As Filed with the Securities and Exchange Commission on November 19, 2007
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Registration No. 333-143039
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
to
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Nine Mile Software, Inc.
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(Name of small business issuer in its charter)
Nevada 7371 20-8006878
- ------------------------------ ------------------------- ----------------------
(State or jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification Number)
Code Number
1245 East Brickyard Road, Suite 590, Salt Lake City, Utah 84106
(801) 433-2000
(Address and telephone number of principal executive offices)
1245 East Brickyard Road, Suite 590, Salt Lake City, Utah 84106
(Address of principal place of business or intended principal place of business)
Andrew Limpert
c/o Nine Mile Software, Inc.
1245 East Brickyard Road, Suite 590
Salt Lake City, Utah 84106
(801) 433-2000
(Name, address and telephone number of agent for service)
Copy to:
Leonard E. Neilson, Esq.
Leonard E. Neilson, P.C.
8160 South Highland Drive, Suite 209
Sandy, Utah 84093
(801) 733-0800
Approximate date of proposed sale to the public: As promptly as practicable
after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check he following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
maximum maximum
Title each class of securities Amount to be offering price aggregate Amount of
to be registered registered (1) per share offering price registration fee
- ----------------------------------------- ------------------- ----------------- -------------------- ------------------
Common stock 714,290 $ 0.70(2) $ 500,003 $ 15.35
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Total $ 15.35
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TOTAL FEE $ 15.35(2)(3)
(1) Represents shares of common stock offered directly to the public by us.
(2) Fee calculated in accordance with Rule 457(o) of the Securities Act.
(3) Registration fee was paid when Form SB-2 registration statement was
filed on May 17, 2007.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed. These
securities may not be sold until after the registration statement filed with the
Securities and Exchange Commission is declared effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to completion dated November , 2007
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PROSPECTUS
NINE MILE SOFTWARE, INC.
714,290 Shares of Common Stock
This is our initial public offering. We are offering a minimum of 214,290
shares of common stock and a maximum of 714,290 shares at the purchase price of
$0.70 per share on a self underwritten, best efforts basis.
Until the minimum of $150,003 is realized by selling a minimum of 214,290
shares offered hereby, all payments for shares will be deposited into an escrow
account with Escrow Specialists, an unaffiliated escrow company in Ogden, Utah,
which will be our escrow agent. If the minimum of $150,003 is not raised, all
payments deposited in the escrow account will be promptly refunded in full,
without interest and without any deduction for expenses. Once $150,003 is
realized, all funds held in the escrow account will be released to us and we
will continue to sell shares up to the maximum amount of 714,290 shares at a
total sales price to the public of $500,003.
Prior to this offering, there has been no public market for our common
stock. If we sell at least the minimum number of shares, of which there is no
assurance, we intend to contact an authorized market maker to sponsor our
securities on the OTC Bulletin Board, a quotation service for subscribing NASD
members. There is, however, no assurance that our shares will ever be quoted on
the Bulletin Board or by any other marketplace.
We will sell the shares in this offering through our officers and
directors. Officers and directors engaged in the sale of our shares will receive
no commission from sales nor will any officer or director register as a
broker-dealer. We have no intention of inviting broker-dealer participation in
this offering. We may advertise and hold investment meetings in various states
where the offering will be registered. We will also distribute this prospectus
to potential investors at the meetings and to our friends and relatives who are
interested in Nine Mile Software and a possible investment in the offering.
The securities offered in this prospectus involve a high degree of risk and
substantial dilution. An investment in our common stock should be made only by
investors who can afford a loss of their entire investment. You should carefully
consider the "Risk Factors" beginning on page 5 of this prospectus and the
matters discussed under "Dilution" on page 9.
Neither the Securities and Exchange Commission ("SEC") nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
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Price to the Public Underwriting Discounts Proceeds
and Commissions(1) to Issuer (2)
- -------------------------------- ------------------------- --------------------------- ----------------------------
Per Share $ 0.70 $ 0.00 $ 0.70
- -------------------------------- ------------------------- --------------------------- ----------------------------
Minimum Offering $ 150,003 $ 0.00 $ 150,003
214,290 Shares
- -------------------------------- ------------------------- --------------------------- ----------------------------
Maximum Offering $ 500,003 $ 0.00 $ 500,003
714,290 Shares
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(1) Our officers and directors will sell the shares, but will receive no commission from sales nor will they
register as a broker-dealer.
(2) Before deducting offering expenses estimated at $35,000 payable by us.
The date of this Prospectus is November , 2007
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TABLE OF CONTENTS
Page
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PROSPECTUS SUMMARY............................................................................. 3
RISK FACTORS................................................................................... 5
DILUTION....................................................................................... 9
THE OFFERING................................................................................... 11
DETERMINATION OF OFFERING PRICE................................................................ 11
USE OF PROCEEDS................................................................................ 11
CAPITALIZATION................................................................................. 12
PLAN OF DISTRIBUTION........................................................................... 12
LEGAL PROCEEDINGS.............................................................................. 14
DESCRIPTION OF OUR BUSINESS.................................................................... 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS..................................... 20
MANAGEMENT..................................................................................... 22
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................... 24
DESCRIPTION OF SECURITIES...................................................................... 25
DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES................... 26
CERTAIN MARKET INFORMATION AND MARKET RISKS.................................................... 26
LEGAL MATTERS.................................................................................. 27
EXPERTS........................................................................................ 28
INTERESTS OF NAMED EXPERTS AND COUNSEL......................................................... 28
WHERE YOU CAN FIND MORE INFORMATION............................................................ 28
FINANCIAL STATEMENTS...........................................................................F-1 TO F-19
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As used in this prospectus, unless otherwise indicate, "we",. "us", "our",
"Nine Mile Software" and the company refer to Nine Mile Software, Inc.
-2-
PROSPECTUS SUMMARY
This summary highlights information contained throughout this prospectus.
Before making an investment decision, you should read carefully the entire
prospectus, including the information under the "Risk Factors" section and our
financial statements and related notes.
OUR BUSINESS
We incorporated on November 30, 2006 in the State of Nevada. We are
developing and intend to produce and distribute to the financial services
industry, the TradeWarrior portfolio rebalancing and trade generation program.
We anticipate launching this product in the third or first quarter of 2008. We
intend to market TradeWarrior to independent Registered Investment Advisors
("RIAs").
Our principal executive offices are located at 1245 East Brickyard Road,
Suite 590, Salt Lake City, Utah 84106 and our telephone number is (801)
433-2000.
We are not a blank check company and do not have any intention to engage in
a reverse merger with any entity in an unrelated industry.
NUMBER OF SHARES BEING OFFERED
We are offering a minimum of 214,290 and a maximum of 714,290 shares of our
common stock on a self underwritten, best efforts basis. Our officers and
directors will offer and sell the shares, but will receive no commission in
connection with sales. Proceeds from sales will be deposited into an escrow
account at Escrow Specialists in Ogden, Utah. If the minimum amount is not
raised, all payments deposited in the escrow account will be refunded in full,
without interest and without any deduction for expenses. If at least the minimum
amount is realized, all funds held in escrow will be released to us and we will
continue to sell shares up to the maximum amount.
NUMBER OF COMMON SHARES OUTSTANDING
We have 1,882,000 shares of our common stock outstanding as of November 15,
2007 and at the date of this prospectus. If we sell the minimum amount, we will
have a total of 2,096,290 shares outstanding and if the maximum amount is sold,
we will have a total of 2,596,290 shares outstanding.
USE OF PROCEEDS
We intend to use the proceeds from the sale of shares to finish programming
the TradeWarrior product, develop and implement marketing strategies and to hire
service personnel.
SUMMARY FINANCIAL DATA
The following summary financial information summarizes the more complete
historical financial information included in our financial statements at the end
of this prospectus.
-3-
SUMMARY FINANCIAL INFORMATION
The following financial information summarizes the more complete historical
financial information at the end of this prospectus.
Statements of Operations Data
For The Period
November 30, 2006
For The Nine For The (Inception)
Months Ended Year Ended to
Sept. 30, 2007 December 31, 2006 Sept. 30, 2007
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(Unaudited) (Unaudited)
Revenues: $ -- $ -- $ --
Expenses:
General & administrative 19,250 1,002 20,252
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Total Expenses 19,250 1,002 20,252
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Income (Loss) from operations
-----------
Net (loss) $ (19,250) $ (1,002) $ (20,252)
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Basic (loss) per share $ (0.01) $ (0.00)
Weighted average number of
shares outstanding 1,822,000 1,822,000 1,822,000
=========== =========== ===========
Balance Sheet Data
Sept. 30, 2007 December 31, 2006,
-------------- ------------------
(Unaudited)
Assets
Current assets
Cash $ 56,108 $ 44,548
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Total current assets
Other assets - Copyright $ 1,190 $ --
----------- -----------
Total assets $ 57,298 $ 44,548
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Liabilities and stockholders' equity
Current Liabilities
Accounts payable $ 2,000 $ --
----------- -----------
Total liabilities $ 2,000 $ --
----------- -----------
Stockholders' equity
Common stock 1,882 1,822
Additional paid-in capital 73,668 43,728
Accumulated deficit (20,252) (1,002)
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Total stockholders' equity 55,298 44,548
----------- -----------
Total liabilities and stockholders' equity $ 57,298 $ 44,548
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-4-
RISK FACTORS
An investment in our common stock involves a high degree of risk, and
should not be made by anyone who cannot afford to lose his or her entire
investment. You should consider carefully the risks set forth in this section,
together with the other information contained in this prospectus, before
deciding to invest in our common stock. If any of the following events or risks
actually occurs, our business, operating results and financial condition would
likely suffer materially and you could lose your entire investment.
Going Concern
We may not be able to continue as a going concern.
Our independent registered public accountants have reviewed our financial
data and information and rendered a statement that they have substantial doubt
about our ability to continue as a going concern for the following reasons:
o we have limited financial resources and have incurred a net loss since
inception through September 30, 2007;
o we have limited working capital and stockholders` equity; and
o our ability to establish an ongoing source of revenues sufficient to
cover operating costs and operate successfully is uncertain.
If we fail to produce revenues, our business could fail, we could cease
operations and you would lose your entire investment.
Risks Relating to Our Business
We have a limited operating history, have not recorded revenues or
operating profits since inception and, if we are unable to generate
sufficient revenues to pay expenses in the near future, our business may
fail resulting in the loss of any money invested in our common stock.
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We have a limited operating history and have not realized any revenues or
operating profits since our inception in November 2006. We face all the risks
and problems associated with businesses in their early stages in a competitive
environment. Prospective investors have only limited information on which to
make an evaluation of our prospects. Our principal product, the TradeWarrior
portfolio rebalancing program, has not been fully developed and has never been
commercially marketed. If we are unable to successfully market the TradeWarrior
within a reasonable time, we may not be able to generate sufficient cash flows
to meet operating expenses. Our prospects should be considered in light of the
risks, expenses and difficulties frequently encountered in the establishment of
any new business in a competitive environment.
As a public company our cost of doing business will increase because of
necessary expenses, including compliance with SEC reporting requirements.
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Because we are becoming a public company, we will incur significant legal,
accounting and other expenses to comply with certain SEC requirements and, in
particular, the Sarbanes-Oxley Act of 2002. Sarbanes-Oxley and other rules
implemented by the SEC, requires management to assess its internal controls over
financial reporting and requires auditors to attest to that assessment. Current
regulations require us to include this assessment and attestation in our annual
report on Form 10-KSB commencing with the annual report for our fiscal year
ending December 31, 2007.
Management will need to invest significant time and energy to stay current
with the public company responsibilities of our business, which will limit their
time they can apply to other tasks associated with operating our business. It is
possible that the additional burden and expense of operating as a public company
will cause us to fail to achieve profitability, which would cause our business
to fail and our investors to lose all their money invested in our stock.
-5-
We estimate that remaining a public company will cost us in excess of
$25,000 annually. This is in addition to all of the other cost of doing
business. It is important that we maintain adequate cash flow not only to
operate our business, but also to pay the cost of remaining public. If we fail
to pay public company costs as such costs are incurred, we will become
delinquent in our reporting obligations and our shares may no longer remain
qualified for quotation on a public market, if one should develop. Further,
investors may lose confidence in the reliability of our financial statements
causing our stock price to decline.
We may need additional capital to fulfill our business strategies, which
may not be available at attractive terms, or at all.
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If we realize the maximum amount from this offering, we expect that we can
complete development of and commence marketing the TradeWarrior program during
the next twelve months. If, however, we realize more than the minimum amount but
less than the maximum amount, we may need to secure additional funds in order to
expand marketing efforts, continue with research and development, add additional
research and marketing staff and acquire additional equipment. If cash flows
from operations are insufficient to fund expected capital needs, or our needs
are greater than anticipated, we will need to raise additional funds possibly
through private or public sales of equity securities or the incurrence of debt.
Additional funding may not be available on favorable terms, or at all. If we
borrow funds, we would likely be obligated to make periodic interest or other
debt service payments and be subject to additional restrictive covenants. If we
raise additional funds through public or private sales of equity securities,
sales may be at prices below the market price of our stock and our stockholders
would suffer significant dilution. Failure to secure additional capital, if
needed, could force us to curtail our growth strategy, reduce or delay capital
expenditures and downsize operations, which would have a material negative
effect on our financial condition.
