SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the year ended June 30, 1999
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________
Commission file number 0-09358
3Si HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Wyoming 83-0245581
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6886 S. Yosemite St.
Englewood, Colorado 80112
(Address of principal executive offices and zip code)
(303) 749-0210
(Registrant's Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
|X| Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock of the Registrant, as of
September 15, 1999, computed by reference to the closing sale price of the
voting stock held by non-affiliates on such date, was approximately $0.125.
As of September 15, 1999, there were outstanding 34,033,530 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
Total Pages 22
Exhibit Index on Page 20
Table of Contents
PART I.......................................................................3
. ITEM 1. BUSINESS......................................................3
GENERAL................................................................3
INDUSTRY BACKGROUND....................................................3
Internet Support Market.............................................3
1. Traditional Support Market (Certified Support)................4
A. Gartner Group Defines the Support Market...................4
B. Forrester Research Inc. Maps Customer Service Market.......6
2. Person-To-Person Internet Support Market......................6
STRATEGY...............................................................6
PRODUCTS AND SERVICES..................................................7
KEWi.net -Internet Support Service..................................7
SALES AND MARKETING....................................................7
STRATEGIC ALLIANCE.....................................................7
COMPETITION............................................................7
EMPLOYEES..............................................................8
ITEM 2. PROPERTIES....................................................8
ITEM 3. LEGAL PROCEEDINGS.............................................8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........8
PART II......................................................................9
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS......................................9
ITEM 6. SELECTED FINANCIAL DATA.......................................9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL............11
CONDITION AND RESULTS OF OPERATIONS..........................11
YEAR 2000....................................................15
RISK FACTORS.................................................15
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK....16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................16
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.....................16
PART III....................................................................16
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............16
BUSINESS EXPERIENCE OF DIRECTORS..............................17
ITEM 11. EXECUTIVE COMPENSATION........................................18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS...............19
AND MANAGEMENT................................................19
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................19
PART IV.....................................................................19
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
REPORTS ON FORM 8-K.....................................20
Page 2
PART I
The information set forth below includes "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, and
is subject to the safe harbor created by that section. You are cautioned not to
place undue reliance on these forward-looking statements and to note that they
speak only as of the date hereof. Factors that could cause actual results to
differ materially from those set forth in the forward-looking statements are set
forth below and include, but are not limited to, the following:
o Need for additional financing;
o Market acceptance of our subscription-based service;
o Technological changes resulting in product obsolescence; and
o The risk factors set forth in Item 7 - "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Risk
Factors".
ITEM 1. BUSINESS
--------
GENERAL
- -------
We deliver Internet-based solutions to help businesses excel in the
delivery of customer support through technologies that allow ease of
distribution.
3Si Holdings, Inc. ("TSIH" or "The Company") changed its business plan in
June 1999. We sold our computer reselling and consulting business to Technology
Integration Group, and our remaining business structure was separated into two
entities: 3Si, Inc. and KEWi.net, Inc. We own a 69% interest in KEWi.net, Inc.,
a Colorado corporation, formed for the purpose of developing Internet-based
customer support products. 3Si, Inc., a Colorado corporation, is a wholly-owned
subsidiary of 3Si Holdings, Inc. and was formed to sell, market, integrate and
distribute KEWi.net products.
Prior to June 1999, 3Si (Solution, System and Service Integration) provided
comprehensive computer hardware and software solutions for over 19 years to
clients throughout the continent. Founded in 1979 as Kimbrough Computer Sales,
Inc., 3Si offered a wide array of systems integration services, including
Internet security and Internet-based customer support, business needs
assessments, hardware sales, maintenance and support, and technical consulting,
training and education.
In June 1998, 3Si announced the first of a family of Internet-based
products designed to further integrate a client's information technology systems
via the Internet. The first product, an Internet-based customer support and
knowledge management solution, is being sold under the name KEWi, an acronym for
Knowledge and Experience bringing you Wisdom over the Internet. In April 1999,
KEWi.net was spun off from 3Si Holdings Inc. to create a company focused on the
development of Internet-based customer support products.
3Si Holdings, Inc. is a Wyoming corporation formed in 1979. Our principal
executive offices are located at 6886 S. Yosemite St., Englewood, Colorado
80112. Our telephone number is (303) 749-0210.
INDUSTRY BACKGROUND
- -------------------
Internet Support Market
It could be said that the Internet is about reaching out to each other and
sharing information. The Newsgroup communities on the Internet are a great
example of people reaching out to each other for support. People on the Internet
have gravitated toward Newsgroups to get answers to questions not readily
available. For this reason 3Si sees the Internet support market divided into two
worlds: 1) the "certified support" environment such as Microsoft, IBM, other
manufacturers; and 2) the "unregulated support" environment like Newsgroups and
Chat.
Page 3
1. Traditional Support Market (Certified Support)
----------------------------------------------
While some companies see providing Internet-based customer support as a
cost savings measure, the majority view this as a way to create added
convenience for customers. Internet users see the Internet as a way of getting
unbiased support for anything.
With over 80 million people accessing the Internet today, and estimates
of an additional one million new Internet users per month, the Internet provides
an ideal vehicle for manufacturers and service providers to support their
products and services. As the desktop system is the predominant interface to the
Internet today, companies within the computer equipment and computer products
markets are the first to adopt Internet-based support solutions.
The customer support market can be categorized into two distinct
segments, the Organizational Infrastructure Support Market and the Proprietary
Product Support Market.
Organizational Infrastructure Support Market. This market is
characterized as a traditional Information Technology function,
supporting company employees' technology needs. Internal support issues
range from supporting desktop and shared hardware, third party software
applications, corporate information systems, corporate networks and
central data center functions. As information continues to grow
companies can not afford to continue to add support staff to meet
customer demands. Information needs to be provided directly to the end
users, who can get help without support personnel intervention. With
KEWi the shackles of tradition can be shed and support can be opened up
to include business specific knowledge, human resource information,
capture of business processes, and non-technical knowledge. With KEWi
the support system truly becomes a competitive advantage for any
organization. KEWi will allow the end user to become self-supporting,
lowering a company's support costs.
