS
EXCLUSIVE LICENSE AGREEMENT. Effective July 1, 1996, the Company,
through Spire Technologies, entered into an Exclusive License and Technical
Assistance Agreement (the "ASI License Agreement") with Australian Software
Innovations (Services) Pty. Ltd., a limited company organized under the laws
of the Commonwealth of Australia ("ASI"). ASI, which maintains its principal
office in Sydney, Australia, develops and markets performance monitoring
software and provides related technical consulting services to customers
located in Asia, Europe, the United Kingdom and the United States. Under the
terms of the ASI License Agreement, the Company acquired an exclusive license
(the "ASI License") in North and South America during a five-year term (which
may be extended for up to three additional five-year periods) to use, market,
modify, manufacture, assemble, test and modify ASI's SYSMON software program
and to use, market, modify, duplicate and sublicense certain technical
information relating to the SYSMON software program. See "Business --
Products -- Software." In consideration of the grant of the ASI License, the
Company paid to ASI a non-refundable license fee in the amount of $550,000
and agreed to pay
9
<PAGE>
royalties to ASI during the term of the ASI License Agreement, based upon
product and maintenance revenues generated by the Company from the use, sale,
license and provision of technical support and maintenance services
attributable to the SYSMON software. In the event the Company fails to meet
certain performance criteria set forth in the ASI License Agreement, ASI may
terminate the exclusive nature of the ASI License throughout the remainder of
the ASI License term. The ASI License Agreement is terminable by either
party upon a material breach by the other party which remains uncured for 30
days following notice from the non-breaching party or by the Company upon 180
days' notice to ASI.
OPTION AGREEMENT. On September 10, 1996, the Company entered into an
Option Agreement (the "ASI Option Agreement") by and among the Company, ASI,
Kilat Holdings Pty. Limited, a limited company organized under the laws of
Australia and the sole shareholder of ASI ("Kilat"), and Eng Lee and Mary
Lee, the sole shareholders of Kilat (the "ASI Shareholders"). The ASI Option
Agreement provides for the Company's acquisition from ASI of all of the
tangible and intangible assets of ASI. Under the terms of the ASI Option
Agreement, ASI granted to the Company an option (the "ASI Option"),
exercisable in the Company's discretion at any time prior to September 10,
1997, to acquire all or any portion of the tangible and intangible assets
(including all software, trademarks and trade names) of ASI, as determined by
the Company; provided, however, that the Company must notify ASI of its
election to exercise the ASI Option not less than 60 days prior to the
expiration of the ASI Option term.
As consideration for the grant of the ASI Option, the Company paid to ASI
an option purchase payment in the amount of $130,000. In the event the
Company elects to exercise the ASI Option, the Company has agreed to pay to
ASI the exercise price of $1,405,000, consisting of cash in the amount of
$1,055,000 and 87,500 shares of Common Stock, subject to certain adjustments
to the cash portion of the exercise price to reflect the profit or loss of
ASI for the period from April 30, 1996 through October 31, 1996. The Company
has also agreed to assume certain liabilities associated with the assets of
ASI to be acquired by the Company. In the event the Company does not
exercise the ASI Option prior to September 10, 1997, the Company will have no
obligation to acquire any assets or liabilities of ASI.
The ASI Option Agreement also contains certain covenants of ASI, Kilat
and the ASI Shareholders to operate the business of ASI during the term of
the ASI Option in a manner consistent with ASI's past practices, to preserve
the Company's exclusive rights during the ASI Option term to acquire the
Assets of ASI as contemplated by the ASI Option Agreement and to guarantee the
performance by ASI of its obligations under the ASI Option Agreement. Each of
the Company, ASI, Kilat and the ASI Shareholders has agreed to preserve
confidential all proprietary information of the other parties and to
indemnify the other parties for any losses arising as a result of the
indemnifying party's misrepresentation or breach or nonfulfillment of certain
covenants set forth in the ASI Option Agreement.
In addition to the grant of the ASI Option, Kilat and the ASI
Shareholders agreed to enter into certain restraint of trade agreements
prohibiting Kilat and the ASI Shareholders from engaging, during the ASI
Option term and, if the Company elects to exercise the ASI Option, for a
period of three years from the date of a definitive acquisition agreement in
any business or activity in the Commonwealth of Australia or elsewhere which
is similar to the Company's business. The ASI Option Agreement also provides
for the Company to make available to ASI a revolving commercial credit
facility (the "ASI Facility") in an amount not to exceed $200,000 on terms to
be determined by the mutual agreement of the Company and ASI. The obligation
of ASI to repay all amounts advanced under the ASI Facility is secured by a
pledge by ASI in favor of the Company of all of ASI's intellectual property.
The ASI Facility expires on September 10, 1997.
10
<PAGE>
USE OF PROCEEDS
All proceeds from any sale of the shares offered hereby will be paid
directly to the Selling Shareholders selling such shares. The Company will
not receive any proceeds from the sale of any of the shares offered hereby.
DIVIDEND POLICY
Dividends are payable on the Common Stock when, as and if declared by
the Company's Board of Directors. No dividend has been declared or paid on
the Common Stock to date. At the present time, the Company intends to retain
any future earnings for the further development and growth of its business
and therefore does not anticipate paying any dividends on the Common Stock in
the foreseeable future. The ability of the Company to pay dividends in the
future will be dependent upon earnings levels, liquidity, capital needs,
applicable covenants in the Company's loan agreements, general business
conditions and other factors considered relevant by the Company's Board of
Directors.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1996. The table should be read in conjunction with the historical
financial statements of the Company and the notes thereto, and the other
financial information appearing elsewhere in this Prospectus.
JUNE 30,
1996
----------
Total long-term debt ................................... $ 222,169
----------
Shareholders' equity:
Common stock, par value $.25 per share, 8,000,000
shares authorized; 4,337,373 shares issued and
outstanding(1)......................................... 1,084,343
Additional paid-capital................................. 1,449,656
Retained earnings....................................... 569,491
----------
Total shareholders' equity.............................. 3,103,490
----------
Total capitalization.................................... $3,325,659
----------
----------
___________________
(1) Does not reflect the possible issuance of up to 1,000,000 shares
of Common Stock that have been reserved for issuance to employees
and other individuals of the Company under the Option Plan, nor the
possible issuance of up to 200,000 shares of Common Stock that are
reserved for issuance to employees of the Company under the Sento
Technical Innovations Corporation 1996 Employee Stock Purchase Plan
(the "Stock Purchase Plan"). See "Management -- Employee Benefit
Plans." As of September 20, 1996, the Company had granted options
for the purchase of 637,185 shares of Common Stock under the Option
Plan and had not sold any shares under the Stock Purchase Plan.
11
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted on the over-the-counter bulletin board
service maintained by the National Association of Securities Dealers (the
"NASD"). The following table sets forth the range of bid prices for the
Common Stock in the over-the-counter market for the periods indicated, as
reported by the National Quotation Bureau. The quotations represent prices
in the over-the-counter market between dealers in securities, do not include
retail markup, markdown or commissions and do not necessarily represent
actual transactions. Prices shown for the quarter ended April 30, 1996 and
the two months ended June 30, 1996 reflect the consummation of the Share
Exchange, including a one-for-seven reverse split of the shares of Common
Stock issued and outstanding at the effective time of the Share Exchange.
BID PRICES
-------------------------
QUARTER ENDED HIGH LOW
----------------------------- ------------ -----------
June 30, 1996 (two months) $6.00 $1.3125
April 30, 1996........... $6.00 $1.3125
January 31, 1996......... .375 .03125
October 30, 1995......... .125 .03125
July 31, 1995............ .125 .05
April 30, 1995........... $.125 $.10
January 31, 1995......... .15 .125
October 31, 1994......... .165 .125
July 31, 1994............ .125 .125
The closing sale price of the Common Stock, as reported by the National
Quotation Bureau, on September 20, 1996 was $4.25 per share. As of
September 20, 1996, the number of shares of Common Stock outstanding was
4,337,373 shares, held by approximately 422 stockholders of record. The
Company has submitted to the NASD an application for quotation of the Common
Stock on the NASDAQ Small Cap Market and the NASD has reserved the symbol
"SNTO" for trading of the Common Stock if such application is approved.
12
<PAGE>
SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
The following tables sets forth selected condensed consolidated
financial information with respect to the Company for the periods indicated.
This information should be read in conjunction with the Company's Condensed
Consolidated Financial Statements including the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere herein. The selected condensed consolidated
financial information as of April 30, 1996, 1995 and 1994 and for the three
years ended April 30, 1996 has been derived from consolidated financial
statements which have been audited by KPMG Peat Marwick LLP, independent
auditors, whose report with respect to such consolidated financial statements
appears elsewhere in this Prospectus. The selected condensed consolidated
financial information as of April 30, 1993 and 1992, and for the two years
ended April 30, 1993 and as of June 30, 1996 and 1995, and for each of the
three-month periods then ended, has been derived from unaudited consolidated
financial statements of the Company which, in the opinion of management,
reflect all adjustments which are of a normal recurring nature necessary for
a fair presentation of the results for such periods. Results for the
unaudited period ended June 30, 1996, set forth herein, are not necessarily
indicative of the results to be expected for the Company's full fiscal year.
<TABLE>
THREE MONTHS ENDED
YEAR ENDED APRIL 30, JUNE 30,
---------------------------------------------------------- -------------------------
STATEMENTS OF INCOME
DATA(1): 1996 1995 1994 1993 1992 1996(2) 1995
---------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)(UNAUDITED) (UNAUDITED) (UNAUDITED)
Total revenues 13,873,401 9,674,683 6,043,411 5,949,072 4,164,044 4,518,439 3,302,858
Cost of sales 8,452,043 6,614,075 3,967,029 4,073,545 2,726,266 2,949,605 1,917,115
Gross profit 5,421,358 3,060,608 2,076,382 1,875,527 1,437,778 1,568,834 1,385,743
Expenses:
Selling, general and
administrative 4,605,402 2,927,081 2,032,513 1,847,836 1,425,894 1,361,315 1,134,763
Research and
development 268,028 -- -- -- -- 43,499 --
Operating income 547,928 133,527 43,869 27,691 11,884 64,020 250,980
Other income
(expenses) (11,628) 11,696 (16,705) (16,740) (19,993) 10,839 (3,460)
Income before income
taxes 536,300 145,223 27,164 10,951 (8,109) 74,859 247,520
Income tax expense 196,745 46,488 8,931 -- -- 22,884 94,058
Net income 339,555 98,735 18,233 10,951 (8,109) 51,975 153,462
Net income per common
share(3) .08 .03 -- -- -- .01 .04
APRIL 30, JUNE 30,
------------------------------------------------------ ---------------------------
BALANCE SHEET DATA: 1996 1995 1994 1993 1992 1996 1995
------ ------ ------ ------ ------ ------ -------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
Cash and cash
equivalents 1,552,806 766,247 493,460 334,740 194,776 2,459,938 1,652,769
Accounts receivable 2,176,642 1,524,948 879,007 1,421,684 868,560 3,523,222 2,110,338
Working capital 943,332 183,268 243,573 845,382 633,737 2,692,590 1,595,650
Total assets 4,544,825 2,815,857 1,821,325 2,238,761 1,425,239 6,755,007 4,981,422
Total liabilities 3,063,918 2,392,563 1,496,766 1,469,381 835,992 3,651,517 3,841,176
Total stockholders'
equity 1,480,907 423,294 324,559 769,380 589,247 3,103,490 1,140,246
</TABLE>
________________
(1) The consolidated financial statements of the Company as of and for the
year ended April 30, 1996 include the financial statements of the Company
and the three subsidiaries of the Company owned during such year (Spire
Technologies, Spire Systems and DewPoint). The financial statements of
the Company as of April 30, 1995, and for each of the years in the two-year
period then ended are the combined financial statements of Spire
Technologies and Spire Systems prior to the completion of the Share
Exchange. All significant intercompany balances and transactions have been
eliminated in consolidation or combination.
(2) In June 1996, the Company changed its fiscal year end from April 30 to
March 31 of each year, commencing with the fiscal year ending March 31,
1997. The consolidated financial statements set forth in the Prospectus
are based upon the Company's former fiscal year end of April 30.
(3) Per share amounts are computed by dividing net income by the weighted
average number of common shares and common share equivalents resulting
from options outstanding. There were 3,992,768, 3,346,274 and 3,612,328
weighted average common shares and common share equivalents outstanding
for the years ended April 30, 1996, 1995 and 1994, respectively, and
there were 3,547,861 weighted average common share and common share
equivalents outstanding for the years ended April 30, 1993 and 1992,
respectively. Income per share for the 1995 and prior years has been
restated to give effect to the Share Exchange. See "Recent
Developments -- Share Exchange."
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Historically, the Spire Companies have focused their sales and
distribution efforts on two product lines within the mid range client/server
computer market niche: providing services as a value added reseller ("VAR")
of Digital's network computer hardware systems and components, and acting as
a distributor/VAR for a variety of software programs and applications
developed by third parties. Recently, the Company has entered into strategic
licensing and product development arrangements with IBM/Lotus,
Corel/WordPerfect, Digital, and ASI, through which the Company became the
licensed developer and sole distributor of various software products.
As part of its ongoing efforts to support customers' needs in the areas
of training, support, and system configuration, the Company offers its
customers an annual maintenance agreement. This allows customers access to
the technical resources and support personnel of the Company, including
automatic product upgrades, "bug fixing" and system configuration consulting.
The demand for technical computer systems consulting represents a growth
opportunity for the Company. The Company hired additional technical
consultants in January 1996, and the Company has begun to concentrate on
marketing its consulting services to generate additional revenues.
Since November 1995, the Company has expanded its distribution model to
include software products that operate in the growing UNIX and NT operating
systems environments. In addition to adding this new family of products,
which serve the UNIX and NT environments, the Company also began marketing a
family of products which provide solutions relating to the Internet. These
products include a third-party product known in the industry as a "firewall,"
which is designed to protect an organization's computer network from access
by unauthorized users, and an "antivirus" product which is designed to
protect the computer network from virus intrusion originating from the
Internet.
The combined revenues of the Company during fiscal year 1996 from these
various activities are broken down as follows:
- Open VMS software sales amounted to approximately 44% of revenues
- System configuration and hardware sales amounted to approximately
45% of revenues
- Technical consulting and maintenance services amounted to
approximately 11% of revenues
With the addition of new product lines, as described above, the
Company's management anticipates that revenues from the sale of UNIX platform
products, Internet security products, and technical consulting will grow
faster, as a percentage of revenues, than the historical product lines of the
Spire Companies.
No single market sector represents a dominant portion of the Company's
revenue base. Governmental and educational institutions represent
approximately 32% of revenues and small to large corporations represent the
remaining 68% of revenues. No single customer represents more than ten
percent of the revenues of the Company. In June 1996, the Company completed a
private placement of approximately $1.5 million of Common Stock and warrants
to purchase shares of Common Stock. See "Recent Developments -- Private
Placement." The Company intends to use these funds to acquire additional
proprietary software licenses and provide working capital for expanded
operations.