If we cannot complete development of and commence marketing TradeWarrior,
we may not be able to realize sufficient revenues to continue operations.
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We will use the proceeds from this offering to complete development of and
commence marketing TradeWarrior. Because we have not commenced marketing
TradeWarrior, actual results, if any, from our marketing efforts and planned
operations are difficult to predict and could vary significantly due to factors
we cannot presently control or predict. These factors could affect the size and
viability of the potential market for TradeWarrior, marketing and sales costs,
and the actual demand for the product. Our inability to successfully market
TradeWarrior would likely cause our business to fail and cause investors in our
common stock to lose their entire investment.
There is an uncertain market for TradeWarrior.
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We are a new business and have no marketing history to accurately predict
whether TradeWarrior will be accepted by the financial services industry,
specifically RIAs, state registered advisors and financial planners. Further, we
cannot predict whether there will be sufficient demand for TradeWarrior for us
to achieve and sustain profitability. If ultimately we are unable to achieve a
viable and profitable market for TradeWarrior, our business would most likely
fail and investors in our shares would lose their entire investment.
We expect to encounter several competitive software programs on the market.
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After TradeWarrior is fully developed and we begin marketing the software
to financial service firms and investment advisors, we will encounter
competition from other similar programs presently on the market. We believe our
primary competitors are iRebal, Tamarac Advisor and eAllocator. These competing
software programs and others on the market may offer similar or superior
features to TradeWarrior at a competitive price. Competitors may also be able to
develop new or enhanced software that may be more efficient and less expensive
than TradeWarrior. Further, competitors may develop proprietary positions that
prevent us from successfully commercializing new software that we may develop.
As a result, our software may not be able to compete successfully and new
developments by others
-6-
may render our software obsolete or uneconomical. If we fail to address
competitive developments quickly and effectively, we will not be able to grow
our business or remain a viable entity.
Our business could be adversely affected by economic developments in the
financial services industry and/or the economy in general.
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Once we begin marketing TradeWarrior, we will depend on the perceived
demand for the application of this technology. TradeWarrior focuses on small to
mid-tier registered investment advisory businesses. Therefore, we may be
susceptible to downturns in the financial services industry and the economy in
general. Any significant downturn in the market or in general economic
conditions would likely negatively affect our business and your investment in
our common stock.
If we fail to retain the services of our key personnel our business would
be adversely affected.
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Our future success depends on retaining existing key employees and
executive officers and our ability to hire new key employees, as necessary. The
loss of existing key employees, particularly our Chief Executive Officer, Damon
Deru, or the inability to attract new key employees could limit our ability to
successfully market TradeWarrior. This would be detrimental to future
development of new programs and products and to our overall business.
We may be unable to protect our software or intellectual property
adequately or cost effectively.
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Our future success depends in part on our ability to protect and preserve
proprietary rights related to our software. We currently are in the process of
seeking appropriate proprietary protection for our developing software and
resulting products and trademarks. We have obtained copyright protection on
"TradeWarrior" and plan to continue to secure copyright protection as we make
enhancements and changes to the program. We also have retained legal
representation to conduct a patent search to help determine the patentability of
TradeWarrior. We will assess the possibility of seeking patent protection for
TradeWarrior when that search is completed. Our use of proceeds from this
offering anticipates seeking patent protection if we determine it is feasible
and worth the time, effort and cost. However, there is no guarantee that we can
actually obtain a patent. We will continue to pursue additional protections for
our intellectual property as we develop new software and related products and
enhance existing products. Our inability to obtain appropriate protections for
our intellectual property may allow competitors to enter our markets and produce
or sell the same or similar software and programs. Further, if we do obtain
these protections, we many not be able to prevent third parties from using our
software or other intellectual property rights and technology without our
authorization. Enforcing intellectual property rights could be costly and
time-consuming and could distract management's attention from operating business
matters.
Our intellectual property may infringe on the rights of others, resulting
in costly litigation.
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In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights, particularly the
filing of suits alleging infringement of intellectual property rights. Other
companies or individuals may allege that our software and programs infringe on
their patents or other intellectual property rights. Litigation, particularly in
the area of intellectual property rights, is costly and the outcome is
inherently uncertain. If we become engaged in such litigation and lose, we could
be liable for substantial damages, and be forced to re-engineer one or more of
our products, discontinue the use of the subject matter in question, obtain a
license to use those rights and/or develop non-infringing alternatives. Any of
these results would increase cash expenditures and adversely affect our
financial condition.
Risks Relating to the Offering and Ownership of Our Common Stock
The book value of your investment after the offering will be much lower
than the purchase price, creating immediate dilution to your investment.
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Purchasers of our shares in this offering will suffer substantial and
immediate dilution to the book value of the common stock below the offering
-7-
price. The net tangible book value of our shares on September 30, 2007, was
approximately $0.03 per share. After sales of the minimum 214,290 shares, the
net tangible book value per share will be approximately $0.08, or a loss to
purchasers of approximately $0.62 per share. After sales of the maximum 714,290
shares, the net tangible book value per share will be approximately $0.20, or a
loss to purchasers of approximately $0.50 per share. Also, we presently have
outstanding stock purchase options to purchase a total of 610,000 shares of our
common stock at the exercise price of $0.025 per share. These options are not
exercisable until May 1, 2008 and are subject to certain vesting criteria based
on sales and profitability. If all or a portion of these options are exercised
at $0.025, purchasers in this offering would suffer additional dilution, based
on the number of options exercised.
Failure to sell the minimum number of shares offered will result in the
failure of this offering and your investment would be returned to you.
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We may not be able to sell the minimum number of shares required to close
this offering. Until 214,290 shares are subscribed and paid for, all proceeds
received from this offering will be placed in escrow at Escrow Specialists.
Proceeds from the offering will be released to us only upon satisfaction of this
minimum amount. If the minimum offering is not reached within the prescribed
time, all funds placed in the escrow account will be promptly returned to
investors without accrued interest. Thus, those persons subscribing to our stock
would lose the use of their funds during this period.
There is no public trading market for our common stock and there is no
assurance that a market will develop or be maintained.
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There is not currently, nor has there ever been, a public trading market
for our securities. Following completion of this offering, we intend to request
an authorized market maker to sponsor an application to have our common stock
quoted on the OTC Bulletin Board. We cannot give you any assurance that our
shares will ever be quoted on the Bulletin Board or that an active trading
market will develop or be sustained. If an active trading market for our common
stock does not develop, it would be difficult, if not impossible, for
stockholders to liquidate their shares. Also, any future trading price for our
shares may be highly volatile and subject to significant fluctuations in
response to variations in our quarterly operating results and other factors.
These price fluctuations may adversely affect the liquidity of our shares, as
well as the price that holders may realize for their shares upon any future
sale.
The arbitrary offering price of our shares is not an indication of their
value.
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Our board of directors has arbitrarily determined the initial offering
price of the shares offered hereby, which price does not necessarily relate to
our asset value, earnings, net worth, financial condition or any other
established criteria of value. Also, the offering price bears no relationship to
any market price for the shares subsequent to the offering. The offering price
should not be regarded as an indication of the actual value or future market
price of the common stock.
We do not anticipate paying dividends in the foreseeable future.
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We anticipate that we will retain any future earnings and other cash
resources for future operations and development of our business. Accordingly, we
do not anticipate declaring or paying any cash dividends in the foreseeable
future. Any future payment of cash dividends will be at the discretion of our
board of directors after taking into account many factors, including operating
results, financial condition and capital requirements. Companies that pay
dividends may be viewed as a better investment than corporations that do not,
which could make our stock less attractive to potential investors.
Future sales or the potential for sale of a substantial number of shares of
our common stock, could cause our market value to decline.
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Immediately after this offering, if the maximum amount is fully subscribed,
we will have 2,596,290 shares of our common stock outstanding. Shares sold in
this offering will be freely tradable without restriction or further
registration under the federal securities laws, unless purchased by our
affiliates. None of the 1,882,000 shares of our common stock outstanding
immediately prior to this offering will be subject to a lock-up agreement or
other arrangement precluding future sales by current holders. These shares are
considered restricted securities and may be sold only pursuant to a registration
statement or the availability of an appropriate exemption from registration.
-8-
Sales of a substantial number of these restricted shares in the public markets,
or the perception that these sales may occur, could cause the market price of
our common stock to decline and materially impair our ability to raise capital
through the sale of additional equity securities.
Trading in our shares will be subject to certain "penny stock" regulation.
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If a market for our shares develops, trading will be subject to certain
provisions commonly referred to as the "penny stock rule." A penny stock is
generally defined to be any equity security that has a market price less than
$5.00 per share, subject to certain exceptions. Accordingly, trading in our
stock will be subject to additional sales practice requirements on
broker-dealers that may require a broker dealer to:
o make a special suitability determination for purchasers of penny
stocks;
o receive the purchaser's written consent to the transaction prior to the
purchase; and
o deliver to a prospective purchaser of a penny stock, prior to the first
transaction, a risk disclosure document relating to the penny stock
market.
Consequently, these disclosure requirements may restrict the ability of
broker-dealers to trade and/or maintain a market in our stock and reduce the
level of trading activity in the secondary market. Also, prospective investors
may not want to get involved with the additional administrative requirements.
For as long as our securities are subject to the rules on penny stocks, the
liquidity of our common stock could be significantly limited, which would have a
material adverse effect on the trading of our shares. This lack of liquidity may
also make it more difficult for us to raise capital in the future.
Effective voting control will be held by our current directors and two
principal stockholders who will have the ability to control future election
of directors and the affairs of our company.
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Presently, our directors and two principal stockholders own in the
aggregate approximately 85% of our outstanding common stock. If the maximum
amount of this offering is sold, these persons will own approximately 61% of the
outstanding shares. Accordingly, current directors and principal stockholders
will have the ability to elect all of our directors, who in turn elect all
executive officers, and to control our business and other affairs without regard
to the votes of other stockholders.
Cautionary Statement Concerning Forward-Looking Information
This prospectus contains forward-looking statements relating to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will" "should,"
"expect," "intend," "plan," anticipate," "believe," "estimate," "predict,"
"potential," "continue," or similar terms, variations of such terms or the
negative of such terms. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including those risks
discussed in the "Risk Factors" section beginning on page 5. Although
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment, actual results could differ
materially from those anticipated in such statements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
DILUTION
Dilution represents the difference between the offering price and the net
tangible book value per share immediately after completion of this offering. Net
tangible book value is the amount resulting from subtracting total liabilities
and intangible assets from total assets. Dilution is primarily the result of our
arbitrary determination of the offering price of the shares being offered.
Dilution is also a result of the lower book value of the shares held by our
existing stockholders.
-9-
At March 31, 2007, our net tangible book value was $34,632 or approximately
$.02 per common share, based on 1,822,000 shares outstanding consisting. These
shares were sold to 13 individuals at a cash price of $.025 per share. We are
now offering a minimum of 214,290 shares and a maximum of 714,290 shares at a
price of $0.70 per share.
If 100% of the Shares are Sold
Upon completion of this offering and if all the offered shares are sold, we
will have 2,596,290 shares outstanding. Our post offering pro forma net book
value that gives effect to the receipt of the net proceeds from 100% of the
shares being sold, but does not take into consideration any other changes in net
tangible book value, will be $519,111, or approximately $0.20 per share. The net
tangible book value of the shares held by our existing stockholder will increase
by $0.17 per share, without any additional investment on their part. You will
incur an immediate dilution from $0.70 per share to $0.20 per share.
If the maximum number of shares are sold, the purchasers of the shares will
own approximately 28% of the total number of shares then outstanding, for which
they will have made a cash investment of $500,003, or $0.70 per share. Our
existing stockholders will own approximately 72% of the total number of shares
then outstanding, for which they have made contributions of cash totaling
$75,550 or $0.04 per share.
If 50% of the Shares are Sold
Upon completion of this offering and if 50% of the offered shares are sold,
we will have 2,229,145 shares outstanding. Our post offering pro forma net book
value that gives effect to the receipt of the net proceeds from 50% of the
shares being sold, but does not take into consideration any other changes in net
tangible book value, will be $269,111, or approximately $0.12 per share. The net
tangible book value of the shares held by our existing stockholder will increase
by $0.09 per share, without any additional investment on their part. You will
incur an immediate dilution from $0.70 per share to $0.12 per share.
If 50% of the offered shares are sold, the purchasers of the shares will
own approximately 16% of the total number of shares then outstanding, for which
they will have made a cash investment of $250,001, or $0.70 per share. Our
existing stockholders will own approximately 84% of the total number of shares
then outstanding, for which they have made contributions of cash totaling
$75,550 or an average of $0.04 per share.
If Minimum Number of the Shares are Sold
Upon completion of this offering and if the minimum number of the offered
shares are sold, we will have 2,096,290 shares outstanding. Our post offering
pro forma net book value that gives effect to the receipt of the net proceeds
from the minimum offering, but does not take into consideration any other
changes in net tangible book value, will be $169,111, or approximately $0.08 per
share. The net tangible book value of the shares held by our existing
stockholder will increase by $0.05 per share, without any additional investment
on their part. You will incur an immediate dilution from $0.70 per share to
$0.63 per share.
