<PAGE>
As filed with the Securities and Exchange Commission on October 13, 1999
Registration No. 333-85355
----------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------------
SENTO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
UTAH 7373 87-0284979
<S> <C> <C>
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
</TABLE>
----------------------
808 EAST UTAH VALLEY DRIVE
AMERICAN FORK, UT 84003
(801) 492-2000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
GARY FILLER
CHIEF FINANCIAL OFFICER
SENTO CORPORATION
808 EAST UTAH VALLEY DRIVE
AMERICAN FORK, UT 84003
(801) 492-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
COPIES TO:
BRIAN G. LLOYD, ESQ.
ERIC D. BAWDEN, ESQ.
PARR WADDOUPS BROWN GEE & LOVELESS
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/
----------------------
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>
SECONDARY PUBLIC OFFERING
PROSPECTUS
Sento Corporation
808 East Utah Valley Drive
American Fork, UT 84003
[LOGO]
SENTO CORPORATION
2,709,320 SHARES OF COMMON STOCK
Sento Corporation's common stock is listed on the NASDAQ SmallCap
Market under the symbol "SNTO".
These shares of common stock are being sold by the selling shareholders
identified in this prospectus. Sento will not receive any of the proceeds from
the sale of these shares by the selling shareholders.
------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" ON
PAGE 5 OF THIS PROSPECTUS.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER 13, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.........................................................3
Risk Factors...............................................................5
Business...................................................................9
Use of Proceeds...........................................................15
Selling Shareholders..................................................... 15
Plan of Distribution..................................................... 18
Legal Matters............................................................ 18
Experts.................................................................. 18
Available Information.....................................................18
Incorporation of Certain Information by Reference.........................19
Indemnification.......................................................... 19
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS. IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE INFORMATION
THAT IS IMPORTANT TO YOU. TO UNDERSTAND THIS OFFERING FULLY, YOU SHOULD READ THE
ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE RISK FACTORS AND THE FINANCIAL
STATEMENTS INCORPORATED BY REFERENCE.
THE COMPANY
SENTO: Sento Corporation, a Utah corporation ("Sento"). Unless
otherwise indicated, references in this report to "Sento"
include Sento and its subsidiaries.
SENTO'S Sento provides IT services to organizations of all sizes that
BUSINESS: use Windows NT, UNIX, and Internet/Intranet-based
client-server computing environments. Such services consist
primarily of the following:
- providing outsourced technical support and
helpdesk functions;
- assessing and training in-house IT staff
both on-site and through distance learning,
including computer-based training ("CBT")
methods.
SENTO'S HISTORY: Sento was formed in 1986 as Spire Technologies, Inc. to market
high-end third party hardware and software products as a value
added reseller ("VAR"). In 1997 and 1998, Sento undertook a
strategic transition to focus its efforts on IT training,
consulting and technical support. In 1998, it constructed a
new generation call center facility (referenced in this
prospectus as the "E-customer Contact Center") which is now
operational and which it anticipates to be fully staffed
during the 2000 fiscal year. Sento sold certain operations,
comprising its VAR business, in March and June 1999. In
October 1999, Sento announced its intention to undertake a
series of transactions intended to accelerate the development
and commercialization of the integrated voice and Internet
customer care technology utilized in Sento's E-customer
Contact Center.
THE OFFERING
Common Stock, par value $0.25, of Sento
(the "Common Stock") offered by the
selling shareholders........................ 2,709,320 shares
Common Stock outstanding prior to and
after this offering.......................... 7,936,409 shares (1)
Use of proceeds.............................. All proceeds of the offering will
be received by the selling
shareholders identified in this
prospectus.
- --------------------
(1) Excludes 2,621,044 shares of Common Stock issuable upon the exercise of
outstanding stock options and warrants granted by Sento.
3
<PAGE>
SELLING SHAREHOLDERS
All of the shares offered in this prospectus are to be sold by the
selling shareholders identified in this prospectus. Most of the selling
shareholders acquired their shares in connection with private placements of (1)
446,048 shares of Common Stock and warrants to purchase 223,024 shares of Common
Stock that Sento completed on June 18, 1996, (2) 720,000 shares of Common Stock
and warrants to purchase 240,000 shares of Common Stock that Sento completed on
August 27, 1997 and (3) 1,200,000 shares of Common Stock and warrants to
purchase 600,000 shares of Common Stock that Sento completed on June 29, 1999.
The remaining selling shareholders acquired their shares in connection with
various other transactions, including business acquisitions and consulting and
financing arrangements. Of the 2,709,320 shares of Common Stock offered by
Sento, 1,872,750 shares (including 600,000 shares issuable upon the exercise of
warrants issued by Sento) were acquired through private placement transactions
and 836,570 (including 167,500 shares issuable upon the exercise of warrants
issued by Sento) shares were acquired in other transactions.
PROPRIETARY MARKS
Sento utilizes many third-party products represented by registered
or common law trademarks, including the following trademarks: (1)
DEC-Registered Trademark-, VMS-Registered Trademark-, Open VMS-TM-,
VAX-Registered Trademark- and Alpha-TM- which are trademarks of Digital
Equipment Corporation ("Digital"); (2) Microsoft-Registered Trademark-,
MS-DOS-Registered Trademark-, DOS-TM-, Windows-Registered Trademark-, Windows
NT-Registered Trademark- and Windows 95-TM- which are trademarks of Microsoft
Corporation ("Microsoft"), (3) OS/2-TM- which is a trademark of International
Business Machines Corporation ("IBM") and (4) Intel-Registered Trademark-
which is a registered mark of Intel Corporation ("Intel"). This prospectus
also contains trademarks of other companies.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus, including
information "incorporated by reference," discuss future expectations, contain
projections of results of operation or financial condition or state other
"forward- looking" information. Those statements are subject to known and
unknown risks, uncertainties and other factors that could cause the actual
results to differ materially from those contemplated by the statements. The
forward-looking information is based on various factors and was derived using
numerous assumptions. Some of these factors are included in the discussion of
"Risk Factors" on the following pages.
4
<PAGE>
RISK FACTORS
The shares offered hereunder involve a high degree of risk, and are
suitable only for persons who can afford to bear such risk, including the loss
of their entire investment in the shares. In evaluating Sento and its business,
prospective investors should carefully consider the following factors in
addition to the other information set forth or referred to herein before
purchasing any of the shares.
RISKS RELATED TO EXISTING AND PROPOSED SENTO OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES. At June 30, 1999, Sento had working
capital of $170,720 and a cash balance of $579,536. Sento's liquidity position
deteriorated substantially during the year ended March 31, 1999, primarily
because Sento used $3,362,744 of cash for employee training and operating
activities during the year ended March 31, 1999 and $2,717,848 of cash for the
purchase of furniture and equipment.
Sento's primary sources of liquidity have been cash received from sales
of assets and cash provided through private sales of equity, as well as
borrowing under a bank line of credit. In addition, Sento has financed some of
its equipment utilized in its business through long-term leasing arrangements.
Sento's expansion and continuing operating losses will require Sento to find
additional sources of funding. In the event Sento is not able to find such
alternate sources of funding, its ability to pursue its planned business
strategy will be limited, and it may be forced to reduce its operations. There
can be no assurance that Sento will be able to obtain necessary capital to fund
its operations and purchase needed equipment to expand its operations on terms
favorable to Sento, if at all.
DEPENDENCE ON CUSTOMERS. No customer accounted for more than 10% of
revenues for the fiscal year ended March 31, 1999. However, two customers
accounted for approximately 83% of technical support revenues, and it is
anticipated that less than five customers will account for more than 80% of the
technical support revenues in the next fiscal year and perhaps longer. In
addition, Sento anticipates that technical support revenues will become the
majority of its revenues, and, therefore, it is anticipated that a small number
of customers will account for the majority of Sento's revenues. Consistent with
industry standards, Sento's contracts are generally cancelable by the customer
on short-term notice. Sento's loss of a significant amount of business with any
of its key customers could have, and the loss of a substantial amount of
business with either of its existing technical support customers would have, a
material adverse effect on Sento's business, financial condition and results of
operations.
COMPETITION. The market for providing IT services is highly fragmented
and very competitive. The IT services industry is comparatively young with many
small regional service companies supplying some training and technical support,
or systems integration services coupled with hardware and software sales. There
are many small IT training companies specializing in various vertical market
niches.
The IT services industry, however, has begun to experience a degree of
consolidation and the entry of major IT companies, which has resulted in an
additional level of competition from service providers that have greater name
recognition, larger installed customer bases, and significantly greater
financial, technical and marketing resources than Sento. Over the past five
years, a number of existing companies have enjoyed increasing success and rapid
internal growth. Several of these companies have been active in acquiring the
smaller regional training companies and are becoming major competitors with a
measurable share of this rapidly expanding market. In addition, major
sole-source IT services companies such as Anderson Consulting, Computer Sciences
Corp. ("CSC"), Electronic Data Systems ("EDS"), and IBM are providing full
"turnkey" solutions to their large customers.
