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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
December 9, 1999
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED)
MILINX BUSINESS GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Suite 3226
1001 Fourth Avenue Plaza
Seattle, WA 98154
Tel:
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
206-621-7032
604 647-7600
REGISTRANT'S TELEPHONE NUMBER
Delaware 000-26421 (New) 91-1954074
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER ID #)
FORESTAY CORP.
1504 R Street, N.W.
Washington, D.C. 20009
FORMER REGISTRANT NAME AND FORMER ADDRESS
Delaware 000-26421 52-2175692
(STATE OR OTHER (COMMISSION (OLD) (I.R.S. EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to a share exchange agreement (the "Exchange Agreement") between
Forestay Corporation ("Forestay"), a Delaware corporation, and Milinx Business
Group, Inc., a Delaware corporation, at Closing all the outstanding shares of
common stock of Forestay Corporation were exchanged for 250,000 shares of common
stock and 250,000 Warrants of Milinx Business Group, Inc. ("Milinx" or the
"Company") in a transaction in which Forestay became a wholly owned subsidiary
of Milinx at the Closing date, December 9, 1999. Milinx has elected successor
issuer status under Exchange Act Rule 12g-3 as of December 9, 1999.
The Exchange Agreement was approved by the Directors of Forestay on December 9,
1999. The Exchange Agreement was adopted by the unanimous consent of the Board
of Directors of Milinx and by the consent of a majority of the shareholders of
Milinx on December 8, 1999. This transaction is intended to be a reorganization
under IRC Section 368(a)(1)(B).
Milinx will continue to retain Grant Thornton & Co. LLP as the auditor for the
new company. Grant Thornton has been the auditor for Milinx and is in the
process of performing the Milinx annual audit for the previous fiscal year, thus
the Company, as successor registrant of Forestay, is not treating this as a
change in registrant's certifying accountant for reporting purposes.
Prior to the exchange, Forestay had 5,000,000 shares of common stock outstanding
which shares were exchanged for 250,000 shares of common stock and 250,000 five
year Warrants of Milinx at $4.00 exercise price per common share. By virtue of
the exchange, Milinx acquired 100% of the issued and outstanding common stock of
Forestay.
At October 31, 1999, prior to the effectiveness of the Exchange Agreement,
Milinx had an aggregate of 210,000,000 common stock $.001 par value authorized,
8,970,000 shares of common stock issued and outstanding, 100,000,000 Preferred
Shares authorized, $.001 par value, 15,000,000 Series A preferred stock $.001
par value authorized, 3,675,000 shares of Series A preferred stock outstanding,
10,000,000 Series B preferred stock authorized, $.001 par value authorized, no
shares of Series B preferred stock outstanding, $.001 par value, and 10,000,000
shares of Series C preferred stock $.001 par value authorized, no shares of
Series C preferred stock outstanding.
Each share of Series A preferred stock is entitled to 2 times voting rights of
the common shares to which they may be converted on all matters on which
shareholders are entitled to vote and can be converted into shares of common
stock at a ratio of 3 shares of common stock for each share of Series A
preferred stock. Series A preferred stock has a preference on dividends,
liquidation and merger at $ .32 per share.
Each share of Series B preferred stock is entitled to the voting rights of the
common shares to which they may be converted on all matters on which
shareholders are entitled to vote and can be converted into shares of common
stock at a ratio of 1 share of common stock for each share of
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Series B preferred. Series B preferred stock has a preference on liquidation and
merger at $2.00 per share.
Each share of Series C preferred stock is entitled to the voting rights of the
common shares to which they may be converted on all matters on which
shareholders are entitled to vote and can be converted into shares of common
stock at a ratio of one share of common stock for each share of Series C
preferred. Series C preferred stock has a preference on dividends, liquidation
and merger at $1.00 per share.
Series A, Series B and Series C preferred stock have adjustment provisions for
sales of common stock by Milinx below $1.00 per share. Holders of Series A
preferred stock have a right to convert to shares of common stock one year after
issuance. Holders of Series B and Series C preferred stock have a right to
convert after December 31, 1999.
The Company may require conversion on various events, including: the election of
51% of the preferred shares outstanding to convert; an acquisition, merger or
other action by the Company; after the closing of a public underwriting of
$10,000,000; after the Company shall have a net worth of $10,000,000; or after
the common stock has been listed on the NASDAQ Stock Market for at least three
months. In the event of a mandatory conversion at the election of the Company,
any enhanced voting rights or increased conversion rights will be fixed at the
time of conversion.
In addition to shares issued and outstanding, there were various options, Units
and Warrants outstanding in Milinx at October 31, 1999. These included 1,069,750
1999 Class A Units, 900,000 1999 Internal A Warrants, 650,000 1999 Internal B
Warrants, and 2,050,000 Employee Options. Class A Units were sold for
$2,139,500, and convert to 1,069,750 common shares and 534,875 International A
Warrants for an additional 534,875 Common Shares. Subsequent to October 31, 1999
(see below) an additional 609,000 International A Units were placed @
$1,218,000, which convert to 609,000 common shares, and 304,500 Warrants which
convert to 304,500 Common Shares. 1999 Internal A Warrants may be exercised in
May, 2000, and are exercisable @ $7.50/common share, with a cashless exercise
feature. 1999 Internal B Warrants are exercisable for Preferred Series A Shares
@ $6.00/share in June, 2000 with a cashless exercise feature. 700,000 Employee
Options are exercisable over time at $2.00 common share, and 1,350,000 Employee
Options are exercisable over time and based on certain performance vesting
provisions at a range from $.10 to current common market value when exercised.
The Officers and Directors and employees of Milinx will continue as officers and
directors and employees of the successor issuer. See "Management" below. The
Articles and by-laws of Milinx will continue without change as the Articles and
by-laws of the successor issuer.
A copy of the Exchange Agreement is filed as Exhibit 1 to this Form 8-K and is
incorporated in its entirety herein. The foregoing description is modified by
such reference.
(b) The following table contains information as of December 30, 1999
regarding the shareholdings of Milinx's current directors and executive officers
and those persons or entities who beneficially own more than 5% of its common
stock (giving effect to the exercise of the units,
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options or warrants or convertible preferred shares held by each such person or
entity), reflecting adjustments made since October 31, 1999:
<TABLE>
<CAPTION>
Amount of Common Percent of
Stock Beneficially Voting Common Stock
Name Owned (1) Rights(2) Beneficially Owned(3)
<S> <C> <C> <C>
Maynard Dokken (4) 8,250,000 16,200,000 47%
President, Director
Mikiko Fujisawa (5) 2,850,000 5,400,000 24%
Vice President, Director
Barry Phillips, (6) 720,000 720,000 7%
Director
Max Tomaszewski (7) 350,000 350,000 4%
James R. Medley, Director (8) 180,000 180,000 2%
Credit Assured International (9) 2,300,000 6,800,000 20%
Milinx International (10) 375,000 375,000 4%
Global Factoring Services, Ltd 1,800,000 1,800,000 16%
North American Funding, Ltd. (11) 920,625 920,625 9%
Trans Research International Ltd (11) 442,500 442,500 5%
Millennium 3 Holdings Ltd.(11) 1,155,000 1,155,000 11%
Dr. Bruce A. Butcher (12) 775,000 1,000,000 8%
TPG Capital Corp. (13) 500,000 500,000 5%
All directors and
executive officers and 5% or more
beneficial holders as
a group: (14) 20,243,125 35,843,125 80%
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes Warrants, Options, Preferred as converted to Common.
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(2) Preferred Shares Series A vote two times the Common Shares into which
they may be converted on all matters.
(3) Beneficial ownership reflects equity ownership, and does not reflect
enhanced voting rights of Series A Preferred. Percentages reflect only
as converted for the particular person or entity and do not assume any
other options, warrants, units or preferred shares are as converted for
any other person or entity except in the summation, where all person
listed as treated as if converted to common shares.
(4) Maynard Dokken owns 2,250,000 Series A Preferred and 300,000 Common
Shares and is married to Mikiko Fujisawa; and he controls Credit Assure
International, which owns 750,000 Series A Preferred Shares. He also
has 400,000 1999 Internal B Warrants , exchangeable @ $6/share for
400,000 Series A Preferred Shares.
(5) Mikiko Fujisawa owns 600,000 Series A Preferred Shares and 300,000
Common Shares and is married to Maynard Dokken; she has a minority
interest in Credit Assure International and Milinx International. She
also has 250,000 1999 Internal B Warrants , exchangeable @ $6/share for
250,000 Series A Preferred Shares.
(6) Barry Phillips has 70,000 Common Shares, 250,000 Employee Options at
$2.00/share, and 400,000 1999 Internal A Warrants exchangeable @
$7.50/share. He also has a minority interest in Credit Assure
International Ltd.
(7) Max Tomaszewski does not include any Employee Options.
(8) James R. Medley vests in options @ $7.50 common share on a quarterly
basis @ 90,000 options per year of service.
(9) Controlled by Maynard Dokken.
(10) Controlled by Global Factoring Services Ltd.
(11) Organized by an affiliate of Global Factoring who disclaims any
beneficial interest.
(12) Dr. Butcher owns 75,000 Series A preferred Shares and 500,000 1999
Internal Warrants. He also has a minority position in Credit Assure
International Inc.
(13) TPG Capital Corporation received 250,000 common shares of Milinx in the
Exchange Agreement, and also received, pursuant to a related services
agreement $100,000 cash and 250,000 Warrants for five years,
transferable and with registration rights, at a strike of $4.00 common
Share.
(14) Percentages calculated on basis of equity interest assuming all
Warrants, options and conversions are converted and added to current
common shares. As converted does not reflect weighted voting attributes
of Series A Preferred Shares.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The registrant was acquired from its sole Shareholder, TPG Capital
Corporation, for consideration consisting of 250,000 restricted common shares of
Milinx, and 250,000 Warrants of Milinx. The Warrants are for a period of five
years, and are exchangeable for common shares at $4.00 share. Warrants are
assignable, subject to an exemption from registration under the Securities Act
of 1933 being available, and have registration provisions in the event of a
registered offering by Milinx. Common Shares of the registrant are registered
pursuant to ss.12g of the Exchange Act. TPG Capital Corporation held 5,000,000
common shares of the registrant, and all of said shares were transferred to
Milinx pursuant to the Exchange Agreement. Pursuant to Exchange Act Rule 12g-3,
Milinx elected successor issuer status of the registrant as of the date of the
exchange, December 9,
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1999. The consideration for the transaction was based on prior sales by the
seller of the shares, TPG Capital Corporation of similar businesses, and was
arms-length. Milinx paid $100,000.00 in professional fees to complete the
exchange.
(b) Milinx intends to continue developing its business applications
products marketed under the "Business Builder Toolbox" label and other business
applications, telecommunications, and financial products
ITEM 3. BUSINESS
Milinx is a development stage company that is developing its business
applications products marketed under the "Business Builder Toolbox" label and
other business applications, telecommunications, and financial products. Test
marketing is underway, and a full marketing program is planned for early 2000.
Milinx is a Delaware corporation and began active operations in February, 1999.
It is headquartered in Seattle Washington at 1001 Fourth Avenue Plaza. Principal
business operations for product development are being conducted in Vancouver,
B.C. through a wholly owned subsidiary, Milinx Business Services, Inc., a B.C.
company. Staff of the subsidiary current also support operations of Milinx,
although United States operations are planned after development is completed.
Milinx Business Services is intended to continue to support development work and
staff will be utilized for other Milinx support as appropriate.
Although there is intense interest in business applications services being
provided over the Internet, Milinx believes it has a unique package that will
enable it to compete against other larger and better-capitalized companies.
THE FOLLOWING CONTAINS FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS MIGHT
DIFFER MATERIALLY FROM THOSE STATED. THE READER SHOULD TAKE PARTICULAR
NOTE OF POTENTIAL INHIBITING FACTORS ON PAGE 14 OF THIS REPORT, THE
COMPANY'S COMPETITORS SOME OF WHICH ARE LISTED ON PAGES 19 AND 20, AND
THE CRITICAL RISK EVALUATION SECTION STARTING ON PAGE 29 OF THIS
REPORT.
CURRENT OPERATIONS
Current operations consist of product development and test marketing of the
Business Builder Toolkit "BBT". Product development activities and applications
are described as follows:
BBT is our acronym for our core service, the Business Builder Toolbox. The BBT
is the vehicle for a comprehensive group of applications that are to be made
available to Small and Medium Enterprises SMEs throughout North America on a pay
for use or rental basis.
The BBT is designed to provide unified messaging and virtual office
functionality. It is designed to automatically receive and digitize messages
(digitizing when necessary), organize, store, relate, display and transmit
digital information. The tables below show the broad characteristics
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of the as designed service and system information, and consequent user benefits
are commented on subsequently. Design is subject to change in the user-test
period and thus is outlined as an illustration of proposed functionality only.
