UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F: 2000 Annual Return
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the fiscal year ended April 30, 2000.
COMMISSION FILE NUMBER: _______________
NET-FORCE SYSTEMS INC.
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(Name of Registrant in its charter)
ANTIGUA and BARBUDA
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(State or other jurisdiction of incorporation or organization)
#P.O. BOX W-645
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THIRD FLOOR DOLLAR BUILDING
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NEVIS STREET
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ST.JOHN'S, ANTIGUA
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(Address of principal executive offices and zip code)
(268) 481-1970
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(Issuer's telephone number)
Securities registered or to be registered under Section 12(b) of the Act.
NONE
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Securities registered or to be registered pursuant to Section 12(g) of the Act.
Securities for which there is a reporting obligation pursuant to
section 15(d) of the Act:
Securities for which there is a reporting obligation pursuant to
section 15(d) of the Act:
Common Stock having a par value of $0.001 per share.
The number of outstanding shares of each of the issuer's classes of capital or
common stock as of April 30, 2000 was 8,500,000 Common Shares.
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of The Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
NET-FORCE SYSTEMS, INC.
Table of Contents
FORWARD LOOKING STATEMENTS................................................1
PART I.......................................................................1
ITEM 1. DESCRIPTION OF BUSINESS..........................................1
I. BUSINESS DEVELOPMENT..........................................1
A. NET-FORCE SYSTEMS INC......................................1
B. NET-FORCE SYSTEMS INC. CORPORATE HISTORY...................1
II. BUSINESS OF THE ISSUER........................................2
III. BUSINESS AND MARKETING STRATEGIES............................4
IV. INDUSTRY OVERVIEW.............................................6
A. Global Gaming Industry.....................................6
B. Internet Entertainment Industry............................9
V. COMPETITION..................................................10
VI. RISKS........................................................11
A. RISKS RELATED TO THE BUSINESS.............................11
B. RISKS RELATED TO THE INDUSTRY.............................13
C. RISKS RELATED TO SECURITIES MARKETS.......................15
VII. REGULATORY BACKGROUND........................................15
VIII. DISCLOSURE...................................................18
ITEM 2. DESCRIPTION OF PROPERTY.........................................18
ITEM 3. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS........................19
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT...............................................................19
ITEM 5. NATURE OF TRADING MARKET........................................20
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING
SECURITY HOLDERS.........................................................20
ITEM 7. TAXATION........................................................21
ITEM 8. SELECTED FINANCIAL DATA.........................................22
ITEM 9. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND PLAN OF OPERATION..........................................23
I. PLAN OF OPERATIONS...........................................23
A. Revenues and Financing....................................23
B. Operations for the Next Twelve Months.....................25
C. Balance Sheet Data........................................25
D. Liquidity and Capital Resources...........................25
E. Material Commitments for Capital Expenditures.............26
F. Material Commitments for Resources........................27
G. Impact of Inflation.......................................27
H. Year 2000 Risks and Compliance............................27
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK.....................................................................27
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.................................................28
Annual Report 2000 Page i
NET-FORCE SYSTEMS, INC.
I. DIRECTORS AND EXECUTIVE OFFICERS.............................28
II. FAMILY RELATIONSHIPS.........................................29
III. INDEMNIFICATION OF DIRECTORS AND OFFICERS....................29
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS..........................30
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT
OR SUBSIDIARIES.................................................30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................30
PART II.....................................................................30
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED......................30
ITEM 15. DEFAULTS UPON SENIOR SECURITIES.................................30
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR
REGISTERED SECURITIES....................................................31
PART III....................................................................32
ITEM 17. FINANCIAL STATEMENTS............................................32
i. NET-FORCE SYSTEMS INC. AUDITED FINANCIAL STATEMENTS,
APRIL 30, 2000...................................................32
ITEM 18. FINANCIAL STATEMENTS............................................48
PART IV INDEX TO EXHIBITS...................................................48
SIGNATURES.........................................................48
Exhibit 2.1 - ARTICLES OF INCORPORATION............................49
Exhibit 2.2 - BY-LAWS..............................................52
Exhibit 2.3 - ARTICLES OF INCORPORATION............................60
Exhibit 2.4 - BY-LAWS..............................................64
Exhibit 6.1 - SOFTWARE LICENSE AGREEMENT...........................71
Exhibit 6.2 - LICENSE..............................................87
Annual Report 2000 Page ii
NET-FORCE SYSTEMS, INC.