If the minimum number of the offered shares are sold, the purchasers of the
shares will own approximately 11% of the total number of shares then
outstanding, for which they will have made a cash investment of $150,003, or
$0.70 per share. Our existing stockholders will own approximately 90% of the
total number of shares then outstanding, for which they have made contributions
of cash totaling $75,550 or an average of $0.04 per share.
-10-
The following table compares the differences of your investment in our
shares with the investment of our existing stockholders.
Maximum
Percent of Offering Sold Minimum 50% 100%
Shares sold 214,290 357,145 714,290
=========== =========== ============
Initial public offering price $ 0.70 $ 0.70 $ 0.70
Price paid by original investors $ 0.04 $ 0.04 $ 0.04
Net tangible book value per share
prior to offering $ .03 $ .03 $ .03
Net proceeds to Nine Mile Software * $ 115,003 $ 215,003 $ 465,003
Total shares outstanding 2,096,290 2,239,143 2,596,290
Net tangible book value per share
after the offering $ 0.08 $ 0.12 $ 0.20
Increase to existing stockholders - per share $ 0.05 $ 0.09 $ 0.17
Dilution to new stockholders - per share $ 0.62 $ 0.58 $ 0.50
Percentage dilution to new stockholders 89% 83% 71%
- ---------------------
* Net proceeds after deducting estimated offering expenses. If we do
not sell the minimum 214,290 shares, all invested funds will be
returned to the investors and we will realize $0 proceeds.
In addition to the above dilution calculations, prospective purchasers
should be aware that we have outstanding stock purchase options to purchase a
total of 610,000 shares of our common stock at the exercise price of $0.025 per
share. These options are not exercisable until May 1, 2008 and are subject to
certain vesting criteria based on sales and profitability. We cannot reasonably
predict whether these options will eventually vest or whether any or all of the
options will ever be exercised. However, if all or a portion of these options
are exercised at $0.025, purchasers in this offering would suffer additional
dilution. The 610,000 shares issuable upon exercise of the options would equal
approximately 19% of the 3,206,290 total shares that would be outstanding,
assuming the maximum number of shares are sold in this offering. The amount of
additional dilution would be based on the number of options actually exercised.
THE OFFERING
This is a self-underwritten offering whereby we are offering for sale to
the public a minimum of 214,290 shares of common stock and a maximum of up to
714,290 shares of common stock at $0.70 per share. We will offer the shares
directly to the public through our three directors, Damon Deru (Chief Executive
Officer), Andrew Limpert (Chairman of the Board) and Michael Christensen
(Secretary). No commissions will be paid in connection with the offer and sale
of the shares by us under this prospectus. Our officers and directors will not
purchase shares in this offering with the goal of assisting us to meet the
minimum offering.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public market for our common
stock. Consequently, our board of directors arbitrarily determined the initial
public offering price of $0.70 per share. Factors considered in determining the
offering price, in addition to prevailing market conditions, include an
assessment of our prospects. The offering price does not necessarily bear any
relationship to our current assets, book value, future earnings, net financial
condition or other established criteria of value and should not be regarded as
an indication of the actual value or future market price of the shares. Such
prices are subject to change as a result of market conditions and other factors,
and no assurance can be given that the shares can be resold at the public
offering price.
-11-
USE OF PROCEEDS
We estimate the net proceeds from the sale of shares offered hereby to be
approximately $465,000 if the maximum number is sold and approximately $115,000
if the minimum number is sold. Net proceeds are determined after deducting
estimated offering costs of approximately $35,000. We anticipate that the
estimated net proceeds will be used generally as set forth below, with the
highest priority uses listed first. The table sets forth the minimum, maximum
investments as well as an assumed sale of 50% of the shares. The percentages
have been rounded.
Minimum 50% Maximum
---------------------- --------------------- ------------------------
Shares Percentage Shares Percentage Shares Percentage
Sold Of Proceeds Sold Of Proceeds Sold Of Proceeds
--------- ----------- --------- ------------ --------- ------------
Gross proceeds................... $ 150,003 - $ 250,002 - $ 500,003 -
========= ========= =========
Costs of offering(1)............. 35,000 23 % 35,000 14 % 35,000 7 %
Commercialization of software 50,000 34 % 50,000 20 % 100,000 20 %
Legal costs (patents)............ 15,000 10 % 15,000 6 % 15,000 3 %
Marketing........................ 15,000 10 % 50,000 20 % 93,000 18 %
Supplies......................... 10,000 7 % 12,500 5 % 15,000 3 %
Professional fees (Ongoing)...... 5,000 3 % 20,000 8 % 50,000 10 %
Salaries......................... 15,000 10 % 40,000 16 % 100,000 20 %
Working capital(2)............... 5,000 3 % 27,500 11 % 87,000 19 %
----------- ---------- ---------- ---------- --------- ------------
Total....................... $ 150,003 100 % $ 250,002 100 % $ 500,003 100 %
=========== ========== ========== ========== ========= ============
- -----------------------
(1) Offering costs include accounting and legal fees, filing fees and
printing expenses. (2) Working capital includes office expenses and other
general corporate purposes.
Amounts set forth above merely indicate our best estimates for the proposed
use of proceeds. Actual expenditures may vary substantially from these estimates
depending on the total amount of proceeds realized, economic conditions and the
progress sustained in furthering our business.
We anticipate that, based on current plans and assumptions relating to our
business, the estimated maximum net proceeds will sustain our operating needs
for a period of approximately 18 months following completion of the offering. If
only the minimum amount is realized, we may only be able to sustain operating
needs for 12 months. There can be no assurance, however, that our cash
requirements during this period will not exceed our available resources,
particularly if we realize less than the maximum proceeds. Upon attaining the
minimum offering amount and pending use of the net proceeds, the funds may be
invested in short-term interest-bearing securities or their equivalent.
CAPITALIZATION
The following table sets forth our actual capitalization at September 30,
2007 and as adjusted to give effect to the sale of the common stock offered
hereby and application of the net proceeds of the offering as set forth at "Use
of Proceeds." This table should be read in conjunction with the financial
statements and the notes thereto included elsewhere in this prospectus.
September 30, 2007
-------------------------------
Actual As Adjusted
----------- -----------
Common stock: 50,000,000 shares authorized,
par value of $0.001; 1,882,000 shares issued and outstanding........... $ 1,882 2,596
Additional paid-in capital.................................................. 73,728 572,957
Accumulated (deficit)....................................................... (20,252) (20,252)
Total stockholders' equity ................................................. $ 55,762 $ 555,301
========== ===========
PLAN OF DISTRIBUTION
Self-Underwritten Offering of Shares
We are offering a minimum of 214,290 shares and a maximum of up to 714,290
shares of common stock as a self-underwritten offering. The offering price is
$0.70 per share.
-12-
Until the minimum of 214,290 shares are sold and a minimum of $150,003
realized, all payments for shares will be deposited into an escrow account at
Escrow Specialists, Ogden, Utah. If at least $150,003 is not raised in this
offering, all payments deposited in the escrow account will be promptly refunded
in full, without interest and without any deduction for expenses. If at least
the minimum $150,003 is raised, all funds held in escrow will be released to us
and we will continue to sell shares up to the maximum amount of 714,290 shares.
We cannot assure you that all or any of the shares offered under this
prospectus will be sold. No one has committed to purchase any of the shares
offered. Therefore, we may sell only a nominal amount of shares and receive
minimal proceeds from the offering. We reserve the right to withdraw or cancel
this offering and to accept or reject any subscription in whole or in part, for
any reason or for no reason. Subscriptions will be accepted or rejected
promptly. All monies from rejected subscriptions will be returned by us to the
subscriber, without interest or deductions.
Once the minimum offering is satisfied, the escrowed funds will be
deposited into an account maintained by us and be immediately available to us.
There are no investor protections for the return of subscription funds once
accepted. After achieving the minimum offering, all subsequent proceeds from the
purchase of shares will be deposited into our company account and will be
immediately available to us. After we have sold the minimum amount, certificates
for shares purchased will be issued and distributed by our transfer agent
promptly after a subscription is accepted and "good funds" are received in our
account.
We will offer and sell the shares in this offering solely by our three
directors. No commissions will be paid for sales of the shares nor will any
individual director register as a broker-dealer pursuant to Section 15 of the
Securities Exchange Act of 1934 in reliance upon Rule 3(a)4-1. Rule 3(a)4-1 sets
forth those conditions under which a person associated with an issuer may
participate in the offering of the issuer's securities and not be deemed to be a
broker-dealer. We believe each of our directors satisfies the requirements of
Rule 3(a)4-1 in that:
o No director is subject to a statutory disqualification, as that term is
defined in Section 3(a)(39) of the Act, at the time of his
participation;
o No director is being paid commissions or other remuneration based
either directly or indirectly on transactions in securities;
o No director is, at the time of his participation, an associated person
of a broker- dealer; and
o Each director meets the conditions of Paragraph (a)(4)(ii) of Rule
3(a)4-1 of the Exchange Act, in that he (i) primarily performs, or is
intended primarily to perform at the end of the offering, substantial
duties for or on behalf of the issuer otherwise than in connection with
transactions in securities; (ii) is not a broker or dealer, or an
associated person of a broker or dealer, within the preceding 12
months; and (iii) does not participate in selling and offering of
securities for any issuer more than once every 12 months other than in
reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).
As long as we satisfy all of these conditions, we believe that we will be
able to satisfy the requirements of Rule 3a4-1 of the Exchange Act,
notwithstanding that a portion of the proceeds from this offering will be used
to pay the salaries of our officers.
As our directors will sell the shares being offered pursuant to this
offering, Regulation M prohibits the company and its officers and directors from
certain types of trading activities during the time of distribution of our
securities. Specifically, Regulation M prohibits our officers and directors from
bidding for or purchasing any common stock or attempting to induce any other
person to purchase any common stock, until the distribution of our securities
pursuant to this offering has ended. We intend to advertise and hold investment
meetings in various states where the offering will be registered. We will also
distribute the prospectus to potential investors at the meetings and to our
friends and relatives who are interested in us and a possible investment in the
offering.
Offering Period and Expiration Date
This offering will commence on the effective date of this prospectus and
continue for a period of 90 business days. We may extend the offering for an
additional 90 business days unless the offering is completed or otherwise
terminated by us. In our sole discretion, we have the right to terminate the
offering at any time, even before we have sold the minimum 214,290 shares. We
have not identified any specific events that might trigger our decision to
terminate the offering.
-13-
Procedures for Subscribing
If you decide to subscribe for any shares in this offering, you must
deliver a check or certified funds together with a completed Subscription
Agreement for acceptance or rejection by us. All checks for subscriptions must
be made payable to "Escrow Specialists - Nine Mile Software, Inc., Escrow
Account." Upon receipt, all funds provided as subscriptions will be immediately
deposited into our escrow account and be available for use by us as soon as the
offing minimum of $150,003 has been achieved.
Right to Reject Subscriptions
We maintain the right to accept or reject subscriptions in whole or in
part, for any reason or for no reason. All monies from rejected subscriptions
will be returned immediately to the subscriber, without interest or deductions.
Subscriptions for shares will be accepted or rejected within 48 hours of our
having received them.
Current Market for Our Shares
Our shares are not currently traded. Upon effectiveness of the registration
statement to which this prospectus relates, we intend to look for a market maker
to file on our behalf a Form 211 for the purpose of having our shares approved
for quotation on the OTC Bulletin Board, maintained by the National Association
of Securities Dealers. Regardless of whether our shares are approved for
quotation on the Bulletin Board, a purchaser of our shares may not be able to
resell the shares and our shares will remain subject to certain penny stock
rules.
If our shares are accepted for quotation on the Bulletin Board,
transactions in the shares will be subject to the penny stock rules.
Broker-dealers may be discouraged from effecting transactions in our shares
because they will be considered penny stocks and will be subject to the penny
stock rules. Rules 15g-1 through 15g-9 under the Securities Exchange Act of 1934
impose sales practice and disclosure requirements on NASD brokers-dealers who
make a market in a penny stock.
A penny stock generally includes any non-Nasdaq equity security that has a
market price of less than $5.00 per share. Under these regulations, a
broker-dealer selling a penny stock to anyone other than an established customer
or accredited investor, must make a special suitability determination for the
purchaser and receive the purchaser's written consent to the transaction prior
to sale. An accredited investor is generally defined as an individual with net
worth in excess of $1,000,000 or an annual income exceeding $200,000, or
$300,000 together with his or her spouse. In addition, penny stock regulations
require the broker-dealer to deliver, prior to any transaction involving a penny
stock, a disclosure schedule prepared by the SEC relating to the penny stock
market, unless the broker-dealer or the transaction is otherwise exempt. A
broker-dealer is also required to disclose commissions payable to the
broker-dealer and the registered representative and current quotations for the
securities. Finally, a broker- dealer is required to send monthly statements
disclosing recent price information with respect to the penny stock held in a
customer's account and information with respect to the limited market in penny
stocks.