FIGURE 1: DESIGNED FUNCTIONALITY OF THE BBT
<TABLE>
--------------------- -------------------------------------------------
<S> <C>
All incoming messages are stored in digital form.
All messages can be accessed by either phone or
Internet. Messages can include multiple media,
e.g. email with voice mail attachment. Message
management by consult, delete, archive, forward,
change priority, change visibility. Preview,
rewind, fast-forward and skip to end capability.
Forward messages to one or many recipients.
UNIFIED MESSAGING Faxes can be forwarded to phone numbers.
Customizable user greetings.
Notification if messages have attachments.
Voice on demand responses.
Fax on demand responses.
Email on demand responses.
Available in 6 languages.
--------------------- -------------------------------------------------
Follow-me call forwarding.
Text to speech conversion of fax and email
messages when accessed by phone. User created,
editable address book allowing multiple
classifications of addresses.
Phone access to address book.
Personal calendar, available to others at
different levels of access.
VIRTUAL OFFICE Event feed delivers
important information to personal calendars.
Split screen viewing of multiple calendars by
multiple users. Calendar event integration with
Personal Digital Assistants and smart phones. One
button publishing from Netscape composer.
Drag and drop document management.
--------------------- -------------------------------------------------
</TABLE>
FIGURE 2: DESIGNED BBT SYSTEM INFORMATION
<TABLE>
----------------------- -----------------------------------------------
<S> <C>
Responds to voice commands.
By phone, fax or Internet.
SYSTEM ACCESS Single message box.
Web or phone selection of password.
User select phone-in password for phone access
to message box.
----------------------- -----------------------------------------------
SYSTEM SPECIFICATION 100% Java, runs on any hardware supported by a
Java Virtual machine.
----------------------- -----------------------------------------------
</TABLE>
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ANTICIPATED SUBSCRIBER BENEFITS Through call-forwarding and text-to-speech
conversion, BBT subscribers could receive their voice messages anywhere, at
anytime, and could have faxes and e-mails read to them over the phone. The BBT
is designed to operate efficiently 24 hours a day, seven days a week. The BBT is
designed to file, store, organize and automatically make information available
to our subscribers' business contacts, clients and customers. Voice, e-mail, fax
and other digital on-demand services will make such information readily
available by phone, fax or over the web. The BBT is designed to automatically
broadcast material to contact lists by phone, e-mail or fax. The BBT should
reduce receptionist and office support costs because it is designed to take
messages, send messages, forward calls, call back, follow the subscriber to
different numbers and log all activities. It is also designed to store the names
and addresses of contacts in an address book, and schedule activities on a
calendar and automatically remind the subscriber of appointments.
The BBT is designed to be user-friendly: it is designed to be able to recognize
voice commands on the telephone and has an elegant and simple interface on the
Internet. Our service is designed for architectural integrity, and hence the
same commands are to work on the web and over the telephone.
We have a call center staffed by sales and service professionals who will
provide support to subscribers online, by fax, e-mail or telephone. (Not only
will they assist with technical operation of the BBT, but they are also intended
to promote innovative and effective applications to increase revenue.)
BBT PROPOSED ENHANCEMENTS Our ability to undertake these activities will
depend on capital and manpower available and management's assessment of market
support.
Early in 2000, it is planned to offer the Sun StarOffice suite of office
productivity software, which emulates and enhances the functionality of
Microsoft's Office suite. This would as implemented offer our clients a fully
functional software suite at a saving of up to 75% per user over the cost of the
Microsoft alternative. File compatibility support is to be provided by our sales
and customer service call center, and is believed will give unique added value
to our offer. Beyond StarOffice, we intend to introduce an ASP version of the
Lotus Notes messaging, productivity and collaboration software, which is to be
specifically developed to operate on our core technology. This leads to what we
believe is an unmatched range of communications capabilities for Milinx clients.
With the proposed financial efficiencies of the ASP delivery model, this should
be within the financial reach of every Small Medium Enterprise ("SME").
Alongside the introduction of Lotus Notes, we are developing a range of
e-commerce functionalities. A major part of our competitive advantage in this
will be the security of financial transactions over the internet that we intend
to provide through our proprietary technology for which a patent application is
on file at the U.S. Patent Office.
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The net result of this is intended to provide substantial business
communications, messaging and e-commerce functionalities over current known
technologies, each area intended to offer a distinct competitive advantage for
Milinx, and the totality offering what we believe are industry-leading scope,
performance, scalability and reliability.
Looking further ahead, it is our intention to consider the introduction of:
A horizontal Enterprise Information Portal, intended as an authoritative source
of business analysis
Online consultancy service
Worldwide Voice Over Internet Service (VOIP) to reduce long distance costs to
near zero in many cases, because communications will take place over the
Internet.
Video conferencing over secure lines in Local Area Networks (LAN) and video
conferencing over wireless networks within Virtual Private Networks (VPN).
Integration of all services with wireless Handheld Personal Computers (HPC) and
cellular phones.
THE BBT WITHIN THE ASP MARKET
The evolution of the Application Service Provider (ASP) delivery model
effectively completes a circular journey in the development of business
computing. In the 1960s, computer hardware and software was so expensive and
complex to operate that businesses used to rent time on a shared use basis. As
prices fell and ease of use increased, computing moved to a desktop PC
environment either standalone or on a client/server basis. Inexorable increases
in both available computing power and businesses' reliance on information
technology "IT" for competitive advantage has led to applications of ever
greater complexity and cost, and a commercial imperative for reduced
implementation time. Mapping these dynamics onto an environment where IT skills
are a scarce and costly resource, and the scene is believed set for widespread
acceptance of the ASP delivery model for software and computing power in the
2000s. Currently the ASP market is polarized into high-end services providing
either multi-disciplinary Enterprise Resource Planning (ERP) functionality or
single discipline ERP functionality such as Human Resources or Supply Chain
Management. These are aimed at bigger businesses, and while cheaper than a
custom installation, still command substantial financial investments from the
user companies. At the other end of the scale are much smaller operations
providing a limited range of Unified Messaging functionalities. These tend to
suffer from reliability and scalability problems, and hence tend to aim an
inexpensive bundle of services at the SOHO (Small Office Home Office) market.
The BBT is believed ideally positioned to exploit the gap in this market, by
providing a much wider and more sophisticated range of functionalities than the
current Unified Messaging companies to the SME sector of businesses. These
services will operate at a lesser level of impact on users than the pure ERP
application services, but will provide a unique range of important value adding
services at, arguably, the larger potential offered by the middle market.
OUR PROPOSED STRATEGIC PARTNERS
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In order to achieve Milinx' goal to be a significant global Application Service
Provider in our chosen market sector, we have sought out alliances with
appropriate businesses which have demonstrated outstanding strengths and
capabilities in the Internet.
PERCEIVED ADVANTAGES OF OUR CORE TECHNOLOGY
The technology that is under development is intended to exploit the strengths
and synergy of our alliance partner's capabilities. The following table
demonstrates our planned system quality:
SYSTEM PLANNED QUALITIES
o Capable of managing millions of registered users.
o To provide universal access to business grade messaging
service for entire communities of employees, partners and
customers.
o High scalability and reliability
o Advanced management tools to manage roles, logs, users and
groups.
o Encrypted communication between all components.
o Supports offline synchronization.
o High performance Java application platform.
o Full text and attribute searching of documents through
built-in verity search engine
o Soft switch implementation.
o Highly detailed and fully tested disaster recovery plans.
o Capability of pro-active technology and business application
integration and offering through the use of industry class
open standards.
o Takes advantage of 2 fiberloops with fiber access
o Uninterruptable Power Supply and independent power generation
capability.
o Fiber channel based Storage Area Network
o Worldwide Internet recognized appliances used throughout the
implementation.
o Full redundancy configuration, with built-in resilience and
workload balancing
o No single point of failure
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o Modular and layered logical design, facilitating market
leading soft switch and VOIP performance
o Installation designed to achieve the highly regarded Cisco
Powered Network designation.
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ASP INDUSTRY ANALYSIS
OUR DEFINITION OF AN ASP
The ITAA (Information Technology Association of America) has defined an ASP
(Application Services Provider) as "Any for-profit company which provides
aggregated information technology resources to subscribers/clients remotely via
the Internet or other networked arrangement".
The key elements of this rather broad definition are that the provision of
resources takes place via the Internet (using a web browser interface, local
access or dedicated networking arrangements) and that revenues are earned
through a "subscription to" or "rental of" the resource.
The ASP model places a new emphasis on the use of the application rather than on
ownership, creating numerous benefits for clients by offering higher levels of
flexibility and access to resources.
EVOLUTION OF THE ASP MODEL
When the power of computing was first introduced for business applications in
the 1960s, it was so expensive and complex that enterprises often had to share
this resource. It was very common to find a firm "renting" a portion of a
mainframe for its use, as owning an entire mainframe computer was extremely
cost-prohibitive for most companies.
Over the decades, as the cost of computing power rapidly declined, it became
more realistic for companies to bring this resource in-house. Companies rushed
to implement their own computer systems, and this action would ultimately cause
a drain on other resources that was not anticipated. The results of ongoing
system maintenance and staffing requirements forced most companies to focus an
increasingly large proportion of their resources on assembling and maintaining a
knowledgeable Information Systems department. This expense became acceptable, as
the IS function grew to be an obligatory component of business, rather than an
advantage.
While this business practice is globally accepted today, it is clearly not
believed an efficient solution, diverting companies' valuable resources away
from their core competencies. Many firms have realized this inefficiency, and
have hoped for alternative solutions. Until recently, however, the technological
obstacles of data transmission were too great for there to be any other option
besides maintaining these resources in-house.
Today, the ASP model brings the outsourcing solution full circle, returning it
to its efficient roots that are reminiscent of the early days of computing. With
the availability of high-bandwidth and other recent advancements in
communications technology, data transmission via the Internet has become faster,
cheaper and more reliable. The fact that the technology and infrastructure to
support the ASP model has just recently been developed, explains why this
industry is only emerging now - the need has been there for decades.
KEY BUSINESS DRIVERS
Since the technological barriers suppressing the ASP model have been
greatly reduced, a number of other business factors have begun to drive the
growth of the ASP industry.
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CLIENT BENEFIT DRIVERS Licensing Costs: Based on the "monthly subscription" or
"rental" pricing model, ASPs offer a vast reduction in the upfront licensing
costs that software vendors require.
TCO: Total Cost of Ownership is greatly reduced by the ASP model, as companies
are no longer burdened with the high costs required to implement and maintain
enterprise systems, purchase and upgrade software, and hire highly-skilled IT
employees.
Reduced Implementation Time: Compared with a customized installation, the ASP
delivery model can reduce lead times from 6 months/1 year to a matter of weeks.
Core Competencies: Outsourcing software and hardware functions to ASPs enables
firms to use their resources to develop what matters most - their own core
competencies and strategic objectives. This allows companies to compete to
maximum effect in the marketplace.
IT Staff Efficiency: Instead of performing routine hardware maintenance and
software upgrades, internal IT staff will be free to develop processes and
systems that will leverage the strategic objectives of the firm.
Ownership Risk: Installing an application today does not ensure that it will
remain the optimum solution for that company in one or two years time,
regardless of upgrades and maintenance. This risk is solidified when the book
value of these assets depreciate rapidly. This ownership risk is transferred
away from the company when the ASP solution is chosen.
Reduced Barriers: As the ASP removes the prohibitive expenses of high-end
applications and solutions; smaller companies now have the opportunity to be
more competitive with larger companies. Representative of this benefit is the
ASP industry trend toward offering best-of-breed applications.
Shortage of IT Skills: Increased demand for skilled IT labor has caused a
shortage, as companies are extremely dependent on their ability to hire and
retain knowledgeable IT staff. ASPs greatly reduce this requirement, as the
online applications require little or no in-house support.
PROVIDER MOMENTUM DRIVERS
Industry Push: Representative of the market potential, many large corporations
are establishing positions in the ASP industry. For example, Microsoft, Lotus
and Novell are developing scalable versions of web-based groupware that will be
introduced to the ASP market in 2000. Furthermore, an ASP Industry Consortium
was established in May 1999 that will introduce standards and foster research.
Members of the Consortium include such influential companies as Sun
Microsystems, AT&T, Cisco, IBM, Compaq and GTE. Beyond demonstrating the
potential for the ASP market, the presence of these large companies in the
industry are believed will reduce Milinx's education costs.
