Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2000
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____________ to
_____________
Commission File Number 0-24372
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Sundog Technologies, Inc.
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(Name of small business issuer as specified in its charter)
The Thorsden Group, Ltd.
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(Former name of small business issuer)
Delaware 33-0611746
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
10542 South Jordan Gateway, Suite 200
South Jordan, Utah 84095
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(Address of principal executive offices and Zip Code)
(801) 501-7100
--------------
(Registrant's telephone number, including Area Code)
Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
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As of June 30, 2000, there were issued and outstanding 23,929,745 shares of the
Company's Common Stock, par value $.001 per share.
Transitional Small Business Disclosure Format (check one): Yes No X
--- --
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Table of Contents
Part I. Financial Information................................................3
Item 1. Financial Statements.......................................... 3
Unaudited Condensed Consolidated Balance Sheets
as of June 30, 2000 and March 31, 2000............................3
Unaudited Condensed Consolidated Statements of
Operations for the three months
ended June 30, 2000 and 1999......................................4
Unaudited Condensed Consolidated Statements of
Cash Flows for the three months
ended June 30, 2000 and June 30 1999..............................5
Notes to Unaudited Condensed
Consolidated Financial Statements.................................6
Item 2. Management's Discussion and Analysis or
Plan of Operation............................................9
Item 3. Quantitative and Qualitative Disclosures
about Market Risk...........................................25
Part II. Other Information..................................................26
Item 2. Changes in Securities and Use of Proceeds.....................26
Item 6. Exhibits and Reports on Form 8-K..............................26
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PART I
ITEM 1--FINANCIAL STATEMENTS
SUNDOG TECHNOLOGIES, INC.
(A Development Stage Company)
Unaudited Condensed Consolidated Balance Sheets
June 30 March 31
2000 2000
----------- -----------
ASSETS
Current Assets
Cash and Cash Equivalents $ 22,557 $ 489,297
Marketable Securities 2,220 3,360
Accounts Receivable 42,366 --
Prepaid Expenses 28,793 24,315
Inventory 22,167 --
----------- -----------
Total Current Assets 118,103 516,972
----------- -----------
Equipment 364,857 339,012
Less: Accumulated Depreciation (185,089) (152,805)
----------- -----------
Equipment, Net 179,768 186,207
----------- -----------
Other Assets
Deposits -- 16,618
Investment in Qui Vive -- 920,811
Investment in Envision
Development Corporation 32,271,960 --
Intangible Assets, net amortization 105,252 45,270
----------- -----------
Total Other Assets 32,377,212 982,699
----------- -----------
TOTAL ASSETS $ 32,675,083 $ 1,685,878
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 328,991 $ 206,476
Accrued Liabilities 59,170 73,902
Loan from Officer 50,000 --
Deferred Income on Maintenance Contracts 1,125 1,500
Deferred Tax Liability 11,806,131 --
Current Portion of Capital Leases 12,647 15,556
Net current liabilities of
discontinued segment -- 460,449
----------- -----------
Total Current Liabilities 12,258,064 757,883
Capital Lease Obligations, net of
current portion 13,669 14,988
Net long-term liabilities of
discontinued segment -- 187,658
----------- -----------
Total Liabilities 12,271,733 960,529
Minority interest in discontinued operations -- 1,338,429
Stockholders' Equity (Deficit)
Common Stock 23,930 23,826
Deferred compensation (4,861,250) (5,693,750)
Additional paid in Capital 14,891,571 14,397,648
Retained Earnings / (Deficit) 10,413,821 (9,327,222)
Accumulated unrealized loss on
securities available for sale (14,722) (13,582)
----------- -----------
Total Stockholders' Equity 20,403,350 (613,080)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,675,083 $ 1,685,878
=========== ===========
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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SUNDOG TECHNOLOGIES, INC.
(A Development Stage Company)
Unaudited Condensed Consolidated Statements of Operations
Sundog Technologies, Inc.
Condensed Statement of Income
(A Company in the Development Stage)
<TABLE>
<CAPTION>
Three Months Ended From Inception
June 30 June 11, 1992
2000 1999 to Jun 30, 2000
------------ ------------ ------------
<S> <C> <C> <C>
Net Revenues $ 42,200 $ 5,689 $ 307,613
Costs and Expenses:
Cost of Revenues 1,678 11,542 100,669
Research and Development 140,423 247,279 1,879,668
Selling, General & Administrative
exclusive of non-cash compensation 768,831 485,655 4,618,339
Amortization of deferred
compensation 925,000 1,850,000
------------ ------------ ------------
Total Costs and Expenses 1,835,932 744,476 8,448,676
------------ ------------ ------------
Operating (Loss) (1,793,732) (738,787) (8,141,063)
------------ ------------ ------------
Gain on disposal of segment 21,531,555 -- 21,531,555
Loss from discontinued operations -- (521,386) (521,386)
Interest Income 4,109 19,733 109,928
Interest Expense (887) (2,053) (16,973)
Other Expense -- -- (288)
Other Income -- -- 289
------------ ------------ ------------
Net (Loss) $ 19,741,045 $ (1,242,493) $ 13,517,393
============ ============ ============
Basic Net Income (Loss) $ 0.83 $ (0.03)
per common share
Weighted average basic shares 23,856,903 22,560,234
Diluted Net Income (Loss)
per common share $ 0.77 $ (0.06)
Weighted average diluted shares 25,480,305 22,560,234
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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SUNDOG TECHNOLOGIES, INC.
(A Development Stage Company)
Unaudited Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
30-Jun
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows used in Operating Activities:
Net Income (Loss) 19,741,045 (1,242,493)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and Amortization 34,789 19,059
Gain on disposal of segment (21,531,555) --
Compensation from option grants 925,000 --
Changes in Assets and Liabilities:
Accounts Receivable (42,366) 45,456
Prepaid Expenses (19,281) (23,989)
Inventory (7,366) --
Accounts Payable 122,514 26,917
Accrued Liabilities (15,108) 1,210
----------- -----------
Net Cash used in Operating Activities (792,328) (1,173,840)
----------- -----------
Cash Flows used in Investing Activities:
Additions to Equipment (54,613) (81,821)
Lease Deposits -- (1,362)
Patent/Trademark Costs (17,096) (10,339)
----------- -----------
Net Cash used in Investing Activities (71,709) (93,522)
----------- -----------
Cash Flows Provided By Financing Activities:
Proceeds from Issuance of Common Stock 351,526 194,834
Loan from officer 50,000 --
Increase in Lease Obligations (4,229) (11,467)
----------- -----------
Net Cash Provided By Financing Activities 397,297 183,367
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (466,740) (1,083,995)
----------- -----------
Beginning Cash and Cash Equivalents 489,297 2,215,620
----------- -----------
Ending Cash and Cash Equivalents 22,557 1,131,625
=========== ===========
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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SUNDOG TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 1 Basis of Presentation
The Company has prepared the accompanying condensed financial statements,
without audit, according to the applicable regulations of the Securities and
Exchange Commission. Certain information and disclosures normally included in
financial statements prepared according to generally accepted accounting
principles have been condensed or omitted. The Company believes that the
following disclosures are adequate and not misleading. These unaudited condensed
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) that, in management's opinion, are necessary to present
fairly the financial position and results of operations of the Company for the
periods presented. It is suggested that these unaudited condensed financial
statements are read in conjunction with the consolidated financial statements
and the notes thereto included in the Company's Annual Report on Form 10-KSB for
the fiscal year ended March 31, 2000, as amended.