These additional sales practice and disclosure requirements imposed upon
brokers-dealers will discourage broker-dealers from effecting transactions in
our shares, which will severely limit the market liquidity of the shares and
impede the sale of our shares in the secondary market, assuming one develops.
LEGAL PROCEEDINGS
From time to time, we may be involved in various claims, lawsuits, and
disputes with third parties incidental to the normal operations of the business.
As of the date of this prospectus, we are not aware of any material claims,
lawsuits, disputes with third parties or regulatory proceedings that would have
any material affect on our business.
-14-
DESCRIPTION OF OUR BUSINESS
History
We were organized as a Nevada corporation on November 30, 2006 to engage in
the business of developing and eventually marketing specialized software to be
used in the financial and brokerage industry.
Two of our founding directors, Damon Deru and Andrew Limpert, currently
work for Belsen Getty, LLC, a registered investment advisory firm. In 2003,
Belsen Getty was looking for a portfolio rebalancing solution to help with their
trading needs. It typically would take the firm months to rebalance their nearly
1,000 accounts using Excel spreadsheets and manually entering trades. Belsen
Getty began to look for a more efficient method, however the available software
products on the market were too expensive or didn't have the necessary
flexibility to accomplish the firm's goals.
Mr. Deru, together with his father-in-law, Tom Evans, a database
programmer, began working on a rebalancing program. After three years of
research and experimentation, they were able to develop an acceptable program.
Belsen Getty initially intended to only use the program internally, but as Mr.
Deru discussed trading solutions with other advisors it became apparent to him
that a need existed for a trading and rebalancing tool.
In November 2006, Mr. Deru, together with our two other initial directors,
Andrew Limpert and Michael Christensen, organized Nine Mile Software, Inc. to
raise necessary funds to complete development and market the software that was
TradeWarrior.
TradeWarrior Rebalancing Program
The TradeWarrior software is a portfolio rebalancing and trade generation
program created for financial and investment advisory firms. It is designed to
help advisors quickly and efficiently trade a large number of client accounts to
a "model portfolio". Generally an investment advisor will create a model
portfolio of stocks, bonds & mutual funds depending on the client's risk
tolerance. Over time, however, the client's portfolio becomes out of balance in
relation to the model portfolio as the market fluctuates and advisors change
their desired allocations. For example, if the stock market has a good year and
advances 15% while the bond market drops 5%, the client's portfolio may be
over-weighted in stocks and under-weighted in bonds. It becomes incumbent upon
the advisor to generate trades to bring the accounts back in balance with the
model portfolio.
Below is a simple illustration of what is necessary to rebalance a client's
portfolio to the desired model portfolio:
Client's Portfolio Model Portfolio Trades Required
------------------ --------------- ---------------
25% A Fund 30% A Fund Buy 5% A Fund
50% B Fund 40% B Fund Sell 10% B Fund
25% C Fund 30% C Fund Buy 5% C Fund
Our TradeWarrior software helps facilitate this rebalancing process by
downloading all of an advisor's account positions into the program. The program
then compares what is currently held in the account against the model portfolio
and generates the necessary trade file to be uploaded back to the custodian
where the trades will be executed. We estimate that manually rebalancing a
client's portfolio takes 15 to 20 minutes per client. However, we believe that
TradeWarrior cuts this time down to two or three minutes per client on average.
The program also reduces human error because it runs all the calculations and
generates a trade file, thereby reducing human error from manually entering
trades to the custodian.
Program Features & Benefits
Although the above example gives the appearance of a simple process, in
reality there are many variables and complexities. To address these issues,
TradeWarrior offers certain features that advisors need in such a program.
-15-
Client Level Trading
--------------------
The TradeWarrior program trades accounts on a client level. Typically a
client will have multiple accounts with an advisor. TradeWarrior will apply the
model portfolio across all of a client's accounts versus applying the model
portfolio to each individual account. Thus, generally a client will only have a
certain fund in one account versus the same fund in all accounts. This can
generate tax efficiency and possibly lower trading costs. The program also
facilitates tax sensitive trading. For instance, most advisors like to place
income generating funds, or funds with high capital gains in tax-deferred
accounts such as IRAs. This could reduce a client's tax bill and helps the
advisor add value to the client. Some competitive programs on the market trade
only on an account level. This means that an advisor using an account based
program holds the same funds in all accounts, when some funds are better suited
for a taxable or tax-deferred account. The TradeWarrior program meets the needs
of advisors by trading on a client level.
Taxable vs. Tax-deferred Accounts
---------------------------------
TradeWarrior's ability to facilitate client level trading allows advisors
to place some funds in taxable accounts and some funds in tax-deferred accounts,
which we believe is good financial planning. TradeWarrior facilitates this need
by allowing the advisor to "rank" the funds being used in their model portfolio
by order of their perceived tax efficiency. This flexibility allows the advisor
to use the most advantageous ranking system. This also allows the advisor to
place their highest ranked funds in a client's tax-deferred accounts and his
lowest ranked funds in the taxable accounts. This feature is completely
customizable by the advisor.
Closed Funds
------------
Some firms have funds in their portfolios that are closed to new investors.
This poses a trading problem because the advisor may want to keep their existing
clients in the closed fund, but need to invest their new clients in an alternate
fund. TradeWarrior facilitates this by allowing the advisor to keep closed funds
for existing clients and automatically uses an alternate open fund for new
clients.
"Do Not Trade" Securities
-------------------------
Some firms and clients have certain securities that they do not want to
sell, yet do not fit into an advisors model portfolio. TradeWarrior solves this
problem by creating "do not trade" restrictions. The restriction can be set on a
firm-wide level that will restrict selling that security for all of an advisor's
accounts. The restriction can also be set on the client level that will restrict
selling that security for that particular client. When rebalancing accounts,
TradeWarrior will automatically pull these do not trade securities and allocate
the remaining funds in a client's account. This allows for seamless trading
without the need for the advisor to continually make manual adjustments. It also
could help reduce trading errors from an advisor accidentally selling a security
that was not supposed to be sold.
Business Strategy
Once we begin marketing the TradeWarrior, we plan to expand the software to
incorporate more database functionality. We believe that the most complete
investment advisory software is a single database for all common financial
service client management applications. Currently, a typical advisory firm will
have a minimum of two to three database programs. This can become tedious
because each firm has to enter the same client data multiple times.
CRM Capability
--------------
Most investment advisory firms have a client relationship management (CRM)
database. This database is used to store general client information such as
names, mailing and e-mail addresses and account numbers. It is also used to keep
track of client contacts, such as letters sent, e-mails, and phone calls, client
financial planning information, and prospects and business contacts.
We do not plan to use offering proceeds to develop a CRM product, but we
expect to develop and market the product when we realize sufficient cash flows
from TradeWarrior sales. We believe that adding CRM capability to TradeWarrior
is a potential area of expansion for our business because:
-16-
o Advisors generally look to reduce the number of databases. Under
current conditions, adding TradeWarrior to their business will
increase the number of databases they need to maintain. Elimination of
this hurdle will be a top development priority as we plan to combine
the two databases into one program.
o Adding CRM is the next natural step for the program, although it will
take some time to develop correctly.
o It will help insulate us from competition. TradeWarrior's current
function is rebalancing and trade generation. We believe that
development of more robust product features will distinguish the
TradeWarrior from competitors. Adding CRM capability to the program
will further build tasks the program can accomplish.
o Many advisors may be reluctant to switch CRM database systems because
of the large time commitment required to do such. However, the benefit
of combining database functionality should help overcome this hurdle.
Currently the CRM market is somewhat crowded with three or four main
competitors. These competitors include, but are not limited to, Junxure-I,
Protracker, ACT! for Advisors, Upswing, and Outlook. When developing the CRM
portion TradeWarrior, our research on features will come from both internal
experience and recommendations from external advisory firms. Many CRM programs
are becoming increasingly complex to operate, taking weeks of training to use
the system. We intend to keep our software as simple and intuitive as possible.
We anticipate marketing our software by emphasizing its trading capability, the
ease of use and low price.
Billing Capability
------------------
Currently there are many options for billing clients in the investment
advisory market. Most major CRM & Portfolio Reporting programs come bundled with
billing software incorporated into it. We envision bundling the billing program
with the CRM program when it is released. This is necessary to achieve our
single database vision. The billing program is already under development
internally. Though there are many billing options available to advisors, we plan
to add features such as commission payouts, customizable advisor payouts, and
non-sufficient funds tracking on client accounts. To our knowledge these
features do not exist in the marketplace.
Web-Based Capability
--------------------
We believe that there is a growing trend within the software industry to
move to a web-based model. The major advantage to this trend is the flexibility
of having the client database accessible by the web. Advisors can access their
data wherever they may be as long as they have an Internet connection. This is
useful for advisors that travel, work from home, or visit clients off location.
The second reason is security of the data. It's generally recognized that client
data is more secure on an outside server than it is on an in-house server. Most
software firms have the financial means and the knowledge to secure the data
with multiple levels of security and offsite backups, whereas most small
advisory firms do not. Because of these two reasons, there is growing interest
in the industry to move to a web-based model. In order for us to remain
competitive, we will have to add web-based capability. However, some advisors
remain skeptical of letting somebody else house their data and refuse to switch
to a web-based system. Accordingly, we believe that it is important to offer
both an in-house desktop version and a web-based version so that we can satisfy
both markets.
Portfolio Reporting Capability
------------------------------
Portfolio reporting for most advisory firms includes, but is not limited
to, performance reporting, tax reporting and transaction history reports. Firms
must account for and report every transaction for every client. Additionally,
many advisory firms have data going back ten years or more. This results in a
very complex database and requires considerable programming and industry
knowledge. Reporting must be not only accurate, but it also must be SEC
compliant. To achieve our single database vision we plan to add portfolio
reporting to TradeWarrior either through internal development or possibly
acquiring
-17-
another firm in the marketplace. Current competitors in this space include, but
is not limited to, Advent Axys, FSCI dbCams, Cornerstone Poweradvisor, Schwab
PortfolioCenter, and Black Diamond.
Marketing
To date we have not undertaken any marketing activities, but we intend to
commence marketing TradeWarrior as soon as we finalize development and realize
necessary funds from this offering.
Our target market will be the investment advisory market that includes
RIAs, brokers and other financial consultants. We intend to generate leads from
known advisory lists and registrars, ads in trade publications, trade shows and
website presence at www.ninemilesoftware.com. Our initial marketing strategy is
designed around scheduling a demonstration of our software to the principal
decision makers in a firm. The emphasis of the marketing will focus on the value
and time savings of TradeWarrior. We will also stress the flexibility of the
program and the hands on service approach. Initial marketing efforts will
concentrate on the advisory market in the U.S. because it is the largest
advisory market in the world and because of our familiarity of the marketplace.
After establishing a position in the U.S. market and as necessary funds are
available, we will explore the possibility of expanding into Canada, Europe, and
elsewhere.
Direct Mail/Phone Campaign
--------------------------
Our initial marketing campaign will begin with a direct mail and phone
campaign, which we believe is the most targeted and cost effective approach. We
plan to mail a cover letter and a professionally prepared marketing brochure to
the key decision makers in a firm and then follow up with phone calls whenever
possible. The goal of this process is to invite qualified buyers to sit through
a demonstration of our software. We believe this will give us the best
opportunity to contact decision makers.
Ads in Trade Publications
-------------------------
We also intend to run ads in industry specific trade publications such as
Investment News, Financial Planner, Benefits Selling, Investment Advisor and
Wealth Manager. Initially, we will conduct a short initial test campaign of one
to three months. We plan to initially run smaller and less expensive ads, but
will experiment with different sizes, colors, language and layouts during the
initial run. If the results are not encouraging from these tests, we will
reconsider this approach before investing more marketing resources.
Trade Shows
-----------
We also plan on attending the various trade shows that are usually hosted
by large, national brokerage firms, trade publications and professional
associations. We believe that these shows offer an effective way to meet
face-to-face with investment advisors. The typical cost to participate in these
shows ranges from $5,000 to $20,000 per show. We would also encounter various
additional costs relating to the shows such as marketing materials, travel,
hotels and meals. We anticipate that initially, we will attend trade shows
sparingly due to the cost, but will evaluate the effectiveness after each show.
Internal Sales Force
--------------------
We do not intend to outsource sales, but rather develop an internal sales
force. We believe that an in- house sales force is advantageous because of the
familiarity with the software, knowledge of financial terms and the needs of
investment advisors. We intend to begin to build a sales team as soon as funds
become available from this offering. We will compensate salespersons with a base
salary and incentive compensation commissions. Sales personnel will also be
required to help with service issues, if needed.
Distribution and Payment
The program will be hosted on our website only and physical discs will not
be produced. This will keep costs down because there will be no cost for disc
production and delivery. Everybody who uses the program will have Internet
-18-
access since the program is a tool to generate trade files for online trading.
When a client purchases the program, they will be given a code to download the
program from the website. If they ever needed additional copies, they could
easily go to the website and download the program again. Online purchases will
also be facilitated on the website using a credit card service. We will use a
credit card service company such as Propay, Inc. so we will not house any
critical client data that could become a liability. We will also accept checks
for firms who wish to use this option.