Transparency: Because of the level of technology available today, the
net-centric model offered by ASPs is not expected to appear to be any different
than the client-server model to users. This "transparency" is beneficial for
Milinx, as conversions to the net-centric model will not require behavioral
changes. Users' acceptance of the new model are expected to be rapid and smooth.
Speed to Market: Software developers providing applications through an ASP are
expected to benefit from maximized speed to market. Instead of having to spend
time and resources on product packaging, marketing and distribution, software
companies should rapidly reach markets via the Internet. Furthermore, new
markets will emerge as a result of the reduced up-front software licensing costs
and reduced implementation costs. Through the ASP channel, software developers
should be able to reach larger markets, faster.
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ASP MARKET SIZE AND POTENTIAL
As a newly emerging force in the business model for the 2000s, there is some
debate about the potential size for the ASP market. The following three examples
are believed illustrative but should be consulted in their entirety for context.
Sources are available from Milinx
o An ASP market size of $2 billion in 2003 for complex high end ERP
applications (Source: International Data Corp.)
o An ASP market worth $6 billion by 2001 (Source: Forrester Research)
o An ASP $23 billion market by 2003, but this figure reflects all IT
outsourcing, not just the ASP delivery mode (Source:Dataquest)
There is believed agreement however behind the central notion that the market is
believed will be subject to immense growth.
ASP BUSINESS MODEL
PRICING
Current ASP pricing falls into three general categories, which are often
accompanied by an initial set-up fee: Fixed-term contract.
Monthly subscription.
Per-use basis.
Some ASPs offer a pre-determined service "package" that a company can to
subscribe to. Other ASPs offer a "pay as you grow" buffet-style service
selection, where new services can be added to the client's list of services, as
needed.
Depending on the source of the applications (i.e. whether the ASP is also an
ISV), some ASPs participate in revenue sharing with the software developer, for
each subscriber.
GROSS MARGINS
Gross margins for the ASP industry are currently estimated by our management at
a 30% to 45% range. These margins are believed possible through the ASPs ability
to achieve economies of scale. As such, margins will improve as the scale of the
ASPs operations increase.
POTENTIAL INHIBITING FACTORS
One of the major inhibiting factors behind a faster and more widespread adoption
of the ASP model is concerns over the security of sensitive information that is
held on remote servers. Milinx' proprietary biometric/encryption technology
(discussed later) is believed after full development to be well placed to deal
with this concern.
A further concern relates to reliability (in respect of bandwidth availability
and data redundancy processes) and scalability of the remote host. Milinx has
addressed this concern by building a believed state of the art infrastructure
with high scalability, on a core technology platform from the two influential
players in Internet hardware and software today, the Sun - Netscape alliance.
Criticisms have been leveled at the ASP delivery model in terms of its limited
flexibility for custom applications. This may be misplaced given that even in a
custom enterprise-wide Enterprise Resource Planning installation upwards of 80%
of the installation is standardized.
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<PAGE> 15
Similarly, some concerns have been expressed to the effect that much of the
current software has not been written to allow for web delivery. However, the
major software players are now planning to release web-enabled software to
participate in the forecast major development of the ASP model. These include
Microsoft, Lotus and Novell.
THE ROLE OF ISVS (INDEPENDENT SOFTWARE VENDORS) Logic may suggest that ISVs
would be resistant to contributing their essential raw material - software - to
the ASP model, given that the delivery mode would delay revenue generation from
the current front-end position. However, industry leaders such as Microsoft,
Lotus, Novell, Oracle, SAP, Peoplesoft, J D Edwards and Baan have all adopted
the model. The reasons for this are threefold: In the case of the ERP providers,
the ASP delivery model allows the opportunity to penetrate new markets of
smaller companies - the larger Fortune 500 companies are reaching saturation
now.
The ISVs have observed established players in mature markets such as bookselling
and stock broking see their dominant positions eroded by new entrants offering
Internet delivery models, and are not about to prejudice their futures by
yielding first mover advantages to others. The predictability of a revenue
stream composed of regular monthly payments is greatly advantageous to public
companies who are seeking to declare consistent positive earnings growth on a
quarterly basis. Furthermore, this can greatly assist financial planning.
EVOLUTION OF THE ASP PLAYERS
The ASP industry has emerged as a result of convergent technologies. As such,
the industry is composed of many companies from very diverse backgrounds that
have come forward to participate. This technology convergence has also
encouraged many of these firms to form alliances or partnerships in attempts to
"leapfrog" the competition.
The following outlines the main categories of ASP companies that have originated
from five different backgrounds.
PURE PLAY ASPS
The pure play ASP is established with the sole purpose of being an ASP. They
represent the last link on the ASP software/service value chain, interacting
with the end-users. As such, their core competencies would reside in their
ability to provide superior service, and offer a wide selection of best-of-breed
applications.
ISVS (INDEPENDENT SOFTWARE VENDOR)
As the original software developer and vendor, ISVs already serve the end-user
their products, directly. It would seem logical that many ISVs would want to
maintain this relationship, and simply offer their products online rather than
distributing it in a box.
ISPS (INTERNET SERVICE PROVIDER)
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For an ISP, managing applications online for their subscribers would be an added
value service complementary to their business. Having an established subscriber
base and immediate access to bandwidth will give ISPs their advantage in the ASP
industry.
IT SERVICE PROVIDERS
IT service providers will rely on their established customer relationships and
industry expertise if they decide to move into the ASP market.
CONSULTING FIRMS
Having industry expertise may give consulting firms an advantage in the ASP
industry, as customers seeking to outsource vital components of their business
may find them a credible source. This may however be tempered by a perception of
higher cost solutions linked with the genre of consultancy.
ASP APPLICATION FUNCTIONALITY CURRENTLY OFFERED
There are two levels of ASP service provision, differentiated by the amount of
impact the services have on the client organization.
TIER 1 - MULTI-DISCIPLINE ERP ASPS - HIGH IMPACT
Tier 1 represents ERPs that have a high impact on an organization, affecting
multiple functions of the business operations. These services are usually
accompanied by a high price, and as such are targeted at larger organizations
that are willing to spend more. Furthermore, consulting and system customization
are also offered as a facet of these services.
ERP (Enterprise Resource Planning): This is a highly integrated information
system that supports many components of the operations of a large business.
TIER 2 - SINGLE-DISCIPLINE ERPS -HIGH IMPACT
Tier 2 represents ERPs that also have a significant impact on an organization,
but which focus on a specific function or discipline in the recipient
organization, and not a comprehensive system. These providers compete for large
company-customers similar to the Tier 1 players' customer base.
The following provides examples of some Tier 2 functions that are offered by ASP
companies.
The list is not exhaustive:
CRM (Customer Relationship Management): This integrated information system
facilitates the management of an organization's pre sales and post sales
activities, not including the marketing function.
SCM (Supply Chain Management): This system coordinates the order taking, order
generation and fulfillment (or distribution) of products, services or
information along the supply chain network
E-Commerce
Human Resources
Procurement
Accounting
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TIER 3 - LOW IMPACT ASPS
Tier 3 represents the ASPs that have a low impact on the organization. This
level was restricted to a limited range of Unified Messaging and Virtual Office
functions. Scalability and reliability issues
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tends to restrict the players to small numbers of subscriber drawn from the SOHO
(Small Office Home Office) market. Typically the offer consists of:
Unified Messaging
Virtual Office
ASP TARGET CUSTOMER PROFILES
LARGE CORPORATIONS
Large Fortune 100 corporations are not currently target customers for the ASP
industry. These companies tend to have invested many millions of dollars on a
customized ERP installation, and exhibit the greatest concern over remote
hosting of sensitive data.
This segment's history of investment in IT has made them dependent on the few
providers that dominate this market, and therefore have very high switching
costs, in consideration of the effort required to handle legacy data.
MEDIUM/LARGE SIZED BUSINESSES
These two market segments are predominantly served by Tier 1 and Tier 2 ASPs.
Their clients may not want to afford (or simply do not require) a highly
customized or comprehensive solution. The Tier 2 "building block" approach
particularly suits the profile of some companies in this segment.
SOHO (SMALL OFFICE HOME OFFICE) MARKET
The SOHO market, served by Tier 3, is limited in its potential due to
scalability issues. This market may be served well by Unified Messaging
solutions, as their operational needs are far more limited than that of the
small/medium sized businesses. As such, they will not likely be profitable for
Tier 2 companies to pursue at this time.
CONCLUSION
The ASP market currently polarizes into two groups of players. One group
consists of companies offering ERP (Enterprise Resource Planning) solutions at
the high end of the market, aimed at larger companies. The other group consists
of organizations offering limited Unified Messaging and Virtual Office
functionality to smaller companies in the SOHO (Small Office Home Office)
market. There is a significant gap in that no major competitors are offering
Unified Messaging and Virtual Office functionality to the large SME
(Small/Medium Enterprises) sector.
TARGET MARKET
Our analysis of the emerging Application Service Provider (ASP) market has
indicated a substantial opportunity for Milinx to fill a major gap by offering
business communications and e-commerce applications on a per user rental basis
to SMEs.
Our key target group therefore is SMEs in North America, of whom those operating
in competitive industries are most likely to be highly predisposed to the
advantages that our services provide. We estimate there are between 270,000 and
300,000 US businesses with revenues between $10 million and $500 million. With
the addition of Canada, there is estimated to be a
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large group of target SMEs available to us. It is our strategy to pick off
significant players individually on an industry-by-industry basis, thereby
proving the breadth and power of our offer.
By way of confirming the potential of the offer, the large Baby Bell telcos have
already gone on record as stating they are looking for ASPs to host unified
messaging for their services. This in itself speaks volumes to support our view
that a large market exists which is waking up to its own strong, latent demand
for precisely the services which Milinx is set up to provide.
MARKETING INFORMATION Our central product is the Business Builder Toolbox (BBT),
which is a conceptual expression for a wide range of business functionalities.
It is not a static range of services. Currently the BBT as designed consists of
a customized integration of Unified Messaging and Virtual Office functionality
being developed in co-operation with our business partners. The BBT will be
enhanced with a suite of office productivity software (emulating and enhancing
Microsoft Office functionalities), Lotus Notes, an e-commerce functionality
suite and online consulting capabilities.
The benefits of the BBT that should accrue to our clients relate not just to the
high quality of the individual components, but also reside in the
comprehensiveness of the offer, which provides a wide array of value-added
services for customers from a single source.
More specifically, the benefits of the BBT as it is currently designed are
enhanced communications for busy and mobile business people. Conversion of
voice, fax and email communications to digital form allows ease of access and
response to messages from any phone or web browser on a 24/7 basis. The system
supports voice recognition and text-to-speech translation for intuitive and
ultra-streamlined inbound and outbound communications instructions.
What we believe differentiates us is the depth and scope of the communications
and e-commerce offer we plan to provide. No competitor is known to currently
exist with a comparable service offer. The extension of our offer into an
ultra-low cost suite of StarOffice office productivity software (emulating
Microsoft Office), will further extend our competitive advantage. To sustain a
dominant position within this newly emerging sector of the Application Service
Provider (ASP) market, we plan development into an enhanced version of Lotus
Notes, and a range of e-commerce functionalities
It is our intention to maintain our focus, and to develop our offer in line with
our declared objective of becoming the leading ASP in the communications and
e-commerce market sector. Our current research and development activity, which
is discussed later in this document, focuses very deliberately on developing a
range of added value services to enhance the comprehensiveness and pre-eminence
of our products and services.
MARKETING OBJECTIVES
o To achieve subscriptions at the level of 5,000 by the end of
Q2 in 2000, then 20,000 by the end of Q4 and 100,000 by the
end of Q2 in 2001
o To providing hosting services for at least 2 other ASPs in
2000
o To position Milinx as the pre-eminent brand in our market
sector.
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The subscription targets are expected to be slow to build initially due to the
fact that Milinx will be creating a new market sector, and also reflects the
longer decision making times inherent in larger organizations.
COMPETITIVE ANALYSIS
The Application Service Provider (ASP) market may be categorized into two groups
of players. One group consists of companies offering Enterprise Resource
Planning (ERP) solutions at the high end of the market, aimed at larger
companies. The other group consists of organizations offering limited Unified
Messaging and Virtual Office functionality to smaller companies in the SOHO
(Small Office Home Office) market. There is a significant gap in that no major
competitors are offering Unified Messaging and Virtual Office functionality to
the large SME (Small/Medium Enterprises) sector.
------------------------------------------------------------------------
DEFINITIONS
------------------------------------------------------------------------
ASP - (Application Service Provider) An organization that hosts software
applications on its own servers within its own facilities. Customers
access the application via private lines or the Internet.
------------------------------------------------------------------------
CRM - (Customer Relationship Management) An integrated information
system that is used to plan, schedule and control the pre-sales and
post-sales activities in an organization.