The Company sells its products through a direct sales force of 40
representatives in the United States, and through a number of third-party
resellers in the Americas, Europe, Australia, and Southeast Asia.
14
<PAGE>
RESULTS OF OPERATION
The following table sets forth for the three most recent fiscal years, the
amounts and percentage relationships to revenues of selected items in the
Company's consolidated financial data.
<TABLE>
SELECTED FINANCIAL
DATA: 1996 % OF % 1995 % OF % 1994 % OF
AMOUNT REVENUE CHANGE AMOUNT REVENUE CHANGE AMOUNT REVENUE
----------- ------- ------ ---------- ------- ------ --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $13,873,401 100% 43% $9,674,683 100% 60% 6,043,411 100%
Gross Profit 5,421,358 39 77 3,060,608 32 47 2,076,382 34
Selling, General, &
Admin. 4,605,402 33 57 2,927,081 30 44 2,032,513 34
Research &
Development 268,028 2 -- -- 0 0 -- 0
Operating Income 547,928 4 310 133,527 1 204 43,869 1
Net Income 339,555 2 244 98,735 1 442 18,233 0
Cash and Cash
Equivalents 1,552,806 103 766,247 55 483,460
Working Capital 943,332 415 183,268 (25) 243,579
Total Assets 4,544,825 61 2,815,857 55 1,821,325
Stockholders' Equity 1,480,907 250 423,294 30 324,559
</TABLE>
FISCAL 1996 COMPARED TO FISCAL 1995
For fiscal 1996, the Company recorded net income of $339,555, or $.08
per share, on revenues of $13,873,401. This compares to fiscal 1995 net
income of $98,735, or $.03 per share, on revenues of $9,674,683.
REVENUES. Revenues increased $4.2 million or 43% from fiscal 1995 to
fiscal 1996. The increase in revenues resulted principally from increased
market penetration in both the software and hardware product lines. Software
sales increased by $2.3 million from fiscal 1995 to fiscal 1996. The
increase was due primarily to the growth of UNIX and Windows NT software
product sales and the release of new versions of WordPerfect for the Digital
operating platforms. Hardware sales in fiscal 1996 increased by $1.9 million
compared to fiscal 1995, largely as a result of the release and customer
acceptance of Digital's Alpha operating platform hardware system during
fiscal 1996. The Company's promotional efforts to bundle the new Alpha Server
and Alpha Version of WordPerfect contributed to the increase in hardware
sales. The expansion of the Company's technical consulting services and
maintenance program also contributed to revenue growth during fiscal 1996.
GROSS PROFIT. As a percentage of revenues, gross profit increased from
32% in fiscal 1995 to 39% in fiscal 1996. The increase in gross profit as a
percentage of revenues can be attributed primarily to three major factors.
First, the Company received the full license rights to WordPerfect for VMS
and Lotus products. This decreased the royalty paid to the owners and
manufacturers of those products. Second, the new product lines sold by the
Company are more technical in nature, and therefore carry a higher discount
from the manufacturers. Third, the Company enjoyed a higher growth in
revenues than the corresponding growth required for personnel; therefore,
fixed costs related to cost of sales were spread over a larger sales base.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general, and
administrative expenses increased as a percentage of revenues from 30% in
fiscal 1995 to 33% in fiscal 1996. The increase was due primarily to four
factors: First, the Company began expanding its international sales channel
aggressively during fiscal 1996. Second, a new UNIX sales division was
created to focus on new product lines. Third, activities relating to the
Company's expanded accounting, legal, and public reporting requirements
increased expenses. Fourth, activities relating to the Company's strategy of
acquiring additional products and other companies required greater
expenditures.
15
<PAGE>
RESEARCH AND DEVELOPMENT. Research and development expenses consist
principally of programming costs for new software. During fiscal 1996, the
Company had total responsibility for several newly licensed products. During
that year, the Company released a WordPerfect upgrade, version 5.1+ for Open
VMS/VAX, WordPerfect 5.1+ for Open VMS/Alpha, and Lotus 1-2-3 for Open
VMS/Alpha. Ongoing programming is necessary to keep pace with software
innovations in several segments of the Company's market niche. With the
Company's strategy to acquire additional exclusive licenses and proprietary
technology, management expects this expense category to increase more rapidly
as a percentage of sales in future periods. Research and development costs
prior to fiscal 1996 were not material.
OTHER INCOME. Other income consists primarily of interest income and
interest expense. Interest income has been earned on excess cash invested in
interest-bearing instruments. Interest income is expected to decline in the
future as cash is used increasingly for operational needs and strategic
expansion.
FISCAL 1995 COMPARED TO FISCAL 1994
For fiscal 1995, the Company recorded net income of $98,735 on revenues
of $9,674,683. This compares to fiscal 1994 net income of $18,233 on
revenues of $6,043,411.
REVENUES. Revenues increased 60% from $6,043,411 in fiscal 1994 to
$9,674,683 for fiscal 1995. The growth in revenues resulted primarily from
increases in sales volume of the Company's historic line of products, the
Company's expanded market presence and its entrance into the UNIX and Windows
NT market niches. During fiscal 1995, the Company expanded its direct sales
force and expanded its relationship with additional third party distributors.
The Company also expanded its product line to include network management and
performance software tools which operate on the UNIX and Windows NT operating
systems platforms. Product pricing and sales margins remained relatively
stable during these periods.
GROSS PROFIT. Gross profit as a percentage of revenues decreased from
34% for fiscal 1994 to 32% for fiscal 1995. This decrease was attributable
primarily to fluctuations in royalties required by the various manufacturers
of software and the increase as a percentage of sales in hardware which
generally carries lower margins. Competition in the Company's industry
remains very high and plays a significant role in determining the margins
that the Company is able to maintain.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased from 34% of revenues for fiscal 1994 to 30%
of revenues for fiscal 1995. The decrease was due primarily to the decrease
in marketing expenditures and increased direct sales efficiencies.
OTHER INCOME. Other income (expense) increased from a deficit of
$16,705 for fiscal 1994 to $11,696 for fiscal 1995. Other income consists
primarily of interest income and interest expense. In addition, for fiscal
1995 other income reflected receipt of a one-time consulting fee in the
amount of $29,772. Interest expense increased from $25,517 for fiscal 1994
to $28,348 in fiscal 1995. This was due primarily to interest charged on
short-term borrowings relating to working capital funding needs.
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THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1995
The following table sets forth, for the periods indicated, the amounts
and percentage relationships to revenues of selected items in the Company's
consolidated financial statements:
<TABLE>
THREE MONTHS ENDED JUNE 30, 1996 % CHANGE THREE MONTHS ENDED JUNE 30, 1995
-------------------------------- -------- --------------------------------
% OF % OF
AMOUNT REVENUE AMOUNT REVENUE
---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Revenues $4,518,439 100% 37% $3,302,858 100%
Gross Profit 1,568,834 35 13 1,385,743 42
Selling, General & Administrative 1,361,315 30 20 1,134,763 34
Research & Development 143,499 3 100 -- --
Operating Income 64,020 1 (74) 250,980 8
Net Income 51,975 1 (66) 153,462 5
Cash and Cash Equivalents 2,459,938 1,652,769
Working Capital 2,692,590 1,595,650
Total Assets 6,755,007 4,981,422
Stockholders Equity 3,103,490 1,140,246
</TABLE>
REVENUES. Revenues for the three months ended June 30, 1996 increased
to $4,518,439 from $3,302,858 for the three months ended June 30, 1995, an
increase of 37%. The increase in revenues reflects increases in both
software product sales and hardware product sales. New versions of existing
software as well as software for new operating platforms were released. The
release of Digital's Alpha operating platform hardware system contributed
substantially to the increase in hardware revenues.
GROSS PROFIT. Gross profit decreased from 42% of revenues for the three
months ended June 30, 1995 to 35% of revenues for the three months ended June
30, 1996. The strong sales of hardware products, which generally carry a
lower margin than software products, along with increased start-up costs
associated with expanding the Company's new UNIX product lines, contributed
to the increase in cost of sales, resulting in lower gross profit margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $1,134,763 for the three months ended
June 30, 1995, as compared to $1,361,315 for the three months ended June 30,
1996, reflecting an increase of 20%. This represents a decrease as a
percentage of sales from 34% for the three months ended June 30, 1995 to 30%
for the three months ended June 30, 1996. The decrease is attributable
primarily to a reduction in marketing and "product show" expenses.
RESEARCH AND DEVELOPMENT EXPENSES. Prior to fiscal 1996, research and
development expenses were minimal as the Comapny relied as its third partie
manufacturers for substantially all product development activities. For the
three months ended June 30, 1996, research and development expenses were
$143,499, due principally to the Comapny's assumption of the full
development responsibilities for several newly licensed software products.
OTHER INCOME. Other income consists primarily of interest income and
interest expense. Interest income increased during the three months ended
June 30, 1996 due to interest earned on the proceeds received by the Company
from the issuance of shares of Common Stock in the Private Placement. See
"Recent Developments -- Private Placement."
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LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has satisfied its liquidity and capital
resource requirements primarily through cash flow from operations. Long-term
bank borrowings have been kept to a minimum and used primarily for the
purchase of a building to house a portion of the Company's operations.
During fiscal 1996 and 1995, the Company generated cash from operating
activities in the amounts of $362,131 and $434,910 respectively. For the same
years, net cash increased $786,559 and $272,787 respectively. The Company's
cash equivalents at the end of fiscal 1996 reflected the additional cash
obtained by the Company in the Share Exchange. In addition, the Company
completed the Private Placement in June 1996, which is reflected in the
unaudited financial information at June 30, 1996.
Working capital increased from $183,268 at April 30, 1995 to $943,332 at
April 30, 1996. The Company's current ratio increased from 1.08 at April 30,
1995 to 1.33 at April 30, 1996. This increase was due primarily to cash
generated from operations and the cash received in the Share Exchange.
Working capital was $2,692,590 at June 30, 1996, reflecting the addition of
proceeds received by the Company in the Private Placement.
Effective June 1, 1996, the Company established two lines of credit with
a commercial bank, one for $1,000,000, secured by trade receivables, at prime
plus two percent, expiring June 1, 1997; the other for $350,000, secured by
equipment, at prime plus two percent, expiring May 1, 1999. As of July 31,
1996, neither of these lines of credit had been used.
Based on anticipated working capital requirements, management believes
that existing cash and cash equivalents, cash generated from operations, and
long-term debt financing and borrowings under the Company's existing lines of
credit will be sufficient to finance the operations of the Company for the
foreseeable future. The Company continues to evaluate opportunities for the
license or acquisition of additional software products as well as the
possible acquisition of, or development of strategic alliances with, other
companies which may have products or distribution channels that are
compatible with the business objectives of the Company. The Company has
obtained the ASI Option, which is exercisable until September 10, 1997; if
the Comapny exercises the ASI Option or identifies and proceeds with any
other acquisition or alliance opportunity, additional capital, in the form of
debt or equity financing, may be required.
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BUSINESS
GENERAL
The Company, through Spire Technologies, Spire Systems, DewPoint and
Centerpost, develops and implements system management and office automation
solutions for open and proprietary computing environments, acts as a "service
and value-added reseller" and distributor of software developed by third
parties, resells Digital network computer systems and components on a
value-added basis and manages VAR and distribution channels in the United
States, Europe, and Southeast Asia. The Company offers a wide range of
desktop, workstation, client/server and centralized computing software,
systems and peripheral equipment, as well as channel management and support
services for both domestic and international clientele in a wide variety of
industries and computing environments, including UNIX, Windows NT and Digital
OpenVMS.
BACKGROUND
The Company was incorporated in the State of Utah in May 1969 for the
purpose of mineral exploration and development. From 1974 until April 1996,
the Company operated as Amacan Resources Corporation and was almost
exclusively engaged as a participant with others in oil and gas exploration
and development. On April 18, 1996, the Company consummated the Share
Exchange by which the Company acquired all the issued and outstanding capital
stock of the Spire Companies in exchange for the issuance to the Spire
Stockholders of a number of shares of Common Stock equal to approximately 90%
of the number of issued and outstanding shares of Common Stock immediately
after the consummation of the Share Exchange. See "The Company" and "Recent
Developments -- Share Exchange." Effective May 1, 1996, the Company divested
itself of all oil and gas interests. The Company does not intend to
participate in any oil and gas operations in the future. See "Business --
Oil and Gas Operations."
THE INDUSTRY
Technological advances in the computer industry continue to create
increasingly smaller, faster and less costly computing solutions. The result
is that, while some users continue to need and utilize mainframe technology,
the largest and fastest growing segment of the computing marketplace is
mid-range, mid-sized computing equipment for government, education and
business users, and smaller, consumer-oriented equipment, including personal
computers.
With the proliferation of these new systems, particularly in the
mid-range market, there has been a proliferation of new computer operating
systems designed for these specialized machines. Like the well-recognized
"operating systems" or "platforms" for PCs (MS-DOS, Windows, and Windows 95
developed by Microsoft Corporation ("Microsoft"), IBM's OS/2, and the
operating systems developed for Apple Computer Inc. ("Apple")), the mid-range
market utilizes a series of unique operating system platforms. These
platforms include Digital's VMS and Open VMS operating systems, a variety of
UNIX operating systems which have been separately developed by many different
manufacturers, and Microsoft's new Windows NT.
Computer application software products (such as wordprocessors,
spreadsheets, management tools, and other types of programs) are typically
designed for use on only one operating system. They generally cannot operate
on other platforms without making extensive and often costly modifications to
the original programming code. As a result of the complexity inherent in a
market which utilizes a wide variety of hardware and software systems, as
well as the changing needs of buyers of such products, the Spire Companies
were formed to serve the role of an "integrator" of solutions for the full
range of mid-range hardware and software users in government, education, and
business environments. The Company has reviewed the hardware and software
being offered by current manufacturers, compared the various competing
products, and elected to represent and sell those software and hardware
systems which the Company considers to be the finest products available on a
stand-alone basis, but which are also capable of being integrated with the
other software and hardware product needs of its customers. Accordingly, the
Company is principally a sales and technical support organization for
third-party products which its employees have tested and, if necessary,
adapted for cross-operating system operation so that its customers can obtain
the benefits of products that function well together in an often
heterogeneous systems environment.
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SALES AND DISTRIBUTION
The Company markets its products and services domestically through a
direct sales force of 40 representatives based in Utah and North Carolina, as
well as through a team of distributors and resellers operating in the U.S.,
Canada, Europe and Southeast Asia managed by DewPoint. Arrangements with
manufacturers, resellers and authorized distributors are an increasingly
important part of the Company's focus on providing complete solutions to its
customers and expanding distribution of its products and services through
indirect channels to domestic and international customers.
