FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C., 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 0-28452
MILLENNIUM SOFTWARE, INC.
Formerly Legal protection Services, Inc.
(Exact name of registrant as specified in its charter)
Nevada 93-1206546
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
2950 E. Flamingo Road, Suite G, Las Vegas, Nevada 89121
(address of principal executive offices) (Zip code)
Issuer's telephone number: (702) 369-9614
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of exchanges on which registered
(None) (None)
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.004 per share.
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. [X] Yes [ ] No
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation SB is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
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ITEM 1 BUSINESS
GENERAL
Millennium Software, Inc. (the 'Company') is engaged in the development of
an Internet business to sell financial software products worldwide. To date it
has secured exclusive worldwide rights to copy, duplicate, sell, distribute and
sub-license software products known as CheckMy Banking 2000, CheckMy Loans 2000,
and CheckMy Mortgage 2000 together with Learning Guides (the 'Software'). The
Software was in testing and proving trials at December 31st, 1999 and not
available for customer use. The intention is to make the Software available for
sale in the March-April 2000 period.
To date the Company has received no sales income since incorporation as ICS
(9612), Inc. in February 1996. The name of the Company was changed to Millennium
Software, Inc. in July 1997.
The Company entered into an Electronic Distribution Agreement with Digital
River, Inc., ('Digital River') Eden Prairie, Minnesota on March 8th, 1999
whereby Digital River will provide order processing and credit card
authorization services for the Company to enable delivery of the Software to
customers by electronic download, and in physical CD-ROM form. The agreement
with Digital River is for a period of two years, renewable by mutual consent.
Digital River is an independent third party company whose shares are traded on
NASDAQ (Symbol DRIV). The Internet site for Digital River, Inc. is located at
http://www.digitalriver.com. It is intended that Digital River will be the sole
supplier of order processing and product delivery services for the Company. The
fee levied by Digital River for the services provided will be 20% of order value
received from sales of the Software.
At December 31st, 1999 the Company had not delivered any software to Digital
River and no services had been provided by Digital River on behalf of the
Company.
The Company entered into a Software Licensing Agreement (the 'Licensing
Agreement') with Abacus Systems, Ltd., ('Abacus') on December 8th, 1999, whereby
the Company has obtained exclusive worldwide rights to publish, copy, distribute
Software products and to sub-license reproduction and distribution rights of
Software products in return for future aggregate royalty payments of 15% of
sales of Software. Abacus Systems, Ltd is a company controlled and managed by
the President of the Company. At December 31st, 1999 the Software products are
not ready for release to the market. Further testing and proving trials are
required before they can be released for sale.
SOFTWARE PRODUCTS
The Company holds the exclusive worldwide marketing rights to three
financial software products, known as CheckMy Banking 2000, CheckMy Loans 2000,
and CheckMy Mortgage 2000 developed by Abacus Systems Ltd. All three products
are designed for personal and small business users. The Software is intended to
run on Windows 95 or 98 computer systems.
CheckMy Banking 2000 provides a software import feature for Quicken QIF
files. Quicken (Copyright: Intuit, Inc., Mountain View) is the leading software
product for the easy and efficient organization of personal and small business
financial records. There are believed to be several million users of Quicken
worldwide. CheckMy Banking 2000 calculates bank charges, interest and cleared
and net balances.
CheckMy Loans 2000 provides a new powerful personal and corporate loan
management system. The software updates monthly loan balances, interest due and
paid amounts and provides loan reports. It contains 25 software calculators for
various 'what-if' possibilities, such as calculating interest savings with loan
consolidation, savings arising from early loan repayments, higher monthly
repayments. The software checks lenders loan interest and loan terms and finds
true values.
CheckMy Mortgage 2000 is a smart mortgage calculator that contains several
advanced new mortgage comparison and forecasts of property values features. The
software calculates mortgage amortization schedules, refinance balances and
total mortgage interest costs. The software provides compare mortgages, and
refinance sections which calculate alternative financial results from different
mortgages. The software is aimed at personal users who wish to keep watch on
their mortgage finances. Country settings screen will allow users to select US,
Canadian, or UK mortgage calculations routines.
The Software will provide calculation processes which will allow personal
and business users to check and verify interest charges, loan repayments,
mortgage repayments, bank charges, deposit clearing delays and also to calculate
ways to save money by more efficient arrangement of personal or corporate
finances.
The Software will be delivered to customers either electronically directly
into their computers via electronic download or by physical delivery via a CD-
ROM.
METHODS OF DISTRIBUTION
The Company intends to use the Internet to market the Software products and
related User Guides.
The Company has two Web Sites under construction located at
http://www.mlnsoft.com and http://www.checkmy200.uk.com (The 'Web Sites'). The
www.mlnsoft.com site is designed to addresses the US and Canadian markets for
the Software, the www.checkmy2000.uk.com site is designed to site the UK market
for the Software.
It is intended that the Web Sites will provide information and
specifications of the Software, copies of Software reports and screens and on-
line ordering facilities. The Company has selected Digital River, Inc. as the
third party provider of electronic order processing, secure credit authorization
and deliverer of the Software. It is intended that on-line ordering links
situated within the Web Sites will provide Internet connections to an electronic
order processing web site created for the Company by Digital River. End Users
wishing to purchase the Software will be able to enter their purchase choices
and delivery address, pay by credit card and select either to have the Software
delivered electronically direct to their computer or in CD-ROM form through
postal mail or courier services organized by Digital River. On confirmed
receipt of each valid order, Digital River will advise the Company on a next
working day basis of the customer name and address, product(s) ordered and order
value. Digital River will also provide a secure on-line management reporting
system for the Company that will track the details of all orders placed and the
accounting records for payments due to the Company and Digital River. Digital
River will receive and hold payments from customers, deduct 20% as a service
fee, and is obligated under the terms of the Electronic Software Distribution
Agreement to pay the balances due to the Company within 30 days after the end of
each calendar monthly period. Digital River will be solely responsible for the
payment of all credit card transaction fees and the preparation and filing of
any sales or use tax returns, and the payments of any and all sales or use
taxes, together with any and all related interest and penalties. Payments due
to the Company from sales of Software less the processing fee of 20% deducted by
Digital River will be subject to adjustment by Digital River based on Software
Product returns and refunds paid to End Users.
At December 31st, 1999 the Web Sites were under construction and were not
available for customers to use.
The Company incurred costs of $2,343 for the development of its Web Sites
to December 31st, 1999.
The Company intends to promote its Web Sites through inclusion in leading
search engines, through advertising in web site directories, through independent
editorial review of the Software products and through Internet linkages leading
visitors to the Company's Web Sites. Some listings may be obtained through paid
advertising.
The Company also intends to promote its Web Sites through expanding its
network of third party Internet sites that lead visitors directly to the
Company's Web Sites. The Company intends to introduce a commission based sales
incentive for Internet marketing affiliates ('Affiliates') which will provide a
30% sales commission on net sales income earned from buyers that originate from
third party Affiliates. Sales commissions due to Affiliates will be payable by
the Company within 30 days after the end of each monthly reporting period.
COMPETITION
CheckMy 2000 products intend to compete in the worldwide market for
personal, and small business financial software products that run on personal
Windows 95 and 98 computers. This market is extremely competitive and there are
many successful and well-established products within this market. There exists a
plethora of companies developing and selling financial software, many of which
have well-established operations and substantially greater financial resources
than the Company. The Software is unproven and completely new. The Company has
insufficient management resources and personnel to compete effectively in the
market for financial software. There is a risk that the Software may not appeal
to personal and business users. There is a risk of failure of the Web Sites to
perform properly.
Major competitors in the market for financial software include Intuit, Inc
(Mountain View, CA), Microsoft Corporation (Redmond, WA) and Sage Computing Ltd
(UK).
SUPPLIERS
The Company intends to copy, market, distribute and sub license Software
and User Guides developed and supplied by Abacus Systems Ltd. Abacus Systems
Ltd, is a private Bermuda company controlled by Anthony Bigwood, the President
of the Company. Abacus has 22 other shareholders, none of whom are related to
the President in any way. The Company has insufficient financial resources or
skilled personnel to undertake software development on its own. It has therefore
reached an agreement with Abacus whereby Abacus has developed Software at its
own cost and the Company has acquired the exclusive worldwide rights to copy,
reproduce, distribute the Software and sub-license rights to reproduction and
distribution of the Software in return for payments to Abacus of 10% royalties
of net revenue income received by the Company from sale of Software and User
Guides, and a 5% royalty fee for the provision of technical support to the
Company.
The provisions for termination of the Software Licensing Agreement are as
follows:
1. Abacus may terminate the License, at its sole discretion, if Royalty and Fee
payments due to Abacus, or any part thereof, become 120 days or more overdue.
2. Abacus may terminate the License, at its sole discretion, if management
control of Millennium changes from the current arrangements.
3. Millennium may terminate the License, at its sole discretion, by giving 120
days written notice to Abacus.
4. The License will be terminated immediately upon written notice by Abacus if
the confidentiality provisions are breached by Millennium.
The confidentiality provisions within the Licensing Agreement are that the
Company agrees to keep confidential all proprietary knowledge acquired about the
Products, promises not to divulge any such knowledge to any third party unless
prior written consent of Abacus and its representatives is provided. Failure to
abide by these confidentiality rules will cause an immediate cancellation of the
License.
The Company does not intend to engage in software development activities
except for the support and maintenance of its Web Sites. It may contract with
Abacus Systems Ltd for the design and development of future additional software
products to be provided at Abacus expense.
SEASONALITY
The Company's proposed business may be affected by a seasonal trend, with
stronger sales in the run up to Christmas period and weaker sales during the
summer months.
EMPLOYEES
The Company has no full-time employees at this time, however, the President
and Secretary of the Company work for and on behalf of the Company part-time
without paid remuneration at present.
LEGAL PROCEDINGS
None.