------------------------------------------------------------------------
ERP - (Enterprise Resource Planning) An integrated information system
that serves all departments within an enterprise. Evolving out of the
manufacturing industry, ERP implies the customized use of packaged
software rather than proprietary software written by or for one
customer. ERP companies offer multiple- or single-discipline high-impact
functional productivity software.
------------------------------------------------------------------------
SCM - (Supply Chain Management) The planning, scheduling and control of
the supply chain, which is the sequence of organizations and functions
that assemble materials and products from manufacturer to wholesaler to
retailer to consumer.
------------------------------------------------------------------------
ERP (ENTERPRISE RESOURCE PLANNING) COMPETITORS
<TABLE>
<CAPTION>
--------------------------- ------------------------------ --------------------------------------------------
NAME APPLICATIONS COMMENTS
--------------------------- ------------------------------ --------------------------------------------------
<S> <C> <C>
AEGIS Custom ASPs Specializing in Sybase EAServer.
--------------------------- ------------------------------ --------------------------------------------------
BREAKAWAY ERP and SCM
--------------------------- ------------------------------ --------------------------------------------------
CIBER ENTERPRISE Back office ERP Baan, Peoplesoft, JD Edwards and SAP
OUTSOURCING
--------------------------- ------------------------------ --------------------------------------------------
CORIO ERP Focused exclusively Peoplesoft and Siebel
--------------------------- ------------------------------ --------------------------------------------------
EXODUS Data Center and Server Farm Supplies physical facilities for ASPs
--------------------------- ------------------------------ --------------------------------------------------
FUTURELINK ERP, consulting and Offers a wide range of products for software
IT outsourcing. vendors like Microsoft and Great Plains.
--------------------------- ------------------------------ --------------------------------------------------
GLOBAL RECRUITING HR
SOLUTIONS
--------------------------- ------------------------------ --------------------------------------------------
THE HUNTER GROUP ERP and HR Planning and integration of Peoplesoft
applications.
--------------------------- ------------------------------ --------------------------------------------------
</TABLE>
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<PAGE> 21
<TABLE>
--------------------------- ------------------------------ --------------------------------------------------
<S> <C> <C>
IBM GLOBAL SERVICES Business Application In a partnership with Cisco IBM supplies
Services Host Division. application form JD Edwards, Great Plains
Software, Systems Union, Oracle, SAP and others.
--------------------------- ------------------------------ --------------------------------------------------
INTERLIANT CRM Provides network-based hosting for Internet,
intranet and extranet projects.
--------------------------- ------------------------------ --------------------------------------------------
INTUIT INC. Personal Finance and Operates the portal site Quicken.com with
Accounting Software content and advice for small businesses.
--------------------------- ------------------------------ --------------------------------------------------
METAMOR WORLDWIDE ERP, SCM and CRM Applications from Baan, SAP, Peoplesoft and JD
Edwards.
--------------------------- ------------------------------ --------------------------------------------------
QWEST COMMUNICATIONS ERP A joint venture between QWest and KPMG.
INTERNATIONAL Application from SAP, Oracle, and Siebel.
--------------------------- ------------------------------ --------------------------------------------------
RESOURCE PARTNERING ERP Provides Peoplesoft applications.
--------------------------- ------------------------------ --------------------------------------------------
SERVICENET ERP A recent joint venture between Andersen
Consulting and GTE
--------------------------- ------------------------------ --------------------------------------------------
SPRINT ERP, CRM and SCM An alliance with Deloitte Consulting to supply
COMMUNICATIONS applications on ASP business model.
--------------------------- ------------------------------ --------------------------------------------------
THESUPPLYCHAIN.COM ERP and SCM A start up ASP that provides service to small-
to medium-sized businesses
--------------------------- ------------------------------ --------------------------------------------------
TELECOMPUTING ERP An early pioneer of the ASP model based on Citrix
technology.
--------------------------- ------------------------------ --------------------------------------------------
USINTERNETWORKING ERP
--------------------------- ------------------------------ --------------------------------------------------
UUNET Data Center and Server Farms Supplying facilities for ASPs.
--------------------------- ------------------------------ --------------------------------------------------
X-COLLABORATION ERP
--------------------------- ------------------------------ --------------------------------------------------
</TABLE>
The significant Unified Messaging players are believed identified as follows:
Unified Messaging / Virtual Office Competitors
<TABLE>
<CAPTION>
------------------------------ ---------------------------------- -------------------------------------------
NAMES APPLICATIONS COMMENTS
------------------------------ ---------------------------------- -------------------------------------------
<S> <C> <C>
GENERAL MAGIC INC. o call screening Brand name is Portico. Features
o call forwarding accessible through voice commands or web
o voice mail browser.
o fax
o email.
------------------------------ ---------------------------------- -------------------------------------------
HOTOFFICE o e-mail The system allows document sharing and
TECHNOLOGIES, o document management retrieving.
INC. o online calendar
o contact list manager.
------------------------------ ---------------------------------- -------------------------------------------
PROGRESSIVE o call screening The company offers the OPUS unified
TELECOMMUNICATIONS CORP. o call forwarding messaging service. Service used through
o fax voice activation.
o email
o voice mail
------------------------------ ---------------------------------- -------------------------------------------
</TABLE>
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<PAGE> 22
[CAPTION]
<TABLE>
------------------------------ ---------------------------------- -------------------------------------------
<S> <C> <C>
STARTOUCH INTERNATIONAL, o call screening The company's ESA services can be
LTD. o call forwarding accessed by telephone or a web browser.
o fax
o voice mail
o pager
o e-mail.
------------------------------ ---------------------------------- -------------------------------------------
WEBLEY SYSTEMS, INC. o outbound calling Webley services can be controlled over
o call screening the phone using speech recognition and a
o call forwarding touch-tone keypad, or through the
o voice mail Internet.
o fax
o email.
------------------------------ ---------------------------------- -------------------------------------------
WILDFIRE COMMUNICATIONS, o outbound calling Wildfire callers use spoken commands.
INC. o call screening
o call forwarding
o voice mail
o fax
o email.
------------------------------ ---------------------------------- -------------------------------------------
</TABLE>
CONCLUSION
Our research into the unified messaging and virtual office sector has revealed
competitors offering a limited range of services compared with our perceived
comprehensive nature of Milinx services. In addition, we believe continuing
problems with reliability and scalability restrict these unified messaging
players to small numbers of subscribers in the Small Office Home Office (SOHO)
sector.
RESEARCH AND DEVELOPMENT
OVERVIEW
The research and development function at Milinx focuses on developing
proprietary technology that will enhance and upgrade the quality of the services
we provide as a business communications and e-commerce ASP. Our goal is to
provide additional and unique competitive advantages and to sustain the position
of sector predominance for Milinx.
PATENT PENDING BIOMETRIC ENCRYPTION TECHNOLOGY
OVERVIEW
The background for this research was our desire to mitigate the concerns
consumers and businesses have with respect to the security of financial
transactions over the Internet. The patent pending proprietary technology we
have developed to address this effectively eliminates the
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<PAGE> 23
security issue, and as a by-product also has many other interesting application
possibilities in large markets.
DESCRIPTION OF OUR TECHNOLOGY
The title of the invention is "Method and Apparatus for Secure E-Commerce
Transactions". This invention relates to the encryption of data and the
authentication of the identity of participants in electronic commerce
transactions and communications. In particular, this invention relates to
methods and apparatus for authenticating the identity of participants and for
securely encrypting e-commerce transactions and communications.
The authentication of the identity of participants is a key requirement of most
electronic transactions. The security of the information being transmitted is
also a concern, particularly where such information represents the confidential
data of the participant.
It is an object of this invention to provide a secure means of conducting
electronic commerce transactions and other communications wherein authentication
of participants is highly reliable regardless of the specific communication
device being used. It is a further object of this invention to provide a high
degree of inherent encryption security by incorporating biometric data in the
encryption process in a manner that minimizes the effective use of biometric
forgery. The invention provides a means for securely authenticating the identity
of a user without requiring the use of any particular communication device in
order to do so.
A user's biometric data (voiceprint and fingerprint) is retained in a database
at an authentication center. A number of biometric encryption devices are
enabled for use with the secure system. A registered user may use any biometric
encryption device enabled by the system to establish a secure communication. The
biometric encryption device may be used in association with a variety of
standard communication devices such as computers, cellular telephones, Personal
Data Assistants (PDAs), point of sale devices, Automated Teller Machines (ATMs),
access control devices, etc.
The system according to the invention provides device independence for a user.
Although each device is enabled for use within the system, a registered user may
choose any enabled device to complete a transaction or communication. Such
independence gives the user flexibility in effecting secure transactions, and
allows the system to track activity by a specific user, for example for billing
purposes. Moreover, the encryption method and apparatus may equally be applied
to any communication, whether it is of a financial nature or not.
E-COMMERCE MARKET CONTEXT
The revenue-generating potential for technology that can resolve the central
security problem relating to Internet commerce is vast. It is believed that 75%
of Internet users are not yet shopping online (Source: The Strategic Group). A
major reason for this is a believed reluctance by 65% of Internet users due to
concern over credit card security. Internet users are forecast by us to grow to
around half a billion people by 2003, with Internet trading revenues set to grow
to US$1.3 trillion annually over the same period (Source: International Data
Corporation).
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<PAGE> 24
It is also predicted that by the end of 2000, 40% of banks will be trading
online (Source: IDC), with the figure rising to 70% by 2002. Indeed in December
1999, a consortium of 11 major US banks (called Spectrum) was announced,
launched to encourage electronic bill paying amongst customers. Currently 63
billion bills are estimated issued in the US every year. With the security
issues surrounding Internet-based payment processes solved, the growth of
Internet commerce should be considerably enhanced.
ADDITIONAL APPLICATIONS FOR THIS BELIEVED PROPRIETARY TECHNOLOGY
The essential focus of the technology that has resulted from our research and
development process is to provide accurate authentication of identity for
interactions between parties, of which non-cash financial transactions represent
the most obvious application. Hence the technology may also apply in a wide
range of non e-commerce applications, including (but not limited to) Automated
Teller Machines, point of sale credit/debit card approval processes, online
banking transactions, cellular telephone security and particularly government
welfare/benefit entitlement claims.
Some additional applications of Milinx' "bio-commerce" technology include
banking by phone, banking by Internet, and buying and selling securities by
telephone or by Internet.
Moving away from the strictly financial transaction arena, there are also
applications for this technology in the fields of workstation and network
access, physical access, high value incentive programs such as frequent flyer
systems, border control, national/state ID and law enforcement.
MARKET CONTEXT FOR ADDITIONAL APPLICATIONS
A major application of this new technology would be for fraud prevention, and
its potential here is estimated significant with fraud costing more than US$20
billion annually. US Banks lose estimated $3 billion each year in credit and
debit card theft schemes and twice that much through fraudulent use of checks
(Source: US National Fraud Center) . Fraud in entitlement programs is estimated
at more than US $10 billion per year (Source: US General Accounting Office).
ADDITIONAL R&D ACTIVITY
Milinx Research and Development works under two assumptions. Firstly, it is our
intent to try to develop proprietary products that will add value to existing
Milinx products. Secondly we want to ensure we stay abreast of technological
advancements so that we can make judicious decisions in the alliances we make
and in the services we offer.
This ongoing research will enable us to select those technologies that will be
most beneficial to our clients and ensure that the company stays at the
forefront of innovation, thereby maximizing our competitive advantage and
shareholder value.
In our ongoing technology research we are intimately aware of multi-function
chip technology, Virtual Private Network (VPN), Voice Over Internet Protocol
(VOIP) gateway technologies and last mile All Digital Subscriber Line (xDSL)
solutions. The convergence of Internet, thin client and broadband technologies
is estimated to bring streaming video, interactive interfaces and virtually free
long distance communications to the market place.
24
<PAGE> 25
SUPPLIERS
Major suppliers are KRP Communications, Ltd for computer hardware and software,
Discount Computer for computer hardware and software, Catalyst for furniture,
and Bar Graphics for printing.
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<PAGE> 26
PROPERTY
The Company has four leases for properties in Vancouver and Seattle. The
Seattle facility is for 1,300 square feet, and expires in October, 2000. Office
space in Seattle is currently tight and expensive. In Vancouver, there are three
leases for an aggregate of 12,000 square feet. All leases are until 2004. Office
space in Vancouver is believed plentiful and the company expects to add more
space without difficulty as needed.