PRODUCTS
OVERVIEW. Through Spire Technologies, the Company strives to fill the
computer needs of its customers by providing a combination of integrated
software packages from different manufacturers and technical support for such
products, including office automation, system management, performance, and
Internet security solutions. The Company is the licensing and support
organization for cross-platform compatible VMS and OpenVMS versions of
WordPerfect, WP Office, and Lotus 1-2-3. Spire Systems is an authorized VAR
of hardware and components manufactured by Digital, and provides its
customers with desktop integration and system hardware. The Company
endeavors to meet the specialized mid-range computing needs of government,
education, and corporate organizations worldwide by providing networking
expertise in integrating multi-vendor networks, network consulting with
respect to connectivity, compatibility, inter-operability and management of
the end-user's local area network ("LAN"), installation of the end-user's
LAN, including interface hardware and software, and timely and professional
technical support.
SOFTWARE. Spire Technologies designs, develops, acquires from third
parties and distributes under license, or acts as a reseller for, various
software products for use on Digital computer operating systems, and computer
operating systems such as UNIX and Windows NT developed by other vendors. In
July 1996, Spire Technologies entered into an Exclusive License and Technical
Assistance Agreement with ASI, pursuant to which the Company acquired the
exclusive rights to use, develop and sublicense the SYSMON and other ASI
software products in North and South America. See "Recent Developments --
Australian Software Innovations" and "Business-Products-Network Management
and Performance."
OFFICE AUTOMATION. Under licenses from Corel, Lotus and
Novell, the Company has obtained the right to create derivative works of
the source code for WordPerfect, Lotus 1-2-3 and WP Office (a.k.a.
Groupwise) with ownership of such derivative works remaining in the
licensors. The Company's engineers have developed, and the Company now
markets, these software solutions for the OpenVMS operating platform. The
Company also markets these same office automation products (developed by
third parties) for UNIX, Digital UNIX, MS-DOS and Windows 95 operating
platforms. Because of the wide variety of computing platforms used today
in many organizations, management believes the ability of the Company to
offer powerful office tools which provide cross-platform compatibility and
user familiarity is important in assisting customers to create effective
corporate standards. The Company also offers other third-party office
automation products. The following paragraphs describe the office
automation products currently offered by the Company:
- WORDPERFECT (Corel). WordPerfect for OpenVMS systems is
one of the leading word processing programs, and Digital's word
processing application of choice for OpenVMS users. Powerful
word processing tools, graphics integration and drawing
capabilities, flexible tables, an equation editor and cross-
platform file compatibility have earned WordPerfect nine TARGET
AWARDS for best word processing software.
- LOTUS 1-2-3 (Lotus). Lotus 1-2-3 for OpenVMS provides users
with spreadsheet tools combined with the power and resources of
an OpenVMS environment. The Company believes features such as
three dimensional worksheets, cross-platform file compatibility,
high impact
20
<PAGE>
business graphics, and presentation quality output capabilities
make Lotus 1-2-3 the preferred spreadsheet application for
OpenVMS environments.
- FAX SR. (Omtool, Inc.). Fax Sr. enterprise server sends and
receives faxes directly from within WordPerfect, or almost any
other OpenVMS application, as easily as printing a document or
receiving a mail message. Faxes are sent directly to a
recipient's fax machine via a server's modem, and can include
text, pictures, graphics, scanned images, logos, cover sheets,
and special characters. Clients are available for Windows, Mac,
Windows NT, MS-DOS, and Motif users.
- WP OFFICE (Novell, Inc.). WP Office is an office automation
package which provides electronic mail, personnel and resources
scheduling, a floating calendar and planner, a multi-function
calculator, a customizable database notebook and a file manager.
Each component is integrated through a flexible shell menu which
allows users to switch between programs and launch non-
WordPerfect programs with a single keystroke.
SYSTEM SECURITY. The Company offers a range of third-party UNIX
and OpenVMS operating system security products. These security software
tools are designed to protect an organization's computer network from
unauthorized external access, such as from the Internet, user monitoring,
auditing and logging, authorization and access control, message integrity
and confidentiality protocols, and automated system security analysis,
reporting and correction tools. System security products offered by the
Company include the following:
- THE BORDERWARE FIREWALL SERVER (Secure Computing
Corporation). The BorderWare Firewall Server provides
comprehensive gateway services while maintaining security for
organizations connecting to the Internet (and other TCP/IP
networks). Virtual Private Networks (VPN) can be created using
BorderWare's "IPSEC" encryption capability, and Secure Public
Servers can be setup on BorderWare's Secure Server Network.
BorderWare combines Internet application-level servers (like
Worldwide web ("Web"), electronic mail ("E-Mail"), NEWSGROUPS
("News") and File Transfer Protocol ("FTP") with a transparent
IP Firewall, and uses its knowledge of application processes
and protocols to examine, control, audit and validate network
traffic to and from the trusted network at both the packet and
connection level. The BorderWare Firewall Server has been
promoted as a one- stop solution to a complete and secure
Internet gateway.
- WEBTRACK (Secure Computing Corporation). WebTrack controls
Internet usage based on duration of sessions or actual sites
visited. WebTrack restricts access to sites containing
undesirable or inappropriate content so the Internet can be
used to increase productivity, not detract from it. Its
customizable site list is updated daily, with sites listed into
one of sixteen different categories, including gambling, sports,
criminal skills, humor, sex, hate speech, job search, and
entertainment. With WebTrack on-line, companies can protect
their organizations from lost productivity and liability without
eliminating the Internet as a valuable business tool.
- INTERSCAN VIRUSWALL (Trend Micro, Inc.). InterScan
VirusWall detects and eliminates viruses attached to Web, FTP,
and E-Mail traffic at the Internet gateway in real time - before
they reach the network. InterScan VirusWall currently detects
more than 6,000 known viruses. Using a flexible central
management interface, organizations can administer Internet
activity, isolate viruses before they reach the LAN - even those
hidden in other files, including compressed or encoded formats
such as ZIP, UUENCODE, and MIME, and identify the origin of
infected files for future reference, to prevent down time and
loss of critical data and systems due to virus infection.
- KBLOCK (Raxco, Inc.). KBLock lets users lock their
unattended, logged-in terminals to make them unavailable to
unauthorized users. It can also automatically lock and remove
idle processes when they have been inactive for a prescribed
period of time.
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<PAGE>
STORAGE MANAGEMENT. The Company offers third-party media
management and remote device access products including media libraries,
backup and restoration applications, and data recovery solutions,
including the following:
- THRUWAY AND THRUNET (Software Partners/32, Inc.). THRUway
and THRUnet are remote device access tools which bridge the gap
between remote OpenVMS and UNIX systems and a central site. They
simplify file access and provide easy and direct management,
backup and restoration of remote data to and from an
organization's central system.
- TAPESYS (Software Partners/32, Inc.). TAPESYS is a tape
management system which gives organizations complete control of
their OpenVMS libraries, including magnetic tapes, optical disks
and super-high-density cartridges. TAPESYS also automates backup
scheduling and keeps an on-line directory of backed-up files for
easy restoring.
- RAXMASTER (Raxco, Inc.). RaxMaster is a comprehensive
OpenVMS performance solution combining PerfectDisk, PerfectTune,
PerfectCache and I/O Monitor into an integrated performance
enhancing tool. Whether problems are due to CPU, files, resource
allocation, memory, or I/O, RaxMaster provides proactive, multi-
function performance solutions to help organizations utilize
their existing systems.
- STORAGECENTER (Software Partners/32, Inc.). StorageCenter
provides comprehensive system backup, media management and
administration, archiving, and restore functions for multi-
vendor computing environments. StorageCenter works across a mix
of UNIX and Windows NT environments.
- PERFECTFILE (Raxco, Inc.). PerfectFile improves system
performance by reducing the internal fragmentation of RMS
indexed files. It identifies those files in need of
reorganization, determines the optimal File Definition Language
("FDL") parameters settings, and restructures them. PerfectFile
is useful for sites with large databases or transaction-
processing applications prone to performance degradation due to
defragmentation.
- ULTRADISK (Raxco, Inc.). UltraDisk allows system managers
to safely move and defragment open files while they are being
read or written to by users. PerfectDisk and UltraDisk make
fragmented files contiguous, consolidate free disk space, and
place files to minimize seek time and head movement. UltraDisk
requires no modifications to existing applications, and features
both a ("DCL") and Menu interface.
USER TRAINING AND SUPPORT. The third-party software solutions
offered by the Company for training and support allow customers to track
user problems and establish interactive links between the terminals of
trainers and users. From the trainer's keyboard, the trainer may intervene,
create log files of sessions and conduct local and remote product training
for groups of users. The following user-training and support products are
offered by the Company:
- CONTRL AND CLYDESUPPORT (Raxco, Inc.). CONTRL and
ClydeSupport are integrated user-support tools for training,
monitoring and assisting OpenVMS users. Utilizing these tools,
the customer can monitor users' terminals, establish interactive
links between terminals, create log files of sessions,
communicate with and transfer files to sites not connected by
DECnet, and create and run multiple interactive terminal
sessions simultaneously.
- PC-DUO (Vector Networks Limited). PC-Duo is a remote
control software solution that returns control of distributed
PC users to the customer. The customer can conduct interactive
on-line conversations or training sessions, provide immediate
on-line help, perform file transfers across networks and monitor
user productivity.
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- LANUTIL (Vector Networks Limited). LANutil is the only
OpenVMS based system designed for complete remote PC LAN
management. It can automate LAN management policies and
procedures through: facilitating OpenVMS backups and restores,
managing hardware and software inventories, standardizing PC
configurations and centralizing LAN software distribution.
LANutil for NT features a 32-bit graphical user interface
("GUI") which acts as a front end to the OpenVMS host, making
LANutil a full client/server product. This gives organizations
the flexibility to select a mix of OpenVMS and NT back-end hosts
that best serves its users' environments.
NETWORK MANAGEMENT AND PERFORMANCE. The third-party software
offered by the Company relative to system performance management allows
customers to monitor systems, databases, events and remote nodes to manage
performance tuning, capacity planning, saturation analysis, bench marking
and resource accounting from a central site. This performance management
is conducted in real-time interactive or background modes, across a wide
array of UNIX and database environments. The Company offers the following
management and performance products:
- OPENAVIATOR (ASI). Open Aviator is a modular system
availability and analysis utility which provides system
administrators with the ability to immediately access and
analyze the events which affect the availability of computing
resources. Easy to understand meters, graphs, and charts
enhance an organization's ability to anticipate critical system
events, manage system resources, and resolve problems and
bottlenecks on their heterogeneous UNIX and NT systems before
they occur. Available modules include:
- COPILOT is an interactive system monitoring,
critical analysis, and management tool designed to provide
organizations with real-time information about the ongoing
availability of their systems and applications data. Its
advances MAPS GUI interface provides organizations with
at-a-glance feedback about their systems, letting them
intelligently and accurately correct those conditions
which affect the availability of their computing
resources.
- AUTOPILOT runs in the background, monitoring and
logging key system, database, and application activities.
Its definable monitors can be set to automatically
watch for events, trigger alarms, and activate scripted
event interventions, problem resolutions, and actions.
- NAVIGATOR is launched from CoPilot and AutoPilot
to retrieve the critical information gathered by
OpenAviator's data collectors and customizable
third-party application connections. This information
is fed into CoPilot and AutoPilot's graphical analysis
modules to provide users with real-time and/or recorded
data and information.
- DATA COLLECTORS are customizable data collection
interfaces which gather critical management and
availability information from all major UNIX operating
systems, Windows NT, Oracle, Ingres, Informix, and
Sybase databases, and a growing list of third-party
applications. This information can be gathered in
either real-time or background modes, and is used
by CoPilot and AutoPilot for critical data
analysis and management.
- CONTROL TOWER reduces data vulnerability, security
risk, and resource degradation caused by unattended
station and session inactivity. Control Tower provides
login session monitoring coupled with warning messages
and definable automatic logout procedures.
- FLIGHTLOG tracks computing resource usage by
department, group or individual for accurate charge-back
accounting, capacity planning and resource growth
analysis.
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<PAGE>
- POLYCENTER CAPACITY PLANNER (Digital). POLYCENTER
is a critical planning and evaluation tool which helps
organizations plan accurately for future resource
expansion in their dynamic, heterogeneous computing
environments. Workload and "what-if" analysis tools
allow for accurately determining current resource
limitations and cost justification for additional
systems or peripherals as resource demands change.
- ENSIGN R3 (Boole & Babbage). Ensign R3
provides distributed system administration and
centralized control for UNIX and Windows NT. Ensign
automates and simplifies system administration tasks,
eliminates repetitive administrative activities,
reduces reactive tasks through a surveillance and
recovery facility and permits delegation of routine
processes to others. Administrative tasks are managed
through a GUI interface, eliminating the need to learn
different UNIX syntax and commands.
- PATHWORKS (Digital). PATHWORKS allows
users to share applications, information, and large
system resources within OpenVMS, UNIX, Windows, MS-DOS
and Mac environments. It provides users with LAN
Manager file and print services, compatibility with
network systems of Novell, E-Mail communications,
security for PC files, LAN and Wide Area Network
("WAN") capabilities and a host of network management
and integration tools.
- XJET AND XCONNECT (XCd Corporation).
XJet and XConnect are Ethernet print servers which
allow users of all six major network operating systems
to simultaneously share printer resources. Users on
Digital, UNIX, Novell and Apple networks can all print
jobs to the same printer as if it were connected
directly to their computer -- without any modification
to application programs. Concurrent support for LAN
Manager, LAN Server and Banyan VINES is also available.
HARDWARE. Spire Systems is an authorized VAR for Digital, and
provides its customers with desktop integration, system and networking
hardware, and Digital Services solutions. Spire Systems is licensed
to sell Digital's 64-bit reduced instruction set computing (RISC)
architecture known as "Alpha", which is designed to support multiple
operating systems. Through Spire Systems, the Company offers
Digital's line of Alpha-based products ranging from chips and boards
to high performance workstations and servers. Alpha supports three
major operating systems: Digital's 64-bit UNIX operating system,
Digital's OpenVMS operating system and Microsoft's Windows NT
operating system. The Alpha-based systems include high performance
database servers and workstations. Spire Systems also offers and
sells Digital's VAX computer systems, components and Intel-based
personal computer systems, as well as peripherals manufactured by
Digital and other entities, including magnetic disk drives, tape
drives, solid state disk and in-film heads, video terminals, printers
and network components.
TECHNICAL SERVICES AND SUPPORT. The Company provides technical
consulting, systems integration and product support services to help
its customers plan, implement and manage their information technology
solutions. The Company's services include maintenance and support
services for Company software solutions, as well as third-party
products sold by the Company; information systems consulting;
technical and application design services; education and training
services; systems integration and project management services; network
design and support services; and outsourcing and resourcing management
services.
