UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14C
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
X Preliminary Information Statement
__ Definitive Information Statement
__ Confidential, for use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
SENTEX SENSING TECHNOLOGY, INC.
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
__ No fee required
X Fee computed on table below per Exchange Act Rules 14c-5(g) and
240.0-11.
(1) Title of each class of securities to which transaction applies:
Common Shares (No Par Value) of Sentex Sensing Technology, Inc.
(2) Aggregate number of securities to which the transaction applies:
96,235,089 common shares
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act ss.240.0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
$0.05 per share
(4) Proposed maximum aggregate value of transaction: $4,811,754.45
(5) Total fee paid: $514.86
__ Fee paid previously with preliminary materials
__ Check box if any part of the fee is offset as provided by Exchange Act
Rule ss.240.0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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INFORMATION STATEMENT PURSUANT TO SECTION 14
OF THE SECURITIES EXCHANGE ACT OF 1934
AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
SENTEX SENSING TECHNOLOGY, INC.
1801 East 9th Street
Cleveland, Ohio 44114
Cleveland, Ohio
[__________ __, 2006]
This information statement has been mailed on or about [_________ __, 2006], to
the shareholders of record on July 3, 2006 (the "Record Date") of Sentex Sensing
Technology, Inc., a New Jersey corporation (the "Company" or "Sentex") in
connection with certain actions approved by the written consent of the majority
shareholders of the Company, dated as of July 24, 2006. The actions approved
pursuant to the written consent are expected to be taken on or about [__________
___, 2006], 20 days after the mailing of this information statement.
THIS IS NOT A NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS AND NO SHAREHOLDER
MEETING WILL BE HELD TO CONSIDER ANY MATTER WHICH WILL BE DESCRIBED HEREIN. WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE NOT REQUESTED TO SEND US A PROXY. THE
ACTIONS DESCRIBED HEREIN HAVE ALREADY BEEN APPROVED BY WRITTEN CONSENT OF
HOLDERS OF A MAJORITY OF THE OUTSTANDING COMMON SHARES. A VOTE OF THE REMAINING
SHAREHOLDERS IS NOT NECESSARY.
SUMMARY TERM SHEET
Below, in bullet point format, are the most material terms of the proposed
transactions. Capitalized terms are defined elsewhere in this Information
Statement.
o Sentex and SecITV entered into a distribution agreement under which
Sentex will obtain the exclusive rights to market SecITV products using
its technology for a fifty-year term.
o In exchange for distribution rights, and under a share issuance and
corporate governance agreement, 69,082,924 Sentex common shares will be
issued, at the direction of SecITV to 1stMF (the majority shareholder
of SecITV) and 27,000,000 Sentex common shares will be issued to two
financial advisors who assisted with the transaction and will provide
other services. Mr. Rubinstein, directly and indirectly, beneficially
owns 100% of the capital stock of SecITV.
o 1stMF will have demand registration rights with respect to up to
100,000,000 Sentex common shares that it receives, and piggyback
registration rights with respect to its Sentex common shares.
o The financial advisors have committed to raise additional funding for
Sentex on a best-efforts basis, and of this additional funding, one
option is for approximately $60,000 to be raised through the sale of
1,000,000 Sentex common shares held by Mr. Kendall. The proceeds from
this sale will be paid to Sentex in exchange for its agreement to issue
1,000,000 common shares to Mr. Kendall by November 16, 2006.
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o Within 180 days of the closing of the share issuances to 1stMF and the
financial advisors, Mr. Kendall will also have the right to sell
40,000,000 of the Sentex common shares beneficially owned by him,
either to Mr. Rubinstein or to other investors, for a purchase price of
$0.05 per share, or an aggregate of $2,000,000. If such shares are sold
to Mr. Rubinstein or entities affiliated with him, Mr. Rubinstein would
then beneficially own approximately 52% of the issued and outstanding
shares of Sentex.
o Alternatively, Mr. Kendall may decide to retain the 40,000,000 shares
for an additional 18 months and instead sell them at a price of $0.08
per share, for an aggregate purchase price of $3,200,000, at such later
date.
o Mr. Kendall will also contribute $4,000,000 of the debt owed to him by
Sentex, which debt will be sold to investors as arranged by SecITV for
proceeds to be used by Sentex as working capital. These sales are
expected to be private sales. After Mr. Kendall's 40,000,000 shares
have been sold as discussed above, two-thirds of the remaining
$3,500,000 of Sentex debt held by Mr. Kendall will be assigned and
transferred on a monthly basis over a three-year period to Mr.