Also, major computer hardware and software companies provide their own
technical support and customer training. Therefore, such companies are not
within the potential customer base for IT service providers and have the
capability of providing services that compete with those provided by Sento.
Sento cannot provide any assurance that better and more efficient
services will not be provided by new or existing IT service providers in
competition with Sento. The services provided by such competitors may be more
effective or less expensive than those provided by Sento. Although Sento intends
to improve, refine and enhance the services it provides, there can be no
assurance that Sento will be able to do so.
CHANGING MARKET. The market for IT services is characterized by rapid
technological advances, new product introductions and enhancements, and changes
in customer requirements. Sento's future success will depend in large part on
its ability to service new products, platforms and rapidly changing technology.
These factors will require Sento to provide adequately trained personnel to
address the increasingly sophisticated, complex and evolving needs of its
customers.
The complex nature of support services has resulted in the demand for
technical support services to expand beyond the telephone and now includes
e-mail, faxes and the Internet. Services include resolution of problems relating
5
<PAGE>
to the configuration and set-up, installation and interoperability of different
products, and the level of support requests ranges from simple error messages to
complex network configurations. These services cover a broad set of
technologies, including operating environments, applications, databases,
communication and network products, systems tools, development environments and
Internet/intranet products. There can be no assurance that Sento will be able to
provide such services profitably. The failure by Sento to adapt to the changing
IT service industry would have an adverse impact on Sento's result of operations
and financial condition.
Sento's success will depend in part on its ability to develop solutions
that keep pace with the continuing changes in information technology, evolving
industry standards and changing client requirements. There can be no assurance
that Sento will be successful in adequately addressing these developments on a
timely basis or that, if these developments are addressed, Sento will be
successful in the marketplace. In addition, there can be no assurance that
products or technologies developed by others will not render Sento's services
non-competitive or obsolete. Sento's failure to address these developments could
have a material adverse effect on its business and financial condition.
ATTRACTING, TRAINING AND RETAINING QUALITY EMPLOYEES. The IT services
market suffers from a significant labor shortage. Sento's success will depend,
in large part, on its ability to attract, retain and train highly-qualified
technical, managerial and marketing personnel with IT expertise. Sento has not
entered into employment agreements that require the services of any of its key
technical personnel to remain with Sento for any specified period of time.
Competition for such personnel is intense. There can be no assurance that Sento
will be able to attract and maintain all personnel necessary for the development
and operation of its business nor that it will be able to train its current
employees on new developments in technology. The loss of the services of key
personnel or an inability to attract, retain, train and motivate qualified
personnel could have a material adverse effect on the business, financial
condition and results of operations of Sento.
DEPENDENCE ON INDUSTRY TREND TO OUTSOURCE SERVICES. Sento's business
depends in large part on the trend within the IT industry to outsource certain
services. Sento cannot provide any assurance that this trend will continue or
that, if the trend continues, it will continue at the same rate of growth. The
failure of this trend to continue could have a material adverse effect on the
business, financial condition and results of operations of Sento.
POTENTIAL SIGNIFICANT FLUCTUATIONS IN QUARTERLY RESULTS. The value of
individual transactions can constitute a substantial percentage of Sento's
quarterly revenue, and particular transactions may generate a substantial
portion of the operating profits for a quarter. Because Sento's staffing and
other operating expenses are based on anticipated revenue levels, and a high
percentage of its expenses are fixed, delays in the receipt of orders or
payments can cause significant variations in operating results from quarter to
quarter. In addition, Sento may expend significant resources pursuing potential
sales that will not be consummated. Sento also may choose to reduce prices or to
increase spending in response to competition or to pursue new market
opportunities, which may adversely affect its operating results.
In particular, Sento's revenues from its E-customer Contact Center
operations are potentially volatile. Such revenues are a function of the number
of support requests received by Sento and the time spent on such requests.
Consequently, Sento's profitability may be adversely affected if Sento receives
fewer support requests than anticipated or the time spent in resolving inquiries
is greater than anticipated.
For all of the reasons identified above, management believes that
period-to-period comparisons of Sento's results of operations may not be
meaningful and that no one should rely upon them as an indication of future
performance. Furthermore, Sento cannot provide any assurance that it will be
able to achieve and sustain profitability on a quarterly basis.
POSSIBLE VOLATILITY OF STOCK PRICE. The trading price of the Common
Stock has fluctuated widely in response to variations in quarterly operating
results, announcements by Sento or its competitors, industry trends, general
economic conditions or other events or factors. Such fluctuations may continue
in the future. Regardless of the general outlook for Sento'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.
RISK OF EMERGENCY INTERRUPTION OF E-CUSTOMER CONTACT CENTER OPERATIONS.
Sento's business depends to a large extent on computer and telecommunications
equipment and software systems. Sento cannot provide any assurance that natural
disaster, human error, equipment malfunction or inadequacy, or other events
would not result in a prolonged interruption in Sento's ability to provide
support services to its clients. The temporary or permanent loss of computer or
telephone equipment or systems, through casualty, operating malfunction or
otherwise, could have a material adverse effect on Sento. Property and business
interruption insurance may not be adequate to compensate Sento for all losses
that it may incur.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of the
Common Stock of Sento or the perception that such sales could occur, could have
a negative impact on the prevailing market prices for the Common
6
<PAGE>
Stock. As of September 30, 1999, Sento had 7,936,409 shares of Common Stock
outstanding, of which at least 428,193 were eligible as of such date under
applicable securities laws for immediate sale in the public market without
restriction, except for any shares purchased by any "affiliate" of Sento (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"). In addition, approximately 2,397,767 outstanding shares were,
as of September 30, 1999, "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. Sento's Articles of Incorporation and
Bylaws, the Utah Revised Business Corporation Act and the Utah Control Shares
Acquisition Act each contain certain provisions that may have the effect of
inhibiting a non-negotiated merger or other business combination. Sento's
Articles of Incorporation grant to the Board of Directors the authority, without
further action by Sento's shareholders, to fix the rights and preferences, and
issue shares of preferred stock. These provisions may deter hostile takeovers or
delay or prevent changes in control of Sento or changes in Sento's management,
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.
DIVIDENDS. Dividends are payable on the Common Stock when, as and if
declared by Sento's Board of Directors. No dividend has been declared or paid on
the Common Stock to date. At present Sento intends to retain any future earnings
for use in its business and therefore does not anticipate paying any dividends
on the Common Stock in the foreseeable future.
RISKS RELATED TO THE PROPOSED ECP.COM TRANSACTIONS
On October 8, 1999, Sento announced its intention to undertake a series
of transactions intended to accelerate the development and commercialization of
the integrated voice and Internet customer care technology utilized in Sento's
E-customer Contact Center (the "Technology"). These transactions are described
in greater detail in the section of this prospectus entitled "Business -- Recent
Developments," commencing on page 10 of this prospectus. The following
paragraphs identify risks associated with the proposed transactions
(collectively the "ECP.com Transactions") with ECP.com, Inc., a newly-formed
Utah corporation organized by existing officers, directors and employes of Sento
("ECP.com") pursuant to a Contribution Agreement between Sento, as contributor,
and ECP.com as contributee (the "Contribution Agreement"). In addition, as part
of the ECP.com Transactions, ECP.com proposes to enter into a Stock Purchase
Agreement with Genesys Telecommunication Laboratories, Inc., a leading developer
of enterprise interaction management software ("Genesys") (the "Genesys Stock
Purchase Agreement"), and a Master Software License Agreement between Genesys,
as licensor, and ECP.com, as licensee.
MANAGEMENT TRANSITION. Sento has recently effected significant changes
in its management team and key employees. In particular, Arthur F. Coombs, III
became Chief Executive Officer in April 1999, Gary B. Filler joined Sento in
March 1999 in a consulting role as Executive Vice President and Acting Chief
Financial Officer, and Keith D. Barr joined Sento in April 1998 as Chief
Information Officer. If the ECP.com Transactions are consummated, Sento
anticipates that Mr. Coombs will resign as an employee, officer and director of
Sento and will become a full-time employee of ECP.com. As a result, Sento will
be required to identify and retain one or more qualified individuals to fill the
vacancies created by Mr. Coombs' departure. Sento has not identified any
prospective candidates to fill such vacancies. There can be no assurance that
Sento will be able to successfully identify and retain individuals who are
capable of filling such vacancies. In addition, a majority of the Board has been
elected since July 1998. Sento's headcount has grown from 162 at June 12, 1998
to 375 at September 30, 1999. Sento cannot provide any assurance that its new
management team and other new personnel can successfully manage Sento's rapidly
evolving business, and any failure to do so would have a material adverse effect
upon Sento's operating results.
FAILURE TO OBTAIN FINANCING. ECP.com's ability to commercialize the
Technology will depend to a significant extent on the ability of ECP.com to
obtain the financing necessary to develop, market and sell the Technology. The
$1,000,000 in proceeds of ECP.com's sale of 500,000 shares of Series A
Convertible Preferred Stock of ECP.com (the "ECP.com Series A Preferred") to
Genesys pursuant to the Genesys Stock Purchase Agreement will be insufficient to
fund the development and commercialization of the Technology. Sento cannot
provide any assurance that ECP.com will be able to obtain additional debt or
equity financing or that such financing, if obtained, will be available on
commercially reasonable terms. If ECP.com is unable to obtain the financing
required to develop, market and sell the Technology, it will be unable to
commercialize the Technology.
