3si Holdings, Inc. (TSIH) - Description of business
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General 3Si Holdings, Inc. ("we, "us," "our," or the "Company") is a Wyoming corporation formed in 1987 under the name "Tyrex Oil Company." We have two wholly owned subsidiaries, including 3Si, Inc., a Colorado corporation (3Si"), where all of our operations are currently conducted, and KEWi.net, Inc., also a Colorado corporation, which is dormant as of the date of this Report. On May 28, 1997, we acquired 3Si through a reverse merger by issuing 72% of our outstanding stock to the 3Si shareholders in exchange for 100% of their common stock. All references to us hereinbelow include 3Si Holdings, Inc. and 3Si, Inc., jointly, unless specifically stated otherwise. We are currently engaged in the marketing, sales and integration of our proprietary software product, iKEW(TM), and the licensing of the iKEW(TM) Internet-based customer support system. Our operations include data consolidation and business coordination. Our iKEW(TM) (Internet powered Knowledge, Experience and Wisdom) products provide our customers business process tools and support. Portal Management, Content Management, Request Tracking and Workflow Processing are all integrated and presented through the customer's look and feel. Our principal executive offices are located at 6886 S. Yosemite Street, Centennial, Colorado 80112, and our telephone number is (720) 493-1660. During our fiscal year ended June 30, 2005, we also maintained research and development activities at offices located in Colorado Springs, Colorado. We vacated these premises in April 2006. See "PART I, Item 2, Description of Property" below.Business We currently provide the ability to create, manage, and share enterprise intelligence with anyone, anywhere, anytime over the Internet, with an easy to use, integrated suite of portal management, content management, request tracking, and workflow management technology to businesses of all sizes and types. Our principal markets during our fiscal years ended June 30, 2005 and 2004 were large corporations located in the United States. The principal services provided during our fiscal years ended June 30, 2004 and 2005 were portal and collaborative tools, web-site development and notification system implementation using the iKEW(TM) products and licensing of the iKEW(TM) Internet-based content management and collaboration. Creating a highly customer centric experience differentiates iKEW(TM) from the traditional IT deployment model. Being customer centric means iKEW(TM) accommodates and reflects the way the customer's business works, thus minimizing the need for training and change to theirorganization. Organizations typically spend thousands or millions of dollars and months or years bringing their disparate systems together. This type of deployment needs to be maintained by a specialized staff and resources, at significant expense. The simplicity of an iKEW(TM) deployment reduces the time and cost of bringing disparate systems together while enabling the customer's IT staff to focus on their core business. Currently we have 13 projects in the sales process. Management is hopeful that the agreements it is putting in place with independent contract representatives will increase this pipeline and expand the customer base. We continue to experience a slow down in finalizing contracts, which we believe is the result of budget concerns related to current economic conditions, and there is no guarantee that we will close our existing opportunities. We are hopeful that the pending agreements with independent contract representatives will increase this pipeline and expand our potential and actual customer base. While no assurances can be provided, we expect to increase our revenue as our product gains additional market acceptance and through the following marketing efforts: First, continued direct marketing to a focused set of customers. This has delivered many of our most successful clients to date, including Lucent, Hewlett Packard, a large financial institution based in San Francisco, California, a large telecommunications company based in Ashburn, Virginia, and others. Second, we continue to pursue other potential resellers of the iKEW product family. We are working toward entering into an agreement to create a reseller relationship with a large educational reseller. Our focus is on two potential contracts. There is no guarantee that these negotiations will be completed.Description of Products/Services. iKEW(TM) is a collaboration of content management and business process management tools. iKEW(TM) is also provided as a series of solution sets of services. These can be contracted as a whole group, individually or in combination, including the following: o Portal Management o Content Management o Request Tracking o Workflow Management o Discussion Forums o Queue Manager Portal Management encompasses document and content management, among other things. Portal Management includes the entire body of knowledge maintained by an organization and how it is packaged, presented to, and accessed by a variety of audiences. Based on need and preference, portals vary in a number of ways, including: o How the user is welcomed o Single sign-on for business applications o Unique branding of the user interface o Type of information