Rubinstein and the financial advisors on a prorata basis.
o Following the closing, Mr. Rubinstein and Mr. Kendall will enter into
employment agreements pursuant to which Mr. Rubinstein will be the
president and Mr. Kendall will be the Treasurer and Chairman of the
Board of Sentex, and the parties agree to elect Messrs. Rubinstein and
Kendall as its sole directors.
o Pursuant to the employment agreement, Mr. Kendall will serve as the
Chairman of the Board until the earlier to occur of his death,
permanent disability or the completion of two years from the execution
of the employment agreement.
o Upon the sale of Mr. Kendall's 40,000,000 shares, Mr. Rubinstein will
become Sentex's Chief Executive Officer.
PARTIES TO THE TRANSACTIONS
SENTEX SENSING TECHNOLOGY, INC., A NEW JERSEY CORPORATION. Sentex's
(www.sentextech.com) executive offices are located at 1801 East 9th Street,
Suite 1510, Cleveland, Ohio 44114, and the phone number is (216) 687-0289.
Sentex is a corporation duly organized in 1980 in the state of New Jersey. It
originally designed, manufactured and marketed sensor technology equipment, and
subsequently computer equipment. It has had no significant operations since July
of 2001.
SECURITY IT VISION, INC., AN OREGON CORPORATION ("SecITV"). SecITV's
(www.secitv.com) executive offices are located at 1380 Lead Hill Blvd., Suite
106, Roseville, California 95661, and its phone number is (916) 774-1736. SecITV
is head company of Astro Datensysteme AG ("Astro") (www.astro.de) which is a
major International accredited Biometrics technology provider. Astro was the
first company in the market which brought biometrics security to a commercial
success. SECITV has partners and clients on the Fortune 100 listing.
BALMORAL FINANCIAL SERVICES COMPANIES, AN OHIO CORPORATION ("Balmoral").
Balmoral's executive offices are located at 7118 Dublin Road, Dublin, Ohio
43017, and its phone number is (614)792-8456. Balmoral
(www.balmoralfinancial.com) is a niche financial services company which has been
in operation since 1986. Balmoral provides private entrepreneurs and public
companies M & A, Bank Guarantees, Documentary Credit, International Promissory
Notes, and PIPE financing. Balmoral works in 20 countries with five satellite
offices with financial institutions in Emerging Markets like Eastern Europe and
the Former Soviet Union (FSU), and places these transactions with American
Companies.
VIEWPOINT TECHNOLOGY, INC., AN OHIO CORPORATION ("Viewpoint"). Viewpoint's
(www.balmoralfinancial.com/viewpoint) executive offices are located at 7118
Dublin Road, Dublin, Ohio 43017, and its phone number is (614)792-8456.
Viewpoint is an Ohio corporation incorporated in 1998. It originally was owned
by European and American investors for IT, laser, communications and other
emerging technology investing. It looks for seed-stage and early-stage
technology ventures. Viewpoint invests in extraordinary entrepreneurs who have
the ability to build great teams and great companies. Viewpoint deals with both
public and private deals and has Holland and Czech Republic selling groups.
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TERMS OF THE TRANSACTIONS
On July 19, 2006, Sentex and SecITV, entered into an exclusive distribution
agreement (the "Distribution Agreement") with SecITV, a biometrics technology
provider. A copy of the Distribution Agreement is attached hereto as Exhibit A.
The Distribution Agreement gives Sentex, effective as of the Closing (as defined
below), the exclusive world-wide rights over the fifty-year term of the
Distribution Agreement to market SecITV technology to end users in the biometric
and security product arena based on Fingerprint Identification, Face Recognition
and Voice Recognition technology. SecITV will receive a fee from Sentex equal to
5% of the net manufacturing cost to Sentex if any products using SecITV's
technology are manufactured by Sentex. If Sentex purchases the products from
SecITV, then Sentex may resell the products to its customers at any price it
determines. The exclusive distribution rights were granted in exchange for
69,082,924 Sentex common shares issued, at the direction of SecITV, to 1stMF,
the majority shareholder of SecITV, and 27,000,000 Sentex common shares issued
to the Financial Advisors (as defined below) and other terms and conditions set
forth in a share issuance and corporate governance agreement (the "SICG
Agreement") entered into on July 19, 2006 among Sentex, SecITV, Henrik
Rubinstein (who directly and indirectly beneficially owns 100% of the capital
stock of SecITV), Robert Kendall (the President of Sentex and significant
beneficial owner of Sentex common shares), Balmoral, and Viewpoint (together
with Balmoral, the "Financial Advisors"). A copy of the SICG Agreement is
attached hereto as Exhibit B.
Pursuant to the SICG Agreement, at the Closing, Sentex will issue the 69,082,924
Sentex common shares, at the direction of SecITV to 1st Management Finance,
Inc., a 90% shareholder of SecITV wholly owned by Mr. Rubinstein ("1stMF"). Mr.
Rubinstein owns directly the other 10% of the capital stock of SecITV. Such
shares will represent approximately 35% of the issued and outstanding shares of
Sentex (taking into account the issuance of shares to the Financial Advisors
described below), based on the number of shares outstanding on the date hereof.