FORWARD LOOKING STATEMENTS
Net-Force Systems Inc. (the "Company" or "Net-Force") cautions readers that
certain important factors (including without limitation those set forth in this
Form 20-F) may affect the Company's actual results and could cause such results
to differ materially from any forward-looking statements that may be deemed to
have been made in this Form 20-F annual return, or that are otherwise made by or
on behalf of the Company. For this purpose, any statements contained in the
annual return that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may", "expect", believe", "anticipate", "intend", "could",
"estimate" or "continue" or the negative or other variations of comparable
terminology, are intended to identify forward-looking statements.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
I. BUSINESS DEVELOPMENT
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A. NET-FORCE SYSTEMS INC.
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Net-Force Systems Inc. (the "Company") was incorporated in March 1999 under the
laws of Antigua and Barbuda as Net-Force Systems Inc. The company's corporate
Web site can be viewed on the World Wide Web at www.netforcesystems.com. The
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Company currently licenses, owns, and operates an electronic website offering a
variety of casino gaming options as well as sports wagering, utilizing the
rapidly expanding medium known as the Internet. On August 5, 1999, a wholly
owned subsidiary called Netforce Entertainment Inc. was incorporated under the
laws of Antigua and Barbuda. Netforce Entertainment Inc. acts as the operating
company for all business activities relating to the online gaming operations.
Netforce Entertainment Inc. licenses proprietary Internet casino software and
systems from Starnet Systems Inc., formerly Softec Systems Caribbean Inc.
Starnet Systems Inc. processes and collects revenues generated from the its
Internet gaming Web sites with the assistance of Electronic Financial Services
Caribbean Inc. The Company oversees operates Web sites has implemented a
substantial marketing program with initial advice from Starnet Systems. Starnet
Systems and Electronic Financial Services Caribbean Inc., both headquartered in
Antigua, are wholly owned offshore subsidiaries of Starnet Communications
International Inc. Net-Force Systems Inc., including its subsidiaries, employs 6
full time persons. The majority of these individuals are either involved in
developing and implementing a marketing strategy or are clerical staff.
B. NET-FORCE SYSTEMS INC. CORPORATE HISTORY
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In March 1999, the Company filed its Articles of Incorporation with the Director
of International Business Corporations, Government of Antigua and Barbuda as
Net-Force Systems Inc., in which, among other things, the Board of Directors was
elected as follows: Terry G. Bowering and Douglas N. Bolen. The authorized
capital of the Company consists of 100,000,000 Common Shares and 50,000,000
Preferred Shares. On March 15, 1999, the Directors, by way of Organizational
Consent of the Directors of the Company, accepted the stock subscriptions and
payment for the number of shares issued to the individuals referred to above at
a price of $0.001 per share. In addition, the Directors appointed Terry G.
Bowering to the office of President, CEO and Chairman of the Board, and Douglas
N. Bolen to the office of Secretary.
On March 15, 1999, the Company accepted subscription agreements from six
entities to acquire securities of the Company pursuant to a Rule 504 offering
under Regulation D. The Board authorized the Company to proceed with the sale of
its shares pursuant to the subscriptions received for the sale of 3,000,000
Annual Report 2000 Page 1
NET-FORCE SYSTEMS, INC.
Common Shares at a price of $0.01 per Common Share. Pacific Stock Transfer
Company was appointed as the Transfer Agent of the Common Shares of the Company.
On July 15, 1999, we signed a software licensing agreement with Softec Systems
Caribbean Inc., later known as Starnet Systems Inc., to launch and market a
turnkey Internet Gaming website. On July 15, 1999, we issued a promissory note
to Mountain High Management Inc. to borrow $495,000 at an interest rate of 15%.
August 5, 1999 marked the date of incorporation of Netforce Entertainment Inc.,
wholly owned subsidiary of Net-Force Systems Inc., under the laws of Antigua and
Barbuda. Netforce Entertainment Inc. acts as the operating subsidiary for the
Internet Gaming web site operations.
