UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1997
Commission File Number: 06425
SENTO TECHNICAL INNOVATIONS CORPORATION
_______________________________________
(Exact name of issuer as specified in its charter)
UTAH 87-0284979
____ __________
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
311 NORTH STATE STREET
OREM, UTAH 84057
________________
(Address of Principal Executive Offices)
(801)226-6222
_____________
Issuer's telephone number, including area code
(Former name, former address, and former fiscal year if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES _X_ NO ___
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1997
______________________ ____________________________
COMMON CAPITAL STOCK 4,352,908
$.25 PAR VALUE
Transitional Small Business Disclosure Format (check one): YES ___ NO _X_
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION
Quarterly Report on Form 10-QSB
for the Quarter Ended June 30, 1997
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1.
Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1997 and March 31, 1997 . . . . . . . . . . . . . . . . . . 1
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of Cash Flows -
Three Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . 3
Notes To Condensed Consolidated Financial Statements . . . . . . . . 4
ITEM 2.
Management's Discussion and Analysis or Plan of Operations . . . . . 5
PART II - OTHER INFORMATION
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SENTO TECHNICAL INNOVATIONS CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, 1997 March 31, 1997
------------- --------------
ASSETS
CURRENT ASSETS
Cash $ 2,506,981 $ 2,225,338
Accounts receivable, net 3,728,299 3,140,425
Other current assets 197,532 241,644
Inventory 269,459 155,465
Deferred tax asset 98,917 98,917
---------- ----------
TOTAL CURRENT ASSETS 6,801,188 5,861,789
FIXED ASSETS
Fixed assets 1,094,478 1,070,347
Accumulated depreciation (378,114) (359,268)
---------- ----------
NET FIXED ASSETS 716,364 711,079
OTHER ASSETS 578,798 476,400
---------- ----------
TOTAL ASSETS $ 8,096,350 $ 7,049,268
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 8,286 $ 8,286
Accounts payable 2,509,897 2,216,634
Accrued liabilities 499,347 260,274
Income taxes payable 132,207 132,207
Deferred revenue 1,252,411 1,104,808
---------- ----------
TOTAL CURRENT LIABILITIES 4,402,148 3,722,209
LONG-TERM LIABILITIES
Long term debt 206,065 208,075
Deferred tax liability 5,333 5,333
------------ ------------
TOTAL LONG-TERM LIABILITIES 211,398 213,408
STOCKHOLDERS' EQUITY
Common stock, $.25 par value. 1,088,251 1,087,784
Additional paid-in capital 1,597,145 1,595,376
Common stock subscriptions 762,500 ---
Deferred compensation (100,000) (100,000)
Retained earnings 134,908 530,491
------------ -----------
TOTAL STOCKHOLDERS EQUITY 3,482,804 3,113,651
------------ -----------
TOTAL LIAB & STOCKHOLDERS' EQUITY $ 8,096,350 $ 7,049,268
============ ===========
See Accompanying Notes to Condensed, Consolidated Financial Statements
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended Three months ended
June 30, 1997 June 30, 1996
------------- -------------
NET SALES $ 3,984,514 $ 4,518,439
COST OF GOODS SOLD 2,651,706 2,949,605
----------- -----------
GROSS PROFIT 1,332,808 1,568,834
EXPENSES
Selling, General, and Admin.