PROPERTIES
The Company does not own or lease any real property at this time but is
using, without charge, office facilities of its President located at 2277 Lawson
Avenue, West Vancouver, BC, Canada. The telephone number is 604-926-5236.
The Company has registered the web domain name www.CheckMy2000.uk.com.
MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's stock trades on the OTC bulletin board with the stock symbol MLNS.
PRICE RANGE OF COMMON STOCK
Date Volume High/Ask Low/Bid Close
--------- ----------- ------------- ------------ ------
12/05/97 10,200 .60 .25 .25
03/05/98 7,000 .60 .25 .27
07/31/98 14,500 .40 .20 .40
09/30/98 1,000 .30 .30 .30
12/31/98 2,000 .30 .03 .05
03/31/99 3,800 .75 .365 .75
06/30/99 800 .875 .50 .50
09/30/99 3,674 .9375 .365 .365
01/11/99 1,000 .9375 .9375 .9375
06/12/99 200 .9375 .9375 .9375
These quotations are over-the-counter quotations and reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.
SELECTED FINANCIAL DATA
(In Dollars, except per share data)
--------------------------------------------
Dec 31, 1999 Dec 31, 1998 Dec 31, 1997
--------------------------------------------
Net sales ---- ----- ----
Operating Income (loss) (59,187) (6,245) (95,614)
Net Income (loss)
Earnings (loss) per share
- Basic (0.011) (0.003) (0.10)
- Diluted (0.011) (0.003) (0.10)
Total assets 6,867 9,854 15,089
Debt* 0 0 0
Shareholder loan 64,338 38,773 37,763
Shareholders equity (deficit) (57,471) (28,919) (22,767)
* Excluding shareholder loans
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The Company is in a development stage and has earned no income since the
date of incorporation in February 1996. Since 1997 the Company's business
objectives are to market and distribute Windows 95/98 financial software
products through the Internet.
The Company received $56,140 in working capital finance from the President
and companies owned by the President during 1999 by provision of interest free
loans. $38,000 of the loan finance has been exchanged for 3,800,000 shares of
Company stock in lieu of cash repayment at December 31st, 1999. The total
amount of working capital finance provided by the President and companies
controlled by the President since the date of incorporation in 1996 to December
31st, 1999 has amounted to $159,463.
The Company has inadequate financial resources with which to enter the
market for personal financial software. Its cash balances at 31st December 1999
amounted to $2,183. The potential marketing expenses required to enter the
market for personal and business software substantially exceeds the Companies
current cash resources. The Company does not anticipate any cash requirements
for purchase of significant equipment over the next twelve months. The Company
has no definite plans to raise additional capital during the next twelve months.
The Company is currently solely reliant on the President of the Company
continuing to provide interest free loan finance to maintain the Company=s day
to day operations. The annual operating expenses before marketing and
advertising costs amount to between $15,000 and $25,000 per annum. Expenses for
development of the Company's Web Sites amounting to $2,343 have been paid for by
the President. The Company has no known liabilities except for repayment of
loans provided by the President. These loans have been provided on an as needed
basis to the Company on an interest free basis, no specific repayment term,
repayable by cash or issuance of company stock. The Company currently has
insufficient cash resources to repay these loans. During the next twelve months
any shortfall in cash requirements may be provided through interest free loans
provided to the Company by the President, however this is not guaranteed. If the
President is unable to provide loan-bridging finance, the Company may have to
discontinue its operations entirely.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATION
The business objective of the Company during the period from incorporation
until July 1997 was to acquire a small growth company in the network marketing
legal services provision sector.
The search for a suitable company continued for 15 months, during which
period discussions were held with several firms. The Company's investigations
failed to find a suitable acquisition candidate and the search in the network
legal services area was discontinued in July 1997.
In 1998, the Company requested the President to develop a business
strategy to enter the fast growing Internet business sector. Several business
models of Internet companies were examined and it was concluded that Internet
marketing software products was potentially promising opportunity. The Company's
current business objectives are to market and distribute Windows 95/98 financial
software products through the Internet.
The Company entered into an Electronic Distribution Agreement with Digital
River, Inc, ('Digital River') Eden Prairie, Minnesota on March 8th, 1999 whereby
Digital River will provide order processing services for the Company to enable
delivery of the Software to customers by electronic download, and facilities for
warehousing and delivery of Software in physical CD-ROM form. Digital River is
an independent company whose shares are traded on NASDAQ (Symbol: DRIV). The
Internet address of Digital River is http://www.digitalriver.com. Digital River
has not commenced providing software delivery services for the Company as of
December 31st, 1999.
The Company is capable of delivering the Software to End Users in CD-ROM
form without services provided by Digital River, but is not able to deliver
Software by electronic download without the facilities provided by Digital River
or a similar supplier. Suppliers, such as Cybersource Corporation, Preview
Systems, and ShopNow.com are able to provide alternative sources of electronic
delivery of the Software. The agreement with Digital River is for a period of
two years from March 8th, 1999, renewable by mutual consent.
The Company's Web Sites are intended to link directly to Digital River
computer servers. Software will be delivered to End Users by Digital River by
electronic download or in physical CD-ROM form.
The terms of the Electronic Distribution Agreement with Digital River
provide that Digital River will collect sales revenues from the Software
delivered by them in accounts controlled by them and they will deduct 20% of net
sales revenues obtained from End User customers processed by Digital River as a
Margin Payment for their facilities provided on behalf of the Company. The
Margin Payment to the Company shall be subject to adjustment by Digital River
based on Software returns and refunds paid to End Users. The terms of the
agreement are that Digital River will notify the Company within thirty days
after the end of each calendar month about payments processed during the
previous calendar month and will pay any net balances owing to the Company
within the said thirty days.
Digital River had not received copies of the Software at December 31st,
1999.
Clause 16, 'Term and Termination' of the agreement with Digital River
contains the following provisions:
'This Agreement will continue in effect for two (2) years from the date
hereof (March 8th, 1999). This Agreement will be automatically renewed for
successive additional one (1) year terms (each, a Renewable Term) unless
terminated by either party upon ninety (90) days written notice prior to the
expiration of the Initial Term or any Renewable Term.
The Agreement may be terminated by a party immediately by written notice to
the other party upon the occurrence of any of the following events: (i) If the
other party ceases to do business, or otherwise substantially terminates its
business operations; (ii) If the other party shall fail to promptly secure or
renew any license registration, permit authorization or approval for the conduct
of its business in the manner contemplated by the agreement or if any such
license, registration, permit, authorization or approval is revoked or suspended
and not reinstated within thirty (30) days; (iii) If the other party materially
breaches any provision of the agreement and fails to fully cure such breach
within thirty (30) days of written notice describing the breach; or (iv) If the
other party becomes insolvent or seeks protection under any bankruptcy laws,
creditors arrangements, composition or comparable proceedings, or if any respect
whatsoever affect a party's obligations to make payments top the other party in
connection with the distribution of Products that occurred prior to the
termination of the agreement'
The Company entered into a Software Licensing Agreement with Abacus Systems
Ltd., on December 8th, 1999, whereby the Company has obtained exclusive
worldwide rights to publish, copy distribute the Software, sub-license
reproduction and distribution rights to the Software developed by Abacus in
return for future royalty payments. Abacus expects to deliver Software to the
Company under the terms of the licensing agreement in March 2000. The Company
has agreed to pay Abacus 10% of royalties based on net revenues received from
the sale of Software licensed by Abacus to the Company plus a 5% royalty based
on net revenues received from the sale of Software licensed by Abacus to the
Company for technical support.
Abacus Systems Ltd is a company controlled and managed by the President of
the Company.
The Company has inadequate financial resources with which to enter the
market for personal financial software. Its cash balances at 31st December 1999
amounted to $2,154. The potential marketing expenses required to enter the
market for personal and business software substantially exceeds the Companies
current cash resources. The Company does not anticipate any cash requirements
for purchase of significant equipment over the next twelve months. The Company
has no definite plans to raise additional capital during the next twelve months.
The Company is currently solely reliant on the President of the Company
continuing to provide interest free loan finance to maintain the Company's day
to day operations. The annual operating expenses before marketing and
advertising costs amount to between $15,000 and $25,000 per annum. The
President has provided $2,343 for development and maintenance of the Company's
Web Sites to December 31st, 1999. The Company has no known liabilities except
for repayment of loans provided by the President. These loans have been
provided on an 'as needed' basis to the Company on an interest free basis, no
specific repayment term, repayable in cash or by issuance of company stock. The
Company currently has insufficient cash resources to repay these loans. During
the next twelve months any shortfall in cash requirements may be provided
through interest free loans provided to the Company by the President, however
this is not guaranteed. If the President is unable to provide loan-bridging
finance, the Company may have to discontinue its operations entirely.
Sales of Software had not commenced at December 31st, 1999 and the Company
had received no income since incorporation.
There are substantial uncertainties and risks involved with the business
plans of the Company, and added substantial uncertainties and risk whether the
Company's cash resources will be sufficient to meet the demands placed on the
Company. There is substantial uncertainty whether the Company will be able to
generate sufficient revenues to maintain its operations over the next twelve
months without additional capital raised or additional interest free loans from
the president.
The Company has no history of marketing software products.
The Company has no history of using a third party such as Digital River to
deliver software electronically and there may be substantial risks involved in
delivering products by electronic download to End Users. There may be
substantial risks involved in the ability of Digital River to pay amounts owing
to the Company under the terms of the Electronic Software Distribution
Agreement. Digital River possessed cash resources in excess of $50 million at
December 31st, 1999 which may, or may not, be sufficient to continue its
operations for the remaining period of the agreement.
If Digital River is unable to raise additional working capital, the Company
may be at risk from a withdrawal of services by Digital River that would impact
the Company's abilities to deliver to deliver products electronically. Other
companies such as Cybersource Corporation, Preview Systems, ShopNow.Com, Inc
provide similar services to Digital River. The Company is able to deliver
product in CD-ROM form and process payments without the facilities of Digital
River being available.