featured and highlighted o Content filtering/searching, Meta tags o Tone of the language and graphics used o Access privileges within the site o User interface with consistent navigation elementsContent Management ------------------ By simplifying the process of knowledge capture and distribution to appropriate personnel, iKEW(TM) ensures that web sites become dynamic and efficient. They reflect what is happening in real time. Behind the scenes, valuable IT resources are freed up. This is accomplished by: o Capturing and creating knowledge at the source o Aggregating and improving that knowledge o Managing distribution securely through the Internet and wireless devices o Unifying disparate information and data o Inputting the knowledge is as easy as using MS Word o Searching using key words, proprietary algorithms, and, techniques that allow each customer to define their own organizational communication terminology. Over time the iKEW(TM) knowledge base reflects the most frequently requested information.Request Tracking ---------------- iKEW(TM)'s request tracking is capable of reflecting requests which are part of an enterprise's everyday work process. If a request goes out to an individual and that request is not answered in a specified amount of time, it will automatically go to the next person in line. Multiple levels of escalation are available, which can incorporate the following features: o Call logging o Escalation and notification (wireless and E-mail) o Two-way communication with a support representative (wireless and Internet) o File attachments to call tickets o Customer profile management o On-line status for customers as well as management o Reporting o Migration of solutions to the iKEW(TM) knowledge databaseWorkflow -------- Workflow Processing enables customers to define approval processes, escalate requests, and mange business processes. These functions are enabled by an easy to use Wizard interface. Workflow Processing provides the following: o Application features like security, personalization, content management, and search are much more powerful when shared across applications via workflow. This enables users to work across departments and applications without worrying about different logins, reducing repetitive task. o Approval Process - once entered, if an Approval Process is needed the Document/Content automatically gets routed to the individual who has Approval rights. Multiple levels of Approval are available. o Escalation Notification - if a request goes out to an individual and that request is not answered in a specified amount of time it will automatically go to the next person in line. Multiple levels of Escalation are available. o Process Management - The flexible workflow infrastructure allows the customer to set up business processes based on the current status and priority of the process object. Business process information can be interfaced with external data sources. The individual components of iKEW(TM) can address separate markets and therefore it is very difficult to estimate the total size of the consolidated market for our integrated product. At the present time, the total worldwide market for all collaborative tools is estimated to be at least $22 billion dollars according to a Forester Report. For example, in 2002 estimates for the size of the portal market varied from $550 million to $800 million with growth rates ranging from 20 percent to 40 percent through 2006. Market share estimates also vary, with Gartner Group estimating that competing products offered by companies such as Plumtree, IBM, and SAP all had a 7 percent share (June 6, 2002). Similar variances are found in the collaboration and content management markets, but indicated that there is no dominant player in these markets. Therefore, because iKEW(TM) is a more tightly integrated product, we believe it has a broader market appeal. By marketing a tightly integrated product, we are able to provide our customers with enhanced functionality for substantially less than our competitors. We further believe that our product has an advantage over its competitors because it significantly reduces the number of technical personnel necessary to accomplish an implementation of the product. This allows us to leverage the "low cost of implementation" of the iKEW(TM) product to more companies, and thus increase our market presence and revenues. During our fiscal years ended June 30, 2005 and 2004, approximately 94% of our aggregate revenues were derived from two customers, including the Ashburn, VA based telecom,which accounted for 72% and 73% of our total revenues, respectively, and the San Francisco based banking firm, which accounted for 0% and 21% of our total revenues, respectively. Loss of either of these customers would have a significant negative impact on our business. We believe that opportunities exist for all components of iKEW(TM) in enterprises ranging from small to large, including government and military, and public/private education institutions. We will continue to pursue these opportunities as a key factor for growth and brand recognition. We anticipate that large enterprises will generate significant revenue from licensing and reselling. These customers are cost sensitive and will provide the user volume needed to allow us to become profitable and generate positive cash flow. The