The Internet Gaming website www.aogaming.com was initially launched in December
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of 1999 for testing purposes. During the months of January to March of 2000, we
experienced some operating and design difficulties with the web-site and gaming
software that prevented customers from depositing funds to play for real-money.
As a result, our marketing expenditures during the period of January to March of
2000 yielded minimal recorded revenues for the period. We re-configured the
software and re-designed the web-site for an official re-launch on April 7,
2000. The casino Web site has functioned effectively in accepting real-money
deposits and wagers and we have recorded consistent customer signups, online
deposits, and revenues from that date forward.
On June 1, 2000, the Board of Directors resolved to authorize the redemption of
the common stock, which was issued pursuant to Rule 504 on or about March 15,
1999 and the same was effected shortly thereafter. On the same date, pursuant to
Regulation S, the Board authorized the issuance of 2,500,000 Units comprised of
one (1) $0.001 par value common stock and one (1) warrant that allows the holder
to purchase one (1) share of the Company's $0.001 par value common stock at an
exercise price of $2.00 per share, to be exercised no later than December 31,
2002 after which the warrants would become null and void. Each Unit was offered
at the price of $0.10. This offering was sold out on or about June 30, 2000.
On September 6, 2000, the balance payable to Starnet Systems Inc. for the
initial fee for the gaming software was waived and adjusted to zero payable as a
result of a compensation agreement to cover early software configuration
difficulties delaying the planned launch date of the casino website in early
2000. See exhibit 10.1, Amendment to Software License Agreement.
On October 26, 2000, Douglas N. Bolen resigned as Director and secretary of the
Company.
II. BUSINESS OF THE ISSUER
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Netforce Entertainment Inc. ("Netforce Entertainment") was incorporated on
August 5, 1999 pursuant to the International Business Corporations Act of
Antigua and Barbuda and is based in Antigua. Netforce Entertainment is a wholly
owned subsidiary of the Company and acts as the operating entity for the
Company's online gaming operations.
Netforce Entertainment Inc. currently owns and maintains an international gaming
Web sites called Antigua Online Gaming located on the World Wide Web at
www.aogaming.com and Netforce Entertainment Inc. has entered into agreements
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with software vendors, including, Starnet Systems for the rights to use Starnet
Systems's proprietary Internet gaming software, and Electronic Financial
Services Caribbean Inc. for the use of its electronic financial conversion
system in relation to the processing of credit cards. Both Starnet Systems Inc.
and Electronic Financial Services Caribbean Inc. are wholly owned offshore
subsidiaries of Starnet Communications International Inc.
Starnet Systems Inc., an Antigua corporation, is in the business of licensing
complete, customized Internet gaming systems to third-party offshore gaming
license holders. Starnet Systems Inc. currently supports in excess of 30 such
licensee's operating worldwide and has endorsed Net-Force Entertainment as a
licensee. Starnet Systems Inc. provides customized software, Web site
development and management on its network, custom database systems to manage
player accounts, and technical support. Netforce Entertainment Inc., has entered
into a software licensing agreement with Starnet Systems Inc. (See Exhibit 6.1)
whereby Starnet Systems Inc. licenses certain Internet casino software to
Netforce Entertainment Inc. and has developed the graphical front end of the
Annual Report 2000 Page 2
NET-FORCE SYSTEMS, INC.
gaming site in exchange for a one-time payment and a percentage of the gross
revenues from our casino Web sites (see Exhibit 6.1). Starnet Systems Inc. hosts
the Company's offshore subsidiary's Web sites. Starnet Systems Inc. also
provides and maintains all hardware necessary for the operation of the Web site
and provides a complete online transaction processing system that allows players
to deposit funds for use of the games. The hardware is maintained in Starnet
Systems Inc.'s offices in Antigua.
To ensure the security of funds transfers over the Internet, Netforce
Entertainment Inc. utilizes the services of Electronic Financial Services
Caribbean Inc., also an Antigua corporation, and wholly-owned subsidiary of
Starnet Communications International Inc., is in the business of securely
converting electronic funds between financial institutions and other companies.
Through alignments with major banks, Electronic Financial Services Caribbean
Inc. processes conversions of worldwide currencies into "e-cash.", utilizing
Starnet Systems Inc.' s proprietary STAR-MX encoding and processing technology
to process tens of thousands of Internet credit card transactions per month.