MANAGEMENT:
EXECUTIVE AND DIRECTORSHIP
MAYNARD L. DOKKEN, PRESIDENT, CEO AND DIRECTOR Age: 37
He is the founder of the Company and was experienced in the real estate
development business prior to his interest in Internet related businesses. He
commenced researching the feasibility of introducing a new unique credit card
product in 1994. After spending in excess of US$1,000,000 on the project, he
reengineered the idea of offering another consumer card to the general public in
1997. He turned his energies to the Internet and telecommunications industries.
He is currently the majority shareholder of Milinx Business Group, Inc. He also
controls two Companies that have licenses or other arrangements with Milinx:
Milinx International and Credit Assure International, Inc. He is married to
Mikiko Fujisawa, Vice President.
M.W. (MAX) TOMASZEWSKI EXECUTIVE VICE PRESIDENT (SUBSIDIARY) Age: 51
He has a B.Sc. Degree from McGill and a M.Sc. (I.A.) Industrial Administration
from the University of Birmingham (U.K.). Mr. Tomaszewski has held various
positions in the field of Marketing and Administration for multi-national
companies, including a division of Abitibi-Consolidated and Hunter Douglas.
During the past 21 years, 16 of which as president and majority shareholder of a
group of private real estate development and investment companies called The
Amadon Group, he was responsible for ventures with a combined value of over
$250,000,000.
MIKIKO FUJISAWA, VICE PRESIDENT, CORPORATE SECRETARY AND DIRECTOR Age: 32
A Japanese citizen, she has over seven years' experience in administrative and
secretarial positions including assisting the Vice President of a corporation
employing over 150,000 people, as well as a Newspaper Editor for Cyugoku
Shinbun-Shya, a newspaper with a circulation of several million. In addition,
she provides corporate secretarial services and is responsible for compliance
matters with the Securities and Exchange Commissions. She is a graduate of
Kwasei Gakuin University (Japan) with a Bachelor of Arts and CDI College of
Business and Technology (Vancouver) with a Business communications Certificate
and a Diploma in Computerized Office Administration. She holds various executive
positions in licensors or suppliers to Milinx including Milinx International and
Credit Assure International Limited. She is married to Maynard Dokken.
26
<PAGE> 27
DONALD L. WILLIAMS, CHIEF OPERATING OFFICER (SUBSIDIARY) Age: 47
Mr. Williams is former president of SoftRisk Technologies. As president, he was
responsible for the overall operation of the company including guiding the
marketing and sales of software products. Of four software products Mr. Williams
conceived of and commercialized, one is an Internet-based application now used
by the United Nations in international peacekeeping and humanitarian assistance
operations. He has several years of experience in senior management and
consulting positions, and is skilled in cultivating and maintaining long-term
business and customer relations. He has been with Milinx since September 15,
1999.
BARRY W. PHILLIPS, TREASURER, CFO AND DIRECTOR Age: 59
He was employed with the Canadian Imperial Bank of Commerce both in Canada and
internationally, from 1956 to 1977 and his experience included: operations,
human resource management, executive training, corporate lending, branch
management, corporate marketing and international money management. He
established a management consulting firm in 1977 in Winnipeg, Manitoba,
specializing in corporate finance and reorganizations, mergers and acquisitions,
succession planning and sale of businesses and the implementation of financial
and management information systems. He is on the advisory board of five private
companies, a director of three private mining companies and has retired from the
Boards of two public companies.
JAMES R. MEDLEY, CHAIRMAN OF THE AUDIT COMMITTEE, DIRECTOR Age: 58
Mr. Medley is the founder and president of Laux Medley Norris Inc, investment
advisors and business counselors since 1976. He currently serves as Treasurer
and Chief Financial Officer for Leading-Edge Earth Products Inc., a publicly
traded development stage company. James Medley has twenty-five years of
experience in diverse areas of financial management and analysis. He manages
portfolios including precious metals, securities and real estate for individuals
and partnerships. He develops financial plans and strategies, does financial
analysis and cash flow forecasting for Businesses, advises companies on SEC
reporting matters and produces financial proformas for start-up companies. He
graduated from the Naval Air Training Command, Maintenance Management and
Information Systems at Ohio University, University of Washington Graduate School
of Business Administration Management Course, and Wentworth Institute,
Mechanical Engineer in Machine Design. James spent ten years in the Navy,
becoming Standardization Officer in the Naval Air Advance Training Command and
Carrier Aircraft Commander before starting Laux Medley Norris, Inc. in Seattle.
KEY PERSONNEL (ALL ARE EMPLOYED AT SUBSIDIARY LEVEL)
BONNIE ROBB, ADVERTISING MANAGER Age: 46
Ms. Robb has Diplomas in Broadcast Journalism and Multimedia Production. She has
been in the communications business for the past twenty years including
ownership of her own business and as a production manager in radio and
television.
Her responsibilities include: the development of advertising strategies for
target markets,
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<PAGE> 28
assist with the negotiations with advertising agencies, approving advertising
scripts and monitoring the cost benefit of the various advertising programs.
DAVID LIBBY, B. COMM., CMA, GROUP CORPORATE CONTROLLER Age: 48
He is a Certified Management Accountant with over twenty five years experience
as a Corporate Controller, initially with General Motors in 1978 and most
recently with Surfwood Supply. He has extensive experience in all aspects of
accounting, including cost accounting, management information systems and
General Accepted Accounting (GAAP) issues.
His responsibilities include: managing all the accounting operations for the
Milinx Group of companies; managing the budgeting system and reporting;
responsibility for all internal controls and costs; monitoring the cash
management systems; the preparation of financial statements for management and
external purposes; and maintaining the relationship with the company's external
auditors.
EDWIN MARK, B. COMM. (FINANCE), LLB, CORPORATE COUNSEL Age: 32
Since his graduation from the University of Saskatchewan seven years
ago, he has been working in a private practice with Mair, Jensen & Blair,
specializing in corporate and commercial law. He also was co-founder of the
Entrepreneurs Business Group and was formerly the Legal Chair for the United Way
(Kamloops). He brings a background in law with a business perspective to the
company.
His responsibilities include: assisting with and advising on all corporate and
legal issues; the review of all contracts and licensing agreements on a
continuous basis; the legal requirements of conducting business throughout the
United States, Canada and other countries which Milinx may eventually operate
in; and assisting with the negotiations on all mergers, acquisitions and
marketing alliances.
GRENFELL FEATHERSTONE, DIRECTOR OF CONCEPT DEVELOPMENT Age: 49
Mr. Featherstone received a B.A. Hons. (Magna Cum Laude) from the University of
Victoria and a Masters in English from Dalhousie. He has considerable experience
in School Administration, teaching courses in English and History of Ideas. He
is a past President of the Debate and Speech Association of British Columbia,
Director of the Canadian Student Debating Federation and President of the
International Independent Schools Public Speaking League.
He has been a Consultant in his own firm providing services in Strategic
Planning and Board Policy in Education and on various projects involving
communications. His responsibilities include: the development of new products
based on market research; the monitoring of the competitiveness of the present
product offerings; coordinating the launch of new products; the development of
corporate communication programs; the development of advertising strategies;
assist with the development of new marketing materials and strategies; and the
development of advertising programs, including monitoring the cost effectiveness
of expenditures.
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HAMID H. TEHRANI, INFORMATION SYSTEMS M Age: 32
He has a BSc. in Comp. Eng. (Bachelor of Computer Engineering) and a MSc. in
Comp.Sc. (Masters of Computer Science). He also has experience as a Programmer,
Project Manager, and Software Developer with The University of Vienna and the
Middle East Technical University. He has skills in various operating systems
including Microsoft NT and Unix, Linux, Sun Solaris and HP-UX. His
responsibilities include: the development of Internet systems, programming
(including Web programming), directing and managing a group of programmers and
administrators, maintain internal computer and network systems including the
company intranet, developing specifications for hardware and software purchases,
assist with the negotiations with vendors, licensing and the integration of all
systems with the World Wide Web.
JAN FORCIER CTI TEAM LEADER Age: 31
Mr. Forcier has a BSc from UBC and Computer Science Diploma from Langara. He has
over 12 years experience in the computer industry, including programming and
telephony systems with Natural Micro Boards. His time and project management
background provides him with the experience to handle a team of programmers in
development environments. His responsibilities include installation and
servicing of telephony and voice recognition systems and software.
JIM B. MAEDEL, HUMAN RESOURCES DIRECTOR Age: 37
Mr. Maedel has a BA in Economics from the University of Waterloo. A District
Manager for Agency Rent A Car for 7 years and Regional Manager for Interactive
Media Corp in Toronto followed by the Call Center Manager for Future Shop. As a
result of his background, he has experience with recruiting, personnel
management policies and relations. His responsibilities include: recommendations
on personnel policies and procedures, preparing job descriptions in conjunction
with department heads, the recruiting of qualified personnel, preparing
recommendations on compensation including salary ranges and benefits, the
management of the company's education and training programs and professional
development, and the supervision of administration personnel.
JONATHAN MYERS, TELECOMMUNICATIONS MANAGER Age: 52
Mr. Myers has spent the past 18 years as a very successful Service Manager with
BC Telecom. He has also worked as a consultant on e-commerce issues. Jonathan
was responsible for the Western Canadian Data Network of the Royal Bank
Financial Group and the National Network of the Hong Kong Bank, as well as the
ICBC Year 2000 conversion. He is currently enrolled in the Masters program for
Project Management at George Washington University.
His responsibilities include: The coordination of telecommunications software
and hardware installation and maintenance, negotiations with telecommunications
service and resource providers, and relevant project management tasks.
MELANIE MITRA, CALL CENTER AND CUSTOMER SERVICE MANAGER Age: 32
Ms. Mitra has an Honors Degree in Political Science and a Minor in Economics
from Bishops University. For the past ten years she has been in the call center
industry involved with the Southam Newspaper Group and Chubb Security. She has
managed more than 400 Call Center Employees and has experience in all operating
positions from set-up to ongoing management, coordination of marketing, IS,
human resources and many other aspect of the requirements for
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Corporate Call Centers. Her responsibilities include: the organization of the
Call and Customer Service Center and systems, the recruiting of qualified
personnel, the training of Customer Service personnel, the maintaining of a high
standard of service, and the generation of new business and auxiliary business
to achieve profitability for the center.
REZA BAZARGAN, TECHNICAL RESEARCH AND DEVELOPMENT MANAGER Age: 34
Reza comes to Milinx with a 5-year degree in Mechanical Design Engineering from
the Technical University in Persia. He has a strong background in project
management, operations management, and strategy planning, including membership
at PMI (Project Management Institute), and various types of consulting work for
Bell Sygma Telecom Solutions, the City of Surrey, and IBM. He also has
represented the Canadian Government in international relations. His
responsibilities include: the management and co-ordination of the technically
oriented projects of the company.
RICHARD BERGIN, DIRECTOR OF SALES AND MARKETING Age: 43
Mr. Bergin has many years of experience in sales and marketing for a range of
companies in highly competitive industries in the United Kingdom. Before coming
to Milinx on October 15, 1999, he led Sales and Marketing for the UK launch of
the Nannini range of Italian eyewear. Prior to that, he was Client Services
Director for the in-house marketing and communications consultancy for Samsung's
electronics businesses in Europe. He was also a managing partner of his own UK
advertising agency. As a board director of Saatchi & Saatchi subsidiary ad
agency in London, he headed the domestic and international account team for
British Telecom, one of the five largest advertisers in the UK. Recently awarded
an MBA with Distinction from Kingston University of London. His responsibilities
include: All sales and marketing activities, including the further development
of appropriate sales and marketing strategies, building and maintaining a strong
sales team, and supervision of the development and growth of our advertising
department.
SASAN KOMAIED, DATABASE DEVELOPMENT TEAM LEADER Age: 35
Mr. Komaied studied Technical Physics, Translation and Informatic at the
University of Austria. He is a Certified Oracle Designer 2000 and Developer
2000. He has two Omnis Certifications, Certification in Siemens Software
Engineering, and is an IBM AS400 Software Engineer. His projects have included
the Daimler Benz Web and Internal Database and Application, including archiving,
video, image and voice in an Oracle database for use on the Web and in internal
applications. Mr. Komaied was also responsible for the online database,
e-commerce, archiving and billing, ordering and shipping for Otto and Nova for
their on-line store and web development and catalogue. These companies are now
two of the largest European online stores. His responsibilities include: the
development of the Oracle database; the day-to-day management of the system; and
the integration of the database with the Internet and telecommunication systems.