Proprietary Product Support Market. The proprietary product support
market is characterized as an end-user customer support function.
External support markets include product support,
installation/configuration support, account information, and call
center management. In this market one of the most difficult types of
products to provide support for is a product that has reached its sales
end-of-life. An end-of-life product is no longer providing significant
revenue to the company, but customers expect continued support.
A. Gartner Group Defines the Support Market
The Gartner Group estimates that revenues from software applications
including sales management, telesales, and customer service solutions will grow
from $900 million in 1997 to $4 billion in 2002 (an annual growth rate of 35%).
Proprietary software products provide a clear value-add to computer hardware
manufacturers. This has led to a current trend of major tier one manufacturers
aggressively seeking value-added partners with industry specific products and
services.
Page 4
The Gartner Group provides the following segmentation model of the
customer support market, further dividing the market into enterprise wide and
workgroup segments based on corporate architectures and usage models.
Customer Support Software Market
------------------------------ -----------------------------
Internal Market External Market
------------------------------ -----------------------------
------------------------------ -----------------------------
Enterprise $229 million (1997) $513 million (1997)
Wide to to
$800 million (2000) $1.7 billion (2000)
------------------------------ -----------------------------
------------------------------ -----------------------------
Average Sale Size Average Sale Size
$100-200K for product $200-300K for product
------------------------------ -----------------------------
------------------------------ -----------------------------
Workgroup $212 million (1997) $222 million (1997)
to to
$450 million (2000) $500 million (2000)
------------------------------ -----------------------------
------------------------------ -----------------------------
Average Sale Price Average Sale Price
$20-30K for product $20-30K for product
------------------------------ -----------------------------
Looking specifically at the help-desk market, International Data
Corporation ("IDC") has estimated that this market will grow to approximately
$2.5 billion in the year 2000 and $3.5 billion by the year 2002.
-----------------------------------------
The Traditional Help-Desk Market
-----------------------------------------
-------------------- --------------------
1997 $1.431 billion
-------------------- --------------------
-------------------- --------------------
1998 $1.743 billion
-------------------- --------------------
-------------------- --------------------
1999 $2.096 billion
-------------------- --------------------
-------------------- --------------------
2000 $2.475 billion
-------------------- --------------------
-------------------- --------------------
2001 $2.923 billion
-------------------- --------------------
-------------------- --------------------
2002 $3.510 billion
-------------------- --------------------
Page 5
B. Forrester Research Inc. Maps Customer Service Market
Forrester Research Inc. maps the customer service market by evaluating
service methodologies based on cost of support and the level of service. Unlike
the Gartner model shown earlier, the model below focuses on emerging Internet
services.
------------------ -------------------- ---------------------
Premium
Service Face-to-face
Ineffective
Service
------------------ --------------------
Teleweb Call center
------------------ --------------------
Knowledge base Human Service
-----------------
Auto-response Web Auto-routed
forms e-mail Inefficient
Service
WEB and Human Service
------------------
FAQs
Internet
Service
------------------ -------------------- ---------------------
Basic
Service
Self Service .......................... 100% Human
Low cost ............................... High cost
Based on Forrester Research Inc., by the year 2000, Internet-based call
center solutions will reduce labor costs by 43% as compared to an estimated
labor cost increase of 3% without Internet-based solutions.
2. Person-To-Person Internet Support Market
----------------------------------------
Person-to-person "chat" and the unregulated newsgroups available on the
Internet define this market. For almost any topic imaginable anyone can ask
questions and get information from others registered in the newsgroup. Microsoft
has gone as far as to certify and compensate some independent support engineers
to monitor and provide quality support to certain newsgroup forums.
Marred by long wait times on phone support lines and unreliable answers,
more and more people are gravitating to a more convenient and diverse form of
help - newsgroups. Newsgroups are one of the most useful and information-rich
parts of the Internet. Unlike typical helpdesk environments where a user has
interaction with a single phone support person, a newsgroup allows interactions
with multiple professionals, each skilled in a specific background and area of
expertise. Newsgroups are designed to offer information. A Newsgroup is like a
room full of people helping to solve a problem; the number of people attending
increases the odds of finding a solution for the user.
Newsgroups are not regulated and often require the user to sift through
volumes of data. They are basically forums for people to voice their opinion,
whether on your question or completely unrelated. This results in unreliable
answers and sometimes even offensive comments.
STRATEGY
- --------
Our strategy is to combine the best of the Newsgroup architecture with a
more disciplined approach as provided by KEWi and includes the following key
points:
o Leverage technical expertise in software support over the Internet. We
have designed our products to provide immediate access support to
Internet-based customers and to provide a self-help knowledge
management solution.
Page 6
o Expand product offering to a broader customer base. By partnering with
companies to market our products to government agencies and companies
with large distribution channels, we intend to increase our penetration
into the Internet-based support market.
o Connect the unregulated and certified support worlds. We intend to
expand our support system by utilizing the advantages of each of the
unregulated and certified support worlds and connecting them into one
integrated support system.
o Utilize network of two-way wireless messaging. We intend to integrate
business applications with a two-way paging system.
PRODUCTS AND SERVICES
- ---------------------
KEWi.net - Internet Support Service
The first of a family of Internet-based products to be developed by
KEWi.net, KEWi is an Internet-based customer support system providing knowledge
management, trouble ticket management, and call avoidance capabilities. Initial
KEWi development is completed and the product is being delivered to customers
today. KEWi provides immediate access to current company information, product
knowledge and general knowledge with the ability to communicate with support
personnel via the Internet. This product allows organizations to provide optimum
support services over the Internet to external customers (distributors, dealers,
end-users, etc.) or internal users and employees while significantly reducing
overall support costs.