The Starnet Systems software license will allow us to establish our company as a
leading Internet provider of gaming and sports wagering services. Through our
subsidiary, Netforce Entertainment Inc., we currently offer via the Internet up
to 25 casino style gaming opportunities, including baccarat, Japanese Pachinko,
Chinese Pai Gow Poker, blackjack and video poker as well as a pari-mutuel sports
betting service. The initial term of the software license is one year, renewable
indefinitely unless written notice of termination of the license is delivered to
the licensor at least 45 days prior to the end of any one-year period.
On August 5, 1999, Netforce Entertainment Inc. was approved for and received an
official gaming license from the Antigua and Barbuda Free Trade and Processing
Zone enabling it to legally conduct Virtual Casino and Sports Wagering
Operations (see Exhibit 6.2). Antigua is a jurisdiction that has clearly defined
Internet Gaming legislation in place that licenses and regulates Internet Gaming
Operators. Antigua charges license holders an annual license fee to maintain the
gaming license in good standing.
The International Press recognizes Antigua and Barbuda as the leader in the
regulation of the Internet Gaming industry. At a time when the issue of
regulation is being focused upon by the US media, a reputation of this kind is
of great importance to the Company and most especially to the Internet gambler.
Antigua and Barbuda is an independent country that has deemed Internet Gaming to
be a legitimate and legal business activity protected and supported under
enacted legislation on that Caribbean island nation. Of vital importance, Cable
and Wireless (West Indies) Telecommunications Company has established Antigua as
a primary hub to facilitate the Internet Gaming industry for its regional
network of submarine fiber-optic cables laid across the Atlantic and Caribbean
enabling Antigua to offer diversified high quality Internet connections into
North America.
Net-Force Entertainment Inc. is now fully licensed and regulated by the Antigua
and Barbuda Free Trade & Processing Zone under clearly defined legislation in
that sovereign nation. Netforce Entertainment Inc. has the added distinction of
having acquired the "preferential seal of approval" status from the Antigua and
Barbuda Free Trade and Processing Zone. The Company proudly displays this seal
on the Gaming Web sites with an associated link to the Antigua and Barbuda Free
Trade & Processing Zone Web site so that consumers (players) will be able to
contact the Antigua regulatory authorities with any concerns, complaints and/or
inquiries. This distinction further signifies that the Company has consented to
and successfully undergone intense scrutiny under the legislated due diligence
requirements in Antigua. This mechanism provides the consumer (player) recourse
to register any complaints with the Antigua regulatory body and instills
credibility and confidence in the operator and the industry as a whole in that
particular jurisdiction. Netforce Entertainment`s primary gaming Web site is
appropriately named Antigua Online Gaming, capitalizing on the recognized brand
identity that Antigua has established as a result of becoming the hub of the
Internet Gaming Industry. The Web sites' URL's can be found on the World Wide
Web at www.aogaming.com, www.aocasino.com, and www.aosportsbook.com.
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The Company's policy is to accept subscriptions only from persons over the age
of 18 years and believed to reside in jurisdictions that are not known to
expressly prohibit Internet gaming. To date, the Company's activities have
included the market analysis, Web site development, acquisition of a gaming
license, obtaining the software license from Starnet Systems and developing the
general infrastructure necessary to fulfill our business objectives.
Annual Report 2000 Page 3
NET-FORCE SYSTEMS, INC.
Through the license acquired from Starnet Systems, the Company offers up to 25
virtual casino games and live sportsbook wagering on most of the world's major
sporting events. Included with the software license is the procurement of an
initial Internet gaming license, concept development and design of the Web based
casino(s), all odds-making rules and regulations, complete graphical user
interface with sophisticated visual and sound effects to create a total gaming
experience, real time wagering, complete secure electronic funds transfer,
retention and analysis of all gaming data, including win/loss, game preferences
and monitoring of player activities, administration and complete 24 hour per
day, 7 days per week customer support services, ongoing customization of the Web
sites, the monitoring of all funds flow, the hosting of server software,
customization and server integration, the provision of credit card processing
and other banking services, discussion, liaison and co-operation with testing
agencies, regulatory boards, governing bodies and governments and marketing
consulting.
