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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
NET-FORCE SYSTEMS INC.
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(Name of Small Business Issuer in its charter)
ANTIGUA and BARBUDA
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(state or other jurisdiction of
incorporation or organization)
#P.O. BOX W-645
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THIRD FLOOR DOLLAR BUILDING
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NEVIS STREET
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ST.JOHN'S, ANTIGUA
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(Address of principal executive offices and zip code)
(268) 481-1970
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(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
NONE
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Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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Title of each class to be so registered
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of The Securities Exchange Act of
1934 during the preceding 12 months (or 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:
[X] Yes [ ] No
Indicate by check mark which financial statements item the registrant has
elected to follow:
ITEM 17 [ ] ITEM 18 [X]
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FORWARD LOOKING STATEMENTS
Net-Force Systems Inc. (the "Company" or "Net-Force") cautions readers that
certain important factors (including without limitation those set forth in this
Form 20-F) may affect the Company's actual results and could cause such results
to differ materially from any forward-looking statements that may be deemed to
have been made in this Form 20-F registration statement, or that are otherwise
made by or on behalf of the Company. For this purpose, any statements contained
in the registration statement that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality of the
foregoing, words such as "may", "expect", believe", "anticipate", "intend",
"could", "estimate" or "continue" or the negative or other variations of
comparable terminology, are intended to identify forward-looking statements.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
I. BUSINESS DEVELOPMENT
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A. NET-FORCE SYSTEMS INC.
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Net-Force Systems Inc. (the "Company") was incorporated in March 1999 under the
laws of Antigua and Barbuda as Net-Force Systems Inc. The company's corporate
Web site can be viewed on the World Wide Web at www.netforcesystems.com. The
Company currently licenses, owns, and operates an electronic website offering a
variety of casino gaming options as well as sports wagering, utilizing the
rapidly expanding medium known as the Internet. On August 5, 1999, a wholly
owned subsidiary called Netforce Entertainment Inc. was incorporated under the
laws of Antigua and Barbuda. Netforce Entertainment Inc. acts as the operating
company for all business activities relating to the online gaming operations.
Netforce Entertainment Inc. licenses proprietary Internet casino software and
systems from Starnet Systems Inc., formerly Softec Systems Caribbean Inc.
("Starnet") and processes and collects revenues generated from the its Internet
gaming Web sites with the assistance of EFS Caribbean Inc. ("EFS"). The Company
oversees the Web sites has implemented a substantial marketing program with
initial advice from Starnet. Starnet and EFS are wholly owned offshore
subsidiaries of Starnet Communications International Inc., which is
headquartered in Antigua.
The Company, including its subsidiaries, employs 6 full time persons. The
majority of these individuals are either involved in developing and implementing
a marketing strategy for the Company or are clerical staff.
B. NET-FORCE SYSTEMS INC. CORPORATE HISTORY
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In March, the Company filed its Articles of Incorporation with the
Director of International Business Corporations, Government of Antigua and
Barbuda as Net-Force Systems Inc., in which, among other things, the Board of
Directors was elected as follows: Terry G. Bowering and Douglas N. Bolen. The
authorized capital of the Company consists of 100,000,000 Common Shares and
50,000,000 Preferred Shares. On March 15, 1999, the Directors, by way of
Organizational Consent of the Directors of the Company, accepted the stock
subscriptions and payment for the number of shares issued to the individuals
referred to above at a price of $0.001 per share. In addition, the Directors
appointed Terry G. Bowering to the office of President, CEO and Chairman of the
Board, and Douglas N. Bolen to the office of Secretary.
On March 15, 1999, the Company accepted subscription agreements from six
entities to acquire securities of the Company pursuant to a Rule 504 offering
under Regulation D. The Board authorized the Company to proceed with the sale of
its shares pursuant to the subscriptions received for the sale of 3,000,000
Common Shares at a price of $0.01 per Common Share. Pacific Stock Transfer
Company was appointed as the Transfer Agent of the Common Shares of the Company.
<PAGE>
II. BUSINESS OF THE ISSUER
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Netforce Entertainment Inc. ("Netforce Entertainment") was incorporated on
August 5, 1999 pursuant to the International Business Corporations Act of
Antigua and Barbuda and is based in Antigua. Netforce Entertainment is a wholly
owned subsidiary of the Company and acts as the operating entity for the
Company's online gaming operations.
Netforce Entertainment Inc. currently owns and maintains an international gaming
Web sites called Antigua Online Sportsbook and Casino located on the World Wide
Web at www.AntiguaOnlineCasino.com and www.AntiguaSportsbook.com. Netforce
Entertainment Inc. has entered into agreements with software vendors, including,
Starnet for the rights to use Starnet's proprietary Internet gaming software,
and EFS for the use of EFS's electronic financial conversion system in relation
to the processing of credit cards. Starnet and EFS are wholly owned subsidiaries
of Starnet Communications International Inc.
Starnet, an Antigua corporation, is in the business of licensing complete,
customized Internet gaming systems to third-party offshore gaming license
holders. Starnet currently supports in excess of 45 such licensee's operating
worldwide and has endorsed Net-Force Entertainment as a licensee. Starnet
provides customized software, Web site development and management on its
network, custom database systems to manage player accounts, and technical
support. Netforce Entertainment Inc., has entered into a software licensing
agreement with Starnet (See Exhibit 6.1) whereby Starnet will licenses certain
Internet casino software to Netforce Entertainment Inc. and has developed the
graphical front end of the gaming site in exchange for a one-time payment and a
percentage of the gross revenues from the Company's Web site (see Exhibit 6.1).
Starnet hosts the Company's offshore subsidiary's Web sites. Starnet also
provides and maintains all hardware necessary for the operation of the Web site
and provides a complete transaction processing system that allows players to
deposit funds for use of the games. The hardware is maintained in Starnet's
offices in Antigua.
Net-Force Entertainment plans to establish merchant accounts with several
international banking institutions for the purpose of accepting credit cards
on-line to facilitate fast and efficient payment for its Internet Gaming
customers world-wide. To ensure the security of funds transfers over the
Internet, the subsidiary utilizes the services of EFS. EFS, also an Antigua
corporation, and wholly-owned subsidiary of Starnet Communications International
Inc., is in the business of securely converting electronic funds between
financial institutions and other companies. Through alignments with major banks,
EFS processes conversions of worldwide currencies into "e-cash." EFS utilizes
Starnet's proprietary STAR-MX encoding and processing technology to process tens
of thousands of Internet credit card transactions per month.
The Starnet license will allow the Company to establish itself as a leading
Internet provider of gaming and sports wagering. Through the Company's
subsidiary, it currently offers via the Internet up to 25 casino style gaming
opportunities, including baccarat, Japanese Pachinko, Chinese Pai Gow Poker,
blackjack and video poker as well as a pari-mutuel sports betting service. The
initial term of the license is one year, renewable indefinitely unless the
Company gives the licensor written notice of termination of the license at least
45 days prior to the end of any one-year period.
On August 5, 1999, Netforce Entertainment Inc. was approved for and received an
official gaming license from the Antigua and Barbuda Free Trade and Processing
Zone enabling it to legally conduct Virtual Casino and Sports Wagering
operations. Antigua is a jurisdiction that has clearly defined Internet Gaming
legislation in place that licenses and regulates Internet Gaming Operators.
Antigua charges license holders an annual license fee to maintain the gaming
license in good standing.
The International Press recognizes Antigua and Barbuda as the leader in the
regulation of the Internet Gaming industry. At a time when the issue of
regulation is being focused upon by the US media, a reputation of this kind is
of great importance to the Company and most especially to the Internet gambler.
Antigua and Barbuda is an independent country that has deemed Internet Gaming to
be a legitimate and legal business activity protected and supported under
enacted legislation on that Caribbean island nation. Of vital importance, Cable
and Wireless (West Indies) Telecommunications Company has established Antigua as
a primary hub to facilitate the Internet Gaming industry for its regional
network of submarine fiber-optic cables laid across the Atlantic and Caribbean
enabling Antigua to offer diversified high quality Internet connections into
North America.
Net-Force Entertainment Inc. is now fully licensed and regulated by the Antigua
and Barbuda Free Trade & Processing Zone under clearly defined legislation in
that sovereign nation. Netforce Entertainment Inc. has the added distinction of
having acquired the "preferential seal of approval" status from the Antigua and
Barbuda Free Trade and Processing Zone. The Company proudly displays this seal
on the Gaming Web sites with an associated link to the Antigua and Barbuda Free
Trade & Processing Zone Web site so that consumers (players) will be able to
contact the Antigua regulatory authorities with any concerns, complaints and/or
inquiries. This distinction further signifies that the Company has consented to
and successfully undergone intense scrutiny under the legislated due diligence
requirements in Antigua. This mechanism provides the consumer (player) recourse
to register any complaints with the Antigua regulatory body and instills
credibility and confidence in the operator and the industry as a whole in that
particular jurisdiction. Netforce Entertainment`s primary gaming Web site is
appropriately named Antigua Online Sportsbook & Casino, capitalizing on the
recognized brand identity that Antigua has established as a result of becoming
the hub of the Internet Gaming Industry. The Web sites' URL's can be found on
the World Wide Web at www.AntiguaOnlineGaming.com, www.AntiguaOnlineCasino.com,
and www.AntiguaSportsbook.com.
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The Company's policy is to accept subscriptions only from persons over the age
of 21 years and believed to reside in jurisdictions that are not known to
expressly prohibit Internet gaming.
To date, the Company's activities have included the market analysis, Web site
development, acquisition of a gaming license, obtaining the software license
from Starnet and developing the general infrastructure necessary to fulfill the
Company's business objectives. The development of the Company's primary gaming
Web-site, www.AntiguaOnlineCasino.com, was completed in early December, 1999.
After sufficient testing, the site officially went live as of December 20, 1999
and is operational and is accepting wagers as of December 20, 1999. A
comprehensive marketing program has been implemented to officially launch the
site as of early January 2000.
Through the license acquired from Starnet, the Company offers up to 25 virtual
casino games and live sportsbook wagering on most of the world's major sporting
events. The company also intends to offer twenty-four hour live simulcast and/or
pari-mutuel betting on any of 15 horse and dog racing tracks in North America,
as soon as the product is ready. Starnet anticipates that the development of
this product will be complete and ready to offer online by mid-2000. Included
with the software license is the procurement of an initial Internet gaming
license, concept development and design of the Web based casino(s), all
odds-making rules and regulations, complete graphical user interface with
sophisticated visual and sound effects to create a total gaming experience, real
time wagering, complete secure electronic funds transfer, retention and analysis
of all gaming data, including win/loss, game preferences and monitoring of
player activities, administration and complete 24 hour per day, 7 days per week
customer support services, ongoing customization of the Web sites, the
monitoring of all funds flow, the hosting of server software, customization and
server integration, the provision of credit card processing and other banking
services, discussion, liaison and co-operation with testing agencies, regulatory
boards, governing bodies and governments and marketing consulting.
III. BUSINESS AND MARKETING STRATEGIES
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The Company intends to capitalize on the evolving opportunities on the Internet
by developing and marketing Internet casinos and sports wagering Web sites. The
Company's business strategy is designed to promote the Net-Force brands and
strive for the industry leadership position by focusing on gaming, providing an
innovative and easy to use concept, acquiring players on an efficient basis,
maximizing player retention and expanding its player base through multiple
marketing channels. The Company believes that this strategy enables it to reduce
reliance on any one source of players, maximize brand awareness and lower
average player acquisition costs. By combining expertise in marketing,
sophisticated computer software systems and a focus on excellent customer
service, the Company believes that it will be able to deliver a unique total
entertainment experience to players. With the Company's mandate of providing a
gaming experience with unmatched options and state-of-the-art technology
allowing for three-dimensional displays and a wide gaming selection, Management
believes players will be provided with a product unparalleled in the
marketplace. Management believes that the Internet is a well suited medium for
the provision of entertainment products and services, especially those related
to casino games.
THE COMPANY'S SERVICES AND PRODUCTS
The Company has established Web sites, located on the Internet at
www.AntiguaOnlineGaming.com, www.AntiguaOnlineCasino.com and
www.AntiguaSportsbook.com, at which it offers a comprehensive interactive gaming
service including a virtual casino and live online sportsbook wagering service.
A pari-mutuel wagering service for horse and dog racing is in the planning
stages and is anticipated to be added to the product line in mid 2000. The Web
sites are accessible to the general public, however only established customers
or players are permitted to play the gaming opportunities offered for money.
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The Company's Web sites are accessible by a minimum hardware configuration
consisting of a 486 personal computer with Windows 95 or greater, with 16 Mega
Bites RAM, 20 Mega Bites free hard disk space, a 14,400 modem and a direct PPP
Internet connection. All games are provided in a Windows-based, menu driven
format with "point and click" interactivity. Players who wish to conduct gaming
operations at the Web sites are able to subscribe over the Internet by
completing an application appearing on the Web sites. Part of the application
process requires that the subscriber open an account and make a minimum deposit
with the company of $20.
The Company's Web sites are designed to invite the players to sign up and apply
for a casino and sports book wagering membership. After a player's membership
application is received and reviewed by the Company, it is either accepted or
rejected based on criterion including, but not limited to, age and geographic
location of the player. The Company's policy is to accept subscriptions only
from players over the age of 21 years and believed to reside in jurisdictions
that are not known to expressly prohibit Internet gaming. The Company intends to
use, among other techniques, Internet databases that publish the local addresses
of most Internet domain names in order to verify that the subscriber resides in
a jurisdiction that is not known to expressly prohibit Internet gaming. Upon
acceptance, the approved player is allowed to download the gaming software over
the Internet for installation on their personal computer. The Company then
provides the player with a username and password through which the player is
able to access the computer servers on which the software is hosted, over the
Internet through their Internet service provider.
The Company's Web site allows the player to review all the terms, rules and
conditions applicable to gaming and other uses at the Web sites. All gaming
winnings and losses are debited and credited to the player's account on a
real-time basis. All games are conducted pursuant to house rules and advantages
that are published at the Web sites and which are at least favorable or more
favorable than those used by the major casinos in Las Vegas, Nevada.
The Company has completed the process of designing the interfaces between the
players and the Starnet software for Antigua Online Sportsbook and Casino. The
Company has beta tested the Web site for ease of use, clarity and accuracy prior
to officially launching the same on December 20, 1999. The gaming opportunities
offered at the Web site have been designed, in conjunction with Starnet, to
evoke sights and sounds similar to a Las Vegas style casino. Computer graphics
present the "lobby" of the casino, and consist of several menu items that the
player can choose to enter. The Company includes in these menu choices the
various gaming rooms, including black jack, baccarat, slot machines, roulette
and video poker. In addition, the player has the option to use the sports
betting option to place bets on sports events taking place around the world. The
players use the Windows format of commands to carry out the gaming activities.
The Web sites also include special effects such as three-dimensional displays,
sounds of cards shuffling, coins falling from virtual machines and other
generally familiar background casino sounds. In addition to English, the Company
also intends to offer players the ability to engage in the proposed gaming
activities in such languages as Spanish, German, Japanese and Chinese or in
whatever languages and/or ethnic identities as Management deems practical in
order to facilitate worldwide expansion of its player base.
The Company intends to conduct continuing development of its Web sites (and such
additional Web sites as the Company deems appropriate with varying themes and
languages) and the products offered thereat in accordance with its players'
demonstrated preferences, demographics, and the evolution of new technologies.
The Company's goal is to utilize the Starnet software and such other software,
which may be identified by the Company as useful to it in order to provide the
players with gaming services, which is competitive, innovative and easy to use
in the Internet gaming industry.
MARKETING
The Company has implemented a comprehensive marketing program in conjunction
with its software provider. The Company has customized various facets of the
marketing program for specific cultures including prospective Asian, European,
South African, South American and Indian players. Starnet combines
state-of-the-art Internet broadcasting capabilities with a fully equipped
multimedia production studio to create an advanced Internet production facility.
The Company believes that international markets will represent a significant
portion of the Company's revenues since many of the products and services
intended to be offered are not currently available in these markets. The
Company's Web sites are intended to contain translations of account registration
forms and playing instructions and the proposed customer service representatives
are intended to be fluent in all languages offered at the Web sites.
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The Company has established its offices in St. John's, Antigua, British West
Indies at the third floor, Dollar Building, Nevis Street, P.O. Box 2032, St.
John's, Antigua, British West Indies. From these offices, the Company conducts
all head office administrative activities. From these offices, Netforce
Entertainment Inc. conducts all marketing and administrative operations of the
Internet Gaming operations. From the marketing office, the Company promotes the
Internet casino gaming and sports wagering Web sites. The marketing program
incorporates the following strategies to target its players:
Strategic Alliances with Major Content and Service Providers. The Company
intends to seek to enter into strategic alliances with major Internet content
and service providers in order to enhance its new customer acquisition efforts,
increase purchases by current customers and expand brand recognition. The
Company is striving to enter into alliances with Internet search engines
services that provide for the Company to be the premier online gaming provider
on certain of their sites with the exclusive right to place gaming banner
advertisements and integrated links to the Net-Force sites on certain
gaming-related Web pages. To date, no such alliances have been identified or
entered into by the Company.
On-Line and Traditional Advertising. The Company promotes its brands through an
aggressive marketing campaign using a combination of on-line and traditional
advertising. The Company advertises on the Web sites of major Internet content
and service providers, and targeted gaming-related Web sites. The Company's
traditional advertising efforts include print advertising in major magazines and
gaming related publications, and may also include radio advertising and
television advertising.
Direct Marketing. The Company uses direct marketing techniques to target new and
existing players with communications and promotions. The sends a personalized
e-mail newsletter to registered players that includes recommendations based on
demonstrated player preferences and prior usage.
Banner Advertisements. Banner advertisements are rectangular graphical/text
images that can be positioned in various strategic places on Web pages and
search engines on the Internet. When a potential player clicks on the banner
advertisement, the player's Web Browser points the player to the advertiser's
home page. The Company pays for such banner advertisements on a variety of Web
pages and search engines, and participates in a banner exchange program. The
Company also intends to enter into agreements with Webmasters in which
Webmasters agree to place Company banner advertisements on their Web pages in
exchange for a commission for each unique player who clicks through banners to
the Company's home page or for a percentage of the profits generated by the
Webmaster.
Submissions to Search Engines. Potential players often learn about Web sites on
the Internet from listings on search engines. The Company has submitted its
URL's and a brief description of its Internet casino gaming and sports wagering
Web sites to various search engines so that the Company's information is
available to potential players who use search engines to locate Internet gaming
sites.
Player Incentive Programs. In order to attract new players, the Company has
instituted an initial balance credit promotion. This program is designed to
attract new players by offering a credit to new player accounts in amounts based
on a percentage of the amount of the initial deposit by the player. To attract
repeat players to the Web site, the Company institutes periodic prizes, cash
draws, special jack pots, competitions and/or a frequent player program where
the player would be rewarded based on the frequency and dollar amount of play.
Development of Related Web Sites. The Company may design related Web sites such
as a site containing tips on how to play certain casino games or a site
providing interesting gaming news. The company intends to design, develop, and
promote a sports information portal site which will feature up-to-date sports
information content including scores, statistics, news, headlines, and odds on
all of the world's major sporting events. This site will be linked to the online
sportsbook to generate traffic with the intention of enhancing revenues. Banner
advertisements would then be placed on all pages of each related Web site to
attract players to the Company's Internet gaming and sports wagering Web sites.
Celebrity Endorsements. The Company intends to seek out a number of celebrities
ranging from film and television to sports professionals to endorse a Web site
developed by the Company. The result of such celebrity endorsement would be to
entice new players to establish accounts based on the endorsement of the chosen
celebrity. To date, no such celebrity endorsements have been confirmed by the
Company.
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Distribution of a CD-ROM. The Company has, in conjunction with Starnet, produced
a CD-ROM on which the Company's casino games are contained. When an individual
obtains the CD-ROM, they are able to play all the Company's casino games without
the necessity of wagering real money. This promotional idea is intended to give
the Company the ability to distribute, to a large number and variety of
potential players, quality examples of the services and products offered at its
Web sites. Once a potential player plays the games offered for fun, the
Company's hopes that the potential player may make an application on the
Company's Web sites and eventually play the same games for money. The Company
intends to distribute such CD-ROM's by direct mail-outs, insertions in
magazines, distributions through Internet Service Providers to their subscribers
and distributions at tradeshows.
IV. INDUSTRY OVERVIEW
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A. Global Gaming Industry
UNITED STATES OF AMERICA
In the U.S., Americans legally wager over $500 billion per year. This level of
legalized gambling is the result of rapid expansion in the industry over the
past decade. Since 1988, the number of states allowing casino gambling has
increased from two, Nevada and New Jersey, to 24, (including those with Native
American Casinos) with all but three states having some form of legalized
gambling. U.S. casino revenues were projected to be about $24 billion in 1998,
reflecting an expected 6% growth from 1997, lower than the double-digit
increases earlier in the decade. Gambling in the U.S. has many forms, including
casinos, horse and dog racing, government run lotteries, riverboat casinos and
Jai Alai, all of which are highly regulated. At the present time, there is no
existing regulation of Internet gambling in the U.S. In July 1998, the U.S.
Congress defeated a proposed bill (the "Kyl" bill) that would prohibit gambling
over the Internet, but exempted certain forms, such as horse and dog racing, and
lotteries. In May 1999, the Kyl bill was re-introduced, in a less stringent form
(See VII "Government Regulation").
Geographic growth prospects have remained relatively flat over the past two
years. With more people employed and improved economic conditions in various
parts of the United States, states and localities have fewer incentives to
encourage gaming development as a prospective source of taxes, tourism and jobs.
Additionally, economic downturns in Asia, and to a lesser extent, South America,
have led to significant decreases in "high roller" traffic to North American
gaming locations, such as Las Vegas and Atlantic City. In response to the
downturn in travelers from this section of its revenue base, the traditional
gaming companies in Las Vegas have continued their rapid growth campaign to
transform the city from a gaming community into a world wide family resort
destination. In recent months Las Vegas in particular has made strides in trying
to upgrade the entertainment it offers. Major U.S. casino destinations are
competing more for resort and vacation population than the average gambling
client.
Pari-mutuel, Lottery and Video Gaming
Pari-mutuel wagering is currently authorized in 43 states in the United States,
all provinces in Canada, and approximately 100 other countries around the world.
The 117 racetracks in 35 states in North America have revenues of $4 billion
dollars from their racing alone.
Video and slot machine gaming constituted one of the fastest-growing sectors in
the gaming industry in the 1990s. The installed video slot machine equipment
inventory base has expanded from approximately 153,000 devices in 1990 to over
500,000 terminals today. Broadly, the market can be divided between the
government systems market (video lottery gaming or VLT) and the casino market
(includes traditional land-based facilities, riverboats and Native American
Class III properties). The video gaming market is different from the devices
used in the traditional casino market. Most video lottery terminals are located
in bars, restaurants and convenience stores where gaming is not the principal
attraction. The stakes on the devices typically range from $0.25 - $2.50 per
play, and payoffs are usually capped between $150 - $1,000 per day. In addition,
some venues distribute the payout from these devices in a ticket form, which is
redeemable for cash from the operator. There are currently slots or video gaming
devices operating in racetracks, bars and restaurants in the following states:
Delaware, Louisiana, Iowa, Rhode Island, West Virginia, New Mexico, Montana,
Oregon and South Carolina and are widely dispersed in Canada.
Although there are no large public gaming operators with significant exposure in
track or ambient VLT operations except for Caesars (now owned by Park Place
Entertainment) - equipment manufacturers, such as IGT, Alliance Gaming, and
Powerhouse Technologies, continue to hold a stake in this potentially growing
market niche. In addition, competition posed by track and ambient VLT operations
could affect casino operations in several key markets, including, Atlantic City.
<PAGE>
In its most recent report on the worldwide lottery industry, International
Gaming and Wagering Business reported that total global lottery sales were up
significantly (4.5%) in 1998, compared to 1997. For most lotteries, the increase
stemmed from a combination of increased sales and the rebounding of local
currencies versus the U.S. dollar. In general, most states' lotteries
experienced record setting years, in most cases erasing 1997's declines.