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EXECUTIVE AND DIRECTORS' COMPENSATION
The following table shows the annual compensation of the executive officers and
directors of Milinx Business Group, Inc. and its subsidiary, Milinx Business
Services, Inc. ("MBS"):
<TABLE>
<CAPTION>
- - ------------------------------------------------------------ ---------------------------------------------------------
Name Annual Salary (US$)
- - ------------------------------------------------------------ ---------------------------------------------------------
<S> <C>
Maynard L. Dokken $100,000
President, CEO, Director
- - ------------------------------------------------------------ ---------------------------------------------------------
Mikiko Fujisawa 87,000
Vice President, Secretary, Director
- - ------------------------------------------------------------ ---------------------------------------------------------
Barry Phillips 42,000
Chief Financial Officer, Director
- - ------------------------------------------------------------ ---------------------------------------------------------
James Medley 36,000
Director
- - ------------------------------------------------------------ ---------------------------------------------------------
Max Tomaszewski 62,000
Executive Vice President (MBS)
- - ------------------------------------------------------------ ---------------------------------------------------------
Don Williams 65,500
Chief Operating Officer (MBS)
- - ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
MARKET FOR MILINX SECURITIES
Milinx has been a non-reporting company with certain of its securities exempt
from registration under the Securities Act of 1933 pursuant to Rules 504 of
Regulation D and Rule 701 of the General Rules and Regulations of the Securities
and Exchange Commission. Milinx did not file a registration statement with the
Securities and Exchange Commission and has not been a reporting company under
the Securities Exchange Act of 1934. Shares are not traded on the OTC Bulletin
Board or any exchange and are not listed in the "Pink Sheets". Milinx intends to
seek listing on the OTC Bulletin Board and NASDAQ listing when qualified.
RELATED TRANSACTIONS
Maynard Dokken, President and Mikiko Fujisawa, Vice President both have
interests in Companies which licensed or sold property to Milinx.
RISK FACTORS
CRITICAL RISK EVALUATION
Milinx has undergone a rigorous process of risk evaluation and has identified a
number of critical success factors that will need to be addressed in order to
meet its business objectives.
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BUSINESS ENVIRONMENT
The Application Service Provider (ASP) Internet-based business model challenges
the Independent Software Vendor (ISV) packaged software model directly. This
challenge defines "the shape of things to come" as the ongoing convergence of
technology provides varied means for Internet-centric ("net-centered") software
distribution. It is expected that the ASP versus ISV battles that are starting
to take shape will contribute significantly to the risks faced by Milinx.
For example, Milinx, along with its business partners, will be offering various
versions of StarOffice - among other applications and services - over the
Internet to computer, cellular telephone and "web appliance" users (users of
Personal Digital Assistants or PDAs). From a software functionality perspective,
StarOffice offers features that are similar to Microsoft Office. As the dominant
ISV, Microsoft can be expected to protect its packaged software business as well
as enter into the ASP environment by also offering its software applications as
a service over the Internet.
Milinx is addressing this critical risk by association with strategic business
partners. Our strategic partners are challenging Microsoft and its competitors
head on. Together, we will have first-to-market advantage and will benefit from
technology convergence, which will enable our net-centered applications to be
accessed by personal computers as well as a growing variety of wireless handheld
devices.
The extent of the business opportunity for well-positioned ASPs is significant.
While the research points to a range of numbers, they are all in the billions of
dollars in the short term. The high tech community is waking up to this
discovery and some big companies are positioning themselves strategically. In
other words, we're going to have more competition.
CRITICAL SUCCESS FACTORS
Milinx is working aggressively with our business partners to build a technology
infrastructure that is highly scalable, reliable and expandable. We are
implementing industry standard technology capable of delivering on-line
solutions to millions of customers with a high accessibility rate. In addition,
Milinx will be utilizing industry-leading "softswitch" telecommunications
technology believed at least six months ahead of any competitor in the ASP
business environment. The softswitch will further increase our capacity and
reliability while reducing the overall cost of distribution dramatically. Milinx
is moving quickly in the implementation of an ever-increasing scope of products
and services in support of the growing Internet-based communications, office
productivity, collaboration and e-commerce needs of the business community. The
company is also investigating the implementation and provision of knowledge
management applications for business that are at least two years' ahead of any
known competitive source. There is uncertainty regarding the receptivity of
packaged software users to the ASP way of doing business because: a) it is new,
b) it requires data conversion, and c) there is a security issue. This means
that there is likely to be some "built-in" resistance on the part of software
users to change from an ISV to an ASP. By now, however, most software users are
accustomed to new innovations and, while data conversion represents an
additional process, it is a relatively straightforward one. Nonetheless, we are
addressing this market acceptance factor by working
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with our industry partners to introduce Milinx to selected customers of theirs
who are demanding ASP services. The key inhibitor to market acceptance, then, is
security.
Milinx is addressing this critical success factor through innovation. The
company owns a worldwide patent pending property entitled "A Method and
Apparatus for Secure E-Commerce Transactions". The embodiment of the patent
pending is a device- independent apparatus that will enable secure
communications and e-commerce transactions in a wide variety of applications
including but not limited to those being offered as a service to our customers.
In addition, this state-of-the-art security feature will set Milinx apart from
its competitors who may have to come to us for a solution to this key security
problem.
We acknowledge that Milinx is a start-up company. As such, the company has no
revenue or track record. This poses numerous problems not the least of which is
financing. Milinx will need access to financing on an ongoing basis if it is to
be successful.
Our iPlanet business partners are helping to address this critical success
factor by creatively supporting of our financing requirements. In addition,
recognized capital corporations have made their presence known and have offered
financing for enabling the replication of data centers as needed across North
America. This fact is expected to provide a measure of comfort and credibility
for prospective investors as we move forward as a reporting company in search of
financing to carry out our business plan.
The company's core technology is under development. Milinx is in the process of
building a data center and working with its business partners to develop and
implement the technology infrastructure required to operate as an ASP. There are
risks associated with this development work that could adversely affect the
overall performance of the company.
This critical success factor is being defined as the timely delivery of product
from our industry partners. Milinx has agreements in place that provide strong
incentives for the timely delivery of our technology backbone by iPlanet
business partners.
SPECIFIC RISKS
MILINX IS CURRENTLY OPERATING AT A LOSS. There have been no revenues from
operations and none are expected for several months The company has been
completely dependent on investments, leases and financing arrangements for
operations. Its ability to develop operations is dependent upon its ability to
advertise its products and generate sales of its BBT and similar products. If
unable to sell sufficient amount of its products at a sufficiently profitable
level, it will need to raise additional capital through the placement of its
securities or from other debt or equity financing. If the Company is not able to
raise such financing or to obtain alternative sources of funding, management
will be required to curtail operations.
MILINX COMMENCED OPERATIONS IN 1999 AND HAS A LIMITED OPERATING HISTORY. Milinx
commenced operations in 1999 and has only a limited history of operations which
to date have not been profitable. Its operations are subject to the risks and
competition inherent in the establishment of
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a relatively new business enterprise. There can be no assurance that future
operations will be profitable. Revenues and profits, if any, will depend upon
various factors, including market acceptance of its concepts, market awareness,
reliability and acceptance of the Internet, dependability of its distribution
network, and general economic conditions. There is no assurance that Milinx will
achieve its expansion goals and the failure to achieve such goals would have an
adverse impact on it.
MILINX ISSUED PREFERRED STOCK HAS SUPER MAJORITY VOTING RIGHTS. Milinx has
designated 15,000,000 shares of Series A preferred stock of which approximately
3,675,000 are issued. Each share of Series A preferred stock entitles the holder
to 2 times the common stock into which it may be converted, currently 6 votes.
Thus, these shares have voting rights equivalent to approximately 20,000,000
common shares giving the holders control of the Company. Maynard Dokken,
President, controls most of these shares. In addition, Milinx may, without
further action or vote by its shareholders, designate and issue additional
series or shares of preferred stock.
The terms of the super majority preferred stock adversely affect the voting
power of the holders of the common stock and may in turn reduce the value of the
common stock. Such designation and issuance of preferred stock favorable to
current management or shareholders makes the possible takeover of the Company or
the removal of management of the Company very difficult and discourages hostile
bids for control of the Company which bids might have provided shareholders with
premiums for their shares.
VOTING CONTROL OF MILINX BY PRESIDENT. Maynard Dokken, founder, President and a
director, owns and controls beneficially the voting rights ascribed
approximately 17,000,000 common shares, and in addition has options for
preferred shares which would vote as if 1,200,000 common shares. His wife,
Mikiko has voting rights in preferred shares or options equivalent to
approximately 4,000,000 common shares.
LACK OF CONTINUED DEVELOPMENT OF E-COMMERCE MARKET. The use of the Internet and
World Wide Web for commercial purposes is expanding dramatically. There is no
assurance, however, that as increased commerce takes place on the Internet that
unforeseen overloads, lack of sufficient hardware, telephone availability or
other problems may develop. In addition, consumer use of the Internet for
purchases, banking, and other commercial uses may decline for any number of
reasons such as security problems, overload difficulties, shopping trends, or
slow Internet access.
COMPETITION FROM LARGER AND MORE ESTABLISHED COMPANIES MAY HAMPER MARKETABILITY.
The competition in the business applications industry is intense. There are
numerous well-established competitors, including national, regional and local
companies possessing substantially greater financial, marketing, personnel and
other resources than Milinx. Milinx may not be able to market or sell its
products if faced with direct product competition from these larger and more
established companies.
TRADEMARK PROTECTION AND PROPRIETARY MARKS. Notwithstanding the pending patent
pending, there is no assurance Milinx will secure a patent for any process or
invention, or be able to sustain a proprietary position in its technology.
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<PAGE> 35
MANAGEMENT AND AFFILIATES OWN ENOUGH SHARES TO CONTROL SHAREHOLDER VOTE. Milinx
executive officers and directors and 5% holders beneficially own approximately
20,720,400 common shares with voting rights of 33,945,525 common shares, that
result in an absolute majority control. As a result, these executive officers
are able to exercise controlling interest over matters requiring stockholder
approval, including the election of directors and the approval of material
corporate matters such as change of control transactions. The effects of such
control could be to delay or prevent a change of control of Milinx unless the
terms are approved by such stockholders.
ISSUANCE OF FUTURE SHARES MAY DILUTE INVESTORS SHARE VALUE. The Certificate of
Incorporation as amended of Milinx authorizes the issuance of 210,000,000 shares
of common stock and 100,000,000 shares of preferred stock. The future issuance
of all or part of the remaining authorized common stock may result in
substantial dilution in the percentage of the Company's common stock held by its
then existing shareholders. Moreover, any common stock issued in the future may
be valued on an arbitrary basis by Milinx. The issuance of the Company's shares
for future services or acquisitions or other corporate actions may have the
effect of diluting the value of the shares held by investors, and might have an
adverse effect on any trading market, should a trading market develop for the
Company's common stock.
CURRENT TRADING MARKET FOR THE COMPANY'S SECURITIES. Milinx common stock is not
traded on the OTC Bulletin Board operated by Nasdaq, and there is no assurance a
trading market will develop, or if developed, at what volume or price. Milinx
did not file a registration statement with the Securities and Exchange
Commission and has not been a reporting company under the Securities Exchange
Act of 1934.
PENNY STOCK REGULATION. Upon commencement of trading in the Company's stock, if
such continues (of which there can be no assurance) the Company's common stock
may be deemed a penny stock. Penny stocks generally are equity securities with a
price of less than $5.00 per share other than securities registered on certain
national securities exchanges or quoted on the Nasdaq Stock Market, provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or system. The Company's securities may
be subject to "penny stock rules" that impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together
with their spouse). For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the transaction
prior to the purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the "penny stock rules" require the delivery, prior to the
transaction, of a disclosure schedule prescribed by the Commission relating to
the penny stock market. The broker-dealer also must disclose the commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements must be sent
disclosing recent price information on the limited market in penny stocks.
Consequently, the "penny stock rules" may restrict the ability of broker-dealers
to sell the Company's securities. The foregoing required penny stock
restrictions will not apply to the Company's securities if such securities
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<PAGE> 36
maintain a market price of $5.00 or greater. There can be no assurance that the
price of the Company's securities will reach or maintain such a level.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
SUCCESSOR ISSUER ELECTION.
Upon effectiveness of the exchange, pursuant to Rule 12g-3(a) of the General
Rules and Regulations of the Securities and Exchange Commission, Milinx became
the successor issuer to Forestay Corporation for reporting purposes under the
Securities Exchange Act of 1934 and elects to report under the Act effective on
December 9, 1999.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The sole Officer and Director of the registrant, Forestay, resigned upon the
acquisition being effective and the successor election being made. No directors
or executive officers of Milinx have resigned as a result of the acquisition or
since the succession.
ITEM 7. FINANCIAL STATEMENTS
Milinx Business Group, Inc. will file Financial Statements on Form 8-K not less
than 60 days from the filing of this report.
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ITEM 8. CHANGE IN FISCAL YEAR
The successor issuer is adopting a fiscal year end of June 30.
EXHIBITS
1 Agreement and Plan of Merger and amendment thereto between Forestay
Corp. and Milinx.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Milinx Business Group, Inc.