SALES AND MARKETING
- -------------------
We will deploy four primary sales and marketing strategies: volume
Internet advertising, indirect sales, radio-based name branding, and association
with advertising plans of primary sponsors. In addition to the initial national
marketing campaign, we expect to build up the user base through the free
membership for all primary sponsor customers.
STRATEGIC ALLIANCE
- ------------------
Space Mark, Inc. In August 1999, we partnered with Space Mark Inc., a
Colorado Springs-based management group, by signing a Master Reseller Agreement.
The agreement gives Space Mark Inc. exclusive rights to market KEWi.net products
to all local, state and federal government agencies in the United States,
including the State of Alaska, as well as all government and commercial
customers in Australia, New Zealand.
COMPETITION
- -----------
There are a number of competitors in the current Customer Relations
Management marketplace. For the most part, these companies have done a terrific
job of raising money and creating a presence in the financial markets. However,
the products are primarily focused in delivering information in a traditional
client server model. Many web-based support products have pre-loaded information
trying to anticipate the way a question is asked, then they reformat the
question and ask the customer to agree with the way that reformatted question is
asked. If the customer agrees with the reformatted question, then they connect
the customer with the requested information. This works well when the user of
the support system can ask the question in the right way, but breaks down when
unanticipated questions are presented to the support system. These types of
systems require significant up-front development of the knowledge trees needed
to respond to the anticipated questions. If the end user does not format an
"anticipated question" in the right manner a reasonable response may not be
supplied.
Most of the Internet-based support products require the purchase of new
servers, related software and integration services in order to deploy the system
over the Internet. We believe that the support organization should focus their
support on their customers, not the support system. The information technology
organizations, in small to medium-sized businesses, are already overwhelmed by
the proliferation of services and personnel required to support internal
infrastructure. They are not looking for more hardware and software to support.
Page 7
With the proliferation of Internet based customer support systems, the
competition may at first glance look intimidating. We believe there is
significant differentiation of our product offering from other support systems.
There are three primary classifications of Internet-based support environments:
1. Newsgroups - DejaNews, MSNews, Manufacturer sponsored news
2. Pay for support - AnswerExpress, SmartComputing, Microsoft Support
3. Free On-line support - Microsoft Support, AskJeeves, About.com
EMPLOYEES
- ---------
As of September 15, 1999, we had three employees, each in the area of
sales and marketing and software development.
ITEM 2. PROPERTIES
----------
We currently rent 900 square feet of space for our data center at 6886
S. Yosemite St., Englewood, Colorado. We are also leasing 300 square feet of
sales office space in Colorado Springs, Colorado. We believe that our facilities
are adequate for the present level of business during the remainder of fiscal
year 2000.
ITEM 3. LEGAL PROCEEDINGS
-----------------
During the quarter ended March 31, 1999, we assigned our government
sales contracts for $500,000 to Storage Area Networks, Inc. ("SAN"). The value
paid of $500,000 was primarily for the Company's GSA contract. Under the terms
of the agreement, payment of liabilities owed to SAN not made within seven days
of receiving payment from the United States Government would be subject to a
weekly interest payment. On May 20, 1999, SAN filed suit against 3Si Holdings,
Inc. requesting full payment of the principal amount owed to SAN. It is our
position that the principal is not due, and interest payments made against the
principal satisfy the agreement between 3Si and SAN. The Company intends to
vigorously defend against this action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Our annual meeting of shareholders was held on April 30, 1999. The
shareholders were requested to vote on the following matters in person or via
timely filed proxy statements and ballots, and the results were as follows:
Purpose For Against Abstain
------- --- ------- -------
1. Ratification and approval of separation of 3Si 29,409,001 74,464 29,020
Holdings, Inc.'s software division as a new subsidiary,
KEWi.net, Inc.; and the private offering of KEWi.net shares.
2. Ratify and approve the sale of all of 3Si Holdings, 29,414,064 73,464 75,957
Inc.'s assets (except accounts receivable).
3. Election of Directors:
Frank W. Backes 29,525,536 37,949
Doris K. Backus 29,522,903 40,582
Tom N. Richardson 29,522,903 40,582
Frederick J. Slack 29,505,536 57,949
Felipe L. Valdez 29,451,444 112,041
4. Ratification and approval of appointment of Balogh & 29,427,433 69,607 66,445
Tjornehoj, LLP as the Company's auditors.
Page 8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
------------------------------------------------------------------------
Our Common Stock is traded on the over-the-counter electronic bulletin
board under the symbol "TSIH". The table below shows the high and low sales
prices for the Company's Common Stock for each calendar quarter for the periods
indicated. Such quotations represent prices between dealers and do not include
retail markup, mark-down or commissions, and may not represent the sales prices
in actual transactions.
- --------------------------------------------------------------------------------
High Low
---- ---
Fiscal 1998
September 30, 1997..................... $ 0.32 $ 0.12
December 31, 1997...................... 0.25 0.08
March 31, 1998......................... 0.25 0.17
June 30, 1998.......................... 0.42 0.31
Fiscal 1999
September 30, 1998..................... $ 0.40 $ 0.06
December 31, 1998...................... 0.34 0.14
March 31, 1999......................... 0.34 0.15
June 30, 1999.......................... 0.25 0.12
- --------------------------------------------------------------------------------
We have not paid cash dividends on our Common Stock in the past and do
not expect to do so in the foreseeable future. The payment of dividends in the
future will be at the discretion of the Board of Directors and will be dependent
upon our financial condition, results of operations, capital requirements and
such other factors as the Board of Directors deems relevant.