(International Gaming & Wagering Business, Vol. 20, Num. 5, May 1999). The only
region reporting continued declines from 1997 was Asia, which is attributable to
the continued weakness in Asian currencies. However, some smaller Asian markets,
such as China's Social Welfare Lottery saw sales virtually double, in most cases
due to the increase in instant ticket sales. Instant tickets and spiel games
(those which Net-Force intends to deliver to its players) once again experienced
an increase in market share. Lotto and spiel games exceeded 40% of all lottery
sales in 1998. International sales of state lotteries in jurisdictions such as
Liechtenstein and South Africa begin promotions revolving around the millennium.
While little focus has been made on the Internet market, the AILE/Intertoto
recently addressed the issue at a conference held in Washington, D.C. (See
www.aile.com). The conference members agreed that a wait and see strategy was
the best approach at the present time, with the AILE/Intertoto maintaining a
watchful eye to ensure that the Internet industry develop an international legal
framework that mirrors that of the current successful system of national laws.
INTERNATIONAL GAMING MARKETS
Gaming outside of the U.S. and Canada is a mixture of active markets, large and
small resort destinations, and strictly regulated, often state-run, operations.
Asia and South Africa provide the most dynamic markets and opportunities for
growth, with Latin America and the Caribbean also active in the gaming industry.
Western Europe consists mostly of mature, state-controlled markets. The
following is an overview of selected foreign markets:
EUROPE
There were a total of 531 European Casinos generating gross Revenues of
$5,336,971,600 US as of February 1999 (International Gaming and Wagering
Business, 1999 European Casino Report, February 1999).
The European Commission last reviewed the issue of gambling in 1991 and found no
need for EU-wide regulation. This position has remained in accordance with the
many of the EU's member states' positions that gaming, including Internet
gambling, should remain an issue for the sovereign state (Cabot, Anthony, THE
INTERNET GAMBLING REPORT III, "European Overview," by Steven Philippsohn, (Trace
Publications, Las Vegas), 1999, P.211-216). Among the member nations of the EU,
views on Internet gambling vary widely. Some states are slowly accepting the
idea of interactive gaming. For example, the Dutch government recently allowed
telephone betting, while certain European states, notably Finland and Sweden,
are allowing providers to offer Internet gambling, but only to their own
respective residents. Conversely, the German position on Internet gaming
reflects the view taken on traditional forms of gambling. That is, that games of
chance are morally corrupting and should only be allowed in connection with
charitable purposes.
Countries such as France, Italy, Spain, England and Portugal are merely
monitoring Internet gambling development to see if it becomes a problem. This is
consistent with these nations' actions toward e-commerce in general, of which,
they have no immediate plans to introduce new legislation.
Prospects for growth in Europe are brightest in Scandinavia, Spain and Eastern
Europe. Sweden is setting up its regulatory system for its new casino market,
and state-sanctioned monopolies are being challenged in Norway and Finland in
the casino and machine markets. In Spain, a more relaxed regulatory climate is
emerging, and new casino operations are coming on line. Three Spanish firms
dominate this market: Cirsa/Unidesa, Recreativos Franco and Sega.
Eastern Europe continues to grow and refine is regulatory structures.
Uncertainty and prohibitions against foreign investment, however, hamper
participation by international operators. Casino Austria is a major player,
although its activity there is shrinking.
The path which European regulation of Internet gambling is taking is more akin
to that which the Australian states are taking. The cultural differences between
European countries, however, are more marked than between the Australian states.
The consequent diversity in attitudes to gambling may slow down the process
(Steven Philippsohn, Internet Gambling, European Overview," 1998, p.215).
<PAGE>
ASIA
Large capital projects and debt levels in Australia left many casinos highly
exposed to the Asian economic crisis. Stung by a US$150 million drop in revenues
from international players, stock prices for Australia's leading casinos are now
a fraction of previous levels. The domestic market remains solid, however, and
long-term prospects are optimistic. The next year should bring the beginning of
a recovery and a more realistic assessment of the international market.
Despite the economic crisis, the casino industry in the Philippines is
experiencing the strongest expansion in the region, with three new operations
having opened in recent years and another scheduled to open in 1999. The Manila
market is being reorganized and partially privatized, providing the opportunity
for change and market growth. Three publicly traded companies are active in the
Philippines casino market: Starwood Hotels & Resorts, Malaysian-based Metroplex
and Manila-based Belle Bay Corporation. Taiwan offers the most interesting
potential for change. The government took another step toward legislation in
1998 by commissioning a report recommending a tightly regulated industry of
casinos in recreational areas. Foreign investment would be permitted up to 40%.
AFRICA AND THE MIDDLE EAST
The most significant activity is occurring at opposite ends of the region. South
Africa is progressing with the transformation of its casino industry and the
opening of a route market for gaming devices. The current estimated size of this
market is US$1.5 billion, with the majority of revenues coming from casino
gaming operations (US$935 million). The Middle East market is growing in
response to the closing of gaming operations in Turkey and limited choices in
Northern Europe. With gaming illegal in Israel, further growth in border areas
is expected. New operations are expected to grow quickly in Palestine-controlled
Jericho to support public demand. In Egypt, across the border from Eilat, major
project development is underway in the Taba Heights. Additional operations have
also opened recently in North Africa, with more than the planning stages.
LATIN AMERICA
Gaming in Latin America remains decentralized and difficult for operators.
However, for patient companies with deep pockets, the market potential in the
region is large, especially in countries such as Argentina and Peru. The level
of optimism has been raised in Brazil and Mexico for gaming legislation in the
near future. Legislation in Brazil, the most populous country in Latin America,
would affect regional markets that target Brazilian players, notable Argentina,
Uruguay and Paraguay.
Sodak Gaming, International Thunderbird, Starwood, Hilton Hotels (Conrad
International), IGT and also very active, especially Recreativos Franco,
Cirsa/Unidesa and Leisure & Gaming.
CARIBBEAN
Although dominated by small hotel and resort-based casino operations, gaming in
the Caribbean is expanding into new areas, as well as growing in established
markets. The Bahamas offers the most substantial casinos in the region, followed
by Puerto Rico and Aruba. Casinos can also be found on other islands such as St.
Maarten, Curacao, and Antigua.
B. Internet Entertainment Industry
-------------------------------
Internet gambling offers people the opportunity to play virtual sports,
horseracing, slot machines and other casino games without the inconvenience of
leaving their home. While Internet gambling provides some amount of competition
for existing casinos, it is not a substantial threat to the traditional gaming
industry. The social aspect of gaming - the primary reason for the
transformation of the Las Vegas gaming market into a destination leisure market
- - cannot be replicated in the artificial environment of the Internet. Most
visitors to casinos are motivated by the ambiance of the casinos, not just the
opportunity to gamble. Small markets, however, may incur negative impacts
associated with Internet gambling as these markets have been established
themselves as leisure destinations.
<PAGE>
The popularity of gaming has transcended beyond the physical boundaries of the
casinos to the borderless and unregulated realm of the Internet. Gambling Web
sites, offering computer users the opportunity to wager on such games as bingo,
sports and horse wagering, poker and roulette, are beginning to thrive on the
Internet. To participate as one of these Web sites, the player needs only to set
up an account, typically supplying credit card information, wire transfers or
E-cash. With a click of the mouse, the player is now able to gamble. Losses are
typically deducted from the players' credit cards or established credit line,
and winnings, upon the request of the player, can be electronically transferred
or mailed to the person. Modern technology has eliminated the physical
requirement of visiting a casino or racetrack before engaging in such games as
slot machines, black jack, roulette and thoroughbred or harness racing. With
Internet gambling, patrons need not leave the comfort of their homes or offices.
<TABLE>
ESTIMATED WORLD-WIDE INTERNET GAMBLING REVENUES ($ MILLIONS)
<CAPTION>
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
# of home users (in millions) 46 81 121 145 159
% users conducting online transactions 15% 18% 21% 24% 27%
Potential Internet Gamblers (in millions) 6.9 14.5 25.4 34.8 43
Per-capita expenditure $146 $154 $155 $160 $160
Potential Internet gambling market $1,009 $2,182 $3,933 $5,555 $7,080
Estimated actual Internet Gambling revenues $300 $651 $811 $1,520 $2,330
Penetration rate 30% 30% 21% 27% 33%
- ----------------
Source: Christian/Cummings Associates, Inc.
</TABLE>
The popularity of Internet gambling is increasing as illustrated by the growth
of gaming-related Web sites. Currently, more than 300 gambling websites are
offered on the Internet, which Management estimates are owned by approximately
100 operators. With the current licensing of gambling Web sites by foreign
governments and increased usage of Internet services, this market will continue
to grow. It is estimated that almost 300 million people will use the Internet by
the year 2000. With casino gambling garnering public acceptance as a form of
entertainment and Internet usage increasing, every personal home computer now
has the capacity to become a "cybercasino." Current market size estimates for
Internet gambling are $650 million in 1999, growing to more than $10.0 billion
by 2002 according to Datamonitor.
INTERNATIONAL OUTLOOK ON INTERNET GAMING
While the U.S. is debating whether to prohibit Internet gaming or create
legislation to severely regulate the industry, other countries are viewing it as
a revenue generator. Most Internet gambling Web sites are located in the
Caribbean and South America, along with other sites in Australia, South Africa,
the Netherlands and New Zealand. The Caribbean governments charge Internet
"casino" operators up to $100,000 annually for a license and require operators
to post bonds. In Antigua, the government requires the employment of local
residents and payment of education taxes. The governments of Liechtenstein and
Finland operate their national lottery via the Internet.
Australia and New Zealand have recently decided to legalize Internet gambling,
choosing to regulate and tax the activity as opposed to banning it. The State of
Queensland in Australia passed a law in March 1998, licensing cybercasinos and
sports betting operations. The other Australian states are expected to pass
similar laws. The states of Australia maintain pro-gambling environments -
Australians spend more than $40 billion a year gambling, or $2,000 per person
per year on average ("Aussies Love Their Gambling." LAS VEGAS REVIEW-JOURNAL,
Rohan Sullivan, March 9, 1998). Placing bets over the phone is legal in
Australia, making legalization of Internet gambling a less controversial issue.
To regulate the industry, the governments propose the establishment of gambling
service providers who will check the identity and address of the gambler.
Winnings will then be taxed accordingly, with the taxes forwarded at the
appropriate rate for the state in which the service provider is based.
On May 15, 1998, European gambling regulators from 18 European countries signed
a recommendation on good practices for Internet gambling services. In the
non-binding statement, the countries agreed that European countries should be
free to regulate Internet gambling services. In addition, the countries should
ensure that Internet gambling is not used for money laundering or under-aged
gambling.
<PAGE>
V. COMPETITION
-----------
The online commerce market is new, rapidly evolving and intensely competitive,
and the Company expects that competition will further intensify in the future.
Barriers to entry are minimal, and current and new competitors can launch new
sites at a relatively low cost. In a search of the Internet by the Company,
there were over 300 online gaming sites as of January 1999. In addition, the
broader gaming industry is intensely competitive.
The Company intends to compete with a variety of companies, including (i) online
vendors of gaming and gaming related products, (ii) online service providers
which offer gaming products directly or cooperation with other retailers, (iii)
traditional providers of gaming products, including specialty gaming providers,
and (iv) other retailers that offer gaming products. Many of these traditional
providers also support dedicated Web sites, which may compete directly with the
Company.
The Company believes that the principal competitive factors in its online market
are brand recognition, selection, variety of value-added services, ease of use,
site content, quality of service, technical expertise and product availability.
Many of the Company's intended and potential competitors have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than the Company. The Company
is aware that certain of its proposed competitors have and may continue to adopt
more aggressive pricing or marketing policies and devote substantially more
resources to Web site and systems development than the Company. Increased
competition may result in reduced operating margins, loss of market share and a
diminished brand franchise.
There can be no assurance that the Company will be able to compete successfully
against intended and future competitors. New technologies and the expansion of
existing technologies may increase the competitive pressures of the Company.
There can be no assurance of the economic success of any marketing effort by the
Company since the revenues derived from the Internet casino gaming and sports
wagering Web sites depend primarily upon the site's acceptance by the
international public, which cannot be predicted with certainty. To be ultimately
successful, the Company will be faced with the challenge of marketing its gaming
Web sites to a variety of foreign cultures. The Company's Web sites will compete
for consumer acceptance with similar Web sites hosted by other companies. As a
result, the success of the Company's marketing efforts is dependent not only on
the quality and acceptance of the Company's virtual casino games and on-line
sports wagering Web sites, but also on the acceptance of other competing virtual
casino games and Web sites offered in the marketplace during the same time
period.
VI. RISKS
-----
A. RISKS RELATED TO THE BUSINESS
No Operating History. The Company was recently formed and has no operating
history. Since incorporation, the Company has expended resources on technology,
license fees, Web site development, hiring of personnel and startup costs. As a
result, losses were incurred since incorporation and management expects to
experience operating losses and negative cash flow for the foreseeable future.
Management anticipates losses will continue to increase from current levels
because the Company expects to incur additional costs and expenses related to:
brand development, marketing and other promotional activities; the addition of
customer service personnel; the continued development of the Web sites; the
expansion of service offerings and Web site content; and development of
relationships with strategic business partners.
There can be no assurance at this time that the Company will operate profitably
or that it will have adequate working capital to meet its obligations as they
become due. The Company believes that its success will depend in large part on
its ability to (i) offer aesthetic, interesting and diverse casino-style games
on its Web sites, as well as sports and pari-mutuel wagering, (ii) attract
players and provide them with outstanding service, (iii) instill consumer
confidence, and (iv) achieve name recognition. Accordingly, the Company intends
to invest heavily in site development, technology and operating infrastructure,
as well as marketing and promotion. As a result, the Company expects to incur
operating losses in the initial stages of its business and for the foreseeable
future.
No Assurance of Profitability. The Company's business is speculative and
dependent upon the acceptance of the Company's Web sites and the effectiveness
of its marketing program. The Company's only assets will be the offshore
Internet gaming Web sites, some administrative office furniture and equipment
and the revenues derived from the Web sites. There can be no assurance that the
Company's Internet gaming and sports wagering Web sites will be successful or
result in revenue or profit. There is no assurance that the Company will earn
significant revenues or that investors will not lose their entire investment.
<PAGE>
Failure to Respond to Change. If the Company faces material delays in
introducing new services, products and enhancements, customers may forego the
use of the Company's services and use those of competitors. To remain
competitive, the Company must continue to enhance and improve the functionality
and features of the Web sites. The Internet and the online commerce industry are
rapidly changing. If competitors introduce new products and services, or if new
industry standards and practices emerge, the existing Web sites, technology and
systems may become obsolete. To develop the Web sites and technology entails
significant technical and business risks. The Company may use new technologies
ineffectively or may fail to adapt the technology to meet customer requirements
or emerging industry standards.
Intellectual Property Claims. Other parties may assert infringement or unfair
competition claims against the Company. Management cannot predict whether they
will do so, or whether any future assertions or prosecutions will harm the
business. If the Company is forced to defend against any infringement claims,
whether they are with or without merit or are determined in the Company's favor,
then the Company may face costly litigation, diversion of technical and
management personnel, or product shipment delays. Further, the outcome of a
dispute may be that management would need to develop non-infringing technology
or enter into royalty or licensing agreements. Royalty or licensing agreements,
if required, may be unavailable on terms acceptable to management, or at all.
Reliance on Trademarks and Copyrights. The Company intends to take steps to
protect proprietary rights which steps may be inadequate. Management regards
copyrights, service marks, trademarks, trade secrets and similar intellectual
property as critical to its success. The Company intends to rely heavily on
trademark and copyright law, trade secret protection and confidentiality or
license agreements with our employees, customers, partners and others to protect
proprietary rights. Effective trademark, service mark, copyright and trade
secret protection may not be available in every country in which the Company
intends to provide its services. Furthermore, the relationship between
regulations governing domain names and laws protecting trademarks and similar
proprietary rights is unclear. Therefore, the Company may be unable to prevent
third parties from acquiring domain names that are similar to, infringe upon or
otherwise decrease the value of intended trademarks and other proprietary
rights.
Risks Inherent in a New Industry. Both the Internet and Internet-based casinos
are relatively new industries. The market for Internet and Sports wagering has
only recently begun to develop, is rapidly evolving and is characterized by an
increasing number of market entrants. As is typical in the case of a new and
rapidly evolving industry, demand and market acceptance for recently introduced
services are subject to a high level of uncertainty. There can be no assurance
that gaming and wagering on the Internet will become widespread, or that the
Company's Web sites will become widely used. If the market fails to develop,
develops more slowly than expected or becomes saturated with competitors or if
the Company's services do not achieve market acceptance, the Company's business,
operating results, and the financial condition will be materially adversely
affected. Because of the uncertainty regarding the legality of Internet wagering
in the United States, and the existing or possible prohibitions in other
jurisdictions, the Company will not permit play by Canadian residents, and may
be precluded from offering play to residents of other countries.
Online Commerce Risks - Reliance on Starnet. Concerns over the security of
transactions conducted on the Internet and other on-line services as well as
user's desires for privacy may also inhibit the growth of gaming and wagering on
the Internet. The activities of the Company are expected to involve the storage
and transmission of proprietary information, such as credit card numbers and
other confidential information. Any such security breaches could damage the
Company's reputation and expose the Company to a risk of loss, litigation and
possible liability. There can be no assurance that the Company's security
measures will prevent security breaches or that failure to prevent such security
breaches will not have a material adverse effect on the Company's business,
financial condition and results of operations. The Company is dependent on
Starnet for its software and the hosting of its Web sites. Business on the
Internet are subject to the risk of credit card fraud and other types of theft
and fraud perpetrated by "hackers" and on-line thieves. Credit card companies
may hold merchants fully responsible for any fraudulent purchases made when the
signature cannot be verified. Although credit card companies and others are in
the process of developing anti-theft and anti-fraud protections, and while the
Company itself will continually monitor this problem, at the present time the
risk from such activities could have a material adverse effect on the Company. A
party who is able to circumvent the Company's security measures could
misappropriate confidential information or cause interruptions in the Company's
operations. The Company may be required to expend significant capital and other
resources to protect against such security breaches or to alleviate problems
caused by such breaches. If a compromise of the Company's security were to
occur, or if Starnet's software or Web site hosting fails, there could be a
material adverse effect on the Company's business, financial condition and the
results of operations.
<PAGE>
Lack of Consumer Confidence. Concerns that a virtual casino's odds can be easily
and arbitrarily manipulated may deter customers from using the Company's Web
site. There can be no assurance that the Company will be able to instill
customer confidence in and alleviate negative perceptions about Internet gaming.
If the Company's efforts are unsuccessful, it could have a material adverse
effect on the Company's business, financial condition and the results of
operations.
Competition. The market for the Company's Internet gaming and sports wagering
services is intensely competitive. The Company's principal competitors include
other on-line Internet casinos. These competitors have longer operating
histories, greater name recognition, larger installed customer bases, and
substantially greater financial, technical and marketing resources than the
Company. The Company believes that the principal factors affecting competition
in its proposed market include name recognition, ability to develop aesthetic
and diverse casino-style games, customer confidence, ability to respond to
changing customer needs, and ease of use. Other than technical expertise and the
limited time available to enter the market, there are no significant proprietary
or other barriers of entry that could keep potential competitors from developing
or acquiring similar tools and providing competing services in the Company's
proposed market. The Company's ability to compete successfully in the on-line
casino and sports wagering business will depend in large part on its ability to
attract new players and respond effectively to continuing technological changes
by developing more sophisticated on-line casino games. There can be no assurance
that the Company will be able to compete successfully in the future, or that
future competition will not have a material adverse effect on the business,
operating results and financial condition of the Company.
Potential for indebtedness. There is no assurance that the Company will not
incur debt in the future, that it will have sufficient funds to repay its
indebtedness or that the Company will not default on its debt, jeopardizing its
business viability. Furthermore, the Company may not be able to borrow or raise
additional capital in the future to meet the Company's needs or to otherwise
provide the capital necessary to conduct its business.
No Assurance that Dividends Will be Paid. The Company does not currently
anticipate declaring and paying dividends to its shareholders in the near
future. It is the Company's current intention to apply net earnings, if any, in
the foreseeable future to increasing its capital base and marketing. Prospective
investors seeking or needing dividend income or liquidity should therefore not
purchase the Shares. There can be no assurance that the Company will ever have
sufficient earnings to declare and pay dividends to the holders of the Company's
Common Stock, and in any event, a decision to declare and pay dividends is at
the sole discretion of the Company's Board of Directors.
Government Regulation. The wagering and casino industry is subject to extensive
government regulation and licensing requirements in certain jurisdictions of the
world. Legal uncertainties may preclude the Company from offering its planned
Internet gaming in certain jurisdictions like Canada. Some jurisdictions may
impose restrictions, licensing requirements or prohibitions on Internet
wagering. At present, the Company does not anticipate any such restrictions,
prohibitions or licensing requirements in its target markets but no assurance
can be made that such restrictions, prohibitions or licensing requirements will
not arise which would materially adversely effect the Company's business,
operating results and financial condition of the Company.
Dependence on Key Personnel. The Company's success is substantially dependent on
the performance of its executive officers and key employees. Given the Company's
early stage of development in the Internet gaming business, the Company is
dependent on its ability to retain and motivate high quality personnel. Although
the Company believes it will be able to attract, retain and motivate qualified
personnel for such purposes, an inability to do so could materially adversely
affect the Company's ability to market, sell, and enhance its services. The loss
of one or more of its employees or the Company's inability to hire and retain
other qualified employees could have a material adverse effect on the Company.
Uninsured Losses. There is no assurance that the Company will not incur
uninsured liabilities and losses as a result of the conduct of its proposed
business. The Company plans to maintain comprehensive liability and property
insurance at customary levels. The Company will also evaluate the availability
and cost of business interruption insurance. However, should uninsured losses
occur, the shareholders could lose their invested capital.
<PAGE>
Liabilities. The Company may have liabilities to affiliated or unaffiliated
lenders. These liabilities would represent fixed costs which would be required
to be paid regardless of the level of profitability experienced by the Company.
There is no assurance that the Company will be able to pay all of its
liabilities. Furthermore, the Company is always subject to the risk of
litigation from players, employees, suppliers or others because of the nature of
its business. Litigation could cause the Company to incur substantial expenses
and, if cases are lost, judgments and awards could add to the Company's costs.
B. RISKS RELATED TO THE INDUSTRY
Dependence on Increasing use of the Internet. The Company's future revenues
substantially depend upon the increased acceptance and use of the Internet and
other online services as a medium of commerce. Rapid growth in the use of the
Internet, the Web and online services is a recent phenomenon. As a result,
acceptance and use may not continue to develop at historical rates and a
sufficiently broad base of customers may not adopt, and/or continue to use, the
Internet and other online services as a medium of commerce and entertainment.
Demand and market acceptance for recently introduced services and products over
the Internet are subject to a high level of uncertainty and there exist few
proven services and products.
In addition, the Internet may not be accepted as a viable long-term commercial
marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and performance improvements. If the Internet continues to
experience significant expansion in the number of users, frequency of use or
bandwidth requirements, the infrastructure for the Internet may be unable to
support the demands placed upon it. In addition, the Internet could lose its
viability as a commercial medium due to delays in the development or adoption of
new standards and protocols required to handle increased levels of Internet
activity, or due to increased governmental regulation. Changes in, or
insufficient availability of, telecommunications services to support the
Internet also could result in slower response times and adversely affect usage
of the Internet generally.
The Company's business, financial condition and results of operations would be
seriously harmed if: use of the Internet, the Web and other online services does
not continue to increase or increases more slowly than expected; the
infrastructure for the Internet, the Web and other online services does not
effectively support expansion that may occur; the Internet, the Web and other
online services do not become a viable commercial marketplace; or traffic to the
Web sites decreases or fails to increase as expected or if management spends
more than was expected to attract visitors to the Web sites.