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COMPETITION
The information technology industry is highly competitive,
international in scope, and comprised of many companies. The methods of
competition include, but are not limited to, marketing, product
performance, price, service, technology and compliance with various
industry standards. Present and potential competition in the various
markets served by the Company comes from firms of various sizes and
types, many of which are larger and have greater resources than the
Company. Firms not now in direct competition with the Company may
introduce competing products in the future. It is possible for
companies to be at various times competitors, customers and
collaborators in different markets.
MATERIALS
The Company is solely dependent on Digital and authorized
distributors of Digital products for its supply of hardware. In
addition, the Company obtains software from numerous third-party
vendors, many of which are the sole sources for such software. The
Company then incorporates the various hardware, peripheral and software
components into an integrated system for on-site installation at each
customer's location. If one of the Company's third-party vendors of
either hardware or software were to become unavailable to the Company,
management believes that the Company would be able to obtain competing
and alternate sources of supply of similar but not identical products.
Nonetheless, the failure of such suppliers to deliver such items on a
timely basis could adversely effect the operating results of the Company
until alternative sources of supply could be arranged. Also, if any of
the license agreements relating to the office automation products
developed by the Company were to be terminated, the operating results of
the Company could also be adversely affected.
SIGNIFICANT CUSTOMERS
Although the Company sells to many customers involved in certain
industries such as government and education which, if aggregated,
would result in sales to a particular industry of more than ten
percent, no single customer represents sales by the Company in the
aggregate amount of ten percent or more of its consolidated revenues.
Accordingly, Company management believes that the loss of any single
customer would not have a material adverse effect on the Company taken
as a whole.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company does not own any patents nor has it filed any patent
applications relating to its products. The Company has a limited
number of copyrights and has obtained licenses to create derivative
works relative to copyrights owned by third parties. The ownership of
such derivative works vests in the licensor. The Company is also
seeking tradename and trademark protection for certain of its names
and marks. Management does not believe that any particular patent or
group of patents, copyrights, trademarks, or tradenames is of material
importance to the business of the Company as a whole.
RESEARCH AND DEVELOPMENT
The Company competes in an industry which is characterized by
rapid technological change. Historically, neither the Company nor the
Spire Companies (prior to the consummation of the Share Exchange) have
incurred significant expenses for research and development.
Management anticipates that it will begin investing in research and
development during the 1997 fiscal year to maintain and strengthen its
competitive position. Management does not anticipate that research
and development expense will exceed five percent of the Company's
gross revenues for the fiscal year ending March 31, 1997.
OIL AND GAS OPERATIONS
Prior to the consummation of the Share Exchange, the Company had
operated almost exclusively since 1974 as a participant with others in
oil and gas exploration and development. The Company's principal
assets during this period were working interests in producing oil and
gas wells and options or rights to participate in the drilling of
additional wells. During this period, the Company participated almost
exclusively with an independent operator,
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Luff Exploration Company ("Luff Exploration") of Denver, Colorado, in its
exploration activity. From 1974 to April 1996, the Company participated with
Luff Exploration in drilling a total of 122 wells, 31 of which were
productive as of April 1996. Of the 122 wells, 50 were exploratory wells and
72 were developmental wells. During its participation with Luff Exploration,
the Company farmed out its interests for drilling by other companies, at
their expense, in a total of 28 additional wells, one of which was productive
as of April 1996. Effective May 1, 1996, the Company transferred to a group
of purchasers, including Kenneth D. Luff, President of Luff Exploration and a
former director of the Company, all of the Company's oil and gas interests in
exchange for the payment of $197,000. The Company does not intend to
participate in any oil or gas operations in the future.
EMPLOYEES
As of September 20, 1996, the Company had approximately 76 total
employees, approximately 64 of which were full-time employees.
Competition for qualified personnel in the computer industry is
intense. The future success and growth of the Company will depend in
large measure upon its ability to attract and retain qualified
management and technical personnel. Failure of the Company to attract
and retain key management and technical personnel and qualified
personnel required to continue the Company's operations could have a
material adverse impact on the Company. None of the Company's
employees is represented by a labor organization with respect to their
employment with the Company, the Company has never had a work
stoppage, and the Company considers its employee relations
satisfactory.
FACILITIES
The headquarters and research and development facilities of the
Company are located at 311 North State Street, Orem, Utah. The
Company owns a 5,200 square foot building, subject to encumbrances of
$121,236 and $100,933 at June 30, 1996, which bear interest at rates
of 8.25% and 8.70%, respectively. In addition, the Company occupies
17,500 square feet of contiguous space under two leases of one year
and two years, respectively, both subject to options to extend the
terms thereof for an additional five lease periods of one year each.
The monthly base rents of these leases are $5,500 and $4,675,
respectively, subject to adjustment during the renewal periods.
Company management believes these contiguous facilities are suitable
and adequate to meet the anticipated needs of the Company for the
current fiscal year. Management anticipates that continued growth of
the Company will necessitate acquisition of additional office space in
the future.
LEGAL AND ADMINISTRATIVE PROCEEDINGS
There are currently no material pending or, to the knowledge of
the Company, threatened legal proceedings, other than ordinary,
routine litigation incidental to the business, to which the Company is
a party or to which any of its property is subject.
26
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information regarding the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
<S> <C> <C> <C>
Gary B. Godfrey . . . . 36 Chairman of the Board and Chief 1996
Executive Officer
Robert K. Bench . . . . 46 President, Chief Financial 1996
Officer and Director
Brian W. Braithwaite . 35 Secretary, Treasurer and 1996
Director
Sherman H. Smith . . . 51 Director 1996
William A. Fresh . . . 67 Director 1996
Eng H. Lee . . . . . . 36 Director 1996
</TABLE>
All directors are elected to one-year terms yearly at the annual
meeting of shareholders. All officers serve at the discretion of the
Board of Directors.
GARY B. GODFREY serves as Chairman of the Board and Chief
Executive Officer of the Company pursuant to his appointment as such
following consummation of the Share Exchange in April 1996. Mr.
Godfrey has been President and a director of Spire Technologies since
its organization in 1986, exercising primary responsibility for
financial management, marketing and personnel. Mr. Godfrey has been
President and a director of Spire Systems since 1992.
ROBERT K. BENCH serves as President, Chief Financial Officer and
a director of the Company pursuant to his appointment as such
following consummation of the Share Exchange in April 1996. In
addition, he continues to serve as the Chief Financial Officer and a
director of Spire Technologies, and as the Chief Financial Officer and
a director of Spire Systems, positions to which he was appointed in
January 1996. Mr. Bench served as the Chief Financial Officer for
CerProbe Corporation ("CerProbe"), a publicly-held corporation which
manufactures products for the semi-conductor industry, from April 1995
through February 1996. CerProbe acquired, through a merger, Fresh
Test Technology Corporation ("Fresh Test") in April 1995. Mr. Bench
was President of Fresh Test from April 1993 to the time of the merger.
From 1991 through 1993, Mr. Bench served as Vice President and Chief
Operating Officer for Fresh Technology Company, an affiliate of Fresh
Test. From 1986 through 1991, Mr. Bench served as Vice President and
Chief Financial Officer at Clyde Digital Corporation, a private
company engaged in computerized software engineering.
BRIAN W. BRAITHWAITE is Secretary, Treasurer and a director of
the Company, and has so served since consummation of the Share
Exchange in April 1996. Mr. Braithwaite has been Vice President,
Secretary, Treasurer and a director of Spire Technologies since its
inception in 1986. Mr. Braithwaite has also served as Vice President,
Secretary, Treasurer and a director of Spire Systems since 1992.
SHERMAN H. SMITH serves as a director of the Company, and has
done so since consummation of the Share Exchange in April 1996.
Pursuant to the terms of the Exchange Agreement, Mr. Smith was
designated by the Board of Directors of Amacan to serve as a director
of the Company upon consummation of the Share Exchange; however, no
arrangement or understanding exists whereby Mr. Smith must be retained
as a director. Mr. Smith, a certified public accountant, is engaged
in the practice of accounting with the accounting firm of Schmitt,
Griffiths, Smith & Co. in Ogden, Utah, with which he has practiced
accounting since 1974.
27
<PAGE>
WILLIAM A. FRESH is a director of the Company pursuant to his
appointment as such following consummation of the Share Exchange. Mr.
Fresh also serves as Chairman of the Board and Chief Executive Officer
of Magellan Technology, Inc. ("Magellan"), a publicly-held corporation
engaged in the business of providing image-based data entry services.
Mr. Fresh founded EFI Electronics Corporation ("EFI"), a manufacturer
and marketer of surge suppression equipment for computer, industrial,
medical and telecommunication devices, in 1981 and subsequently served
as its chairman and president until 1986. Mr. Fresh is currently
president, chairman and owner of Orem Tek Development Corporation, a
consulting and business park development corporation. In addition,
Mr. Fresh has served as a director of CerProbe since April 1995. Mr.
Fresh co-founded Fresh Test and served as its chairman and Chief
Executive Officer from January 1986 through March 1995.
ENG H. LEE serves as a director of the Company pursuant to his
appointment as such by the Board of Directors in September 1996, to
fill a vacancy created by the resolution of the Board of Directors to
increase the number of directors of the Company. Mr. Lee is the
founder and Managing Director of ASI, a position he has held since
1987. See "Recent Developments -- ASI" and "Certain Relationships and
Related Party Transactions."
EXECUTIVE COMPENSATION
The following table sets forth the compensation for each of the
last three fiscal years, for services rendered to the Company by any
individual who served as the Company's Chief Executive Officer at any
time during the 1996 fiscal year (collectively, the "Named Executive
Officers"). No executive officer of the Company was paid in excess of
$100,000 in salary and bonus by the Company during the fiscal year
ended April 30, 1996. The following table does not reflect
compensation paid to Gary B. Godfrey or any other executive officer of
the Company by Spire Technologies and Spire Systems prior to the
consummation of the Share Exchange.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------- ---------------------- --------
SECURI-
TIES
OTHER RESTRICTED UNDER- ALL
YEAR ANNUAL STOCK LYING LTIP OTHER
NAME AND ENDED SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION APRIL 30, ($) ($) ($) ($) (#) ($) ($)
- -------------------------- -------- ------- ------ ------------ ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tad M. Ballantyne 1996 10,008 0 0 0 0 0 0
Former President and Chief 1995 10,000 0 0 0 0 0 0
Executive Officer 1994 0 0 0 0 0 0 0
Gary B. Godfrey 1996 2,692 0 0 0 0 0 0
Chief Executive Officer 1995 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0
</TABLE>
EMPLOYEE BENEFIT PLANS
STOCK OPTION PLAN. The Board of Directors adopted the Option
Plan effective as of January 31, 1996. As part of the Share Exchange,
the Company's shareholders approved the Option Plan on April 18, 1996,
and the Company has substituted options to purchase shares of the
Common Stock pursuant to the Option Plan for each outstanding option
to purchase shares of the Spire Technologies Common Stock pursuant to
the Spire Option Plan. The Option Plan is designed to promote the
long-term success of the Company and the creation of incremental
stockholder value by (a) encouraging directors and key employees of
the Company and its subsidiaries to focus on critical long-range
objectives, (b) encouraging the attraction and retention of key
employees with exceptional
28
<PAGE>
qualifications, and (c) linking the interests of key employees of the
Company directly to stockholder interests through increased stock
ownership. Awards under the Option Plan may be in the form of stock
options, stock appreciation rights ("SARs"), restricted shares of Common
Stock or stock units, commonly known as phantom stock awards. The Option
Plan is administered by a committee (the "Option Plan Committee") of two
or more disinterested directors appointed by the Board of Directors. The
Option Plan Committee is presently composed of the Compensation Committee
of the Board of Directors. As of September 20, 1996, the Company had
granted options for the purchase of 656,185 shares of Common Stock under
the Option Plan. The following description of the Option Plan does not
purport to be complete and is qualified in its entirety by reference to
the full text thereof.
Grants under the Option Plan may be made to directors, executive
officers and key employees of the Company who are expected to make
significant contributions to the Company. Except with respect to the
annual grant of options to non-employee directors described below, the
Option Plan Committee, in its sole discretion, determines the number and
type of awards granted to a participant under the Option Plan, and the
terms and conditions of such award, including any vesting conditions.
The Option Plan specifically provides for an initial grant to each
non-employee director of the Company of 5,000 options upon election or
appointment as a director of the Company (which options vest in
increments of 1,667 options over a three-year period) and an annual grant
to each non-employee director of 2,000 options which are immediately
exercisable at the fair market value of shares of Common Stock on the
date of grant. The Option Plan provides that up to 1,000,000 shares of
Common Stock are available for issuance thereunder, and that no
participant may receive awards for more than an aggregate of 200,000
options, restricted shares or stock units in any single calendar year.
Options may be incentive stock options, as that term is defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), as well as nonstatutory stock options. The exercise price of an
option may not be less than the fair market value of a share of Common
Stock on the date of the grant. The Committee may grant SARs in tandem
with any option granted in an amount equal to or less than the number of
options so granted. Generally, SARs may be exercised at any time after
the underlying option vests. Upon exercise, each SAR entitles a
participant to receive from the Company a payment equal to the excess of
the fair market value of a share of Common Stock, determined at the time
the SAR is exercised, over the exercise price of the related option. At
the discretion of the Committee, payments may be made in cash, shares of
Common Stock or a combination thereof.
EMPLOYEE STOCK PURCHASE PLAN. On April 18, 1996, the Board of
Directors of the Company adopted the Stock Purchase Plan and reserved
200,000 shares of Common Stock for possible future issuance to employees
of the Company and other individuals thereunder. The shareholders of the
Company ratified and approved the adoption of the Stock Purchase Plan on
September 10, 1996. The purpose of the Stock Purchase Plan is to provide
a method whereby employees of the Company and certain of its
subsidiaries, except for employees who own beneficially five percent or
more of the voting stock of the Company, may acquire a proprietary
interest in the Company through the purchase of shares of Common Stock.
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Code. The Stock Purchase Plan is
administered by a committee (the "Purchase Plan Committee") of no fewer
than two members of the Board of Directors. The Purchase Plan Committee
is presently composed of the Compensation Committee of the Board of
Directors. As of September 20, 1996, the Company had not sold any shares
under the Stock Purchase Plan. The following description of the Stock
Purchase Plan does not purport to be complete and is qualified in its
entirety by reference to the full text thereof.
The Stock Purchase Plan provides for a series of six semi-annual
offerings commencing on April 1 and October 1, respectively, in each of
the years 1996 through 1998, and terminating on the succeeding September
30 and March 31, respectively; provided, however, that the initial
offering under the Stock Purchase Plan was deemed to have commenced on
April 18, 1996, the effective date of the Stock Purchase Plan. On the
applicable offering commencement date, a participating employee will be
deemed to have been granted an option to purchase, on the offering
termination date, a maximum number of shares of Common Stock determined
by multiplying 15% by the employee's projected base pay for the offering
period, and dividing by 85% of the fair market value of Common Stock on
the applicable offering commencement date. No employee will be granted an
option which permits him or her to purchase in excess of $25,000 of
Common Stock per calendar year.