Expenses 1,675,663 1,361,315
Research and Development 78,750 143,499
----------- -----------
OPERATING INCOME (LOSS) (421,605) 64,020
OTHER REVENUE AND (EXPENSES) 26,274 10,839
----------- -----------
INCOME (LOSS) BEFORE TAXES (395,331) 74,859
PROVISION FOR INCOME TAXES 250 22,884
----------- -----------
NET INCOME (LOSS) $ (395,581) $ 51,975
NET INCOME (LOSS) PER SHARE $ (.09) $ 0.01
Weighted Average Number of Common and
Common Equivalent Shares Outstanding 4,351,134 4,269,140
See accompanying notes to Condensed Consolidated Financial Statements
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION
Statements of Cash Flows
(Unaudited)
Three months ended Three months ended
June 30, 1997 June 30, 1996
------------- -------------
OPERATING ACTIVITIES
Cash flows from operating activities:
Net Income $ (395,581) $51,975
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation & Amortization 47,409 18,901
Decrease (increase) in assets:
Accounts receivable (590,983) (952,267)
Other current assets (199,136) (97,817)
Increase (decrease) in
liabilities:
Accounts payable 264,013 287,736
Accrued liabilities 268,323 214,952
Income taxes payable --- (59,597)
Other deferred revenue 147,603 (37,189)
------------- -------------
Net cash provided by (used in)
Operating activities (458,352) (573,306)
INVESTING ACTIVITIES
Cash flows from investing activities:
Sale of interest in oil and gas
properties --- 197,000
Proceeds from the sale of an asset 1,400 ---
Purchase of furniture and equipment (24,131) (104,085)
------------- -------------
Net cash provided by (used in)
investing activities (22,731) 92,915
FINANCING ACTIVITIES
Cash flows from financing activities:
Proceeds from issuance of stock 2,236 1,561,168
Subscriptions 762,500 ---
Principal payments of long-term
debt (2,010) (1,857)
------------- -------------
Net cash provided by (used in)
financing activities 762,726 1,559,311
Net increase in cash 281,643 1,078,920
Cash at beginning of period 2,225,338 1,381,019
Cash at end of period $ 2,506,981 $ 2,459,939
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest $ 4,722 $ 4,761
Cash paid for income taxes $ 250 $ 0
See accompanying notes to Condensed Consolidated Financial Statements
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 1997
(Unaudited)
A. BASIS OF PRESENTATION
_____________________
The balance sheet as of June 30, 1997, the statements of operations for the
three month periods ended June 30, 1997 and June 30, 1996, and the
statements of cash flows for the three month periods ended June 30, 1997
and June 30, 1996 have been prepared by the Company without 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. The Condensed Consolidated Balance Sheet as of March
31, 1997 was derived from the audited Consolidated Financial Statements of
such date.
Operating results for the three months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the
Company's fiscal year ending March 31, 1998. The unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended March 31, 1997.
B. EARNINGS PER SHARE
__________________
Earnings per share is computed based on the weighted average number of
common shares and, as appropriate, dilutive common stock equivalents
outstanding during the period. Stock options and warrants are considered
to be common stock equivalents. Fully diluted earnings per share for the
three months and six months ended June 30, 1997 and 1996 were not
materially different from primary earnings per share.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128).
SFAS 128 establishes a different method of computing earnings per share
than is currently required under the provisions of Accounting Principles
Board Opinion No. 15, Under SFAS 128, the Company will be required to
present both basic earnings per share and diluted earnings per share.
Basic earnings per share is expected to be higher than the currently
presented primary earnings per share as the effect of dilutive stock
options will not be considered in computing basic earnings per share.
Diluted earnings per share is expected to be comparable or slightly lower
than the currently presented primary earnings per share.
SFAS 128 is effective for both interim and annual periods ending after
December 15, 1997. Accordingly, the Company plans to adopt SFAS 128 in its
fiscal third quarter and at that time all historical earnings per share
data presented will be restated to conform to the provisions of SFAS 128.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
GENERAL
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., 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 value-added basis and manages value-added
reseller 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.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996.
______________________________________________________________________________
Net sales for the three months ended June 30, 1997 were $3,984,514, compared to
$4,518,439 for the three months ended June 30, 1996, a decrease of 12%. The
overall decrease was attributable to the cyclical nature of hardware sales which
decreased $973,793 for the comparable quarters. Sales of software and
consulting and support services for the three months ended June 30, 1997
increased by $493,498 to $2,340,026, or 26%, from $1,846,528 for the three
months ended June 30, 1996.