Inability to Acquire Domain Names. The Company may be unable to acquire or
maintain Web domain names relating to the brand in the jurisdictions in which
management may conduct business. As a result, the Company may be unable to
prevent third parties from acquiring and using domain names relating to the
Company's brand, which could damage its brand and reputation and take customers
away from its Web sites. The Company currently holds the
"www.AntiguaOnlineGaming.com", "www.AntiguaOnlineCasino.com" and
www.AntiguaSportsbook.com domain names and may seek to acquire additional domain
names. Governmental agencies and their designees generally regulate the
acquisition and maintenance of domain names. The regulation of domain names in
the United States and in foreign countries is subject to change in the near
future. The changes in the United States are expected to include a transition
from the current system to a system that is controlled by a non-profit
corporation and the creation of additional top-level domains. Governing bodies
may establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names.
Requirements to Change Manner of Business. The adoption or modification of laws
or regulations relating to the Internet could adversely affect the manner in
which the Company proposes to conduct its business. In addition, the growth and
development of the market for online gaming may lead to more stringent consumer
protection laws, both in the United States and abroad, that may impose
additional burdens on the Company. Laws and regulations directly applicable to
communications or commerce over the Internet are becoming more prevalent. The
United States Congress recently enacted Internet laws regarding children's
privacy, copyrights, taxation and the transmission of sexually explicit
material. The European Union recently enacted its own privacy regulations. Laws
regulating the Internet, however, remain largely unsettled, even in areas where
there has been some legislative action. It may take years to determine whether
and how existing laws such as those governing intellectual property, privacy,
libel, and taxation apply to the Internet.
<PAGE>
In order to comply with new or existing laws regulating online commerce, the
Company may need to modify the manner in which it proposes to do business, which
may result in additional expenses. For instance, the Company may need to spend
time and money revising the process by which it intends to accept players'
wagers to ensure that each wager complies with applicable laws. The Company may
need to hire additional personnel to monitor compliance with applicable laws.
The Company may also need to modify its software to further protect players'
personal information.
Liability for Content. As a publisher of online content, the Company faces
potential liability for defamation, negligence, copyright, patent or trademark
infringement, or other claims based on the nature and content of materials that
it publishes or distributes. If the Company faces liability, then its reputation
and its business may suffer. In the past, plaintiffs have brought these types of
claims and sometimes successfully litigated them against online companies. In
addition, the Company could be exposed to liability with respect to the
unauthorized duplication of content or unauthorized use of other parties'
proprietary technology. Although the Company intends to carry general liability
insurance, such insurance may not cover claims of these types. The Company
cannot be certain that it will be able to obtain insurance to cover the claims
on reasonable terms or that it will be adequate to indemnify the management or
the Company for all liability that may be imposed. Any imposition of liability
that is not covered by our insurance or is in excess of insurance coverage could
harm the business.
The Imposition of Taxes. If one or more states or any foreign country
successfully asserts that the Company should collect taxes on the winnings
earned by players, the financial position and results of operations could be
harmed. If the Company becomes obligated to collect taxes, it will need to
update its system that processes wagers and winnings to calculate the
appropriate sales tax for each player and to remit the collected sales to the
appropriate authorities. These upgrades will increase operating expenses. In
addition, players may be discouraged from utilizing the Company's Web sites
because they have to pay tax, causing net sales to decrease. As a result, the
Company may be adversely materially affected.
C. RISKS RELATED TO SECURITIES MARKETS
Inability to meet Future Capital Requirements. The Company cannot be certain
that additional financing will be available on favorable terms when required, or
at all. If the Company raises additional funds through the issuance of equity,
equity-related or debt securities, the securities may have rights, preferences
or privileges senior to those of the rights of the common stock and those
stockholders may experience additional dilution. The Company expects to require
substantial working capital to fund the business. Since inception, the Company
has experienced negative cash flow from operations and expects to experience
significant negative cash flow from operations for the foreseeable future.
Management currently anticipates that the private financing done to date,
together with expected revenues, will be sufficient to meet anticipated needs
for working capital and capital expenditures through at least the next 12
months. After that, the Company may need to raise additional funds.
Volatility of the Common Stock. The market price for the Company's common stock
is likely to be highly volatile and subject to wide fluctuations in response to
factors including the following, some of which are beyond the Company's control:
actual or anticipated variations in the quarterly operating results;
announcements of technological innovations or new services by the Company or its
competitors; changes in financial estimates by securities analysts; conditions
or trends in the Internet and/or online commerce or gaming industries; changes
in the economic performance and/or market valuations of other Internet, online
gaming companies; announcements by management or competitors of significant
acquisitions, strategic partnerships, joint ventures or capital commitments;
additions or departures of key personnel; release of lock-up or other transfer
restrictions on the outstanding shares of common stock or sales of additional
shares of common stock; and potential litigation.
<PAGE>
In addition, the stock market has from time to time experienced extreme price
and volume fluctuations. These broad market fluctuations may adversely affect
the market price of the Company's common stock.
Securities Class Action Lawsuit. In the past, following periods of volatility in
the market price of their stock, many companies have been the subject of
securities class action litigation. If the Company was sued in a securities
class action, it could result in substantial costs and a diversion of
management's attention and resources and would cause the stock price to fall.
Year 2000 Risks. Many existing computer programs use only two digits to identify
a year. These programs were designed and developed without addressing the impact
of the upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. The Company uses software, computer technology and other services
developed and provided by third party suppliers that may fail due to the year
2000 phenomenon. If any one of the systems fails due to the Year 2000 issues,
the business of the Company could be adversely affected. (For a complete
discussion See: "MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS - F.
YEAR 2000 RISKS AND COMPLIANCE")
VII. REGULATORY BACKGROUND
---------------------
In July 1998, the U.S. Senate voted to largely prohibit gambling on the
Internet. Under the legislation, operators of illegal Internet gambling sites
could be sentenced to up to four years in jail and fined up to $20,000. Gamblers
who illegally bet via the Internet could receive a jail sentence of up to three
months and a fine of either $500 or three time the amount of the bet. Some
Internet-based "fantasy" or "rotisserie" sports league activities would be
exempt from the ban. However, in August 1998 the U.S. House of Representatives
overwhelmingly voted down the legislation. On March 23, 1999, Senator Kyl
(R-Arz.) submitted Bill S.692 to the Senate for consideration. If passed, this
Bill would also serve to effectively outlaw gambling on the Internet in the
United States. As of November 1, 1999 the Senate had not voted on this
legislation, in part because it is effectively the same legislation that was
voted down in 1998, and even if it should pass a Senate vote it is highly
questionable as to whether the House of Representatives would view it any
differently from the last Internet gaming bill.
The move on the part of the federal government to ban Internet gambling is a
departure from gambling policy. The federal government has typically left the
issue up to the authority of the state governments, resulting in a wide range of
attitudes towards gambling. Most states allow some type of gambling whether it
be full casinos, card rooms, pari-mutuel tracks or state-operated lotteries.
Only two states, Hawaii and Utah, prohibit all forms of gaming.
While passage of the act is possible, in one form or another, practical
enforcement of the law is a separate matter. The Internet is a global
information and communications medium operating without boundaries. Due to the
global nature of this medium, no regulatory agency has control over the content
of information accessible to users. The inability of governments to regulate
materials it deems offensive or illegal results in political and social
frustration. Measures to remove offensive materials, such as those classified as
containing adult content, have been unsuccessful to date. The same enforcement
problems will be encountered with gambling sites. These are three avenues
through which law enforcement officials may attack the problem: the gaming Web
site, the ISP or the user. The enforcement of anti-Internet gambling laws
through each of the avenues presents interesting social and technological
problems.
<PAGE>
CURRENT INTERNET GAMBLING ENFORCEMENT
Senator Jon Kyl released his proposed "Internet Gambling Prohibition Act" on
March 29, 1999. A similar Bill, also proposed by Senator Kyl failed to pass in
1998. The current proposed 28 page Bill attempts to ban most forms of gambling
on the Internet within U.S. borders. There is no prohibition on individuals
placing bets over the Internet, only "gambling businesses" within U.S.
jurisdictions, are proposed to be prohibited. The Bill also outlines several
exemptions, some of which are summarized as follows:
- - The basic proposal states that it shall be unlawful for a person engaged
in a gambling business to use the Internet or any other interactive
computer service to place, receive, or otherwise make a bet or wager. The
significance of the language is that it does not make the act of gambling
on the Internet illegal. Only gambling businesses based and operated
within U.S. borders are affected.
- - Penalties for violators include fines in the amount of total wagers
received, or $20,000, whichever is greater, and jail time of up to four
years. This is significant and, if approved, will limit new participants.
- - Several types of gambling are exempted. These include fantasy sports
leagues, state lotteries, and certain activities under the Interstate
Horseracing Act of 1978.
- - The Bill provides that interactive computer service providers shall have
no liability for hosting illegal gambling businesses.
In its proposed format, compliance will be difficult to enforce. Therefore, it
seems the Bill will not pass in its current format. Some selected reasons are
summarized below as extracted from "Staking VALUE Early", The RESOURCE
INDICATOR, Vol. 3, No. 15:
- - In testimony before the House Justice subcommittee on crime, Deputy
Assistant Attorney General Kevin V. DiGregory said the long reach of the
Internet into people's homes and across international borders creates
special obstacles for law enforcement. It simply will not be enforceable.
- - Prosecutors will not be able to indict operators of virtual casinos who
are based legally in other countries. The Deputy Assistant Attorney
General supported this claim by stating that a foreign national who is
operating a licensed Internet-based casino in his country will not be
violating his country's laws if he solicits or accepts bets from Untied
States citizens.
- - It is nearly impossible to close off an entire category of content, since
presently, there is no mechanism to automatically identify and screen out
types of content from U.S. Internet consumers.
- - In Australia, just seconds away in cyberspace, lawmakers are taking the
opposite road. Rather than attempting to ban Internet gaming, Australian
politicians are attempting to regulate online wagering by developing a
seal of approval that will draw players from unregulated cybercasinos and
bring new tax revenue to Australia.
- - Other nations, including Sweden, Germany, South Africa, Costa Rica,
Antigua, the Marshall Islands, and Curaco have already begun licensing and
regulatory processes for online casino operators.
- - Even if enacted, Michael Mount, deputy press secretary for Senator Kyl,
said the law will do little to stop an operator who is headquartered
abroad. "It will be hard to regulate it", he said of the possibility that
foreign sites might accept bets from inside of the United States. "There
is nothing the [law enforcement] can do if everything is run over there,
including the ISP." ("Senate effort to outlaw Internet Gambling may prove
futile," Knight-Riddler/Tribune News: Wed, May 12, 1999).
March 4, 1998 marked the first federal prosecution for gambling on the Internet
as 14 gambling site operators were charged with conspiring to illegally transmit
bets over the Internet and the telephone. ("14 Net gambling operators charged,"
Mike Brunker, MSNBC, March 5, 1998). The men were owners or managers of six
Caribbean and Central American-based companies that advertise sports books over
the Internet or in magazines circulated in the U.S. The charges were a violation
of the Wire Act, which prohibits gambling over telephone lines, as opposed to
the use of the Internet.
The only known federal case against an Internet gambling operator prior to this
most recent event involved the Interactive Gaming and Communications Corporation
in Pennsylvania. The company operated a virtual gambling operation in Grenada,
which reportedly handled over $58 million in wagers. In February 1997, FBI
agents seized company records and froze company assets. ("Can Lawmakers Control
Online Gambling?" New York Times, Peter Lewis, September 22, 1997). The company
is also involved in legal issues with the state Attorney General's Office. No
formal charges were filed by the Department of Justice, although the company
eventually sold its gambling assets to a Canadian-based company.
<PAGE>
STATES' ROLES IN INTERNET GAMBLING
Residents in states prohibiting gambling may circumvent anti-gaming laws by
logging into the Internet. Several states have taken the initiative to curtail
Internet Gambling within its borders by taking legal action against the Web site
operators. In the following section, measures taken by state offices to
prosecute Internet and offshore gambling operations that have transacted
business within their state are summarized.
Nevada - In July 1997, Nevada became the first state to pass a law prohibiting,
and legalizing, Internet gambling. It is a misdemeanor to place a bet from
Nevada over the Internet, regardless of the location of the gambling site. In
addition, the law allows for the prosecution of those accepting bets from Nevada
residents. However, Senate Bill 318 is also the first statute to expressly
allow:"licensed" race and sports books, off-track betting operators and casinos
to accept wagers via the Internet (Rose, J. Nelson, Gambling and the Law,
"Nevada First State to Expressly Prohibit, and Legalize, Internet Gambling,"
(Whittier Law School, Los Angeles, CA), May 12, 1999).
Minnesota - The Minnesota Attorney General sued Wager Net Web, a Las Vegas-based
company that was preparing to offer sports betting over the Internet, for
consumer fraud when the company advertised that its service was legal. The
company intended the service to be set up and run by another company located
outside the U.S. Subsequently, the company filed an appeal with the state court
of appeals claiming that the state did not have jurisdiction over the company
since it was not based in Minnesota. In December 1997, a Minnesota state court
ruled that the Attorney General does indeed have jurisdiction to prosecute
Internet gambling companies. (The National Bet, U.S. News Online, Dan McGraw).
The state is seeking a court order to stop the advertising and civil penalties
of at least $25,000. The case reached the Minnesota State Supreme Court, where
on May 8, the same court upheld a lower court's ruling. The court, however, did
not address the issue of whether Internet gambling itself is illegal.
Wisconsin and Missouri - The Coeur d'Adlene Indian Tribe of Idaho, Unistar
Entertainment and Executone Information Systems are being sued by the attorneys
general of Wisconsin and Missouri over the operation of a national online
lottery. The tribe claims that it has the authorization to operate the lottery
under the Indian Gaming Regulatory Act of 1988 since the computer server
operating the games is located on the reservation. The states contend that the
gambler must be physically present on the reservation when gambling as opposed
to using the Internet. The lawsuit seeks injunctions to stop the operation of
the gambling sites in Wisconsin, in addition to fines and consumer restitution
("Wisconsin Sues Over Internet Gambling," The Associated Press, The New York
Times on the Web, September 16, 1997).
Missouri - In May 1998 a Missouri judge upheld a civil lawsuit against
Interactive Gaming and Communication Corporation (IGCC) by the state's attorney
general. IGCC was found to have violated state consumer protection law, fined
$66,000 and ordered to "reject and refuse" all applications by Missouri
residents. When the company accepted wagers by undercover agents in Missouri,
criminal charges were filed against the company's president. The case is still
pending.
The Company is presently of the view that it is not prohibited from offering its
services and accepting wagers from resident of almost all jurisdictions in the
world. However, Internet gaming is a relatively new activity and some or all of
these jurisdictions may take action to more severely regulate or even prohibit
Internet gaming operations in their jurisdictions. The Company intends to adopt
a proactive policy of lobbying international jurisdictions, where appropriate,
for purposes of seeking approval of Internet gaming and the regulation of those
activities on a basis that is favorable to the Company.
In addition to the aforementioned regulations pertaining specifically to gaming,
the Company may become subject to any number of laws and regulations that may be
adopted with respect to the Internet in general as the Internet becomes widely
used. These laws may cover issues such as user privacy, freedom of expression,
pricing, content and quality of services, taxation, advertising, intellectual
property rights and information security.
Furthermore, the growth of online commerce may prompt calls for more stringent
consumer protection laws. Several states have proposed legislation to limit the
uses of personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Management does not contemplate providing personal information regarding the
Company's customers to third parties. However, the adoption of additional
consumer protection laws could create uncertainty in Web usage and reduce the
demand for the Company's products and services.
<PAGE>
Management is not certain how its business may be affected by the application of
existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, taxation, libel, obscenity
and export or import matters. The vast majority of these laws were adopted prior
to the advent of the Internet. As a result, they do not contemplate or address
the unique issues of the Internet and related technologies. Changes in laws that
are intended to address these issues could create uncertainty in the Internet
market place. This uncertainty could reduce demand for the Company's services or
its cost of doing business may increase as a result of litigation costs or
increased service delivery costs.
In addition, because the Company's services are intended to be made available
over the Internet in multiple foreign countries, other jurisdictions may claim
that the Company is required to qualify to do business in that foreign country.
The Company intends to qualify to do business only in
Antigua and Barbuda. The Company's failure to qualify in a jurisdiction where it
is required to do so could subject it to taxes and penalties. It could also
hamper the Company's ability to enforce contracts in these jurisdictions. The
application of laws or regulations from jurisdictions whose laws do not
currently apply to the business could have a material adverse effect on the
business, results of operations and financial condition.
VIII. DISCLOSURE
----------
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and/or
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. In addition, the Company intends to be an electronic
filer and as such, all items filed by the Company are available through an
Internet site maintained by the SEC which contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC, which site is available at http://www.sec.gov. The
Company also maintains an Internet site which contains information about the
Company. This site is available at http://www.netforcesystems.com.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
I. PLAN OF OPERATIONS
------------------
A. Revenues and Financing
----------------------
As of the second quarter ended, October 31, 1999, the Company had no revenues.
The gaming site was completed and was live to accept wagers via the Internet,
its principal source of revenue, on December 20, 1999. It is anticipated that
the Internet will continue to become more accessible and that the market
opportunities for the Company will continue to expand. This tremendous growth
will also attract many potential new competitors. In order to maintain revenue
growth, the Company intends to expand the content and to improve the services on
its Internet Web sites, as well as researching and developing other projects
that will utilize its existing facilities and expertise.
The Company has been funded to date through debt financing from private arm's
length lenders. The Company has secured approximately $495,000 US through debt
financing. The sum was received by the Company pursuant to a note payable dated
July 13, 1999 payable to Mountain High Management Inc. The loan is unsecured,
bears interest at the rate of 15% per annum and is due on July 29, 2001. The
Company received the sum on or about July 13, 1999. Management believes that the
$495,000 plus revenues from wagers placed will enable the Company to meet its
financial obligations for the next 12 months. No assurance can be given that
revenues from gaming activities and/or proposed secondary revenues will enable
the Company to meet its financial obligations. As such, the Company may solicit
and arrange for additional debt financing from private arm's length lenders in
the event existing financing and revenues do not meet the Company's financial
obligations. In addition, the Company may consider raising additional equity
financing through the sale of common stock of the Company through private
placements to sophisticated investors. The combination of existing financing,
expected revenues and additional debt and/or equity financing is intended to
provide the Company with sufficient operating capital for a period of
approximately two years.
<PAGE>
B. Operations for the Next Twelve Months
-------------------------------------
The company's primary on-line wagering Web-site, www.AntiguaOnlineCasino.com,
went live on the Internet on December 20, 1999. As this site is fully
operational, wagers are being accepted. The company has implemented the
marketing program to officially launch the site in early January 2000. As such,
revenues are expected to commence in the first calendar quarter of 2000.
The Company intends to hire additional product, marketing, computer programming
and graphic design personnel over the next twelve months as is deemed necessary
by management. From player data obtained from the web sites during the first ten
to twelve months of operations, the Company plans to make adjustments to the
operations as is deemed necessary by management.
Operations to date have been predominantly limited to establishing the
infrastructure and other general and administrative expenditures and
organizational costs. As stated, the live operations of the gaming Web-sites
www.AntiguaOnlineCasino.com and www.AntiguaSportsbook.com commenced on December
20,1999, however, the official launch of the sites commenced with the
implementation of the marketing program in early January 2000.
<TABLE>
C. Balance Sheet Data
------------------
<CAPTION>
At Oct.31,1999 At July 31,1999 At April 30,1999
-------------- --------------- ----------------
<S> <C> <C> <C>
Working Capital 568,494 637,910 33,507
Total Assets 768,563 747,500 40,000
Shareholders' Equity (deficit) 35,500 35,500 35,500
</TABLE>
D. Liquidity and Capital Resources
-------------------------------
Cash flow used in investing activities in the period ended July 31, 1999 totaled
$103,097 and consisted of an increase in organization costs ($3,097) and the
purchase of the Gaming Software as per the Softec Systems Inc. software
agreement ($100,000), booked as a fixed asset. During this period, the company
increased its working capital and total assets by $707,500 due mainly to an
increase in accounts receivable of $120,000 due from its wholly-owned
subsidiary, Netforce Entertainment Inc. and from financing activities in the
form of an issuance of the promissory note in the amount of $495,000. Net
increase in cash balance was $484,403 for a total cash balance as at July 31,
1999 of $517,910. Increase in accounts payable was $212,500 which consists of
accruals ($2,500), software license agreement (net=$90,000), and the Antigua
gaming license fee ($120,000) both of which are payable in monthly installments
by wholly-owned subsidiary Netforce Entertainment Inc. within 12 months of
commencement of operations.
As of October 31, 1999, full operations had not yet commenced; therefore there
was no change in Shareholder's Equity due to operating gains or losses.
Pre-operating and organization costs, which have been capitalized, increased by
$62,160 and consisted mainly of office rent, salaries, and misc. overhead and
startup costs. Fixed assets increased by $28,319 which mainly consisted of the
purchase of computers, software, office furniture and equipment, and office
leasehold improvements. As a result of the above, there was a net decrease in
cash for the period of $75,964 for a total cash balance at the end of the period
of $441,946.
As of December 20, 1999, the gaming site www.AntiguaOnlineCasino.com and
www.AntiguaSportsbook.com went live. Given that the on-line advertising program
was not launched until the beginning of January 2000, revenues were not expected
to be significant for the balance of the month of December,1999. Revenues from
sales should commence shortly after the launch of the marketing program for the
online Casino and Sportsbook. The Company anticipates that revenues from wagers
will not initially meet expenses and as such, the Company plans to finance
operations through additional debt financing from arm's length private lenders
until such time as revenues from wagers meet or exceed expenses. Once achieved,
the Company intends to begin repaying the private arm's length lenders. In
addition, the Company may raise additional money as is deemed necessary by
management through private placements of stock issued out of the treasury of the
Company to individuals or corporations who have expressed interest in obtaining
stock in the Company.
<PAGE>
E. Impact of Inflation
-------------------
The Company believes that inflation will not materially affect its business.
F. Year 2000 Risks and Compliance
------------------------------
Many existing computer programs use only two digits to identify a year. These
programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. The Company uses software, computer technology and other services
developed and provided by third party suppliers that may fail due to the year
2000 phenomenon. For example, the Company is dependent on the financial
institutions involved in processing customers' credit card payments for the
Internet services and a third party that hosts the Company's services. The
Company is also dependant on telecommunications vendors and suppliers to
maintain our network and the United States Postal Service and other third party
carriers to deliver orders to customers.
The Company has identified three categories of computer systems, which may be
affected by the Year 2000 issue:
1. Internal Systems. The Company owns and operates computer hardware
on which is loaded licensed software from major software
providers. The Company uses these computers and software programs
for some accounting functions, office administration functions,
word processing functions and internal and external e-mail;
2. Third party Providers of Computer Systems. The Company relies on
various third party providers of computer hardware and software
which third parties provide critical services to the Company
including, service development, Web site development, credit card
processing, website hosting, long distance Internet connectivity,
e-mail providers, and substantially all other systems used by the
Company in respect of the operation of the Web site; and
3. The General Infrastructure. This category includes the integrity
and stability of the Internet in providing the Company's services,
the computer systems of financial institutions and services used
by customers, the utility companies used by the Company and the
customers.
In respect of number 1 above, the Company has assessed the year 2000 readiness
of its internal systems. All hardware and software used internally have been
purchased within the previous three months and were purchased from reputable
vendors with assurances therefrom that all such items, alone and in combination
with each other are Year 2000 compliant. Based upon these assurances, the
Company has neither incurred any expenses in relation to this assessment nor has
it developed a remediation plan because it believes that it is not necessary.
In respect of number 2 above, the Company has relied upon third parties for the
provision of substantially all of the systems for the operation of the Web
sites. These systems include software used to provide the Company's Web sites'
search capabilities, customer interaction, and transaction processing functions,
as well as firewall, security monitoring and back-up capabilities. The Company
is currently assessing the Year 2000 readiness of the third party supplied
software, computer technology and other services of the Company's vendors. As
part of the assessment, the Company is in the process of seeking assurances from
these third parties that their software, computer technology and other services
are Year 2000 compliant. At this time, the Company has not yet developed a
contingency plan to address situations that may result if these third parties
are unable to achieve Year 2000 compliance. Such contingency plan will depend on
the results of the Year 2000 review and assessment, the extent of the corrective
actions that have been implemented by the third parties and by the Company and
the status of the distribution systems that the Company intends to establish.