On September 15, 1999, the closing sales price of our Common Stock was
$0.125, and we had approximately 2000 shareholders of record.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The following selected consolidated financial data as of and for each
of the periods from January 1, 1999 to June 30, 1999, are derived from our
consolidated financial statements. The information set forth below should be
read in conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Form 10-K and
the Consolidated Financial Statements and Notes thereto. The selected
consolidated financial data presented below as of June 30, 1999 and 1998 and for
each of the periods in the 30 months ended June 30, 1999, have been derived from
our audited financial statements also included elsewhere herein. The selected
historical consolidated financial data presented below as of December 31, 1996,
and 1995 and for the years ended December 31, 1996 and 1995 are derived from,
and are qualified by reference to, audited financial statements of the Company
not included herein.
Page 9
Year Ended Year Ended Six Months Year Ended Year Ended
June 30, June 30, Ended June December 31, December 31,
1999 1998 30, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Net sales $ 16,478,328 $ 29,384,507 $ 9,976,536 $ 19,007,245 $ 21,774,221
=====================================================================================
Earnings (loss) from
operations $ (2,911,454) $ 210,614 $ (190,063) $ 3,590 $ (109,477)
====================================================================================
Net earnings (loss) from
continuing operations $ (3,429,603) $ 169,140 $ (275,198) $ (195,315) $ (177,977)
Discontinued operations - - 200,793 - -
-------------------------------------------------------------------------------------
Net earnings (loss) $ (3,429,603) $ 169,140 $ (74,405) $ (195,315) $ (177,977)
====================================================================================
Earnings (loss) per common share:
From continuing operations $ (.09) $ - $ (.04) $ (651) $ (593)
From discontinued operations - - .03 - -
------------------------------------------------------------------------------------
Net earnings (loss) $ (.09) $ - $ (.01) $ (651) $ (593)
====================================================================================
Dividends per share $ - $ - $ 133 $ 319 $ 715
=====================================================================================
At end of period:
Total assets $ 1,934,416 $ 8,176,572 $ 7,263,823 $ 5,349,586 $ 5,221,723
Long-term obligations - 142,948 64,502 76,060 99,496
Working capital (deficit) (1,908,685) (197,218) 1,767,402 (168,223) 166,922
Stockholders' equity (2,270,974) 1,090,403 2,708,572 142,966 433,893
Operations Included
On May 28, 1997, Tyrex (now 3Si Holdings, Inc.) acquired 100% of the
common stock of 3Si in a reverse triangular merger accounted for as a purchase.
Under the terms of the merger, 3Si is a wholly owned subsidiary of 3Si Holdings,
Inc.. The merger is accounted for financial statement purposes as a purchase of
Tyrex by 3Si, since the merger resulted in 72% of the subsequently outstanding
common stock of Tyrex being issued to the 3Si stockholders. The financial
information for the period ended June 30, 1997, contains the results of
operations of 3Si for the six months ended June 30, 1997, and the results of
operations for Tyrex from the date of acquisition (May 28, 1997) through June
30, 1997. The financial information for the years prior to January 1, 1997,
include the results of operations for 3Si only.
Going Concern
The selected financial data has been prepared assuming that the Company
will continue as a going concern. At June 30, 1999, current liabilities exceed
current assets by $1,908,685. We have sold our computer reselling and consulting
business as of May 1, 1999. Our remaining business is our Internet-based
customer support system, KEWi.net. Through June 30, 1999, there has been nominal
license fee revenue generated from KEWi.net. The entity to whom 3Si Holdings,
Inc. assigned our government sales contracts (SAN) is owed in excess of $2.3
million by 3Si Holdings, Inc.. On May 20, 1999, SAN filed suit against 3Si
Holdings, Inc. to collect full payment of the amount owed. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The selected financial data does not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
Page 10
Earnings Per Share
Net (loss) earnings per share for to the year ended June 30, 1999, was
computed on the basis of the weighted average number of common shares only, as
shares subject to warrants and stock options would have an anti-dilutive effect.
For the year ended June 30, 1998, the weighted average number of shares
outstanding is 36,571,766 (basic) and 36,734,121 (diluted). For the period ended
June 30, 1997, the weighted average number of shares is based on 300 shares of
3Si being outstanding for five months (pre-merger) and 39,248,424 shares of
Tyrex being outstanding for one month. For the years ended December 31, 1996 and
1995, the weighted average number of shares outstanding is 300.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Financial Condition
As of June 30, 1999, the Company had a working capital deficit of
approximately $1.9 million, and had negative working capital from operations of
$2.6 million for the year then ended.
3Si Holdings, Inc.'s two largest creditors are owed approximately $2.3
million and $700,000 respectively. The creditor who is owed the largest balance
has filed suit to collect the amount owed.
We have sold our computer selling and consulting business as of May 1,
1999. Our remaining business, KEWi.net (Internet-based customer support), has
generated nominal revenue through June 30, 1999. The Kewi.net subsidiary
received a net capital infusion of $535,000 during FY1999. The continuing
operation of KEWi.net will require significant amounts of working capital.
The Company intends to use proceeds from the earn-out agreement
associated with the May 1, 1999 sale to pay its major creditors. Under the
earn-out agreement, the Company may receive up to an additional $2.2 million.
The agreement provides for additional payments to 3Si Holdings, Inc. of $325,000
when key contracts are renewed. The agreement also provides for additional
payments to 3Si Holdings, Inc. of a percentage of the profits for the next three
years from the sold business. There is no assurance as to the amount of the
contingent payments, and to whether there will be sufficient funds to pay the
creditors in full.
3Si Holdings, Inc. is seeking to attract sponsors or investors to fund
its continuing KEWi.net operations. There is no assurance that the Company will
be able to raise these additional funds.
The Company currently has no line of credit facility in place.