Note 2 Concentration
The Company is still in the development stage, and its revenues to date are from
fewer than 10 customers.
Note 3 Equity
During the three months ended June 30, 2000, the Company issued 198,263 shares
of common stock at an average price of $1.77 per share, as follows: 75,000 were
issued for cash, 93,263 were issued in connection with warrant exercises, and
30,000 were issued in connection with option exercises.
Note 4 Sale of Qui Vive
On February 10, 2000, the Company entered into an Acquisition Agreement (the
"Initial Acquisition Agreement") with Perfumania.com, QV Acquisition Co., which
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SUNDOG TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
is a wholly owned subsidiary of Perfumania.com., and Rock Mountain Ventures
Fund, LP to sell its entire ownership in the Company's wholly owned subsidiary,
Qui Vive, Inc. ("QV"). If the acquisition would have been consummated, pursuant
to the Initial Acquisition Agreement, Perfumania.com would have received 550,000
of Qui Vive Series A Preferred stock, representing the Company's entire equity
interest in Qui Vive in exchange for 1,530,000 shares of Perfumania.com common
stock. Additionally, the Company would have received 10,000 shares of
Perfumania.com common stock in exchange for licensing rights associated with Qui
Vive technology.
Subsequent to signing the Acquisition Agreement on February 10, 2000, we
conducted additional discussions with Envision Development Corporation
(successor in interest to "Perfumania.com") ("Envision") concerning Envision's
interest in acquiring QV. After extensive arms-length negotiations between
Envision and Sundog, on March 31, 2000 we entered into an Amended and Restated
Acquisition Agreement (the "Acquisition Agreement") with Envision, QV
Acquisition Co., and Rock Mountain Ventures Fund, LP.
Pursuant to the Acquisition Agreement, on April 7, 2000, we transferred to
Envision all of our interest in QV in exchange for 1,492,500 shares of Envision
common stock. These shares are subject to a contractual covenant prohibiting
sale of such stock in the open market any time on or before October 7, 2001. We
are permitted to sell such shares in large blocks in privately negotiated
transactions; nevertheless, because any acquirer must take such shares subject
to the prohibition on sale before October 7, 20001, we expect interest in
acquiring our Envision shares to be limited and the purchase and sale price in
any such transaction to be a significant discount from current market prices.
Even after all contractural restrictions on the sale of our shares of Envision
common stock have expired, such shares may continue to be "control securities"
and may not be resold except prusuant to an effective registration statement or
pursuant to the so-called "leak out" provisions of Rule 144 promulgated under
the Securities Act.
The 1,219,500 shares of Envision common stock we presently own, and the 272,500
shares of Envision common stock we expect to acquire are subject to a
contractural covenant prohibiting sale of such stock in the open market any time
on or before October 7, 2001. We are permitted to sell such shares in large
blocks in privately negotiated transactions; nevertheless, because any acquirer
must take such shares subject to the prohibition on sale before October 7, 2001,
we expect interest in acquiring our Envision shares to be limited and the
purchase and sale price in any such transaction to be a significant discount
from current market prices. Even after all contractural restrictions on the sale
of our shares of Envision common stock have expired, such shares may continue to
be "control securities" and may not be resold expect pursuant to an effective
registration statement or pursuant to the so-called "leak out" provisions of
Rule 144 promulgated under the Securities Act.
Note 5 Investment in Envision Development Corporation
On April 7, 2000, Envision's common stock had a market value of $66.25 per share
as quoted by the American Stock Exchange. Due to the following factors, the
value of Envision's common stock has been discounted to a price of $21.63 per
share in order to more accurately reflect the value of the transaction described
in note 4 above.
1. Sundog contractually agreed to an 18 month lock out on the stock it
received. Therefore, the Envision Development common stock can not be sold
into the public market until October 7, 2001.
2. Envision Development common stock has experienced extreme volatility. The
quoted price $20.50 in mid January, rising to a high of $72 on May 3, 2000
and then dropping to $22 by June 30, 2000.
3. The Company owns a large block of Envision's common stock with its
ownership percentage at approximately 19%.
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SUNDOG TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
4. In addition to the Company owning a large block, the trading volume of
Envision common stock traded is very low.
5. The Company received minimal registration rights. The Company has been
granted piggy-back rights on only 20 percent of it holding.
6. On the day the Company signed the letter of intent to the sale of Qui Vive
the value of Envision's stock was $21.63 per share.
Taking these factors into consideration, and based upon consultation with
appraisal advisors, management believes that a $21.63 per share value most
fairly reflects the value of the transaction.
Use of Our Shares of Envision common stock.
In the near-term, we intend to use our shares of Envision common stock to help
fund our operations. In light of the restrictions on resale imposed by the
securities laws and the contractual restriction prohibiting sale of our shares
of Envision common stock on an exchange prior to October 7, 2001, we do not
intend to sell our shares of Envision common stock in the market. Rather, we
intend to use the stock as collateral in obtaining a loan, which loan we expect
to repay with proceeds from the sale of the Envision stock when the restriction
period has passed.
We have entered into a loan agreement pursuant to which the Company can borrow
up to 50% of the average value of our Envision stock 10 days prior to loan
funding. The loan is a non-recourse loan with a two year term and an interest
rate of 8.15%. We are also considering selling one or more large blocks of our
shares of Envision common stock in a privately negotiated transaction. However,
private sales of the Company's Envision stock are subject to certain
restrictions on resale imposed by governing securities laws. We expect to use
any proceeds from a loan secured by a pledge of our Envision shares or from a
sale of such shares to fund our ongoing research, development and operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and the notes thereto appearing
elsewhere in this Quarterly Report on Form 10-QSB.
OVERVIEW
Sundog Technologies, Inc. ("we," "Sundog" or the "Company") is a Delaware
corporation organized in 1992 for the purpose of seeking and acquiring business
opportunities. Sundog was formerly known as The Thorsden Group, Ltd, and changed
its name to "Sundog Technologies, Inc." in April 1999. In October 1997, we
acquired Arkona, Inc., a Utah corporation ("Arkona"), through a wholly-owned
subsidiary corporation. Arkona is continuing its business of developing,
marketing and selling software products for use in portable and distributed
network computing. Unless otherwise required by the context, references to "we,"
"Sundog" or the "Company" in this Report include Sundog and Arkona.
On June 5, 1998, we formed a new subsidiary called, Qui Vive Inc. ("QV"). QV is
engaged in the development of e-mail security software. On April 7, 2000, we
sold our interest in QV to Envision Development Corporation, a Florida
corporation ("Envision") in exchange for 1,492,500 shares of Envision common
stock.
In March 2000, we closed down our professional services division, which provided
our customers with both training and consulting in business process improvement
(BPI). The professional service group was unable to generate sufficient sales to
justify the cost of continuing the group's independent operation. We will
continue to provide BPI consulting services as requested by customers.
Universal Update(TM) Overview
Moving data between dissimilar computing environments is a fundamental problem
at many different levels within a computing environment. Universal Update(TM) is
a tool that is used to solve this problem at the data and application level.