Pricing
We believe that the price of the TradeWarrior software will be one of its
main selling points. We initially plan to offer the software for $3,000 per
year, with a one time conversion and training fee between $1,000 to $3,000,
depending on the amount of data to be converted and number of people to be
trained. We anticipate that the price will compete favorably with our main
competitors such as "iRebal", which currently charges $50,000 per year with a
$10,000 setup fee, and "Tamarac" that charges a minimum $10,000 per year with a
$2,000 setup fee.
We expect that the payback time for customers using our software will be
relatively short. We project that it currently takes an advisor 18 minutes to
rebalance a client using existing means, and that TradeWarrior will take
approximately three minutes per client. That equals a time savings of 15 minutes
per client. Assuming the average advisor's time is worth $100 per hour, an
advisor would achieve payback after rebalancing only 100 clients. If the advisor
has more clients and rebalances more than once a year, then additional savings
would be achieved. We also feel that reduced trading errors and the ability to
trade quickly versus taking weeks and months to complete the trading cycle will
equate to additional savings for users.
Competition
Rebalancing software is a relatively new industry and, accordingly, there
is limited competition. We believe that our TradeWarrior software is competitive
with other software on the market because of comparable functionality at a lower
price. The three primary competitors to TradeWarrior are iRebal, Tamarac Advisor
and eAllocator.
iRebal
------
iRebal has a strong software suite, but we believe its price is prohibitive
for most advisory firms. iRebal targets advisory firms that have over $250
million in assets under management. The iRebal software program was purchased by
TD Ameritrade in January 2007. We anticipate that they plan to stay in the same
price range, but maybe offer a slight discount to TD Ameritrade advisors. Their
program rebalances across accounts at the client level and is designed to help
manage cash flows into and out of the portfolio. iRebal also offers tax lot
trading that is not currently available with TradeWarrior. iRebal's program is
customized to each firm and involves an extensive set-up phase which generally
takes six months. The principal drawback to the iRebal is that it costs $50,000
with a $10,000 initial setup fee. Accordingly, we believe the TradeWarrior can
successfully compete with iRebal because we can market to small and mid-size
firms that cannot afford iRebal.
Tamarac Advisor
---------------
Tamarac Advisor uses optimization software to decide the trades versus a
rules-based system used by both TradeWarrior and iRebal. Optimization software
picks securities to trade automatically depending on some preset parameters
defined by the advisor. Optimization software is not transparent in its decision
making, meaning that an advisor cannot go back in and see why the software
decided on a particular trade or easily change the trades that the program is
recommending. Rules based software trades on preset rules and securities models
defined by the advisor. Rules based software is completely transparent, meaning
that an advisor can easily see why a particular trade was made and can manually
override any transactions in the software. Tamarac is not a transparent based
system, meaning advisors don't have total control over what trades are
generated. Tamarac's product, a web-based model, is priced at $10,000 minimum
with a $2,000 setup fee and will cover up to 1,000 accounts, with additional
fees over that. We believe TradeWarrior will be competitive with Tamarac on
price. We also believe more advisors prefer the rules-based trading approach
versus the optimization approach that Tamarac uses.
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eAllocator
----------
eAllocator is the newest program in the rebalancing software market. From
our review of the software, we believe the eAllocator is limited in scope at its
current stage primarily because it trades only on an account level and not a
client level. It is also a web based program, which can be viewed as a positive
or negative. They are also a rules based system similar to iRebal and
TradeWarrior. They do have cost basis information on the trades, which is a
positive. Being a new program, eAllocator is only compatible with two portfolio
reporting systems (dbCams and Portfolio Center). eAllocator charges $5,000 per
year with a $1,000 set-up fee. eAllocator is our closest competitor it terms of
cost, but we believe we are competitive because of more advanced features as
well as a cost advantage.
Free Custodian Software
-----------------------
Some custodians, such as TD Ameritrade and Fidelity, have developed their
own rebalancing and trading software. Our management has performed tests on
these systems and found them to only have account level and not client level
trading. These systems cannot handle all asset classes such as individual fixed
income. They also do not have rules-based logic, such as "do not trade"
securities, and do not have cost basis information. The primary strength of
these systems is that they are free. We do not believe these custodian developed
programs to be competitive with TradeWarrior because they lack the variety of
capabilities and functions of TradeWarrior.
Intellectual Property
We have retained the law firm Kunzler & Associates in Salt Lake City, Utah
to help us protect our intellectual property. We have obtained copyright
protection on TradeWarrior and plan to continue to update our copyright
protection as we make changes and enhancements to the program. We also plan to
trademark our company and product names along with any logos associated with
those names, if we are able to raise the necessary funds from this offering.
Kunzler & Associates are currently conducting a patent search to help
determine the patentability of TradeWarrior. We will assess the possibility of
seeking patent protection when their search is completed. We have budgeted for
the possibility of seeking patent protection if our board of directors
determines it is feasible and worth the time, effort and cost, however there is
no guarantee that we can actually obtain a patent. We will continue to pursue
additional protections for our intellectual property as we develop new software
and related products and enhance existing products.
Employees
We currently do not have any employees associated with Nine Mile Software,
Inc. other than the directors Damon Deru (CEO), Andrew Limpert (Chairman of the
Board), and Michael Christensen (Secretary). If we are able to close on this
offering, Damon Deru will become a full time employee of the company.
We have also contracted with Dan Agnew of AppVision Consulting in Las
Vegas, Nevada to further develop TradeWarrior to the point of marketability. He
will convert TradeWarrior from Microsoft Access program to a Microsoft .NET
platform database. We will also work with him to add additional features to
TradeWarrior such as cost basis information and one-click rebalancing to quickly
rebalance all clients in the database.
Mr. Agnew has extensive industry experience having worked for Investment
Advisory Network, where he helped write in-house rebalancing and trading
software for them. He was also a developer at Techfi, Inc. which is a portfolio
reporting company that was bought out by Advent, Inc in 2002. He has since
started his own company, AppVision Consulting, doing ad-hoc programming jobs for
investment advisors. He also works for an insurance company in Las Vegas where
he develops software programs for internal use. Mr. Agnew is proficient in
Microsoft Visual Basic.Net, Microsoft ASP, Microsoft ASP.Net and the Microsoft
SQL Server family of products.
If this offering is successful, we plan to add a technical support employee
prior to the launch of TradeWarrior. This employee would primarily be
responsible
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for handling incoming tech support calls and setting up new clients on
TradeWarrior. We also plan to add a salesperson to help market TradeWarrior and
to add additional sales and support staff as business warrants and funds are
available.
Employee Stock Option Plan
In March 2007, our board of directors approved the creation of an employee
stock option plan and authorized 650,000 shares of our common stock to be
reserved for issuance under the plan. The board of directors will finalize and
oversee drafting of the formal plan and establish, at its discretion, the terms
and conditions of the awards to be made under the plan. We have not issued any
options as of the date of this prospectus.
Facilities
Initially we plan to rent office space from Belsen Getty, LLC located at
1245 E. Brickyard Rd #590, Salt Lake City, UT 84106. This arrangement will save
us expenses because we rent the space at a reasonable rate. Also, we do not have
to buy expensive office equipment such as furniture, printers and copiers as are
able to use Belsen Getty's equipment, which is included in the rent. If we are
successful in marketing TradeWarrior and need to expand our facilities, we will
evaluate at that point other office space. In this event, we would most likely
experience a greater cost of doing business due to higher rent cost and
purchasing and/or leasing office equipment.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion of our financial condition and plan of operation
should be read in conjunction with the financial statements and notes thereto
appearing elsewhere in this prospectus.
- --------------------------------------------------------------------------------
Plan of Operation
Since our inception in November 2006, we have primarily engaged in the
development of our TradeWarrior software in anticipation of introducing it to
the investment advisory market during the latter part of 2007. Our plan of
operation for the next 12 months is to first complete commercialization of the
TradeWarrior software. We have engaged Dan Agnew as an independent contractor to
rewrite the program in a more robust programming language and work directly with
Mr. Deru to map out and optimize the logic flows of the program. Management
anticipates this will take between three and nine months to complete. During
this development period, a beta group of 15 to 30 RIA users that we have
previously identified will be using the program and providing real industry
feedback. This is essential to gain perspective and insight into the industry
needs in a real time feedback loop in order to adjust the program to real life
needs of end users.
After a successful beta iteration period, we will prepare to launch the
TradeWarrior product commercially. The goal of management is to launch no later
than fourth quarter of 2007. We believe that if the maximum amount of this
offering is realized, we will not need additional funding for approximately 18
months. If the minimum amount is raised, we may need to shift some of the funds
into marketing and other operational expenses. We anticipate that if only the
minimum offering amount is realized, we will have adequate funds for a period of
12 months, using a lesser amount for personnel and marketing than if the maximum
is raised.
Beyond development of the TradeWarrior, we do not plan to use offering
proceeds for the potential CRM product. We anticipate developing the CRM product
if and when sufficient cash flows are realized from sales of the original
TradeWarrior product.
We do not expect to make major capital expenditure for completing
development and marketing TradeWarrior. We do anticipate an increase in
employees if and when TradeWarrior is completed and marketed successfully. Mr.
Deru will be our lone full time employee upon closing of the offering. Mr. Agnew
will be a part time contract employee through the reprogramming phase of the
development. In preparing to commence marketing TradeWarrior, management will
assess the potential demand for up to two customer service personnel to assist
in responding to new customers' questions, orientation and installation of
programs. This decision will be partially based on whether the offering is
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closed at the maximum ornearer to the minimum level. In either scenario,
management believes we could be generating revenue within the first 12 month of
operation from conclusion of the offering.
Results of Operations and Liquidity and Capital Resources
We have not realized any revenues since inception. For the period from
inception through September 30, 2007, we incurred a net loss of $20,252. For the
three months ended September 30, 2007, we incurred a net loss of $4,489 and
19,250, respectively. The net loss is attributed to general and administrative
expenses and professional fees associated with the preparation and filing with
the SEC of our registration statement.
At September 30, 2007, we had total assets of $57,298 and stockholders'
equity of $55,298, compared to total assets of $44,548 and total stockholders'
equity of $44,548 at December 31, 2006. The increase in total assets and
stockholders' equity at September 30, 2007 is attributed to the additional sale
of common stock during July and August 2007
At December 31, 2006 we had working capital of $44,548 compared to $54,108
at September 30, 2007. We anticipate meeting our working capital needs during
the 2007 fiscal year with the proceeds from this offering. We have no other
agreements or arrangements for additional funding and there can be no assurance
any such funding will be available to us, or if available, such funding will be
on acceptable or favorable terms to us.
Going Concern Consideration
Because we are a new company with limited assets and capital and no current
revenues, we are relying on the proceeds of this offering to launch our software
product. Failure to raise adequate capital and generate adequate sales revenues
could result in having to curtail or cease operations. Additionally, even if we
do raise sufficient capital to support our operating expenses and generate
adequate revenues, there can be no assurances that the revenue will be
sufficient to enable us to develop business to a level where it will generate
profits and cash flows from operations. If we are not successful in realizing at
least the minimum offering amount and, in such event, are unable to secure
adequate alternative financing, there is substantial doubt about our ability to
continue as a going concern
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements.
Recent Accounting Pronouncements
--------------------------------
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value
Measurements." SFAS 157 defines fair value, establishes a framework for
measuring fair value in accordance with U.S. GAAP, and expands disclosures about
fair value measurements. The statement clarifies that the exchange price is the
price in an orderly transaction between market participants to sell an asset or
transfer a liability at the measurement date. The statement emphasizes that fair
value is a market-based measurement and not an entity-specific measurement. It
also establishes a fair value hierarchy used in fair value measurements and
expands the required disclosures of assets and liabilities measured at fair
value. SFAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007. The adoption of this standard is not expected
to have a material impact on our financial condition, results of operation or
liquidity.
In June 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"),
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement No. 109," which prescribes comprehensive guidelines for recognizing,
measuring, presenting and disclosing in the financial statements tax positions
taken or expected to be taken on tax returns. FIN 48, effective for fiscal years
beginning after December 15, 2006, seeks to reduce the diversity in practice
associated with certain aspects of the recognition and measurement related to
accounting for income taxes. We are currently assessing the impact of FIN 48 on
our consolidated financial position and results of operations.
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
This statement requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, if practicable. It permits
for subsequent measurement using either fair value measurement with changes in
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fair value reflected in earnings, or the amortization and impairment
requirements of Statement No. 140. Subsequent measurement of separately
recognized servicing assets and servicing liabilities at fair value, eliminates
the necessity for entities that manage risks inherent in servicing assets and
servicing liabilities with derivatives, to qualify for hedge accounting
treatment and eliminates the characterization of declines in fair value as
impairments or direct write-downs. SFAS No. 156 is effective for an entity's
first fiscal year beginning after September 15, 2006. The adoption of this
statement is not expected to have a material effect on our future reported
financial position or results of operations.
MANAGEMENT
Directors and Executive Officers
The following table sets forth the name, age and position of our present
officers and directors. Each director has been a director of the company since
inception.