Results of Operations
- ---------------------
Status of Proprietary Software Development
During the FY1998, 3Si Holdings, Inc. completed research and
development on our first two proprietary software products - a contact
management database program and an Internet-based customer support system
(KEWi.net). Both programs operate via the Internet. The Company completed
technological feasibility of the contact management database program in November
1997, and the KEWi.net system in January 1998. 3Si Holdings, Inc. incurred
approximately $70,000 of research expense, and $239,000 of software development
costs in FY1998.
KEWi.net was introduced into the marketplace in June 1998. The contact
management database program was deemed not to be commercially viable at that
time.
Page 11
3Si Holdings, Inc. completed technological feasibility on its two-way
paging (wireless messaging) software in April 1999, and is working on its
development through June 30, 1999. The Company is in the research stage for an
upgrade of its KEWi.net software. 3Si Holdings, Inc. incurred approximately
$13,000 of research expense and $11,000 of software development costs in FY1999.
Year Ended June 30, 1999 Compared to Year Ended June 30, 1998
OVERVIEW
During FY1999, 3Si Holdings, Inc. exited out of the computer selling
and consulting business. We sold our field services division just prior to
FY1999. We assigned our government sales contract effective January 1, 1999, and
sold the balance of our computer selling and consulting business as of May 1,
1999. Our remaining business is the KEWi.net system.
The current year loss is due to the decline in sales (as we exited out
of the computer selling and consulting business) combined with declining
margins. The Company incurred a net loss of $3,429,603 in FY1999 compared to net
earnings of $169,140 in FY1998.
Comparative Analysis
Net sales decreased approximately $12.9 million, or 44.0% from the
previous year. This change is primarily the result of 3Si Holdings, Inc. exiting
out of the computer selling and consulting business. We sold our field services
division just prior to FY1999. We assigned our government sales contract
effective January 1, 1999, and sold the balance of our computer selling and
consulting business as of May 1, 1999. Product sales decreased approximately
$10.1 million. Revenue from consulting and services decreased approximately $2.1
million. Revenues from the United States Postal Service ("USPS") sub-contract
(which was part of the May 1, 1999 sale) decreased approximately $700,000.
Software sales for 3Si Holdings, Inc.'s remaining business (KEWi.net) are
approximately $8,000 in FY1999.
Cost of goods sold in total decreased approximately $8.8 million or 43%
from the prior year. 3Si Holdings, Inc.'s gross profit percent on product sales
dropped dramatically in FY1999. The gross profit on product sales dropped to
4.9% in FY 1999. This decrease is attributed to declining margins on commercial
sales due primarily to stiff competition and extremely low margins on sales
under its government contract. The direct costs of consulting and Internet
security assessments approximately equaled the revenues due in part to customer
dissatisfaction with these services.
Selling and administrative expenses decreased approximately $1 million
or 11% from the previous year. This decrease is due to $1.6 million in
reductions in compensation costs as 3Si Holdings, Inc. exited out of the
computer selling and consulting business. Other selling and administrative costs
increased as the Company was unable to start reducing these costs until after
the May 1, 1999, sale. Bad debts, depreciation, amortization, and lease costs
associated with an unsuccessful conversion of the internal accounting system all
increased from the prior year.
Interest expense increased as a result of increased use of the
Company's revolving line of credit to finance our working capital needs.
At June 30, 1999, the Company had three employees, all associated with
KEWi.net.
Page 12
Results of Operations
- ---------------------
Year Ended June 30, 1998 Compared to Year Ended June 30, 1997
Overview
FY1998 was the first full year of operations of 3Si Holdings, Inc.
(formerly Tyrex Oil Company) subsequent to the May 28, 1997 merger of Tyrex and
3Si, Inc. The Company realized net earnings of $169,140 for FY1998, versus a net
loss of $297,816 for FY1997. The Company's net earnings for FY1998 is
attributable primarily to the significant increase in sales between the two
years. The Company realized sales of approximately $29,385,000 in FY1998 versus
$20,263,000 in the comparable period the year before.
Additionally, the loss incurred in FY1997 is attributable primarily due
to the Company's investment in our Internet security startup business, which
began in earnest in July 1996. The Internet security division lost approximately
$324,000 in FY1997. We reduced our Internet security workforce in May 1998, due
to the continuing losses, which the Internet security division produced. For the
FY1998, the Internet security division had incurred losses of approximately
$235,000. The services, which had been performed by the separate Internet
security division, are now being performed by various consultants employed by
the Company or subcontracted when necessary.
We also sold our field services division at June 30, 1998. The division
had produced losses of approximately $133,000 in the FY1998. The Company sold
the field services division to a reputable Denver organization specializing in
the field services business for $12,500, and recognized a gain on the sale for
FY1998.
Comparative Analysis
Sales increased approximately $9,122,000, or 45.0% from the previous
year. This change is primarily the result of increased product sales and the
United States Postal Service (USPS) sub-contract. Product sales increased
approximately $5,336,000 due to the Company's implementation of our solution
selling methodology and use of our recently developed contact management
software within our sales force. The USPS sub-contract sales for the year
increased approximately $2,190,000. The balance of the increase was in the
Company's services sector, predominantly in its integration services in relation
to its product sales.
3Si Holdings, Inc.'s gross margin changed as a percentage of sales from
29.5% in FY1997 to 31.1% in FY1998. This change is primarily due to the addition
of the USPS sub-contract. The USPS sub-contract creates higher, consulting-based
margins (i.e. the compensation related to the delivery of the consulting sales
is included in selling and administrative expenses versus cost of goods sold).
Gross margin on hardware sales actually decreased from 13.4% in FY1997 to 11.5%
in FY1998 reflecting continuing competitive pressures on hardware sales.