Universal Update(TM) provides a centralized data distribution hub for all of a
company's information sources. It easily handles the complex logistics of moving
information throughout the enterprise----tracking the information, managing
updates and modifications, and selecting the best delivery methods. Universal
Update(TM) is the information clearinghouse for the mobile and distributed
enterprise.
Primary Features and Benefits of Universal Update(TM)
o Complex data selection and extraction processes are hidden behind a
simple point-and-click graphic user interface ("GUI"). Typically,
selecting and exporting data requires scripting or programming. Custom
programming is virtually eliminated by using Universal Update(TM).
o Universal Update(TM) is non-intrusive to source data set. Universal
Update(TM) does not require modification to the source data or
processes. It does not embed any additional code or functions within
the source environment and requires only read access rights to extract
data. As a result, Universal Update(TM) dose not affect business
functions and environment stability.
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o Universal Update(TM) automatically recognizes changes in source data.
Through patented technology, Universal Update(TM) automatically
recognizes changes in the source data set and replicates those changes
to the target data sets. This allows incremental updates to the target
data without having to periodically reload the entire data set from
source to target.
o Universal Update(TM) works with a wide variety of source and target
data sets. Universal Update(TM) incorporates sophisticated adapter
technology that enables data movement between many different types of
source and target data sets. By working through JDBC/ODBC drivers
(industry standard interfaces that allow users to access read/write
databases) or defined application program interfaces (APIs), Universal
Update(TM) gives users great flexibility in linking dissimilar data
environments.
By design, Universal Update(TM) is intended to be non-intrusive to the source
data. As a result, scanning source data for changes and replicating those
changes requires an overhead of time. The amount of time required to scan the
source data, recognize changes and replicate those changes depends on source
data set size and the speed of the servers used to host the source data and
Universal Update(TM) . Universal Update(TM) is categorized as a near real-time
data replication solution and is not intended to compete with enterprise-class
real-time transaction replication systems.
Universal Update(TM)'s Niche
There are many tools and technologies available for moving data between data
sets. If the data sets are identical - for example, both are Oracle database
sets - capabilities exist within the database itself for both local and remote
data replication.
The technological challenge becomes much more complex when moving data between
different kinds of databases or data environments. There are numerous products
in addition to Universal Update(TM) designed for this type of data movement;
however, most such products require a significant amount of manual integration
before they can be set up and used. For example, most database products include
interfaces that permit a user to extract data from or import data to other
sources. These interfaces by definition require that another program, or custom
programming, be used to handle the data extraction and moving. Third party
commercial products are available to take advantage of the database interfaces;
however, they typically require additional custom programming to ensure that the
correct data is extracted in the correct format.
In this type of environment, Universal Update(TM) adds value by allowing data to
be easily extracted and moved between disparate data sets. Little, if any,
custom programming is required. In cases where custom programming is required, a
user can typically limit such changes to a small portion of the program, called
"adapters," through a software developer kit (SDK) included with Universal
Update(TM). Selecting data to be extracted is a simple point-and-click operation
through a feature rich GUI. A user may also further refine the data by applying
filters to the data targets. Since the transport protocol between the different
modules of Universal Update(TM) is TCP/IP, the product can be used to move data
between both local and remote data sets.
How the Customer Benefits From Universal Update(TM)
Universal Update(TM)technology:
- Extends a company's system investments,
- Eliminates the complexity of advanced data distribution,
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- Lowers the cost of providing timely information updates,
- Improves communication between distributed partners, customers, and
employees, and
- Ensures flexibility for future integration with new data sources
and applications.
Current Status of Development
We are currently shipping v1.6 of Universal Update(TM) with plans to release
v1.7 at the end of August 2000. We plan to release new versions of the product
every 3 - 4 months for the next year. We invested $856,111 and $597,774 in
development of Universal Update(TM) in FY 1999 and FY 2000 respectively. The
reason for the decrease in development costs in FY 2000 was insufficient
funding.
The purpose for this aggressive release schedule is to catch up for cutbacks
experienced in FY 2000 and to meet additional customer demands. A sample of the
enhancements planned for implementation over the next year is listed below.
o We plan to make performance and task management improvements.
o We plan to revise Universal Update(TM) to maintain table to
table relationships when distributing information between
disparate database systems.
o We plan to add data preview tools to view data within a
potential source database system as an external tool
o We plan to alter Universal Update(TM) to include the ability
to create products that span multiple tables within a database
system without creating a custom view using database tools
provided by the particular database vendor(s).
o We plan to alter Universal Update(TM) to allow users with SQL
experience to make modification to the SQL statement used by
Universal Update(TM). This will give the user the ability to
provide more advanced filter criteria depending on the
database source and the expertise of the Universal Update(TM)
user.
o We plan to add a transformation API that will allow users to
perform major data transformation during the data distribution
process of Universal Update(TM). With this, Universal
Update(TM) users with Java and SQL expertise will be able to
write to this API.
Opportunities for Use of Universal Update(TM)
Because of the universal nature of the data exchange problem, there are numerous
potential applications for Universal Update(TM) technology. Common tasks such as
effecting a change from older technology to new technology, tying together
different groups within a company and allowing data interchange between
companies all create opportunities for Universal Update(TM). Examples of tasks
for which our Universal Update(TM) technology has been and can be used, based on
our discussions with customers, include:
o Synchronizing data from different systems in a university
setting.
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o Consolidating data from different sources to a single
authoritative source within a data center.
o Replicating government employee contact information throughout
the enterprise from the human resources package that is the
authoritative source.
o Importing employee information from a human resources database
into a health insurers database.
o Updating a hosted web-based catalog from customer databases.
o Aggregating corporate data to specialized servers that
distribute data to hand-held devices.
Our Strategy
We have elected to focus on a parallel marketing strategy pursuing both
near-term niche opportunities and longer-term strategic opportunities. We hope
that this parallel approach will allow Sundog to realize near-term revenue while
establishing a longer-term strategic market position.
Seek Near-Term Niche Opportunities
In order to generate revenues in the near term, we are seeking opportunities
with the following characteristics, which projects we call "niche
opportunities":
o Little existing competition. There are applications and/or
databases that have not achieved wide market acceptance. As a
result, third party tools and services are limited -- creating
little or no existing competition for Sundog.
o Sufficient market size. Ideal markets are smaller segments
that are not well supported but offer reasonable revenue
opportunities.
o Easy technical market entry. Niche opportunities must require
few or no changes to our existing product. This will allow us
to keep the majority of our technical resources focused on
longer-term strategic opportunities.
o Well-defined, active channel. A well-defined and active
channel is key, even if the channel is small, allowing us to
quickly enter this market and fully leverage sales and
marketing resources.
o Sufficient time window. Once a need has been identified within
a market, there must be a sufficient window of opportunity to
allow reasonable time for sales and marketing activities.
Factors include a reasonably stable customer base and no
significant planned changes to the applications we are
targeting.
o Possible synergy with other niches. An example would be
developing a solution for a financial package that could
easily be adapted to other similar financial packages.
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Seek Long-Term Strategic Opportunities
In order to strategically position ourselves for the long term, we are seeking
opportunities with the following characteristics, which we view as "strategic
opportunities":
o Significant market opportunity. The ideal market opportunity
would be in a rapidly expanding market with substantial growth
potential.
o Strong partnership positions. We would like to gain market
entry and establish a strategic position though one or more
key partnerships.
o Long-term revenue potential. We are seeking a market with size
and dynamics that will permit us to establish a long-term
revenue position.
o Competitive advantages. We hope to establish a technical
advantage and key strategic relationships.