1stMF will have demand registration rights with respect to up to 100,000,000
Sentex common shares that it may own from time to time and piggyback
registration rights with respect to its Sentex common shares, as well as any
Sentex common shares issued to other SecITV affiliates under the SICG Agreement,
in any registration statement that Sentex files, in each case, for specified
periods after the Closing.
The SICG Agreement also provides for additional financing and management
arrangements for Sentex involving Mr. Kendall, Mr. Rubinstein and the Financial
Advisors. At the Closing, Sentex will issue 15,000,000 common shares to Balmoral
and 12,000,000 common shares to Viewpoint in exchange for services by the
Financial Advisors to SecITV and Sentex which have already been provided and for
which the rights to such shares have vested. The Financial Advisors will then
hold approximately 14% of the issued and outstanding shares of Sentex (taking
into account the issuance of shares to 1stMF described above), based on the
number of shares outstanding on the date hereof. In addition, the Financial
Advisors have committed to raise additional funding for Sentex on a best-efforts
basis. Of this additional funding, approximately $60,000 is to be raised through
the sale of 1,000,000 Sentex common shares held by Mr. Kendall, subject to the
approval of Mr. Kendall's bank, which holds the shares as collateral. The
proceeds from this sale will be paid to Sentex in exchange for its agreement to
issue 1,000,000 common shares to Mr. Kendall by November 16, 2006. The Financial
Advisors did not provide any reports, opinions or appraisals in connection with
the transactions contemplated by the Distribution Agreement and the SICG
Agreement.
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Within 180 days of the Closing, Mr. Kendall will also have the right to sell
40,000,000 of the Sentex common shares beneficially owned by him (which includes
the 1,000,000 shares discussed above), also subject to his bank's approval,
either to Mr. Rubinstein or to other investors, as arranged by Mr. Rubinstein
through a private transaction or a registered resale arrangement, for a purchase
price of $0.05 per share, or an aggregate of $2,000,000. If such shares are sold
to Mr. Rubinstein or entities affiliated with him, Mr. Rubinstein would then
beneficially own approximately 52% of the issued and outstanding shares of
Sentex (based on the number of shares outstanding on the date hereof and
assuming the issuance of the shares to the Financial Advisors and an additional
1,000,000 shares are issued to Mr. Kendall). Alternatively, Mr. Kendall may in
his sole discretion decide to retain the 40,000,000 shares for an additional 18
months and instead sell them at a price of $0.08 per share, for an aggregate
purchase price of $3,200,000, at such later date. Mr. Kendall will retain his
ownership of approximately 8,000,000 additional shares.
Mr. Kendall will also contribute $4,000,000 of the debt owed to him by Sentex,
which debt will be sold to investors as arranged by SecITV for proceeds to be
used by Sentex as working capital. The sale of the debt is expected to be to
private interests. After Mr. Kendall's 40,000,000 shares have been sold as
discussed above, two-thirds of the remaining $3,500,000 of Sentex debt held by
Mr. Kendall will be distributed on a monthly basis over a three-year period to
Mr. Rubinstein and the Financial Advisors, on a prorata basis.
Under the SICG Agreement, following the Closing, Mr. Rubinstein will be the
President and Mr. Kendall will be the Chairman of the board and Treasurer of
Sentex. The parties agree to elect Messrs. Rubinstein and Kendall as its sole
directors following the Closing, with Mr. O'Leary resigning as a Director upon
the election of Mr. Rubinstein. Mr. Rubinstein will enter into an employment
agreement with Sentex following the Closing pursuant to which he will serve as
the President. Additionally, Mr. Kendall will enter into an employment agreement
with Sentex (the "Employment Agreement") pursuant to which he will serve as the
Treasurer and Chairman of the board until the earlier to occur of his death,
permanent disability, conviction of a crime resulting in at least one year of
incarceration or the completion of two years from the execution of the
Employment Agreement. Therefore, if not terminated earlier, Mr. Kendall will
retire from Sentex not later than the end of the second fiscal year following
the Closing. Mr. Kendall's annual base salary is still subject to negotiation.
The Employment Agreement will also provide for one-year non-compete and
confidentiality obligations. Upon the sale of Mr. Kendall's 40,000,000 shares,
Mr. Rubinstein will become Sentex's Chief Executive Officer.
The Sentex common shares to be issued to 1stMF and the Financial Advisors are
expected to be placed into escrow as soon as practicable and released at the
Closing. The closing of the transactions contemplated by the Distribution
Agreement and the SICG Agreement (the "Closing") will occur following receipt by
the parties of all necessary approvals and submission of all required
governmental filings, including the filing of this definitive information
statement with the Securities and Exchange Commission ("SEC"). The transactions
contemplated by the Distribution Agreement and the SICG Agreement have been
approved by the parties' Boards of Directors and by a majority of the Sentex
shareholders in an action by written consent.