In addition, the Contribution Agreement provides that if ECP.com does
not raise $6,000,000 in equity funding (including the $1,000,000 proposed to be
raised from the sale of the shares of ECP.com Series A Preferred to Genesys in
the ECP.com Transactions) within 120 days of the closing of the ECP.com
Transactions, Sento may elect to rescind the Contribution Agreement and the
ECP.com Transactions. If ECP.com fails to raise the necessary equity funding and
7
<PAGE>
the ECP.com Transactions are rescinded, the development of the Technology will
suffer and Sento's operations and financial condition may be negatively
affected.
FAILURE TO COMMERCIALIZE THE TECHNOLOGY. The Technology is unproven in
applications outside of Sento's E-customer Contact Center and Sento's
commercialization of the Technology is limited to a single beta customer
relationship. ECP.com's success in commercializing the Technology will depend to
a significant extent on ECP.com's ability to develop and commercialize the
Technology in settings and for applications in which the Technology has not been
tested. There can be no assurance that ECP.com will be able to develop and/or
commercialize the Technology for settings or applications that will be
commercially feasible or that it will be able to develop and/or commercialize
the Technology for use in applications other than Sento's existing and future
E-customer Contact Centers.
DILUTION OF SENTO'S OWNERSHIP. If the ECP.com Transactions are
completed, Sento will own the equivalent of approximately 47% of the issued and
outstanding shares of ECP.com Common Stock on a fully-diluted basis, after
giving effect to the conversion of the shares of ECP.com Series A Preferred to
be issued to Sento and Genesys in the ECP.com Transactions. ECP.com's success in
developing and licensing the Technology will depend to a significant extent on
ECP.com's ability to obtain financing required to develop, market and sell the
Technology. As a result, ECP.com will have an incentive to issue additional
capital stock to sources of such financing. The issuance of such additional
capital stock would have the effect of diluting Sento's ownership of the ECP.com
capital stock and Sento's ability to influence the management and policies of
ECP.com. The Board of Directors of ECP.com would be able to issue additional
capital stock to the extent of ECP.com's authorized but unissued shares of
capital stock, which currently represents approximately 83% of the total
authorized capital stock of ECP.com.
The dilution of Sento's economic interests could result in Sento
receiving less financial benefit from ECP.com's use of the Technology than Sento
could have obtained through commercializing the Technology itself. In addition,
Sento's lack of voting control over ECP.com could result in ECP.com taking
actions in conflict with or adverse to the interests of Sento. These actions
could include licensing the Technology to competitors of Sento. In addition,
Sento will not have the unrestricted right to develop new applications for the
Technology without consent from ECP.com. Without a controlling interest in
ECP.com, Sento will not be assured of obtaining ECP.com's consent for such
additional applications.
RELIANCE ON ECP.COM FOR OUTSOURCED SERVICES. If the ECP.com
Transactions are completed, Sento will no longer possess the Technology and will
no longer employ a number of existing technical support employees who are
presently engaged in developing the Technology and maintaining Sento's
E-customer Contact Center. If the ECP.com Transactions are completed, many of
these technical support functions will be provided by ECP.com employees on an
outsourced basis pursuant to the Services Agreement. As a result, Sento will be
dependent on ECP.com for many of the technical support functions related to
Sento's E-customer Contact Center. The outsourcing relationship could result in
decreased attention to Sento's needs, slower response times and the lack of
redundant support functions. In addition, if ECP.com fails in its business
efforts, Sento would be required to re-develop the technical services necessary
to support its opportunities.
CONFLICTS BETWEEN SENTO AND ECP.COM. If the ECP.com Transactions are
completed, ECP.com will own the Technology. Although a Services Agreement
between Sento and ECP.com will grant to Sento the right to utilize the
Technology in the operation of its existing and future E-customer Contact
Centers, ECP.com will likely have the opportunity to license the Technology to
third parties, including existing and potential competitors of Sento.
Immediately following the ECP.com Transactions, Sento will likely possess the
ability to influence the management and policies of ECP.com and may cause
ECP.com to forego licensing opportunities with existing and potential
competitors of Sento in order to preserve Sento's ability to maintain its
existing and future E-customer Contact Centers. As a result, Sento cannot make
assurances that ECP.com's proposal to license the Technology will result in any
greater benefit to Sento shareholders than the commercialization of the
Technology by Sento alone.
CONFLICTS WITH SENTO'S DIRECTORS, OFFICERS AND EMPLOYEES. ECP.com was
founded by certain existing directors, officers and employees of Sento.
Furthermore, upon completion of the ECP.com Transactions, certain existing
directors, officers and employees of Sento will own 915,000 shares of the Common
Stock of ECP.com (the "ECP.com Common Stock") and exercisable options to acquire
an additional 1,730,000 shares of ECP.com Common Stock, representing an
aggregate of approximately 26% of the total issued and outstanding shares of
ECP.com Common Stock as of such date (on a fully-diluted basis, after giving
effect to the exercise of such options and the conversion of the shares of
ECP.com Series A Preferred to be issued to Sento and Genesys in ECP.com
Transactions). ECP.com may have the opportunity to use, develop or commercialize
the Technology in a manner that may be in conflict with or adverse to the
interests of Sento and its shareholders. As a result of their financial
interests, certain Sento directors, officers and employees may have incentives
to approve or facilitate such opportunities, including voting their shares of
ECP.com Common Stock in favor of approval of exploiting such opportunities.
Sento cannot provide any assurance that certain directors, officers and/or
employees of Sento will not have such incentives or that they will not act upon
such incentives.
8
<PAGE>
COMPETITION IN THE E-BUSINESS CUSTOMER SERVICE MARKET. The e-business
customer service market is new and intensely competitive. There are no
substantial barriers to entry, and established or new entities may enter this
market in the near future. Furthermore, established enterprise software
companies, including IBM, Hewlett-Packard Company, Microsoft Corporation and
similar companies, may leverage their existing relationships and capabilities to
offer e-business customer service applications. Any delays in the general market
acceptance of the e-business customer service applications and ECP.com's
proposed products and services would likely harm ECP.com's competitive position.
Delays would allow ECP.com's competitors additional time to approve their
service or product offerings, and also provide time for new competitors to
develop e-business customer service applications and solicit prospective
customers within ECP.com's target markets. Increased competition could result in
pricing pressures, reduced operating margins and loss of market share.
CHANGING NEEDS OF THE E-BUSINESS CUSTOMER SERVICE MARKET. The
e-business customer service industry is characterized by rapid technological
change, changes in customer requirements and preferences and the emergence of
new industry standards and practices that could render ECP.com's existing
products, services, proprietary technology and systems obsolete. To be
competitive, ECP.com must continually improve the performance, features and
reliability of its products and services, including its existing e-business
customer service applications, and develop new products, services, functionality
and technology that address the increasingly sophisticated and varied needs of
its prospective customers. If ECP.com cannot adapt or respond in a
cost-effective and timely manner to changing industry standards, market
conditions or customer requirements, its business and operating results would
suffer.
BUSINESS
Sento provides IT services to organizations of all sizes that use or
develop applications for Windows NT, UNIX and Internet/Intranet-based
client-server computing environments. Such services consist primarily of the
following:
- providing outsourced technical support and help-desk
functions; and
- assessing and training in-house IT staff both on-site and
through distance learning, including CBT methods.
Sento was formed in 1986 as Spire Technologies, Inc. and marketed
high-end third party hardware and software products as a value added reseller
("VAR"). In 1996, Sento completed a share exchange with an existing public
company. In November 1996, the Common Stock was registered on the Nasdaq Stock
Market (Small Cap Market) (Symbol: SNTO). In 1998, Sento changed its name to
Sento Corporation.
In 1997 and 1998, Sento undertook a strategic transition to focus its
efforts on IT training and technical support. In 1998, Sento constructed its
E-customer Contact Center which is now operational and is anticipated to be
fully staffed during the 2000 fiscal year. Sento sold certain operations,
comprising its VAR business, in March and June 1999. See "-- Background." In
October 1999, Sento announced its intention to undertake a series of
transactions intended to accelerate the development and commercialization of the
integrated voice and Internet customer care technology utilized in Sento's
E-customer Contact Center. See "-- Recent Developments."
BACKGROUND
Historically, Sento's operations consisted almost entirely of a VAR
business oriented to purchases of high-end third-party hardware and software
products. Sento generated revenues almost exclusively from sales and
distribution of third party hardware and software products. In 1997, Sento began
a strategic transition using its technical core competencies to offer IT
outsourcing services such as helpdesk, systems and network consulting and IT
training ("outsourcing" refers to the transfer of IT product and service
responsibility from internal personnel to external providers). Management
believes these new service offerings will contribute greater operating margins
than distributing third-party products. Sento divested its VAR business in March
and June 1999. Sento has also refocused its training activities away from
"traveling" courses held in hotel conference rooms to intensive multiweek IT
certification courses held primarily at the Corporate headquarters in American
Fork, Utah. The multiweek courses have shown higher profitability to date and
increasing enrollment. Sento also offers custom corporate training and CBT.