III. BUSINESS AND MARKETING STRATEGIES
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We intend to capitalize on the evolving opportunities on the Internet by
developing and marketing Internet casinos and sports wagering Web sites. Our
business strategy is designed to promote the Net-Force brands and strive for the
industry leadership position by focusing on gaming, providing an innovative and
easy to use concept, acquiring players on an efficient basis, maximizing player
retention and expanding its player base through multiple marketing channels. We
believe that this strategy enables it to reduce reliance on any one source of
players, maximize brand awareness and lower average player acquisition costs. By
combining expertise in marketing, sophisticated computer software systems and a
focus on excellent customer service, we believe that we will be able to deliver
a unique total entertainment experience to players. With our mandate of
providing a gaming experience with unmatched options and state-of-the-art
technology allowing for three-dimensional displays and a wide gaming selection,
we believe players will be provided with a product unparalleled in the
marketplace. We believe that the Internet is a well suited medium for the
provision of entertainment products and services, especially those related to
casino games.
THE COMPANY'S SERVICES AND PRODUCTS
We have established Web sites, located on the Internet at
www.AntiguaOnlineGaming.com, www.AntiguaOnlineCasino.com and
www.AntiguaSportsbook.com, at which we offer a comprehensive interactive gaming
service including a virtual casino and live online sportsbook wagering service.
Our Web sites are accessible by a minimum hardware configuration consisting of a
486 personal computer with Windows 95 or greater, with 16 Mega Bites RAM, 20
Mega Bites free hard disk space, a 14,400 modem and a direct PPP Internet
connection. All games are provided in a Windows-based, menu driven format with
"point and click" interactivity. Players who wish to conduct gaming operations
at the Web sites are able to subscribe over the Internet by completing an
application appearing on the Web sites. Part of the application process requires
that the subscriber open an account and make a minimum deposit with the company
of $20.
Our Web sites are designed to invite the players to sign up and apply for a
casino and sports book wagering membership. After a player's membership
application is received and reviewed by us, it is either accepted or rejected
based on criterion including, but not limited to, age and geographic location of
the player. The Company's policy is to accept subscriptions only from players
over the age of 18 years and believed to reside in jurisdictions that are not
known to expressly prohibit Internet gaming. Upon acceptance, the approved
player is allowed to download the gaming software over the Internet for
installation on their personal computer. We then provide the player with a
username and password through which the player is able to access the computer
servers on which the software is hosted, over the Internet through their
Internet service provider.
Our Web site allows the player to review all the terms, rules and conditions
applicable to gaming and other uses at the Web sites. All gaming winnings and
losses are debited and credited to the player's account on a real-time basis.
All games are conducted pursuant to house rules and advantages that are
published at the Web sites and which are at least favorable or more favorable
than those used by the major casinos in Las Vegas, Nevada.
On April 7, 2000, we completed the process of designing the interfaces between
the players and the Starnet Systems software for Antigua Online Gaming and
officially launched www.aogaming.com. The gaming opportunities offered at the
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Annual Report 2000 Page 4
NET-FORCE SYSTEMS, INC.
Web site have been designed, in conjunction with Starnet Systems, to evoke
sights and sounds similar to a Las Vegas style casino. Computer graphics present
the "lobby" of the casino, and consist of several menu items that the player can
choose to enter. The Company includes in these menu choices the various gaming
rooms, including black jack, baccarat, slot machines, roulette and video poker.
In addition, the player has the option to use the sports betting option to place
bets on sports events taking place around the world. The players use the Windows
format of commands to carry out the gaming activities. The Web sites also
include special effects such as three-dimensional displays, sounds of cards
shuffling, coins falling from virtual machines and other generally familiar
background casino sounds. In addition to English, we also intend to offer
players the ability to engage in the proposed gaming activities in such
languages as Spanish, German, Japanese and Chinese or in whatever languages
and/or ethnic identities as we deem practical in order to facilitate worldwide
expansion of its player base. Currently, the casino web-sites and gaming
software are only offered in English.
We intend to conduct continuing development of its Web sites (and such
additional Web sites as we deem appropriate with varying themes and languages)
and the products offered thereat in accordance with its players' demonstrated
preferences, demographics, and the evolution of new technologies. Our goal is to
utilize the Starnet Systems' software and such other software, which may be
identified by us as useful to it in order to provide the players with gaming
services, which is competitive, innovative and easy to use in the Internet
gaming industry.