REASONS FOR THE TRANSACTIONS
Sentex's Board of Directors considered various factors in approving the
transactions, including:
o the revenue prospects represented by the distribution rights to SecITV
technology
o the background of Mr. Rubinstein and SecITV
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o improved prospects of growth in an emerging market
o the need for an influx of working capital
o increased visibility in the financial community
o enhanced access to capital markets
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS AS A RESULT OF THE
TRANSACTION
The contemplated transactions will result in the issuance of an additional
96,235,089 common shares, which is nearly equal to the current issued and
outstanding common shares. This issuance will initially result in a dilution of
the Company's current shareholders' ownership interests on a per share basis of
approximately 50%.
PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
There were no contacts, transactions, negotiations or agreements between Sentex
and SecITV prior to being introduced for the purpose of discussing the proposed
transactions. Sentex and SecITV were introduced by Rodney Kincaid in his
capacity with the Financial Advisors in April of 2006. Since then, Sentex and
SecITV have explored the possibilities of entering into a mutually beneficial
arrangement, resulting in the contemplated transaction.
OUTSTANDING SHARES; VOTES PER SHARE; VOTE REQUIRED TO APPROVE THE TRANSACTIONS
The Company currently has 103,764,911 common shares issued and outstanding, each
of which is entitled to one vote per share. There are no dividend or pre-emptive
rights with regard to such shares. The contemplated transaction has been
approved by written consent of the required holders of a majority of the issued
and outstanding common shares as of July 24, 2006.
DISSENTER'S RIGHTS OF APPRAISAL
The shareholders have no dissenter's rights of appraisal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following sets forth certain information regarding the beneficial ownership
of the Common Shares as of August 10, 2006 by each person who is known by the
Company to own beneficially more than 5% of the outstanding Common Shares.
Except as otherwise described in the notes below, the following beneficial
owners have sole voting power and sole investment power with respect to all
Common Shares set forth opposite their names.
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NAME AND ADDRESS OF AMOUNT OF
BENEFICIAL OWNER BENEFICIAL OWNER PERCENTAGE
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
CPS Capital, Limited(1),(2) 47,719,814 45.99%
1801 East Ninth Street
Cleveland, Ohio 44114
-------------------------------------------------------------------------------
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(1) All common shares, other than 300,000 shares directly owned by Mr. Kendall,
are held of record by CPS Capital, Ltd. or are beneficially owned by CPS
Capital, Ltd. Mr. Kendall and his wife own 100% of the outstanding membership
interests in CPS Capital, Ltd.
(2) CPS has sole voting and dispositive power with respect to 47,719,814 common
shares. Mr. Kendall and his wife also are deemed to have sole voting and
investment power over such shares and the shares held directly by Mr. Kendall.
The following sets forth certain information regarding the beneficial ownership
of the Common Shares as of August 10, 2006 by: (a) the Company's Directors; and
(b) the Company's executive officers; and (c) the Company's executive officers
and Directors as a group. Except as otherwise described in the notes below, the
following beneficial owners have sole voting power and sole investment power
with respect to all Common Shares set forth opposite their names.
------------------------------------------------------------------------------
NAME AND ADDRESS OF AMOUNT OF PERCENTAGE
BENEFICIAL OWNER (1) BENEFICIAL OWNER
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Robert S. Kendall (2),(3) 48,019,814 46.28%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
James S. O'Leary -- --
------------------------------------------------------------------------------
------------------------------------------------------------------------------
William R. Sprow -- --
------------------------------------------------------------------------------
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All Directors and Officers 48,717,314 46.95%
(as a group)
------------------------------------------------------------------------------
(1) The name and address of each individual is listed in the table, except where
otherwise indicated, is c/o Sentex Sensing Technology, Inc., 1801 East Ninth
Street, Cleveland, Ohio 44114.
(2) Except for 300,000 common shares directly owned by Mr. Kendall, all shares
owned beneficially by Mr. Kendall are held of record by CPS Capital, Ltd. or are
beneficially owned by CPS Capital, Ltd. Mr. Kendall and his wife own 100% of the
outstanding membership interests in CPS Capital, Ltd.
(3) CPS has sole voting and dispositive power with respect to 47,719,814 common
shares. Mr. Kendall and his wife also are deemed to have sole voting and
investment power over such shares and the shares held directly by Mr. Kendall.
CHANGE IN CONTROL
A change of control may occur pursuant to the transaction contemplated by the
SICG Agreement, as more particularly described above under "Terms of the
Transactions."
DIRECTORS AND EXECUTIVE OFFICERS
There are no material legal proceedings to which any director or executive
officer (or individual proposed for election as a Director) of Sentex is a party
adverse to Sentex or has a material interest adverse to Sentex.