Identified Near-Term Niche Opportunities and Long-Term Strategic Opportunities
Sundog Technologies has identified several near-term and longer-term market
opportunities, including the following:
-> Near-Term Opportunity - Business Intelligence
"Business Intelligence" refers to the process of gathering and analyzing data
to gain additional insight into business issues and processes. It encompasses
several traditional data functions including data mining, data distribution and
reporting. These functions are well established for mainstream markets; however,
we have identified several opportunities in smaller market segments and should
begin producing revenues from those segments by the end of August 2000.
-> Longer-Term Strategic Opportunity - Mobile Computing
Mobile computing is currently being heralded as the next great frontier for
computing opportunity. Business Research Group estimates that there are 50
million mobile workers in the United States alone. Gartner Group has predicted
that by the end of 2000, 40% of white-collar workers will work in a mobile
environment and that, by 2003, 137 million businesses worldwide will be
employing servicing or supporting the mobile computing workforce.
Mobile computing began with notebook computers but is currently being extended
to personal digital assistants - (PDA's) and web enabled phones - (WEP) through
wireless access protocol (WAP). Both of these last two platforms are far more
pervasive and widely used than desktop and notebook PC's. Industry experts
estimate that there are 1 billion wireless phones in use worldwide. As PDA's are
updated to include better connectivity capabilities (similar to wireless phones)
and as wireless phones gain additional computing capability (similar to PDA's),
a huge market will be created for content management and content delivery to
these platforms.
Corporations are beginning to recognize the importance of PDA's and WEP's as an
extension to their corporate computing platforms. One of the technical problems
involved with using these mobile devices for corporate computing is enabling
complex corporate processes on these platforms. One industry leader describes
this problem as "fitting an elephant in a teacup."
Our Universal Update(TM) is a perfect solution for this problem, allowing key
pieces of data to be extracted from complex corporate sources and replicated to
mobile computing devices. We are aggressively pursuing partnerships that will
allow us to offer this type of solution to the mobile computing market.
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Our Partnership With Aether Software
One of the first such partnerships is our partnership with Aether Software,
announced on June 13, 2000. Aether Software produces a family of products called
ScoutWare(TM). ScoutWare(TM) products are designed to manage PDA's and the
content on those devices from a central server. By deploying ScoutWare(TM)
solutions, corporations can utilize PDA's as valuable mobile computing platforms
for a variety of enterprise IT functions. As Aether Software's technologies are
combined with Universal Update(TM), Sundog and Aether Software expect to offer a
powerful solution for accessing and updating corporate data sources from or to
PDAs. The benefits of this partnership provided by both Companies include:
o Aether provides the framework for centrally managing and
distributing information to PDAs;
o Sundog provides easy access to multiple complex data sources;
o Sundog eliminates the need for custom programming or scripting
to access data and create data conduits;
o Sundog is non-intrusive to data sources so that no changes are
required to core data or business processes;
o Sundog automatically recognizes a change in source data,
tracks changes and distributes incremental updates and
leverages Aether's ScoutWare(TM) to ensure that all mobile
targets have current data sets;
o Interoperability between ScoutWare and Universal Update(TM)is
expected to provide ease of use;
o The combined solution is expected to include full automation
of conduit and forms development so that PDA forms and
applications, and access to the data that drives those forms,
can be quickly and easily developed and implemented; and
o The combined solution is expected to permit deployment of
mobile solutions in hours, versus days or weeks.
-> Under Consideration For Future Expansion
We are constantly considering additional market opportunities as a way to expand
our product line and gain revenue from other market segments. Some of the market
opportunities currently under consideration include.
o Web content management
o Business to business (B2B) data interchange
o Directory services enablement
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These and other market opportunities are being evaluated in terms of market
potential, competition, expected growth and other factors.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 and 1999
Revenues for the quarter ended June 30, 2000 were $42,200 compared to $5,689 for
the quarter ended June 30, 1999. Such increase in revenue is attributable to
increased sales of Universal Update, the Company's data base product. Operating
costs and expenses totaled $1,835,932 in the quarter ended June 30, 2000
compared to $744,476 for the same period in 1999. Operating expenses for 2000
included $140,423 research and development costs and $768,831 for selling,
general and administrative expenses and $925,000 for deferred compensation. This
compares to research and development costs of $247,279 and $485,655 for selling,
general and administrative expenses and no deferreed compnsation for the same
period in 1999. The increased expenses in 2000 are due to deferred compensation
associated with options granted at an exercise price below fair market value and
costs for the promotion of the Company's data-base product. The Company expects
expenditures to increase in all areas of its business during the next twelve
months as development and promotion of existing and new products continues
assuming available working capital.
The Company had $4,109 in interest income during the quarter ended June 30,
2000, compared to $19,733 for the same period in 1999. The decrease in interest
income is due to decreased cash balances maintained by the Company in banks. Net
income for the quarter ended June 30, 2000 was $19,741,045 or $.83 per share,
compared to a loss of $(1,242,493) or $(.06) per share for the same quarter in
1999. The increase in net income is attributable to the shares of Envision
common stock received in connection with the sale of the Company's interest in
QV on April 7, 2000. The shares of Envision common stock received by the Company
in such transaction are subject to significant resale restrictions. In addition,
the market price for such shares is extremely volatile.
When options are granted below the market value, the Company records deferred
compensation in the equity section of its balance sheet. As the options vest the
Company recognizes the compensation expense. Deferred compensation for the
quarter ended June 30, 2000 was $92,500 due to 50,000 options granted below
market value. Amortization of deferred compensation expense recognized for
options that vested during the quarter was $925,000. There was no comparable
income recognized in the quarter ended June 30, 1999.
The primary marketing focus for the quarter continued to be establishing the
Company's identity in the marketplace and building a secure platform for future
growth, including recruiting the key personnel and business partners required to
build end-user solutions.
Liquidity and Capital Resources
At June 30, 2000, the Company had cash and cash equivalents of $22,557, as
compared to cash and cash equivalents of $489,297 as of March 31, 2000. Cash was
provided during the period through the sale of stock in a private placement, the
exercise of Warrants granted in August 1998 and the exercise of stock option by
a former employee.
The Company held marketable securities available for sale at June 30, 2000.
Although the Company does not intend to engage in the business of investing in
or buying and selling securities of other companies, these securities were
received as partial consideration in connection with the sale of the Company's
common stock in October 1997. These marketable securities were 3,000 shares of
common stock of Eurogas Corp. ("EUGS").
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At June 30, 2000, the sale price of EUGS common stock, as reported by the
over-the-counter ("OTC") electronic bulletin board, was $0.74 per share. Shares
traded in the NASDAQ OTC markets are characterized by volatile changes in price
and thin trading volumes. The relatively low volume of securities traded and the
dramatic effect that sales of even a few shares can have on the market price of
such securities may have an adverse effect on the Company's ability to liquidate
its remaining holdings or to realize the values similar to those shown above.