29
<PAGE>
The price per share of Common Stock to be paid by participants under
the Stock Purchase Plan is the lesser of (a) 85% of the fair market value
of the Common Stock on the applicable offering commencement date or (b)
85% of the fair market value of the Common Stock on the applicable
offering termination date. The exercise price shall be payable through
payroll deduction from an employee's compensation (beginning with the
commencement of the second offering on October 1, 1996) or by delivering
payment of the exercise price to the Company prior to the offering
termination date.
COMPENSATION OF DIRECTORS
The directors of the Company are not presently compensated for
attendance at board and committee meetings. All directors are reimbursed
for expenses in connection with attendance at Board and committee
meetings. The Compensation Committee of the Board is currently reviewing
and preparing proposals relating to director compensation for submission
to the Board.
EMPLOYMENT ARRANGEMENTS
In connection with the appointment of Messrs. Godfrey and Bench as
executive officers of the Company, the Company and Messrs. Godfrey and
Bench agreed that the Company will pay to Messrs. Godfrey and Bench, as
aggregate compensation for their services to the Company and its
subsidiaries, the annual amount of $125,000 each. The Company has also
agreed to pay to each of Messrs. Godfrey and Bench the annual amount of
$10,000 to fund insurance policies maintained by Messrs. Godfrey and
Bench. The Company has no plans or arrangements with any officer or
director whereby any such person would obtain remuneration in connection
with the resignation, retirement or other termination of his employment.
Likewise, the Company has no remunerative plans or arrangements covering
any officer or director that would arise from a change in control of the
Company or a change in the individual's responsibilities following a
change in control of the Company. The Company is not currently the owner
or beneficiary of any life insurance policies on any of its officers or
key employees.
COMMITTEES AND MEETINGS
The Board of Directors has formed a standing Audit Committee, the
members of which are Sherman H. Smith and William A. Fresh. Prior to the
Share Exchange, the Audit Committee was comprised of Lamar H. Holley and
Tad M. Ballantyne, and did not hold any meetings during the fiscal year
ended April 30, 1996. The Audit Committee's functions include the
recommendation of the Company's independent auditor and the review of the
Company's internal accounting and financial practices and controls and
all services performed by the Company's independent auditor.
The Board of Directors also has formed a standing Compensation
Committee comprised solely of non-employee directors, the members of
which are Sherman H. Smith and William A. Fresh. The Compensation
Committee currently serves as the Option Plan Committee and the Purchase
Plan Committee pursuant to the Option Plan and the Stock Purchase Plan,
respectively. Prior to the Share Exchange, the Board of Directors had
not formed a standing Compensation Committee.
Prior to the Share Exchange, the Board of Directors was comprised of
Tad M. Ballantyne, Lamar H. Holley, Russell G. Holley and Kenneth D.
Luff. Lamar H. Holley and Russell G. Holley are brothers. Upon the
completion of the Share Exchange on April 18, 1996, Messrs. Godfrey,
Bench, Braithwaite, Smith and Fresh were appointed as directors of the
Company and Messrs. Ballantyne, Holley, Holley and Luff resigned as
directors of the Company as contemplated by the Exchange Agreement. See
"Recent Developments -- Share Exchange." During the fiscal year ended
April 30, 1996, there were three meetings held by the Board of Directors.
No director attended fewer than 75% of the total number of meetings of
the Board and of the committees on which he served. The Company does not
maintain a standing nominating committee of the Board of Directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws contain certain provisions which provide for
the indemnification of the Company's directors and officers against
expenses, including attorney's fees, judgments, fines and amounts paid in
settlement
30
<PAGE>
incurred by a director or officer in connection with any threatened,
pending or completed action, suit or proceeding arising from his or her
service to or for the benefit of the Company and to which he or she is
made a party. At present there is no pending litigation or proceeding
involving any director or officer of the Company where indemnification
will be required or permitted under the Company's Bylaws. The Company is
not aware of any threatened litigation or proceeding which may result in
a claim for such indemnification. The Company currently maintains no
policy of director's and officer's liability insurance.
The Company believes that the indemnification of its directors
and officers will facilitate the Company's ability to continue to
attract and retain qualified individuals to serve as directors and
officers of the Company. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to the provisions
described above, the Company has been informed that in the opinion of
the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During the fiscal year ended April 30, 1996, the Company paid
approximately $58,100 to Luff Exploration for the Company's share of
expenses associated with the production of oil and gas. Such expense was
allocated based on the Company's interest in each oil or gas well. The
President and principal shareholder of Luff Exploration is Mr. Kenneth D.
Luff, who was a director of the Company until the consummation of the
Share Exchange.
On September 10, 1996, the Board appointed Mr. Eng H. Lee to serve as a
director of the Company. Mr. Lee is the record owner of fifty percent (50%),
and through his wife, Mary Lee, is the beneficial owner of one hundred
percent (100%), of the capital stock of Kilat, the sole shareholder of ASI.
Mr. Lee also currently serves as the Managing Director of Kilat and ASI.
Effective July 1, 1996, the Company, through Spire Technologies, entered into
the ASI License Agreement with ASI, pursuant to which the Company obtained
the ASI License, paid ASI a license fee in the amount of $550,000 and agreed
to pay certain royalties to ASI. On September 10, 1996, the Company entered
into the ASI Option Agreement with ASI, Kilat and Mr and Mrs. Lee, pursuant
to which the Company obtained the ASI Option to acquire all or any portion of
the assets of ASI, paid to ASI an option purchase payment in the amount of
$130,000 and will make available to ASI the ASI Credit Facility in an amount
not to exceed $200,000. See "Recent Developments -- Australian Software
Innovations."
31
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information as of September 20, 1996 with
respect to the beneficial ownership of shares of the Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of the Common
Stock, by each director and current Named Executive Officer (see "Management --
Executive Compensation"), by each shareholder of the Company electing to offer
or sell shares of the Common Stock offered hereby (a "Selling Shareholders") and
by all directors and officers as a group. Unless otherwise noted, each person
named has sole voting and investment power with respect to the shares indicated.
The percentages set forth below have been computed based on the number of
outstanding securities, excluding treasury shares held by the Company, which was
4,337,373 shares of Common Stock as of September 20, 1996.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIALLY OWNED
AS OF SEPTEMBER 20, 1996 SHARES AFTER OFFERING
------------------------------- --------------
NUMBER OF
SHARES
NUMBER OF BEING NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT OFFERED SHARES PERCENT
- ------------------------------------ ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Gary B. Godfrey......................... 1,101,701(1) 25.4% 25,000 1,076,701 24.8%
149 North 835 East
Lindon, Utah 84042
Douglas D. Yates........................ 635,711(2) 14.7 70,000 565,711 13.0
797 North 500 West
Lehi, Utah 84043
Jeffrey L. Webster...................... 625,970 14.4 91,000 534,970 12.3
465 West 320 North
American Fork, UT 84003
Brian W. Braithwaite.................... 537,265 12.4 20,000 517,265 11.9
1348 North 1400 West
Provo, Utah 84604
Robert K. Bench......................... 454,261(3) 10.4 0 454,261 10.4
626 East 1820 North
Orem, Utah 84057
William A. Fresh........................ 99,804(4)(7) 2.3 0 99,804 2.3
Hsi-Che Chen............................ 80,000 ** 80,000 0 0
Keith A. Cannon......................... 30,000 ** 30,000 0 0
Corporation of the President of The
Church of Jesus Christ of Latter
Day Saints............................. 36,000 ** 36,000 0 0
Banyan Investment Company............... 20,000 ** 20,000 0 0
Clemons and Leslie Walker Family Trust.. 14,000 ** 14,000 0 0
Robert P. Ellis......................... 12,000 ** 12,000 0 0
Ballard Investment Corporation.......... 10,000 ** 10,000 0 0
David M. Berkowitz IRA.................. 10,000 ** 10,000 0 0
LuDene F. Dallimore IRA................. 10,000 ** 10,000 0 0
Paul N. Davis........................... 10,000 ** 10,000 0 0
Howard and Beth Falco................... 10,000 ** 10,000 0 0
James K. Farrelly Retirement Plan....... 10,000 ** 10,000
Max C. Tanner Keogh..................... 10,000 ** 10,000 0 0
James W. Loss........................... 10,000 ** 10,000 0 0
Allan R. Lyons.......................... 10,000 ** 10,000 0 0
The Mart Warehousing and Storage,
Inc. .................................. 10,000 ** 10,000 0 0
Petroventure Holdings Limited........... 10,000 ** 10,000 0 0
Sheldon and Janet Razin................. 10,000 ** 10,000
San Joaquin Construction Corporation.... 10,000 ** 10,000 0 0
September Corporation................... 10,000 ** 10,000 0 0
Andrew E. Shapiro....................... 10,000 ** 10,000 0 0
Lincoln F. Stock........................ 10,000 ** 10,000 0 0
Clemons F. Walker....................... 10,000 ** 10,000 0 0
John and Carolyn Witkowski.............. 10,000 ** 10,000 0 0
Wasatch Family Dental P.C. Trust........ 8,000 ** 8,000 0 0
Sherman H. Smith........................ 6,360(5)(7) ** 0 6,360 **
Wayne M. Hammersly...................... 6,000 ** 6,000 0 0
Hoya Investments........................ 6,000 ** 6,000 0 0
John and Marilyn Chatterton............. 5,714 ** 5,714 0 0
Bruce Cox............................... 5,000 ** 5,000 0 0
Melvin R. Stoltz, MD Inc. Defined
Benefit Plan........................... 5,000 ** 5,000 0 0
Walfred J. and Vida Fassler............. 2,500 ** 2,500 0 0
David J. Enzer.......................... 2,500 ** 2,500 0 0
Greg Flynn.............................. 2,500 ** 2,500
Stephen L. Hunsaker..................... 2,000 ** 2,000 0 0
Glenn Holley............................ 2,000 ** 2,000 0 0
Guy and Norma Ivins..................... 2,000 ** 2,000 0 0
Eng H. Lee.............................. 0 0 0 0 0
All officers and directors as a group
(6 persons)............................ 2,199,391(6)(7) 50.6 206,000 2,154,391 49.6
</TABLE>
__________________
32
<PAGE>
* Shares of the Common Stock underlying options or other convertible
securities are deemed to be outstanding for purposes of calculating the
percentage of class for the owner of such securities, but not for purposes
of calculating any other person's percentage ownership.
** Represents less than 1% of the outstanding shares of Common Stock.
(1) Shares held by Gary B. Godfrey and Karie Godfrey, Trustees of the Gary
B. Godfrey Family Revocable Trust dated July 1, 1993.
(2) Shares held by Douglas D. Yates and Rita S. Yates, Trustees of the
Rita S. Yates Family Revocable Trust dated July 1, 1993.
(3) Includes presently exercisable options to purchase 41,829 shares of
Common Stock issued under the Option Plan in connection with the Share
Exchange in substitution for options to purchase shares of Spire
Technologies Common Stock. See "Recent Developments -- Share Exchange."
(4) Includes 20,000 shares owned of record by Mr. Fresh's individual
retirement account.
(5) Includes 2,000 shares owned of record by the Gerald Smith Family
Partnership, of which Mr. Smith is a limited partner. Mr. Smith disclaims
beneficial ownership of such shares.
(6) Includes presently exercisable options to purchase 41,829 shares of
Common Stock.
(7) Includes presently exercisable options to purchase 2,000 shares of
Common Stock issued to each of Mr. Fresh and Mr. Smith pursuant to the
Option Plan. See "Management -- Employee Benefit Plans -- Stock Option
Plan."
33
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby will not be offered or
sold through any underwriting syndicate, nor has the Company retained any
underwriter, broker or dealer to facilitate the offer or sale of such
shares. No underwriting commissions or discounts will be paid by the
Company in connection therewith. Those Selling Shareholders electing to
offer or sell shares of Common Stock offered hereby will do so through
the use of brokers in private transactions. The Company will receive no
proceeds from the sale of any of the shares of Common Stock offered
hereby.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's Articles authorize the issuance of eight million
(8,000,000) shares of Common Stock, par value $.25 per share. As of
September 20, 1996, there were 4,337,373 shares of Common Stock issued
and outstanding, held by approximately 422 stockholders of record.
Except as otherwise required by law, each share of Common Stock entitles
the stockholder to one vote on each matter which stockholders may vote on
at all meetings of stockholders of the Company. Holders of the Common
Stock are not entitled to cumulative voting in the election of directors.
Holders of the Common Stock do not have preemptive, subscription or
conversion rights, and there are no redemption or sinking fund provisions
applicable thereto. Shares of Common Stock are entitled to share equally
and ratably in dividends paid from the funds legally available for the
payment thereof, when, as and if declared by the Board of Directors of
the Company. The declaration of dividends, however, is subject to the
discretion of the Board of Directors. Holders of Common Stock are also
entitled to share ratably in the assets of the Company available for
distribution to holders of Common Stock after payment of liabilities of
the Company upon liquidation or dissolution of the Company, whether
voluntary or involuntary. All the outstanding shares of Common Stock are
fully paid and nonassessable.
The Company has no present intention of paying any cash dividends on
the Common Stock and plans currently to retain any earnings to finance
the development and expansion of its operations. The payment of cash
dividends also may be restricted by a number of other factors, including
future earnings, capital requirements and the financial condition of the
Company, and restrictions on the payment of dividends imposed under Utah
law.
CERTAIN INDEMNIFICATION AND LIMITED LIABILITY PROVISIONS
The Company's Bylaws provide that the Company shall indemnify all
directors and officers of the Company as permitted by the Utah Revised
Business Corporation Act (the "Corporation Act"). Under such provisions,
any director or officer, who in his capacity as such, is made a party to
any suit or proceeding, shall be indemnified if such director or officer
acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interest of the Company and, in the case of
a criminal proceeding, he or she had no reasonable cause to believe his
or her conduct was unlawful; provided, however, that no indemnification
may be given a director or officer where the claim or liability arose out
of that person's own negligence or willful misconduct, or if such person
is ultimately adjudged in the proceeding to be liable to the Company or
liable on the basis that he or she derived an improper personal benefit.
The Bylaws and the Corporation Act further provide that such
indemnification is not exclusive of any other rights to which such
individuals may be entitled under the Articles, the Bylaws, any
agreement, vote of stockholders or otherwise.
The Company currently maintains no policy of director's and
officer's liability insurance for the benefit of the officers and
directors of the Company.
UTAH CONTROL SHARES ACQUISITION ACT
The Utah Control Shares Acquisition Act (the "Control Shares Act")
provides that any person or entity which acquires 20% or more of the
outstanding voting shares of a publicly-held Utah corporation is denied
voting
34
<PAGE>
rights with respect to the acquired shares, unless a majority of the
disinterested shareholders of the corporation elects to restore such voting
rights. A "control share acquisition" is generally defined as the direct or
indirect acquisition of either ownership or voting power associated with
previously issued and outstanding control shares. The shareholders of a
corporation may elect to exempt the stock of the corporation from the
provisions of the Control Shares Act through adoption of a provision to that
effect in the articles of incorporation or bylaws of the corporation.