The Directors and Executive Officers of the Company are as follows:
Name Age Position/Proposed Position
---- --- --------------------------
Robert S. Kendall 67 Chairman, Current President and Treasurer
James S. O'Leary 68 Director
William R. Sprow 67 Controller
Henrik Rubinstein 47 Nominee for Director and contemplated President
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ROBERT S. KENDALL has been the Chairman, President and Treasurer of the Company
since March 1, 1996. He shall maintain his position as a duly elected director
of the Company until such time as his successor is duly qualified and elected.
He is also President and Chairman of CPS Capital, Limited, an investment company
based in Cleveland. Until April 1996, he was also Chairman of the Board and
founder of LDI Corporation, an asset leasing and technology services company
which he, along with two others, founded in 1972. LDI was one of the largest
independent lessors of technology and computer equipment in the United States.
Mr. Kendall is also a general partner in NCP, Ltd., a real estate partnership
actively engaged in investing, acquiring, financing and managing commercial,
industrial and other properties. From 1969 to 1972, Mr. Kendall was branch
manager at Victor Computer, a manufacturer and distributor of computer systems.
From 1963 to 1969, he was a salesman, financial specialist and sales manager at
Burroughs Corporation (now Unisys Corp.). Mr. Kendall graduated from Case
Western Reserve University with a bachelor's degree in psychology in 1960, and
attended graduate school at John Carroll University.
JAMES S. O'LEARY had been employed by Monitek since August 1982 and served as
its Executive Vice President, Secretary and Treasurer since April 1987. The
Company has retained his services and, from December 1996 through November 1998,
he served as Vice President of Finance and Chief Financial Officer. In December
1998, Mr. O'Leary was elected as a Director and was appointed Chief Operating
Officer of the Company. In September 1999, Mr. O'Leary resigned from his
position as Chief Operating Officer but he remained a Director. He will resign
his position as a duly elected Director of the Company upon the election of Mr.
Rubinstein as a Director.
WILLIAM R. SPROW has served as the Chief Financial Officer of the Company since
December 2001. He is responsible for all financial operations from day to day
accounting, financial reporting, SEC report preparation and submission, and a
variety of administrative responsibilities for all CPS companies, Sentex and
Regency. He additionally handles IT administration issues for our own internal
system. Mr. Sprow also serves as Controller of CPS Holding Company, Ltd., a
related company that is responsible for energy purchasing and subsequent energy
management for a variety of clients ranging from large Fortune 1000 clients to
large public institutions. With over 38 years of related accounting and
financial experience, Mr. Sprow served as Vice President, Finance of Borden
Consumer Products, Canada from 1980 to 1985; as Controller and Operations
Manager for Sherwin-Williams Canada from 1986 to 1993; in key management
positions with a number of Northeast Ohio companies from 1995 to 1999.
HENRIK RUBINSTEIN has many years of experience as founder and managing director
of Astro Datensysteme AG ("AD") and has acted as CEO of AD since 1989. Henrik
holds a director position as well in SecITV. Additionally, Mr. Rubinstein is
directly involved on the Board of Directors of 1stMF.
There are no family relationships among directors, executive officers, or
persons nominated or chosen by Sentex to become directors or officers.
No Director, officer or nominated Director or officer, in the past five years,
has been subject to any bankruptcy or similar activity, had any criminal
conviction, been the subject to any order limiting involvement in any type of
business, securities or banking activities, or been found as having violated a
federal or state securities or commodities law. No Director, officer or
nominated Director or officer has been a party, during the past five years to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding been, or is subject to, a judgment, decree or
final order finding violations of or enjoining future violations of or
prohibiting or mandating activities subject to federal or state securities laws.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Kendall, as a director, executive officer and beneficial owner of more than
five percent of the common shares of the Company, and Mr. Rubinstein, as a
nominee for election as a director, have material interests in the proposed
transactions, as more fully described under "Terms of the Transactions," set
forth above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
No person who, at any time during the Company's most recent fiscal year, was a
director, officer, or beneficial owner of more than ten percent of any class of
equity securities of the Company failed to file, on a timely basis, any reports
required by Section 16(a) of the Exchange Act during the most recent fiscal
year.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company does not have a standing audit, nominating or compensation
committees of the Board of Directors, or committees performing similar functions
due to the fact that the Company has not had any significant operations since
2001.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Neither the Company's Chief Executive Officer, nor any other executive officer's
total compensation exceeded $100,000 for the fiscal year ended November 30,
2005.
Long-Term Compensation:
No long-term compensation was paid during the fiscal years ended November 30,
2005, 2004, or 2003 to any executive officer of the Company by way of restricted
stock awards, options or stock appreciation rights, or other long-term incentive
plans.