There are substantial risks involved in marketing new software products if
the software contains unknown software errors ('Errors') that cause program
failures when in the hands of End Users. The Software may contain several
unknown Errors that may cause product to be returned and sales revenue
reimbursed to the End User. There is a risk of substantial returns if the
Software contains such Errors.
There are substantial risks involved in bringing the new Web Sites to
market and in the Company's ability to attract visitors to the Web Sites. There
are several hundreds of millions of web sites in existence, and many of them
compete strongly in securing prime Search Engine placements and in the amount
spent on marketing expenditures to attract visitors. The Company does not
possess sufficient financial resources to compete effectively in this market.
There are substantial risks involved in relying on Affiliates to bring
buyers to our Web Sites. Affiliates can remove the Company's banner from their
websites at any time without notice. Such action would cause sales of the
Software through Affiliates to cease from such sites.
There is no expected significant change in the number of employees during
the year 2000.
Y2K ISSUES
The Company may experience problems internally or externally when computer
clocks moved forward in to the year 2000. There is inadequate information
available to determine the extent to which Y2K problems may impact upon the
Company, its bankers, suppliers and other parties. No Y2K problems were
experienced to December 31st, 1999.
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of December 31st, 1999, the outstanding
shares of common stock of the company owned of record or beneficially by each
person who owned of record, or was known by the Company to own beneficially,
more than 5% of the Company's Common Stock, and the name and share holding of
each officer and director and all officers and directors as a group.
Title of
Class Name & Address Amount & Nature % of class
of beneficial owner of beneficial owner
_______________________________________________________________________________
Common Abacus Systems Ltd 1,668,000 30.90
44 Church Street
Hamilton
Bermuda
Common Abacus Corporation Ltd 1,942,208 35.98
Kissack Court
Ramsey
Isle of Man
United Kingdom
Common A.M. and E.J.Bigwood (2) 8,586,080 (2) 79.52
2277 Lawson Avenue
West Vancouver
BC V7V 2E3 Canada
Common Officers and Directors 4,291,790 (1) 79.52
Combined
(1) The President shareholdings include options ('Options') to purchase 300,000
shares at $.01 which are exercisable until November 21, 2002
(2) 4,291,790 shares belong to A.M. Bigwood. 4,291,790 shares belong to E.J.
Bigwood. 2,500 shares belong to James Bigwood, Mr. and Mrs. Bigwood's son.
Mr. Bigwood and Mrs. Bigwood each hold 50% ownership of Abacus Corporation Ltd.
Abacus Corporation Ltd controls 96.825% ownership of Abacus Sysytems Ltd.
Abacus Systems Ltd holds directly 1,668,000 shares of the Company. Abacus
Corporation Ltd holds directly 326,750 shares of the Company. The beneficial
ownership of 1,942,208 shares by Abacus Corporation Ltd includes its holdings
through Abacus Systems Ltd.
The fully diluted number of shares issued amounted to 5,398,500 on December 31st
1999 including 300,000 Options issued to the President. These shareholdings and
Options are used as the basis of calculations of % of Class.
9
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CHANGES IN CONTROL
There are currently no arrangements that will result in a change in control
of the Company.
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth certain information with respect to each of
the Directors, Executive Officers of the Company, their ages, and all positions
with the company.
Name Age Position
________________________________________________________________________________
Anthony M. Bigwood 60 President and Director
2277 Lawson Avenue
West Vancouver
BC V7V 2E3 Canada
Elizabeth J. Bigwood 58 Secretary/Treasurer and Director
2277 Lawson Avenue
West Vancouver
BC V7V 2E3 Canada
________________________________________________________________________________
Anthony Michael Bigwood B.Sc., PhD., MBA(Sloan). President and Director.
Age 60, British citizen. Dr. Bigwood was educated in Britain where he attended
the University of Bristol studying natural sciences. He continued his studies
after his degree to earn a Ph.D. He was recruited by Unilever as management
trainee and held several management positions in Unilevers= chemical division.
He joined the mining finance group Rio Tinto Zinc Corporation as a financial
management consultant and was appointed Director of RTZ Consultants Ltd. within
three years of joining the firm. Dr. Bigwood was selected as >executive of the
year= by RTZ and selected to join the Sloan MBA Program at the London Business
School for one year where he studied banking, finance and management sciences.
On rejoining RTZ he became managing director of RTZ Computer Services, RTZ
Software and Rio Tinto Management Services (Toronto). He left RTZ to start his
own computer company which he ran successfully. He sold his shareholdings after
6 years. Thereafter Dr. Bigwood has continued to provide financial consulting
advisory services and has lead several negotiations with major banks to secure
financing for corporate acquisitions. Dr. Bigwood controls several private
companies including Abacus Corporation, Ltd., (Isle of Man, UK) and Abacus
Systems Ltd (Bermuda) and in addition is President of the following US
companies: Asia & Pacific Mining Ventures, Inc., Mid West Oil & Gas, Inc. and
General Audit Systems, Inc.
Elizabeth J. Bigwood MCSP, Company Secretary and director, age 58, British
citizen. Mrs. Bigwood was educated in Britain where she trained as a
physiotherapy nurse. She has worked in orthopedic hospitals and children
intensive care hospitals where she specialized in treating spinal deformities
and was responsible for running a special needs clinic for several years. She
has organizational and record keeping skills to which she applies to the
maintenance of company records.
Our executive officers have served since February of 1996. A director=s
term of office is ten (10) years, renewable by mutual consent. The next renewal
date is February 1st, 2006.
FAMILY RELATIONSHIPS
Anthony M. Bigwood, President and Director, and Elizabeth J. Bigwood,
Secretary/Treasurer and director, are husband and wife.
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Each of the officers and directors of the Company are engaged in other
businesses, either individually or through partnerships and corporations in
which they have an interest, hold an office or serve on boards of directors.
Certain conflicts of interest may arise between the Company and its officers and
directors. The primary conflict of interest is the amount of time that the
officers are able to devote to the Company as opposed to their other business
ventures. As the Company begins to procure revenues, more time will be devoted
to the Company. Another possible conflict of interest could arise from the fact
that the Company President, Anthony Bigwood, also controls Abacus Systems, Ltd.,
which is the sole supplier of the software products that the Company markets. A
contract exists (attached hereto as exhibit No. 10) which specifies the
relationship and various responsibilities of each party in this matter.
The Company will attempt to resolve any such conflicts of interest in favor
of the Company. The officers and directors of the company are accountable to it
and its shareholders as fiduciaries, which requires that such officers and
directors exercise good faith and integrity in handling the Company's affairs. A
Shareholder may be able to institute legal action on behalf of the Company or on
behalf of itself and all other similarly situated shareholders to recover
damages or for other relief in cases of the resolution of conflicts in any
manner prejudicial to the Company.
Abacus Systems Ltd, is a private Bermuda company controlled by Anthony
Bigwood, the President of the Company. Abacus has 22 other shareholders, none of
whom are related to the President in any way. The Company has insufficient
financial resources or skilled personnel to undertake software development on
its own. The Company has acquired the exclusive rights to copy, reproduce,
distribute and sub-license rights to reproduce and distribute CheckMy Banking
2000, CheckMy Loans 2000 and CheckMy Mortgage 2000 together with User
Guides (the 'Software') in return for payments to Abacus of 10% royalties of net
revenue income received by the Company from sale of the Software, and a 5%
royalty fee for the provision of technical support to the Company.
The provisions for termination of the Software Licensing Agreement are as
follows:
1. Abacus may terminate the License, at its sole discretion, if Royalty and Fee
payments due to Abacus, or any part thereof, become 120 days or more overdue.
2. Abacus may terminate the License, at its sole discretion, if management
control of Millennium changes from the current arrangements.
3. Millennium may terminate the License, at its sole discretion, by giving 120
days written notice to Abacus.
4. The License will be terminated immediately upon written notice by Abacus if
the confidentiality provisions are breached by Millennium.
The confidentiality provisions within the Licensing Agreement are that the
Company agrees to keep confidential all proprietary knowledge acquired about the
Products, promises not to divulge any such knowledge to any third party unless
prior written consent of Abacus and its representatives is provided. Failure to
abide by these confidentiality rules will cause an immediate cancellation of the
License.
The terms of the Software License agreement with Abacus are that Abacus has
developed the Software at its own expense and has granted an exclusive license
to the Software to the Company and provides technical and customer support for
the Company in exchange for future royalties payments of 15% in aggregate of
revenues obtained by the Company from sales of the Software. The Company has
researched the percentage amount of annual sales income expensed by unrelated
third party software companies developing and selling pre-packaged financial
software products on software research and development and technical support
prior to entering into the Licensing Agreement with Abacus to determine if the
basis of the proposed future royalty payments of 15% of sales revenues to Abacus
for the rights to the Software was on no better terms than could be obtained
from an unrelated third party software company at arms' length. The study
undertaken by the Company found that unrelated third party software companies
spend on average a greater proportion of their annual revenues on research and
development and technical support than the future royalty payment of 15% due to
Abacus. The Company is satisfied that the basis of payment of 15% royalties by
the Company to Abacus is on terms consistent with or better for the Company than
could be obtained from unrelated third party companies and consistent with or
better for the Company than if the Company had developed the Software at its own
expense, which it would not have been able to do without securing additional
cash resources.
Comparable expenditures on research and development and technical and
customer support by pre-packaged software companies expressed as a percentage of
annual revenues obtained from recent filings with the Securities and Exchange
Commission, Washington, DC are as follows: Sales income figures are displayed in
$ thousands:
Company Annual Sales Research & Dev Support
Oracle $8,827,000 17% 35%
Intuit $847,500 17% 15%
Best Software $69,000 16.2% N/A
Sagent Technologies $48,000 26% N/A
Average 19.05% 25%
License Support
Future royalty
Payments to Abacus 10% 5%
The Company does not intend to engage in software development activities
except for the support and maintenance of its Web Sites. The Company incurred
costs of $2,343 on development of its Web Sites to December 31st, 1999, which
was paid on behalf of the Company by the President.