Selling and administrative expenses increased approximately $2,634,000,
or 41.9%, due primarily to the addition of the labor costs associated with the
USPS sub-contract. During FY1998, the Company incurred additional labor costs of
approximately $1,785,000 relative to the USPS sub-contract. Included in selling
and administrative expenses are also approximately $90,000 of research and
development expenses which were not in the FY1997 expenses, and approximately
$427,000 of increased commission expense produced by the increased sales in
FY1998. The balance of the increase in selling and administrative expenses
relates to increases in compensation for remaining employees including officers
and increases in infrastructure due to startup and ultimate closure of the St.
Louis sales office in April 1998.
The Company did realize increased interest income during FY1998 due to
excess cash balances resulting from the merger with Tyrex. Interest expense
increased as a result of increased use of the Company's revolving line of credit
to finance the growth in sales during the period. The excess cash balances at
Tyrex (now 3Si Holdings, Inc.) were not available for 3Si Holdings, Inc.'s use
in paying down the line of credit; instead these balances were held in Tyrex's
bank account for use in the completion of the self-tender offer.
At June 30, 1998, the Company had 123 employees, including 77 servicing
the USPS sub-contract in Raleigh, NC versus having had 128 with 57 servicing the
USPS sub-contract at June 30, 1997.
Page 13
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Overview
The statements of operations and cash flows for the six months ended
June 30, 1997, include the results of operations and cash flows for 3Si for the
six months ended June 30, 1997, and the 33 days from May 28, 1997, (the date of
the acquisition) to June 30, 1997, for Tyrex. Due to the nature of Tyrex's
operations during the 33 days ended June 30, 1997, (i.e. completing the sales of
its oil and gas properties and discontinuing its oil and gas operations) the
results of Tyrex's operations are disclosed as "discontinued operations".
Tyrex realized a gain on its final disposition of oil and gas
properties of $536,700 in this 33 day period. Included in Tyrex's gain from
discontinued operations for this 33 day period were costs attributable to the
acquisition of approximately $190,000 and severance costs relating to Tyrex's
remaining employees of approximately $117,000 including accrued payroll taxes.
As of June 30, 1997, Tyrex had three full-time employees. No discontinued
operations are included in the December 31, 1996 and 1995 financial statements,
which reflect only the operations of 3Si.
3Si realized a net loss from continuing operations of $275,198 during
the six months ended June 30, 1997. This loss is attributable primarily to 3Si's
continued investment in its Internet security startup business and reduced
hardware sales. The Internet security division lost $150,180 during the first
six months of 1997 attributable to its startup nature whereby revenues generated
by the Internet security division did not yet cover expenses.
Comparative Analysis
Sales were approximately $9,977,000 during the six months ended June
30, 1997. Total sales were up from the same period in the previous year by
approximately $1,255,000 or 14.4%. This change is primarily the result of the
USPS sub-contract, which did not begin until May 1996; and, a decline in
hardware sales between periods. The USPS sub-contract sales for the first six
months of 1997 and 1996 were approximately $1,970,000 and $367,000 respectively,
accounting for an increase of approximately $1,603,000. The decline in hardware
sales, which was approximately $348,000, was directly attributable to the three
3Si co-owners' attention in merger and financing activities. The co-owners'
involvement was diverted from usual sales activities causing the lower hardware
sales during the first six months of 1997 versus the first six months of 1996.
The Company's gross margin changed as a percentage of sales from 25.7%
in 1996 to 31.9% in 1997. These changes primarily resulted from the addition of
the USPS contract and the Internet security business which create higher,
consulting based, margins (i.e. the compensation related to the delivery of the
consulting sales is included in selling and administrative expenses versus cost
of goods sold). Gross margin increased approximately $1,105,000 due to the
addition of the USPS sub-contract and the Internet security business, slightly
offset by lower hardware sales as discussed above.
Selling and administrative expenses increased approximately $1,415,000,
or 72.3% due primarily to the addition of the labor costs associated with the
USPS sub-contract. During the first six months of 1997, the Company incurred
additional labor costs of approximately $1,284,000 relative to the USPS
sub-contract. Included in selling and administrative expenses for the six months
ended June 30, 1997, are also approximately $251,000 of expenses related to the
Internet security business which had not existed until July 1996. These
increases in costs were slightly offset by savings in other expenses due to cost
containment and expense reduction in other areas.
At June 30, 1997, the Company had 128 employees, including 57 servicing
the USPS sub-contract in Raleigh, NC and three in Wyoming versus having had 84
in total at June 30, 1996, including 29 servicing the USPS sub-contract.
Page 14
YEAR 2000
- ---------
The year 2000 ("Y2K") issue arose because many computer programs
existing today utilize only two characters to recognize a year. Therefore, when
the year 2000 arrives, these programs may not properly recognize a year
beginning with "20" instead of "19". The Y2K issue may result in the improper
processing of dates and date-sensitive calculations by computers and other
microprocessor-controlled equipment as the year 2000 is approached and reached.
State of Readiness
We have divided our Y2K exposure into three major areas:
o Internal systems. Internal systems have been replaced or upgraded to
meet Y2K requirements.
o Products. Being Internet-based products, the only Y2K issues around
the products are the servers that run KEWi and the paging management
service. These systems are believed to be Y2K compliant, and all of
the software on these servers has been tested by the manufacturers to
be Y2K compliant.
o Potential Y2K problems associated with outside vendors. 3Si and
KEWi.net do not anticipate any significant problems associated with
outside vendors. The biggest potential issue will be Internet access
and our providers have assured us that they are ready for Y2K.
Risks Presented By The Year 2000 Issue
To date, we have not identified any Y2K issues that we believe could
materially adversely affect us or for which a suitable solution cannot be
implemented. However, as the review of our internal systems and interfaces with
outside vendors progresses, it is possible that Y2K issues may be identified
that could result in a material adverse effect on our operations.
Contingency Plans
Although we have not prepared a formal contingency plan to date, we
intend to continue to assess our Y2K risks and develop contingency plans if
needed.