<PAGE>
Based upon the results of this assessment, the Company will develop and
implement, if necessary, a remediation plan with respect to the third party
software, third party vendors and computer technology and services that may fail
to be Year 2000 compliant. At this time, the expenses associated with this
assessment and potential remediation plan are expected to be insignificant but
cannot be determined with any degree of accuracy at this time. The failure of
the software and computer technologies of the third parties to be Year 2000
compliant would have an adverse effect on the Company including difficulties in
operating the website effectively or at all, difficulties accepting customers'
wagers, difficulties in developing the services and difficulties conducting
other fundamental parts of the business.
In respect of number 3 above, the Year 2000 readiness of the general
infrastructure necessary to support the Company's operations is difficult to
assess. For example, the Company depends on the integrity and stability of the
Internet to provide the Company's services. The Company also depends on the Year
2000 compliance of the computer systems and financial services used by
consumers. Thus, the infrastructure necessary to support the Company's
operations consists of a network of computers and telecommunications systems
located throughout the world and operated by numerous unrelated entities and
individuals, none of which has the ability to control or manage the potential
Year 2000 issues that may impact the entire infrastructure. The Company's
ability to assess the reliability of this infrastructure is limited and the
Company relies solely on generally available news reports, surveys and
comparable industry data. Based on these sources, the Company believes that most
entities and individuals that rely significantly on the Internet are reviewing
and attempting to remediate issues relating to Year 2000 compliance, but it is
not possible to predict whether these efforts will be successful in reducing or
eliminating the potential negative impact of Year 2000 issues.
A significant disruption in the ability of consumers to reliable access the
Internet or portions of it or to use their credit cards would have an adverse
effect on demand for the Company's services. In addition, the Company may have
difficulties operating portions or all of its Web sites
effectively, taking customers' wagers, and conducting other fundamental parts of
the Company's business.
The costs to address the Year 2000 compliance issues delineated above have not
been determined at this time. The cost of developing and implementing a plan, if
necessary, could be material and the Company may not have enough time to
implement it before the year 2000. Any failure of the Company's material
systems, its suppliers' material systems or the Internet to be year 2000
compliant could include difficulties in operating the Web sites effectively,
taking wagers, providing services or conducting other fundamental parts of the
Company's business, any one of which would have an adverse effect on the
Company.
ITEM 3. DESCRIPTION OF PROPERTY
The Company occupies 1,900 square feet of commercial office space at Third
Floor, Dollar Building, Nevis Street, St. John's, Antigua, West Indies. This
facility houses all of the Company's operations including production, marketing,
Web site development, financial transactions and administration. The only
operation not housed at this location is the computer server on which the
Company's online casino is hosted. The building in which the Company has leased
space is in the heart of St. John's and is home to several other Technology and
Internet based companies. This arrangement and proximity to other similar
companies is expected to lend itself well to promoting the Company as being in
the right area and on the leading edge of technology. As well, the company
offices are in close proximity to banking services, the post office, money
transfer services, courier services, and other essential business service
providers and their offices.
The terms of the Nevis Street commercial lease are as follows: The Company
leases 1,900 square feet through to September 30, 2000 (12 months) at an annual
rent of $37,164 USD. The Company leases said space on a month-to-month basis
during the term. The Company has a renewal option thereafter of up to five years
on terms to be negotiated at the time. The Company has obtained an insurance
policy as is required by the terms of the lease.
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 1, 2000 by (i) each person
who is known to the Company to own beneficially more than 5% of the Company's
outstanding Common Stock, (ii) each of the Company's directors, (iii) executive
officers and (iv) all current directors and executive officers as a group.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Owner (1) of Class
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Douglas N. Bolen 500,000 5.9%
Suite 2103-1188 Quebec St. beneficial owner (2)
Vancouver, British Columbia
Canada, V6A 4B3
Secretary/Director
Terry G. Bowering 4,500,000 52.9%
Marble Hill beneficial owner (3)
P.O. Box W-645
St. John's, Antigua
West Indies
President/Chief Executive Officer
And Director
Terry G. Bowering 500,000 5.9%
C/o High Street & Corn Alley beneficial owner (4)
P.O. Box 1679
St. John's, Antigua
West Indies
Hendrika Prins 500,000 5.9%
C/O Sagem - JC Roder beneficial owner (5)
35 Rue De Bains
Geneva, Switzerland 120
Alfred Peeper 500,000 5.9%
Hogeweg 76-1 2042 GJ Zandvoort beneficial owner (6)
The Netherlands
Beverly Hunt 500,000
C/O Sagem -JC Roder beneficial owner (7) 5.9%
35 Rue De Bains
Geneva, Switzerland 120
All Directors & Executive Officers 7,000,000 82.4%
And control persons as a Group (5 persons)
- ---------------------------------------
</TABLE>
(1) No member of Management has the right to acquire within sixty days
through options, warrants, rights, conversion, privilege or similar
obligations any security of the Company.
(2) The BRF Family Trust, of which Douglas N. Bolen is a beneficiary enjoys
legal ownership of said securities.
(3) Geneva Overseas Holdings Ltd., of which Terry G. Bowering is a
beneficial owner, enjoys legal ownership of said securities.
(4) JPKT Metro Investment Corporation, of which Terry G. Bowering is a
beneficiary, enjoys legal ownership of said securities.
(5) Orientstar Finance Limited, of which Hendrika Prins is a beneficial
owner enjoys legal ownership of said securities.
(6) Eur-Am BV, of which Alfred Peeper is a beneficial owner enjoys legal
ownership of said securities.
(7) Fonds Mondial D'Investissement, of which Beverly Hunt is a beneficial
owner enjoys legal ownership of said securities.
<PAGE>
CHANGES IN CONTROL
Management is not aware of any arrangements which may result in a change of
control of the issuer.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
I. DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
TERRY G. BOWERING, PRESIDENT, CHIEF EXECUTIVE OFFICER & CHAIRMAN OF THE BOARD
Marble Hill
P.O. Box W-645
St. John's, Antigua
West Indies
Telephone: (268) 481-1970
DOB: August 30, 1960 (Age 39) Regina, Saskatchewan, Canada
Terry G. Bowering, B.Admin, M.B.A., Director
Mr. Bowering brings over fifteen years of experience in business management. Mr.
Bowering has considerable experience in both large corporations and
entrepreneurial enterprises and is qualified in the areas of business
development, finance, information systems, marketing, and sales. From January
1998 until his resignation June 20, 1999, Mr. Bowering was Vice President,
Offshore Operations for Starnet Communications International Inc., a Delaware
corporation, which is a fully reporting issuer on the NASD OTC:BB. Described as
being the "Microsoft of Internet Gaming", Starnet is one of the world's leading
Internet Gaming Software providers. Mr. Bowering was instrumental in
establishing and developing offshore operations and foreign government relations
for Starnet in Antigua and for establishing worldwide offshore banking
relationships in concert with the corporate development of Starnet's
subsidiaries, Electronic Financial Services Caribbean Inc. (EFS) and the EFS
group of International companies. Mr. Bowering has been interviewed and quoted
in the International press including FOX TV, COMPUTER WORLD MAGAZINE, and SHIFT
MAGAZINE, specifically on the subject of offshore Internet Gaming. From 1996 to
1998, Mr. Bowering was an Investment Advisor, Vancouver office, with Levesque
Securities Inc., a major Canadian brokerage firm. From May 1992 to June 1996,
Mr. Bowering was a financial analyst with the Asset Management Group Dept. of
Crown Life Insurance in Regina, Saskatchewan, Canada. Currently, Mr. Bowering
holds a position as a Director of Denmans.com, Inc., a company which is a
retailer of jewelry and related services via the Internet.
Mr. Bowering holds a Bachelor of Administration in Finance from the University
of Regina, and a Master of Business Administration with a concentration in
Strategic Management from the University of Saskatchewan.
Mr. Bowering was appointed to the above positions on March 1, 1999 to serve
until his successor has been elected and qualifies.
DOUGLAS N. BOLEN, CORPORATE COUNSEL, SECRETARY AND DIRECTOR
Suite 2103 - 1188 Quebec Street
Vancouver, British Columbia, Canada
Canada, V6A 4B3
(604) 506-4243
DOB: August 25, 1965 (Age 34) Regina, Saskatchewan, Canada
Douglas N. Bolen, B.A., L.L.B. - Corporate Counsel, Secretary and Director.
Mr. Bolen brings over ten years experience in entrepreneurial enterprise. Mr.
Bolen received a Bachelor of Arts from the University of Regina, Saskatchewan
and his Bachelor of Laws from the University of Saskatchewan. Mr. Bolen is a
member in good standing of the Law Society of Saskatchewan, the Regina Bar
Association and the Canadian Bar Association. From 1992 to 1995, Mr. Bolen was
attending the College of Law at the University of Saskatchewan. Since February
1999, Mr. Bolen has held the positions of Corporate Counsel, Secretary and
Director of Denmans.com, Inc. a Colorado company which is a retailer of jewelry
and related services via the Internet. Denmans.com, Inc. is soon-to-be publicly
traded on the NASD OTC:BB. From 1995 to 1999, Mr. Bolen articled and practiced
law at Balfour Moss, Barristers and Solicitors, a large Regina, Canada based law
firm with a practice concentration in the area of Corporate Commercial law.
Mr. Bolen was appointed to the position of Director on March 1, 1999 to serve
until his successor has been elected and qualifies.
<PAGE>
DWIGHT LEWIS, DIRECTOR
Cassada Gardens
P.O. Box W-386
St. John's, Antigua
(268)463-5103
DOB: May 24, 1961 (Age 38) St. Lucia, West Indies
Dwight Lewis, MA, BSc. - Director
Mr. Lewis is presently engaged as a Financial Consultant to Hanson International
Investment Services Ltd., an investment advisory organization. He also is
Managing Director of Mahaut Ltd., a corporation that provides offshore financial
services to its clients. Most recently Mr. Lewis was engaged as a Financial
Consultant and Interim Manager of RYO International Corporation and SAGA
Corporation, which were eventually merged to form International Data Processing.
This corporation owns and operates a number of Internet Casinos based and
licensed in Antigua. On behalf of the corporation's overseas principals, Mr.
Lewis was responsible for establishing these operations from conception to live
operation, having dealt with all aspects of the company's operations and
providing ongoing management and supervisory services.
From 1992 to 1997, Mr. Lewis was employed with the Bank of Antigua Ltd. as a
Senior Manager dealing with management of the investment portfolio and general
supervision of all bank operations. From 1988 to 1992, Mr. Lewis was employed
with the Eastern Caribbean Central Bank, located in St. Kitts, as a Senior Bank
Examiner. This entailed general supervision of commercial banking activities in
all member banks of the Eastern Caribbean Central Bank. From 1986 to 1988, Mr.
Lewis worked as a Budget Analyst with the Ministry of Finance, Government of St.
Lucia, and with Barclays Bank, St. Lucia, from 1980 to 1983.
Mr. Lewis graduated from the University of West Indies, Cave Hill Campus,
Barbados, with a Bachelor of Science Degree in Economics and Management. Mr.
Lewis also attended the University of Sheffield, Management School, England,
where he obtained an MA in Banking and International Finance. Mr. Lewis resides
in Antigua, West Indies.
Mr. Lewis was appointed to the position of Director on December 20, 1999 to
serve until his successor has been elected and qualifies.
II. FAMILY RELATIONSHIPS
--------------------
There are no family relationships among directors, executive officers or persons
nominated or chosen by the Company to become officers or executive officers.
III. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
----------------------------------------
The Company is not aware of any material legal proceedings involving any
director, director nominee, promoter or control person including criminal
convictions, pending criminal matters, pending or concluded administrative or
civil proceedings limiting one's participation in the securities or banking
industries, or findings of securities or commodities law violations. However,
legal bankruptcy proceeding under Canadian law involving Terry Bowering in 1997,
concluded with Mr. Bowering receiving a judicial discharge.
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
The Company did not pay any compensation to its chief executive officer, any
other executive officer nor to any senior employees during its first fiscal year
ended April 1999 nor in the first quarter ended July 31, 1999. Currently, the
executive officers receiving salary from the Company are Terry Bowering,
President, Chairman of the Board, Chief Operating Officer, who is receiving a
salary of $90,000 per year and Douglas N. Bolen, Corporate Counsel,
Secretary/Treasurer, who is receiving a salary of $18,000 per year.
The members of the Company's Board are reimbursed for actual expenses incurred
in attending Board meetings. There are no other arrangements for compensation to
the Board of Directors' members.
There are no written employment contracts or agreements with any executive
officers. Employee salaries are set by the Members of the Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is not aware of any transactions or proposed transactions in respect
of which the Company was or is to be a party, in which any director, executive
officer, nominee for election as a director, 5% security holder, member of the
immediate family of any of the previously named persons had a direct or indirect
interest in the transaction.
ITEM 8. DESCRIPTION OF SECURITIES
The securities to be registered pursuant to this Form 20-F are all of the
authorized Common Stock of Net-Force Systems Inc. Holders of the Common Stock
are entitled to cast one vote for each share held at all shareholder meetings
for all purposes, except that in the election of Directors, each shareholder of
Common Stock shall have as many votes for each share held by him as there are
directors to be elected and for whose election the shareholder has a right to
vote. There are no preemptive rights associated with the securities and no
cumulative voting is authorized by the Articles of Incorporation or the By-Laws.
The total amount of shares authorized by the Company's Articles of Incorporation
is 150,000,000. Of these, 100,000,000 are Common Stock and 50,000,000 are
Preferred Stock. There has been no issuance of any Preferred stock. Dividend,
voting, conversion rights, liquidation rights and other rights of the Preferred
Stock, if any, will be established by the Board of Directors upon issuance.
The Company has never declared or paid cash dividends on the common stock of the
Company. Management intends to retain all available funds and any future
earnings for use in the operation and expansion of the business and does not
anticipate paying any cash dividends in the foreseeable future.
PART 2
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
There is no public trading market for the common equity shares of the
registrant. If the registrant successfully obtains a listing, as is presently
intended by management, the common equity shares will be listed upon the OTC
Bulletin Board Service. As of January 1, 2000, there are approximately 12 equity
holders of record of the Company's Common Stock. As of January 1, 2000, there
are no shares of the Company's Common Stock subject to outstanding options or
warrants to purchase or securities convertible into Common Stock of the Company.
The number of shares eligible for trading will be all of the Common Stock except
that which is owned by management of the Company. The Management of the Company
currently owns an aggregate of 5,500,000 shares which can be sold only in
compliance with Rule 144. There have been no cash dividends declared since the
inception of the Company nor its subsidiaries. There are no restrictions that
would limit the ability to pay dividends on common equity or that are likely to
do so in the future.
ITEM 2. LEGAL PROCEEDINGS
The issuer is not a party to any pending legal proceeding nor is its property
the subject of any pending legal proceeding.
<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no disagreements on accounting and financial disclosures from
the inception of the Company through to the date of this Registration Statement.
EXPERTS
The consolidated financial statements of Net-Force Systems Inc. as at October
31, 1999, April 30, 1999 and July 31, 1999, appearing in this Registration
Statement have been audited by Pannell Kerr Forster, St. John's, Antigua,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In March 1999, the Company issued an aggregate of 5,000,000 shares of Common
Stock to the initial two Directors of the Company at a price of $0.001 per
common share in exchange for an aggregate of $5,000. In addition, the Company
issued 500,000 shares to the JPKT Metro Investment Trust for the sum of $500.00.
The certificates representing these shares bear a restrictive legend. These
shares were issued under the exemption from registration provided by Section
4(2) of The Securities Act 1933. On March 15, 1999, the Company executed a Form
D disclosing that it relied upon Rule 504 in selling 3,000,000 shares of the
Common Stock in exchange for an aggregate of $30,000 US to six entities. This
offering was done by means of a private placement to the following entities in
the following amounts:
Richland Acceptance Corporation
P.O. Box 3140
Roadtown, British Virgin Islands
West Indies 500,000
Orienstar Finance Limited
C/O Sagem - JC Roder
35 Rue De Bains
Geneva, Switzerland 120 500,000
Altmar Inc.
P.O. Box 1062
1 Capital Place
Roadtown, British Virgin Islands
West Indies 500,000
Eur-Am, B V
Hogeweg 76-1 2042 GJ Zandvoort
The Netherlands 500,000
Fonds Mondial D'Investissement S A
C/O Sagem -JC Roder
35 Rue De Bains
Geneva, Switzerland 120 500,000
Sharp, Flint & Blunt
P.O. Box 3140
Roadtown, British Virgin Islands
West Indies 500,000
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VIII of the Company's Articles of Incorporation read as follows:
<PAGE>
INDEMNIFICATION. The Corporation shall indemnify any and all of its Directors,
officers, employees or agents or former Directors, officers, employees or agents
or any person or persons who may have served at its request as a Director,
officer, employee or agent of another company, partnership, joint venture, trust
or other enterprise in which it owns shares of capital stock or of which it is a
creditor, to the full extent permitted by law. Said indemnification shall
include, but not be limited to, the expenses, including the cost of any
judgments, fines, settlements and counsel's fees, actually and necessarily paid
or incurred in connection with any action, suit or proceeding, whether civil,
criminal, administrative or investigative, and any appeals thereof, to which any
such person or his legal representative may be made a party or may be threatened
to be made a party by reason of his being or having been a Director, officer,
employee or agent as herein provided unless such action, suit or proceeding is a
result of the Director, officer, employee or agent's own negligence or illegal
action. The foregoing right of indemnification shall not be exclusive of any
other rights to which any Directors, officer, employee or agent may be entitled
as a matter of law or which he may be lawfully granted.
In addition, Section 97 of The Antigua and Barbuda International Business
Corporations Act, 1982 indicates that the foregoing provisions shall not
eliminate or limit the liability of a director to the corporation or to its
shareholders for monetary damages for any breach of the director's duty of care
to the corporation or to its shareholders, acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, improper
corporate distributions, or any transaction from which the director directly or
indirectly derived an improper personal benefit.
<PAGE>
PART F/S. FINANCIAL STATEMENTS
i. NET-FORCE SYSTEMS INC. AUDITED FINANCIAL STATEMENTS, OCTOBER 31, 1999.
CONSOLIDATED FINANCIAL STATEMENTS
NET-FORCE SYSTEMS INC.
(A DEVELOPMENT-STAGE COMPANY)
AUDITED
OCTOBER 31, 1999
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31ST OCTOBER, 1999
<PAGE>
C O N T E N T S PAGE
--------------- ----
AUDITORS' REPORT 1
BALANCE SHEET 2
STATEMENT OF CHANGES IN FINANCIAL POSITION 3
NOTES TO THE BALANCE SHEET 4 - 6
<PAGE>
PAGE 1
AUDITORS' REPORT TO THE MEMBERS OF
----------------------------------
NET-FORCE SYSTEMS INC.
----------------------
We have examined the Balance Sheet of Net-Force Systems Inc. as at 31st
October, 1999 and Statement of Changes in Financial Position for the period then
ended. These Financial Statements are the responsibility of the Company's
Management. Our responsibility is to express an opinion on the Financial
Statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance that the Financial Statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the Financial Statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall Financial Statement presentation.
In our opinion, the Financial Statement referred to above present
fairly, in all material respects, the financial position of Net-Force Systems
Inc. as at 31st October, 1999 and the Changes in Financial Position for the
period then ended in accordance with generally accepted accounting principles.
/S/ PANNELL KERR FORSTER
"PANNELL KERR FORSTER"
ANTIGUA:
22ND NOVEMBER, 1999 CHARTERED ACCOUNTANTS
- ------------------- ---------------------
<PAGE>
<TABLE>
PAGE 2
NET-FORCE SYSTEMS INC.
----------------------
BALANCE SHEET AT 31ST OCTOBER, 1999
-----------------------------------
(EXPRESSED IN UNITED STATES DOLLARS)
<CAPTION>
Notes 31/10/99 31/07/99
----- ------------- -------------
<S> <C> <C> <C>
CURRENT ASSETS
- --------------
Cash at bank 3 441,946 517,910
Accounts receivable and prepayments 126,548 120,000
------------- -------------
568,494 637,910
ORGANISATION AND PRE-OPERATING COST 4 71,750 9,590
-----------------------------------
FIXED ASSETS 5 128,319 100,000
------------
------------- -------------
TOTAL ASSETS $ 768,563 $ 747,500
============= =============
FINANCED BY:-
-------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
LIABILITIES
- -----------
Accounts payable and accruals 6 217,500 215,000
Promissory notes 7 513,563 495,000
Shareholders' advance 2,000 2,000
------------- -------------
733,063 712,000
------------- -------------
SHAREHOLDERS' EQUITY
Share capital 8 8,500 8,500
Share premium 27,000 27,000
------------- -------------
35,500 35,500
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 768,563 $ 747,500
============= =============
</TABLE>
APPROVED ON BEHALF OF THE BOARD:
/s/ "Terry Bowering" : DIRECTOR
THE ATTACHED NOTES FORM PART OF THIS BALANCE SHEET.
<PAGE>
<TABLE>
PAGE 3
NET-FORCE SYSTEMS INC.
----------------------
STATEMENT OF CHANGES IN FINANCIAL POSITION
------------------------------------------
FOR THE PERIOD ENDED 31ST OCTOBER, 1999
---------------------------------------
(EXPRESSED IN UNITED STATES DOLLARS)
<CAPTION>
31/10/99 31/07/99
------------- -------------
<S> <C> <C>
CHANGES IN WORKING CAPITAL ITEMS
- --------------------------------
Increase in accounts receivable (6,548) (120,000)
Increase in accounts payable and accruals 2,500 212,500
------------- -------------
(4,048) 92,500
------------- -------------
CASH FLOW FROM/(USED) IN INVESTING ACTIVITIES
- ---------------------------------------------
Increase in organisation cost (62,160) (3,097)
Purchase of fixed assets (28,319) (100,000)
------------- -------------
(90,479) (103,097)
------------- -------------
CASH FLOW FROM/(USED) IN FINANCING ACTIVITIES
- ---------------------------------------------
Increase in promissory notes 18,563 495,000
------------- -------------
NET INCREASE/(DECREASE) IN CASH DURING PERIOD (75,964) 484,403
- ---------------------------------------------
CASH - beginning of the period 517,910 33,507
------------- -------------
CASH - end of the period $ 441,946 $ 517,910
============= =============
</TABLE>
<PAGE>
PAGE 4
NET-FORCE SYSTEMS INC.
----------------------
NOTES TO THE BALANCE SHEET
--------------------------
AT 31ST OCTOBER, 1999
---------------------
(EXPRESSED IN UNITED STATES DOLLARS)
1. INCORPORATION AND PRINCIPAL ACTIVITIES
The Company was incorporated on 1st March, 1999 under the International
Business Corporations Act. No. 28 of 1982 of the laws of Antigua and
Barbuda.
The Company will be engaged in all business activities permitted under
the International Business Corporations Act. 1982 except International
Banking, Trust and Insurance. It will generally carry on the business
of an investment and holding company. To date, the company has not
commenced trading.
On 5th August, 1999, a wholly owned subsidiary - Net Force
Entertainment Inc. was incorporated under the International Business
Corporations Act of the laws of Antigua and Barbuda. This subsidiary
Company will be engaged all aspects International betting, gaming,
sports betting and bookmaking but with a major emphasis on internet
gaming.
Net Force Entertainment Inc. has been granted a gaming licence by the
Antigua and Barbuda Free Trade & Processing Zone and has also entered
into a software gaming licence with Softec Systems for the operation of
an internet casino. The Company has not commenced trading.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Currency Translation
Foreign currency transactions during the period have been converted
at the exchange rates ruling at the dates of these transactions
Foreign currency assets and liabilities at the period end and have
been translated at the rates ruling at the Balance Sheet date.
b) Fixed Assets
Fixed assets are stated at cost and are being depreciated on the
straight line basis over the estimated useful lives of the assets at
the following rates:-
Leasehold Improvements 20%
Computer Software 10%
Computer Equipment 25%
Office Furniture and Equipment 15%
<TABLE>
<CAPTION>
3. CASH AT BANK 31/10/99 31/07/99
------------- -------------
<S> <C> <C>
Swiss American Bank Ltd. 434,612 517,910
Swiss American National Bank of Antigua 7,334 -
------------- -------------
$ 441,946 $ 517,910
============= =============
</TABLE>
<PAGE>
PAGE 5
NET-FORCE SYSTEMS INC.