The Company may contract with Abacus Systems Ltd for the future design and
development of additional software products to be provided at Abacus expense.
In August of 1997 the Company approved a private placement of shares to
Asia Pacific Mining (Bermuda) Ltd., which is controlled by the Company
President. (Note: Asia Pacific Mining (Bermuda) changed its name to Abacus
Systems Ltd, in 1999). 1,180,500 shares at $.05 each were issued to raise
$59,250.
The Company issued 3,000,000 shares, in September 1999, to the President,
Dr. A. M. Bigwood (2,000,000 shares) and Abacus Systems Ltd (1,000,000), a
company controlled by the President, at $0.01 per share in lieu of monetary
repayment of debt of $30,000 owed by the Company to the President, previously
provided as a shareholder loan. The Company reduced the amount owed to the
President by a corresponding $30,000.
The Company authorized the issue of 50,000 shares, in lieu of monetary
repayment of debt of $500 owed by the Company to General Audit Systems, Inc., a
Company controlled by the President on September 29th, 1999. The shares were
issued in October 1999.
The Company issued 7,500 shares, in December 1999, to Abacus Systems Ltd,
a company controlled by the President, at $0.01 per share in lieu of monetary
repayment of debt of $75.00 owed by the Company to the President, previously
provided as a shareholder loan. The Company reduced the amount owed to the
President by a corresponding $75.
The Company granted 300,000 incentive options (the 'Options') on common
shares to the President at an exercise price of $.01 per share on November 22,
1999. The terms of the Options are payment in cash within a 3 year period ending
November 21st, 2002, after which date any outstanding Options will be cancelled.
The value of share holders equity based on the financial statements prepared by
the Company's auditors was -0.01 (negative) per share on September 30, 1999.
The President has advanced loans to the Company from time to time to
provide funds for company expenses. The terms of the loans are interest free,
without specific term, repayable in cash or by issue of company shares.
Currently the Company does not have sufficient funds to repay these loans. The
Company has issued 3,057,500 shares to the President and companies controlled by
the President at $0.01 per share in lieu of repayment of $30,575 in cash.
The per share value of shares issued for services, repayment of shareholder
loans cash, and incentive stock options during the period January - December
1999 was determined firstly by reference to whether the volume of stock
transactions during the immediately prior three month period on the OTC
represented 1% or greater of the total number of shares issued, to establish
fair market value. In the director's opinion, trading volume of less than 1% of
shares issued does not constitute a proper market for the purposes of
establishing fair market value. During each quarterly period during January 1st,
1999 - December 31st, 1999 the volume of shares traded on the OTC market
amounted to 0.187%, 0.04%, 0.181% and 0.024% of the total number of shares
issued, all of which fell below the threshold of 1% of shares issued. The per
share value of shares issued for services, repayment of shareholder loans, cash
and incentive stock options was then determined by reference to total
stockholders' equity value reported in the current period financial statement
divided by the number of shares issued, or $0.01 per share, whichever is the
greater value at the date of issuance of shares.
ITEM 6 EXECUTIVE COMPENSATION
Any compensation received by officers or directors of the Company will be
determined from time to time by the Board of Directors. The company is currently
developing a new Internet business venture and has not paid any salaries or
executive compensation. The executive officers and directors will not
receive compensation until operations commence.
Stock Options - The Company granted 300,000 incentive options (the
'Options') on common shares to the President at an exercise price of $.01 per
share on November 22, 1999. The terms of the Options are payment in cash within
a 3 year period ending November 21st, 2002, after which date any outstanding
Options will be cancelled. The options can be converted into common shares upon
full payment in cash. No part payments are allowed. Any number of options may be
converted at any time within the three year period. Any and all options which
remain unconverted to common shares after November 21st, 2002 and the attached
right to convert to common shares will be cancelled.
The audited value of shareholders equity based on the financial statements
prepared by the Company's auditors was -0.01 (negative) per share on September
30, 1999.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
_______________________________________________________________________________
Number of Securities % of total
Underlying Options/SARs Options/SARs Execise/Base Exp.
Name Granted Granted in 1999 Price($/sh) Date
_______ ______________________ _______________ ___________ ________
Anthony Bigwood 300,000 100% $.01/sh 10/21/02
The Company's transfer agent at December 31st, 1999 is Interwest Transfer
of Salt Lake City, Utah. Interwest Transfer confirms that as of 12/31/99, there
are approximately 82 shareholders of record.
DIVIDENDS
To date, the Company has not paid any dividends on its common stock. The
payment of dividends by the Company, if any in the future, rests within the
discretion of its Board of Directors and will depend among other things,
upon the Company's earning, its capital requirements and its financial
condition, as well as other relevant factors.
ITEM 10 - RECENT SALE OF UNREGISTERED SECURITIES
In August of 1997 the Company approved a private placement of shares to
Asia Pacific Mining (Bermuda) Ltd., which is controlled by the Company
President. (Note: Asia Pacific Mining (Bermuda) changed its name to Abacus
Systems Ltd., in 1999). 1,180,500 shares at $.05 each were issued to raise
$59,250.
The Company issued 3,000,000 shares, in September 1999, to the President,
Dr. A. M. Bigwood (2,000,000 shares) and Abacus Systems Ltd (1,000,000), a
company controlled by the President, at $0.01 per share in lieu of monetary
repayment of debt of $30,000 owed by the Company to the President, previously
provided as a shareholder loan. The Company reduced the amount owed to the
President by a corresponding $30,000.
The Company authorized the issue of 50,000 shares, in lieu of monetary
repayment of debt to General Audit Systems, Inc., a Company controlled by the
President, for payment by General Audit Systems, Inc., on behalf of the Company,
of $500 in September 1999 for expenses. These shares were issued in October
1999.
The Company issued 7,500 shares, in December 1999, in lieu of monetary
repayment of debt to Abacus Systems Ltd, a company controlled by the President,
at $0.01 per share as compensation for $75.00 owed by the Company to the
President, previously provided as a shareholder loan. The Company reduced the
amount owed to the President by a corresponding $75.
1,000 shares were issued to Ms. D Stoute during 1999 for provision of
software development services amounting to $10.00.
5,000 shares were issued by Private Placement to other parties during 1999
for $50 cash. 2,500 shares were issued to Peter and Susan Cassidy of London,
Ontario, Canada. The other 2,500 shares were issued to Mr. Steven Buist of
Hamilton, Ontario, Canada.
All of the above mentioned shares were offered pursuant to an exemption
from registration under Section 4(2) of the Securities Act of 1933.
ITEM 11 Description of Securities
The authorized capital stock of the Company consists of 25,000,000 Shares
of Common Stock. The holders of Common Stock (i) have equal ratable rights to
dividends from funds legally available therefore, when, as and if declared by
the Board of Directors of the Company; (ii) are entitled to share ratably in all
of the assets of the Company available for distribution or winding up of affairs
of the Company; (iii) do not have preemptive subscription or conversion rights
and there are no redemption or sinking fund applicable thereto; and (iv) are
entitled to one noncumulative vote per share, on all matters which shareholders
may vote on at all meetings of shareholders. At this time there are
approximately 7,504,500 shares outstanding, including 300,000 Options granted to
the President.
NONCUMULATIVE VOTING
Holders of Shares of Common Stock of the Company do not have cumulative
voting rights which means that the holders of more than 50% of such outstanding
Shares, voting for the election of directors, can elect all of the directors to
be elected, if they so choose, and, in such event, the holders of the remaining
Shares will not be able to elect any of the Company's directors.
PENNY STOCK REGULATION
The Securities Exchange Commission (the 'SEC') has adopted rules that
regulate broker dealer practices in connection with transactions in 'penny
stocks.' Penny stocks generally are equity securities with a price of less than
$5.00 (other than securities registered on certain national securities exchanges
or quoted on the NASDAQ system, provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange system.) The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the SEC that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with bid and
offer quotations for the penny stock, the compensation of the broker-dealer and
its salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from such rules, the broker-dealer must make a special written
determination that a penny stock is a suitable investment for the purchase and
receive the purchaser's written agreement to the transaction. These disclosure
requirements may have the effect of reducing the level of trading activity in
any secondary market for a stock that becomes subject to the penny stock rules.
The Company's common stock is subject to the penny stock rules, and accordingly,
investors in this Offering may find it difficult to sell their shares, if at
all.
ITEM 13. Financial Statements
The Company's financial accounts have been audited by D. Coffey CPA from 1996 to
December 31st,1999. There have been no disputes or disagreements with the
auditor.
A. Summary of significant accounting policies.
In compliance with SOP 98-5 all organizational costs were fully expensed in
the December 31st, 1998 financial accounts.
In compliance with para 12 of SFAS 7 the nature of the Companies
development activities during the accounting periods have been as follows:
December 31st, 1997. The Company was engaged in negotiations with several
third party arms length companies in Canada and Singapore in pursuit of its
search for possible acquisition and merger. No suitable acquisition was
found and the Company terminated these negotiations. The Company was in its
development phase and did not earn any revenues during the period.
December 31st, 1998. The Company was engaged in laying plans to develop an
Internet based business. It was not engaged in any other commercial activities
during the current period. The Company was in a developmental phase and did not
earn any revenues during the period.
December 31st, 1999. The Company was engaged in developing an Internet
based business and commenced development of a web site. The Company entered
into an Electronic Software Distribution Agreement with Digital River, Inc. in
March 1999. The Company entered into a software licensing agreement with Abacus
Systems Ltd, a company controlled by the President. The Company was in its
development phase and did not earn any revenues during the period.
The Company's accounting policy in regards to exchanging stock for services
rendered is to expense the cost and issue stock in lieu of cash payment.
The Company's accounting policy in regards to exchanging stock for
shareholder loans advanced to the Company is to issue stock in lieu of cash
repayment and reduce the shareholder loans by the value of stock issued.