Sento's training services are provided through its wholly-owned subsidiary Sento
Training Corporation ("Sento Training").
Sento's marketing efforts focus primarily on middle market to
enterprise level companies, as well as divisions/departments of Fortune 500
companies. Sento sells and delivers its services through two IT service offices
located in American Fork, Utah, and Sydney, Australia. Sento's E-customer
Contact Center is located in its American Fork, Utah facility.
9
<PAGE>
During the year ended March 31, 1998, Sento expanded its service
offerings and geographic range through the acquisitions of Australian Software
Innovations Pty. Ltd. ("ASI") in Sydney, Australia (now known as Sento Australia
Pty. Ltd., being referred to herein as "Sento Australia"), and Astron
Incorporated in Orem, Utah.
RECENT DEVELOPMENTS
On October 8, 1999, Sento announced its intention to undertake a series
of transactions intended to accelerate the development and commercialization of
the integrated voice and Internet customer care technology utilized in Sento's
E-customer Contact Center. The ECP.com Transactions, which Sento's Board of
Directors have recommended and submitted for review and approval by Sento's
shareholders at a special meeting of shareholders to be held in late 1999,
contemplate that Sento and other parties to the ECP.com Transactions will take
the following actions:
(i) Sento will transfer to ECP.com substantially all of the
Technology in exchange for 4,000,000 shares of the ECP.com Series A Preferred;
(ii) Sento and ECP.com will enter into a Services Agreement,
enabling Sento to utilize the Technology in developing its existing and future
E-customer Contact Centers;
(iii) Sento will transfer to ECP.com certain tangible assets,
consisting primarily of computer equipment, in exchange for ECP.com's delivery
of a secured promissory note in the original principal amount of approximately
$900,000;
(iv) Sento and ECP.com will enter into a Facilities and Services
Agreement whereby Sento will permit ECP.com to use certain office and research
and development space located at Sento's principal offices, and provide
accounting and administrative services to ECP.com; and
(v) ECP.com and Genesys will enter into a Stock Purchase Agreement
and Master Software License Agreement, providing for ECP.com to transfer
3,500,000 shares of the ECP.com Series A Preferred to Genesys in exchange for
$1,000,000 in cash and a favorable license to use Genesys' Internet suite of
enterprise interaction management software in the development of ECP.com's
business operations on terms that are substantially more favorable than the
pricing structure currently available to Sento.
If the ECP.com Transactions are consummated, Sento and Genesys will own
4,000,000 shares and 3,500,000 shares of the ECP.com Series A Preferred,
respectively, representing approximately 47% and 41%, respectively, of the
issued and outstanding shares of ECP.com Common Stock (on a fully-diluted basis,
after giving effect to the conversion of the ECP.com Series A Preferred to be
issued to Sento and Genesys in the ECP.com Transactions). If the ECP.com
Transactions are approved, Sento also anticipates that certain existing
employees of Sento, including Arthur F. Coombs, III, Sento's Chief Executive
Officer, will resign as employees of Sento and will become employees of ECP.com.
THE INDUSTRY
The IT industry encompasses a broad spectrum of technology and services
used in the processing, distribution and management of information. This
spectrum includes:
- a user's desktop information system, consisting principally of
computer hardware, software and associated training;
- back office services, including existing and future IT systems
infrastructure; and
- organizational management of IT systems (including Internet
and Intranet) and requirements.
Sento believes most organizations face a rapidly changing, highly
competitive environment where improved utilization of IT products and services
can be a significant factor in improving products and services, lowering costs,
increasing customer satisfaction and building competitive advantages. Many top
executives and managers recognize the importance of information technology in
their organizations and the potential benefits of improved IT utilization. At
the same time, the rapid technological change and migration required to achieve
those benefits create tremendous pressure on organizations and their management.
As the pace of technological change accelerates, the organization's ability to
evaluate, integrate, deploy and leverage IT systems is becoming a critical
competitive issue. In particular, internal IT departments are frequently
challenged to use limited time and resources (both financial and human) to stay
abreast of rapid technological change while maintaining the operations of
existing IT systems without incurring significant technological or operational
risks.
The challenge of maintaining an organization's focus on core business
areas while attempting to monitor and benefit from rapid IT development has
prompted many organizations to seek professional IT training and technical
services from external providers. Growing product complexity, shorter product
life cycles and an increasing number
10
<PAGE>
of products and multi-vendor computer and network configurations have increased
the demand for technical support services. At the same time, software
publishers, hardware manufacturers, online service providers and other
organizations are finding it increasingly difficult and expensive to service all
their needs in-house. Technical support is especially challenging to undertake
as a non-core function because of the need for ongoing capital investment in
specialized equipment, the technical workforce management challenge and the
inherent need for scale. As a result, "outsourcing" is rapidly gaining favor
among many organizations.
Sento believes that the principal factors motivating organizations to
pursue outsourced IT services are the desire to provide improved customer
service, an effort to focus internal organizational resources on the
organization's core competencies, the necessity of enhancing IT effectiveness
and the benefit of supplementing internal IT resources. Sento believes most
organizations that use information technology, whether in their core business or
to facilitate non- IT business operations, are currently outsourcing or will, in
the future, outsource some or all of their IT needs.
BUSINESS STRATEGY
Sento's business strategy is to develop and provide integrated IT
solutions that enable its customers to effectively use leading-edge technology
to improve their business operations and results. Sento believes it can pursue
its business strategy by implementing the following strategic initiatives:
DEVELOP AND MARKET LEADING-EDGE IT SOLUTIONS. Sento's services and
products are split into two strategic business segments: comprehensive product
support and helpdesk services available through Sento's E-Customer Contact
Center and customized and general system and applications training available
through Sento Training. Sento's products and services help businesses provide
and improve Internet and telephone-based customer service. Sento Training
provides students with high-quality IT training that has been designed to
incorporate leading-edge delivery systems, measurement tools and training
practices.
INTERNAL GROWTH AND ACQUISITIONS. Sento intends to expand its
operations by opening or acquiring additional call centers and training offices
in strategic locations in the U.S. and foreign countries. Management believes
that if Sento successfully identifies and consummates acquisitions of additional
offices, it will enhance its ability to offer its multinational clients a
comprehensive package of integrated IT services. In addition to geographic
expansion, Sento will seek to identify and acquire companies that provide
complementary technical support and training services, and, as a result, extend
the breadth of its service offerings.
ATTRACT AND RETAIN HIGHLY SKILLED IT PROFESSIONALS. Sento's success
depends on its ability to attract, train, motivate and retain highly skilled IT
professionals. Management believes Sento's dual service approach (technical
support and training) provides an excellent career path filled with significant
opportunities across the spectrum of IT experience, from entry level positions
through highly-skilled IT consultants. Sento's helpdesk and technical support
centers will offer both entry level employees and seasoned professionals the
prospect of training to enhance their abilities while serving customers in a
broad range of IT areas. Sento also offers its professionals the prospect for
rapid advancement and expert personal training, as employees can move from one
career step to another while remaining within Sento. Sento provides its
employees the chance to work with leading-edge technologies, in a stimulating,
flexible, entrepreneurial environment with ongoing technical training.
CAPITALIZE ON TECHNOLOGY. Sento has completed its construction of a new
generation technical support center in American Fork, Utah. Sento has integrated
technology into the support center from divergent companies on the cutting-edge
of the IT and computing industries. The support center goes beyond a traditional
telephone call center by using leading-edge technology to establish Sento's
E-customer Contact Center. A customer interaction can be answered through nearly
any media type, including voice and fax communication and all electronic
customer interactions over the Internet (e-mail, Web text chat, Web
call-throughs, Web collaboration, Web call-back interactions and co-browsing)
with the same speed and efficiency as traditional telephone calls. The advent of
the Internet and the proliferation of electronic customer interactions are
changing the manner in which businesses communicate with their customers and
Sento's E-customer Contact Center positions Sento to meet these emerging
opportunities.
SERVICES
Sento's integrated IT solutions are designed to enable its customers to
effectively use leading-edge technology to improve their business processes and
operating results. Sento delivers IT services in two strategic categories:
technical support and training services.
IT TECHNICAL SUPPORT. Sento offers a broad range of IT outsourcing
services consisting principally of call center, helpdesk and product support
services. Sento uses advanced systems, including client-server-based database
and reporting systems, Internet, local area networks ("LAN"), multi-user
systems, Computer-Telephony Integration ("CTI") and Integrated Voice Response
("IVR") technologies, to provide timely technical support to its customers,
11
<PAGE>
enabling those customers to focus increased attention on their core business
operations. CTI combines data with voice systems in order to enhance telephone
services. For example, automatic number identification ("ANI") allows a caller's
records to be retrieved from the database while the call is routed to the
appropriate party. IVR is an automated telephone answering system that responds
with a voice menu and allows the user to make choices and enter information via
the user's telephone keypad. IVR systems are used in call centers as a
replacement for human switchboard operators. IVR systems may also integrate
database access and fax responses.