Name Age Position
---- --- --------
Damon Deru 27 Chief Executive Officer and Director
Andrew Limpert 37 Chairman of the Board and Director
Michael Christensen 40 Secretary and Director
- --------------------------
All directors serve for one-year terms until their successors are elected
or they are re-elected at the annual stockholders' meeting. Officers hold their
positions at the pleasure of the board of directors, absent any employment
agreement, of which none currently exists or is contemplated.
There is no arrangement, agreement or understanding between any of the
directors or officers and any other person pursuant to which any director or
officer was or is to be selected as a director or officer. Also, there is no
arrangement, agreement or understanding between management and non-management
stockholders under which non-management stockholders may directly or indirectly
participate in or influence the management of our affairs.
The business experience of each of the persons listed above during the past
five years is as follows:
Damon Deru is a graduate of the University of Utah where he received his
B.S. Degree in Finance. He has worked in the financial services industry since
2001 as an investment advisor at Belsen Getty, LLC, a financial services firm
located in Salt Lake City, Utah. In his role at Belsen Getty, Mr. Deru is
responsible for investment research, trading responsibilities for over 1,000
accounts, and managing and maintaining the databases and other information
technology (IT) needs. Mr. Deru has since 2004 served as the financial manager
of Axxess Funding Group, LLC, a private Salt Lake City, Utah firm engaged in
funding secured real estate loans to individuals and commercial real estate
developers. He holds a Series 65 license which qualifies him as an SEC
Registered Investment Advisor.
Andrew Limpert is a graduate from the University of Utah and Westminster
College with degrees of B.S. in Finance and an MBA with an emphasis in Finance.
For the past 15 years he has founded, consulted on and funded numerous
businesses in the private and public arenas. Since 1998, he has been an
investment advisor with Belsen Getty, LLC, providing wealth management direction
and strategic and financial advice for several investment banks. Mr. Limpert has
also been associated with Axxess Funding Group, LLC since 2004 as its marketing
manager. Mr. Limpert also serves as a director of BBM Holdings Inc, a New York
based provider of ship-to-shore internet connectivity technology.
Michael Christensen is a graduate of Weber State University, where he
received an MBA and a B.S. Degree in Accounting. Mr. Christensen has over 15
years of experience in financial and accounting management and administration.
He has experience in the distribution and printing industries, performance
reporting and accounting systems support for an investment advisor. From 2002 to
the present, Mr. Christensen has been on the staff of the Commissioner of
Education for the LDS Church Educational System. Among his responsibilities he
provides financial and budget support to the Board of Trustees for such
institutions as Brigham Young University.
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Each director will devote only a portion of their business time to the
affairs and operations of Nine Mile Software. The approximate percentage of
business time to be devoted to our company by each director is expected to be as
follows:
o Damon Deru -- 75% *
o Andrew Limpert -- 30%
o Michael Christensen -- 20%
- --------------------
* We anticipate that Mr Deru will devote 100% of his business time
to Nine Mile Software business at the completion of the offering.
During the past five years, none of our officers, directors, promoters or
control persons has had any of the following events occur:
o any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer, either at the time of the
bankruptcy or within two years prior to that time;
o any conviction in a criminal proceeding or being subject to a pending
criminal proceeding, excluding traffic violations and other minor offenses;
o being subject to any order, judgment or decree, not substantially
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking business; and
o being found by a court of competent jurisdiction in a civil action, the
SEC or the Commodity Futures Trading Commission to have violated a federal or
state securities or commodities law, and the judgment has not been reversed,
suspended or vacated.
Committees of the Board of Directors
Currently we do not have any standing committees of the board of directors.
Until such time as formal committees are established, our board of directors
will perform some of the functions associated with a nominating committee and a
compensation committee, including reviewing all forms of compensation provided
to our executive officers, directors, consultants and employees, including stock
compensation. The board will also perform the functions of an audit committee
until we establish a formal audit committee.
Relationships and Related Party Transactions
We have not had any material transactions since our inception in 2006 with
any officer, director, nominee for election as director, or any stockholder
owning greater than five percent (5%) of our outstanding shares, nor any member
of the above referenced individuals' immediate family.
Executive Compensation
If we are successful in closing this offering, our CEO Damon Deru will
receive a monthly allowance to be determined by the board of directors. There
are no plans for the other directors to receive a salary at this time. However,
we may issue options under an employee stock option plan as incentives to
achieve certain performance thresholds.
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Stock Purchase Options
On May 1, 2007, we sold and issued a total of 610,000 stock purchase
options exercisable for the purchase of our common stock at $0.025 per share.
The options were issued to the following persons and for the number of shares
indicted next to each persons name.
Damon Deru -- 400,000 shares
Michael Christensen -- 100,000 shares
Thomas Henderson -- 10,000 shares
Tom Evans -- 100,000 shares
Messrs. Deru and Christensen are directors and executive officers. Messrs.
Henderson and Evans are expected to become employees following the completion of
this offering.
The options are not exercisable for a period of one year and are subject to
a vesting schedule. Fifty percent of the options will vest when we first realize
a quarterly profit from operations or when we have sold an aggregate of 80
TradeWarrior programs. The balance of the options will vest when we first record
$1.0 million in total revenues. The options will expire if not exercised within
60 months of issuance, on May 1, 2013.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our shares of common stock by
o each person known by us to be the beneficial owner of more than 5% of
our outstanding shares of common stock;
o each of our directors;
o our executive officers; and
o by all directors and executive officers as a group.
Beneficial ownership is determined in accordance with SEC rules. In
computing the number of shares beneficially owned by a person and the percentage
ownership of that person, shares of common stock subject to options or warrants
held by that person that are currently exercisable or will become exercisable
within 60 days after the date of this prospectus, are deemed outstanding, but
those shares are not deemed outstanding for purposes of computing percentage
ownership of any other person. The number and percentage of shares beneficially
owned are based on 1,822,000 shares of common stock outstanding as of March 31,
2007. Each person named in the table has sole voting and investment power with
respect to all shares shown as beneficially owned by that person, subject to
community property laws, where applicable.
Amount and Nature of Percent of Class
Name and Address(1) Beneficial Ownership Before Offering After Offering(2)
- ------------------- ---------------------- --------------- -----------------
Damon Deru * 200,000 10.6 % 7.7 %
Andrew Limpert * 600,000 31.9 % 23.1 %
Michael Christensen * 30,000 1.6 % 1.2 %
All directors and officers 830,000 44.1 % 32.0 %
a group (3 persons)
Other Beneficial Owners
Scott Deru 120,000 6.4 % 4.6 %
Terry Deru 600,000 31.9 % 23.1 %
Total directors, officers and 1,550,000 82.4 % 59.7 %
Other beneficial owners
- --------------------------
* Director and/or executive officer
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(1) Unless otherwise indicated, the address for each person listed above is
c/o Nine Mile Software, Inc., 1245 East Brickyard Road, Suite 590, Salt
Lake City, Utah 84106.
(2) Based on 2,596,290 shares outstanding after the offering and assumes
the maximum number of offered shares are sold.
DESCRIPTION OF SECURITIES
Our Common Stock
Authorized and Outstanding
--------------------------
We are authorized to issue up to 50 million shares of common stock, par
value $0.001 per share, of which 1,882,000 shares are outstanding as of the date
of this prospectus.
Voting Rights
-------------
Holders of our common stock have the right to cast one vote for each share
of stock in their name on the books of our company, whether represented in
person or by proxy, on all matters submitted to a vote of holders of common
stock, including election of directors. There is no right to cumulative voting
in election of directors. Except where a greater requirement is provided by
statute, by our articles of incorporation or by-laws, the presence, in person or
by proxy duly authorized, of one or more holders of a majority of the
outstanding shares of our common stock constitutes a quorum for the transaction
of business. The vote by the holders of a majority of outstanding shares is
required to effect certain fundamental corporate changes such as liquidation,
merger, or amendment of our articles of incorporation.
Dividends
---------
There are no restrictions in our articles of incorporation or by-laws that
prevent us from declaring dividends. We have not declared any dividends and we
do not plan to declare any dividends in the foreseeable future.
Preemptive Rights
-----------------
Holders of our common stock are not entitled to preemptive rights, and no
redemption or sinking fund provisions are applicable to our common stock. All
outstanding shares of our common stock are, and the shares of common stock sold
in the offering will when issued, be fully paid and non-assessable.
Options
-------
We presently have outstanding stock purchase options to acquire an
aggregate of 610,000 shares of our common stock. The options are held by four
individuals and have an exercise price of $0.025 per share, but are not
exercisable until May 1, 2008. The term of the options is 60 months, but they
are subject to a vesting schedule based on future sales and revenues.
Our board of directors has also authorized an employee stock option plan
and reserved 650,000 shares of our common stock to for issuance under the plan.
The board will draft the definitive plan and will establish the terms and
conditions of awards to be made under the plan. No options under the plan have
been issued.
Transfer Agent
--------------
We have retained as our transfer agent Cottonwood Stock Transfer, 5899
South State Street, Salt Lake City, Utah 84107, telephone (801) 266-7151.
Shares Eligible for Future Sale
If we sell the maximum number of offered shares, we will have outstanding
an aggregate of 2,536,290 shares of common stock. The 714,290 shares to be
issued in the offering will be freely transferable without restriction under the
Securities Act, excluding any shares purchased by a person who is or thereby
becomes an affiliate of Nine Mile Software. All 1,822,000 shares outstanding
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immediately prior to the offering were issued in private transactions without
registration under the Securities Act and are deemed "restricted securities" as
defined by Rule 144 under the Securities Act.
Under Rule 144, a person or persons whose shares are aggregated, who has
satisfied a one-year holding period may sell within any three-month period, that
number of restricted shares that does not exceed the greater of 1% of the then
outstanding common shares, or the average weekly trading volume during the four
calendar weeks prior to such sale. Sales under Rule 144 are also subject to
certain requirements as to the manner of sale, notice and the availability of
current public information about us. Rule 144 permits, under certain
circumstances, the sale of restricted shares by a person who is not an affiliate
and has satisfied a two-year holding period, without regard to the volume or
other resale limitations.
We are unable to predict the effect that sales under Rule 144 may have on
the then prevailing market price of the common stock, if a market for our shares
develops, but such sales may have a substantial depressing effect on such market
price.
All of our officers, directors and 5% or more stockholders hold restricted
shares. However, commencing November 30, 2007, 1,822,000 of these shares will be
one year old and will be eligible for sale under Rule 144, subject to all the
provisions of that Rule and subject to the terms of the escrow arrangement
described below. The remaining 60,000 shares will become eligible for Rule 144
sales commencing on July 31, 2008.At that time shares become eligible for sale
under Rule 144 and assuming the maximum shares offered by this prospectus are
sold, each of these individuals will be eligible to sell into the market up to
25,362 shares during any three-month period.
Escrow
At the direction of the Utah Division of Securities, certain of our
stockholders have agreed to deposit their shares of our common stock in escrow
for a period of up to four years. Three directors, Damon Deru, Andrew Limpert
and Michael Christensen, and two principal stockholders, Terry Deru and Scott
Deru have placed in escrow an aggregate of $1,550,000 shares. No excrowed shares
may be sold, transferred, pledged or otherwise disposed of during the term of
the escrow unless the recipient of the shares agrees to and accepts the terms of
the escrow.
Commencing the third year of the escrow terms, 2 1/2% of the escrowed
shares, pro rate per quarter, may be released to individual stockholders. Also,
in the event our shares become "covered securities" pursuant to Section 18(b)(1)
of the Securities Act, all securities held in escrow will be released. For
purposes of Section 18(b)(1), a covered security is listed on the New York Stock
Exchange or American Stock Exchange, or listed or authorized for listing, on The
Nasdaq National Market System.
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Additionally, Damon deru and Michael Christensen have agreed to deposit in
escrow stock purchase options to purchase an aggregate of 500,000 shares of Nine
Mile common stock. The escrowed options and underlying common shares will be
subject to the same terms and conditions as the escrowed shares of common stock.
The Utah Division of Securities has also directed that, in lieu of posting
a bond in connection with the persons selling the offered shares, we will place
in escrow $25,000. The funds will be held by Escrow Specialists until the
closing of the offering and up to a period of four years.
DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Our bylaws provide that directors, officers and any person who acted at our
request as an officer or director, will be indemnified by us to the fullest
extent authorized by the general corporate laws of Nevada, against all expenses
and liabilities reasonably incurred in connection with services for us or on our
behalf if:
o Such person acted in good faith with a view to our best interests; and
o In the case of a monetary penalty in connection with a criminal or
administrative action or proceeding, such person had reasonable grounds to
believe that his or her conduct was lawful.
Insofar as indemnification for liabilities arising under the Securities Act
might be permitted to directors, officers or persons controlling our company
under the provisions described above, we have been informed that in the opinion
of the SEC such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
CERTAIN MARKET INFORMATION AND MARKET RISKS
There is not presently, nor has there ever been, a public trading market
for our common stock. We expect to request a broker-dealer to make an
application to the NASD to have our shares quoted on the OTC Bulletin Board. The
application will consist of current corporate information, financial statements
and other documents as required by Rule 15c2-11 of the Securities Exchange Act
of 1934.