The useful life of computer equipment is depreciated over five (5) years.
The Web Sites software development costs paid by the President and expensed
by the Company to December 31st, 1999 amounted to $2,343.
No compensation expense has been recognized in the financial statements for
1999 for the issue of incentive stock options to the President.
MILLENNIUM SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999, AND
DECEMBER 31, 1998
TABLE OF CONTENTS
Page Number
INDEPENDENT ACCOUNTANT'S REPORT......................... 1
FINANCIAL STATEMENT
Balance Sheets................................ 2
Statements of Operations and Deficit
Accumulated During the Development Stage..... 3
Statement of Changes in Stockholders' Equity.. 4
Statement of Cash Flows....................... 5
Notes to the Financial Statements............. 6-9
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Stockholders
of Millennium Software, Inc.
Las Vegas, Nevada
I have audited the accompanying balance sheets of Millennium Software, Inc. (a
development stage company) as of December 31, 1999, and December 31, 1998, and
the related statements of operations, cash flows, and changes in stockholders'
equity for the period from February 20, 1996, (date of inception) to December
31, 1999. These statements are the responsibility of Millennium Software, Inc's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted an audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principle used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the accompanying financial statements present fairly, in all
material aspects, the financial position of Millennium Software, Inc. as of
December 31, 1999, and December 31, 1998, and the results of operations, cash
flows, and changes in stockholders' equity for the years then ended, as well as
the cumulative period from February 20, 1996, in conformity with generally
accepted accounting principles.
/s/David Coffey
David Coffey, C.P.A.
Las Vegas, Nevada
June 14, 2000
MILLENNIUM SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31
-------------------------------
1999 1998
------------ -------------
ASSETS
Cash $ 2,154 $ 2,884
Computers less accumulated depreciation
of $6,567 and $4,310, respectively 4,713 6,970
------- -------
Total Assets $ 6,867 $ 9,854
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Loans from stockholders $ 64,338 38,773
------- -------
Total Liabilities 64,338 38,773
Stockholders' Equity
Common stock, authorized 25,000,000
shares at $.004 par value, issued and
outstanding 5,098,500 shares and
2,035,000 shares, respectively, after
giving effect to a 4 to 1 reverse split
Effective July 30, 1997 20,394 8,140
Additional paid-in capital
Deficit accumulated during the
Development stage (197,833) (138,646)
------- --------
Total Stockholders' Equity (57,471) (28,919)
Total Liabilities and Stockholders' Equity $ 6,867 $ 9,854
======== =======
The accompanying notes are an integral part of these financial statements.
-2-
MILLENNIUM SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING THE DEVELOPMENT STAGE
(With Cumulative Figures From Inception)
Twelve months ended December 31, From Inception,
-------------------------------- Feb.20, 1996 to
1999 1998 Dec.31, 1999
-------------- -------------- ---------------
Income $ 0 $ 0 $ 0
Expenses
Advertising 0 0 7,286
Amortization of organizational costs 0 633 1,000
Auto expenses 0 0 2,416
Computer expenses 10 0 3,985
Consulting 0 0 1,000
Depreciation 2,257 2,256 6,567
Research and development 2,343 0 2,343
Internet expenses 801 0 12,801
Legal and professional fees 21,180 2,804 63,669
Office expenses 446 552 4,802
Telephone 1,991 0 4,800
Travel, meals, and lodgings 30,159 0 87,164
------------- --------------- --------------
Total expenses 59,187 6,245 197,833
Net loss (59,187) (6,245) $ (197,833)
=========
Retained earnings, beginning of period(138,646) (132,401)
-------------- --------------
Deficit accumulated during
the development stage $ (197,833) (138,646)
============== ==============
Earnings (loss) per share,
after giving effect to a 4 to 1 reverse
split effective July 30, 1997:
Net loss, assuming no dilution $ (0.02) $ 0.00 $ (0.10)
=============== ============== ========
Net loss, assuming full dilution$ (0.02) 0.00 $ (0.10)
=============== ============== ========
Weighted average shares,
no dilution 3,055,625 2,035,000 2,024,881
=============== ============== ========
Weighted average shares,
fully diluted 3,105,625 2,035,000 2,041,548
=============== ============== ========
The accompanying notes are an integral part of these financial statements.
-3-
MILLENNIUM SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 20, 1996, (Date
of Inception) TO December 31, 1999
Common Stock Additional
Shares Amount Paid-In
Capital Total
--------- --------- ---------- ---------
Balance February 20, 1996 ---- $ ---- $ ---- $ ----
Issuance of common stock for
services, March, 1996 1,000,000 1,000 0 1,000
Issuance of common stock for
cash, March, 1996 1,000,000 1,000 0 1,000
May, 1996 1,418,000 1,418 69,482 70,900
Less offering costs 0 0 (22,198) (22,198)
Less net loss 0 0 0 (36,787)
--------- --------- --------- ---------
Balance, December 31, 1996 3,418,000 3,418 47,284 13,915
Reverse stock split 4 to 1
on July 30, 1997 (2,563,500) 0 0 0
Issuance of common stock
for cash, August, 1997 1,180,500 3,418 54,303 59,025
Less net loss 0 0 0 (95,614)
--------- --------- --------- ---------
Balance, December 31, 1997 2,035,000 8,140 101,587 (22,674)
Less net loss 0 0 0 (5,198)
--------- --------- --------- ---------
Balance, September 30, 1998 2,035,000 8,140 101,587 (27,872)
Less net loss 0 0 0 (1,047)
--------- --------- --------- ---------
Balance, December 31, 1998 2,035,000 8,140 101,587 (28,919)
Issuance of common stock
for cash, June, 1999 5,000 20 30 50
Issuance of common stock to
offset debt, September, 1999 3,050,000 12,200 18,300 30,500
Issuance of common stock for
services, June 1999 1,000 4 6 10
Issuance of common stock to
offset debt, December, 1999 7,500 30 45 75
Less net loss 0 0 0 (59,187)
--------- --------- --------- ---------
Balance, December 31, 1999 5,098,500 $ 20,394 $119,968 $(57,471)
========= ========= ========== =========
The accompanying notes are an integral part of these financial statements.
-4-
MILLENNIUM SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(With Cumulative Figures From Inception)
Twelve months ended Dec. 31, From Inception
--------------------------- Feb.20,1996 to
1999 1998 Dec.31,1999
-------- -------- --------------
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES
Net Loss $ (59,187) $ (6,244) $ (197,833)
Non-cash items included in net loss:
Issue of stock for services 10 0 1,010
Amort. of organizational costs 0 633 0
Depreciation 2,257 2,256 6,567
Adjustments to reconcile net loss to
cash used by operating activity:
Loans from stockholders 56,140 1,010 94,913
Stock issued to repay loans
From stockholders (30,575) 0 (30,575)
--------- -------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES (31,355) (2,345) (125,918)
CASH FLOWS USED BY
INVESTING ACTIVITIES
Computers 0 0 11,280
--------- -------- -----------
NET CASH USED BY INVESTING ACTIVITIES 0 0 11,280
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES
Issue of stock to offset
loans from stockholders 30,575 0 30,575
Sale of common stock 50 0 7,190
Paid-in capital 0 0 123,785
Less offering costs 0 0 (22,198)
--------- -------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 30,625 0 139,352
--------- -------- -----------
NET INCREASE IN CASH (730) (2,345) $ 2,154
===========
CASH AT BEGINNING OF PERIOD 2,884 5,229
--------- -------- -----------
CASH AT END OF PERIOD $ 2,154 $ 2,884
========= ======== ===========
The accompanying notes are an integral part of these financial statements.
-5-
MILLENNIUM SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999, AND DECEMBER 31, 1998
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated on February 20, 1996, under the laws of
the State of Nevada as 'Legal Protection Services, Inc.'. The business
purpose was then to sell prepaid legal services. On July 10, 1997, the
shareholders approved a change of name to 'Millennium Software, Inc.'.
The Company is still in the development stage and has not generated any
revenue from operations. The Company is engaged in the development of
an Internet-based business and commenced development of a web site.
The Company entered into an Electronic Distribution Agreement with
Digital River, Inc. in March of 1999.
The Company adopted, effective December, 1998, SOP 98-5 issued by the
Securities & Exchange Commission. SOP 98-5 specifies that all
organizational costs be expensed as incurred. Consequently, the
unamortized organizational cost balance was recognized as a December,
1998, expense.
The Company will adopt future accounting policies and procedures based
upon the nature of transactions.
NOTE B COMPUTER EQUIPMENT
Computer equipment is carried at cost. Expenditures for maintenance
and repairs are charged against operations. Renewals and betterments
that materially extend the life of the asset are capitalized.
Expenditures for software development, maintenance, and support of the
Internet web site are charged against operations as incurred.
Depreciation of the equipment is provided using the straight-line
method over the estimated useful lives fro both federal income taxes
and financial reporting. Computer equipment is depreciated over five
years.
NOTE C LOANS FROM STOCKHOLDERS
The Company's President, or companies controlled by the Company's
President, have extended loans to the Company at no interest, payable
on demand, for working capital purposes. As of December 31, 1999, the
Company had issued 3,057,500 shares of common stock, at $.01 per share,
in repayment of $30,575 of its loans from stockholders. The balance
due after the issuance of shares was $64,338 as of December 31, 1999.
-6-
MILLENNIUM SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999, AND DECEMBER 31, 1998
(continued)
NOTE D EARNINGS (LOSS PER SHARE)
Basic EPS is determined using net income divided by the weighted
average shares outstanding during the period. Diluted EPS is computed
by dividing net income by the weighted average shares outstanding,
assuming that stock options, convertible bonds, or similar instruments
have been exercised.