HELPDESK. Helpdesk services are provided by vendor-certified
professionals acting on behalf of a customer to provide end users and
IT staffs with a knowledgeable resource to address questions and
problems involving applications, integrated desktop, network support or
customized areas of need. Helpdesk personnel provide flexible services
of a moderately technical nature that can be easily scaled to meet a
customer's changing technical support requirements. Utilizing Sento
personnel, customers can develop a program that meets their
requirements, then implement the program rapidly as a complete helpdesk
solution or as a supplement to the customer's on-site facility. In
addition, Sento can dispatch trained engineers to customer or end-user
locations when necessary to provide on-site solutions.
PRODUCT SUPPORT. Product support services are targeted towards original
equipment manufacturers ("OEMs"), software publishers, hardware system
manufacturers and other organizations requiring high quality technical
services. These services, which are more technical in nature than
helpdesk or call center services, are designed to provide customers
with immediate and efficient access to "best-of-class" product support.
Sento delivers comprehensive first-level support (support related to
product installation, features and configuration) to end users and
manufacturers, combining hardware and network support with application
support for proprietary and off-the-shelf programs.
IT TRAINING. Sento provides instructor-led training in seminar
(including intensive multiweek IT Certificate courses), customized corporate and
multimedia settings. Sento's objective is to provide high-quality IT training
designed to incorporate leading delivery systems, measurement tools and training
practices. Sento currently offers training and related certification services to
IT professionals, including Microsoft Certified Systems Engineer ("MCSE"),
Certified NetWare Engineer ("CNE"), Certified Winframe Administrator ("CWA"),
Certified Internet Webmaster ("CIW"), Internet and networking technologies.
Sento instructors combine their presentation skills with technical information
and years of practical, real-world experience and examples. Instructors are
certified in their area of instruction, with many having multiple certifications
(such as MCSE, MCP, CNE, and/or CWA) to their credit.
In addition, Sento offers training for QuickBooks customers. These
courses provide tips, configurations, tweaks and solutions required to address
obstacles faced by business and accounting professionals. Students are provided
instruction in the use of solutions to maximize their productivity. Sento
provides its training and applications through various settings including
seminar, customized corporate and multimedia including video and computer-based
training via Internet and CD-ROM.
INTERNATIONAL OPERATIONS. In July 1997, Sento acquired substantially
all of the assets of ASI, including the OpenAviator suite of UNIX-based
management and performance monitoring utilities. Shortly thereafter, Sento sold
the OpenAviator product suite to BMC Software, Inc. ("BMC") and agreed to
provide related product support services during a transition period which
expired on December 31, 1998. Sento contributed the remainder of the ASI assets
to Sento Australia, which acts as a sales agent for BMC's Patrol product line.
These software sales are complemented by professional consultancy and
integration, performance tuning education, and customized configuration and
development services.
ACQUISITIONS AND DIVESTITURES
As a result of Sento's transition to offering IT outsourcing services
rather than pursuing its historical VAR business, Sento has sold its VAR
business and related assets in a series of divestiture transactions completed
during the period between December 31, 1998 and June 30, 1999. These
transactions consisted principally of:
- the sale of Sento's remaining VAR business and related assets
to an unrelated party in June 1999 in exchange for an initial
cash payment of $50,000 and contingent payments based on
revenues generated from the divested business and assets,
which contingent payments will not exceed $350,000;
- the sale of all of the stock of Sento UK Limited (acquired in
October 1997 for 31,750 shares of Common Stock) in exchange
for the return of 43,750 shares of Common Stock issued to the
principal and certain employees of Sento UK Limited and an
agreement to pay Sento a royalty equal to two percent of net
revenues generated by Sento UK Limited during the five-year
period commencing April 1, 1999;
12
<PAGE>
- the sale of all of the assets of Sento's east coast division
(acquired in July 1997 from CDG Technologies, Inc. for 60,000
shares of Common Stock) in exchange for the payment of cash in
an amount equal to $135,000 (paid over a three-year period)
and a royalty based upon net revenues of the divested
operations over the three-year period, provided that the
entire purchase price will be reduced to $100,000 if paid in
full prior to January 1, 2001;
- the sale of 67% of the stock of Dewpoint Distributed
Solutions, Inc. ("Dewpoint") (representing Sento's entire
ownership of the stock of Dewpoint) in exchange for cash in
the amount of $5,000 and the delivery of promissory notes in
the original principal amount of $333,336, secured by a pledge
of all of the Dewpoint shares transferred by Sento and bearing
interest at the rate of six percent (6%) per annum; and
- the sale of all of the assets of Sento's west coast division
(acquired in October 1997 from PC Business Solutions, Inc. for
250,000 shares of Common Stock) in exchange for a promissory
note in the original principal amount of $250,000, secured by
a pledge of 100,000 shares of Common Stock and bearing
interest at the rate of seven and one-half percent (7.5%) per
annum.
In October 1998, Sento acquired equipment and intellectual property
from Functional Software, Pty., Ltd. ("Functional Software") in exchange for
$450,000 in cash and approximately 130,000 shares of Common Stock. Functional
Software is the developer of COSMOS, a system management framework technology
for UNIX and Windows NT computer systems. Subsequent to the acquisition, Sento
determined that the level of revenues reasonably anticipated to be generated
from the operation of the Functional Software assets would be substantially
lower than anticipated at the time of the acquisition. Sento also determined
that the anticipated expenses of the acquired business would be higher than
anticipated at the time of acquisition. Sento has, as of March 31, 1999, entered
into an agreement with the successor-in-interest to Functional Software, whereby
Sento sold all of the equipment and intellectual property acquired from
Functional Software in exchange for the return to Sento of 100,000 shares of
Common Stock.
In August 1998, Sento Training acquired the marketing rights to certain
IT training courses from Educational Systems, Inc. ("ESI") for $100,000 cash and
an agreement to pay future royalties of not less than $500,000 and not more than
$1,400,000 (in cash and shares of Common Stock) over a 33-month period.
Effective April 1, 1999, Sento began withholding royalty payments, based upon
Sento's working capital position and disagreements with the principals of ESI
regarding certain representations and obligations contained in the acquisition
agreement. In July 1999, Sento, Sento Training and ESI entered into a Settlement
and Release Agreement pursuant to which Sento agreed to issue to ESI 169,097
shares of Common Stock in full satisfaction of the obligations of Sento and
Sento Training to ESI. In addition, the parties released and discharged any
claims they had against each other, whether arising under the original
acquisition agreement or otherwise.
COMPETITION
The IT industry is highly competitive, global in scope and comprised of
myriad enterprises and individuals. Methods of competition within the industry
include, but are not limited to, marketing, product performance, price, product
differentiation, service, technology and compliance with industry standards.
Sento anticipates that present and potential competition in the various markets
it serves will come from enterprises and individuals of various types, many of
which are larger and have greater resources than those of Sento. Firms not now
in direct competition with Sento may introduce competing products in the future.
It is possible for companies to be at various times competitors, customers and
collaborators in different markets. Management believes that its efforts to
implement Sento's strategy of delivering integrated IT solutions, if
successfully implemented, may constitute a competitive advantage.
As Sento has completed its transition to the delivery of outsourced IT
services, it has encountered a new range of competitors within each of the
technical support and training industry segments. Each of the two industry
segments exhibits unique characteristics and is rapidly growing and highly
competitive. In the IT technical support industry Sento also faces significant
and diverse competition from a broad spectrum of international, national,
regional and local enterprises. In the IT training industry, among other
competitors, Sento faces competition from large hardware and software vendors,
as well as many independent international, national, regional and local training
companies.
Sento's competitors include major sole source IT services companies
such as Anderson Consulting, Computer Sciences Corp., Electronic Data Systems,
and IBM which provide full "turnkey" solutions to their large customers, as well
as the following national and worldwide services companies, among others, who
compete in one or more of the two market segments in which Sento competes:
13
<PAGE>
<TABLE>
<CAPTION>
COMPANY STOCK SYMBOL FY END TTM REV ($MIL) MARKET SEGMENT*
- ------- ------------ ------ -------------- --------------
<S> <C> <C> <C> <C>
Aris Corporation ARSC Dec 115 T
Sykes International SYKE Dec 469 TS
CBT CBTSY Dec 162 T
Learning Tree Int'l LTRE Sep 187 T
Computer Learning CLCX Jan 145 T
National Tech Team TEAM Dec 117 TS
Teletech Holdings TTEC Dec 369 TS
Stream --- Dec 200 TS
</TABLE>
*T--Training, TS--Technical Support
Sento's ability to compete in its market segments will be driven by its
niche approach, state-of-the-art call center technology, its core competencies
in leading-edge technologies, and by servicing higher-end IT segments such as
networks, TCP/IP, CTI, and systems rather than simpler products like desktop
applications and games.