Stock Options:
The Company adopted the Sentex Sensing Technology, Inc. Stock Option Plan at a
special meeting of its shareholders held on November 14, 1996. Under the Plan,
the Company may grant different types of options covering up to 7,000,000 Common
Shares to its existing and future directors, officers and employees. As of
August 10, 2006, there were no Company stock options held by the directors or
executive officers of the Company.
Director Compensation
There are no standard arrangements pursuant to which directors of Sentex are
compensated for any services provided as directors.
Compensation Pursuant to Plans:
The Company has no plans pursuant to which cash or non-cash equivalents were
paid during the fiscal years ended November 30, 2005, 2004, or 2003.
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FINANCIAL AND OTHER INFORMATION
See Sentex and Subsidiaries' Consolidated Balance Sheet for the year ending
November 30, 2005 (audited) and the Six Months ended May 31, 2006 (unaudited),
Consolidated Statements of Operations for the Six Months ended May 31, 2005
(unaudited), and May 31, 2006 (unaudited), and Consolidated Statements of Cash
Flow for the Six Months ended May 31, 2005 (unaudited) and May 31, 2006
(unaudited), set forth in the Company's most recent 10-QSB, filed July 14, 2006,
incorporated by reference herein, and attached hereto as Exhibit C.
See Sentex and Subsidiaries' Consolidated Statements of Cash Flows for the years
ended November 30, 2005 and 2004, set forth in the Company's Annual Report filed
on Form 10-KSB/A, filed April 18, 2006, incorporated by reference herein, and
attached hereto as Exhibit D.
See Sentex and Subsidiaries' Consolidated Balance Sheet for the year ended
November 30, 2004, set forth in the Company's Annual Report filed on Form
10-KSB/A, filed July 22, 2005, incorporated by reference herein, and attached
hereto as Exhibit E.
See Sentex and Subsidiaries' Consolidated Statements of Cash Flows for the year
ended November 30, 2003, set forth in the Company's Annual Report filed on Form
10-KSB, filed May 6, 2004, incorporated by reference herein, and attached hereto
as Exhibit F.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOUR" OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
Certain statements in the Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Financial Statements included in
this Information Statement constitute "forward-looking statements" as that term
is defined in the Private Securities Litigation Reform Act of 1995. These may
include statements projecting, forecasting or estimating Company performance and
industry trends. The achievement of the projections, forecasts or estimates is
subject to certain risks and uncertainties. Actual results and events may differ
materially from those projected, forecasted or estimated. The applicable risks
and uncertainties include general economic and industry conditions that affect
all business, as well as matters that are specific to the Company and the
markets it serves.
Specific risks to the Company include an inability of the Company to finance its
working capital needs. In light of this and other uncertainties, the inclusion
of a forward-looking statement herein should not be regarded as a representation
by the Company that the Company's plans and objectives will be achieved.
OVERVIEW
Our Future Business
On May 4, 2006 a press release was issued stating that the Company had signed a
Memorandum of Understanding with SecITV to bring to the Company the existing
biometric technology of Astro Datensystems AG/Security IT Vision. On July 19,
2006, Sentex and SecITV, entered into the Distribution Agreement and the SICG
Agreement. SecITV develops and markets proprietary fingerprint, face recognition
and voice recognition identification biometric technology and software
solutions. It also delivers advanced identification solutions and information
services to law enforcement departments, public safety agencies and other
government and private sector customers.
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SecITV pioneered the development of automated finger identification technology
that can be used without the aid of non-automated methods of identification such
as a personal identification, password, single sign on, token, smart card, ID
card, credit card, passport, driver's license or other form of possession- or
knowledge-based identification. This advanced biometric identification
technology improves both the accuracy and speed of finger-based biometrics and
is the only finger identification algorithm that has been used on Sun Solaris,
Linux, Microsoft and several other embedded operating system platforms.
Since Astro/SecITV's inception in 1989, it has spent substantial time and effort
in completing the development of what it believes is the most discriminating and
effective finger and face biometric technology available. Recently, it has
focused on multimodal solutions. During the past four years, SecITV's focus has
shifted to marketing and selling this technology and completing strategic
acquisitions that can help it leverage its capability to deliver identification
solutions. With the strategic partnership in Sentex, SecITV intends to move this
to a business model of exclusive distribution.
SecITV intends to build a direct sales force of professionals with substantial
experience in selling technology-based solutions to government and corporate
customers. It expects to add up to 150 qualified personnel after the Closing and
raising capital.
After successful completion of the contemplated transactions, Sentex expects to
have a 20-person research and development team for the development of new ASICS,
Bio codes and Data Warehouse solutions. The face recognition team is expected to
have a direct focus on multimodal solutions and the implementation of them in
commodity products in the market. The voice recognition team is expected to act
in parallel on a similar stream of multimodal combinations. The ASIC development
is expected to bring a new device which will allow SecITV to bundle its current
chips in higher speed and add more networking and Bluetooth performance. An
integrated framegrabber is provided to get more features in commodity
environments for multimodal face recognition.