NOTE E STOCK ISSUANCE
In June of 1999, the Company issued 5,000 shares of its common stock at
$.01 per share, for a total of $50 cash. Also in June of 1999, the
Company issued 1,000 shares of its common stock at $.01 per share for a
total of $10, in exchange for services. The policy of the Company is
that, when it issues stock for services, the assigned value of the
stock is expensed in the Statement of Operations.
In September of 1999, the Company issued 3,000,000 shares of its common
stock and approved the issue of another 50,000 shares, at $.01 per
share, a total of $30,500, in repayment of loans from stockholders. In
December of 1999, the Company issued 7,500 shares of common stock, at
$.01 per share for a total of $75, in repayment of loans from
stockholders.
NOTE F REVERSE STOCK SPLIT
On July 10, 1997, the stockholders approved a 4 for 1 reverse stock
split to be effective July 30, 1997.
NOTE G CONTRACTS AND COMMITMENTS
The Company entered into an Electronic Software Distribution Agreement
with Digital River, Inc., Eden Prairie, Minnesota, in March of 1999.
The agreement is for a period of 24 months, expiring March 7, 2001,
renewable for successive one-year terms unless terminated by either
party. Under the terms of the agreement Digital River provides
-7-
MILLENNIUM SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999, AND DECEMBER 31, 1998
(continued)
NOTE G CONTRACTS AND COMMITMENTS (continued)
Computer facilities to deliver software purchased through the Company's
web site, electronically by downloading or by delivery of physical CD
versions. The Company's web site links directly to the Digital River
order processing web site. The Company has not yet delivered any
software to Digital River. The agreement provides for company
indemnification of Digital River (and its successors) against any and
all liabilities, losses, damages and expenses associated with or
incurred as a result of any claims, action or proceeding instituted
against Digital River as a result of acts or failures to act on the
part of the Company. No known current or future liabilities exist
under the terms of the agreement with Digital River at the date of this
financial statement. Digital River is not a related third party as
defined by SFAS 57.
The Company entered into a Software Licensing Agreement with Abacus
Systems, Ltd., on December 8, 1999, whereby the Company has obtained
worldwide rights to publish, copy distribute, and sub-license
reproduction and distribution rights to software products developed by
Abacus in return for future royalty payments. Abacus Systems, Ltd., is
a private company controlled by the President of the Company. The
Company has agreed to pay a 10% royalty based on net revenues from the
sale of software licensed to Abacus to the Company plus a 5% royalty
based on net revenues received from the sale of software licensed by
Abacus to the Company for technical support.
NOTE H RELATED PARTY TRANSACTIONS
In September of 1999 the Company issued 3,000,000 shares of its common
stock and approved the issuance of another 50,000 shares, at $.01 per
share, as a reduction of $30,500 payable to the Company's President or
companies controlled by the Company's President. In December of 1999
the Company issued another 7,500 shares of its common stock at $.01 per
share for a similar debt reduction of $75.
The Company's President has paid $2,343 for expenses for the
development of web sites on behalf of the Company. This amount is
included in the loans from stockholders balance of $64,338 as of
December 31, 1999.
-8-
MILLENNIUM SOFTWARE, INC.
( A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999, AND DECEMBER 31, 1998
(continued)
NOTE H RELATED PARTY TRANSACTIONS (continued)
The Company entered into a Software Licensing Agreement with Abacus
Systems, Ltd., on December 8, 1999, whereby the Company has obtained
worldwide rights to publish, copy distribute, and sub-license
reproduction and distribution rights to software products developed by
Abacus in return for future royalty payments. Abacus Systems, Ltd., is
a private company controlled by the President of the Company. The
Company has agreed to pay a 10% royalty based on net revenues from the
sale of software licensed to Abacus to the Company plus a 5% royalty
based on net revenues received from the sale of software licensed by
Abacus to the Company for technical support. No sales have been made
and no royalty payments were due as of December 31, 1999.
NOTE I STOCK OPTION
On November 22, 1999, the Company issued an option to its President to
acquire 300,000 shares of its common stock at a price of $.01 per
share, for $3,000 cash. The terms of the Option are payment in cash
within a three year period ending November 21, 2002, after which date
any outstanding options will be canceled. The options can be converted
into common shares upon full payment in cash. Any number of options
can be converted at any time during the three-year period. Any and all
options which remain unconverted to common shares after November 21,
2002, and the attached right to convert to common shares will be
canceled.
CONTRACTS
Electronic Software Distribution Agreement
This agreement is made and entered into on March 8th, 1999 by and between
Digital River, Inc., its successors or assigns, 9625 West 76th Street Eden
Prairie, Minnesota 55344 (>DR=) and the Millennium Software, Inc registered
office at 2950 East Flamingo Road, Suite G, Las Vegas, Nevada 89121 a
corporation, hereafter referred to as 'Vendor', with its principal office at
2277 Lawson Avenue, West Vancouver BC V7V 2E3 Canada.
BACKGROUND
a. Vendor is the Owner of all rights (or has a license to sell) to the
Software as defined hereunder.
b. Vendor desires to enter into an Agreement with the DR to allow DR to
distribute the Software.
c. DR desires to obtain the right to distribute the Software.;
NOW THEREFORE, the parties hereby agree as follows:
1.DEFINITIONS
a. Software: the executable object code for the Vendor's software identified
on Exhibit A, including all subsequent versions thereof provided to the DR
pursuant to this Agreement.
b. Documentation: all computer readable and/or printed instructions, manuals
and other materials normally provided from time to time by Vendor to End
Users for use of the Software, and all subsequent versions thereof
provided to DR pursuant to this Agreement.
c. End-User License Agreement (EULA): the computer readable license agreement
provided by Vendor that governs the use of the Product by End Users, and
which is to be included with each copy of the Product sold by DR
hereunder.
d. DR Materials: computer readable materials provided by DR for inclusion in
an electronic package containing the Software, Documentation, and EULA,
which materials have been approved by Vendor.
e. Product: a copy of the Software, Documentation, EULA and DR Materials , if
any, packaged in computer readable form together for electronic delivery
on www.digitalriver.com (or equivalent) and/or in tangible packaged form
for delivery in accordance with this Agreement, as identified on Exhibit
A.
f. End User: person(s) or organization(s) that acquire a Product for use
rather than resale or distribution.
g. Vendor Trademarks: the trademarks, trade names and logos used by Vendor in
connection with the product.
h. Territory: all countries in the world except (i) countries to which export
or re-export of any Product, of the direct products of any Product is
prohibited by the United States law without first obtaining the permission
of the United States Office of Export Administration or its successors,
and (ii) countries that may be hereafter explicitly excluded pursuant to
the terms of this Agreement.
i. Dealer: person(s) or organization(s) that resell the Products.
j. Site: the Vendor's World Wide Web Site
k. Host Sales: sales of the Products originating from the Site.
l. Channel Sales: sales of the Product originating from a source other that
the Site.
Electronic Software Distribution Agreement
m. Transaction: the processing at one time of a payment made by an End User,
which processing of payment may include more than one (1) Product.
2. LICENSE
a. Vendor hereby grants DR, within the Territory, a license and right to:
1. Reproduce and distribute the Product in computer readable form to the
End Users and/or Dealers;
2. Package the Product in a computer readable form reasonably specified
by Vendor.
3. Utilize the Vendor Trademarks in connection with the replication of
the Product, packaging and distribution of the Product, in a manner
reasonably specified by Vendor; and
4. Distribute in tangible form the Product to the End Users and/or
Dealers.
b. DR acknowledges that the Software and Documentation are the property of
Vendor or its licensors and that DR has no rights in the foregoing except
for encryption software supplied by DR, if any, and those expressly granted by
this Agreement.
c. Under no circumstances shall the provisions of this Agreement be deemed to
require DR to engage in any activities in connection with the distribution of
the Products that could, in the reasonable discretion of DR, result in a
financial loss to DR or result in an unacceptably small level of profitability
for DR.
3. VENDOR'S GENERAL OBLIGATIONS
a. Vendor shall deliver the current version of the Product to DR immediately
following execution of this Agreement. Vendor will provide DR with:
(i) copies of the Software on master diskettes, (ii) Product specification
information in a single file, self extracting archive format, or in another
mutually agreeable computer readable form that can be reproduced by DR,(iii)
Documentation in a computer readable form mutually agreeable to the parties
that can be reproduced by DR, and (iv) all the items and materials specified
in the 'Requirements Checklist' on Exhibit B.
b. Vendor shall provide DR with computer readable copies and/or tangible
packaged Products containing all new releases, updates, or revisions of the
Software and Documentation within a reasonable time after each such release
is made generally available by Vendor. Vendor will notify DR of its plans
for each new release, update, or revision of the Product to DR in sufficient
quantities on or before the date it is offered to any other distributor.
c. For Products are listed on Exhibit A as Host Sales, Vendor shall provide a
hypertext link to www.digitalriver.com (Or equivalent) on the Site (the
Link) where Product may be purchased by End-User from DR. Vendor agrees to
prominently display the Link and use readable efforts to promote the Link
on Site. Vendor agrees that no other hypertext link for sale of the
Products will be placed on the Site or elsewhere without the prior written
consent of DR.
d. If Vendor makes any modifications, updates, or enhancements (the
Improvements) to the Product, Vendor will offer the Improvements for
distribution by DR on terms substantially equivalent to those provided in
this Agreement. In the event that Vendor develops or acquires any new
products, Vendor agrees to give DR the right of first refusal for
distribution of these products on the Site and as provided for in this
Electronic Software Distribution Agreement
Agreement with respect to the Products.
e. Vendor shall furnish an EULA in computer readable form to DR which is to
be included with each copy of the Products sold by DR hereunder. Vendor=s
linking of the Site to www.digitalriver.com (or equivalent) shall
constitute approval of the EULA DR is delivering as part of the Product.
f. Vendor shall provide all support and be fully responsible for all warranty
obligations relating to the Product. Such support and warranty shall be in
accordance with Vendor's then-current published software support policy,
or, in the absence of such a policy in a reasonable manner.
g. Vendor shall provide DR, without charge, such technological information,
current maintenance documentation, and telephone assistance as is necessary
to enable DR to effectively reproduce, electronically package, and
distribute the Products as provided for in this Agreement.