----------------------
NOTES TO THE BALANCE SHEET
--------------------------
AT 31ST OCTOBER, 1999
---------------------
(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
4. ORGANISATION AND PRE-OPERATING COST 31/10/99 31/07/99
------------- -------------
<S> <C> <C>
Incorporation costs 9,590 9,590
Pre-operating costs 62,160 -
------------- -------------
$ 71,750 $ 9,590
============= =============
</TABLE>
The above will be amortised over a period of two (2) years commencing
from the first day of trading.
<TABLE>
<CAPTION>
5. FIXED ASSETS 31/10/99 31/07/99
------------- -------------
<S> <C> <C>
Leasehold Improvements 9,668 -
Computer Software 100,000 100,000
Computer Equipment 12,550 -
Office Furniture and Equipment 6,101 -
------------- -------------
$ 128,319 $ 100,000
============= =============
6. ACCOUNTS PAYABLE AND ACCRUALS
Softec Systems - Software licence 90,000 90,000
Softec Systems - Gaming licence 120,000 120,000
Accruals 7,500 5,000
------------- -------------
$ 217,500 $ 215,000
============= =============
</TABLE>
The gaming software was bought from Softec Systems which sold the
software along with a gaming licence issued by the Antigua and Barbuda
Free Trade and Processing Zone.
<TABLE>
<CAPTION>
7. PROMISSORY NOTE 31/10/99 31/07/99
------------- -------------
<S> <C> <C>
Mountain High Management Inc.
Principal 495,000 495,000
Interest payable 18,563 -
------------- -------------
$ 513,563 $ 495,000
============= =============
</TABLE>
The above promissory note was issued for funds injected into the
Company and is due and payable on demand. It bears interest at the rate
of 15% per annum on the principal sum.
<PAGE>
PAGE 6
NET-FORCE SYSTEMS INC.
----------------------
NOTES TO THE BALANCE SHEET
--------------------------
AT 31ST OCTOBER, 1999
---------------------
(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
8. SHARE CAPITAL 31/10/99 31/07/99
------------- -------------
<S> <C> <C>
Authorised
----------
100,000,000 Common Shares of US$0.001 par value 100,000 100,000
50,000,000 Preferred Shares of US$0.001 par value 50,000 50,000
------------- -------------
$ 150,000 $ 150,000
============= =============
Issued and Fully Paid
8,500,000 Common Shares of US$0.001 par value $ 8,500 $ 8,500
============= =============
</TABLE>
<PAGE>
ii. NET-FORCE SYSTEMS INC. AUDITED FINANCIAL STATEMENTS, JULY 31, 1999.
CONSOLIDATED FINANCIAL STATEMENTS
NET-FORCE SYSTEMS INC.
(A DEVELOPMENT-STAGE COMPANY)
AUDITED
JULY 31, 1999
NET-FORCE SYSTEMS INC.
----------------------
FINANCIAL STATEMENTS
--------------------
FOR THE THREE MONTHS ENDED 31ST JULY, 1999
------------------------------------------
<PAGE>
C O N T E N T S PAGE
--------------- ----
AUDITORS' REPORT 1
BALANCE SHEET 2
STATEMENT OF CHANGES IN FINANCIAL POSITION 3
NOTES TO THE BALANCE SHEET 4 - 5
<PAGE>
PAGE 1
AUDITORS' REPORT TO THE MEMBERS OF
----------------------------------
NET-FORCE SYSTEMS INC.
----------------------
We have examined the Balance Sheet of Net-Force Systems Inc. as at 31st
July, 1999 and Statement of Changes in Financial Position for the three months
then ended. These Financial Statements are the responsibility of the Company's
Management. Our responsibility is to express an opinion on the Financial
Statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance that the Financial Statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the Financial Statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall Financial Statement presentation.
In our opinion, the Financial Statement referred to above present
fairly, in all material respects, the financial position of Net-Force Systems
Inc. as at 31st July, 1999 and the Changes in Financial Position for the three
months then ended in accordance with generally accepted accounting principles.
/s/ PANNELL KERR FORSTER
"PANNELL KERR FORSTER"
ANTIGUA:
16TH AUGUST, 1999 CHARTERED ACCOUNTANTS
- ----------------- ---------------------
<PAGE>
PAGE 2
<TABLE>
NET-FORCE SYSTEMS INC.
----------------------
BALANCE SHEET AT 31ST JULY, 1999
--------------------------------
(EXPRESSED IN UNITED STATES DOLLARS)
<CAPTION>
Notes 31/10/99 31/07/99
----- ------------- -------------
<S> <C> <C> <C>
CURRENT ASSETS
- --------------
Cash at bank 2 517,910 33,507
Accounts receivable 120,000 -
------------- -------------
637,910 33,507
ORGANISATION AND PRE-OPERATING COST 3 9,590 6,493
-----------------------------------
FIXED ASSETS 100,000 -
------------
------------- -------------
TOTAL ASSETS $ 747,500 $ 40,000
============= =============
FINANCED BY:-
-------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
LIABILITIES
- -----------
Accounts payable and accruals 4 215,000 2,500
Promissory notes 5 495,000 -
Shareholders' advance 2,000 2,000
------------- -------------
712,000 4,500
------------- -------------
SHAREHOLDERS' EQUITY
- --------------------
Share capital 6 8,500 8,500
Share premium 27,000 27,000
------------- -------------
35,500 35,500
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 747,500 $ 40,000
============= =============
</TABLE>
APPROVED ON BEHALF OF THE BOARD:
/s/ "Terry Bowering" : DIRECTOR
THE ATTACHED NOTES FORM PART OF THIS BALANCE SHEET.
<PAGE>
PAGE 3
NET-FORCE SYSTEMS INC.
----------------------
STATEMENT OF CHANGES IN FINANCIAL POSITION
------------------------------------------
FOR THE THREE MONTHS ENDED 31ST JULY, 1999
------------------------------------------
(EXPRESSED IN UNITED STATES DOLLARS)
31/07/99
-------------
CHANGES IN WORKING CAPITAL ITEMS
- --------------------------------
Increase in accounts receivable (120,000)
Increase in accounts payable and accruals 212,500
-------------
92,500
-------------
CASH FLOW FROM/(USED) IN INVESTING ACTIVITIES
- ---------------------------------------------
Increase in organisation cost (3,097)
Purchase of fixed assets (100,000)
-------------
(103,097)
-------------
CASH FLOW FROM/(USED) IN FINANCING ACTIVITIES
- ---------------------------------------------
Increase in promissory notes 495,000
-------------
NET INCREASE IN CASH DURING PERIOD 484,403
- ----------------------------------
CASH - beginning of the period 33,507
-------------
CASH - end of the period $ 517,910
=============
<PAGE>
PAGE 4
NET-FORCE SYSTEMS INC.
----------------------
NOTES TO THE BALANCE SHEET
--------------------------
AT 31ST JULY, 1999
------------------
(EXPRESSED IN UNITED STATES DOLLARS)
2. INCORPORATION AND PRINCIPAL ACTIVITIES
The Company was incorporated on 1st March, 1999 under the International
Business Corporations Act. No. 28 of 1982 of the laws of Antigua and
Barbuda.
The company will be engaged in all business activities permitted under
the International Business Corporations Act. 1982 except International
Banking, Trust and Insurance. It will generally carry on the business
of an investment and holding company. To date, the company has not
commenced trading.
2. CASH AT BANK 31/07/99 01/05/99
------------- -------------
Swiss American Bank Ltd. $ 517,910 $ 33,507
============= =============
3. ORGANISATION AND PRE-OPERATING COST
This represents cost incurred in the formation of the Company and will
be amortised over two (2) years commencing from the first day of
trading.
4. ACCOUNTS PAYABLE AND ACCRUALS 31/07/99 01/05/99
------------- -------------
Softec Systems - Software licence 90,000 -
Softec Systems - Gaming licence 120,000 -
Accruals 5,000 2,500
------------- -------------
$ 215,000 $ 2,500
============= =============
The gaming software was bought from Softec Systems which sold the
software along with a gaming licence issued by the Antigua and Barbuda
Free Trade and Processing Zone.
5. PROMISSORY NOTE 31/07/99 01/05/99
------------- -------------
Mountain High Management Inc. $ 495,000 -
============= =============
The above promissory note was issued for funds injected into the
Company and is due and payable on demand. It bears interest at the rate
of 15% per annum on the principal sum.
<PAGE>
PAGE 5
NET-FORCE SYSTEMS INC.
----------------------
NOTES TO THE BALANCE SHEET
--------------------------
AT 31ST JULY, 1999
------------------
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
6. SHARE CAPITAL 31/07/99 01/05/99
------------- -------------
<S> <C> <C>
Authorised
----------
100,000,000 Common Shares of US$0.001 par value 100,000 100,000
50,000,000 Preferred Shares of US$0.001 par value 50,000 50,000
------------- -------------
$ 150,000 $ 150,000
============= =============
Issued and Fully Paid
---------------------
8,500,000 Common Shares of US$0.001 par value $ 8,500 $ 8,500
============= =============
</TABLE>
7. SUBSEQUENT EVENT
On 5th August, 1999, a wholly owned subsidiary - Net Force
Entertainment Inc. was incorporated under the International Business
Corporations Act of the laws of Antigua and Barbuda. This subsidiary
company will be engaged all aspects International betting, gaming,
sports betting and bookmaking but with a major emphasis on internet
gaming.
Net Force Entertainment Inc. has been granted a gaming licence by the
Antigua and Barbuda Free Trade & Processing Zone and has also entered
into a software gaming licence with Softec Systems for the operation of
an internet casino. The company has not commenced trading.
<PAGE>
iii. NET-FORCE SYSTEMS INC. AUDITED FINANCIAL STATEMENTS, APRIL 30,
1999.
CONSOLIDATED FINANCIAL STATEMENTS
NET-FORCE SYSTEMS INC.
(A DEVELOPMENT-STAGE COMPANY)
AUDITED
APRIL 30, 1999
NET-FORCE SYSTEMS INC.
----------------------
BALANCE SHEET
-------------
AT 1ST MAY 1999
---------------
<PAGE>
C O N T E N T S PAGE
--------------- ----
AUDITORS' REPORT 1
BALANCE SHEET 2
NOTES TO THE BALANCE SHEET 3
<PAGE>
PAGE 1
AUDITORS' REPORT TO THE MEMBERS OF
----------------------------------
NET-FORCE SYSTEMS INC.
----------------------
We have examined the Balance Sheet of Net-Force Systems Inc. as at 1st
May, 1999. This Balance Sheet is the responsibility of the Company's Management.
Our responsibility is to express an opinion on the Balance Sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance that the Balance Sheet are free of material misstatement.
An audit includes examining on a test basis, evidence supporting the amounts and
disclosures in the Balance Sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall Balance Sheet presentation.
In our opinion, the Balance Sheet referred to above present fairly, in
all material respects, the financial position of Net-Force Systems Inc. as at
1st May, 1999 in accordance with generally accepted accounting principles.
/s/ PANNELL KERR FORSTER
"PANNELL KERR FORSTER"
ANTIGUA:
11TH AUGUST, 1999 CHARTERED ACCOUNTANTS
- ----------------- ---------------------
<PAGE>
PAGE 2
NET-FORCE SYSTEMS INC.
----------------------
BALANCE SHEET AT 1ST MAY, 1999
------------------------------
(EXPRESSED IN UNITED STATES DOLLARS)
Notes 1999
----- -------------
CURRENT ASSETS
- --------------
Cash at bank 2 33,507
-------------
CURRENT LIABILITIES
- -------------------
Accounts payable 2,500
Shareholders advance 2,000
-------------
4,500
-------------
Working capital 29,007
--------------- -------------
ORGANISATION COST 3 6,493
- ----------------- -------------
$ 35,500
=============
FINANCED BY:
SHAREHOLDERS' EQUITY
- --------------------
Share capital 4 8,500
Share premium 27,000
-------------
$ 35,500
=============
APPROVED ON BEHALF OF THE BOARD:
/s/ "Terry Bowering" : DIRECTOR
THE ATTACHED NOTES FORM PART OF THIS BALANCE SHEET.
<PAGE>
PAGE 3
NET-FORCE SYSTEMS INC.
----------------------
NOTES TO THE BALANCE SHEET
--------------------------
AT 1ST MAY, 1999
----------------
(EXPRESSED IN UNITED STATES DOLLARS)
3. INCORPORATION AND PRINCIPAL ACTIVITIES
The Company was incorporated on 1st March, 1999 under the International
Business Corporations Act, No. 28 of 1982 of the laws of Antigua and
Barbuda.
The company will be engaged in all business activities permitted under
the International Business Corporations Act, 1982 except International
Banking, Trust and Insurance. It will generally carry on the business
of an investment and holding company.
2. CASH AT BANK 01/05/99
-------------
Swiss American Bank Ltd. $ 33,507
=============
3. ORGANISATION COST
This represents costs incurred in the formation of the company and will
be amortised over two (2) years commencing from the first day of
trading.
4. SHARE CAPITAL 01/05/99
-------------
AUTHORISED
----------
100,000,000 Common Shares of US$0.001 par value 100,000
50,000,000 Preferred Shares of US$0.001 par value 50,000
-------------
$ 150,000
=============
ISSUED AND FULLY PAID
---------------------
8,500,000 Common Shares of US$0.001 par value $ 8,500
=============
<PAGE>
PART III. INDEX TO EXHIBITS
2. (i) Articles of Incorporation of Net-Force Systems Inc.
(ii) Bylaws of Net-Force Systems Inc.
(iii) Articles of Incorporation - Net-Force Entertainment Inc.
(iv) Bylaws of Net-Force Entertainment Inc.
6. Material Contracts
(i) Starnet Systems Inc. (formerly Softec Systems Caribbean Inc)
(ii) Government of Antigua and Barbuda Gaming License
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Net-Force Systems Inc.
(Registrant)
Date: January 14, 2000
/s/ "Terry G. Bowering"
-----------------------------------------------------------------------
Terry G. Bowering, President, Chairman of the Board, Chief Executive
Officer and Director
Date: January 14, 2000
/s/ "Douglas N. Bolen"
-----------------------------------------------------------------------
Douglas N. Bolen, Corporate Counsel, Secretary and Director
EXHIBIT 2.1
ANTIGUA AND BARBUDA
The International Business Corporations Act, 1982
No. 28 of 1982 Cap. 222 Vol. 5 of the Revised Laws of Antigua 1992 Edition
A Company Limited by Shares
ARTICLES OF INCORPORATION
OF
NET-FORCE SYSTEMS INC.
ARTICLE 1
---------
NAME
----
The name of the Corporation is NET-FORCE SYSTEMS INC.
ARTICLE II
----------
REGISTERED OFFICE AND AGENT
---------------------------
The registered agent of the Corporation shall be Hill & Hill whose office is
situate at 36 Long Street, in the City of Saint John in Antigua and Barbuda,
which offices shall also be the registered office of the Corporation.
<PAGE>
ARTICLE III
-----------
CAPITAL
-------
1. The Corporation is authorized to issue 100,000,000 bearer or
registered shares of US$0.001 each par value common stock which
shall be designated "Common Shares" and 50,000,000 Preferred
Shares of US$0.001 each par value which shall be designated
"Preferred Shares".
2. No pre-emptive rights shall attach to the shares to be issued in
respect of any class.
3. Both classes of shares may be issued in series and the directors
shall have the authority to fix the number of shares in, or to
determine the designation of, and the rights, privileges,
restrictions and conditions attaching to the shares of each
series.
4. The Corporation shall have the power to increase or reduce said
capital, and to issue any part of its capital, original or
increased, with or without any preference, priority, or special
privilege, or subject to any postponement of rights, or to any
conditions or restrictions, and so that, unless the conditions of
issue shall otherwise expressly declare, every issue of shares,
whether declared to be preference or otherwise shall be subject
to the power herein contained.
ARTICLE IV
----------
BOARD OF DIRECTORS
------------------
The objects for which the Corporation is established are:
a. To conduct any and all business activities permitted by the Laws
of Antigua/Barbuda as an International Business Corporation.
b. To carry on the business of an investment and holding company and
for that purpose to acquire and hold either in the name of the
Corporation or in that of any nominee, shares, stocks,
debentures, debenture stock, script bonds, notes, obligations,
investments and securities and warrants or options in respect of
any shares, stocks, debentures, debenture stock, script bonds,
notes, obligations, investments or securities, of all kinds
issued in any country in any part of the world.
c. To acquire and deal with any property, real or personal, to erect
buildings, and generally to do all acts and things which, in the
opinion of the Corporation or the Directors, may be conveniently
or profitably, or usefully, acquired and dealt with, carried on,
erected or done by the Corporation in connection with said
property.
d. The Corporation shall not engage in International Banking, Trust,
Insurance, Betting and Book making or any activity which requires
a License under the International Business Corporations Act.
e. To generally have and exercise all powers, rights and privileges
necessary and incident to carrying out properly the objects
herein mentioned.
ARTICLE VI
----------
EXISTENCE
---------
The Corporation shall have perpetual existence unless sooner dissolved in
accordance with the Laws of Antigua and Barbuda. The date on which corporate
existence shall begin is the date on which these Articles of Incorporation are
filed with the Director of International Business Corporations of Antigua and
Barbuda.
<PAGE>
ARTICLE VII
-----------
LIABILITY OF SHAREHOLDERS
-------------------------
The liability of a shareholder is limited to the amount, if any, unpaid on the
shares held or subscribed to by said shareholder.
ARTICLE VIII
------------
INDEMNIFICATIONS
----------------
The Corporation shall indemnify any and all of its Directors, officers,
employees or agents or former Directors, officers, employees or agents or any
person who may have served at its request as a Director, officer, employee or
agent of another company, partnership, joint venture, trust or other enterprise
in which it owns shares of capital stock or of which it is a creditor, to the
full extent permitted by law. Said indemnification shall include, but not be
limited to, the expenses, including the cost of any judgments, fines,
settlements and counsel's fees, actually and necessarily paid or incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, and any appeals thereof, to which any such
person or his legal representative may be made a party or may be threatened to
be made a party by reason of his being or having been a Director, officer,
employee or agent as herein provided unless such action, suit or proceeding is a
result of the Director, officer, employee or agent's own negligence or illegal
action. The foregoing right of indemnification shall not be exclusive of any
other rights to which and Directors, officers, employee or agent may be entitled
as a matter of law or which he may be lawfully granted.
ARTICLE IX
----------
CHARTER CONTINUATION
--------------------
The Corporation is authorized to transfer its charter to any jurisdiction which
permits continuation of a foreign corporation.
ARTICLE X
---------
SECURITIES
----------
No securities of the Corporation will be distributed to the public in Antigua
and Barbuda in contravention of Section 365 of the International Business
Corporations Act, 1982.
ARTICLE XI
----------
INCORPORATORS
-------------
The name and address of the Corporation's incorporators are:
Stacy Richards-Anjo Ethlyn Tonge
C/o Hill & Hill Chambers c/o Hill & Hill Chambers
Long Street, St. John's Long Street, St. John's
Antigua Antigua
"Stacy Richards-Anjo" "Ethlyn Tonge"
- ----------------------------------- -------------------------
DATED this 24th day of February, 1999 at St. John's, Antigua.
- -------------------------------------------------------------
EXHIBIT 2.2
ANTIGUA AND BARBUDA
The International Business Corporations Act, 1982
No. 28 of 1982 Cap. 222 Vol. 5 of the Revised Laws of Antigua 1992 Edition
A Company Limited by Shares
BY-LAWS
OF
NET-FORCE SYSTEMS INC.
PRELIMINARY
-----------
In these By-Laws, if not inconsistent with the subject or context, the words
hereinafter stated shall bear the meanings opposite to them.
THE CORPORATION The above-named Corporation
THE ACT The International Business Corporations Act, 1982 No.
28 of 1982, and every other Act for the time being in
force concerning corporations and affecting the
Corporation.
THESE PRESENTS These By-Laws as originally framed, or as from time
to time amended or altered by special resolution.
THE REGISTER The Register of shareholders to be kept as required
by Section 130 of the Act.
OFFICE The Registered Office for the time being of the
Corporation.
THE BOARD The Board of Directors for the time being of the
Corporation.
ORDINARY RESOLUTION A resolution passed by a majority of the shares
entitled to vote.
1. Shares and Share Capital
------------------------
1.1 Issuance
---------
The issue or allotment of shares shall be under the control of the
Board which may issue the whole or any portion thereof with such
referred, deferred, special or limited rights as it may think fit.
1.2 Alteration of Capital
---------------------
The Corporation may from time to time by ordinary resolution increase
the share capital by such sum to be divided into shares of such amount
as the resolution shall prescribe. The Corporation may by ordinary
resolution:
a. Consolidate and divide all or any portion of its share capital
into shares of larger amount than its existing shares;
b. Sub-divide its existing shares, or any of them, into shares of
smaller amount that is fixed by the Articles of Incorporation
subject, nevertheless, to the provisions of the Act;
c. Cancel any shares which, at the date of the passing of the
resolution, have not been taken up or agreed to be taken up by
any person.
Subject to the provisions of the Act, the Corporation may by special
resolution reduce its share capital, any capital redemption reserve
fund or any share premium account.
<PAGE>
2. Share Certificates and Register
-------------------------------
2.1 Certificates
------------
Certificates representing shares of the Corporation shall be in such
form as shall be determined by the directors. Such certificates shall
be signed by a director. All certificates for shares shall be
consecutively numbered or otherwise identified. Certificates may be
issued to bearer or in registered form. Bearer certificates shall be
marked as not transferable to residents of Antigua and Barbuda.
2.2 Register
--------
The number of shares, the date of issue, the consideration paid, and
the serial number of each bearer or registered certificate shall be
entered on the Register of the Corporation. In the case of registered
shares, the name and address of the holder shall also be entered on
said register.
2.3 Lost or Damaged Certificate
---------------------------
In the case of a lost, destroyed or mutilated certificate, a new one
may be issued therefore upon such terms and indemnity to the
Corporation as the Board may prescribe.
3. Transfer of Shares
------------------
3.1 Transfer
--------
Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
shall be the duty of the Corporation to issue a new certificate to the
person entitled thereto, and cancel the old certificate; every such
transfer shall be entered on the Register of the Corporation.
3.2 Record Owner
------------
The Corporation shall be entitled to treat the holder on record of any
registered share as the holder in fact thereof, and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest
in such share on the part of any other person whether or not it shall
have express or other notice thereof, except as expressly provided by
the Act.
4. Fiscal Year
-----------
The fiscal year of the Corporation shall begin on the 1st day of
January each year.
5. Dividends
---------
The Board may from time to time declare, and the Corporation may pay,
dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law.
6. Seal
----
The Board may provide a corporate seal which shall be circular in form
and shall have inscribed thereon the name of the Corporation, the place
of incorporation and the year of incorporation.
<PAGE>
7. Meetings
--------
7.1 Annual Directors' Meeting
-------------------------
The annual Directors' Meeting of the Corporation shall be held no more
than four (4) months from the date of registration of the Corporation
at such place within Antigua and Barbuda as the Board may determine.
7.2 Annual Shareholders' Meeting
----------------------------
An Annual Shareholders' Meeting of the Corporation shall be held every
year after the incorporation of the Corporation at such time and place
within Antigua and Barbuda as shall from time to time be prescribed by
the Board.
7.3 Special Shareholders' Meeting
-----------------------------
The Board may, whenever it thinks fit, convene a Special Shareho9lders'
Meeting. The Board shall also on the requisition of the holders of not
less than one-twentieth (1/20) of the issued share capital of the
Corporation proceed to convene a special Shareholders' Meeting of the
Corporation.
7.3 Proceedings
-----------
All business shall be deemed special that is transacted at a Special
Shareholders' Meeting, and also that is transacted at any Annual
Shareholders' Meeting, with the exception of the consideration of the
accounts and auditor's report, if any, the election of directors and
the reappointment of any incumbent auditor.