Inclusion on the OTC Bulletin Board permits price quotations for our shares
to be published by that service. Although we intend to apply to the OTC Bulletin
Board subsequent to the filing of our registration statement, we do not
anticipate our shares to immediately be traded in the public market. Also,
secondary trading of our shares may be subject to certain state imposed
restrictions. Except for the application to the OTC Bulletin Board, there are no
plans, proposals, arrangements or understandings with any person concerning the
development of a trading market in any of our securities. There can be no
assurance that our shares will be accepted for trading on the OTC Bulletin Board
or any other recognized trading market.
Without an active public trading market, you may not be able to liquidate
the shares you purchase in this offering. If a market does develop, the price
for our securities may be highly volatile and may bear no relationship to our
actual financial condition or results of operations. Factors discussed in this
prospectus, including the many risks associated with an investment in our
securities, may have a significant impact on the market price of our common
stock.
-27-
The ability of individual stockholders to trade their shares in a
particular state may be subject to various rules and regulations of that state.
A number of states require that an issuer's securities be registered in their
state or appropriately exempted from registration before the securities are
permitted to trade in that state. Presently, we have no plans to register our
securities in any particular state.
It is unlikely that our securities will be listed on any national or
regional exchange or The Nasdaq Stock Market. Therefore our shares most likely
will be subject to the provisions of Section 15(g) and Rule 15g-9 of the
Exchange Act, commonly referred to as the "penny stock" rule. Section 15(g) sets
forth certain requirements for broker-dealer transactions in penny stocks and
Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule
3a51-1 of the Exchange Act.
The SEC generally defines a penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be a penny stock
unless that security is:
o registered and traded on a national securities exchange meeting specified
criteria set by the SEC;
o authorized for quotation on The Nasdaq Stock Market;
o issued by a registered investment company;
o excluded from the definition on the basis of price (at least $5.00 per
share) or the issuer's net tangible assets; or
o exempted from the definition by the SEC.
Broker-dealers who sell penny stocks to persons other than established
customers and accredited investors are subject to additional sales practice
requirements. An accredited investor is generally defined as a person with
assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000
together with their spouse.
For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must receive
the purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the first transaction, of a risk disclosure
document relating to the penny stock market. A broker-dealer also must disclose
the commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities. Finally, monthly
statements must be sent to clients disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker-dealers to
trade and/or maintain a market in our common stock and may affect the ability of
stockholders to sell their shares.
These requirements may be considered cumbersome by broker-dealers and could
impact the willingness of a particular broker-dealer to make a market in our
shares, or they could affect the value at which our shares trade. Classification
of the shares as penny stocks increases the risk of an investment in our shares.
Dividend Policy
We have never declared or paid cash dividends or made distributions in the
past and do not anticipate paying cash dividends or making distributions in the
foreseeable future. We currently intend to retain and invest future earnings to
finance operations.
LEGAL MATTERS
Leonard E. Neilson, Attorney at Law, 8160 South Highland Drive, Suite 104,
Sandy, Utah 84093, telephone (801) 733-0800, has acted as our legal counsel.
EXPERTS
Our financial statements for the period November 30, 2006 (inception) to
December 31, 2006, appearing in this prospectus and the registration statement,
to which it relates, have been audited by Moore & Associates, Chartered,
independent auditors. Moore & Associates have set forth in their report relating
-28-
to the financial statements, an explanatory paragraph with respect to the
uncertainty surrounding our ability to continue as a going concern. Their report
is given upon their authority as experts in accounting and auditing. We have
prepared the unaudited financial statements for the period ended March 31, 2007.
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or
certified any part of this prospectus, or having given an opinion on the
validity of the securities being registered, or on other legal matters in
connection with the registration or offering of the common shares, was employed
on a contingency basis or had, or is to receive, in connection with the
offering, a substantial interest, directly or indirectly, in Nine Mile Software.
Nor is any such person connected with Nine Mile Software as a promoter,
director, officer or employee.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement that we filed with the
SEC in accordance with its rules and regulations. This prospectus does not
contain all of the information in the registration statement. For further
information regarding both our company and the securities in this offering, we
refer you to the registration statement, including all exhibits and schedules.
You may inspect our registration statement, without charge, at the public
reference facilities of the SEC's Washington, D.C. office, 100 F Street, NE,
Washington, D.C. 20549 and on its Internet site at http://www.sec.gov. You also
may request a copy of the registration statement and these filings by writing or
calling us at 1245 East Brickyard Road, Suite 590, Salt Lake City, Utah 84106,
telephone number (801) 433-2000.
Upon the effectiveness of our registration statement, we will be subject to
the informational requirements of the Securities Exchange Act of 1934 and will
be required to file reports and other information with the SEC. These reports
and other information may also be inspected and copied at the SEC's public
reference facilities or its web site.
-29-
NINE MILE SOFTWARE, INC.
FINANCIAL STATEMENTS
December 31, 2006
C O N T E N T S
Independent Registered Public Accounting Firm........................... F-3
Balance Sheet........................................................... F-4
Statement of Operations................................................. F-5
Statement of Stockholders' Equity....................................... F-6
Statement of Cash Flows................................................. F-8
Notes to the Financial Statements....................................... F-9
F-2
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Nine Mile Software, Inc.
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheets of Nine Mile Software, Inc. as
of December 31, 2006, and the related statements of operations, stockholders'
equity and cash flows from inception on November 30 , 2006 through December 31,
2006. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nine Mile Software, Inc. of
December 31, 2006 and the results of its operations and its cash flows from
inception on November 30, 2006 through December 31, 2006, in conformity with
accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 7 to the
consolidated financial statements, the Company has not yet established an
ongoing source of revenues sufficient to cover its operating costs and allow it
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 7. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Moore & Associates Chartered
- -------------------------------------
Moore & Associates Chartered
Las Vegas, Nevada
March 26, 2007
2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146
(702) 253-7511 Fax (702) 253-7501
- --------------------------------------------------------------------------------
F-3
NINE MILE SOFTWARE
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
December 31,
2006
-------------------
ASSETS
CURRENT ASSETS
Cash in bank $ 44,548
-----------
TOTAL CURRENT ASSETS 44,548
-----------
OTHER ASSETS
Copyright --
-----------
TOTAL ASSETS $ 44,548
===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ --
-----------
TOTAL CURRENT LIABILITIES --
LONG-TERM DEBT --
-----------
TOTAL LIABILITIES --
-----------
STOCKHOLDERS' EQUITY
Common stock: $0.001 par value;
50,000,000 shares authorized,
1,822,000 shares issued and outstanding 1,822
Additional paid in capital 43,728
Accumulated deficit (1,002)
-----------
TOTAL STOCKHOLDERS' EQUITY 44,548
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 44,548
===========
The accompanying notes are an integral part of these financial statements.
F-4
NINE MILE SOFTWARE
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
From Inception
On November 30,
2006 through
December 31,
2006
----------------------
REVENUES $ --
COST OF SALES --
--------------
GROSS MARGIN --
--------------
OPERATING EXPENSES
General and administrative 1,002
--------------
TOTAL OPERATING EXPENSES 1,002
--------------
NET LOSS $ (1,002)
==============
BASIC LOSS PER SHARE $ (0.00)
==============
Weighted Average Shares
Outstanding 1,822,000
==============
The accompanying notes are an integral part of these financial statements.
F-5
NINE MILE SOFTWARE
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Additional Total
Common Stock Paid in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
----------- ----------- ----------- ----------- -----------
Balance November 30, 2006 -- $ -- $ -- $ -- $ --
Shares issued for cash
at $0.025 per share 360,000 360 8,640 -- 9,000
Shares issued for cash
at $0.025 per share 1,462,000 1,462 35,088 -- 36,550
Net loss for the year ended
December 31, 2006 -- -- -- (1,002) (1,002)
----------- ----------- ----------- ----------- -----------
Balance December 31, 2006 1,822,000 $ 1,822 $ 43,728 $ (1,002) $ 44,548
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-6
NINE MILE SOFTWARE
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
From Inception
On November 30,
2006 through
December 31,
2006
---------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,002)
Adjustments to reconcile net income to
net cash provided by operating activities:
Common stock issued for services --
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable --
-----------
NET CASH PROVIDED BY OPERATING ACTIVITES (1,002)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Copyright costs incurred --
-----------
NET CASH (USED) BY INVESTING ACTIVITIES --
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock issued 45,550
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 45,550
-----------
NET INCREASE IN CASH 44,548
CASH - Beginning of period --
-----------
CASH - End of period $ 44,548
===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
CASH PAID FOR:
Interest $ --
===========
Income taxes $ --
===========
NON CASH FINANCING ACTIVITIES: $ --
===========
The accompanying notes are an integral part of these financial statements.
F-7
NINE MILE SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
1. Summary of Significant Accounting Policies
Nature of Business
Nine Mile Software, Inc. (the Company) was incorporated in the State
of Nevada on November 30, 2006. The Company is engaged in the business
of developing and marketing specialized software for brokerage.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Basic (Loss) per Common Share
Basic (loss) per share is calculated by dividing the Company's net
loss applicable to common shareholders by the weighted average number
of common shares during the period. Diluted earnings per share is
calculated by dividing the Company's net income available to common
shareholders by the diluted weighted average number of shares
outstanding during the year. The diluted weighted average number of
shares outstanding is the basic weighted number of shares adjusted for
any potentially dilutive debt or equity. There are no such common
stock equivalents outstanding as of December 31, 2006.
(Loss) Shares Basic (Loss) Per Share
(Numerator) (Denominator) Amount
For the Year Ended $ (1,002) 1,822,000 $ (0.00)
============ ============ ========
Dividends
The Company has not adopted any policy regarding payment of dividends.
No dividends have been paid during any of the periods shown.
Comprehensive Income
The Company has no component of other comprehensive income.
Accordingly, net income equals comprehensive income for the periods
ended December 31, 2006.
Advertising Costs
The Company's policy regarding advertising is to expense advertising
when incurred. The Company had not incurred any advertising expense as
of December 31, 2006.
F-8
NINE MILE SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
1. Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid instruments purchased with a maturity of three months or
less to be cash equivalents to the extent the funds are not being held
for investment purposes.
Income Taxes
The Company provides for income taxes under Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. SFAS No. 109
Requires the use of an asset and liability approach in accounting for
income taxes. Deferred tax assets and liabilities are recorded based on
the differences between the financial statement and tax bases of assets
and liabilities and the tax rates in effect when these differences are
expected to reverse.
SFAS No. 109 requires the reduction of deferred tax assets by a
valuation allowance if, based on the weight of available evidence, it
is more likely than not that some or all of the deferred tax assets
will not be realized.
The provision for income taxes differs from the amounts which would be
provided by applying the statutory federal income tax rate to net loss
before provision for income taxes for the following reasons:
December 31,
2006
------------
Income tax expense at statutory rate $ 391
Valuation allowance (391)
------------
Income tax expense per books $ -0-
============
Net deferred tax assets consist of the following components as of:
December 31,
2006
------------
NOL Carryover $ 391
Valuation allowance (391)
------------
Net deferred tax asset $ -0-
============
Due to the change in ownership provisions of the Tax Reform Act of
1986, net operating loss carry forwards for federal income tax
reporting purposes are subject to annual limitations. Should a change
in ownership occur net operating loss carry forwards may be limited as
to use in future years.
F-9
NINE MILE SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
1. Summary of Significant Accounting Policies (Continued)
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances
that could indicate carrying amounts of long-lived assets may not be
recoverable. When such events or changes in circumstances are present,
the Company assesses the recoverability of long-lived assets by
determining whether the carrying value of such assets will be recovered
through undiscounted expected future cash flows. If the total of the
future cash flows is less than the carrying amount of those assets, the
Company recognizes an impairment loss based on the excess of the
carrying amount over the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or the
fair value less costs to sell.
Accounting Basis
The basis is accounting principles generally accepted in the United
States of America. The Company has adopted an December 31 fiscal year
end.
Stock-based compensation.
As of January 31, 2007, the Company has not issued any share-based
payments to its employees.
The Company adopted SFAS No. 123-R effective January 1, 2006 using the
modified prospective method. Under this transition method, stock
compensation expense includes compensation expense for all stock-based
compensation awards granted on or after January 1, 2006, based on the
grant-date fair value estimated in accordance with the provisions of
SFAS No. 123-R.
Copyright costs
The Company has capitalized the costs of obtaining its copyrights. The
Company will amortize the copyright costs over the estimated life of 10
years upon commencement of sales. The Company expects to begin sales in
2007.
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" which defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. Where
applicable, SFAS No. 157 simplifies and codifies related guidance
within GAAP and does not require any new fair value measurements. SFAS
No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those
fiscal years. Earlier adoption is encouraged. The Company does not
expect the adoption of SFAS No. 157 to have a significant effect on its
financial position or results of operation.
F-10
NINE MILE SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
1. Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continue)
In June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109", which prescribes a
recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
de-recognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. FIN 48 is effective for
fiscal years beginning after December 15, 2006. The Company does not
expect the adoption of FIN 48 to have a material impact on its
financial reporting, and the Company is currently evaluating the
impact, if any, the adoption of FIN 48 will have on its disclosure
requirements.
In March 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 156, "Accounting for
Servicing of Financial Assets--an amendment of FASB Statement No. 140."