architecture of iKEW(TM) allows support for multiple customers from a single infrastructure, keeping costs low and attractive to this market. Further, because iKEW(TM) is "Real World SimplicitySM," customers do not require expensive information technology professionals for support. This allows iKEW to serve a broader base of customers ranging from small to the large enterprises. In the event we are able to raise the capital necessary to allow us to expand our marketing efforts, we intend to target ses because we believe that once introduced to the cost saving features of using iKEW(TM), they can access the Internet as a competitive weapon against their much larger competitors. Without making a significant capital investment, they can take advantage of iKEW(TM)'s economies of scale, keeping their costs low, while enhancing their ability to compete on a global scale.Enterprise Market Large enterprises can reap significant benefits from installation and utilization of the iKEW(TM) Product. These companies have very large, expensive information technology staffs, and their priorities are to support and focus on mission critical systems. They tend to be geared toward large, complex projects, and find it difficult to adjust to rapidly changing business requiring web enabled technologies. Our strategy for these organizations is to offer them a license, with annual maintenance and an application tool set. The Real World SimplicitySM of iKEW(TM) does not require the corporations' information technology human resources for implementation or maintenance, freeing them to focus on the mission critical systems.Channel Sales Channel sales are those sales provided by resellers of the iKEW(TM) Product. These resellers typically focus on using the iKEW(TM) product in their vertical markets, such as professional services or price comparison products. We expect channel sales could be a significant growth vehicle because we do not have the resources to hire a global sales force at this time. To provide us with greater access to those markets and to capitalize through these channel sales opportunities, we plan to continue to develop reseller relationships. As of the date of this Report, we are negotiating an agreement to create a reseller relationship with a large systems integrator. This integrator is focusing on the contact center andgovernment industry. The focus is on government and contact center contracts as well as systems requiring support for legacy systems. There is no guarantee that these negotiations will be completed. We have an established relationship with an Alaskan Native Corporation, which should lead to their purchase and use of iKEW product and services. To date this agreement has resulted in discussions of potential customer opportunities for both organizations, but no firm contracts have resulted. If such an agreement is finalized, we believe that in the long term this will lead to more business in the government sector. We have also formed a reseller relationship with our former President and CEO (who has remained as a director and one of our principal stockholders). We believe that in the long term this will lead to more international business.Vertical Markets Education is one of the markets that we will continue to focus on. One issue that the iKEW(TM) product addresses is how to deliver training in a cost effective manner. They want to limit or eliminate travel related expense to keep the cost of training as low as possible. Another issue faced is how to secure this environment over the Internet, and iKEW(TM) solves this with world-class proprietary security. We continue to pursue educational initiatives through the internal organizations of various companies, as well as public and private educational institutions. Price comparison solutions is another market that we intend to continue to target. One example of the price comparison market is an overnight mail service price comparison solution, which we developed for one of our larger clients. Because of contractual obligations, we are precluded from releasing the name of this client, but it is a large San Francisco based financial firm. With overnight mail service, addresses are certified against the United States Postal Service database, prices from different carriers are provided, labels are created, and links are available to track packages. This resulted in our customer generating substantial savings in overnight mail service costs with improved reliability of delivery. This was a license sale. Governments at all levels have time-to-market requirements as well. We believe that an iKEW(TM) product implementation could provide increased productivity achieved by simplification of information distribution, reduction in IT resources, and a reduction in travel. Significant opportunity exists within government for the complete set of iKEW(TM) capabilities. All public school districts are potential customers for iKEW(TM). iKEW(TM) provides services that cost effectively link administrators, teachers, students, and parents. Budget limitations have created an environment where school districts cannot afford expensive IT solutions, yet they need to leverage technology to maximize the tax dollars they receive. iKEW(TM) deployed as an Application Service Provider ("ASP") service reduces or eliminates the need for schools to maintain