4. WARRANTIES
a. Vendor represents and warrants that it has the right and authority to
enter into this Agreement and to grant DR the rights to the Software and
Documentation granted in this Agreement.
b. Vendor represents and warrants to DR that the Vendor has all rights,
title, and interest in the software and Documentation or has obtained the
right to grant to DR the license set forth in this Agreement. As of the
execution date of this Agreement, Vendor represents and warrants that to
the best of Vendor's knowledge the Product does not infringe upon or
misappropriate the proprietary rights of any other person or organization.
c. DR represents and warrants that it has the right and authority to enter
into this Agreement.
d. DR represents and warrants that it will use its best efforts to accurately
replicate the Product.
e. DR represents and warrants that except for encryption software, if any,
supplied by DR, the products will not be altered by DR.
5. INITIALIZATION FEE
Vendor agrees to pay DR the Initialization Fee specified on Exhibit A.
Vendor agrees to allow DR to offset the unpaid Initialization Fee against any or
all other amounts owing to Vendor by DR under this Agreement. Product available
from Vendor will be installed on DR's server upon fulfillment of other
obligations pursuant to this Agreement. The Initialization Fee includes normal
price changes and version updates. All programming and other changes made after
initial site setup excluding normal price changes, product addition and version
updates will be charged to Vendor at One Hundred Dollars ($100.00) per hour
(Site Maintenance). Vendor agrees to pay the billed Site Maintenance charges
within thirty (30) days from the date of billing. In the event that Site
Maintenance is not paid for within thirty (30) days of billing, Vendor agrees to
allow DR to offset the unpaid Site Maintenance against any or all other amount
owing to Vendor by DR under this Agreement.
6. PROCESSING AND PAYMENTS
Sales activities shall be processed, and payments shall be made in
accordance with the provisions specified on Exhibit C.
7. ORDERS BY MEANS OTHER THAN FROM SITE
The Vendor shall be charged (written)($ . ) for each order
taken for the Products by means including, but not limited to, orders taken
Electronic Software Distribution Agreement by telephone, email, facsimile
transmission or by means other than from the Site, which amount shall, as
applicable, be invoiced to the Vendor by DR, or deducted from payments made by
DR to the Vendor.
8. RECORDS
DR and Vendor agree to maintain adequate books and records relating to the
distribution of the Products to end Users and Dealers, including without
limitation, books, records, and tax returns relating to returns, refunds, and
sales and use taxes. Such books and records shall be available at the principal
office of each party for inspection by the other party or its representative
during normal business hours, for the purpose of determining the accuracy of the
payments required to be made pursuant to the provisions of this Agreement. Each
party shall have the right to conduct such an audit upon twenty (20) days
advance written notice not more than twice each year. In the event that such an
audit discloses an underpayment which is greater than five percent (5%), then
the party responsible for the underpayment shall pay the underpayment and
reasonable costs of such audit, otherwise the party requesting the audit shall
pay the costs of such audit.
9. DELIVERY OF PRODUCTS
As specified in Exhibit A, DR and/or Vendor shall be responsible for making
digital and/or tangible delivery of the Products as follows:
a. The following provisions shall apply to any Products listed on Exhibit A
for which digital delivery is to be made by DR:
1. Within twenty-four (24) hours after receipt of an order from an End
User, DR shall make digital delivery of the Products available to the
End User.
b. The following provisions will apply to any Products listed on Exhibit A
for which tangible delivery is to be made by DR:
1. The Vendor shall provide DR with an inventory of the Products to be
held on consignment and used by DR to fulfill orders for the Products.
DR shall be responsible for the delivery of the Products to the End
Users at the locations designed by the End User.
2. The Products shall be delivered to DR prepackaged and ready for
shipment and delivery to the End User. The Vendor shall be solely
responsible for the shipment of the Products to DR and shall be solely
responsible for all costs and expenses associated with any such
shipments. The Vendor shall bear the entire risk of loss or damage to
the Products during shipments to or from DR.
3. Within fifteen (15) days after the date of this Agreement, the Vendor
shall provide DR with such consigned quantities of the Products as may
be mutually agreed upon in writing by DR and the Vendor. On a periodic
basis, DR shall provide an inventory detail to Vendor showing the
current inventory of the Products, Periodically, DR will issue
consignment purchase orders for the estimated needs of the Product to
be tangibly delivered. The Vendor shall be responsible for making
prompt delivery of the Products to DR.
4. All Shipments of Product to DR will be clearly labeled with DR's
purchase order number on the outside of the box. If DR is tracking
serial numbers for the Products, Vendor will provide with each shipment
of the Product a complete list of the serial numbers of the Product
enclosed in the box.
5. DR shall have no liability of any kind whatsoever as a result of a
delay in the delivery of the Products by Vendor, or the delivery of
<PAGE>
Products to DR in non-conforming condition, Upon the termination of this
Agreement, at the Vendor's sole cost and expense, the unsold inventory
of the Products shall be returned to the Vendor.
c.The following provisions shall apply to any Products listed on exhibit A
for which digital or tangible delivery is to be made by Vendor:
1. The Vendor shall maintain an inventory of the Products to be used by
Vendor to fulfill orders for tangible delivery of products.
2. On a daily basis, by electronic and/or facsimile transmission, DR shall
notify Vendor about the number of orders for the Products made the
previous day ( the Order Notification). The Order Notification shall
contain the names and delivery addresses (including, as applicable,
electronic delivery addresses) of the End Users; the names, serial
numbers, and quantity of the Products sold to particular End Users; and
the manner of the delivery to such End Users (whether digital or
tangible delivery).
3. Vendor shall be responsible for making digital or tangible delivery,
as applicable, of all Products to the End Users and Dealers identified
in the Order Notifications, and shall be responsible for all risk of
loss of, or damage to the Products during digital or tangible delivery
to the End Users. Vendor shall, as specified in the Order Notification,
make digital delivery or tangible shipment to the End User of all the
Products within twenty-four (24) hours after receipt of the Order
Notifications.
4. Vendor shall develop, establish, and maintain such delivery systems and
procedures as may, in the discretion of DR, be necessary ensure that the
Products are promptly and correctly delivered, and which enable DR and
Vendor to immediately determine the status of the Products during
delivery. On a daily basis, by electronic and/or facsimile
transmission, Vendor shall provide a report to DR which provides
information about the digital deliveries and tangible shipments of the
Products made the previous day (the Shipment Reports). The Shipment
Reports shall contain the names, and delivery addresses (including, as
applicable, electronic delivery addresses) of the End Users or Dealers
to whom the Products have been digitally delivered or tangibly shipped;
the form of delivery (whether digital or tangible delivery); the name,
address, and telephone number of carriers (in case of tangible
shipment); confirmation numbers; package tracking information; and any
other information that may from time to time be requested by the
Company.
10. MARKETING PAYMENTS
If Exhibit D has been initialed by the parties and attached to this
Agreement, Vendor, and DR agree to the marketing payments and marketing
activities provided for on Exhibit D.
11. CUSTOMER SERVICE
DR's policy is to provide End User's with a thirty (30) day right to return
Products for a refund of the purchase price paid by the End User, Returns and
refunds may be made in the discretion of DR. This policy is subject to
modification from time to time in the discretion of DR. To the extent the
Vendor's return policies are consistent with those of DR then in effect, DR
shall cooperate and assist the Vendor and End Users with respect to Product
Returns.
<PAGE>
12. CONFIDENTIALITY
a. Each party agrees that all binary code, inventions, algorithms, know-how
ideas, and all other business, technical and financial information it
obtains from the other party constitutes the confidential property of the
disclosing party (confidential Information). Except as expressly
permitted in this Agreement, the receiving party will hold in confidence
and not use or disclose any Confidential Information and shall similarly
bind its employee and agents. The receiving party shall not be obligated
under this Section with respect to information the receiving party can
document that:
1. Is or has become readily available to the public through no fault of
the receiving party or its employees or agents; or
2. Is received without restriction from another person or organization
lawfully in possession of such information and lawfully empowered to
disclose such information;
3. Was rightfully in the possession of the receiving party without
restriction prior to its disclosure by the disclosing party; or
4. Is independently developed by the receiving party or its employees or
agents without access to the other disclosing party's similar
Confidential Information.
Each party's obligation with respect to Confidential Information shall
continue for the shorter of three (3) years from date of termination of this
Agreement or until one of the above enumerated conditions becomes applicable.
Each party acknowledges that its breach pf this Section would cause irreparable
injury to the other for which monetary damages are not adequate remedy.
Accordingly, a party will be entitled to injunctive relief and other equitable
remedies in the event of a breach of the terms of this Agreement. b. DR agrees
no to: (i) disassemble, decompile, or otherwise reverse engineer the Software,
or otherwise attempt to learn the source code, structure, algorithms or ideas
underlying the Software; or (ii) take any action contrary to EULA except as
allowed under this Agreement.
13. VENDOR TRADEMARKS
a. DR acknowledges that the Vendor Trademarks are trademarks owned or
licensed solely and exclusively by Vendor, DR agrees to use the Vendor
Trademarks only in the form and manner and with appropriate legends as
prescribed by Vendor. All use of Vendor Trademarks shall inure to the
benefit of Vendor.
b. DR shall not remove, alter, cover, or obfuscate any copyright notice or
other proprietary rights notice placed in or on the Products by Vendor.