7.5 Quorum
------
No business shall be transacted at any shareholders' meeting unless a
quorum of shareholders is present at the time when the meeting proceeds
to business. Save as is herein otherwise provided, shareholders present
in person or by proxy representing a majority of the Corporation's
shares shall constitute a quorum.
7.6 Chairman
--------
All meetings shall be chaired by a Director appointed by the Board to
act as Chairman.
7.7 Minutes
-------
Minutes of the proceedings of every Annual Shareholders' Meeting shall
be kept, and shall be signed by the Chairman of the same meeting, or by
the Chairman of the next succeeding meeting, and the same, when so
signed, shall be conclusive evidence of all such proceedings and of the
proper election of the Chairman.
7.8 Votes of Shareholders
---------------------
Subject to any rights or restrictions for the time being attached to
any class or classes of shares, every shareholder shall have one vote
for each share of which he is the holder. All elections for directors
shall be decided by majority vote; all other questions shall be decided
by majority vote except as otherwise required by the Act.
7.9 Informal Action by Shareholder
------------------------------
Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at
a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed
by all of the shareholders entitled to vote with respect to the subject
matter thereof.
<PAGE>
7.10 Proxies
-------
Votes may be given either personally or by proxy. The instrument
appointing a proxy shall be in writing under the hand of the appointer
or his attorney duly authorized in writing, or if the appointer is a
corporation, either under seal or under the hand of an officer or
attorney duly authorized. A proxy need not be a shareholder of the
Corporation. The instrument appointing a proxy and the power of
attorney or other authority, if any, under which it is signed or a
certified copy of that power of attorney shall be deposited at the
office or at such other place within Antigua as is specified for that
purpose in the notice convening the meeting.
7.11 Notice of Meeting
-----------------
Written or printed notice stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less that
Twenty-One (21) days before the date of the meeting, either personally
by mail or facsimile, to each shareholder on record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the mail, addressed to the shareholder at his address
as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid.
7.12 Waiver of Notice
----------------
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such
notice.
8. Directors
---------
8.1 Number of Directors
-------------------
Unless and until the Corporation in a General or Special Shareholders'
Meeting shall otherwise determine, the number of Directors shall be
five. Each director shall hold office unless removed as provided in
these presents, until the next Annual Shareholders' Meeting and until
his successor shall have been elected.
8.2 Remuneration of Directors
-------------------------
Each of the Directors shall be paid out of the funds of the Corporation
such remuneration for his services as a director as the Corporation is
an Annual Shareholders' Meeting may from time to time determine. The
directors may also be paid all traveling, hotel and other expenses
properly incurred by them in attending and returning from meetings of
the directors or any committee of the directors or meetings of the
Corporation or in connection with the business of the Corporation.
8.3 Directors with Other Offices and Interests
------------------------------------------
A director may hold any other office or place of profit under the
Corporation and he or any firm of which he is a member may act in a
professional capacity for the Corporation in conjunction with his
office of director of the Corporation for such period and in such terms
as to remuneration and otherwise as the Board may determine. No
director or intending director shall be disqualified by his office from
contracting with the Corporation, either with regard thereto, as a
vendor, purchaser or otherwise, nor shall any such contract, or any
contract or arrangement entered into by or on behalf of the Corporation
in which any director so contracting or being so interested be liable
to account to the Corporation for any profit realized by any such
contract or arrangement by reason of such director holding such office,
or of the fiduciary relationship thereby established so long as the
director notifies the Corporation in accordance with the requirements
of the Act. To the extent permitted by the Act, any director may vote
as a director or shareholder in respect of any such contract or
arrangement; provided that such director must disclose his interest in
the contract or arrangement, the contract or arrangement must be
entered into by the Corporation in an Annual or Special Shareholders'
Meeting, and before the contract or arrangement is so entered into, the
directors must disclose their interests to the meeting.
<PAGE>
8.4 Proceedings of the Board
------------------------
The Board at the request of any Director may meet together for the
dispatch of business, adjourn and otherwise regulate their meetings as
it thinks fit.
8.5 Executive Committee
-------------------
The Board at a duly constituted meeting may by a resolution appoint a
committee from among themselves to be known as an executive committee.
This committee may perform such acts in the name of the Board in the
same fashion as if the Board had acted. The limits of the executive
committee's acts shall be prescribed by resolution of the Board. The
powers of this committee may be changed from time to time by subsequent
resolution of the Board.
8.6 Quorum
------
The quorum necessary for the transaction of the business of the Board
may be fixed by the Board, and unless so fixed shall be one-half (1/2)
of the number of persons then serving as directors. The quorum of any
committee of the Board shall be fixed by the meeting of the Board
appointing such committee and, if not so fixed, then such quorum shall
be fixed by the members of such committee.
8.7 Voting
------
Every question at a meeting of the Board shall (except where otherwise
provided by the Board) shall be determined by a majority of the votes
of the Directors present, every director having one (1) vote.
8.8 Action without a Meeting
------------------------
A resolution may be adopted without any meeting of the Board or of a
committee if evidenced by writing under the hands of all the directors
or of all the members of such committee, and such writing shall be as
valid and effectual as a resolution duly passed at a meeting of the
Board or such committee.
8.9 Powers of the Board
-------------------
The business of the Corporation shall be managed by the Board, who may
exercise all such powers of the Corporation as are not by the Act or by
these By-Laws required to be exercised by the Corporation in an Annual
Shareholders' Meeting, subject nevertheless to any regulation of these
By-Laws, to the provisions of the Act as may be prescribed by special
resolution of the Corporation, but no regulation so made by the
Corporation shall invalidate any prior act of the Board which would
have been valid if such regulation had not been made. The general
powers given by this by-law shall not be limited or restricted by any
special authority or power given to the Board by any other By-Law.
8.10 Appointment of Attorney
-----------------------
The Board may from time to time and at any time, by powers of attorney,
appoint any corporation, firm or person to be the attorneys of the
Corporation for the purpose of executing deeds on behalf of the
Corporation in or outside Antigua and Barbuda and for such periods and
subject to such conditions as they may think fit, and any such power of
attorney may contain such provisions for the protection of persons
dealing with any such attorney as the Board may think fit, and may also
authorize any such attorney to sub-delegate all or any of the powers,
authorities and discretion vested in him.
<PAGE>
8.11 Removal of Director
-------------------
Any director may be removed by a majority vote of the shareholders.
8.12. Resignation of Director
-----------------------
A director may resign at any time by giving written notice to the
Board. Unless otherwise specified in the notice, the resignation shall
take effect upon receipt thereof by the Board and the acceptance of the
resignation shall not be necessary to make it effective.
8.13 Presumption of Assent
---------------------
A director of the Corporation who is present at a meeting of the
directors at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall
be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent
shall not apply to a director who voted in favor of such action.
9. Officers
--------
9.1 Number
------
The officers of the Corporation shall be a president, a vice-president,
a secretary and a treasurer, each of whom shall be elected by the
directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Directors. Any two or more
offices may be held by the same person.
9.2 Election and Term of Office
---------------------------
The officers of the Corporation to be elected by the Board shall be
elected annually at the first meeting of the Board after each Annual
Meeting of the shareholders. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified or
until his death or until he shall resign or shall have been removed in
the manner hereinafter provided.
9.3 Removal
-------
Any officer or agent elected or appointed by the Board may be removed
by the Board whenever in their judgment the best interests of the
Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
9.4 Vacancies
---------
A vacancy in any office because of death, resignation, removal or
disqualification, may be filled by the Board for the unexpired portion
of the term.
9.5 President
---------
The President shall be the principal executive officer of the
Corporation and, subject to the control of the directors, shall in
general supervise and control all of the business affairs of the
Corporation. He may sign, with the secretary or any other proper
officer of the Corporation thereunto authorized by the directors, any
deeds, mortgages, bonds, contracts, or other instruments which the
directors have authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the
directors or by these By-Laws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or
executed; and in general shall perform all duties incident to the
office of president and such other duties as may be prescribed by the
directors from time to time.
<PAGE>
9.6 Secretary
---------
The secretary shall keep the minutes of the shareholders' and of the
directors' meeting in one or more books provided for that purpose, see
that all notices are duly given in accordance with the provisions of
these By-Laws or as required, and be custodian of the Corporate
records.
9.7 Treasurer
---------
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or
sureties as the directors shall determine. He shall have charge and
custody of and be responsible for all funds and securities of the
Corporation; receive and give receipts for moneys due and payable to
the Corporation from any source whatsoever, and deposit all such moneys
in the name of the Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with these By-Laws and
in general perform all of the duties incident to the office of
treasurer and such other duties as from time to time may be assigned to
him by the president or by the Board.
9.8 Salaries
--------
The salaries of the officers shall be fixed from time to time by the
Board and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the Corporation.
10. Accounts
---------
The Board shall cause to be kept such books of account as are necessary
to comply with the provisions of the Act. The books of account shall be
kept at the office or at such other place as the Board thinks fit, and
shall always be open to the inspection of the Board. Any director or
shareholder shall have the right to inspect any account or book or
document of the Corporation. The Board shall from time to time in
accordance with the provisions of the Act cause to be prepared and to
be laid before an Annual Shareholders' Meeting such profit and loss
accounts, balance sheets and reports as may be necessary.
11. Auditors
---------
Auditors may be appointed and their duties regulated in accordance with
the provisions of the Act. Subject to the provisions of the Act, all
acts done by any person acting as an auditor shall, as regards all
persons dealing in good faith with the Corporation, be valid,
notwithstanding that there was some defect in his appointment or that
he was at the time of his appointment not qualified for appointment.
12. Liquidation
------------
If the Corporation shall be wound up (whether the liquidation be
voluntary, under the supervision of or by the Court) the Liquidator
may, with the required authority, divide among the shareholders in
specie or kind the whole or any part of the assets of the Corporation,
and whether or not the assets shall consist of property of one kind or
properties of different kinds, and may for such purpose set such value
as he deems fair upon one or more or classes of property, and may
determine how such different classes of shareholders. The Liquidator
may, with the like authority, vest any part of the assets in trustees
upon such trusts for the benefit of shareholders as the Liquidator with
the like authority shall think fit, and the liquidation of the
Corporation may be closed and the Corporation dissolved.
<PAGE>
13. Amendments
----------
These By-Laws may be altered, amended or repealed and new By-Laws may
be adopted by a vote of the shareholders representing a majority of all
the shares issued and outstanding, at any Annual Shareholders' Meeting
or at any Special Shareholders' Meeting when the proposed amendment has
been set out in the notice of such meeting.
14. Initial Directors
-----------------
The initial Board of Directors shall be composed of:
Terry G. Bowering
Douglas N. Bolen
EXHIBIT 2.3
ORGANISATIONAL MEETING OF NET FORCE ENTERTAINMENT INC. HELD AT THE REGISTERED
OFFICE ON THE 13TH DAY OF AUGUST 1999 AT 11:30 A.M
- --------------------------------------------------------------------------------
Present: Asdak Inc by its Director Alice Roberts
Clovis Grant as Secretary
Alice Roberts called the meeting to order. Alice Roberts acted as Chairman of
the meeting and Clovis Grant acted as Secretary thereof. The persons present
declared their waiver of notice of the time and place of the meeting. The
Chairman stated that a quorum was reached since the sole initial director was
represented.
By-Laws
- -------
The Secretary presented to the meeting the Certificate of Incorporation and Good
Standing and a print of the Articles of Incorporation and By-laws of the Company
as registered with the Executive Director, International Financial Sector
Authority on the 5th August 1999. By motion duly made, seconded and carried it
was resolved that the By-Laws be approved and adopted in the form presented.
Officers
- --------
By motion duly made, seconded and carried it was resolved that the following
persons be appointed officers of the company -
Terry Bowering - President
Douglas Bolen - Secretary
Shares
- ------
By motion duly made, seconded and carried it was resolved that the Board of
Directors be authorized to issue the following shares in the company in the
format attached:
Net Force Systems Inc, St John's, Antigua 100 shares
Banking Arrangements
- --------------------
By motion duly made, seconded and carried it was resolved that
(1) the Company be authorized to open an account or accounts with Swiss American
Bank Ltd, St. John's, Antigua.
(2) the usual banking resolutions required by the Company's bankers for the
operation of accounts by the Company be deemed resolutions duly passed by this
resolution.
(3) all cheques, bills of exchange and other negotiable instruments shall be
signed on behalf of the Company by either Terry Bowering or Douglas Bolen.
There being no further business the meeting ended at 11:45 a.m.
/s/ "Alice Roberts" /s/ "Clovis Grant"
....................... ..........................
Alice Roberts Clovis Grant
Chairman of Meeting Secretary of Meeting
<PAGE>
ANTIGUA AND BARBUDA
The International Business Corporations Act, Cap 222
A Company Limited By Shares
ARTICLES OF INCORPORATION
OF
NET FORCE ENTERTAINMENT INC.
----------------------------
ARTICLE I
NAME
----
The name of the Company is NET FORCE ENTERTAINMENT INC.
ARTICLE II
REGISTERED OFFICE AND AGENT
---------------------------
The registered agent of the Company shall be Caribbean Management & Trust
Company Limited situate at 60 Nevis Street in the city of Saint John, Antigua,
which office shall also Be the registered office of the Company.
ARTICLE III
CAPITAL
-------
The authorized capital of the Company is US$ 100,000.00 divided into 100,000,000
common Shares of US$0.01 each. The Company shall have the power to increase or
reduce said Capital, and to issue any part of it's capital, original on
increased, with or without any Preference, priority, or special privilege, or
subject to any postponement of rights, or to any Conditions or restrictions; and
so that, unless the conditions of issue shall otherwise Expressly declare, every
issue of shares, whether declared to be preference or otherwise, Shall be
subject to the power herein contained.
ARTICLE IV
BOARD OF DIRECTORS
------------------
The Powers of the Company shall be exercised by the Board of Directors of the
Company. The company shall have a minimum of one and a maximum of four
directors.
<PAGE>
2
ARTICLE V
CORPORATE PURPOSE
-----------------
The object for which the Company is established are:-
(a) To engage only in any International betting, gaming, sportsbetting and
bookmaking Permitted by the laws of Antigua and Barbuda and to accept
wagers on sporting Events taking place in the Caricom region from
residents of countries outside the Caricom region.
(b) To acquire and with any property, real or personal, to erect any
buildings, and do All acts and things, which in the opinion of the
Company or the directors, may be Conveniently or profitably, or
usefully, acquired and dealt with, carried on, erected Or done by the
Company in connection with the property.
(c) To generally have and exercise all powers, rights and privileges
necessary and incident to carry out properly the objects herein
mentioned.
(d) With the exception of betting, gaming, sportsbetting, and bookmaking,
the company Shall not engage in International Banking, Trust, or
Insurance or any activity Which requires a Licence under the
International Business Corporations Act
ARTICLE VI
EXISTENCE
---------
The Company shall have perpetual existence unless sooner dissolved in
accordance with the Laws of Antigua and Barbuda. The date on which
corporate existence shall begin in the date On which these Articles of
Incorporation are filed with the Director of International Business
Corporations of Antigua and Barbuda.
ARTICLE VII
LIBIALITY OF SHAREHOLDERS
-------------------------
The liability of a shareholder is limited to the amount, if any unpaid on
the shares held or subscribed to by such shareholder.
ARTICLE VIII
INDEMNITIES
-----------
The Company shall indemnify any and all of its Directors, Officers,
employees or agents or Former Directors, officers, employees or agents or
any person or persons who may have Served at its request as a Director,
officer, employee or agent of another corporation,
3
<PAGE>
partnership, joint venture, trust or other enterprise in which it owns
capital stock or of which it is a creditor, to the full extent permitted by
law; and such indemnity shall include, but not be limited to, the expense,
including the cost of any judgements, fines, settlements and counsel's
fees, actually and necessarily paid or incurred in connection with any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, and any appeals thereof, to which any such person or his
legal representative may be made a party or may be threatened to be made a
party by reason of his being or having been a Director, officer, employee
or agent as herein provided. The foregoing right of indemnity shall not be
exclusive of any other rights to which any Directors, officer, employee or
agent may be entitled as a matter of law or which may be lawfully granted.
ARTICLE IX
CHARTER CONTINUATION
--------------------
The Company is authorized to transfer its charter to any jurisdiction which
permits Continuation of a foreign corporation.
ARTICLE X
SECURITIES
----------
No securities of the Company will be distributed to the public in Antigua
and Barbuda.
ARTICLE XI
INCORPORATORS
-------------
The name and address of the Company's incorporators are;-
CLARE K. ROBERTS, Attorney-at-law, 60 Nevis Street, St.John's, Anitgua
CLOVIS GRANT, Attorney's Clerk, 60 Nevis Street, St. John's Antigua.
Dated this "5th" day of "August", 1999 at St. John's Antigua.
/s/ "Clare K. Roberts" /s/ "Clovis Grant"
............................... ...............................
Clare K. Roberts Clovis Grant
Attorney-at-Law Attorney's Clerk
EXHIBIT 2.4
ANTIGUA AND BARBUDA
The International Business Corporation Act, Cap 222
A Company Limited By Shares
BY-LAWS
OF
NET FORCE ENTERTAINMENT INC.
----------------------------
PRELIMINARY
-----------
In these and other by-laws of the Company, unless the context otherwise
requires -
"Act" means the International Business corporation Act, Cap 222, as
from time to time amended any other enactment for the time being in
force substituted therefore;
"Board" means the board of directors for the time being of the Company;
"Company" means the above-named Company;
"ordinary resolution" means a resolution passed by a majority of the
shares entitled to vote;
"office" means the registered office for the time being of the Company;
and
"Register" means the register of shareholders to be kept as required by
section 130 of the Act.
Unless the context otherwise requires, words and expressions defined in the Act
have the same meanings when used in these By- Laws in particular,
(a) words importing the singular number include the plural and vice-
versa;
(b) words importing gender include the masculine, feminine and neuter
genders; and
(c) words importing a person include an individual, partnership,
association and body corporate and a trustee, executor,
administrator and other personal representative of any person.
5
<PAGE>
SHARES AND SHARE CAPITAL
1.1 ISSUANCE. The issue or allotment of shares shall be under the control
of the Board which may issue the whole or any portion thereof with such
preferred, deferred, special or limited rights as it may think fit.
1.2 PREEMPTIVE RIGHTS. All new issue of unissued shares of whatever kind
shall be offered To the shareholders in proportion to the normal value
of existing shares held by them, And such offer shall be made by notice
specifying the number of shares to which the shareholder is entitled
and limiting a time within which the offer, if not accepted, will be
deemed to be declined; and after the expiration of such time or on the
receipt of an indication from the shareholders to whom such notice is
given that declines to accept the shares so offered, the Board may
dispose of the same in such manner as it deems most beneficial to the
Company.
1.3 ALTERATION OF CAPITAL. The Company may from time to time by ordinary
resolution Increase the share capital by such sum to be divided into
shares of such amount as the Resolution shall prescribe. The Company
may by ordinary resolution:
(a) Consolidate and divide all or any portion of its share capital
into shares of Larger amount than it's existing shares;
(b) Sub-divide it's existing shares, or any of them, into shares of
smaller amount Than is fixed by the Articles of Incorporation
subject, nevertheless, to the Provisions of the Act;
(c) Cancel any shares which at the date of the passing of the
resolution, have not Been taken up or agreed to, be taken up by
any person.
Subject to the provisions of the Act, the Company may by special
resolution reduce Its share capital, any capital redemption reserve fund or any
premium account.
II
SHARE CERTIFICATES AND REGISTER
-------------------------------
2.1 CERTIFICATES. Certificates representing shares of the Company shall be in
such form as Shall be determined by the directors. Such certificates shall be
signed by a director. All Certificates for shares shall be consecutively
numbered or otherwise identified. Certificates May be issued to bearer or in
registered form. Bearer certificates shall be marked as not Transferable to
residents of Antigua and Barbuda.
6
<PAGE>
2.2 REGISTER. The number of shares, the date of issue, the consideration paid,
and the Serial number of each bearer or registered share certificates shall be
entered on the Register Of the Company. In the case of registered shares, the
name and address of the holder shall Also be entered on said Register.
2.3 LOST OR DAMAGED CERTIFICATE. In the case of a lost, destroyed or mutilated
certificate, a New one may be issued therefor upon such terms and indemnity to
the Company as the Board may prescribe.
III
TRANSFER OF SHARES
------------------
3.1 TRANSFER. Upon surrender to the Company or the transfer agent of the Company
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Company to issue a new certificate to the person entitled thereto, and cancel
the old certificate; every such transfer shall be entered on the Register of the
Company. 3.2 Record Owner. The Company shall be entitled to treat the holder of
record of any registered share as the holder in fact thereof, and accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person whether or not it shall have express
or other notice threof, except as expressly provided by the Act.
IV
FINANCIAL YEAR
--------------
4.1 The financial year of the company shall begin on the 1st day of January each
year.
V
DIVIDENDS
---------
5.1 The Board may from time to time declare, and the Company may pay, dividends
on its outstanding shares in the manner and upon the terms and conditions
provided by law.
VI
SEAL
----
6.1 The board may provide a corporate seal which shall have inscribed thereon
the name of the Company, the place of incorporation and year of incorporation.
7
<PAGE>
VII
MEETINGS
--------
7.1 ANNUAL DIRECTORS' MEETING. The Annual Director's Meeting of the Company
shall be held no more than four months from the date of registration of the
Company and at such place within Antigua And Barbuda as the Board may determine.
7.2 ANNUAL SHAREHOLDERS' MEETING. An annual Shareholders' Meeting of the Company
shall be held every year after the incorporation of the Company at such time and
place within Antigua and Barbuda as shall from time to time be prescribed by the
Board.
7.3 SPECIAL SHAREHOLDERS' MEETING. The Board may, whenever it thinks fit,
convene a Special Shareholders' Meeting. The Board shall also on the requisition
of the holders of not Less than one-twentieth of the issued share capital of the
Company proceed to convene a Special Shareholders' Meeting of the Company.
7.4 PROCEEDINGS. All business shall be deemed special that is transacted at a
Special Shareholders' Meeting, and also that is transacted at any Annual
Shareholders' Meeting, with the exception of the consideration of the accounts
and auditor's report, if any, the election of directors and the re- appointment
of any incumbent auditor.
7.5 QUORUM. No business shall be transacted at any shareholders' meeting unless
a quorum of shareholders is present at the time when the meeting proceeds to
business. Save as is herein otherwise provided, shareholders present in person
or by proxy representing a majority of the Company's shares shall constitute a
quorum.
7.6 CHAIRMAN. All meetings shall be chaired by a Director appointed by the Board
to act as Chairman.
7.7 MINUTES. Minutes of the proceedings of every Annual Shareholders' meeting
shall be kept and shall be signed by the Chairman of the same meeting, or by the
Chairman of the next succeeding meeting, and the same, when so signed, shall be
conclusive evidence of all such proceeding and of the proper election of the
chairman.
7.8 VOTES OF SHAREHOLDERS. Subject to any rights or restrictions for the time
being attached to any class or classes of shares, every shareholder shall have
one vote for each share of which he is the holder. All elections for directors
shall be divided by majority vote; all other question shall be decided by
majority vote except as otherwise required by the Act.
7.9 INFORMAL ACTION BY SHAREHOLDER. Unless otherwise provided by l;aw, any
action required to be taken at a meeting of the shareholders, or any other
action which may be taken at a meeting of the shareholders, may be taken without
a meeting if a consent in
8
<PAGE>
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
7.10 PROXIES. Votes may be given either personally or by proxy. The instrument
appointing a proxy shall be in writing under the hand of the appointee or his
attorney duly authorized in writing, or if the appointee is a corporation either
under seal or under the hand of an officer or attorney duly authorized. A proxy
need not be a shareholder of the Company. The instrument appointing a proxy and
the power of attorney or other authority, if any, under which it is signed or a
certified copy of that power or authority shall be deposited at the office or at
such other place within Antigua and Barbuda as is specified for that purpose in
the notice convening the meeting.
7.10 NOTICE OF MEETING. Written or printed notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than twenty-one
days before the date of the meeting, either personally or by mail, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
company, with postage thereon prepaid.