Given the extensive market opportunity in the networking, Internet, and
CTI systems operating environments, management believes that Sento's strategy of
providing the "best-of-breed" services in the technically high-end market niche
will provide it with competitive positioning to achieve high growth and capture
market share while reaching profitability objectives.
SIGNIFICANT CUSTOMERS
No customer accounted for more than 10% of Sento's revenues for the
fiscal year ended March 31, 1999. However, two customers accounted for
approximately 83% of technical support revenues, and it is anticipated that less
than five customers will account for more than 80% of the technical support
revenues in the next fiscal year and perhaps longer. In addition, it is
anticipated that technical support revenues will become the majority of Sento's
revenues, and, therefore, it is anticipated that a small number of customers
will account for the majority of Sento's revenues. Consistent with industry
standards, Sento's contracts are generally cancelable by the customer on
short-term notice. The loss of, or the failure to retain a significant amount of
business with any key customer could have a material adverse effect on the
business, financial condition and results of operations of Sento.
PATENTS AND PROPRIETARY TECHNOLOGY
Sento does not own any patents nor does it have any patent applications
relating to its products. Sento 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.
Sento is also seeking tradename and trademark protection for certain of its
names and marks. Accordingly, Sento's management does not believe that any
particular patent or group of patents, copyrights, trademarks, or tradenames is
of material importance to the business of Sento as a whole.
RESEARCH AND DEVELOPMENT
Sento competes in an industry which is characterized by rapid
technological change. Historically, Sento has not incurred significant expenses
for research and development.
EMPLOYEES
As of September 30, 1999, Sento had approximately 375 total employees,
of which approximately 335 were full-time employees and 40 were part-time
employees. Competition for qualified personnel in the IT industry is intense.
The future success and growth of Sento will depend in large measure upon its
ability to attract and retain qualified management and technical personnel.
There can be no assurance that Sento will be able to attract and maintain all
personnel necessary for the development and operation of its business nor that
it will be able to train its current employees on new developments in
technology. Failure of Sento to attract and retain key management and technical
personnel and qualified personnel required to continue Sento's operations could
have a material adverse impact on Sento. None of Sento's employees is
represented by a labor organization with respect to his or her employment with
Sento. Sento has never had a work stoppage, and Sento considers its employee
relations satisfactory.
14
<PAGE>
PROPRIETARY MARKS
Sento utilizes many third-party products represented by registered
or common law trademarks, including the following trademarks: (1)
DEC-Registered Trademark-, VMS-Registered Trademark-, OpenVMS-TM-,
VAX-Registered Trademark- and Alpha-TM- which are trademarks of Digital; (2)
Microsoft-Registered Trademark-, MS-DOS-Registered Trademark-, DOS-TM-,
Windows-Registered Trademark-, Windows NT-Registered Trademark- and Windows
95-TM-which are trademarks of Microsoft; (3) OS/2-TM- which is a trademark of
IBM and (iv) Intel-Registered Trademark- which is a registered trademark of
Intel. This prospectus also contains trademarks of other companies.
FACILITIES
The headquarters and existing call center of Sento are located at 808
East Utah Valley Drive, American Fork, Utah. Sento leases approximately 40,000
square feet of space used for its administrative, call center, technical support
and training operations. The monthly base rent is $33,400, subject to adjustment
during the renewal periods. Management anticipates that continued growth of
Sento, if achieved, will necessitate acquisition of additional office space
during fiscal year 2000. Sento also leases a 4,100 square foot facility in
Sydney, Australia and a 2,600 square foot facility in Orem, Utah.
USE OF PROCEEDS
All proceeds from any sale of the shares offered in this prospectus,
less commissions and other customary fees and expenses, will be paid directly to
the Selling Shareholders selling the shares. Sento will not receive any proceeds
from the sale of any of the shares offered in this prospectus.
SELLING SHAREHOLDERS
The following table sets forth, as of the date of this prospectus, the
name of each shareholder selling shares of the Common Stock of Sento as part of
this offering (each a "Selling Shareholder"), certain beneficial ownership
information with respect to the Selling Shareholders, and the number of shares
that may be sold from time to time by each Selling Shareholder pursuant to this
prospectus. There can be no assurance that any of the shares offered hereby will
be sold. The percentages set forth below have been computed based on the number
of outstanding shares of Common Stock as of September 30, 1999, which was
7,936,409 shares of Common Stock. Except as otherwise indicated, Sento believes
the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws, where applicable.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING UPON COMPLETION OF OFFERING (1)
--------------------------- -------------------------------
NUMBER OF
NUMBER OF SHARES BEING UMBER OF
BENEFICIAL OWNER SHARES PERCENT (2) OFFERED(1) NSHARES PERCENT (2)
- -------------------------------------------- ------------- ---------- ------------ --------- -----------
<S> <C> <C> <S> <C> <C>
Ancor Sales Co. Profit Sharing Trust 37,500(6) * 37,500 0 *
Janae Arnold 77,618 * 77,618 0 *
Bay Area Micro-Cap Fund I.P. 210,000(7) * 210,000 0 *
Brian W. Braithwaite(3) 397,167 5.0% 397,167 0 *
Irwin Bronstein 6,000 * 6,000 0 *
Joseph J. Bunker 25,000 * 25,000 0 *
Keith Cannon 45,000(8) * 45,000 0 *
Walter A. Carozza 23,436(9) * 23,436 0 *
Kevin W. Clark 6,000 * 6,000 0 *
Lester L. Colbert, Jr. 45,000(10) * 45,000 0 *
Arthur F. Coombs, Jr. 30,000(11) * 30,000 0 *
Stanley J. Cutler(4) 34,000(12) * 30,000 4,000 *
Paul Davis 5,000 * 5,000 0 *
Steven A. Dawes 19,500 * 19,500 0 *
Delta Financial Resources, Inc. 203,505(13) * 150,000 53,505 *
Michelle Drolet 17,000 * 17,000 0 *
Walfred J. and Vida L. Fassler 1,250 * 1,250 0 *
Gary B. Filler(5) 47,000(14) * 30,000 17,000 *
Genesys Telecommunications Laboratories 243,753(15) * 243,753 0 *
Kelly J. Gleave 30,000(16) * 30,000 0 *
Jeff Gray 60,000(17) * 60,000 0 *
Leila Huddani 24,000 * 24,000 0 *
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING UPON COMPLETION OF OFFERING (1)
--------------------------- -------------------------------
NUMBER OF
NUMBER OF SHARES BEING UMBER OF
BENEFICIAL OWNER SHARES PERCENT (2) OFFERED(1) NSHARES PERCENT (2)
- -------------------------------------------- -------------- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
Nizar Huddani 24,000 * 24,000 0 *
Guy and Norma Ivins 3,000 * 3,000 0 *
Robert H. and Mary Jane Latvala 6,000 * 6,000 0 *
Clair A. Lewis IRA 5,000 * 5,000 0 *
M3 Partners LLC 46,875(18) * 46,875 0 *
Dinesh Maniar 30,000(19) * 30,000 0 *
Daniel Mcleod 30,000(20) * 30,000 0 *
Clark M. Mower 35,000(21) * 30,000 5,000 *
Alexander I. Paluch 23,436(22) * 23,436 0 *
Peregrine Properties LLC 150,000(23) * 150,000 0 *
Mark Peterson 90,000(24) * 90,000 0 *
RCG Capital Markets Group Inc. 45,000(25) * 45,000 0 *
Rogers Family Trust 45,000(26) * 45,000 0 *
Silicon Valley Bank 60,000(27) * 60,000 0 *
Heidi M. Smith 104,285 * 104,285 0 *
Jerry Spilsbury 150,000(28) * 150,000 0 *
Mont E. Tanner 6,000 * 6,000 0 *
Clemons F. Walker 533,200(29) 6.7% 200,000 333,200 *
Whisper Investment Company 30,000(30) * 30,000 0 *
John Whitney 12,500(31) * 12,500 0 *
John J. Witkowski 26,000(32) * 15,000 11,000 *
Bert Zaccaria(33) 45,000(34) * 45,000 0 *
ZD Air, Inc.(33) 45,000(35) * 45,000 0 *
-------------- ----------- ---------
3,133,025 2,709,320 423,705
</TABLE>
- ---------------------------
* Represents less than one percent of the outstanding shares of
Common Stock.
(1) Assumes the sale by each Selling Shareholders of all of the shares
offered hereunder by such Selling Shareholder. There can be no
assurance that any of the shares offered hereby will be sold.
(2) The percentages set forth have been computed without taking into
account any treasury shares held by Sento and, with respect to
those persons holding warrants to purchase Common Stock
exercisable within 60 days of August 11, 1999, the number of
shares of Common Stock that would be issuable at the end of such
period assuming the exercise thereof.
(3) Brian W. Braithwaite served on Sento's Board of Directors and as
Corporate Secretary from August of 1986 until October of 1997.
(4) Stanley J. Cutler currently serves as Sento's Corporate Secretary.