On April 7, 2000, the Company transferred to Envision all of its interest in QV
in exchange for 1,219,500 shares of Envision common stock delivered at closing
and an agreement by Envision to issue to Sundog another 272,500 shares of
Envision common stock within 2 business days of the approval of such issuance by
its shareholders. On June 30, 2000, the price of Envision Development shares as
quoted on the American Stock Exchange was $22 per share.
The 1,219,500 shares of Envision common stock we presently own, and the 272,500
shares of Envision common stock we expect to acquire, are subject to a
contractual covenant prohibiting sale of such stock in the open market any time
on or before October 7, 2001. We are permitted to sell such shares in large
blocks in privately negotiated transactions; nevertheless, because any acquirer
must take such shares subject to the prohibition on sale before October 7, 2001,
we expect interest in acquiring our Envision shares to be limited and the
purchase and sale price in any such transaction to be a significant discount
from current market prices. Even after all contractual restrictions on the sale
of our shares of Envision common stock have expired, such shares may continue to
be "control securities" and may not be resold expect pursuant to an effective
registration statement or pursuant to the so-called "leak out" provisions of
Rule 144 promulgated under the Securities Act. The relatively low volume of
securities traded and the dramatic effect that sales of even a few shares can
have on the market price of such securities may have an adverse effect on the
Company's ability to liquidate its remaining holdings or to realize the values
similar to those shown above.
As of June 30, 2000 and August 15, 2000, the Company did not have working
capital sufficient to meet its short term obligations. The Company has entered
into a loan agreement pursuant to which a private lender has agreed to loan the
Company up to an amount equal to 50% of the average market price of our shares
of Envision common stock during the 10 trading days prior to funding. This is a
non-recourse loan with a two-year term and an interest rate of 8.15%. The loan
is expected to fund sometime during the month of August 2000. If the loan does
not fund at that time, the Company will have a critical shortage of capital and,
if the Company cannot obtain funding from other sources, will be unable to pay
our current expenses.
Even if the loan does fund, if the Company does not begin to generate
significant revenues in the near future, the Company will need to raise
additional funds to fund our rapid expansion, to develop new or enhance existing
services or products or to respond to competitive pressures. The Company cannot
provide assurance that additional financing will be available on terms favorable
to it, or at all. If adequate funds are not available or are not available on
acceptable terms, the Company's ability to fund its marketing and planned
product development programs or otherwise respond to competitive pressures would
be limited.
Cautionary Statement Regarding Forward-Looking Statements
The Company considers all forward-looking statements contained in this Quarterly
Report to be covered by and to qualify for the safe harbor protection provided
by Section 21E of the Securities Exchange Act of 1934, as amended. Shareholders
and prospective shareholders should understand that several factors govern
whether the results described by any such forward-looking statement will be or
can be achieved. Any one of those factors could cause actual results to differ
materially from those projected in this Report.
The forward-looking statements contained in this report include plans and
objectives of management for future operations, plans relating to the products
and predictions regarding the economic performance of the Company. Assumptions
applicable to the foregoing involve judgments with respect to, among other
things, future economic, competitive, and market conditions, future business
decisions, and the time and money required to successfully complete development
projects, all of which are difficult or impossible to predict accurately and
many of which are beyond the Company's control. Although the Company believes
that the assumptions underlying the forward-looking statements are reasonable,
any of those assumptions could prove inaccurate. Therefore, we cannot assure
that the results contemplated in any of the forward-looking statements contained
herein will be realized. The impact of actual experience and business
developments may cause the Company to alter its marketing, capital expenditure
plans, or other budgets, which may in turn affect the Company's results of
operations. In light of the inherent uncertainties in forward-looking
statements, the inclusion of any such statement does not guarantee that the
objectives or plans of the Company will be achieved. Among other risk factors to
consider are the factors identified in the subsection entitled "Factors That May
Affect Future Results" below.
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Development Stage, Accumulated Deficit
The Company is a development stage company and has had only limited revenues
since its inception. There can be no assurance that the Company will be able to
achieve a significant level of sales or attain profitability. The Company's
operations have been limited to developing software, initial sales and marketing
efforts and fund raising activities. There can be no assurance that the Company
will be able to grow in the future or attain profitability. As a result, the
Company believes that its prior results of operation are not necessarily
meaningful and should not be relied upon as an indication of future performance.
The profit potential of the Company's business is speculative, and to be
successful, the Company must, among other things, develop and market software
that is widely accepted by business customers at prices that will yield a
profit. The Company's software products are in the development stage. There can
be no assurance that the products of the Company will achieve broad commercial
acceptance. The Company's ability to generate future revenues will depend on a
number of factors, many of which are beyond the Company's control and include,
among others, the ability of the Company to complete its product development
activities and to carry on timely and effective marketing campaigns.
Because of the foregoing factors, among others, the Company is unable to
forecast its revenues or the rate at which it will add new customers with any
degree of accuracy. There can be no assurance that the Company will be able to
increase its sales in accordance with its internal forecasts or to a level that
meets the expectations of investors. There can also be no assurance that the
Company will ever achieve favorable operating results or profitability.
FACTORS THAT MAY AFFECT FUTURE RESULTS.
Our short and long-term success is subject to certain risks, many of which are
substantial in nature. You should consider carefully the following risk factors,
in addition to other information contained in this report as you evaluate the
Company and its business. Any one of these factors could cause actual results of
our operations to differ materially from projected results.
We are in the development stage, meaning that we have had only limited revenues
from sales of products or services.
We are is in the development stage and have a limited operating history. There
can be no assurance that we will be able to achieve a significant level of sales
or attain profitability. Our operations to this point have been limited to
developing software, making initial sales under contracts with two customers and
obtaining financing for our operations. As a result of the increase in operating
expenses caused by recent hiring of a sales force, operating results may be
adversely affected if significant sales do not materialize in the near term. We
can provide no assurance that we will be able to generate significant sales in
the near term or the long term.
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We have incurred substantial losses since our inception, expect to continue to
incur losses and may never be profitable.
We have incurred operating losses each year since our inception in 1992.
However, as of June 30, 2000, the Company had accumulated retained earnings of
approximately $13,483,448 due to the gain of $21,531,555 recognized by the
Company on the sale of Qui Vive. We expect to incur additional losses for the
foreseeable future, and we expect our losses to increase as our research and
development efforts progress. Our operating expenses are expected to increase as
a result of our recent hiring of a 6 person sales force, a new management team
and planned additional. We do not expect sales revenues to increase in
sufficient amount during the coming fiscal year to offset our operating
expenses, and we can provide no assurance that our revenues will ever be large
enough to offset operating and other expenses. We do not expect to be profitable
in the near future and may never be profitable.
We require additional capital to meet our short term obligations and continue
development of our products.
We do not presently have working capital sufficient to meet our immediate term
obligations. We have entered into a loan agreement pursuant to which a private
lender has agreed to loan us up to an amount equal to 50% of the average market
price of our shares of Envision common stock during the 10 trading days prior to
funding. This is a non-recourse loan with a two-year term and an interest rate
of 8.15%. The loan is expected to fund sometime during the month of August 2000.
If the loan does not fund at that time, we will have a critical shortage of
capital and, if we cannot obtain funding from other sources, will be unable to
pay our current expenses.