RISK FACTORS
- ------------
We recognize that with the trend toward Internet-based software
products, there is a short window of opportunity where KEWi, a developed and
available product, can capture a market demanding Internet designed solutions.
The risk of losing this advantage exists. There is no assurance that we will be
able to capture and maintain enough market share to compete successfully in the
future. We see the following risk factors associated with the business of the
Company:
Need for additional financing. In order to successfully implement new
product rollout in the future, we will require debt and/or equity financing.
This financing will be used to fund the national expansion of the new product
through marketing and sales. Additional financing is also needed to complete the
timely payment of existing creditors as a result of the sale of the reseller and
consulting divisions to Technology Integration Group.
Product development risk. The development of our proprietary products
has been managed within our headquarters in Englewood, Colorado. Limited
resources due to a self-funding model has limited our ability to develop, test
and support its proprietary products. Development activities have struggled to
pace market and client demands.
Press and public relations on a national level. As KEWi.net's
proprietary products are Internet-based solutions, technology inherently may
cross geographic boundaries seamlessly. KEWi.net's ability to promote clients on
a national and international level is paramount to reaching the projected
business volumes of its proprietary products.
Page 15
Product distribution and market acceptance. We have developed a
subscription-based distribution model for our proprietary products. Although
subscription-based services are commonplace within the information technology
industry, this model represents a significant deviation for the traditional
knowledge management and support center industry. Existing support center call
management products are Windows-based applications licensed on a per-user basis
with an associated annual maintenance fee. A subscription-based service offers
many advantages over traditional software distribution models. This model has
not yet been proven within the target market.
Increased competition. With the consolidation and realignment taking
place within the computer product sales industry, new companies are emerging
that combine product sales with integration and professional service
capabilities. Some of these companies are well established on a national level
and employ significant financial and technical resources. Furthermore,
manufacturers are recognizing the value the Internet holds in reaching their
customer base and have begun to announce Internet-based applications targeted at
the end user support industry.
Dependence on officers and key employees. We currently have a strong
dependency on a few key employees and officers of the company. The loss of the
services of these individuals could have negative impact on the company.
Employee retention. In any highly competitive market and/or competitive
geographic area, employee turnover is a critical factor. Our headquarters are
located in an area of high competition and virtually no unemployment.
Changing Technologies. Our business is subject to changes in technology
and new service introductions. Accordingly, our ability to compete will be
depend upon our ability to adapt to technological changes in the industry and to
develop services based on those changes to satisfy evolving client requirements.
Technological changes may create new products or services that are competitive
with, superior to, or render obsolete the services currently offered.
No dividends contemplated. To date, we have not paid any cash or other
dividends on our Common Stock and do not anticipate paying dividends in the
foreseeable future.
Control by insiders. Three shareholders of KEWi.net, Frederick J.
Slack, Felipe L. Valdez, and Frank W. Backes, own approximately 83.4% of the
outstanding common stock of 3Si Holdings, Inc. These three individuals also
serve as three of the current five members on the board of directors of 3Si
Holdings, Inc.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
---------------------------------------------------------
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
See Item 14 for an Index to Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
Page 16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The following persons serve as directors and/or executive officers of
the Registrant as of September 15, 1999. Officers serve at the discretion of the
Board of Directors and are elected annually by the Board of Directors. All
directors hold their offices until the next annual meeting of the shareholders
of the Company and until their successors are elected.
---------------------- ------------------------------------ ------------------- -------------------
Name Position with Company Director Since Officer Since
---------------------- ------------------------------------ ------------------- -------------------
Frank W. Backes President, Chief Executive Officer, 5/28/97 1/22/98
and a Director
---------------------- ------------------------------------ ------------------- -------------------
Frederick J. Slack Executive Vice President, 5/28/97 1/22/98
and a Director
- ---------------------- -------------------------------------------------------- -------------------
Felipe L. Valdez Secretary, and a Director 5/18/97 1/22/98
---------------------- ------------------------------------ ------------------- -------------------
Tom N. Richardson Director 7/10/86 N/A
---------------------- ------------------------------------ ------------------- -------------------
Doris K. Backus Director 12/5/91 N/A
---------------------- ------------------------------------ ------------------- -------------------
BUSINESS EXPERIENCE OF DIRECTORS
- --------------------------------
Frank W. Backes, 38, was appointed President and Chief Executive Officer of
3Si Holdings, Inc. in June 1999. Mr. Backes previously served as Executive Vice
President and Chief Technologist of 3Si since August 1993. Prior to 1993, he
served as a computer industry analyst with Digital Equipment Corporation. Mr.
Backes also serves as a Director of 3Si Holdings, Inc.
Frederick J. Slack, 44, was appointed Executive Vice President in June 1999
of KEWi.net and is responsible for sales and marketing. From 1993 to June 1999,
he served as President and Chief Executive Officer of 3Si. Prior to joining 3Si
in 1993, Mr. Slack served as project manager for government customers at Digital
Equipment Corporation. Mr. Slack also serves as a Director of 3Si Holdings, Inc.
Felipe L. Valdez, 46, was appointed Secretary of 3Si Holdings, Inc. in June
1999. From August 1993 to June 1999, he served as Chief Operating Officer of
3Si. Prior to 1993, Mr. Valdez spent 17 years as a manager with Digital
Equipment Corporation. Mr. Valdez also serves as a Director of 3Si Holdings,
Inc.
Tom N. Richardson, 49, has served as a Director of 3Si Holdings, Inc. since
July 1986. Mr. Richardson has been an independent oil operator since December
1997. From March 1994 to December 1997, he served as President and Chief
Financial Officer of Tyrex Oil Co. Mr. Richardson joined Tyrex Oil Co. in 1980
as Land Manager.