Neither the Company's Articles nor its Bylaws exempt the Common Stock from
the Control Shares Act.
The provisions of the Control Shares Act may discourage companies
interested in acquiring a significant interest in or control of the Company from
doing so.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Atlas Stock
Transfer, Inc., 5899 South State Street, Murray, Utah 84107, (801)
266-7151.
35
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
As of September 20, 1996, the Company had 4,337,373 shares of Common
Stock outstanding. 1,036,656 of these shares, including the 647,214 Shares
offered hereby, are freely tradeable without restriction or further
registration under the Securities Act, except for any Shares purchased by an
"affiliate" of the Company (as defined in the Securities Act and the rules
and regulations thereunder) which will be subject to the resale limitations
of Rule 144. The remaining 3,300,717 shares are "restricted securities" as
that term is defined under Rule 144.
In general, under Rule 144, as currently in effect, beginning 90
days after the effective date of the Registration Statement of which this
Prospectus is a part, a shareholder (or shareholders whose shares are
aggregated), including an affiliate of the Company, who beneficially has
owned his or her restricted securities (as that term is defined in Rule
144) for at least two years from the later of the date such securities
were acquired from the Company or (if applicable) the date they were
acquired from an affiliate, is entitled to sell, within any three-month
period, a number of such shares that does not exceed the greater of 1% of
the then outstanding shares of Common Stock or the average weekly trading
volume in the Common Stock during the four calendar weeks preceding the
date on which notice of such sale was filed under Rule 144, provided
certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, affiliates
of the Company must comply with the restrictions and requirements of Rule
144, other than the two-year holding period requirement, in order to sell
shares of Common Stock which are not restricted securities. Under Rule
144(k), if a period of at least three years has elapsed between the later
of the date the restricted securities were acquired from the Company or
the date they were acquired from an affiliate of the Company, a
shareholder who is not an affiliate of the Company at the time of sale
and has not been an affiliate at any time during the 90 days prior to the
sale would be entitled to sell the shares immediately without compliance
with the foregoing requirements under Rule 144, other than the
requirements as to the availability of current public information about
the Company.
The Commission has proposed certain amendments to Rule 144 that
would reduce to one year the holding period required prior to restricted
securities becoming eligible for resale in the public market under Rule
144 and reduce to two years the holding period required prior to a person
becoming eligible to effect sales under Rule 144(k). This proposal, if
adopted, would result in a substantial number of shares of Common Stock
becoming eligible for resale in the public markets significantly sooner
than would otherwise be the case, which could adversely affect the market
price for the Common Stock. No assurances can be given concerning
whether or when such proposal will be adopted by the Commission.
The Common Stock is quoted on the NASD's OTC Bulletin Board under
the symbol "STIC." Application has been made to NASDAQ to be traded on
the NASD's Small Cap Market. At the time of acceptance onto the Small
Cap Market, the symbol will be "SNTO." No prediction can be made of the
effect, if any, that sales of shares of Common Stock under Rule 144 or
the availability of shares for sale will have on the market price of the
Common Stock prevailing from time to time after the offering. The
Company is unable to estimate the number of shares that may be sold in
the public market under Rule 144, because such amount will depend on the
trading volume in, and market price for, the Common Stock and other
factors. Nevertheless, sales of substantial amounts of Common Stock in
the public market, or the perception that such sales could occur, could
adversely affect the market price of the Common Stock.
LEGAL MATTERS
The validity of the Shares and the Warrant Shares being offered
hereby and certain other matters are being passed upon for the Company by
Kimball, Parr, Waddoups, Brown & Gee, Salt Lake City, Utah.
36
<PAGE>
EXPERTS
The financial statements of Sento Technical Innovations Corporation
and subsidiaries (formerly Spire International Corp.) as of April 30,
1996, 1995 and 1994, and for each of the years in the three-year period
ended April 30, 1996 have been included herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
From 1979 to July, 1995, KPMG was retained by Amacan to audit
Amacan's financial statements. On July 14, 1995, upon the recommendation
and approval of the Board of Directors, Amacan engaged Tanner as
independent auditor to audit Amacan's financial statements for the year
ending April 30, 1995, and notified KPMG of their dismissal as
independent auditor. KPMG's reports on Amacan's financial statements for
the fiscal years ended April 30, 1994 and 1993 contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. Amacan had no
disagreements with KPMG on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure, which, if not resolved, would have caused KPMG to make
reference to the subject matter of the disagreement in connection with
its reports. In addition, during the fiscal year and the interim period
during which KPMG served Amacan preceding its dismissal, Amacan had no
reportable events ("Reportable Events") as defined in Item 304(a)(1)(v)
of Regulation S-K, promulgated pursuant to the Securities Exchange Act of
1934, as amended. No consultations occurred between Amacan and Tanner
during the fiscal year and any interim period preceding the recent
appointment of Tanner regarding the application of accounting principles,
the type of audit opinion that might be rendered or other information
considered by Amacan in reaching a decision as to an accounting, auditing
or financial reporting issue.
Upon consummation of the Share Exchange on April 18, 1996, and
pursuant to the recommendation and approval of the Board of Directors,
the Company determined to retain the services of KPMG, who had served as
the independent auditor of the Spire Companies since October 1995, to
audit the financial statements of the Company for the fiscal year ending
April 30, 1996, and to dismiss Tanner. Tanner's reports on Amacan's
financial statements for the fiscal year ended April 30, 1995 contained
no adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles. The
Company had no disagreements with Tanner on any matter of accounting
principles or practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved, would have caused Tanner to
make reference to the subject matter of the disagreement in connection
with its reports. In addition, during the two fiscal years and the
interim period preceding Tanner's dismissal, the Company had no
Reportable Events. No consultations occurred between the Company and
KPMG during the fiscal year and any interim period preceding the recent
retention of KPMG regarding the application of accounting principles, the
type of audit opinion that might be rendered or other information
considered by the Company in reaching a decision as to an accounting,
auditing or financial reporting issue.
37
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report . . . . . . . . . . . . . . . F-1
Balance Sheets at June 30, 1996 (unaudited) and April 30,
1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . F-2
Statements of Income for the three-month periods ended June
30, 1996 and 1995 (unaudited) and years ended April 30,
1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . F-3
Statements of Stockholders' Equity for the two months ended
June 30, 1996 (unaudited) and years ended April 30, 1996,
1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . F-4
Statements of Cash Flows for the three month periods ended
June 30, 1996 and 1995 (unaudited) and years ended April
30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . F-5
Notes to Financial Statements . . . . . . . . . . . . . . . F-6
38
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Sento Technical Innovations Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheet of Sento
Technical Innovations Corporation and Subsidiaries (formerly Spire
International Corp.) as of April 30, 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for the year then
ended. We have also audited the combined balance sheet of Spire
Technologies, Inc. and Spire Technologies Systems Division, Inc. as of April
30, 1995, and the related combined statements of income, stockholders'
equity, and cash flows for each of the years in the two-year period then
ended. These consolidated and combined financial statements are the
responsibility of the Companies' management. Our responsibility is to
express an opinion on these consolidated and combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Companies as of April 30,
1996 and 1995, and the results of their operations and their cash flows for
each of the years in the three year period ended April 30, 1996, in
accordance with generally accepted accounting principles.
Salt Lake City, Utah
June 21, 1996
F-1
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Balance Sheets
June 30, 1996, April 30, 1996, and 1995
<TABLE>
June 30,
1996 April 30, April 30,
ASSETS (unaudited) 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Current assets:
Cash $2,459,938 1,552,806 766,247
Accounts receivable 3,523,222 2,176,642 1,524,948
Other current assets 92,248 7,806 17,410
Deferred tax asset (note 4) 42,723 42,723 39,041
---------- --------- ---------
Total current assets 6,118,131 3,779,977 2,347,646
Fixed assets (note 3):
Land 36,021 36,021 36,021
Buildings 250,489 250,489 250,489
Furniture and equipment 608,483 526,005 372,669
Transportation equipment 11,516 11,516 11,516
Accumulated depreciation (269,633) (256,183) (202,484)
---------- --------- ---------
Net fixed assets 636,876 567,848 468,211
Interest in oil and gas properties (note 2) - 197,000 -
---------- --------- ---------
$6,755,007 4,544,825 2,815,857
---------- --------- ---------
---------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (note 3) $ 7,775 7,721 87,527
Accounts payable 1,871,909 1,050,535 998,115
Accrued liabilities 198,582 488,660 360,388
Income taxes payable (note 4) 135,599 52,715 32,154
Deferred maintenance revenue 1,018,208 1,017,364 686,194
Other deferred revenue 193,468 219,650 -
---------- --------- ---------
Total current liabilities 3,425,541 2,836,645 2,164,378
---------- --------- ---------
Long-term liabilities:
Long-term debt, excluding current portion (note 3) 214,394 215,691 223,412
Deferred tax liability (note 4) 11,582 11,582 4,773
---------- --------- ---------
Total long-term liabilities 225,976 227,273 228,185
---------- --------- ---------
Stockholders' equity (notes 2 and 7):
Common stock, $.25 par value. Authorized
8,000,000 shares; issued and outstanding
4,337,373 at June 30, 1996, 3,891,325 at
April 30, 1996, and 183,000 at April 30, 1995 1,084,343 972,832 2,000
Additional paid-in capital 1,449,656 - 7,410
Treasury stock, 17,000 shares in 1995, at cost - - (170,000)
Retained earnings 569,491 508,075 583,884
---------- --------- ---------
Total stockholders' equity 3,103,490 1,480,907 423,294
---------- --------- ---------
Commitments (note 5)
$6,755,007 4,544,825 2,815,857
---------- --------- ---------
---------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Statements of Income
Three-month periods ended June 30, 1996 and 1995, and
years ended April 30, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Three Three
months months Year Year Year
ended ended ended ended ended
June 30, June 30, April 30, April 30, April 30,
1996 1995 1996 1995 1994
--------- --------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses and maintenance $1,846,529 1,793,795 7,694,695 5,356,572 3,136,919
Hardware sales and service 2,671,910 1,509,063 6,178,706 4,318,111 2,906,492
---------- --------- ---------- --------- ---------
Total revenues 4,518,439 3,302,858 13,873,401 9,674,683 6,043,411
---------- --------- ---------- --------- ---------
Cost of sales:
Software licenses and maintenance 741,732 734,811 3,100,738 2,879,943 1,441,133
Hardware sales and service 2,207,873 1,182,304 5,351,305 3,734,132 2,525,896
---------- --------- ---------- --------- ---------
Total cost of sales 2,949,605 1,917,115 8,452,043 6,614,075 3,967,029
---------- --------- ---------- --------- ---------
Gross profit 1,568,834 1,385,743 5,421,358 3,060,608 2,076,382
Selling, general, and administrative
expenses 1,361,315 1,134,763 4,605,402 2,927,081 2,032,513
Research and development expense 143,499 -- 268,028 -- --
---------- --------- ---------- --------- ---------
Income from operations 64,020 250,980 547,928 133,527 43,869
Other income (expense):
Interest income 14,420 2,117 24,918 10,272 8,812
Interest expense (4,761) (5,886) (31,831) (28,348) (25,517)
Other income (expense) 1,180 309 (4,715) 29,772 --
---------- --------- ---------- --------- ---------
Total other income (expense) 10,839 (3,460) (11,628) 11,696 (16,705)
---------- --------- ---------- --------- ---------
Income before income taxes 74,859 247,520 536,300 145,223 27,164
Income tax expense (note 4) 22,884 94,058 196,745 46,488 8,931
---------- --------- ---------- --------- ---------
Net income $ 51,975 153,462 339,555 98,735 18,233
---------- --------- ---------- --------- ---------
---------- --------- ---------- --------- ---------
Net income per share $ 0.01 0.04 0.08 0.03 --
---------- --------- ---------- --------- ---------
---------- --------- ---------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Statements of Stockholders' Equity
Two months ended June 30, 1996 (unaudited), and
years ended April 30, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Total
Additional stock-
Common stock paid-in Treasury Retained holders'
Shares Amount capital stock earnings equity
--------- --------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances at April 30, 1993 100,000 $ 1,000 7,410 - 466,916 475,326
Stock issuance 100,000 1,000 - - - 1,000
Stock repurchase (17,000) - - (170,000) - (170,000)
Net income - - - - 18,233 18,233
--------- --------- ---------- ---------- -------- ---------
Balances at April 30, 1994 183,000 2,000 7,410 (170,000) 485,149 324,559
Net income - - - - 98,735 98,735
--------- --------- ---------- ---------- -------- ---------
Balances at April 30, 1995 183,000 2,000 7,410 (170,000) 583,884 423,294
Issuance of treasury stock 4,386 - 65,790 43,860 - 109,650
Business combination (note 2) 3,703,939 970,832 (73,200) 126,140 (415,364) 608,408
Net income - - - - 339,555 339,555
--------- --------- ---------- ---------- -------- ---------
Balances at April 30, 1996 3,891,325 972,832 - - 508,075 1,480,907
--------- --------- ---------- ---------- -------- ---------
Stock issuance (unaudited) 446,048 111,511 1,449,656 - - 1,561,167
Net income (unaudited) - - - - 61,416 61,416
--------- ---------- ---------- ---------- -------- ---------
Balances at June 30, 1996 (unaudited) 4,337,373 $1,084,343 1,449,656 - 569,491 3,103,490
--------- ---------- ---------- ---------- -------- ---------
--------- ---------- ---------- ---------- -------- ---------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Statements of Cash Flows
Three-month periods ended June 30, 1996 and 1995 (unaudited),
and years ended April 30, 1996, 1995, and 1994
<TABLE>
Three Three
months months
ended ended
June 30, June 30, Year Year Year
1996 1995 ended ended ended
-------- -------- April 30, April 30, April 30,
(unaudited) 1996 1995 1994
---------------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 51,975 153,462 339,555 98,735 18,233
Adjustments to reconcile net income to
net cash provided by operating activities:
Deferred taxes - - 3,127 (12,931) 12,249
Depreciation 18,901 31,758 53,699 41,056 37,313
Stock issued in lieu of compensation - - 109,650 - -
Decrease (increase) in assets:
Accounts receivable (952,267) (299,285) (632,225) (645,941) 368,801
Other current assets (97,817) (21,451) 9,604 9,108 (26,518)
Increase (decrease) in liabilities:
Accounts payable 287,736 260,363 5,327 456,304 (304,540)
Accrued liabilities 214,952 (3,552) (95,987) 305,018 20,929
Income taxes payable (59,597) 82,116 18,561 19,417 (2,135)
Deferred maintenance revenue (37,189) 330,522 331,170 164,144 89,877
Other deferred revenue - - 219,650 - -
---------- --------- --------- -------- --------
Net cash provided by (used in)
operating activities (573,306) 533,933 362,131 434,910 214,209
---------- --------- --------- -------- --------
Cash flows from investing activities:
Capital expenditures (104,085) (21,779) (153,336) (114,395) (25,123)
Net cash acquired in business combination - - 484,781 - -
Sale of interest in oil and gas properties 197,000 - - - -
---------- --------- --------- -------- --------
Net cash provided by (used in)
investing activities 92,915 (21,779) 331,445 (114,395) (25,123)
---------- --------- --------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of stock - - - - 1,000
Net borrowings on note payable to bank - - - - (13,166)
Principal payments of long-term debt (1,857) (1,707) (87,527) (176,167) (52,167)
Proceeds from issuance of long-term debt - - - 128,439 -
Deposit for private placement subscriptions - - 180,510 - -
Net proceeds from issuance of common stock 1,561,167 -
---------- --------- --------- -------- --------
Net cash provided by (used in)
financing activities 1,559,310 (1,707) 92,983 (47,728) (64,333)
---------- --------- --------- -------- --------
Net increase in cash 1,078,919 510,447 786,559 272,787 124,753
Cash at beginning of period 1,381,019 1,652,769 766,247 493,460 368,707
---------- --------- --------- -------- --------
Cash at end of period $2,459,938 2,163,216 1,552,806 766,247 493,460
---------- --------- --------- -------- --------
---------- --------- --------- -------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest $ 4,761 5,886 21,016 28,348 25,517
Cash paid for income taxes 191,596 11,585 378,587 23,832 17,705
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Notes to Financial Statements
April 30, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED CONDENSED INFORMATION, YEAR END, AND NAME CHANGE
The balance sheet as of June 30, 1996, the statements of income and cash
flows for the three-month periods ended June 30, 1996 and 1995, and the
statement of stockholder's equity for the two-month period ended June 30,
1996, have been prepared by the Company without an audit. Accordingly,
they do not include all of the information and footnotes required by
generally-accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
Management has determined that commencing in fiscal year 1997, a new fiscal
year end of March 31 will be adopted to coincide with the calendar quarter
end. Form 8-K was filed June 18, 1996, reporting this change. The
transition to a March 31 fiscal year end will be accomplished via filing
one 11-month year as allowed by SEC regulations.