Even if the loan does fund, if we do not begin to generate significant revenues
in the near future, we will need to raise additional funds to fund our rapid
expansion, to develop new or enhance existing services or products or to respond
to competitive pressures. If additional funds are raised through the issuance of
equity or equity-linked securities, the percentage ownership of our stockholders
would be reduced. In addition, these securities may have rights, preferences or
privileges senior to those of our stockholders. We cannot assure you that
additional financing will be available on terms favorable to us, or at all. If
adequate funds are not available or are not available on acceptable terms, our
ability to fund our marketing and planned product development programs or
otherwise respond to competitive pressures would be significantly limited.
Our accountants have included an explanatory paragraph on our financial
statements regarding our status as a "going concern."
Our consolidated financial statements included in our most recent Annual Report
on Form 10-K have been prepared on the assumption that we will continue as a
going concern. Our independent public accountants have issued their report dated
June 12, 2000 that includes an explanatory paragraph stating that our recurring
losses and accumulated deficit, among other things, raise substantial doubt
about our ability to continue as a going concern. Our product line is limited
and it has been necessary to rely upon financing from the sale of our equity
securities and certain assets consisting of marketable securities to sustain
operations. Additional financing may be required if we are to continue as a
going concern.
The market may not accept our software and technologies.
Our software is in a development stage. Our Universal Update(TM) 1.5 program was
first publicly distributed in December 1998 and has produced only limited sales
to date, despite the release and distribution of an enhanced version in June of
1999. Our Universal Update(TM) 1.6 with support for Linux was first released on
April 17, 2000, and we have no sales as of June 30, 2000. We can provide no
assurance that end-users will be interested in purchasing any of our existing or
future products in the near term or the longer term.
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We face significant competition from remote access software developers.
The market for remote access software is highly competitive greater financial,
technical and marketing resources than we do. These advantages may enable them
to respond more quickly to new or emerging technologies and changes in customer
preferences. These advantages may also allow them to engage in more extensive
research and development, undertake extensive far-reaching marketing campaigns,
adopt more aggressive pricing policies and make more attractive offers to
potential employees and strategic partners. As a result, we may be unable to
obtain a significant market share in the remote access software business. In
addition, competition may result in price reductions, reduced gross margin and
loss of market share. We may not be able to compete successfully, and
competitive pressures may adversely affect our business, results of operations
and financial condition.
We are dependent upon highly qualified personnel, and the loss of such personnel
is a risk to our success.
We are highly dependent upon the efforts of management and technically skilled
personnel, including programmers and engineers, and future performance will
depend in part upon our ability to increase sales, manage growth effectively,
and to retain the services of our management, our technical staff and sales
staff. Because competition for management, technical and sales personnel is
intense, we may be unable to retain our key employees or attract other highly
qualified employees in the future. The loss of the services of any of our
management, technical or sales team of the failure to attract and retain
additional key employees could have a material adverse effect on our business,
financial condition and results of operations.
We rely on our intellectual property rights, and if we are unable to protect
these rights we may face increased competition and our business may be
materially adversely affected.
We regard our intellectual property as critical to our success, and we rely on
copyright, patent and trade secret protection to protect our proprietary rights
in intellectual property. We are currently pursuing and expect to pursue the
registration of copyrights, patents and trademarks in the United States.
Effective trademark, copyright, trade secret or patent protection may not be
available in every country in which our products are or become available. We
intend to effect appropriate registrations internationally and domestically as
our operations expand, but the United States or foreign jurisdictions may not
afford any protection for our intellectual property. Any of our intellectual
property rights may be challenged, invalidated or circumvented, or the rights
granted thereunder may not provide any competitive advantage. We could also
incur substantial costs in asserting our intellectual property or proprietary
rights against others, including any such rights obtained from third parties,
and/or defending any infringement suits brought against us. Although we enter
into confidentiality and invention agreements with our employees and
consultants, there can be no assurance that such agreements will be honored or
that we will be able to protect effectively our rights to unpatented trade
secrets and know-how. Moreover, there can be no assurance that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets and know-how. We may be
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required to obtain licenses to certain intellectual property or other
proprietary rights from third parties. Such licenses or proprietary rights may
not be made available under acceptable terms, if at all. If we do not obtain
required licenses or proprietary rights, we could encounter delays in product
development or find that the development or sale of products requiring such
licenses is foreclosed.
The software industry, and in particular, the Internet, are characterized by
rapid development and change. We must develop products and technology that keep
pace with technological change.
The software and Internet markets are recognized for rapid technological
developments, frequent new product introductions and evolving industry
standards. The emerging nature of these technologies, products and services and
their rapid evolution require that we continually improve the performance,
features and reliability of our software, particularly in response to
competitive offerings by other companies. There can be no assurance that we will
successfully respond quickly, cost effectively and sufficiently to these
developments. There may be a time-limited market opportunity for our products,
and there can be no assurance that we will be successful in achieving widespread
acceptance of our products before competitors offer products and services with
features and performance similar to current offerings. In addition, the
widespread adoption of new technologies or standards could require substantial
expenditures to modify or adapt our products and services and which could have a
material adverse effect on our business, financial condition and results of
operations. Furthermore, our new software enhancements may contain design flaws
or other defects that limit their marketability.
There can also be no assurance that research and development and discoveries by
others will not render some or all of our products or potential product
offerings uncompetitive or obsolete. We compete with a number of entities that
are currently developing and producing software products that compete with our
current and proposed products. Many of these competitors have substantially
greater capital resources, research and development capabilities, and production
and marketing resources, capabilities and experience than we have available to
us. These competitors may succeed in developing products that are more effective
or less costly than any products that we may develop, or that gain market
acceptance prior to any of our products, making market penetration more
difficult for us.
Our shares of Envision common stock may not be sold in the market until October
7, 2001. Even after such date, they will be "restricted securities" and subject
to certain restrictions.
The 1,219,500 shares of Envision common stock we presently own, and the 272,500
shares of Envision common stock we expect to acquire, are subject to a
contractual covenant prohibiting sale of such stock in the open market any time
on or before October 7, 2001. We are permitted to sale such shares in large
blocks in privately negotiated transactions; nevertheless, because any acquirer
must take such shares subject to the same prohibition on sale before October 7,
2001, we would expect interest in acquiring our Envision shares to be limited
and the purchase and sale price in any such transaction to be a significant
discount from current market prices.
Even after any contractual restrictions on the sale of our shares of Envision
common stock have expired, such shares will continue to be "control securities"
as that term is defined under the Securities Act, and may not be resold unless
and until such time as the relevant Envision shares are registered under
applicable federal and state securities laws or unless an exemption from
registration is available. After October 7, 2001, the Envision Shares may be
sold in compliance with Rule 144 adopted under the Securities Act. Rule 144
provides, in part, that a person holding control securities for a period of one
year may sell in any three-month period an amount equal to the greater of the
average weekly trading volume of the stock during the four calendar weeks
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preceding the sale, or one percent of the issuer's outstanding common stock. As
a result of such restrictions on transferability, we will be unable to quickly
liquidate our Envision shares in the public market at any time. Our Envision
shares may significantly decrease in value before we are able to sell such
shares.
Shares of Envision common stock may be significantly overvalued.