Sentex is currently in discussions with several states in the United States for
office facilities to headquarter the Company. The desire is to acquire
approximately 22,000 square feet of operating space, and to provide incentives
to garner up to $6,000,000 in seed funding to start the operations. Additionally
we are in discussions with several institutional investors to acquire capital
project funding of $30,000,000. The money will be needed for national
identification card projects, prior to receiving additional financing.
Sentex is looking to acquire, after settlement of ongoing business, several
patents relating to future automotive projects. These future automotive projects
are subject to the receipt of additional required capital. It is contemplated
that Sentex will develop a BIC (Biometric Internet Computer) Trust Center. The
required server farms are under discussion and are expected to be purchased as
soon as reasonable after the location of the headquarters is established.
Sentex will have some costs for its Postal Office and Shop POS (Point of Sale)
Terminal development. The possibility of outsourcing the physical housing is
currently being discussed in order to reduce production costs.
FINANCIAL CONDITION
Working Capital and Liquidity
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During the last several fiscal years, the Company has incurred losses from
operations. In addition, the Company's certified public accountants, Hausser +
Taylor LLC, have included in their auditors' report, which covers the Company's
financial statements for the years ended November 30, 2004 and November 30,
2005, a statement that the Company's recurring losses from operations raised
substantial doubt about the Company's ability to continue as a going concern.
For fiscal year 2004 and the year ended November 20, 2005, the Company sustained
losses of approximately $781,000 and $377,000, respectively. These losses have
had a substantial adverse effect on the working capital of the Company. The
Company believes the contemplated transactions are expected to increase working
capital and liquidity as more particularly described above, and will allow the
Company to pursue additional financing, also as described above.
Net Tax Operating Loss Carryforwards
As of May 31, 2006, the Company had approximately $16,656,000 in net tax
operating loss carryforwards which will expire at various dates through the year
2025. Federal tax law imposes restrictions on the use of net operating loss
carryforwards in the event of a change in ownership, such as a merger. Due to
the merger with Monitek, approximately $6,265,000 of the $16,656,000 net
operating losses may be subject to these limitations and potentially may not be
able to provide any economic benefit to the Company.
RESULTS OF OPERATIONS
On November 20, 2005, JJJ-RT, LLC ("JJJ-RT") assumed the operations of the
former Regency Technologies, Ltd. ("Regency").
The Company currently has no active operation. Expenses shown on the
Consolidated Statement of Operations include corporate administrative overhead
only.
Investment in Regency Technologies, Ltd.:
Due to a change in control, the Company now accounts for its investment in
JJJ-RT on the equity method. However, losses and distributions have exceeded the
Company's investment in JJJ-RT. Accordingly, the Company has reflected such
investments at zero. The Company's share of future losses in this investment
will be suspended for book purposes. Furthermore the Company's share in future
income will not be recognized until the aggregate of such income equals the
aggregate of their suspended losses.
The net loss on disposal of Regency is the result of recognizing the net
investment deficit in Regency as of November 20, 2005 as income to bring the
value of the investment to zero and decreasing that gain by the forgiveness of
inter-company debt as stated in the Contribution and Investment Agreement.
The following table sets forth certain summarized financial information of
JJJ-RT, the Company's only investment, based upon the applicable financial
statements, adjusted for accounting principles generally accepted in the United
States of America. This information is for the five months ended May 31, 2006
and has not been audited or reviewed, among JJJ-RT, Regency, Regency
Acquisition, LLC and the Company, dated November 20, 2005.
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BALANCE SHEET DATA 2006
Current assets $ 330,520
Leasehold improvements 14,774
Other assets 990
-----------
Total Assets 346,284
===========
Current Liabilities 249,382
Partners' Equity 96,902
-----------
Total liabilities and partners' equity $ 346,284
===========
STATEMENT OF INCOME DATA
Revenues $ 1,759,533
===========
Net income $ (97,604)
===========
CHANGES IN ACCOUNTING STANDARDS
New Accounting Standards - In November 2004, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 151,
"Inventory Costs," to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs and wasted material. This standard
requires that such items be recognized as current-period charges. The standard
also establishes the concept of "normal capacity" and requires the allocation of
fixed production overhead to inventory based on the normal capacity of the
production facilities. Any unallocated overhead must be recognized as an expense
in the period incurred. This standard is effective for inventory costs incurred
starting January 1, 2006. The Company does not believe the adoption of this
standard will have a material impact on its consolidated financial statements.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets." This standard amended APB Opinion No. 29, "Accounting for Nonmonetary
Transactions," to eliminate the exception from fair value measurement for
nonmonetary exchanges of similar productive assets. This standard replaces this
exception with a general exception from fair value measurement for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. This statement is effective
for all nonmonetary asset exchanges completed by the company starting January 1,
2006. The Company does not believe the adoption of this standard will have a
material impact on its consolidated financial statements.