(5) Gary B. Filler currently serves on Sento's Board of Directors and
as Acting Chief Financial Officer of Sento.
(6) Includes shares subject to a presently exercisable warrant to
purchase 7,500 shares of Common Stock.
(7) Includes shares subject to a presently exercisable warrant to
purchase 70,000 shares of Common Stock.
(8) Includes shares subject to a presently exercisable warrant to
purchase 15,000 shares of Common Stock.
(9) Includes shares subject to a presently exercisable warrant to
purchase 7,812 shares of Common Stock.
(10) Includes shares subject to a presently exercisable warrant to
purchase 15,000 shares of Common Stock.
(11) Includes shares subject to a presently exercisable warrant to
purchase 10,000 shares of Common Stock.
(12) Includes shares subject to a presently exercisable warrant to
purchase 10,000 shares of Common Stock.
(13) Includes shares subject to a presently exercisable warrant to
purchase 50,000 shares of Common Stock.
(14) Includes 32,000 shares of Common Stock and shares subject to a
presently exercisable warrant to purchase 10,000 shares of Common
Stock in the name of G.T. Investments, of which Mr. Filler is the
sole shareholder.
(15) Includes shares subject to a presently exercisable warrant to
purchase 81,251 shares of Common Stock.
(16) Includes shares subject to a presently exercisable warrant to
purchase 10,000 shares of Common Stock.
(17) Includes shares subject to a presently exercisable warrant to
purchase 20,000 shares of Common Stock.
(18) Includes shares subject to a presently exercisable warrant to
purchase 15,625 shares of Common Stock.
(19) Includes shares subject to a presently exercisable warrant to
purchase 10,000 shares of Common Stock.
(20) Includes shares subject to a presently exercisable warrant to
purchase 10,000 shares of Common Stock.
(21) Includes shares subject to a presently exercisable warrant to
purchase 10,000 shares of Common Stock.
(22) Includes shares subject to a presently exercisable warrant to
purchase 7,812 shares of Common Stock.
(23) Includes shares subject to a presently exercisable warrant to
purchase 50,000 shares of Common Stock.
16
<PAGE>
(24) Includes shares subject to a presently exercisable warrant to
purchase 30,000 shares of Common Stock.
(25) Includes a presently exercisable warrant to purchase 45,000 shares
of Common Stock.
(26) Includes shares subject to a presently exercisable warrant to
purchase 15,000 shares of Common Stock.
(27) Includes shares subject to a presently exercisable warrant to
purchase 60,000 shares of Common Stock.
(28) Includes shares subject to a presently exercisable warrant to
purchase 50,000 shares of Common Stock.
(29) Includes 280,900 shares of Common Stock held in the name of the
Walker Family Trust, presently exercisable warrants to purchase
50,000 shares of Common Stock held by Mr. Walker and presently
exercisable warrants to purchase 50,000 shares of Common Stock
held in the name of the Walker Family Trust.
(30) Includes shares subject to a presently exercisable warrant to
purchase 10,000 shares of Common Stock.
(31) Includes shares subject to a presently exercisable warrant to
purchase 12,500 shares of Common Stock.
(32) Includes shares subject to a presently exercisable warrant to
purchase 5,000 shares of Common Stock and 11,000 shares owned
jointly by John J. and Carolyn A. Witkowski.
(33) Bert Zaccaria is the President and a shareholder of ZD Air, Inc.
(34) Includes shares subject to a presently exercisable warrant to
purchase 15,000 shares of Common Stock.
(35) Includes shares subject to a presently exercisable warrant to
purchase 15,000 shares of Common Stock.
PRIVATE PLACEMENT -- The Selling Shareholders acquired a significant
portion of the shares offered hereby in connection with private placements of
(1) 446,048 shares of Common Stock and warrants to purchase 223,024 shares of
Common Stock that Sento completed on June 18, 1996 (the "1996 Private
Placement"), (2) 720,000 shares of Common Stock and warrants to purchase 240,000
shares of Common Stock that Sento completed on August 27, 1997 (the "1997
Private Placement") and (3) 1,200,000 shares of Common Stock and warrants to
purchase 600,000 shares of Common Stock that Sento completed on June 29, 1999
(the "1999 Private Placement" and together with the 1996 Private Placement and
the 1997 Private Placement, collectively, the "Private Placements"). Sento
conducted the Private Placements pursuant to the terms set forth in (1) a
Private Placement Memorandum of Sento dated April 24, 1996, (2) a Private
Placement Memorandum of Sento dated May 30, 1997 and (3) a Private Placement
Memorandum of Sento dated May 5, 1999, respectively.
The 1996 Private Placement consisted of the offer and sale to certain
Selling Shareholders (the "1996 Selling Shareholders") of 200,000 units (the
"1996 Units") comprised of two shares each, together with one warrant each for
the purchase of one share of Common Stock, exercisable until April 30, 1998, at
an exercise price of $3.50 per share. The 1996 Units were offered on a "best
efforts" basis on behalf of Sento by officers of Sento at an offering price per
Unit of $7.00. Sento accepted subscriptions from the 1996 Selling Shareholders
for all of the 1996 Units offered in the 1996 Private Placement.
The 1997 Private Placement consisted of the offer and sale to certain
Selling Shareholders (the "1997 Selling Shareholders") of 240,000 units (the
"1997 Units") comprised of three shares each, together with one warrant each for
the purchase of one share of Common Stock, exercisable until May 31, 1999, at an
exercise price of $5.50 per share. The 1997 Units were offered on a "best
efforts" basis on behalf of Sento by certain independent brokers at an offering
price per 1997 Unit of $12.50. Sento accepted subscriptions from the 1997
Selling Shareholders for all of the 1997 Units offered in the 1997 Private
Placement.
The 1999 Private Placement consisted of the offer and sale to certain
Selling Shareholders (the "1999 Selling Shareholders" and together with the 1996
Selling Shareholders and the 1997 Selling Shareholders, collectively, the
"Private Placement Selling Shareholders") of 600,000 units (the "1999 Units" and
together with the 1996 Units and the 1997 Units, collectively, the "Units")
comprised of two shares each, together with one warrant each for the purchase of
one share of Common Stock, exercisable until May 31, 2002, at an exercise price
of $2.50 per warrant. The 1999 Units were offered on a "best efforts--all or
none" basis on behalf of Sento by officers of Sento at an offering price per
1999 Unit of $3.20. Sento accepted subscriptions from the 1999 Selling
Shareholders for all of the 1999 Units offered in the 1999 Private Placement.
In connection with the purchase of Units by Private Placement Selling
Shareholders, Sento executed registration rights agreements entitling such
Selling Shareholders to certain incidental, or "piggyback," registration rights
with respect to the shares acquired thereunder. Sento also has executed
registration rights agreements entitling other Selling Shareholders to
"piggyback" registration rights with respect to certain shares of Common Stock
acquired in connection with various other transactions, including business
acquisitions and consulting and financing arrangements.
17
<PAGE>
PLAN OF DISTRIBUTION
The shares offered in this prospectus will not be offered or sold
through any underwriting syndicate, nor has Sento retained any underwriter,
broker or dealer to facilitate the offer or sale of the shares. Sento will not
pay any underwriting commissions or discounts in connection with this offering.
Those Selling Shareholders electing to offer or sell shares will do so in
transactions on the NASDAQ Small Cap Market, in negotiated transactions or in a
combination of the two methods of sale, at prices relating to the prevailing
market prices or at negotiated prices. The Selling Shareholders may sell the
shares to or through broker-dealers. Such broker-dealers may receive
compensation in the form of discounts or commissions from the Selling
Shareholders and/or the purchasers of the shares for whom such broker-dealers
may act as agents or to whom they may sell as principal, or both. The
compensation as to a particular broker-dealer may be in excess of customary
commissions. Sento will not receive any proceeds from the sale of any of the
shares.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available.
LEGAL MATTERS
The validity of the shares being offered in this prospectus and certain
other legal matters pertaining to Sento are being passed upon for Sento by Parr
Waddoups Brown Gee & Loveless, Salt Lake City, Utah.
EXPERTS
The financial statements of Sento as of March 31, 1999 and 1998, and
for the years then ended have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
Sento has filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), a registration statement on Form S-3 (the "Registration Statement") with
respect to the shares of Common Stock offered by this prospectus. This
prospectus, filed as a part of the 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
Sento and the shares offered hereby, reference is made to the Registration
Statement and any amendments, exhibits and schedules thereto, which may be
inspected with charge and copied at prescribed rates at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 (the public may obtain information on the operation of
the Public Reference Room by calling the Commission at 1-800-SEC-0330). Such
information may also be available at the Internet site maintained by the
Commission at http://www.sec.gov. 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.
Sento is subject to the informational and reporting requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). As long as
Sento is subject to such periodic reporting and information requirements, it
will file with the Commission all Commission reports, proxy statements and other
information required thereby, which may be inspected at the Public Reference
Room and at the Commission's regional offices located at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such materials may also
be obtained by mail upon written request from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of
prescribed fees. In addition, electronically filed documents, including reports,
proxy statements and other information filed by Sento, can be obtained from the
Commission's Internet site at http://www.sec.gov.