The valuations of companies such as Envision that engage in business over the
Internet have been volatile and, despite such volatility, have generally
increased dramatically over the last few years. Such valuations have been far
out of line with the valuations attributed to companies engaged in other lines
of business and many investment advisors have warned that such valuations are
not warranted and are overinflated. There can be no assurance that the valuation
of our shares of Envision common stock will not suffer a significant correction
before such Envision shares can be sold in compliance with governing contractual
covenants and the securities laws.
We may be required to recognize capital gain and pay taxes on the sale of our
Envision shares.
If we sell some or all of our shares of Envision common stock, we will recognize
gain (or loss) for tax purposes on the Envision shares sold in an amount equal
to the difference between the sale price of such shares and our basis in each
such share. Moreover, if, in connection with our sale of any of our shares of
Envision common stock, our board of directors declares a dividend, shareholders
of Sundog entitled to receive such dividend will be required to pay income taxes
at the rate applicable to ordinary gains. To the extent you give any weight to
the value of our shares of Envision common stock in valuing our business or
shares, you should be aware that, because of applicable taxes, the amount of
money we may be able to use or distribute upon eventual disposition of our
shares of Envision common stock will be significantly less than the market price
of such shares.
Although our license terms limit our liability for product liability claims,
there can be no assurance that such a claim will not be brought in the future.
We have not experienced product liability claims to date. However, our products
include programs designed for mission critical applications, creating the risk
that the failure or malfunction of our products may result in serious damage or
loss and open us to a claim for damages. While contract terms limit our
exposure, there can also be no assurance that a court would not rule such
provisions to be invalid or unenforceable, or that changes in the law would
render such terms void or unenforceable. A successful claim could have a
material adverse effect on our operations and finances. Furthermore, the cost of
defending against a claim, even successfully, could be material and could have
an adverse effect on our results of operations and an adverse effect on the
marketing of our products.
There is no present market for our common stock, and it is possible no such
market may ever develop.
There has been no market for our common stock, and it is possible that no market
will develop. Our common stock is not listed on any exchange, and it may never
be eligible to be listed on any exchange. We intend to seek listing on The
Nasdaq SmallCap Market or quotation on the Nasdaq OTC Bulletin Board during 2000
or 2001, but our application may not be accepted. Until we are eligible to
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satisfy the listing criteria of Nasdaq or another stock market or qualify to be
quoted on the Nasdaq OTC Bulletin Board, trading, if any, in our common stock
will be extremely limited or non-existent. Consequently, an investor may find it
more difficult to dispose of, or to obtain accurate quotations as to the price
of, our securities.
The unpredictability of our quarterly results of operations makes it difficult
to predict our financial performance and, if a market for our common stock
develops, may adversely affect the trading price of our common stock
Our quarterly results of operations have varied in the past and are likely to
vary significantly from quarter to quarter. A number of factors are likely to
cause these variations, some of which are outside of our control. These factors
include:
o the rate at which customers purchase Sundog's software and the
prices paid for such software;
o the amount and timing of capital expenditures and other costs
relating to the expansion of Sundog's business;
o the introduction of software products by Sundog or its
competitors;
o price competition or changes in Internet and computer
technology; and
o technical difficulties or economic conditions specific to
Sundog's business.
Due to these and other factors, we believe that quarter-to-quarter comparisons
of our operating results may not be meaningful and you should not rely upon them
as an indication of our future performance. Our operating expenses are based on
expected future revenues and are relatively fixed in the short term. If our
revenues are lower than expected, we would incur greater than expected losses.
In addition, during future periods our operating results likely will fall below
the expectations of investors. In this event, the market price of our common
stock likely would decline.
Our founders and a single investor hold a majority of our outstanding shares,
which will allow them to influence the outcome of matters submitted to
stockholders for approval
Our founders, most of whom are no longer employed by or affiliated with us, and
a single investor own a majority of our issued and outstanding common stock. As
a result, these stockholders have substantial control over matters requiring
approval by our stockholders, such as the election of directors and approval of
significant corporate transactions. In addition, this concentration of ownership
may also have the effect of delaying or preventing a change in control.
Our board may issue preferred stock without shareholder approval, which may
adversely affect the value of our common stock and permit the our board to block
a takeover attempt.
Our board of directors has the authority to issue up to 10,000,000 shares of
preferred stock and to determine the rights, preferences, privileges and
restrictions of such shares without further vote or action by our stockholders.
The rights of the holders of common stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future. In addition, the issuance of preferred stock could have
the effect of making it more difficult for third parties to acquire a majority
of our outstanding voting stock.
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Obtaining additional capital through the sale of common stock will result in
dilution of shareholder interests.
If additional funds are raised by issuing additional shares of common stock, or
securities such as options or warrants or preferred stock convertible into
common stock, further dilution of the equity ownership of existing holders of
our common stock will result. If adequate funds are not made available to us, we
may be required to delay, scale back or even eliminate one or more of our
product candidates and/or product development programs, and/or obtain funds
through arrangements with collaborative partners or others that may require us
to relinquish rights that we would not otherwise relinquish.
There is no present public market for our common stock. If and when such a
market develops, our stock price may be volatile.
There has been no market for our common stock and there is no assurance that any
market will develop. Our common stock is not listed on any exchange. If and when
such a more established market may develop, the market price of our common
stock, like that of the securities of other software and high technology
companies, may be highly volatile. Broad market fluctuations may adversely
affect the market price of our common stock. Our stock price may be affected by
each of the factors described above, as well as:
o Announcements by us or competitors concerning technological
innovations, new products or procedures developed by us or our
competitors,
o The adoption or amendment of governmental regulations and
similar developments in the United States and foreign
countries that affect our products or markets specifically or
our markets generally,
o Disputes relating to patents or proprietary rights,
o Publicity regarding actual or potential results relating to
product candidates under development by us or a competitor,
o Delays in product development,
o Slow acceptance of our products in new or existing markets,
and
o Economic and other external factors, as well as
period-to-period fluctuations in financial results.
Anti-takeover provisions of Delaware Corporate Law and our ability to issue
preferred stock may affect the price of our common stock and allows the Board of
Directors to issue securities that may significantly dilute your ownership and
voting power.
Under our Certificate of Incorporation, as amended, we are authorized to issue
up to 10,000,000 shares of preferred stock. We have not issued any Preferred
stock and there are no present plans to issue any Preferred stock. Our Board of
Directors has the authority to issue the Preferred stock with such voting and
other rights superior to those of our common stock, which could effectively
deter any attempted takeover of the Company. In addition, the Delaware General
Corporation Law prohibits certain mergers, consolidations, sales of assets or
similar transactions between a corporation on the one hand and another company
which is, or is an affiliate of, a beneficial holder of 15% or more of such
corporation's voting power (defined as an "Interested Stockholder") for three
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years after the acquisition of the voting power, unless the acquisition of the
voting power was approved beforehand by the corporation's board of directors or
the transaction is approved by a majority of such corporation's shareholders
(excluding the Interested Stockholder). These provisions prohibiting Interested
Stockholder transactions could also preserve management's control of Sundog.
We have not declared any dividends with respect to our common stock.
We have never paid cash dividends on our common stock. We intend to retain
earnings, if any, to finance the operation and expansion of our business and,
therefore, we do not expect to pay cash dividends on Our shares of common stock
in the foreseeable future.
Our common stock may be deemed to be a "low-priced stock" and subject to certain
regulatory action that limits or restricts the market for such stock.