expensive hardware platforms and provides the security schools require.Small to Medium-Sized Business Market Small to medium-sized enterprises can take advantage of iKEW(TM)'s strengths, low cost, and rapid implementation. These types of enterprises need to be very cost conscious and, at the same time, improve their time to market. iKEW(TM)'s ASP delivery model reduces the need for any capital investment. All that is required is access to a web browser and an Internet connection to take advantage of the iKEW(TM) capabilities. We are continuing to move forward with the design and definition of a major upgrade to our iKEW(TM) product, and believe that the next major release will make this market segment more accessible. No date has been set for completion of the upgrade.iKEW Overview ------------- iKEW is a total knowledge management system encompassing business collaboration and data consolidation that is delivered as an application development tool kit. The key to effective knowledge management is to consolidate data so an authorized user can discover, access and utilize it. iKEW combines the following packages under one interface: Portal Management, Content Management, Request Tracking, Workflow Processing, Authoring, Quizzing, Reporting, Scheduling, and Discussion Groups. These packages can be delivered as a combined solution under one look and feel or the customer can choose individual packages and incorporate them into their current environment. The goal is to add packages without adding additional interfaces, while cutting cost and protecting the customer's current investments in technology. Additionally, our proprietary database interface product, Queue Manager, integrates diverse backend systems.Subsequent Events On August 23, 2005, we entered into a Letter of Intent to engage in a business combination with Entellectual Solutions Properties Group, Inc. ("eSPG") based in Tampa, Florida. As part of the terms of the Letter of Intent, eSPG agreed to loan us the principal sum of $170,000. If consummated, the proposed terms include a 50-50 split in ownership of our Company, provided that eSPG provides a minimum amount of working capital. As of the date of this Report, a number of issues remain outstanding, but we are continuing to discuss this proposed transaction, as well as other possible scenarios with eSPG. If the business transaction is not consummated, we will also owe an additional $25,000 to eSPG for a break-up fee. Also, in August 2005, one of our principals resigned his positions as Chief Technical Officer, Chief Financial Officer and Director. In February 2005, Mr. Thorson resigned his positions as Chief Executive Officer, but he remains a Director. Mr. Slack assumed the duties of Chief Executive Officer upon this resignation.Employees During fiscal year 2005, we had eight employees, five of whom were in the area of sales and marketing, software development and customer service, and two of whom were in administration. As of the date of this Report, we have seven (7) employees, including two in sales, three in software development and Mr. Slack, our CEO. None of our employees are members of any union and we consider our employee labor relations to be good.Competitive Conditions Our industry is highly competitive and includes both small firms and large diversified firms that have greater financial, technical and marketing capabilities than we currently have available. Our industry is not dominated by any one firm. Because of the unique nature of our product, we offer the same solutions/services along various industry segments, including portals, content management, business process management, document management, customer relationship management and instant collaboration. None of our competitors attempt to offer their products to all of these categories. Separated by these categories, our competitors include, but are not limited to Hummingbird, IBM and Oracle (portals), Stellent and FileNet (content management and document management), Megastorm and Pega (business process management), Remedy and Siebel (customer relationship management) and Genesis and Raindance (instant collaboration). We compete on the basis of competitive pricing, a reputation for quality and the unique nature of our software. We believe that it is our tightly coupled and highly integrated product that allows us to cross the different market categories enabling us to deliver projects quicker and for less cost than our competitors. A large number of established and well-financed entities are active in our industry. Many such entities have significantly greater financial resources, technical expertise and managerial capabilities than ours and, consequently, we are and will continue to be at a competitive disadvantage.Government Regulations We are not subject to any extraordinary government regulations.Patents and Trademarks In addition to rights provided at common law, we have submitted trademark/servicemark applications with the U.S. Patent & Trademark Office to register the marks "iKEW" and "REAL WORLD SIMPLICITY" and to have them listed in its principal register. Subsequently, in November 2005, we were advised that our applications were accepted. An application to register our trademarks has been submitted and as of the date of this Report, our application is pending. This action was taken in January 2006.