In addition, Sento 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.
18
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by Sento with the Commission pursuant to
the Exchange Act (File No. 0- 06425) are incorporated herein by reference as of
their respective dates:
(a) Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1999.
(b) Quarterly Report on Form 10-QSB for the quarter ended June
30, 1999.
(c) Description of Sento's Common Stock contained in a
Registration Statement on Form 10 dated July 24,
1972, as modified and amended by Sento's Current
Report on Form 8-K filed on October 20, 1997.
All reports and other documents filed by Sento pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
prospectus and prior to the termination of the offering of the Common Stock
shall be deemed to be incorporated by reference herein. Any statement contained
in a document incorporated or deemed to be incorporated by reference shall be
deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which is also incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
Sento will provide without charge to each person to whom a prospectus
is delivered, upon the written or oral request of such person, a copy of any or
all of the information incorporated by reference in this prospectus, other than
exhibits to such information (unless such exhibits are specifically incorporated
by reference into the information that this prospectus incorporates). Requests
for such copies should be directed to Gary Filler, Acting Chief Financial
Officer, Sento Corporation, 808 East Utah Valley Drive, American Fork, Utah
84003, telephone (801) 492-2000.
INDEMNIFICATION
Sento's Bylaws provide that it will indemnify its directors and
officers as permitted by the Utah Revised Business Corporation Act, as amended.
Under the Act, Sento may indemnify any person acting in his or her capacity as a
director or officer of Sento who is made a party to any suit or proceeding if
the person acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to Sento's best interests. Sento may indemnify the person
in the case of a criminal proceeding if he or she had no reasonable cause to
believe his or her conduct was unlawful. Sento may not indemnify any director or
officer, however, where the claim or liability arose out of that person's own
negligence or willful misconduct, or if that person is ultimately adjudged in
the proceeding to be liable to Sento or liable on the basis that he or she
derived an improper personal benefit.
In addition, under the Registration Rights Agreements between Sento and
the Selling Shareholders who purchased shares under the Private Placements,
Sento has agreed to indemnify such Selling Shareholders, and such Selling
Shareholders have agreed to indemnify Sento and its officers, directors and
controlling persons, for some specific liabilities that might arise under the
Securities Act in connection with the registration statement of which this
prospectus is a part.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to Sento's directors, officers and controlling persons
pursuant to the foregoing provisions or otherwise, Sento has been advised that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable. If a claim
for indemnification against such liabilities is asserted by a director, officer
or controlling person in connection with the securities being registered, Sento
will, unless in the opinion of its legal counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by Sento is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue. Sento does not consider its payment of expenses incurred or paid
by any of its directors, officers or controlling persons in the successful
defense of any action, suit or proceeding to be against public policy and,
therefore, it does not anticipate submitting, on its own initiative, such issue
to the judgment of a court.
19
<PAGE>
2,709,320 SHARES
COMMON STOCK
---------------
PROSPECTUS
---------------
October 13, 1999
20
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses of the offering,
sale and distribution of the shares being registered pursuant to this
registration statement (the "Registration Statement"), other than underwriting
discounts and commissions. All of the expenses listed below will be borne by
Sento. All of the amounts shown are estimates, except the SEC registration fees.
<TABLE>
<CAPTION>
Amount
------
<S> <C>
SEC registration fees............................. $ 2,186
Accounting fees and expenses...................... 6,500
Legal fees and expenses........................... 15,000
Blue sky fees and expenses........................ 1,000
Miscellaneous expenses............................ 1,814
------------
Total.................................... $ 26,500
------------
------------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sento is a Utah corporation. Reference is made to Sections 16-10a-902
through 16-10a-907 of the Utah Revised Business Corporation Act, as amended (the
"Act"). Section 16-10a-902 of the 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, (i) indemnification 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 of the 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 provisions discussed above, Section
16-10a-905 of the 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 of
competent jurisdiction. Section 16-10a-904 of the 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 upon the
satisfaction of certain conditions.
Article 9 of Sento's Bylaws provides that Sento shall indemnify all
directors and officers of Sento as permitted by the Act. Under such provisions,
any director or officer, who in his capacity as such, is made a party to any
suit or
II-1
<PAGE>
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 interests of Sento 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 Sento 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
Sento's Articles, the Bylaws, any agreement, vote of stockholders or otherwise.
In addition, pursuant to the Registration Rights Agreements executed by
Sento and the Selling Shareholders who purchased Shares under the Private
Placement, Sento has agreed to indemnify such Selling Shareholders, and such
Selling Shareholders have agreed to indemnify Sento and its officers, directors
and controlling persons, for certain liabilities which might arise under the
Securities Act in connection with the Registration Statement.
Indemnification may be granted pursuant to any other agreement, bylaw,
or vote of shareholders or directors. Sento currently maintains no policy of
director's and officer's insurance for the benefit of the officers and directors
of Sento. The foregoing description is necessarily general and does not describe
all details regarding the indemnification of officers, directors or controlling
persons of Sento.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Sento
pursuant to the foregoing provisions or otherwise, Sento has been advised that
in the opinion of the 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 Sento of expenses incurred or paid by a director, officer or
controlling person of Sento 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, Sento 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.
II-2
<PAGE>
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.
<TABLE>
<CAPTION>
REGULATION
S-K EXHIBIT INCORPORATED
NO. DESCRIPTION BY REFERENCE FILED HEREWITH
--- ----------- ------------ --------------
<S> <S> <C> <C>
4. Articles of Incorporation, as amended. (1)
4. Bylaws of Sento. (2)
4. Specimen Certificate. (3)
5 Legal Opinion of Parr Waddoups Brown Gee & Loveless, counsel to
Sento, as to the legality of the securities offered.*
23. Consent of Parr Waddoups Brown Gee & Loveless (included in their
legal opinion filed as Exhibit 5 to this Registration
Statement).*
23. Consent of KPMG, independent public accountants. X
24 Power of Attorney (included on page II-5 of this
Registration Statement).*
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES. -- NOT APPLICABLE.
- ------------------
* Previously filed.
(1) Incorporated by reference to Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1999, filed with the Commission on June 29, 1999.
(2) Incorporated by reference to Annual Report on Form 10-KSB for the fiscal
year ended April 30, 1996, filed with the Commission on July 29, 1996, as
amended by Form 10-KSB/A filed with the Commission on August 1, 1996 filed
with the Securities and Exchange Commission on September 27, 1996.
(3) Incorporated by reference to Registration Statement on Form S-1 filed with
the Commission on September 27, 1996, as amended by Amendment No. 1 to Form
S-1 Registration Statement on Form S-1/A filed with the Commission on
November 6, 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 Sento
pursuant to the foregoing provisions or otherwise, Sento 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 Sento of expenses incurred or paid by a
director, officer, or controlling person of Sento 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, Sento
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.
II-3
<PAGE>
Sento hereby undertakes:
(1) To file, during any period in which Sento offers or sells securities, a
post-effective amendment to this registration statement to include any
additional or changed material information on the plan of distribution.
(2) For the purpose of determining liability under the Securities Act, to
treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that time
to be the initial bona fide offering thereof.
(3) To file a post-effective amendment to remove from registration any of
the securities being registered that remain unsold at the termination
of the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Sento has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of American Fork, State of Utah, on October 12, 1999.
SENTO CORPORATION
By: /s/ Arthur F. Coombs, III
-------------------------------------------
Arthur F. Coombs, III
President and Chief Executive Officer
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Kieth E. Sorenson* Chairman of the Board October 12, 1999
- --------------------------------------------
Kieth E. Sorenson
President, Chief Executive Officer
/s/ Arthur F. Coombs, III and Director (principal executive October 12, 1999
- -------------------------------------------- officer)
Arthur F. Coombs, III
Acting Chief Financial Officer and
/s/ Gary B. Filler* Director (principal financial and October 12, 1999
- -------------------------------------------- accounting officer)
Gary B. Filler
/s/ Kim A. Cooper Director October 12, 1999
- --------------------------------------------
Kim A. Cooper
*By: /s/ Arthur F. Coombs, III
- --------------------------------------------
Arthur F. Coombs, III
Attorney-in-fact
</TABLE>
II-5
<PAGE>
EXHIBIT 23.2
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Sento Corporation:
We consent to incorporation by reference in Registration Statement No. 333-85355
on Form S-3 of Sento Corporation of our report dated May 21, 1999, except as to
the first paragraph of note 6, which is as of June 8, 1999, and the second
paragraph of note 16, which is as of June 9, 1999, relating to the consolidated
balance sheets of Sento Corporation and subsidiaries as of March 31, 1999 and
1998 (as restated), and the related consolidated statements of operations,
stockholders' equity and comprehensive loss, and cash flows for the years then
ended, as such report appears in the March 31, 1999 Annual Report on Form 10-KSB
of Sento Corporation and to the reference to our firm under the heading
"experts" in the prospectus.
KPMG LLP
Salt Lake City, Utah
October 12, 1999