Shares of our common stock may be deemed to be "penny stock," resulting in
increased risks to our investors and certain requirements being imposed on some
brokers who execute transactions in our Common Stock. In general, a penny stock
is a an equity security that:
o Is priced under five dollars;
o Is not traded on a national stock exchange or on Nasdaq (the
NASD's automated quotation systems for actively traded stock);
o May be listed in the "pink sheets" or the Nasdaq OTC Bulletin
Board; and
o Is issued by a company that has less than $5 million dollars
in net tangible assets (if it has been in business less than
three years) or has less than $2 million dollars in net
tangible assets (if it has been in business for at least three
years); and
o Is issued by a company that has average revenues of less than
$6 million for the past three years.
Our common stock has an unknown trading price (presumably less than five
dollars), is not trading on an exchange or Nasdaq and is issued by a company
that has average revenues of less than $6 million. However, we have been in
business for at least three years and, according to the pro forma balance sheet
included in the notes of our most recent audited financial statements, have more
than $2 million dollars in net tangible assets. Accordingly, we do not believe
our common stock is presently a "penny stock." Nonetheless, because our primary
tangible assets include highly volatile marketable securities, our net tangible
assets may be less than $2 million dollars at some date in the future and,
unless the common stock is listed on a stock exchange or has a market price of
$5, the common stock will qualify as penny stock.
At any time the Common Stock qualifies as a penny stock, the following
requirements, among others, will generally apply:
o certain broker-dealers who recommend penny stock to persons
other than established customers and accredited investors
(generally institutions with assets in excess of $5,000,000 or
individuals with a net worth in excess of $1,000,000 or an
annual income exceeding $200,000 or $300,000, jointly with
their spouse) must make a special written suitability
determination for the purchaser and receive the purchaser's
written agreement to a transaction prior to sale.
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<PAGE>
o prior to executing any transaction involving a penny stock,
certain broker-dealers must deliver to certain purchasers a
disclosure schedule explaining the risks involved in owning
penny stock, the broker-dealer's duties to the customer, a
toll-free telephone number for inquiries about the
broker-dealer's disciplinary history, and the customer's
rights and remedies in case of fraud or abuse in the sale.
o in connection with the execution of any transaction involving
a penny stock, certain broker dealers must deliver to certain
purchasers the following:
* bid and offer price quotes and volume information,
* the broker-dealer's compensation for the trade,
* the compensation received by certain salesperson for the
trade,
* monthly accounts statements, and
* a written statement of your financial situation and
investment goals.
These requirements significantly add to the burden of the broker-dealer and
limit the market for penny stocks. If our common stock is or becomes subject to
the existing rules on penny stocks, the liquidity and market price for our
common stock could be severely affected by limiting the ability of
broker-dealers to sell our common stock and the ability of shareholders to sell
their securities in the secondary market.
ITEM. 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial position,
operating results or cash flows due to adverse changes in financial market
prices and rates. The Company is, or may become, exposed to market risk in the
areas of changes in United States interest rates and changes in foreign currency
exchange rates as measured against the United States Dollar. These exposures are
directly related to our normal operating and funding activities. Historically
and as of December 31, 1999, the Company has not used derivative instruments or
engaged in hedging activities.
Foreign Currency Risk
The Company may enter into contracts where we pay or a third party pays us in a
foreign currency. This would expose the Company to changes in exchange rates.
Changes in the foreign exchange rates may positively or negatively affect our
financial position, results of operations or cash flows. Management does not
believe that near-term changes in exchange rates will result in a material
effect on future earnings, fair values or cash flows, and therefore have chosen
not to enter into foreign currency hedging instruments. Such an approach may not
be successful, especially in the event of a significant and sudden decline in
the foreign exchange rates.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities.
---------------------------------------
During the three months ended June 30, 2000, the Company issued 198,263 shares
of common stock in transactions that were not registered under the Securities
Act of 1933, as amended (the "Securities Act"), at an average price of $1.77 per
share. The Company issued 75,000 shares in exchange for cash proceeds to the
Company of $2.00 per share, issued 93,263 upon the exercise of outstanding
warrants with an exercise price of $2.00 per share, and issued 30,000 upon the
exercise of options with an exercise price of $0.50 per share.
The above-described issuances of our shares of common stock were
effected in reliance upon the exemption for sales of securities not involving a
public offering, as set forth in Section 4(2) of the Securities Act, based upon
the following: (a) the investors represented and warranted to the Company that
they were "accredited investors," as defined in Rule 501 of Regulation D
promulgated under the Securities Act and/or had such background, sophistication,
education, and experience in financial and business matters as to be able
(alone, or together with a purchaser representative) to evaluate the merits and
risks of an investment in the securities; (b) there was no public offering or
general solicitation with respect to the offering, and the investors represented
and warranted that they were acquiring the securities for their own account and
not with an intent to distribute such securities; (c) the investors were
provided with any and all other information requested by the investors with
respect to the Company, (d) the investors acknowledged that all securities being
purchased were "restricted securities" for purposes of the Securities Act, and
agreed to transfer such securities only in a transaction registered with the SEC
under the Securities Act or exempt from registration under the Securities Act;
and (e) a legend was placed on the certificates and other documents representing
each such security stating that it was restricted and could only be transferred
if subsequently registered under the Securities Act or transferred in a
transaction exempt from registration under the Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. See the Exhibit Index following the signature page hereof.
(b) Reports on form 8-K.
On April 24, 2000, the Company filed a Current Report on Form 8-K
reporting that on April 7, 2000, the Company sold to Envision Development
Corporation, a Florida corporation all of the Company's capital stock in Qui
Vive, Inc., in exchange for 1,482,000 shares of Envision common stock (1,219,500
to be delivered at closing and 272,500 to be delivered following approval of the
transaction by Envision's shareholders).
On August 9, 2000, the Company filed a Current Report on Form 8-K
reporting (i) that on August 2, 2000, the Company terminated its engagement of
Mantyla McReynolds, a professional corporation, as its independent auditors, and
(ii) that on August 3, 2000, the Company engaged Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ended March 31,
2001.
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf on August 18,
2000 by the undersigned thereunto duly authorized.
Sundog Technologies, Inc.
August 18, 2000 /s/ Alan Rudd
--------------- -------------
Date Alan Rudd
President and
Chief Executive Officer
August 18, 2000 /s/ Stephen Russo
--------------- -----------------
Date Stephen Russo
CFO and
Principal Financial Officer
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Title of Document Location
------ ----------------- --------
<S> <C> <C>
3.1 Certificate of Incorporation Incorporated by reference to
Company's registration statement on
Form 10-SB, File No. 0-24372
3.2 Amendment to Certificate of Incorporation Incorporated by reference to
Definitive Information Statement on
Form 14C, filed with the SEC on May
6, 1998
3.3 Bylaws Incorporated by reference to
Company's registration statement on
Form 10-SB, File No. 0-24372
4.1 Specimen Stock Certificate Incorporated by reference to
Company's registration statement on
Form 10-SB, File No. 0-24372
10.1 Collateral Loan Agreement dated August 15, Filed herewith.
2000, between the Company and Braveheart,
Inc.
10.2 Escrow Agreement dated August 15, 2000, Filed herewith.
among the Company, Braveheart, Inc. and
Steve Kapustin
27.1 Financial data schedule Filed herewith.
</TABLE>
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