By /s/ Maynard Dokken
------------------------
President, Director
Date: December 30, 1999
37
<PAGE> 1
EXHIBIT 1
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") among FORESTAY
CORPORATION, a Delaware corporation ("Forestay"), MILINX BUSINESS GROUP, INC., a
Delaware corporation ("Milinx") and the persons listed in Exhibit A hereof
(collectively the "Shareholders"), being the owners of record of all of the
issued and outstanding stock of Forestay.
Whereas, Milinx wishes to acquire and the Shareholders wish to transfer
all of the issued and outstanding securities of Forestay in a transaction
intended to qualify as a reorganization within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
Now, therefore, Forestay, Milinx and the Shareholders adopt this plan
of reorganization and agree as follows:
1. EXCHANGE OF STOCK
1.1. NUMBER OF SHARES. The Shareholders agree to transfer to Milinx at
the Closing (defined below) the number of shares of common stock of Forestay,
$.0001 par value per share, shown opposite their names in Exhibit A, in exchange
pro rata for an aggregate of 250,000 shares of voting common stock of Milinx,
$0.0001 par value per share.
1.2. EXCHANGE OF CERTIFICATES. Each holder of an outstanding
certificate or certificates theretofore representing shares of Forestay common
stock shall surrender such certificate(s) for cancellation to Milinx, and shall
receive in exchange a certificate or certificates representing the number of
full shares of Milinx common stock into which the shares of Forestay common
stock represented by the certificate or certificates so surrendered shall have
been converted. The transfer of Forestay shares by the Shareholders shall be
effected by the delivery to Milinx at the Closing of certificates representing
the transferred shares endorsed in blank or accompanied by stock powers executed
in blank.
1.3. FRACTIONAL SHARES. Fractional shares of Milinx common stock shall
not be issued, but in lieu thereof Milinx shall round up fractional shares to
the next highest whole number.
1.4. FURTHER ASSURANCES. At the Closing and from time to time
thereafter, the Shareholders shall execute such additional instruments and take
such other action as Milinx may request in order more effectively to sell,
transfer, and assign the transferred stock to Milinx and to confirm Milinx's
title thereto.
2. RATIO OF EXCHANGE. The securities of Forestay owned by the
Shareholders, and the relative securities of Milinx for which they will be
exchanged, are set out opposite their names in Exhibit A.
3. CLOSING.
3.1. TIME AND PLACE. The Closing contemplated herein shall be held as
soon as possible, but in any event no later than December 9, 1999 at the offices
of Cassidy & Associates at 1504 R Street, NW, Washington, D.C. unless another
place or time is agreed upon in writing by the parties
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<PAGE> 2
without requiring the meeting of the parties hereof. All proceedings to be taken
and all documents to be executed at the Closing shall be deemed to have been
taken, delivered and executed simultaneously, and no proceeding shall be deemed
taken nor documents deemed executed or delivered until all have been taken,
delivered and executed. The date of Closing may be accelerated or extended by
agreement of the parties.
3.2. FORM OF DOCUMENTS. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission required by this Agreement
or any signature required thereon may be used in lieu of an original writing or
transmission or signature for any and all purposes for which the original could
be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original writing or
transmission or original signature.
4. UNEXCHANGED CERTIFICATES. Until surrendered, each outstanding
certificate that prior to the Closing represented Forestay common stock shall be
deemed for all purposes, other than the payment of dividends or other
distributions, to evidence ownership of the number of shares of Milinx common
stock into which it was converted. No dividend or other distribution shall be
paid to the holders of certificates of Forestay common stock until presented for
exchange at which time any outstanding dividends or other distributions shall be
paid.
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders, individually and separately, represent and warrant as
follows:
5.1. TITLE TO SHARES. The Shareholders, and each of them, are the
owners, free and clear of any liens and encumbrances, of the number of Forestay
shares which are listed in the attached Exhibit 1 and which they have contracted
to exchange.
5.2. LITIGATION. There is no litigation or proceeding pending, or
to any Shareholder's knowledge threatened, against or relating to shares of
Forestay held by the Shareholders.
6. REPRESENTATIONS AND WARRANTIES OF FORESTAY. Forestay represents
and warrants that:
6.1. CORPORATE ORGANIZATION AND GOOD STANDING. Forestay is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and is qualified to do business as a foreign
corporation in each jurisdiction, if any, in which its property or business
requires such qualification.
6.2. REPORTING COMPANY STATUS. Forestay has filed with the Securities
and Exchange Commission a registration statement on Form 10-SB which became
effective pursuant to the Securities Exchange Act of 1934 and is a reporting
company pursuant to ss.12(g) thereunder.
6.3. REPORTING COMPANY FILINGS. Forestay has timely filed and is
current on all reports required to be filed by it pursuant to ss.13 of the
Securities Exchange Act of 1934.
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<PAGE> 3
6.4. CAPITALIZATION. Forestay's authorized capital stock consists of
100,000,000 shares of Common Stock, $.0001 par value, of which 5,000,000 shares
are issued and outstanding, and 20,000,000 shares of Preferred Stock, of which
no shares are issued or outstanding.
6.5. ISSUED STOCK. All the outstanding shares of its Common Stock
are duly authorized and validly issued, fully paid and non-assessable.
6.6. STOCK RIGHTS. Except as set out by attached schedule, there are no
stock grants, options, rights, warrants or other rights to purchase or obtain
Forestay Common or Preferred Stock issued or committed to be issued.
6.7. CORPORATE AUTHORITY. Forestay has all requisite corporate power
and authority to own, operate and lease its properties, to carry on its business
as it is now being conducted and to execute, deliver, perform and conclude the
transactions contemplated by this Agreement and all other agreements and
instruments related to this agreement.
6.8. AUTHORIZATION. Execution of this agreement has been duly
authorized and approved by Forestay's board of directors.
6.9. SUBSIDIARIES. Forestay has no subsidiaries.
6.10. FINANCIAL STATEMENTS. Forestay's financial statements dated as of
June 7, 1999 copies of which will have been delivered by Forestay to Milinx
prior to the Closing Date (the "Forestay Financial Statements"), fairly present
the financial condition of Forestay as of the date therein and the results of
its operations for the periods then ended in conformity with generally accepted
accounting principles consistently applied.
6.11. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in the Forestay Financial Statements, Forestay did
not have at that date any liabilities or obligations (secured, unsecured,
contingent, or otherwise) of a nature customarily reflected in a corporate
balance sheet prepared in accordance with generally accepted accounting
principles.
6.12. NO MATERIAL CHANGES. Except as set out by attached schedule,
there has been no material adverse change in the business, properties, or
financial condition of Forestay since the date of the Forestay Financial
Statements.
6.13. LITIGATION. Except as set out by attached schedule, there is not,
to the knowledge of Forestay, any pending, threatened, or existing litigation,
bankruptcy, criminal, civil, or regulatory proceeding or investigation,
threatened or contemplated against Forestay or against any of its officers.
6.14. CONTRACTS. Except as set out by attached schedule, Forestay is
not a party to any material contract not in the ordinary course of business that
is to be performed in whole or in part at or after the date of this agreement.
6.15. TITLE. Except as set out by attached schedule, Forestay has good
and marketable title to all the real property and good and valid title to all
other property included in the Forestay Financial Statements. Except as set out
in the balance sheet thereof, the properties of Forestay are not subject
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<PAGE> 4
to any mortgage, encumbrance, or lien of any kind except minor encumbrances that
do not materially interfere with the use of the property in the conduct of the
business of Forestay.
6.16. TAX RETURNS. Except as set out by attached schedule, all required
tax returns for federal, state, county, municipal, local, foreign and other
taxes and assessments have been properly prepared and filed by Forestay for all
years for which such returns are due unless an extension for filing any such
return has been filed. Any and all federal, state, county, municipal, local,
foreign and other taxes and assessments, including any and all interest,
penalties and additions imposed with respect to such amounts have been paid or
provided for. The provisions for federal and state taxes reflected in the
Forestay Financial Statements are adequate to cover any such taxes that may be
assessed against Forestay in respect of its business and its operations during
the periods covered by the Forestay Financial Statements and all prior periods.
6.17. NO VIOLATION. The Closing will not constitute or result in a
breach or default under any provision of any charter, bylaw, indenture,
mortgage, lease, or agreement, or any order, judgment, decree, law, or
regulation to which any property of Forestay is subject or by which Forestay is
bound.
7. REPRESENTATIONS AND WARRANTIES OF MILINX. Milinx represents and
warrants that:
7.1. CORPORATE ORGANIZATION AND GOOD STANDING. Milinx is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and is qualified to do business as a foreign corporation in
each jurisdiction, if any, in which its property or business requires such
qualification.
7.2. CAPITALIZATION. Milinx's authorized capital stock consists of
210,000,000 shares of Common Stock, $.001 par value, of which 8,970,000 shares
are issued and outstanding, and 40,000,000 shares of preferred stock, $.001 par
value, of which 3,675,000 Series A shares are issued and outstanding.
7.3. ISSUED STOCK. All the outstanding shares of its Common Stock are
duly authorized and validly issued, fully paid and non-assessable.
7.4. STOCK RIGHTS. Except as set out by attached schedule, there are no
stock grants, options, rights, warrants or other rights to purchase or obtain
Milinx Common or Preferred Stock issued or committed to be issued.
7.5. CORPORATE AUTHORITY. Milinx has all requisite corporate power and
authority to own, operate and lease its properties, to carry on its business as
it is now being conducted and to execute, deliver, perform and conclude the
transactions contemplated by this Agreement and all other agreements and
instruments related to this agreement.
7.6. AUTHORIZATION. Execution of this agreement has been duly
authorized and approved by Milinx's board of directors.
7.7. SUBSIDIARIES. As set out in schedule attached hereto, Milinx has
four subsidiaries.
7.8. FINANCIAL STATEMENTS. Milinx's draft audited financial statements,
which are subject
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<PAGE> 5
to revision, dated as of June 30, 1999, financial statements copies of which
will have been delivered by Milinx to Forestay prior to the Closing Date (the
"Milinx Financial Statements"), fairly present the financial condition of Milinx
as of the date therein and the results of its operations for the periods then
ended in conformity with generally accepted accounting principles consistently
applied.
7.9. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected
or reserved against in the Milinx Financial Statements, Milinx did not have at
that date any liabilities or obligations (secured, unsecured, contingent, or
otherwise) of a nature customarily reflected in a corporate balance sheet
prepared in accordance with generally accepted accounting principles.
7.10. NO MATERIAL CHANGES. Except as set out by attached schedule,
there has been no material adverse change in the business, properties, or
financial condition of Milinx since the date of the Milinx Financial Statements.
7.11. LITIGATION. Except as set out by attached schedule, there is not,
to the knowledge of Milinx, any pending, threatened, or existing litigation,
bankruptcy, criminal, civil, or regulatory proceeding or investigation,
threatened or contemplated against Milinx or against any of its officers.
7.12. CONTRACTS. Except as set out by attached schedule, Milinx is not
a party to any material contract not in the ordinary course of business that is
to be performed in whole or in part at or after the date of this agreement.
7.13. TITLE. Except as set out by attached schedule, Milinx has good
and marketable title to all the real property and good and valid title to all
other property included in the Milinx Financial Statements. Except as set out in
the balance sheet thereof, the properties of Milinx are not subject to any
mortgage, encumbrance, or lien of any kind except minor encumbrances that do not
materially interfere with the use of the property in the conduct of the business
of Milinx.
7.14. TAX RETURNS. Except as set out by attached schedule, all required
tax returns for federal, state, county, municipal, local, foreign and other
taxes and assessments have been properly prepared and filed by Milinx for all
years for which such returns are due unless an extension for filing any such
return has been filed. Any and all federal, state, county, municipal, local,
foreign and other taxes and assessments, including any and all interest,
penalties and additions imposed with respect to such amounts have been paid or
provided for. The provisions for federal and state taxes reflected in the Milinx
Financial Statements are adequate to cover any such taxes that may be assessed
against Milinx in respect of its business and its operations during the periods
covered by the Milinx Financial Statements and all prior periods.
7.15. NO VIOLATION. The Closing will not constitute or result in a
breach or default under any provision of any charter, bylaw, indenture,
mortgage, lease, or agreement, or any order, judgment, decree, law, or
regulation to which any property of Milinx is subject or by which Milinx is
bound.
8. CONDUCT PENDING THE CLOSING
Forestay, Milinx and the Shareholders covenant that between the date
of this Agreement and the Closing as to each of them:
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<PAGE> 6
8.1. No change will be made in the charter documents, by-laws, or other
corporate documents of Forestay.
8.2. Forestay will use its best efforts to maintain and preserve its
business organization, employee relationships, and goodwill intact, and will not
enter into any material commitment except in the ordinary course of business.