This statement requires an entity to recognize a servicing asset or
servicing liability each time it undertakes an obligation to service a
financial asset by entering into a servicing contract in any of the
following situations: a transfer of the servicer's financial assets
that meets the requirements for sale accounting; a transfer of the
servicer's financial assets to a qualifying special-purpose entity in a
guaranteed mortgage securitization in which the transferor retains all
of the resulting securities and classifies them as either
available-for-sale securities or trading securities; or an acquisition
or assumption of an obligation to service a financial asset that does
not relate to financial assets of the servicer or its consolidated
affiliates. The statement also requires all separately recognized
servicing assets and servicing liabilities to be initially measured at
fair value, if practicable, and permits an entity to choose either the
amortization or fair value method for subsequent measurement of each
class of servicing assets and liabilities. The statement further
permits, at its initial adoption, a one-time reclassification of
available for sale securities to trading securities by entities with
recognized servicing rights, without calling into question the
treatment of other available for sale securities under Statement 115,
provided that the available for sale securities are identified in some
manner as offsetting the entity's exposure to changes in fair value of
servicing assets or servicing liabilities that a servicer elects to
subsequently measure at fair value and requires separate presentation
of servicing assets and servicing liabilities subsequently measured at
fair value in the statement of financial position and additional
disclosures for all separately recognized servicing assets and
servicing liabilities. This statement is effective for fiscal years
beginning after September 15, 2006, with early adoption permitted as of
the beginning of an entity's fiscal year. Management believes the
adoption of this statement will have no immediate impact on the
Company's financial condition or results of operations.
F-11
NINE MILE SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
1. Summary of Significant Accounting Policies (Continued)
Revenue Recognition
The Company will determine its revenue recognition policies upon
commencement of principle operations.
2. COMMON STOCK
On November 30, 2006, the Company received $9,000 from its founders for
360,000 shares of its common stock. On December 8, 2008, the Company
completed an unregistered private offering under the Securities Act of
1933, as amended, relying upon the exemption from registration afforded
by Rule 504 of Regulation D promulgated there under. The Company sold
1,462,000 shares of its $0.001 par value common stock at a price of
$0.025 per share for $36,550 in cash.
3. GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principle, which contemplate
continuation of the Company as a going concern. However, the Company
has accumulated deficit of $1,002 as of December 31, 2006. The Company
currently has limited liquidity, and has not completed its efforts to
establish a stabilized source of revenues sufficient to cover operating
costs over an extended period of time.
Management anticipates that the Company will be dependent, for the near
future, on additional investment capital to fund operating expenses The
Company intends to position itself so that it may be able to raise
additional funds through the capital markets. In light of management's
efforts, there are no assurances that the Company will be successful in
this or any of its endeavors or become financially viable and continue
as a going concern.
F-12
NINE MILE SOFTWARE, INC.
FINANCIAL STATEMENTS
December 31, 2006
F-13
C O N T E N T S
Balance Sheet........................................................... F-15
Statement of Operations................................................. F-16
Statement of Stockholders' Equity....................................... F-17
Statement of Cash Flows................................................. F-18
Notes to the Financial Statements....................................... F-19
F-14
NINE MILE SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
September 30, December 31,
2007 2006
----------- -----------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash in bank $ 56,108 $ 44,548
----------- -----------
TOTAL CURRENT ASSETS 56,108 44,548
----------- -----------
OTHER ASSETS
Copyright 1,190 --
----------- -----------
TOTAL ASSETS $ 57,298 $ 44,548
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,000 $ --
----------- -----------
TOTAL CURRENT LIABILITIES 2,000 --
LONG-TERM DEBT -- --
----------- -----------
TOTAL LIABILITIES 2,000 --
----------- -----------
STOCKHOLDERS' EQUITY
Common stock: $0.001 par value;
50,000,000 shares authorized, 1,882,000 and
1,822,000 shares issued and outstanding, respectively 1,882 1,822
Additional paid in capital 73,668 43,728
Accumulated deficit (20,252) (1,002)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 55,298 44,548
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 57,298 $ 44,548
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-15
*****
NINE MILE SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
From Inception
For the Three For the Nine On November 30,
Months Ended Months Ended 2006 through
September 30, September 30, September 30,
2007 2007 2007
----------- ----------- -----------
REVENUES $ -- $ -- $ --
COST OF SALES -- -- --
----------- ----------- -----------
GROSS MARGIN -- -- --
----------- ----------- -----------
OPERATING EXPENSES
General and administrative 4,489 19,250 20,252
----------- ----------- -----------
TOTAL OPERATING EXPENSES 4,489 19,250 20,252
----------- ----------- -----------
NET LOSS $ (4,489) $ (19,250) $ (20,252)
=========== =========== ===========
BASIC LOSS PER SHARE $ (0.00) $ (0.01)
=========== ===========
Weighted Average Shares
Outstanding 1,852,000 1,842,000
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-16
NINE MILE SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
Additional Total
Common Stock Paid in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
----------- ----------- ----------- ----------- -----------
Balance November 30, 2006 -- $ -- $ -- $ -- $ --
Shares issued for cash
at $0.025 per share 360,000 360 8,640 -- 9,000
Shares issued for cash
at $0.025 per share 1,462,000 1,462 35,088 -- 36,550
Net loss for the year ended
December 31, 2006 -- -- -- (1,002) (1,002)
----------- ----------- ----------- ----------- -----------
Balance December 31, 2006 1,822,000 1,822 43,728 (1,002) 44,548
Shares issued for cash
at $0.50 per share 60,000 60 29,940 -- 30,000
Net loss for the nine months
ended September 30, 2007 -- -- -- (19,250) (19,250)
----------- ----------- ----------- ----------- -----------
Balance September 30, 2007 1,882,000 $ 1,882 $ 73,668 $ (20,252) $ 55,298
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-17
NINE MILE SOFTWARE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
From Inception
For the Three For the Nine On November 30,
Months Ended Months Ended 2006 through
September 30, September 30, September 30,
2007 2007 2007
----------- ----------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (4,489) $ (19,250) $ (20,252)
Adjustments to reconcile net income
to net cash provided by operating activities:
Common stock issued for services -- -- --
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable -- 2,000 2,000
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITES (4,489) (17,250) (18,252)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Copyright costs incurred -- (1,190) (1,190)
----------- ----------- -----------
NET CASH (USED) BY INVESTING ACTIVITIES -- (1,190) (1,190)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock issued 30,000 30,000 75,550
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 30,000 30,000 75,550
----------- ----------- -----------
NET INCREASE IN CASH 25,511 11,560 56,108
CASH - Beginning of period 30,597 44,548 --
----------- ----------- -----------
CASH - End of period $ 56,108 $ 56,108 $ 56,108
=========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
CASH PAID FOR:
Interest $ -- $ -- $ --
=========== =========== ===========
Income taxes $ -- $ -- $ --
=========== =========== ===========
NON CASH FINANCING ACTIVITIES: $ -- $ -- $ --
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-18
NINE MILE SOFTWARE, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2007
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at September
30, 2007 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and notes thereto
included in the Company's December 31, 2006 audited financial statements.
The results of operations for the period ended September 30, 2007 are not
necessarily indicative of the operating results for the full years.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal
course of business. The Company has had no revenues and has generated
losses from operations.
In order to continue as a going concern and achieve a profitable level of
operations, the Company will need, among other things, additional capital
resources and to develop a consistent source of revenues. Management's
plans include of investing in and developing all types of businesses
related to the equine industry.
The ability of the Company to continue as a going concern is dependent
upon its ability to successfully accomplish the plan described in the
preceding paragraph and eventually attain profitable operations. The
accompanying financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going
concern.
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NINE MILE SOFTWARE, INC.
Part II
Item 24. Indemnification of Directors and Officers
Our officers and directors are indemnified as provided by the Nevada
Revised Statutes (the "NRS") and our By-laws. Under the NRS, director immunity
from liability to a company or its stockholders for monetary liabilities applies
automatically unless it is specifically limited by a company's articles of
incorporation, which is not the case with our articles of incorporation.
Excepted from that immunity are:
(1) a willful failure to deal fairly with Nine Mile Software or its
stockholders in connection with a matter in which the director has a
material conflict of interest;
(2) a violation of criminal law, unless the director had reasonable cause
to believe that his or her conduct was lawful or no reasonable cause to
believe that his or her conduct was unlawful;
(3) a transaction from which the director derived an improper personal
profit; and
(4) willful misconduct.
Our By-laws provide that we will advance all expenses incurred to any
director who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was our director or officer, or is or was serving at our request as a director
or executive officer of another company, partnership, joint venture, trust or
other enterprise, prior to the final disposition of the proceeding, promptly
following request. This advancement of expenses is to be made upon receipt of an
undertaking by or on behalf of such person to repay said amounts should it be
ultimately determined that the person was not entitled to be indemnified under
our bylaws or otherwise. The board of directors may authorize the corporation to
indemnify and advance expense to any officer, employee, or agent of the
corporation who is not a director to the extent permitted by law.
If a claim for indemnification against such liabilities, other than payment
by us of expenses incurred or paid by one of our directors, officers, or
controlling persons in the successful defense of any action, suit or proceeding,
is asserted by one of our directors, officers, or controlling persons in
connection with the securities being registered, we will, unless in the opinion
of counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification is
against public policy as expressed in the Securities Act, and we will be
governed by the final adjudication of such issue.
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses of the offering, whether or not all shares are sold,
all of which are to be paid by Nine Mile Software out of the proceeds from the
offering, are as follows:
Filing fee under the Securities Act of 1933......... $ 25
Accountants' fees and expenses ..................... 5,000
Legal fees and related expenses..................... 23,000
Blue Sky fees and expenses.......................... 1,000
Printing expenses................................... 2,500
Transfer agent fees................................. 1,500
Miscellaneous....................................... 1,975
-----------
Total.................................. $ 35,000
Item 26. Recent Sales of Unregistered Securities
At the inception of our company in November 2006 we issued a total of
1,822,000 shares of our common stock to 13 persons for cash consideration of
$0.025 per share, or an aggregate of $45,550. In July and August 2007, we issued
an additional 60,000 shares to three persons for cash consideration of $0.50 per
share or $30,000. The shares were issued in a private transaction to persons
familiar with our company and without registration under the Securities Act of
1933 pursuant to the exemption from registration provided by Section 4(2) of the
Securities Act. No form of solicitation was used in the issuance of the shares.
The shares are considered restricted securities and certificates representing
the shares must contain a legend restricting further transfer unless the shares
are first registered or qualify for an exemption.
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On May 1, 2007, we issued 610,000 stock purchase options that can be
exercised for the purchase of our common stock at $0.025 per share. The options
were sold to the following persons for the number of shares and consideration
indicted
Name Exercisable into # of Shares Consideration
---- ---------------------------- -------------
Damon Deru 400,000 shares $ 100
Michael Christensen 100,000 shares $ 25
Thomas Henderson 10,000 shares $ 10
Tom Evans 100,000 shares $ 25
The options are not exercisable for a period of one year and are subject to
a vesting schedule. Fifty percent of the options will vest when we first realize
a quarterly profit from operations or when we have sold an aggregate of 80
TradeWarrior programs. The balance of the options will vest when we first record
$1.0 million in total revenues. The options will expire if not exercised within
60 months of issuance, on May 1, 2013.
The options were issued in a private transaction to two directors, Messrs.
Deru and Christensen, and to Messrs. Henderson and Evans who are expected to
become employees following the completion of this offering. The transaction is
exempt from registration under the Securities Act of 1933 pursuant to the
exemption from registration provided by Section 4(2) of the Securities Act. The
options are considered restricted securities and the underlying shares, if and
when issued, will also be restricted securities.
Item 27. Exhibits
(a) The following exhibits are filed with this Registration Statement:
Exhibit No. Exhibit Description
- ----------- -------------------
3.1* Articles of Incorporation
3.2* By-Laws
4.1* Specimen stock certificate
5.1 Opinion of Leonard E. Neilson, Attorney at Law, regarding
legality of securities being registered
10.1* Escrow Agreement
10.2 Securities Escrow Agreement
10.3 Form 4-5EIA Escrow Agreement
23.1 Consent of Moore & Associates, Chartered, Certified Public
Accountants
23.2 Consent of Leonard E. Neilson, Attorney at Law (included as
part of Exhibit 5.1)
99.1* Subscription Agreement
- --------------
* Included as Exhibits to Form 10-SB filed with SEC on May 17, 2007.
Item 28. Undertakings
We hereby undertake:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement; and
(iii) To include any additional or changed material information on the plan
of distribution.
2. That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
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Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Salt
Lake City, State of Utah, on this 19th day of November 2007.
NINE MILE SOFTWARE, INC.
(REGISTRANT)
By: /S/ DAMON DERU
----------------------------------------------
Damon Deru
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Damon Deru as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
By: /S/ DAMON DERU
--------------------------------------
Damon Deru
Chief Executive Officer and Director
Date: November 19, 2007
By: /S/ ANDREW LIMPERT
--------------------------------------
Andrew Limpert
Chairman of the Board and Director
Date: November 19, 2007
By: /S/ MICHAEL CHRISTENSEN
--------------------------------------
Michael Christensen
Secretary and Director
Date: November 19, 2007
S-4