On September 10, 1996, the name of the parent company was changed from
Spire International Corp. to Sento Technical Innovations Corporation.
DESCRIPTION OF BUSINESS
Sento Technical Innovations Corporation (Sento) at April 30, 1996 is the
parent of Spire Technologies, Inc. (STI), Spire Technologies Systems
Division, Inc. (STSDI) and Dewpoint Distributed Solutions, Inc. (formerly
Amacan Industries, Inc.) (Dewpoint) (collectively, the Company). STI and
STSDI are resellers of computer software and hardware respectively, and
also provide technical support for certain software. STSDI has no employees
or facilities, with all work performed by STI in exchange for a management
fee. Dewpoint had no operations in fiscal 1996, but will provide worldwide
distribution, reseller, and channel management for leading software
manufacturers. The Company's customers consist of business and governmental
entities, geographically dispersed throughout the United States and abroad.
Revenue from foreign sales was insignificant in previous years, and in the
year ended April 30, 1996, was approximately nine percent of total sales.
As a reseller the Company is dependent on third-party suppliers, with over
seventy percent of the Company's revenues derived from products it obtains
from three suppliers. At April 30, 1996, Sento owned certain investments
in oil and gas producing properties, which were disposed of in May 1996 as
discussed in note 2.
F-6
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Notes to Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF PRESENTATION
The consolidated financial statements as of and for the year ended April
30, 1996, include the financial statements of Sento and its wholly-owned
subsidiaries, STI, STSDI, and Dewpoint. The financial statements as of
April 30, 1995, and for each of the years in the two-year period then ended
are the combined financial statements of STI and STSDI. All significant
intercompany balances and transactions have been eliminated in
consolidation or combination.
FIXED ASSETS
Fixed assets are stated at cost. Depreciation of fixed assets is computed
on the straight-line method over the estimated useful lives of individual
classes of assets. The estimated useful lives of the individual classes of
assets are as follows:
Buildings 40 years
Furniture and equipment 3-10 years
Transportation equipment 5 years
INTERESTS IN OIL AND GAS PROPERTIES
Interests in oil and gas properties, acquired in the business combination
discussed in note 2 are stated at cost to the Company, which is fair market
value at the date of the business combination.
REVENUE RECOGNITION
Revenue from the sale of software licenses and hardware sales is recognized
at the time of delivery. Revenue from maintenance contracts and customer
service is recognized as the service is performed. Deferred maintenance
revenue consists of payments received on software maintenance contracts and
recorded as revenue over the period of the contract, which is typically one
year.
RESEARCH AND DEVELOPMENT
Research and development costs are expended as incurred.
F-7
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Notes to Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
INCOME PER SHARE
Per share amounts are computed by dividing net income by the weighted
average number of common shares and common share equivalents resulting
from options outstanding. There were 3,992,768, 3,346,274, and 3,612,328
weighted average common shares and common share equivalents outstanding for
the years ended April 30, 1996, 1995, and 1994, respectively. Income per
share for 1995 and 1994 have been restated for the effects of the business
combination discussed in note 2 which for accounting purposes represented
stock splits for the STI and STSDI stockholders.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of trade receivables, notes payable, trade accounts
payable, accrued expenses, and long-term debt approximate fair value.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
F-8
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Notes to Financial Statements
(2) BUSINESS COMBINATION AND ASSET DISPOSITION
On January 23, 1996, STI and STSDI, which were both privately held by the
same group of owners, entered into an agreement and plan of reorganization
(Exchange Agreement) with Amacan Resources Corporation (Amacan) wherein
STI and STSDI became wholly owned subsidiaries of Amacan. The Exchange
Agreement was approved by Amacan stockholders on April 18, 1996. Since
1974, Amacan, a publicly-traded company, has been almost exclusively
engaged as a participant with others in oil and gas operations and
development. Amacan's principal assets were working interests in producing
oil and gas wells and options or rights to participate in the drilling of
additional wells. As part of the merger, Amacan was renamed Spire
International Corp.
Upon approval of the Exchange Agreement by the Amacan stockholders, (a) the
389,102 shares of Amacan's common stock previously outstanding (as adjusted
for a reverse stock split) remained outstanding and (b) Amacan issued an
additional 3,502,223 shares of its common stock for all of the issued and
outstanding shares of STI and STSDIs' common stock. The business
combination is treated for accounting purposes as a "reverse merger"
wherein STI and STSDI are shown as the acquiring companies because the
former stockholders of STI and STSDI have the significant majority of the
outstanding common stock after the combination, and management of STI and
STSDI has become the management of the combined companies. The business
combination is accounted by the purchase method of accounting with the net
assets of Amacan being recorded at their fair value at the date of closing
and the operating results of Amacan prior to the business combination are
not included with the historical operating results of STI and STSDI.
F-9
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Notes to Financial Statements
(2) BUSINESS COMBINATION AND ASSET DISPOSITION (continued)
The following pro forma financial information presents the combined results
of operations of STI, STSDI, and Amacan as if the acquisition had occurred
as of May 1, 1993. The pro forma financial information does not necessarily
reflect the results of operations that would have occurred had STI, STSDI,
and Amacan constituted a single entity during such periods.
Years ended April 30,
-----------------------------------
1996 1995 1994
----------- --------- ---------
Net sales $14,020,329 9,862,216 6,231,833
Net income $ 238,365 127,258 31,242
Net income per share $ 0.06 0.04 0.01
As described above, the Company acquired Amacan's interest in oil and gas
producing properties in the business combination. On May 1, 1996, these
properties were sold to an unrelated party. The properties were recorded
at fair market value as of acquisition date, as determined by the
subsequent sales price. Accordingly, no gain or loss was recorded on
disposal. The operating loss for the oil and gas operations during the
period from date of acquisition (April 18, 1996) to April 30, 1996, was
insignificant.
(3) NOTE PAYABLE TO BANK AND LONG-TERM DEBT
The Company had a $75,000 unsecured line of credit with a commercial bank
that expired March 23, 1996. No amounts were outstanding at April 30, 1996
or April 30, 1995. Subsequent to year-end, the Company established two new
lines of credit with a commercial bank: one for $1,000,000, secured by
trade receivables, at prime plus two percent, expiring June 1, 1997; the
other for $350,000, secured by equipment, at prime plus two percent,
expiring May 1, 1999.
F-10
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Notes to Financial Statements
(3) NOTE PAYABLE TO BANK AND LONG-TERM DEBT (continued)
Long-term debt at April 30, 1996 and 1995, consisted of the following:
1996 1995
-------- -------
8.25% first mortgage payable in monthly
installments of $1,173, including interest,
with final payment of $107,417 due July 15,
1999, secured by the Company's land and
building with a financial statement carrying
value of $255,831 at April 30, 1996 $121,909 125,755
8.70% SBA loan payable in monthly installments
of $1,078, including interest, secured by the
Company's land and building with a financial
statement carrying value of $255,831 at April
30, 1996 101,503 104,754
5% simple interest loan payable in monthly
installments of 1.4% of the Spire Technologies
gross margin from the prior month, secured by
common stock of Spire Technologies.
Paid off in December 1995 - 80,430
-------- -------
Total long-term debt 223,412 310,939
Less current portion 7,721 87,527
-------- -------
Long-term debt, excluding current portion $215,691 223,412
-------- -------
-------- -------
Aggregate maturities of long-term debt are as follows: 1997, $7,721; 1998,
$8,400; 1999, $9,139; 2000, $112,877; 2001, $5,469; and thereafter $79,806.
F-11
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Notes to Financial Statements
(4) INCOME TAXES
Income tax expense consists of:
Current Deferred Total
-------- -------- -------
Year ended April 30, 1996:
Federal $165,923 5,139 171,062
State 25,683 - 25,683
-------- ------- -------
$191,606 5,139 196,745
-------- ------- -------
-------- ------- -------
Year ended April 30, 1995:
Federal $ 50,242 (11,273) 38,969
State 9,177 (1,658) 7,519
-------- ------- -------
$ 59,419 (12,931) 46,488
-------- ------- -------
-------- ------- -------
Year ended April 30, 1994:
Federal $ (3,179) 10,679 7,500
State (139) 1,570 1,431
-------- ------- -------
$ (3,318) 12,249 8,931
-------- ------- -------
-------- ------- -------
Actual income tax expense differs from the "expected" tax expense (computed
by applying the U.S. federal corporate income tax rate of 34 percent to
income before income taxes) as follows:
1996 1995 1994
-------- ------- ------
Computed "expected" tax expense $182,342 49,376 9,236
Increase (decrease) in income
taxes resulting from:
State income taxes, net of
federal tax benefit 16,950 4,963 840
Other (2,547) (7,851) (1,145)
-------- ------- ------
Income tax expense $196,745 46,488 8,931
-------- ------- ------
-------- ------- ------
F-12
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Notes to Financial Statements
(4) INCOME TAXES (continued)
The tax effects of temporary differences that give rise to current
deferred tax assets and noncurrent deferred tax liabilities at April 30,
1996 and 1995, are presented below:
1996 1995
-------- ------
Current deferred tax assets:
Deferred compensation $ 16,514 9,232
Allowance for bad debts 42,723 29,809
-------- ------
Total gross current deferred assets 59,237 39,041
Less valuation allowance (16,514) -
-------- ------
Net current deferred tax assets $ 42,723 39,041
-------- ------
-------- ------
Noncurrent deferred tax assets:
Investment tax credit carryforwards $ 10,095 -
Net operating loss carryforward 73,903 -
-------- ------
Total gross noncurrent deferred assets 83,998 -
Less valuation allowance (3,667) -
-------- ------
Net noncurrent deferred tax assets 80,331 -
Deferred tax liability - tax depreciation in
excess of book depreciation 91,913 4,773
-------- ------
Net noncurrent deferred tax liability $ 11,582 4,773
-------- ------
-------- ------
The valuation allowance for deferred tax assets as of May 1, 1994, was $-0-.
The net change in the total valuation allowance for the years ended April 30,
1996 and 1995, was an increase of $-0- and $20,181, respectively.
Subsequently recognized tax benefits relating to the valuation allowance for
deferred tax assets as of April 30, 1996, will be allocated as an income tax
benefit to be reported in the statement of operations.
F-13
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Notes to Financial Statements
(4) INCOME TAXES (continued)
At April 30, 1996, the Company has net operating loss carryforwards for
federal income tax purposes of $189,500 which expire from 1997 to 2008.
The Company also has investment tax credit carryforwards for federal
income tax purposes of $10,095 which expire from 1997 to 2001.
As a result of the business combination discussed in note 2, Sento has
undergone greater than 50 percent change of ownership under the rules of
the Tax Reform Act of 1986. Consequently, certain of the Company's net
operating loss carryforwards and investment credit carryforwards may
expire unutilized. The maximum amount of the remaining carryforwards
available to offset future income in a given year is limited to the
product of Sento's value on the date of ownership change and the federal
long-term tax-exempt rate, plus any limited carryforward not utilized in
prior years.
(5) LEASES
The Company has operating leases for office space and equipment. The
Company incurred rent expense of $80,426, $19,973 and $-0- for the years
ended April 30, 1996, 1995, and 1994, respectively. Future minimum rent
payments under existing operating leases are $128,476 in fiscal 1997 and
$122,425 in fiscal 1998.
(6) RETIREMENT PLAN
The Company has a qualified defined contribution retirement plan under
Section 401(k) of the Internal Revenue Code. The plan covers all
employees who meet minimum age and service requirements, and allows
participants to defer a portion of their annual compensation on a pretax
basis. In addition, employer contributions are made at the discretion
of the Board of Directors. Participants are fully vested at all times in
employee contributions. Employer contributions vest over a six-year
period. Employer contributions of $12,376, $11,545, and $6,001 were made
for the years ended April 30, 1996, 1995, and 1994, respectively.
F-14
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(formerly SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
Notes to Financial Statements
(7) COMMON STOCK
At April 30, 1995, STI had common stock with a par value of $.01 per
share and 100,000 shares authorized and issued. STSDI had common stock
with no par value, 1,000,000 shares authorized and 100,000 shares issued
and outstanding.
The Company has a stock option plan under which incentive stock options,
nonqualified stock options, stock appreciation rights, and stock units
may be granted to directors and employees of the Company. The Company
has reserved 1,000,000 shares of common stock for issuance under the
plan. The number of shares, exercise price, terms, and exercise period
are determined by the Board of Directors on an option-by-option basis.