7.11 WAIVER OF NOTICE. Unless otherwise provided by law, whenever any notice is
required to be given to any shareholder, a waiver thereof in writing, signed by
the person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
VIII
DIRECTORS
---------
8.1 NUMBER OF DIRECTORS. Unless and until the Company in a General or Special
Shareholders' Meeting shall otherwise determine, the number of directors shall
be two. Each director shall hold office unless removed as provided in these
presents, until the next Annual Shareholders' Meeting and until his successor
shall have been elected.
8.2 REMUNERATION OF DIRECTORS. Each of the directors shall be paid out of the
funds of the Company such remuneration for his services as a director as the
Company in an Annual Shareholders' Meeting may from time to time determine. The
directors may also be paid travelling, hotel and other expenses properly
incurred by them in attending and returning from meetings of the directors or
any committee of the directors or meetings of the Company in connection with the
business of the Company.
8.3 DIRECTORS WITH OTHER OFFICES AND INTERESTS. A director may hold any other
office or place of profit tinder the Company and he or any firm of which he is a
member may act in a professional capacity for the Company in conjunction with
his office of director of the
9
<PAGE>
Company for such period and on such terms as to remuneration and otherwise as
the Board may determine. No director or intending director shall be disqualified
by his office from contracting with the Company, either with regard thereto, or
as vendor, purchaser or otherwise, nor shall any such contract, or any contract
or arrangement entered into by or on behalf of the Company in which any director
is in any way interested, be liable to be avoided, nor shall any director so
contracting or being so interested be liable to account to the Company for any
profit realized by way of such contract or arrangement by reason of such
director holding such office, or of the fiduciary relationship thereby
established so long as the director notifies the Company in accordance with the
requirements of the Act. To the extent permitted by the Act, any director may
vote as director or shareholder in respect of any such contract or arrangement;
provided that such director must disclose his interest to his co-directors, and
if all the directors be interested in the contract or arrangement, the contract
or arrangement must be entered into by the Company in an Annual or Special
Shareholders' Meeting, and before the contract or arrangement is so entered
into, the directors must disclose their interests to the meeting.
8.4 PROCEEDINGS OF THE BOARD. The Board at the request of any director may meet
together for the dispatch of business, adjourn and otherwise regulate their
meetings as it thinks fit.
8.5 EXECUTIVE COMMITTEE. The Board at a duly constituted meeting may by a
resolution appoint a committee from among themselves to be known as an executive
committee. This committee may perform such acts in the name of the Board in the
same fashion as if the Board had acted. The limits of the executive committee's
acts shall be prescribed by resolution of the Board. The powers of this
committee may be changed from time to time by subsequent resolution of the
Board.
8.6 QUORUM. The quorum necessary for the transaction of the business of the
Board may be fixed by the Board, and unless so fixed shall be one-half of the
number of persons then serving as directors. The quorum of any committee of the
Board shall be fixed by the meeting of the Board appointing such committee and,
if not so fixed, then such quorum shall be fixed by the members of such
committee.
8.7 VOTING. Every question at a meeting of the Board shall (except where
otherwise provided by the Board) be determined by a majority of the votes of the
directors present, every director having one vote.
8.8 ACTION WITHOUT A MEETING. A resolution may be adopted without any meeting of
the Board or of a committee if evidenced by writing tinder the hands of all the
directors or of all the members of such committee, and such writing shall be as
valid and effectual as a resolution duly passed at a meeting of the Board or
such committee.
8.9 POWERS OF THE BOARD. The business of the Company shall be managed by, the
Board, who may exercise all such powers of the Company as are not by the Act or
these By-Laws required to be exercised by the Company in an Annual Shareholders'
Meeting, subject
10
<PAGE>
nevertheless to any regulations of these By-Laws, to the provisions of the Act
and to such regulations being not inconsistent with the provisions of the Act as
may be prescribed by special resolution of the Company, but no regulation so
made by the Company shall invalidate any prior act of the Board which would have
been valid if such regulation had not been made. The general powers given by
this By-Law shall not be limited or restricted by any special authority or power
given to the Board by any other By-Law.
8.10 APPOINTMENT OF ATTORNEY. The Board may from time to time and at any time,
by power of attorney, appoint any company, firm or person to be the attorney or
attorneys of the Company for the purpose of executing deeds on behalf of the
Company in or outside Antigua and Barbuda and for such periods and subject to
such conditions as they may think fit, and any such power of attorney may
contain such provisions for the protection of persons dealing with any such
attorney as the Board may think fit, and may also authorize any such attorney to
sub-delegate all or any of the powers, authorities and discretions vested in
him.
8.11 REMOVAL OF DIRECTOR. Any director may be removed by a majority vote of the
shareholders.
8.12 RESIGNATION OF DIRECTOR. A director may resign at any time by giving
written notice to the Board. Unless otherwise specified in the notice, the
resignation shall take effect upon receipt thereof by the Board and the
acceptance of the resignation shall not be necessary to make it effective.
8.13 PRESUMPTION OF ASSENT. A director of the Company who is present at a
meeting of the directors at which action on any company matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall rile his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the secretary of the Company immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favour
of such action.
OFFICERS
--------
9.1 NUMBER. The officers of the Company shall be president, a secretary and a
treasurer, each of whom shall be elected by the directors. Such other officers
and assistant officers as may be deemed necessary may be elected or appointed by
the directors. Any two or more offices may be held by the same person.
9.2 ELECTION AND TERM OF OFFICE. The officers of the Company to be elected by
the Board shall be elected annually at the first meeting of the Board held after
each Annual Meeting of
11
the shareholders. Each officer shall hold office until his successor shall have
been duly elected and shall have qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided.
9.3 REMOVAL. Any officer or agent elected or appointed by the Board may be
removed by the Board whenever in their judgement the best interests of the
Company would be served thereby, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed.
9.4 VACANCIES. A vacancy in any office because of death, resignation, removal or
disqualification, may be filled by the Board for the unexpired portion of the
term.
9.5 PRESIDENT. The president shall be the principal executive officer of the
Company and, subject to the control of the directors, shall in general supervise
and control all of the business and affairs of the Company. He may sign, with
the secretary or any other proper officer of the Company thereunto authorized by
the directors, any deeds, mortgages, bonds, contracts, or other instruments
which the directors have authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the directors or
by these by-laws to some other officer or agent of the Company, or shall be
required by law to be otherwise signed or executed; and in general shall perform
all duties incident to the office of president and such other duties as may be
prescribed by the directors from time to time.
9.6 SECRETARY. The secretary shall keep the minutes of the shareholders' and of
the directors' meetings in one or more books provided for that purpose, see that
all notices are duly given in accordance with the provisions of these BY-Laws or
as required, and be custodian of the Company records.
9.7 TREASURER. If required by the directors, the treasurer shall give a bond for
the faithful discharge of his duties in such sum and with such surety or
sureties as the directors shall determine. He shall have charge and custody of
and be responsible for all funds and securities of the Company; receive and give
receipts for moneys due and payable to the Company from any source whatsoever,
and deposit all such moneys in the name of the Company in such banks, trust
companies or other depositories as shall be selected in accordance with these
By-Laws and in general perform all of the duties as from time to time may be
assigned to him by the President or by the Board.
9.8 SALARIES. The salaries of the officers shall be fixed from time to time by
the Board and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the Company.
12
<PAGE>
X
ACCOUNTS
--------
10.1 The Board shall cause to be kept such books of account as are necessary to
comply with the provisions of the Act. The books of account shall be kept at the
office or at such other place as the Board thinks fit, and shall always be open
to the inspection of the Board. Any director or shareholder shall have the right
to inspect any account or book or document of the Company. The Board shall from
time to time in accordance with the provisions of the Act cause to be prepared
and to be laid before an Annual Shareholders' Meeting such profit and loss
accounts, balance sheets and reports as may be necessary.
XI
AUDITORS
--------
11.1 Auditors may be appointed and their duties regulated in accordance with the
provisions of the Act. Subject to the provisions of the Act, all acts done by
any person acting as an auditor shall, as regards all persons dealing in good
faith with the Company, be valid, notwithstanding that there was some defect in
his appointment or that he was at the time of his appointment not qualified for
appointment.
XII
LIOUIDATION
-----------
12.1 If the Company shall be wound up (whether the liquidation be voluntary,
under the supervision of or by the Court) the liquidator may, with the required
authority, divide among the shareholders in specie or kind the whole or any part
of the assets of the Company, and whether or not the assets shall consist of
property of one kind or properties of different kinds, and may for such purpose
set such value as he deems fair upon one or more or classes of property, and may
determine how such division shall be carried out as between shareholders or
different classes of shareholders. The Liquidator may, with the like authority,
vest any part of the assets in trustees upon such trusts for the benefit of
shareholders as the Liquidator with the like authority shall think fit, and the
liquidation of the Company may be closed and the Company dissolved.
13
<PAGE>
XIII
AMENDMENTS
----------
13.1 These By- Laws may be altered, amended or replaced and new By-Laws may be
Adopted by a vote of the shareholders representing a majority of all the shares
issued and Outstanding, at any, Annual Shareholders' Meeting or at any Special
Shareholders' Meeting When the proposed amendment has been set out in the notice
of such meeting.
XIV
INITIAL DIRECTORS
-----------------
14.1 The initial Board of Directors shall be composed of the following members;-
ASDAK INC.
NET FORCE ENTERTAINMENT INC
Nevis Street, St.John's, Antigua
RESOLUTION OF SOLE SHAREHOLDER
IT IS RESOLVED THAT
(1) Asdak Inc be removed as a director of the company with immediate effect.
(2) the following persons be appointed as directors of the company with
immediate effect:
Terry G. Bowering
Douglas N. Bolen
Dated the "17th" day of August 1999
NET FORCE SYSTEMS INC
"Terry G. Bowering"
By................................
EXHIBIT 6.1
SOFTWARE LICENSE AGREEMENT
THIS AGREEMENT is entered into this 31st day of July, 1999,
BETWEEN:
NET-FORCE ENTERTAINMENT INC., with registered offices in St. John's
Antigua, West Indies;
(hereinafter referred to as the "Licensee")
AND
SOFTEC SYSTEMS CARIBBEAN INC. with offices at 1589 Newgate Street, St.
John's Antigua, West Indies;
(hereinafter referred to as "Softec")
WHEREAS,
A. Softec owns rights to Internet casino software (the "Software");
B. Softec wishes to license the Software to other companies;
C. Softec wishes to provide a complete computer hardware and software
package that the Licensee may use to operate an Internet gaming site;
and,
D. The Licensee wishes to license the Software and make use of Softec's
computer hardware in order to operate an Internet gaming site.
NOW THEREFORE, in consideration of the premises and mutual covenants herein set
forth, the parties agree as follows:
1. GENERAL PROVISIONS
- -- ------------------
1.1 DEFINITIONS
1.1.1 "Licensed Software" shall mean a licensed data processing
program or micro program consisting of a series or sequence of
signals, or instructions, statements, or fonts stored on any
media in machine readable form, and any related licensed
materials such as, but not limited to, graphics, flow charts,
logic diagrams, manuals, and listing made generally available
by Softec for use in connection with the licensed programs.
The Licensed Software shall consist of not more than 2
casinos, one with an adult theme (where a license is
available), and one with a non-adult theme (collectively, the
"Casino"). The Casino shall have various games of chance which
includes, but are not limited to, blackjack, roulette, pai gow
poker, video poker and slot machine and other games as added
from time to time, based on a theme chosen by the Licensee, a
sportsbook web site within the gaming site, an HTML version of
the sportsbook, and a lottery ticket distribution web site.
1.1.2 "Net Monthly Revenue" shall mean, for any given calendar
month, the total amount wagered in the casino, horse track and
the sportsbook, less winnings in the Casino, horse track and
the sportsbook, PLUS, total sales of lottery tickets, less the
invoiced cost for purchasing lottery tickets for the lottery
ticket sales, PLUS, any membership fees or additional fees
that may be charged by the Licensee that are not related to
currency conversion or transaction processing.
1.1.3 "Hardware" shall mean all the necessary computers, routers,
cabling, monitors, hard drives, back-up systems, and other
equipment, as determined by Softec in its absolute discretion,
located at its offices in St. John's Antigua, Vancouver,
Canada, or other locations designated by Softec as may be
required in order to properly store, distribute and run the
Licensed Software.
<PAGE>
1.1.4 "Games" shall mean the casino style games, sportsbook,
lottery, and pari-mutuel games that are played using the
Licensed Software and are available from time to time.
1.1.5 "Downloadable Software" shall mean the portion of the Licensed
Software that must be resident on a customer's computer in
order for the customer to access and play the Games.
1.1.6 "Master CD" shall mean the compact disc containing the
Downloadable Software that may be used to mass-produce compact
discs for delivery to the Licensee's customers.
1.1.7 "Customer Information" shall mean all data collected and
stored on customers including, without limiting the generality
of the foregoing, name, address, phone and fax number, e-mail
address, credit card numbers and expiration dates or
information on other types of payments, amounts wagered and
frequency of wagering.
1.1.8 "Confidential Information" shall mean material in the
possession of Softec which is not generally available to or
used by others or the utility or value of which is not
generally known or recognized as standard practice, including,
without limitation, all financial business and personal data
relating to Softec's clients, any non-public information about
affiliates, subsidiaries, consultants and employees of Softec
or its affiliates, business and marketing plans, strategies
and methods, studies, charts, plans, tables and compilations
of business industrial information, computer software and
computer technology whether patentable, copyrightable or not,
which is acquired or developed by or on behalf of Softec or
its affiliates from time to time.
1.2 RIGHT TO AUDIT
1.2.1 The Licensee shall, within reason, have the right, without
prior notice to Softec to inspect and audit all Softec's
business, accounting and supporting records that are necessary
for purposes of determining Softec's compliance with the terms
of this Agreement. Softec shall fully co-operate with any
independent chartered accountants or certified public
accountants hired by the Licensee to conduct any such
inspection or audit. If any such inspection or audit discloses
an under statement of less than 3% for any period, Softec
shall pay, within ten days after receipt of the inspection or
audit report, the sums due on account of such understatement
with interest calculated at U.S. prime plus one percent.
Further, if such inspection or audit is made necessary by
failure of Softec to furnish invoice reports or any other
documentation as herein required, or if an understatement for
any period is determined by such inspection or audit to be 3%
or greater, Softec shall, on demand and in any event within
the said ten days, in addition to paying the sums due on
account of such understatement, also reimburse for the cost of
such inspection or audit, including without limitation, the
charges of any independent chartered accountants or certified
public accountants retained by the Licensee in connection with
such audit or inspection and the reasonable travel expenses,
room, board and compensation of employees of the Licensee.
1.2.2 The Licensee's right to audit records shall only extend to
records that date back no more than two of Softec's fiscal
years prior to the date Softec receives notice of an impending
audit.
<PAGE>
1.3 INDEMNIFICATION
1.3.1 The Licensee acknowledges and agrees that neither Softec nor
any of its members, shareholders, directors, officers,
employees or representatives will be liable to the Licensee or
any of the Licensee's customers for any special, indirect,
consequential, punitive or exemplary damages, or damages for
loss of profits or savings, in connection with this Agreement,
the services or the Hardware or any other information,
material or services provided by Softec to the Licensee under
this Agreement. If, despite the foregoing limitations, Softec
or any of its shareholders, directors, officers, employees or
representatives should become liable to the Licensee or any
other person (a "Claimant") in connection with this Agreement,
then the maximum aggregate liability of Softec, its members,
shareholders, directors, officers, employees and
representatives for all such things and to all such parties
will be limited to the lesser of the actual amount of loss or
damage suffered by the Claimant or the amount of the
Licensee's fees payable by the Licensee to Softec for the six
months prior to the loss.
1.3.2 The Licensee shall indemnify and save harmless Softec and its
members, shareholders, directors, officers, employees, agents,
contractors, representatives, parent company, or subsidiaries
(together, the "Indemnified Parties") from and against all
damages, losses, costs and expenses (including actual legal
fees and costs), fines and liabilities incurred by or awarded
asserted or claimed against any of the Indemnified Parties by
any licensing or government agency who licenses, regulates, or
otherwise governs the licensing or use of Internet gambling in
connection with the Licensee's activities under this
Agreement, including claims brought by a person using or
relying upon any advice given or publication produced and
distributed by the Licensee.
1.3.3 Notwithstanding anything in this Section 1.3, if Softec is
found guilty of fraud in executing its' obligations under this
Agreement, the Licensee shall not be responsible for any
indemnification of the Indemnified Parties to the extent that
the fraud has caused there to be damages.
1.4 DISRUPTIONS
1.4.1 The Licensee acknowledges that from time to time, as a result
of Hardware failure, supplier failures, or acts of God, the
services provided under this Agreement by Softec can be
temporarily disrupted. The Licensee acknowledges and agrees
that neither Softec nor any of its members, shareholders,
directors, officers, employees or representatives will be
liable to the Licensee or any of the Licensee's customers for
any special, indirect, consequential, punitive or exemplary
damages, or damages for loss of profits or savings, in
connection with these temporary disruptions. For the purpose
of this section, if the services provided under this Agreement
by Softec are temporarily disrupted for seven days within any
one-month period, the minimum monthly fees as calculated in
section 1.7.3 shall be reduced on a pro rata basis.
1.4.2 The Licensee acknowledges that Softec's ability to perform its
obligations under this Agreement are subject to government
licensing in whatever jurisdiction Softec may choose to
operate. Softec shall not be held liable for any damages of
any kind whatsoever that may result from changes in government
legislation or policy.
<PAGE>
1.5 CONDITIONS OF LICENSE
This license is granted under the following conditions:
1.5.1 The Licensee acknowledges that its rights in and to the
Licensed Software may not be assigned, licensed or otherwise
transferred by operation of law without the prior written
consent of Softec. Violation of this section is grounds for
immediate termination of this Agreement.
1.5.2 Copyright and other proprietary rights of Softec protect the
Licensed Software. The Licensee may be held directly
responsible for acts relating to the Licensed Software which
are not authorized by this Agreement.
1.5.3 All right, title and interest in and to the Licensed Software,
and any copies thereof, and all documentation, code and logic,
which describes and/or comprises the Licensed Software remains
the sole property of Softec.
1.5.4 Softec shall not be responsible for failure of performance of
this Agreement due to causes beyond its control, including,
but not limited to, work stoppages, fires, civil disobedience,
riots, rebellions, acts of God, and similar occurrences.
1.5.5 The sportsbook "format" shall remain standard, and will not be
materially altered from Softec's standard sportsbook
facilities. Format shall refer to the tabular presentation of
the sports information making up the sportsbook look and feel
and shall not include the graphics that may be added in order
to personalize it.
1.5.6 The Licensee acknowledges that this is a non-exclusive
agreement and that Softec will license the Licensed Software
to as many other parties as are willing to enter into a
licensing agreement with Softec.
1.5.7 The Licensee shall supply to Softec an irrevocable letter of
credit in the amount of $100,000 U.S. An appropriate amount of
these funds shall be released to Softec in the event the
Licensee should become unable or unwilling to pay for any
legitimately invoiced amounts. This security shall only be
used to remedy non-payment of legitimate invoices, and cannot
be applied by Softec to any other alleged breaches of this
Agreement. This section shall only become effective upon the
Licensee achieving in any one month Net Monthly Revenue of
$1,000,000 or greater.
1.5.8 The Licensee shall be responsible for ensuring that they are
operating the Licensed Software in compliance with any and all
applicable state, provincial, national, and international
laws.
1.5.9 The Licensee shall provide Softec with all documentation
necessary to show that the Licensee has obtained any and all
necessary licenses in order to operate an Internet casino
and/or Sportsbook in the jurisdiction in which the Licensee
chooses to operate.
1.5.10 It is the policy of Softec to prevent the use of the Licensed
Software for use as a "money laundering" vehicle. The Licensee
warrants that they will undertake all reasonable efforts to
prevent persons from using the Licensed Software for use as a
money-laundering vehicle. If it is revealed that the Licensee
is purposely allowing or is willfully blind to money
laundering, Softec may terminate this agreement without
notice.
1.5.11 The Licensee shall not accept wagers from persons residing in
Canada and shall implement all measures stipulated by Softec
to ensure that persons residing in Canada are not able to
wager utilizing the Licensed Software.
<PAGE>
1.6 TERM AND TERMINATION
1.6.1 This Agreement shall commence and be deemed effective on the
date when fully executed (the "Effective Date"). This
Agreement is in effect for a period of one-year (the "Term")
and shall be automatically renewed indefinitely with
additional one year terms unless the Licensee gives written
notice of termination of this Agreement at least 45 days prior
to the end of any one year period.
1.6.2 Softec may terminate this Agreement by giving written notice
to the Licensee at least six months prior to the end of any
one year term provided, however, Softec shall not give notice
of termination in the first year of this Agreement.
1.6.3 Softec may terminate this Agreement at any time upon five days
notice if the Licensee is more than 30 days in arrears in
paying any material monthly fees due and owing to Softec. The
Licensee shall be allowed to cure the breach during the notice
period, thus pre-empting Softec's ability to terminate this
Agreement in accordance with this section. The arrears
contemplated in this section must be of a material amount for
this section to be used by Softec. For the purposes of this
section, material shall mean anything greater than 5% of the
previous month's fees.
1.6.4 Softec may terminate this Agreement at any time upon five days
notice if the Licensee becomes bankrupt or insolvent or ceases
carrying on business for any reason.
1.6.5 The Licensee may terminate this Agreement at any time upon
five days notice if Softec becomes bankrupt or insolvent or
ceases carrying on business for any reason.
1.6.6 The Licensee may, inter alia, terminate this Agreement at any
time upon five days notice if Softec is materially in breach
of this Agreement for more than 30 days. Softec shall be
allowed to cure the breach during the notice period, thus
pre-empting the Licensee's ability to terminate this Agreement
in accordance with this section.
1.6.7 Softec may terminate this Agreement at any time upon five days
notice if Softec, or any of its principals, officers or
Directors becomes the subject of third party civil or criminal
litigation as a result of the Licensee's operations under this
Agreement. The litigation contemplated herein must be
material, and found to be of a serious nature by independent
legal counsel.
1.6.8 Upon termination of this Agreement, the Licensee shall
immediately return to Softec any and all of Softec's materials
which Softec has a proprietary right in that are in the
Licensee's possession and/or in the possession of the
Licensee's agents, servants and employees.
1.6.9 Upon termination of this Agreement, all Customer Information
shall be given to the Licensee and Softec shall not make use
of or disclose any Customer Information to any third party.
1.6.10 Upon termination of this Agreement for any reason, any
security given by the Licensee shall be returned to the
Licensee within thirty days of termination, provided however
that if there are any outstanding invoiced amounts (as per
section 1.5.7) against the Licensee, sufficient security shall
be retained in order to pay for those claims.
<PAGE>
1.7 Remuneration
1.7.1 The Licensee shall pay to Softec a non-refundable one-time fee
of $100,000 U.S. for the development of the graphical front
end of the gaming site and all set-up costs. This payment
shall be paid in accordance with the following schedule:
o $ 10,000 per month for ten months with the first payment
being made three months from the date of the 3
acceptance of the first wager using the Licensed
Software.
1.7.2 The Licensee shall pay to Softec a monthly fee based on a
percentage of the Net Monthly Revenue. The fee shall be paid
in accordance with Schedule A of this Agreement. The fees
shall commence when the Licensee accepts a wager utilizing the
Licensed Software.
1.7.3 Notwithstanding any amount due and owing in accordance with
Schedule A of this Agreement, the Licensee shall pay to Softec
a minimum of $25,000 per month. This section shall come into
effect 120 days from the acceptance of the first wager
utilizing the Licensed Software.
1.7.4 All monthly payments shall be delivered to Softec by the 15th
of each month in payment for the previous month's activity.
1.8 CONFIDENTIALITY
1.8.1 The Licensee shall not disclose, publish, or disseminate
Confidential Information to anyone other than those of its
employees or others with a need to know, and the Licensee
agrees to take reasonable precautions to prevent any
unauthorized use, disclosure, publication, or dissemination of
Confidential Information. The Licensee agrees not to use
Confidential Information otherwise for its own or any third
party's benefit without the prior written approval of an
authorized representative of Softec in each instance.