Doris K. Backus, 45, has served as a Director of 3Si Holdings, Inc. since
December 1991. She previously served as Secretary of the Company and was
employed by the Company from 1983 to 1999.
The Company is not aware of any family relationships among any of the
directors and executive officers of the Company. Except as disclosed above, none
of the directors are directors of any other company having a class of equity
securities registered under or required to file periodic reports pursuant to the
Securities and Exchange Act of 1934, as amended, or any company registered as an
investment company under the Investment Company Act of 1940, as amended.
Page 17
ITEM 11. EXECUTIVE COMPENSATION
-----------------------
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------------------------------
Other Annual SAR Options
Name and Principal Position Year Salary ($) Bonus ($) Compensation(1) (#) (#) (2)
- -------------------------------------------------------------------------------------------------------
Frank W. Backes 1999 $ 110,000 --- --- --- ---
President and Chief Executive 1998 110,000 --- --- --- ---
Officer 1997 37,500 --- --- --- 13,200
Frederick J. Slack 1999 $ 110,000 --- --- --- ---
Executive Vice President, 1998 110,000 --- --- --- ---
1997 37,500 --- --- --- 13,200
Felipe L. Valdez 1999 $ 0 --- --- --- ---
Secretary 1998 110,000 --- --- --- ---
1997 37,500 --- --- --- 13,200
<FN>
(1) Perquisites and other personal benefits or property did not, in aggregate,
exceed $50,000 or 10% of the total compensation.
(2) 3Si was a subchapter S corporation prior to its acquisition by Tyrex.
Amounts indicated are distributions to the three officers of 3Si named
above, made to them in their capacities as shareholders.
</FN>
Employment Agreements. Separate employment agreements have been signed with
each of the officers, Frank W. Backes and Frederick J. Slack. Pursuant to the
agreements, the Company compensated each of the individuals $110,000 in fiscal
1999. The individuals are eligible for increases in their annual compensation
subject to the profitability of the Company. The agreements expire May 31, 2000
unless terminated for cause by 3Si or early termination by the individual with
90 days' written notice. Mr. Felipe L. Valdez since, May 1999, has been employed
by Technology Integration Group. He remains a director, and a principal
shareholder of the company.
Option/SAR Grants Table. There were no stock options granted to officers
during the fiscal year ended June 30, 1999.
Page 18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
-----------------------------------------------
AND MANAGEMENT
--------------
The following table sets forth the ownership of common stock by each
officer and director of the Company and by all officers and directors as a
group.
Name and Address Shares Beneficially Percent
Owned(1)
-------------------------------- --------------- ---------------
Frank W. Backes 9,387,777 27.7%
6886 S. Yosemite Street
Englewood, CO 80112
-------------------------------- --------------- ---------------
Frederick J. Slack 9,387,777 27.7%
6886 S. Yosemite Street
Englewood, CO 80112
-------------------------------- --------------- ---------------
Felipe L. Valdez 9,387,779 27.7%
6886 S. Yosemite Street
Englewood, CO 80112
-------------------------------- --------------- ---------------
Tom N. Richardson 188,721 Less than 1.0%
777 N. Overland Trail, #101
Casper, WY 82601
-------------------------------- --------------- ---------------
Doris K. Backus 53,570 Less than 1.0%
777 N. Overland Trail, #101
Casper, WY 82601
-------------------------------- --------------- ---------------
(1) Beneficial ownership results in each case from the possession
of sole or shared voting and investment power with respect to
the shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Amounts due from 3Si Holdings, Inc. stockholders were $162,395 and
$79,882 at June 30, 1999 and 1998, respectively. This June 30, 1998 amount is
included in other current assets. Due to the uncollateralized nature of these
receivables and the going concern consideration, the June 30, 1999 balance of
$162,395 has been fully reserved and recorded as an expense.
Other than as set forth herein, no officer, director or principal
shareholder of 3Si has or proposes to have any direct or indirect material
interest by security holdings, contracts or otherwise in the Company or in any
assets proposed to be acquired by the Company or in any purchase, the value of
which will be affected by the operations of the Company.
Page 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) Documents Filed as a Part of The Report
(1) Financial Statements
The Company is currently completing the financial
statements and associated schedules to be filed as
part of our Form 10-K for the fiscal year ended June
30, 1999. The financial statements and associated
schedules will be filed within 120 days subsequent to
our fiscal year end being reported on this form.
(2) Exhibits
3.1(a) Articles of Incorporation, as amended, filed
as part of the Company's Registration Statement on Form S-2 (file no.
2-68269), and incorporated herein by this reference.
3.2 Bylaws, as amended, filed as part of the
Company's Registration Statement on Form S-2 (file no. 2-68269), and
incorporated herein by this reference.
21. Subsidiaries of the Registrant.
27. Financial Data Schedule
(b) Reports on Form 8-K
(1) The Company filed a Form 8-K on June 30, 1999
reporting the sale of substantially all of its
assets, excluding cash, accounts receivable, and its
subsidiary, KEWi.net, to P.C.
Specialists, Inc., a California corporation.
Page 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Colorado Springs, State of Colorado, on this 13th day of October, 1999.
3Si Holdings, Inc.
By: /s/ Frank W. Backes
-----------------------------
Frank W. Backes, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
President and Chief
/s/ Frank W. Backes Executive Officer, Director October 13, 1999
- ----------------------------
Frank W. Backes (Principal Executive Officer)
Executive Vice President, October 13, 1999
/s/ Frederick J. Slack Director
- ----------------------------
Frederick J. Slack
/s/ Felipe L. Valdez Secretary, Director October 13, 1999
- ----------------------------
Felipe L. Valdez
Page 21
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
The Registrant has two subsidiaries, 3Si, Inc., a corporation organized
under the laws of the State of Colorado, and KEWi.net, a corporation organized
under the laws of the State of Colorado.