8.3. No change will be made in the charter documents, by-laws, or other
corporate documents of Milinx.
8.4. Milinx will use its best efforts to maintain and preserve its
business organization, employee relationships, and goodwill intact, and will not
enter into any material commitment except in the ordinary course of business.
8.5. None of the Shareholders will sell, transfer, assign, hypothecate,
lien, or otherwise dispose or encumber the Forestay shares of common stock owned
by them.
9. CONDITIONS PRECEDENT TO OBLIGATION OF THE SHAREHOLDERS
The Shareholder's obligation to consummate this exchange shall be
subject to fulfillment on or before the Closing of each of the following
conditions, unless waived in writing by the Shareholders as appropriate:
9.1. MILINX'S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Milinx set forth herein shall be true and correct at the Closing
as though made at and as of that date, except as affected by transactions
contemplated hereby.
9.2. MILINX'S COVENANTS. Milinx shall have performed all covenants
required by this Agreement to be performed by it on or before the Closing.
9.3. BOARD OF DIRECTOR APPROVAL. This Agreement shall have been
approved by the Board of Directors of Milinx.
9.4. SUPPORTING DOCUMENTS OF MILINX. Milinx shall have delivered to
the Shareholders the following documents in form and substance reasonably
satisfactory to the Shareholders:
(a) A good standing certificate from the jurisdiction of Milinx's
organization stating that Milinx is a corporation duly organized, validly
existing, and in good standing;
(b) Secretary's certificate stating that Milinx's authorized capital
stock is as set forth herein;
(c) Certified copies of the resolutions of the
board of directors of Milinx authorizing the execution of this Agreement and the
consummation hereof;
(d) Secretary's certificate of incumbency of the officers and directors
of Milinx;
(e) Milinx's draft audited Financial Statements (subject to revision)
for the period ended June 30, 1999; and
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<PAGE> 7
(f) Any document as may be specified herein or required to satisfy the
conditions, representations and warranties enumerated elsewhere herein.
10. CONDITIONS PRECEDENT TO OBLIGATION OF MILINX
Milinx's obligation to consummate this exchange shall be subject to
fulfillment on or before the Closing of each of the following conditions, unless
waived in writing by Milinx:
10.1. SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Shareholders set forth herein shall be true and correct at
the Closing as though made at and as of that date, except as affected by
transactions contemplated hereby.
10.2. SHAREHOLDERS' COVENANTS. The Shareholders shall have performed
all covenants required by this Agreement to be performed by them on or before
the Closing.
10.3. FORESTAY'S REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Forestay set forth herein shall be true and correct at the
Closing as though made at and as of that date, except as affected by
transactions contemplated hereby.
10.4. FORESTAY'S COVENANTS. Forestay shall have performed all covenants
required by this Agreement to be performed by them on or before the Closing.
10.5. BOARD OF DIRECTOR APPROVAL. This Agreement shall have been
approved by the Board of Directors of Forestay.
10.6. SUPPORTING DOCUMENTS OF FORESTAY. Forestay shall have delivered
to the Shareholders the following documents in form and substance reasonably
satisfactory to the Shareholders:
(a) A good standing certificate from the jurisdiction of Forestay's
organization stating that Forestay is a corporation duly organized, validly
existing, and in good standing;
(b) Secretary's certificate stating that Forestay's authorized capital
stock is as set forth herein;
(c) Certified copies of the resolutions of the board of directors of
Forestay authorizing the execution of this Agreement and the consummation
hereof;
(d) Secretary's certificate of incumbency of the officers and
directors of Forestay;
(e) Forestay's Financial Statements; and
(f) Any document as may be specified herein or required to satisfy the
conditions, representations and warranties enumerated elsewhere herein.
11. SHAREHOLDER REPRESENTATIVE. The Shareholders hereby irrevocably
designate and appoint Cassidy & Associates, 1504 R Street, N.W. Washington,
District of Columbia 20009, as
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<PAGE> 8
their agent and attorney in fact (the "Shareholders' Representative") with full
power and authority until the Closing to execute, deliver, and receive on their
behalf all notices, requests, and other communications hereunder; to fix and
alter on their behalf the date, time, and place of the Closing; to waive, amend,
or modify any provisions of this Agreement, and to take such other action on
their behalf in connection with this Agreement, the Closing, and the
transactions contemplated hereby as such agent or agents deem appropriate;
provided, however, that no such waiver, amendment, or modification may be made
if it would decrease the number of shares to be issued to the Shareholders
hereunder or increase the extent of their obligation to indemnify Reorganization
hereunder.
12. TERMINATION. This Agreement may be terminated (1) by mutual
consent in writing; (2) by any of the Shareholders, Milinx or Forestay if there
has been a material misrepresentation or material breach of any warranty or
covenant by any other party; or (3) by any of the Shareholders, Milinx or
Forestay if the Closing shall not have taken place within 15 days following
execution of this Agreement, unless adjourned to a later date by mutual consent
in writing.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Shareholders, Milinx and Forestay set out herein shall
survive the Closing.
14. ARBITRATION
14.1. SCOPE. The parties hereby agree that any and all claims (except
only for requests for injunctive or other equitable relief) whether existing
now, in the past or in the future as to which the parties or any affiliates may
be adverse parties, and whether arising out of this agreement or from any other
cause, will be resolved by arbitration before the American Arbitration
Association within the District of Columbia.
14.2. CONSENT TO JURISDICTION, SITUS AND JUDGEMENT. The parties hereby
irrevocably consent to the jurisdiction of the American Arbitration Association
and the situs of the arbitration (and any requests for injunctive or other
equitable relief) within the District of Columbia. Any award in arbitration may
be entered in any domestic or foreign court having jurisdiction over the
enforcement of such awards.
14.3. APPLICABLE LAW. The law applicable to the arbitration and this
agreement shall be that of the State of Delaware, determined without regard to
its provisions which would otherwise apply to a question of conflict of laws.
14.4. DISCLOSURE AND DISCOVERY. The arbitrator may, in its discretion,
allow the parties to make reasonable disclosure and discovery in regard to any
matters which are the subject of the arbitration and to compel compliance with
such disclosure and discovery order. The arbitrator may order the parties to
comply with all or any of the disclosure and discovery provisions of the Federal
Rules of Civil Procedure, as they then exist, as may be modified by the
arbitrator consistent with the desire to simplify the conduct and minimize the
expense of the arbitration.
14.5. RULES OF LAW. Regardless of any practices of arbitration to the
contrary, the arbitrator will apply the rules of contract and other law of the
jurisdiction whose law applies to the arbitration so that the decision of the
arbitrator will be, as much as possible, the same as if the dispute had been
determined by a court of competent jurisdiction.
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<PAGE> 9
14.6. FINALITY AND FEES. Any award or decision by the American
Arbitration Association shall be final, binding and non-appealable except as to
errors of law or the failure of the arbitrator to adhere to the arbitration
provisions contained in this agreement. Each party to the arbitration shall pay
its own costs and counsel fees except as specifically provided otherwise in this
agreement.
14.7. MEASURE OF DAMAGES. In any adverse action, the parties shall
restrict themselves to claims for compensatory damages and\or securities issued
or to be issued and no claims shall be made by any party or affiliate for lost
profits, punitive or multiple damages.
14.8. COVENANT NOT TO SUE. The parties covenant that under no
conditions will any party or any affiliate file any action against the other
(except only requests for injunctive or other equitable relief) in any forum
other than before the American Arbitration Association, and the parties agree
that any such action, if filed, shall be dismissed upon application and shall be
referred for arbitration hereunder with costs and attorney's fees to the
prevailing party.
14.9. INTENTION. It is the intention of the parties and their
affiliates that all disputes of any nature between them, whenever arising,
whether in regard to this agreement or any other matter, from whatever cause,
based on whatever law, rule or regulation, whether statutory or common law, and
however characterized, be decided by arbitration as provided herein and that no
party or affiliate be required to litigate in any other forum any disputes or
other matters except for requests for injunctive or equitable relief. This
agreement shall be interpreted in conformance with this stated intent of the
parties and their affiliates.
14.10. SURVIVAL. The provisions for arbitration contained herein shall
survive the termination of this agreement for any reason.
15. GENERAL PROVISIONS.
15.1. FURTHER ASSURANCES. From time to time, each party will execute
such additional instruments and take such actions as may be reasonably required
to carry out the intent and purposes of this agreement.
15.2. WAIVER. Any failure on the part of either party hereto to comply
with any of its obligations, agreements, or conditions hereunder may be waived
in writing by the party to whom such compliance is owed.
15.3. BROKERS. Each party agrees to indemnify and hold harmless the
other party against any fee, loss, or expense arising out of claims by brokers
or finders employed or alleged to have been employed by the indemnifying party.
15.4. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in person or sent
by prepaid first-class certified mail, return receipt requested, or recognized
commercial courier service, as follows:
If to Forestay, to:
Forestay Corporation
1504 R Street, N.W.
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Washington, District of Columbia 20009
If to Milinx, to:
Milinx Business Group Corporation
c/o Butcher & Williams
Suite 3827
1001 Fourth Avenue Plaza
Seattle, Washington 98154
If to the Shareholders, to:
Cassidy & Associates
1504 R Street, N.W.
Washington, District of Columbia 20009
15.5. GOVERNING LAW. This agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware.
15.6. ASSIGNMENT. This agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided,
however, that any assignment by either party of its rights under this agreement
without the written consent of the other party shall be void.
15.7. COUNTERPARTS. This agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Signatures sent by
facsimile transmission shall be deemed to be evidence of the original execution
thereof.
15.8. EXCHANGE AGENT AND CLOSING DATE. The Exchange Agent shall be the
law firm of Cassidy & Associates, Washington, D.C. The Closing shall take place
upon the fulfillment by each party of all the conditions of Closing required
herein, but not later December 9, 1999 unless extended by mutual consent of the
parties.
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15.9. REVIEW OF AGREEMENT. Each party acknowledges that it has had time
to review this agreement and, as desired, consult with counsel. In the
interpretation of this agreement, no adverse presumption shall be made against
any party on the basis that it has prepared, or participated in the preparation
of, this agreement.
15.10. SCHEDULES. All schedules attached hereto, if any, shall be
acknowledged by each party by signature or initials thereon and shall be dated.
15.11. EFFECTIVE DATE. This effective date of this agreement shall be
December 8, 1999.
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SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION
AMONG FORESTAY, MILINX AND THE SHAREHOLDERS OF FORESTAY
IN WITNESS WHEREOF, the parties have executed this agreement.
FORESTAY CORPORATION
By ______________________________________
James M. Cassidy
President
MILINX BUSINESS GROUP CORPORATION
By ______________________________________
Maynard L. Dokken
President
THE SHAREHOLDERS OF FORESTAY
CORPORATION:
TPG CAPITAL CORPORATION:
By ______________________________________
James M. Cassidy, President
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Exhibit A
<TABLE>
<CAPTION>
Number of Number of
Forestay Shares Milinx Name of
To Be Shares To Be Shareholder Address
Exchanged Received
<S> <C> <C> <C>
5,000,000 250,000 TPG Capital Corporation 1504 R St. NW, Washington DC 20009
</TABLE>
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SCHEDULE 7.5- STOCK RIGHTS FOR MILINX STOCK
<TABLE>
<CAPTION>
- - ---------------------------------------- ---------------------------------------------------------- ------------------------
TYPE CHARACTERISTICS # ISSUED
- - ---------------------------------------- ---------------------------------------------------------- ------------------------
<S> <C> <C>
1999 Class A Unit Convertible to 1 Series B Preferred Share plus 1/2 1999 1,069,750
International Warrant A
- - ---------------------------------------- ---------------------------------------------------------- ------------------------
1999 Internal Warrant A Exercisable for 1 common share @ $7.50 each 900,000
- - ---------------------------------------- ---------------------------------------------------------- ------------------------
1999 Internal Warrant B Exercisable for 1 Preferred A Share @ $6.00 each 650,000
- - ---------------------------------------- ---------------------------------------------------------- ------------------------
Options- Exercisable for 1 common share @ $2.00 each
Sales Associates 200,000
Directors 500,000
Director and Executive 500,000
- - ---------------------------------------- ---------------------------------------------------------- ------------------------
Options- Exercisable for 1/2 Common Share @ $0.10 to current market 2,700,000
Employee Incentive Program value
- - ---------------------------------------- ---------------------------------------------------------- ------------------------
</TABLE>
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SCHEDULE 7.13- MILINX MATERIAL CONTRACTS
1. Interactive Intelligence Software Licensing Agreement
2. KRP Communications Ltd. Software and Hardware Reseller Agreement
15