1.8.2 Softec shall not disclose, publish, or disseminate Customer
Information to anyone other than those of its employees with a
need to know, and Softec agrees to take reasonable precautions
to prevent any unauthorized use, disclosure, publication, or
dissemination of Customer Information. Softec agrees not to
use Customer Information otherwise for its own or any third
party's benefit without the prior written approval of an
authorized representative of the Licensee in each instance.
1.8.3 All Confidential Information, and any Derivatives thereof
whether created by Softec or the Licensee, remains the
property of Softec and no license or other rights to
Confidential information is granted or implied hereby. For
purposes of this Agreement, "Derivatives" shall mean: (a) for
copyrightable or copyrighted material, any translation,
abridgement, revision or other form in which an existing work
may be recast, transformed or adapted; (b) for patentable or
patented material, any improvement thereon; and (c) for
material which is protected by trade secret, any new material
derived from such existing trade secret material, including
new material which may be protected by copyright, patent
and/or trade secret.
1.8.4 Notwithstanding anything in this Section 1.8, Softec shall be
allowed to use Customer Information for the purpose of
fulfilling its reporting obligations as a public company.
Softec shall also be allowed to use Customer Information in a
statistical form so long as it does not identify individuals
or specific companies.
1.8.5 The Licensee shall not disclose the contents of this Agreement
to any third party who is not bound to maintain
confidentiality between the parties. The Licensee acknowledges
that disclosure of the terms of this Agreement to third
parties would cause considerable damage to Softec and its
parent company, Starnet Communications International Inc.
<PAGE>
2. OBLIGATIONS OF THE LICENSOR
- -- ---------------------------
2.1 HARDWARE
2.1.1 Softec shall supply the Hardware as defined in this Agreement.
2.1.2 Softec shall maintain the Hardware and pay all costs for
maintaining and/or upgrading the Hardware.
2.1.3 Softec shall supply the office space required to house the
Hardware.
2.1.4 The Hardware shall, at all times, remain the property of
Softec.
2.1.5 Softec shall supply an appropriate connection to the Internet
with sufficient bandwidth to properly operate the Licensed
Software. The Licensee shall pay for all bandwidth associated
only with those customers that are not playing the Games using
real money and for the downloading of the Licensed Software
via the Internet, and for any related marketing via the
Internet. Bandwidth shall be charged to the Licensee at market
rates.
2.1.6 Softec shall not be required to maintain a redundant site.
2.1.7 Softec shall make all reasonable efforts to repair and correct
any problems arising under Softec's areas of responsibility
that may arise from time to time which would cause it to be
unable to perform its' obligations under this Agreement (see
section 1.5.4).
2.1.8 Softec shall notify the Licensee of any problems that may
arise from time to time and shall keep the Licensee apprised
of any efforts undertaken to rectify the problem.
2.1.9 The Hardware shall be located only in places where Internet
gambling may be operated legally and where the Licensee has
obtained all necessary licenses to conduct online gaming.
2.2 THE LICENSED SOFTWARE
2.2.1 Softec shall install the Licensed Software on the Hardware.
2.2.2 Softec shall allow all of the Licensee's customers and all
persons who seek to be licensee's customers Internet access to
the Licensed Software.
2.2.3 Softec shall allow the Licensee's customers to download
directly from the server the Downloadable Software necessary
for the Licensee's customer to play the Games.
2.2.4 Softec shall supply to the Licensee a single Master CD
containing the Downloadable Software.
2.2.5 Softec may from time to time, at its discretion, create
additional games, which can be added to the Licensed Software.
If additional games become available, the Licensee may request
to have the additional games added to the Licensed Software at
no additional licensing cost to the Licensee.
2.2.6 Softec may from time to time, at its discretion, translate
part or all of the Games into other languages, which can be
added to the Licensed Software. If additional languages become
available, the Licensee may request to have the additional
languages added to the Licensed Software at no cost to the
Licensee.
2.2.7 Notwithstanding anything stated in this section 2.2, any
changes requested by the Licensee to be made to the graphics
portion of the Licensed Software, shall be charged to the
Licensee at market rates.
2.2.8 Notwithstanding anything stated in this section 2.2, any
changes made to the Master CD at the Licensee's request will
be billed to the Licensee at market rates, plus a $100.00 U.S.
administration fee. Softec retains the right to refuse to make
the requested changes.
<PAGE>
2.2.9 Softec shall only be required to provide the Licensed Software
in the English language only.
2.2.10 Softec will provide all upgrades of the Licensed Software that
do not require changes to the graphical interface, at no
charge to the Licensee.
2.2.11 All upgrades are to be made available to the Licensee within
30 days of the completion of testing.
2.2.12 The Licensee may operate the Casino on as many separate URL's
as the Licensee wants, with no additional licensing fee to be
paid.
2.2.13 Softec warrants that the Licensed Software correctly
implements algorithms, which are in accordance with the rules
and payouts, which may be displayed on the screen at any time
by the player. Pseudo-random numbers used by the software for
the purposes of choosing game outcomes and shuffling cards are
generated in an unbiased manner.
2.2.14 Notwithstanding anything in this Agreement, the Licensee shall
not operate more than two casinos with different names and/or
different graphics.
2.3 FINANCIAL TRANSACTIONS
2.3.1 Softec shall provide a transaction processing system that will
allow the Licensee's customers to deposit funds for use of the
Games (the "Transaction Processing System"). The Licensee's
customers will be able to deposit funds via the Internet
through the use of Visa, Master Card, or American Express
credit cards. Other methods of payment may be made available
from time to time at Softec's discretion, at a cost to the
Licensee to be agreed upon at the time.
2.3.2 Softec shall only be responsible for processing credit card
debits and credits for which the Licensee holds the
appropriate merchant number accounts.
2.3.3 The Licensee shall be responsible for all aspects of
collecting and paying funds, in accordance with this
Agreement.
2.3.4 The Licensee shall have no rights whatsoever in the
Transaction Processing System.
2.4 TECHNICAL SUPPORT
2.4.1 Softec shall supply 24-hour technical support for the
Licensee's customers and for the Licensee.
2.4.2 Softec shall make the Technical support available via the
Internet and via toll free telephone lines.
2.4.3 Softec shall determine the number of people acting as
technical support and the number of incoming telephone lines
for technical support in its absolute discretion.
2.4.4 Technical support offered via the telephone shall be in
English language only.
2.5 ACCOUNTING
2.5.1 Softec shall maintain records of all transactions and wagers
placed utilizing the Licensed Software.
<PAGE>
2.5.2 The Licensee shall pay a flat fee of $100.00 US plus all
reasonable hourly administration fees and disbursements,
including printing, photocopying and shipping costs, each time
accounting information is requested. Administration fees shall
be paid at market prices. No fees are payable for regular
accounting information provided to the Licensee for the
purpose of calculating Net Revenue.
2.5.3 Softec shall supply a complete accounting record, as defined
by Softec from time to time, of the previous month's activity
relating to the Licensed Software within ten working days of
the end of each month. The accounting records shall be
delivered either by facsimile or by e-mail.
2.5.4 Softec shall provide daily interim accounting reports, as
defined by Softec from time to time. The daily interim
accounting records shall be delivered either by facsimile or
by e-mail.
2.5.5 Softec shall have the right to utilize the accounting
information for statistical and reporting purposes provided
specific information about the Licensee is not disclosed.
2.5.6 Softec shall archive and maintain the accounting information
for a period of 2 fiscal years.
2.5.7 Softec, at its discretion, may destroy any portion of the
accounting information that Softec deems to be no longer
relevant.
2.5.8 The Licensee shall be given thirty days written notice prior
to the destruction of any accounting information. The Licensee
may choose to archive information about to be destroyed, at
its own facilities.
2.6 CUSTOMER DATA
2.6.1 Softec shall maintain a database containing the Customer
Information.
2.6.2 The Customer Information shall remain the property of the
Licensee.
2.6.3 Softec shall provide daily interim Customer Information
reports, as defined by Softec from time to time.
2.6.4 The Licensee shall pay a fee of $100.00 US plus all reasonable
hourly administration fees and disbursements, including
printing, photocopying and shipping costs, each time
additional Customer Information is requested. Administration
fees shall be paid out at market prices.
2.6.5 Softec shall have the right to utilize the Customer
Information for any purpose that does not conflict with the
Licensee's marketing of the Licensed Software. Under no
circumstances shall Softec utilize the Customer Information in
the marketing of any gaming site being operated by a
subsidiary of Starnet Communications International Inc.,
Softec's parent company.
2.6.6 Softec shall archive and maintain the Customer Information for
a period of two years.
2.6.7 Softec, in its discretion, may destroy any portion of the
Customer Information that Softec deems to be no longer
relevant.
2.6.8 The Licensee shall be given thirty days written notice prior
to the destruction of any Customer Information. The Licensee
may choose to archive information about to be destroyed, at
its own facilities.
<PAGE>
2.7 THE GAMES
2.7.1 The lottery tickets and play options available in the lottery
web site shall be determined from time to time by Softec in
its sole discretion.
2.7.2 Softec shall determine the odds for the casino from time to
time. The Licensee shall be responsible for setting the odds
for the sportsbook and the HTML sportsbook, from time to time,
in its sole discretion.
2.7.3 The Licensee shall determine the betting limits for both the
casino sportsbook and the HTML sportsbook, from time to time,
in its sole discretion. The Licensee may choose zero as a
betting limit.
2.7.4 The Licensee, in its sole discretion, shall determine the
betting limits for the Games. The Licensee may choose zero as
a betting limit.
2.7.5 Softec shall determine the games available in the casino and
both versions of the sportsbook, from time to time, in its
sole discretion.
2.7.6 Softec shall determine the lottery tickets available in the
casino as well as the forms of play, from time to time, in its
sole discretion.
2.7.7 Softec shall only supply the Games that the Licensee has
appropriate licenses to operate.
3. OBLIGATIONS OF THE LICENSEE
- -- ---------------------------
3.1 LICENSES
3.1.1 The Licensee shall be responsible for obtaining and
maintaining all necessary licenses for the operation of an
Internet Casino and an Internet Sportsbook operation, or
whichever the Licensee intends to operate, in a location where
Softec maintains Hardware.
3.1.2 Softec shall recommend a lawyer in Antigua that can assist the
Licensee in obtaining, an Internet casino license as required
by the Antigua Free Trade Zone.
3.2 MERCHANT NUMBERS
3.2.1 The Licensee shall be responsible for obtaining and
maintaining appropriate merchant numbers for the processing of
Visa, Master Card American Express credit cards and any other
credit card the Licensee may obtain merchant numbers for (the
"Merchant Numbers").
3.2.2 Notwithstanding that from time to time, Softec may make
merchant numbers available to the Licensee through another
subsidiary of Starnet Communications International Inc.
("SCII"), neither Softec nor SCII, nor any other subsidiary of
SCII shall be responsible for maintaining or continuing to
provide merchant numbers.
3.3 MARKETING
3.3.1 The Licensee shall be responsible for all marketing of the
services offered through the Licensed Software.
3.3.2 The Licensee shall spend on a monthly basis, a minimum of 15%
of the previous month's Net Revenue on marketing and promoting
the Licensee's gaming site.
3.3.3 Softec is not responsible for tracking or maintaining any
records or data with respect to marketing. The Licensee shall
be allowed access to the Hardware for the purpose of tracking
and maintaining marketing data.
3.3.4 The Licensee shall be responsible for all aspects of customer
service, including, but not limited to dealing with customer
complaints and paying out winnings, provided that the Licensee
has and is using its own credit card merchant accounts.
<PAGE>
3.4 DISTRIBUTION OF SOFTWARE
3.4.1 The Licensee shall be responsible for the production and
distribution of compact discs containing the Downloadable
Software.
3.4.2 The Licensee shall not alter the Licensed Software as supplied
on the Master CD in any way.
3.4.3 The Licensee shall ensure that the packaging for the Licensed
Software, as well as any logo imprinted on the compact disk,
shall display all proprietary rights symbols such as Copyright
and Trademark, as supplied by Softec (the "Symbols"). The
Symbols shall be of the exact same size and font as supplied
by Softec.
3.5 REGULATORY ISSUES
3.5.1 The Licensee shall be solely responsible for determining which
jurisdictions they choose to market to and receive wagers
from.
3.5.2 The Licensee shall be responsible for determining the legality
of accepting wagers in whichever jurisdictions they choose to
market to and receive wagers from.
3.5.3 The Licensee shall indemnify Softec for any reasonable legal
costs, and fines that arise as a result of the Licensee
choosing to accept wagers from any jurisdiction that
determines or has determined that Internet wagering is
illegal.
3.6 THE WEB SITE
3.6.1 The Licensee shall construct and maintain the entire web
site(s) where the Downloadable Software is to be made
available to the Licensee's customers (the "Web Sites").
3.6.2 The Licensee shall pay for any and all Uniform Resource
Locators ("URL's") that the Licensee deems necessary to
properly market the Licensed Software.
3.6.3 The Licensee shall ensure that the Web Sites shall display a
statement that the software is licensed, as well as all
proprietary rights symbols such as Copyright and Trademark, as
supplied by Softec (the "Symbols"). The Symbols shall be of
the exact same size and font as supplied by Softec.
3.6.4 The Licensee shall have the right to add as many URL's that
are dedicated solely to the promotion of the Licensee's gaming
site as the Licensee deems necessary.
3.6.5 The Licensee shall have the right to make any changes to the
Web Sites the Licensee feels appropriate. All changes that are
effected by Softec will be charged to the Licensee at market
rates.
3.6.6 If requested, Softec shall construct and maintain any and all
additional web sites the Licensee deems necessary for the
marketing of the Licensed Software. All work done to build
additional web sites shall be charged to the Licensee at
market rates.
3.6.7 Softec shall not in any way be responsible for the design of
the Web Sites utilized by the Licensee.
3.6.8 The Licensee shall include in their Terms and Conditions of
Play for the Licensed Software the Terms and Conditions that
are recommended by Softec. The Licensee may embellish or add
to these Terms and Conditions. If the Licensee does not
implement the minimum required Terms and Conditions, in so far
as the Terms and Conditions would have protected the Licensee,
Softec shall not be responsible to the Licensee,
notwithstanding anything in this Agreement.
<PAGE>
4 STANDARD CLAUSES
------------------
4.1 NOTICES
Unless otherwise provided in this Agreement, any notice provided for
under this Agreement shall be in writing and shall be sufficiently given
if delivered personally, or if transmitted by facsimile with an original
signed copy delivered personally within twenty-four hours thereafter, or
mailed by prepaid registered post addressed to Softec at their
respective addresses set forth below or at such other than current
address as is specified by notice.
To Softec: Newgate Street
P.O. Box 1589
St. John's, Antigua
West Indies
Attention: General Counsel
Fax: (268) 480-1656
To the Licensee: Hill & Hill legal offices in St.
John's, Antigua
4.2 Entire Agreement and Schedules
- --- ------------------------------
The parties agree that this Agreement and its Schedule, if any,
constitute the complete and exclusive statement of the terms and
conditions between the Licensee and Softec covering the performance
hereof and cannot be altered, amended or modified except in writing
executed by an authorized representative of each party. The Licensee
further agrees that any terms and conditions of any purchaser order or
other instrument issued by the Licensee in connection with this
Agreement which are in addition or inconsistent with the terms and
conditions of this Agreement shall not be binding on Softec and shall
not apply to this Agreement.
4.3 Governing Law and Arbitration
- --- -----------------------------
Any dispute in connection with this Agreement shall be settled by
arbitration in accordance with any Arbitration Act agreed upon between
the parties; provided, however, should any dispute arise under this
Agreement, the parties shall endeavor to settle such dispute amicably
between themselves. In the event that the parties fail to agree upon an
amicable solution, such dispute shall be finally determined by
arbitration as aforesaid.
4.4 GOOD FAITH
The parties acknowledge to one another that each respectively intends to
perform its obligations as specified in this Agreement in good faith.
4.5 PARTIES TO ACT REASONABLY
The parties agree to act reasonably in exercising any discretion,
judgment, approval or extension of time that may be required to effect
the purpose and intent of this Agreement. Whenever the approval or
consent of a party is required under this Agreement, such consent shall
not be unreasonably withheld or delayed.
4.6 GOVERNING LAW
This agreement and all Schedules shall be governed by and construed in
accordance with the laws of the Country of Antigua, and the Licensee
hereby attorns to the jurisdiction of the courts of Antigua
notwithstanding any other provision expressed or implied in either this
agreement or the Schedules.
4.7 TIME TO BE OF THE ESSENCE
Time is of the essence.
<PAGE>
4.8 NUMBER AND GENDER
In this Agreement the use of the singular number includes the plural and
vice versa the use of any gender includes all genders, and the word
"person" includes an individual, a trust, a partnership, a body
corporate and politic, an association and any other incorporated or
unincorporated organization or entity.
4.9 CAPTIONS
Captions or descriptive words at the commencement of the various
sections are inserted only for convenience and are in no way to be
construed as a part of this Agreement or as a limitation upon the scope
of the particular section to which they refer.
4.10 NON-ASSIGNABILITY
This Agreement is personal to the Licensee, except as provided in S.
4.11, and the Licensee may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent or
Softec.
4.11 BENEFIT
This Agreement shall ensure to the benefit of and be binding upon the
Licensee, its successors and assigns. The Licensee may delegate the
performance of any of its obligations hereunder to any corporation which
controls, is controlled by or is under common control with the Licensee.
4.12 WAIVER
No condoning, excusing or waiver by any party hereto of any default,
breach of non-observance by any other party hereto, at any time or times
with respect to any covenants or conditions herein contained, shall
operate as a waiver of that party's rights hereunder with respect to any
continuing or subsequent default, breach or nonobservance, and no waiver
shall be inferred from or implied by any failure to exercise any rights
by the party having those rights.
4.13 FURTHER ASSURANCE
Each of the parties hereto hereby covenants and agrees to execute such
further and other documents and instruments and to do such further and
other things as may be necessary to implement and carry out the intent
of this Agreement.
4.14 CUMULATIVE RIGHTS
All rights and remedies of Softec are cumulative and are in addition to
and shall not be deemed to exclude any other rights or remedies allowed
by law except as specifically limited hereby. All rights and remedies
may be exercised concurrently.
4.15 PRIOR AGREEMENTS
Except as specifically provided for herein, this Agreement, including
its Schedules, contains all of the terms agreed upon by the parties with
respect to the subject matter herein and supersedes all prior
agreements, arrangements and understandings with respect thereto,
whether oral or written.
4.16 SEVERABILITY
If any part of this Agreement is unenforceable because of any rule of
law or public policy, such unenforceable provision shall be severed from
this Agreement, and this severance shall not affect the remainder of
this Agreement.
<PAGE>
4.17 NO PARTNERSHIP
Notwithstanding anything in this Agreement, no part of this Agreement,
nor the Agreement as a whole shall be construed as creating a
partnership or agency relationship between the parties. If any part of
this Agreement should become construed as forming a partnership or
agency relationship, that part shall be amended such that no partnership
or agency relationship is created, but that part achieves what it was
originally intended to achieve.
4.18 DOLLAR AMOUNTS
All references to money or specific dollar amounts in this Agreement are
in United States Dollars.
4.19 INTERPRETATION
In the interpretation of this Agreement or any provision hereof, no
inference shall be drawn in favor of or against any party by virtue of
the fact that one party or its agents may have drafted this Agreement or
such provision.
IN WITNESS WHEREOF the parties have executed this Agreement on the date first
written.
SOFTEC SYSTEMS CARIBBEAN INC.
Per: /s/ "Christopher Zacharias" Per: /s/ "Mark Dohlen"
Name: Christopher H. Zacharias Name: Mark N. Dohlen
Title: In House Counsel Title: CEO
THE LICENSEE: NET-FORCE ENTERTAINMENT INC.
Per: /s/ "Terry Bowering"
Name: Terry G. Bowering
Title: President, Director
<PAGE>
SCHEDULE A
- ----------
The Licensee agrees to pay Softec monthly fees according to the following:
THE LICENSEE'S NET MONTHLY FEE PAYABLE
REVENUE (U.S. DOLLARS)
> $0.00 but < or = to $500,000 25%
> $500,000 but < or = to $1,000,000 20%
> $1,000,000 but < or = to $5,000,000 15%
> $5,000,000 to $10,000,000 12.5%
> $10,000,000 plus 10%
The above table should be read with the following understanding: If the
licensee has a Net Monthly Revenue of $550,000, the fee payable is calculated as
follows:
25% on the first $500,000 = $125,000
20% on the next $50,000 = $ 10,000
---------
For a total fee payable = $135,000
<PAGE>
SCHEDULE OF MARKET RATES
------------------------
The Market rates as set out in this schedule and referred to in this
Agreement are subject to change without notice to the Licensee.
3D graphics:-------------------------------------------------$150.00 per hour
Video editing:-----------------------------------------------$100.00 per hour
Graphic design:----------------------------------------------$75.00 per hour
Programming:-------------------------------------------------$150.00 per hour
Quality Assurance and testing:-------------------------------$40.00 per hour
<PAGE>
SCHEDULE OF MERCHANT NUMBER TERMS
---------------------------------
o Monthly processing limit: $100,000
o Merchant discount: 5.50%
o Rolling reserve: 5% for 180 days if chargeback are less than
5%
o 25% if chargebacks exceed 5% - but will be subject to review
o Transaction fee: $1.60 per transaction applied to both debit
and credit transactions
o Fraud Screen fee: $0.60 per transaction applied to all sales
transaction regardless of the response, (accept or reject).
This system is essential to keep the chargeback ratio down.
o Settlement: 30 days following the month end (e.g. All
September transactions will be settled by October 30th 1998)
o Chargeback: $25 per chargeback transaction
o Payout processing fee is $5.00 per bank draft.
Softec makes no guarantee as to the availability of the merchant
numbers contemplated in this Schedule. Please refer to section 3.2.2 of
this Agreement for clarification.
EXHIBIT 6.2
[GOVERNMENT LOGO HERE]
GOVERNMENT OF ANTIGUA AND BARBUDA
Director of Offshore Gaming
Expediter of International Investment
Office of the Prime Minister
Queen Elizabeth Highway,
ST. JOHN'S, ANTIGUA, W.I.
Tel: (268)-462-0773/462-4956
E-mail: [email protected]
August 5, 1999
Mr. Terence Bowering
President, Manager Director
Net Force Entertainment Inc.
P.O. Box W-645,
St, John's. Antigua
Dear Mr. Bowering,
This letter serves as notification of the approval of the application for
Virtual Casino/Sports Wagering License for Net Force Entertainment Inc., a
company duly incorporated under the laws of Antigua and Barbuda. Your office
will be notified when the License Certificate is available.
I remain,
/s/ Gyneth A. McAllister
Mrs. Gyneth A. McAllister
<PAGE>
License #0138A
[FREE TRADE & PROCESSING ZONE LOGO HERE]
ANTIGUA AND BARBUDA
FREE TRADE & PROCESSING ZONE
CERTIFICATE AUTHORIZING THE ESTABLISHMENT
AND OPERATION OF BUSINESS IN THE
FREE TRADE & PROCESSING ZONE
Pursuant to Section 11 of the Free Trade & Processing Zone Act No. 12 of
1994, the Commission certifies that: NET FORCE ENTERTAINMENT INC.
-------------------------------------------
(Name of Business)
which was incorporated under the laws of Antigua & Barbuda on the 5th day of
August 1999, is licensed and authorized to establish and operate
An Offshore Virtual Casino Wagering and Sportsbook Wagering business
- --------------------------------------------------------------------------------
(Type of Business)
for the period August 5, 1999 to August 4, 2000.
within the Free Trade & Processing Zone in Antigua.
/s/ signature
-------------------------
Commissioner
/s/ signature
-------------------------
Chairman
Dated this 1st day of September 1999
In antigua and Barbuda
License fee remains the same for a
period of five (5) years.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 441,946
<SECURITIES> 0
<RECEIVABLES> 126,548
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 128,319
<DEPRECIATION> 0
<TOTAL-ASSETS> 768,563
<CURRENT-LIABILITIES> 733,063
<BONDS> 0
0
0
<COMMON> 8,500
<OTHER-SE> 27,000
<TOTAL-LIABILITY-AND-EQUITY> 768,563
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