14. INDEMNIFICATION
a. Vendor shall defend, indemnify, and hold DR and its successors and assigns
harmless from and against any and all liabilities, losses, damages, costs,
and expenses (including without limitation, reasonable legal fees and
expenses) associated with or incurred as a result of any claim, action, or
proceeding instituted against DR and its successors and assigned arising
out of or relating to the acts or failure to act of the Vendor, or any of
its affiliated companies, agents, employees or other related parties under
this Agreement including, without limitation, action, claims, or
proceedings related to: (i) Vendor's performance of its obligations under
this Agreement, (ii) the breach by Vendor of any pf the terms of this
Agreement or any of the representation and warranties contained herein;
Electronic Software Distribution Agreement
(iii) the actual or alleged infringement of any proprietary rights arising
out of DR's duplication, sale, distribution, or other use of the Product
pursuant to this Agreement; or (iv) in the event the Vendor is obligated to
sales or use tax payments pursuant to the provisions of Exhibit C, any
obligation or liability of DR and its successors and assigns to make use tax
payments in any state indicated in Exhibit C or otherwise.
b. DR shall indemnify and hold Vendor harmless from and against any and all
liabilities, losses, damages, costs, and expenses (including reasonable
legal fees and expenses) associated with or incurred as a result of any
claim action, or proceeding instituted against Vendor resulting from DR's
improper or unauthorized replication, packaging, marketing, distribution, or
installation of the Product, or the breach by DR of any of the terms of this
Agreement or any of the representations and warranties contained herein.
c. If either Vendor or DR receives notice or knowledge of a claim as described
above, it will promptly notify the other party in writing and give the other
party all necessary information and assistance and the exclusive authority
to evaluate, defend, and settle such claim.
15. LIMITATION OF LIABILITY The total liability of DR (including its employees,
agents, and Dealers) for all claims, whether in contract, tort (including
negligence and product liability) or otherwise, arising out of, connected with,
or resulting from the distribution of the Products or the provisions of this
Agreement shall not exceed the net amount realized by DR hereunder. IN NO EVENT
SHALL DR BE LIABLE FOR ANY LOSS OF DATA, LOST PROFITS, OR INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL, OR EXEMPLARY DAMAGES, EVEN IF DR HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL
PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN.
16. TERM AND TERMINATION
a. This Agreement will continue un effect for two (2) years from the date
hereof (Initial Term). This Agreement will be automatically renewed for
successive additional one (1) year terms (each, a Renewal Term) unless
terminated by either party upon ninety (90) days written notice prior to
the expiration of the Initial Term and Renewal Term.
b. This Agreement may be terminated by a party immediately by written notice
to the other party upon the occurrence of any of the following events: (i) If
the other party ceases to do business, or otherwise substantially terminates
its business operations; (ii) If the other party shall fail to promptly
secure or renew any license registration, permit, authorization or approval
for the conduct of its business in the manner contemplated by this Agreement
or if any such license, registration, permit, authorization or approval is
revoked or suspended and not reinstated within thirty (30) days; (iii) If the
other party materially breaches any provision of this Agreement and fails to
fully cure such breach within thirty (30) days of written notice describing
the breach; or (iv) If the other party becomes insolvent or seeks protection
under any bankruptcy laws, creditor's arrangement, composition or comparable
proceeding, or if any such proceeding is instituted against the other and not
dismissed within ninety (90) days.
c. Upon termination of this Agreement for any reason, DR will immediately
cease distribution of the Product. The termination of this Agreement
<PAGE>
shall not in any respect whatsoever affect a party=s obligation to make
payments to the other party in connection with the distribution of Products
that occurred prior to the termination of this Agreement.
d. Termination by either party will not affect the rights of any End User
under the terms of the EULA.
17. GENERAL PROVISIONS
a. This Agreement many not be assigned by Vendor or transferred by operation
of law to any other person or organization without the express written
approval of DR. DR shall be entitled to assign this Agreement in the event
of a merger, acquisition, joint venture, or a sale of substantially all of
its assets or business, or any similar transaction.
b. All notices and demands hereunder shall be in writing and shall be served
by personal delivery, nationally-recognized express courier, or by certified
mail at the address of the receiving party set forth in this Agreement (or at
such different address as may be designated by such party by written notice
to the other party). All notices and demands shall be deemed given upon the
earlier of receipt, two (2) days after deposit with a nationally-recognized
express courier; or five (5) days after deposit in the mail.
c. This Agreement shall be governed by and construed in accordance with the
substantive laws of the state of Minnesota. d. Each party is acting as an
independent contractor and not as an agent, partner, or joint venturer with
the other party for any purpose. Except as provided in the Agreement,
neither party shall have the right, power, or authority to act or to create
any obligation, express or implied, on behalf of the other.
e. The indemnification and confidentiality obligations set forth in the
Agreement and any other provision which by its sense and context is
appropriate, shall survive the termination of this Agreement by either party
for any reason.
f. The titles and headings of the various sections and paragraphs in this
Agreement are intended solely for convenience of reference and are not
intended for any other purpose whatsoever, or to explain, modify or place
any construction upon ir in any of the provisions of this Agreement.
g. All exhibits to this Agreement are incorporated herein by reference and
made part of this Agreement.
h. No provisions in either party's purchase orders, or in any other business
forms employed by either party will supersede the terms and conditions of
this Agreement, and no supplement, modification, or amendment of the
Agreement shall be binding, unless executed in writing by a duty authorized
representative of each party to this Agreement.
i. DR shall not be in breach of the Agreement in the event it is unable to
perform its obligations under this Agreement as a result of natural disaster,
was, emergency conditions, labor strike, the failure or substantial failure
of the Internet, or other reasons or conditions beyond its reasonable
control.
j. The parties have read this Agreement and agree to bound by its terms and
further agree that it constitutes the complete and entire agreement of the
parties and supersedes all previous communications, oral or written, and all
other communications between them relating to the license and to the subject
thereof. No representation or statements of any kind made by either party,
which are not expressly stated herein, shall be binding on such party.
Electronic Software Distribution Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth above.
DR: Vendor:
Digital River, Inc. Millennium Software, Inc.
Signature:_________________ Signature: /s/ Anthony Bigwood
Name & Title: Name & Title: A.M. Bigwood, Pres.
and CEO
Date: 3/24/99 Date: March 8th 1999
<PAGE>
Electronic Software Distribution Agreement
EXHIBIT A Defined Terms
As used in this Agreement, the following terms shall have the meanings
ascribed to them below, and shall have application to the Products and DR and
the Vendor, as applicable, as indicated in the following table:
The term 'Advertised Price' shall mean the price at which the product will be
initially sold for Host Sales.
The term 'Discount Percentage' shall mean the percent by which the Advertised
Price is reduced.
The term 'Margin Payment' shall mean the Dollar amount of the Discounted
Percentage, which, as applicable, shall be retained by or paid by DR.
The term 'Percentage Cost' shall mean an amount equal to the Advertised Price
minus the Margin Payment, and which shall be payable by DR to Vendor for each
copy of a Product sold to an End User in a Host Sale.
The term 'Fee' shall mean the amount indicated, which shall be payable to DR
for each Transaction.
The term 'Responsible for Delivery' shall mean the party responsible for
delivering the Products to End Users.
The term 'Method of Delivery' shall mean the manner in which the Products are
delivered to End Users, either digitally or tangibly.
The term 'Distribution Cost' shall mean the amount indicated, which is the
amount DR shall pay Vendor for each Product sold in a Channel Sale and which
shall not in any event be an amount more than the amount for which the Vendor
sells the same Product to any other person or organization.
<PAGE>
Electronic Software Distribution Agreement
EXHIBIT A (continued)
Product Information
Please fill out the following template for each Product.
Product name (50 characters maximum): CHECKMYLOANS2000
Vendor Name (up to 36 characters): MILLENNIUM SOFTWARE, INC
If product is for tangible delivery by
DR, shipping weight: NOT GREATER THAN 75 GRAMS WEIGHT
Product Categories (up to 3) PERSONAL SOFTWARE
Does this Product include electronic
documentation? (Y/N) ON LINE FILES WILL BE RESIDENT ON
OUR WEB SITEDoes this Product
include online help?
(Y/N) YES
What is the platform for this Product? Win95/98 & NT
What is the vendor part number of this
product? CL #1
Will DR distribute serial numbers? (Y/N) NO
Does this Product have an export ban? (Y/N) NO
If yes, to which countries is export
Restricted or banned? N/A
EXHIBIT C
Processing and Payments
For each copy of a product sold and delivered to an End User, DR shall be
responsible for the following processing of payments made by End Users
(including amounts for sales or use taxes). Amounts collected by DR shall be
deposited in an account established, owned, and maintained by DR. DR shall be
solely responsible for the payment of any and all credit card transaction fees.
DR shall be solely responsible for the preparation and filing of any sales or
use tax returns, and the payments of any and all sales or use taxes, together
with any and all related interest and penalties.
Within thirty (30) days after the end of each calendar month, by electronic
and/or facsimile transmission, DR shall contain the names and delivery addresses
of the End Users, and names, Vendor Product numbers, and quantity pf the
Products sold to particular End Users. Within thirty (30) days after the end of
each calendar month, DR shall, as indicated, in Exhibit A, pay Percentage Costs
and Distribution Costs to the Vendor based on the number of Products for which
DR processed payment during the immediately preceding calendar month. Any
payment or part of a payment hereunder, which is not paid when due shall bear
interest at the rate of 1.5% per month from its due date until paid.
DR acknowledges that it shall bear the risk associated with unauthorized returns
of Vendor products and credit card charge-backs in connection with the
distribution of the Vendors products as contemplated by this Agreement. Under
no circumstances shall DR be obligated to pay any Percentage Costs or
Distribution Costs in connection with any activities that are deemed to be
fraudulent or criminal. DR shall use its best efforts to screen for, detect,
prevent and take such other actions, as it deems reasonably necessary to prevent
fraudulent activity. The existence of fraud, or the possibility of the
existence of fraud shall be determined in the sole discretion of DR, and DR may,
at it deems appropriate under the circumstances. During the pendency of any
such payment to the Vendor of the Percentage Costs and Distribution Costs
associated with such inquiries and investigations. The payment of percentage
Costs and Distribution Costs shall be subject to adjustment by DR based on
Product returns and refunds paid to End Users.