In December 2004, the FASB released a revised version of SFAS No. 123 (FASB
123R), "Accounting for Stock-Based Compensation." This statement supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and its related
implementation guidance. This statement amends and clarifies the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services. This statement requires a public entity to measure the cost of
employee services received in exchange for an award of equity instruments and to
recognize this cost over the vesting period or time period during which the
employee is required to provide service in exchange for the reward. This
statement is effective for the Company starting January 1, 2006. The Company
does not expect the adoption of this statement to have a material impact on its
financial statements.
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In June 2005, the FASB released SFAS No. 154, "Accounting Changes and Error
Corrections", a replacement of APB Opinion No. 20 and FASB Statement No. 3, to
change the requirements for the accounting for and reporting of a change in
accounting principle. This statement requires retrospective application to prior
periods' financial statements of changes in an accounting principle, unless it
is impracticable to determine either the period specific effects or the
cumulative effect. If impracticable to determine period specific effects, this
statement requires the new accounting principle to be applied to balances of
assets and liabilities as of the beginning of the earliest period for which
retrospective application is practicable and a corresponding entry made to
opening balance of retained earnings for that period. If it is impracticable to
determine the cumulative effect to prior periods, the statement requires the new
accounting principle to be applied from the earliest date practicable. This
statement requires that a change in depreciation, amortization and depletion
methods for long-lived assets be accounted for as a change in estimate affected
by a change in accounting principle. Lastly, this statement carries forward
guidance from Opinion 20 for reporting the correction of an error in previously
issued financial statements and a change in accounting estimate. This standard
is effective for accounting changes and corrections of errors made in fiscal
years beginning after December 15, 2005. The Company does not believe the
adoption of this standard will have a material impact on its consolidated
financial statements.
There have been no changes in or disagreements with accountants on any
accounting and financial disclosures.
INTEREST OF CERTAIN PERSONS IN THE TRANSACTIONS
Mr. Kendall, the Company's Chairman, President and Treasurer, and Mr.
Rubinstein, a nominee for Director, each have the interests in the transactions
described under "Terms of the Transactions," set forth above.
HOUSEHOLDING
The SEC permits a single set of annual reports, proxy statements or information
statements to be sent to any household at which two or more shareholders reside
if they appear to be members of the same family. Each shareholder continues to
receive a separate proxy card. This procedure, referred to as householding,
reduces the volume of duplicate information shareholders receive and reduces
mailing and printing costs. A number of brokerage firms have instituted
householding. Only one copy of this information statement and the attached
appendices will be sent to certain beneficial shareholders who share a single
address, unless any shareholder residing at that address gave contrary
instructions.
If any beneficiary shareholder residing at such an address desires at this time
to receive a separate copy of this information statement and the attached
appendices, or if any such shareholder wishes to receive a separate information
statement, proxy statement or annual report in the future, the shareholder
should provide such instructions to the Company by calling (216) 687-0289, or by
writing to Sentex at 1801 East 9th Street, Suite 1510, Cleveland, Ohio 44114.
INFORMATION INCORPORATED BY REFERENCE
Upon written or oral request, we will furnish, without charge, to record and
beneficial shareholders a copy of any of the documents referred to in this
information statement or incorporated by reference. These documents
14
will be provided by first class mail or other equally prompt means within one
business day of the request. Please make your request to the address or phone
number listed above.
By order of the Board of Directors,
/s/ Robert S. Kendall
-------------------------------
Robert S. Kendall, President
Cleveland, Ohio
[_______ ___, 2006]
INDEX TO EXHIBITS TO INFORMATION STATEMENT
Exhibit Document
------- --------
A Exclusive Distribution Agreement, dated July 19, 2006, by and
between Security IT Vision, Inc. and Sentex Sensing Technologies,
Inc.
B Share Issuance and Corporate Governance Agreement, dated July 19,
2006, by and among Sentex Sensing Technology, Inc., 1st Management
Finance, Inc., Henrik Rubinstein, and Robert Kendall.
C Sentex Sensing Technology, Inc. Quarterly Report filed on
Form 10-QSB, filed July 14, 2006.
D Sentex Sensing Technology, Inc. Annual Report for the year ending
November 30, 2005, filed on Form 10-KSB/A, filed April 18, 2006.
E Sentex Sensing Technology, Inc. Annual Report for the year ending
November 30, 2004, filed on Form 10-KSB/A, filed July 22, 2005.
F Sentex Sensing Technology, Inc. Annual Report for the year ending
November 30, 2003, filed on Form 10-KSB, filed May 6, 2004.
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