Gross margin for the three months ended June 30, 1997 was 34% of net sales
compared to 35% of net sales for the comparable period in 1996. The Company
expanded its line of software products during the past year, and the Company
receives a smaller discount from the software manufacturers on these new
products. Increased competition in a maturing market niche requires that the
Company offer deeper discounts to its customers.
Research and development expenses for the three months ended June 30, 1997 were
$78,750, compared to $143,499 for the three months ended June 30, 1996. New
versions of several products being developed by the Company were completed and
released for sale to the general public during the last two quarters of the
fiscal year ended March 31, 1997. The Company has not started any new product
development projects.
Selling, general and administrative expenses for the three months ended June30,
1997 were $1,675,663, compared to $1,361,315 for the three months ended June 30,
1996, an increase of 23%. Expansion of the Company's technical services
division, the formation of a new software distribution company, and costs
relating to financing and acquisition activities all contributed to this
increase.
Net income decreased from $51,975 for the period ended June 30, 1996, to a loss
of $395,581 for the period ended June 30, 1997. The lower sales volume, coupled
with the larger expenditures for sales, marketing, and administrative costs,
contributed to the loss for the period ended June 30, 1997.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and capital requirements primarily
through cash generated from operations, equipment lease financing facilities,
and sales of equity securities. In June, 1997 the Company commenced a private
placement of 240,000 units, each unit consisting of 3 shares of common stock and
one warrant to purchase a share of common stock at a price of $5.50 per share.
Initial subscriptions for shares to be sold in the private placement, totaling
$762,500, had been received by the Company at June 30 1997 and are reflected in
the unaudited financial statements. As of June 30, 1997, the initial
subscriptions received had not been accepted by the Company, but were being held
pending completion of the private placement in August, 1997.
Effective June 1, 1996, the Company established a line of credit with a
commercial bank, secured by equipment at prime plus two percent, expiring May 1,
1999. As of June 30, 1997, none of the $350,000 line had been used for purchase
of equipment.
At June 30, 1997, the cash balance was $2,506,981, compared to $2,225,338 as of
March 31, 1997. Working capital increased from $2,139,580 at March 31, 1997 to
$2,399,040 at June 30, 1997. The Company's current ratio remained at 1.6. The
increase in cash relates to cash received through subscriptions to the private
placement.
FACTORS AFFECTING FUTURE RESULTS
This Quarterly Report on Form 10-QSB contains forward-looking statements with
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Statements in
this report regarding the expansion of the Company's operations and any future
acquisition activities are forward looking statements. Words such as "expects",
"intends", "believes", "anticipates", and "likely" also identify forward looking
statements. Actual results could differ materially from those anticipated for a
number of reasons, including, among others, increased competition, a downturn in
the market for the Company's products and services, increases in interest rates,
and other unanticipated factors. Risk factors, cautionary statements, and other
conditions that could cause actual results to differ are contained in the
Company's filings with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-KSB.
<PAGE>
PART II: OTHER INFORMATION
___________________________
SIGNATURES
__________
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SENTO TECHNICAL INNOVATIONS CORPORATION
---------------------------------------
(Registrant)
Date: \s\ Robert K. Bench
-------------------------------------
Robert K. Bench
President and Chief Financial Officer
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 2,506,981
<SECURITIES> 0
<RECEIVABLES> 3,976,604
<ALLOWANCES> (248,305)
<INVENTORY> 259,459
<CURRENT-ASSETS> 6,801,188
<PP&E> 1,094,478
<DEPRECIATION> (378,114)
<TOTAL-ASSETS> 8,096,350
<CURRENT-LIABILITIES> 4,402,148
<BONDS> 0
0
0
<COMMON> 1,088,251
<OTHER-SE> 2,394,553
<TOTAL-LIABILITY-AND-EQUITY> 8,096,350
<SALES> 3,984,514
<TOTAL-REVENUES> 3,984,514
<CGS> 2,651,706
<TOTAL-COSTS> 1,754,413
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (395,331)
<INCOME-TAX> 250
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (395,581)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
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