No options were granted prior to May 1, 1995. At April 30, 1996,
options to acquire 551,685 shares have been granted of which 41,830 are
exercisable. A summary of activity follows:
Number Price per
of shares share
--------- ------------
Options outstanding at beginning of year - $ -
Plus options granted 551,685 1.24 - 3.50
Less options canceled or expired - -
------- ------------
Options outstanding at end of year 551,685 $1.24 - 3.50
------- ------------
------- ------------
On April 18, 1996, the Board of Directors of the Company adopted the
Stock Purchase Plan and reserved 200,000 shares of Common Stock for
possible future issuance to employees of the Company and other
individuals thereunder. The shareholders of the Company ratified and
approved the adoption of the Stock Purchase Plan on September 10, 1996.
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code. As of
April 30, 1996, the Company had not sold any shares under the Stock
Purchase Plan.
(8) SUBSEQUENT EVENTS
In April, 1996, the Company undertook a private offering to sell
unregistered shares of its common stock to certain accredited investors.
The Company intends to use the proceeds to acquire additional software
licenses and technology, to fund additional research and development,
and for additional working capital. The shares were offered in units,
at $7.00 per unit, with each unit consisting of two shares of common
stock plus one warrant to buy one share of common stock for $3.50 before
April 30, 1998. The Company closed the offering in June 1996, when 223,024
units had been subscribed from which $1,561,167 of cash proceeds were
received.
F-15
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
_______________________
TABLE OF CONTENTS
PAGE
----
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Recent Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Price Range of Common Stock . . . . . . . . . . . . . . . . . . . . . . 12
Selected Condensed Consolidated
Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 14
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Certain Relationships and Related Party Transactions . . . . . . . . . . 31
Principal and Selling Shareholders . . . . . . . . . . . . . . . . . . . 32
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . 34
Shares Eligible for Future Sale. . . . . . . . . . . . . . . . . . . . . 36
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . 37
Index to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . F-1
____________________
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
647,214 SHARES
COMMON STOCK
_______________
PROSPECTUS
_______________
_______________, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth expenses in connection with the issuance
and distribution of the Common Stock being registered, other than
underwriting discounts and commissions. All of the expenses listed below
will be borne by the Company. All of the amounts shown are estimates, except
the SEC registration fees, the Nasdaq Stock Market filing fee and the NASD
filing fee.
AMOUNT
------
SEC registration fees........................ $ 950
Accounting fees and expenses................. *
Legal fees and expenses...................... *
Blue sky fees and expenses................... 1,000
Miscellaneous expenses....................... 1,500
------
Total..................................... $ *
------
------
__________________
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 16-10a-902 ("Section 902") of the Corporation Act provides that
a corporation may indemnify any individual who was, is, or is threatened to
be made a named defendant or respondent (a "Party") in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal (a
"Proceeding"), because he is or was a director of the corporation or, while a
director of the corporation, is or was serving at its request as a director,
officer, partner, trustee, employee, fiduciary or agent of another
corporation or other person or of an employee benefit plan (an "Indemnifiable
Director"), against any obligation incurred with respect to a Proceeding,
including any judgment, settlement, penalty, fine or reasonable expenses
(including attorneys' fees), incurred in the Proceeding if his conduct was in
good faith, he reasonably believed that his conduct was in, or not opposed
to, the best interests of the corporation, and, in the case of any criminal
Proceeding, he had no reasonable cause to believe his conduct was unlawful;
provided however, that, pursuant to Subsection 902(4), (i) indemnification
under Section 902 in connection with a Proceeding by or in the right of the
corporation is limited to payment of reasonable expenses (including
attorneys' fees) incurred in connection with the Proceeding and (ii) the
corporation may not indemnify an Indemnifiable Director in connection with a
Proceeding by or in the right of the corporation in which the Indemnifiable
Director was adjudged liable to the corporation, or in connection with any
other Proceeding charging that the Indemnifiable Director derived an improper
personal benefit, whether or not involving action in his official capacity,
in which Proceeding he was adjudged liable on the basis that he derived an
improper personal benefit.
Section 16-10a-903 ("Section 903") of the Corporation Act provides that,
unless limited by its articles of incorporation, a corporation shall
indemnify an Indemnifiable Director who was successful, on the merits or
otherwise, in the defense of any Proceeding, or in the defense of any claim,
issue or matter in the Proceeding, to which he was a Party because he is or
was an Indemnifiable Director of the corporation, against reasonable expenses
(including attorneys' fees) incurred by him in connection with the Proceeding
or claim with respect to which he has been successful.
In addition to the indemnification provided by Sections 902 and 903,
Section 16-10a-905 ("Section 905") of the Corporation Act provides that,
unless otherwise limited by a corporation's articles of incorporation, an
Indemnifiable Director may apply for indemnification to the court conducting
the Proceeding or to another court
II-1
<PAGE>
of competent jurisdiction. On receipt of an application and after giving any
notice the court considers necessary, (i) the court may order mandatory
indemnification under Section 903, in which case the court shall also order
the corporation to pay the director's reasonable expenses to obtain
court-ordered indemnification, or (ii) upon the court's determination that
the director is fairly and reasonably entitled to indemnification in view of
all the relevant circumstances and regardless of whether the director met the
applicable standard of conduct set forth in Section 902 or was adjudged
liable as described in Subsection 902(4), the court may order indemnification
as the court determines to be proper, except that indemnification with
respect to certain Proceedings resulting in a director being found liable as
described in Subsection 902(4) is limited to reasonable expenses (including
attorneys' fees) incurred by the director.
Section 16-10a-904 ("Section 904") of the Corporation Act provides that
a corporation may pay for or reimburse the reasonable expenses (including
attorneys' fees) incurred by an Indemnifiable Director who is a Party to a
Proceeding in advance of the final disposition of the Proceeding if (i) the
director furnishes the corporation a written affirmation of his good faith
belief that he has met the applicable standard of conduct described in
Section 902, (ii) the director furnishes to the corporation a written
undertaking, executed personally or in his behalf, to repay the advance if it
is ultimately determined that he did not meet the required standard of
conduct, and (iii) a determination is made that the facts then known to those
making the determination would not preclude indemnification.
Section 16-10a-907 of the Corporation Act provides that, unless a
corporation's articles of incorporation provide otherwise, (i) an officer of
the corporation is entitled to mandatory indemnification under Section 903
and is entitled to apply for court ordered indemnification under Section 905,
in each case to the same extent as an Indemnifiable Director, (ii) the
corporation may indemnify and advance expenses to an officer, employee,
fiduciary or agent of the corporation to the same extent as an Indemnifiable
Director, and (iii) a corporation may also indemnify and advance expenses to
an officer, employee, fiduciary or agent who is not an Indemnifiable Director
to a greater extent than the right of indemnification granted to
Indemnifiable Directors, if not inconsistent with public policy, and if
provided for by its articles of incorporation, bylaws, general or specific
action of its board of directors or contract.
Article 9 of the Company's Bylaws provides that the Company shall
indemnify all directors and officers of the Company as permitted by the
Corporation Act. Under such provisions, any director or officer, who in his
capacity as such, is made a party to any suit or proceeding, shall be
indemnified if such director or officer acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interest of
the Company and, in the case of a criminal proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful; provided,
however, that no indemnification may be given a director or officer where the
claim or liability arose out of that person's own negligence or willful
misconduct, or if such person is ultimately adjudged in the proceeding to be
liable to the Company or liable on the basis that he or she derived an
improper personal benefit. The Bylaws further provide that such
indemnification is not exclusive of any other rights to which such
individuals may be entitled under the Articles, the Bylaws, any agreement,
vote of stockholders or otherwise.
Indemnification may be granted pursuant to any other agreement, bylaw,
or vote of shareholders or directors. The Company currently maintains no
policy of director's and officer's insurance for the benefit of the officers
and directors of the Company. The foregoing description is necessarily
general and does not describe all details regarding the indemnification of
officers, directors or controlling persons of the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
SHARE EXCHANGE. Pursuant to the Exchange Agreement among Amacan, Spire
Technologies, Spire Systems, and the Spire Stockholders, the Company acquired
all of the issued and outstanding stock of the Spire Companies in exchange
for the issuance of 3,501,883 unregistered shares of Common Stock to the
Spire Stockholders. At the Effective Time, in accordance with the terms of
the Exchange Agreement, each issued and outstanding share of the Spire
Technologies Common Stock was exchanged for 35.4786 shares of Common Stock,
and each issued and outstanding share of the Spire Systems Common Stock was
exchanged for 4.0155 shares of Common Stock. After giving effect to the
Share Exchange, including the related one-for-seven reverse split of all
issued and outstanding shares of Common Stock (excluding the shares issued to
the Spire Stockholders), the shares of Common Stock owned by the shareholders
of the Company immediately prior to the Share Exchange represented
approximately 10% of the outstanding shares of Common Stock, and the shares
of Common Stock acquired in the Share Exchange by the Spire Stockholders
represented approximately 90% of the
II-2
<PAGE>
outstanding shares of Common Stock. The shares of Common Stock issued to the
Spire Stockholders in the Share Exchange were issued by the Company in
reliance upon exemptions from registration contained in Section 4(2) of the
Securities Act.
PRIVATE PLACEMENT. On June 18, 1996, the Company completed a Private
Placement of unregistered Shares of the Common Stock to certain accredited
investors. The Shares were offered in Units, at $7.00 per Unit, with each
Unit consisting of two Shares of Common Stock plus one Warrant to purchase
one Warrant Share for $3.50 at any time prior to or on April 30, 1998. A
total of 223,024 Units were sold in the Private Placement, consisting of
446,048 Shares and warrants exercisable for the purchase of 223,024 Warrant
Shares, from which the Company received cash proceeds of $1,561,167. The
Company intends to use the proceeds of the Private Placement to acquire
additional software licenses and technology, to fund additional research and
development, and for additional working capital. The Company completed the
Private Placement in reliance upon exemptions from registration contained in
Section 3(b) and 4(2) of the Securities Act and in Rule 506 of Regulation D
promulgated thereunder.
ITEM 16. EXHIBITS
(a) EXHIBITS TO THE REGISTRATION STATEMENT.
The following exhibits required by Item 601 of Regulation S-K have been
included herewith or have been filed previously with the commission as
indicated below.
REGULATION
S-K EXHIBIT NO. DESCRIPTION EXHIBIT NO.
--------------- ----------- -----------
2 Agreement and Plan of Reorganization dated (1)
January 23, 1996, among the Company, Spire
Technologies, Spire Systems and the Spire
Stockholders.
3.1 Articles of Incorporation of the Company, (2)
as amended.
3.2 Articles of Amendment and Share Exchange. (3)
3.4 Bylaws of the Company. (4)
4.1 Articles of Incorporation of the Company, (2)
as amended.
4.2 Bylaws of the Company. (4)
4.3 Specimen Certificate.*
5 Legal Opinion of Kimball, Parr, Waddoups,
Brown & Gee, counsel to the Company, as to
the legality of the securities offered.*
10.1 Exclusive License and Technical Assistance (4)
Agreement dated as of July 1, 1996 by and
between Australian Software Innovations
(Services) Pty. Ltd and the Company.
10.2 Sento Technical Innovations Corporations
Stock Incentive Plan.*
10.3 Option Agreement by and among Spire
International Corp. Australian Software
Innovations (Services) Pty Ltd, Kilat
Holdings Pty. Limited, and Eng Lee and
Mary Lee, dated September 10, 1996.*
21 Subsidiaries of the Registrant. 1
23.1 Consent of Kimball, Parr, Waddoups, Brown &
Gee (included in their legal opinion filed
as Exhibit 5 to this Registration Statement).*
II-3
<PAGE>
REGULATION
S-K EXHIBIT NO. DESCRIPTION EXHIBIT NO.
--------------- ----------- -----------
23.3 Consent of KPMG Peat Marwick LLP, independent 2
public accountants.
24 Power of Attorney (included on page II-5 of
this Registration Statement).
(b) Financial Statement Schedules. -- Not applicable.
__________________
* To be filed by amendment.
(1) Incorporated by reference to Current Report on Form 8-K filed by the
Company with the Securities and Exchange Commission on February 2, 1996.
(2) Incorporated by reference to the exhibits to a Registration Statement
on Form S-8 filed with the Securities and Exchange Commission on September
27, 1996.
(3) Incorporated by reference to the Current Report on Form 8-K filed with
the Securities and Exchange Commission on May 2, 1996, as amended by Form
8-K/A filed with the Securities and Exchange Commission on July 29, 1996.
(4) Incorporated by reference to an Annual Report on Form 10-KSB for the
fiscal year ended April 30, 1996 filed by the Company on July 29, 1996, as
amended by Form 10-KSB/A filed with the Securities and Exchange Commission
on August 1, 1996.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer, or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or on the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE>
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Salt
Lake City, State of Utah, on September 27, 1996.
SENTO TECHNICAL INNOVATIONS CORPORATION
By: /s/ GARY B. GODFREY
--------------------------------------
Gary B. Godfrey, Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated. Each person whose signature to
this Registration Statement appears below hereby constitutes and appoints
Gary B. Godfrey and Robert K. Bench, and each of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his
or her behalf individually and in the capacity stated below and to perform
any acts necessary to be done in order to file all amendments and
post-effective amendments to this Registration Statement, and any and all
instruments or documents filed as part of or in connection with this
Registration Statement or the amendments thereto and each of the undersigned
does hereby ratify and confirm all that said attorney-in-fact and agent, or
his substitutes, shall do or cause to be done by virtue hereof.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ GARY B. GODFREY Chairman of the Board and September 27, 1996
- ------------------------ Chief Executive Officer
Gary B. Godfrey (principal executive officer)
/s/ ROBERT K. BENCH President, Chief Financial September 27, 1996
- ------------------------ Officer and Director
Robert K. Bench (principal accounting and
financial officer)
/s/ BRIAN W. BRAITHWAITE Secretary, Treasurer and September 27, 1996
- ------------------------ Director
Brian W. Braithwaite
/s/ WILLIAM A. FRESH Director September 27, 1996
- ------------------------
William A. Fresh
Director September 27, 1996
- ------------------------
Eng H. Lee
/s/ SHERMAN H. SMITH Director September 27, 1996
- ------------------------
Sherman H. Smith
II-6
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
JURISDICTION OF
NAME INCORPORATION OR ORGANIZATION
---- -----------------------------
Spire Technologies, Inc. Utah
Spire Systems Incorporated Utah
DewPoint Distributed Solutions
Incorporated Utah
Centerpost Innovations Pty. Ltd. New South Wales, Australia
<PAGE>
EXHIBIT 23.3
The Board of Directors
Sento Technical Innovations Corporation:
We consent to the use of our report dated June 21, 1996 on the financial
statements of Sento Technical Innovations Corporation and subsidiaries
(formerly Spire International Corp.) as of April 30, 1996 and 1995 and the
related statements of income, stockholders' equity and cash flows for each of
the years in the three year period ended April 30, 1996, included herein and
to the references to our firm under the headings "Experts" and "Selected
Condensed Consolidated Financial Data" in the Prospectus.
KPMG Peat Marwick LLP
Salt Lake City, Utah
September 27, 1996