MARKETING
We have implemented a comprehensive marketing program in conjunction with its
software provider, Starnet Systems. We believe that international markets will
represent a significant portion of our revenues in the future since many of the
products and services intended to be offered are not currently available in
these markets.
We have established offices in St. John's, Antigua, British West Indies at the
third floor, Dollar Building, Nevis Street, P.O. Box W-645, St. John's, Antigua,
British West Indies. From these offices, we conduct all administrative
operations and marketing activities for Netforce Entertainment Inc. Marketing
activities include promoting the Internet casino gaming and sports wagering Web
sites. The marketing program incorporates the following strategies to target its
players:
Strategic Alliances with Major Content and Service Providers. We intend to seek
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to enter into strategic alliances with major Internet content and service
providers in order to enhance its new customer acquisition efforts, increase
purchases by current customers and expand brand recognition. We are striving to
enter into alliances with Internet search engines services that provide for us
to be the premier online gaming provider on certain of their sites with the
exclusive right to place gaming banner advertisements and integrated links to
the Net-Force web sites on certain gaming-related Web pages. To date, no such
alliances have been identified or entered into by us.
Off-Line and Traditional Advertising. We have initiated an aggressive marketing
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campaign using a combination of on-line and traditional advertising. We
advertise on the Web sites of major Internet content and service providers, and
targeted gaming-related Web sites. Our traditional advertising efforts include
print advertising in major magazines and gaming related publications. To date,
we have advertised in the past in the following publication: High Roller
Magazine - Spring 2000 Special Issue.
Direct Marketing. We utilize direct marketing techniques to target new and
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existing players with communications and promotions by sending a personalized
e-mail newsletters to registered players. These e-mail communications include
internal bonus credit promotions, informational content. We also utilize this
medium to solicit customer feedback on our service.
Banner Advertisements. Banner advertisements are rectangular graphical/text
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images that can be positioned in various strategic places on Web pages and
search engines on the Internet. When a potential player clicks on the banner
advertisement, the player's Web Browser points the player to the advertiser's
home page. We pay for such banner advertisements on a variety of Web pages and
search engines, and participates in a banner exchange program. We also intend to
enter into agreements with Webmasters in which Webmasters agree to place our
banner advertisements on their Web pages in exchange for a commission for each
unique player who clicks through banners to our web sites' home page or for a
percentage of the profits generated by the Webmaster. Some of the sites where we
Annual Report 2000 Page 5
NET-FORCE SYSTEMS, INC.
have placed advertising banners to date include www.rgtonline.com,
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www.gambling.net, www.tsn.com, www.football.com, and www.basketball.com.
- ---------------- ----------- ---------------- ------------------
Submissions to Search Engines. Potential players often learn about Web sites on
- ------------------------------
the Internet from listings on search engines. We have submitted our URL's and a
brief description of our Internet casino gaming and sports wagering Web sites to
various search engines so that the our information is available to potential
players who use search engines to locate Internet gaming sites. Examples of the
search engines that the company's URLs have been submitted to include:
www.yahoo.com, www.altavista.com, www.lycos.com, www.dmoz.com,
- ------------- ----------------- ------------- ------------
www.directhit.com, www.euroseek.com, www.google.com, www.excite.com,
- ----------------- ---------------- -------------- --------------
www.looksmart.com, www.hotbot.com. The websites have also been submitted to the
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following Internet casino directories including but not limited to
www.gamblingregistry.com, www.casinolocator.com, www.casinoseek.com,
- ------------------------ --------------------- ------------------
www.gambling.com, and www.top100casinos.com. These Directories are centralized
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search tools for locating Web sites in a particular industry.
Player Incentive Programs. In order to attract new players, we have instituted
- --------------------------
an initial balance credit promotion. This program is designed to attract new
players by offering a credit to new player accounts in amounts based on a
percentage of the amount of the initial deposit by the player. To attract repeat
players to the Web site, we have instituted periodic prizes, cash draws, special
jack pots, competitions and/or a frequent player program where the player would
be rewarded based on the frequency and dollar amount of play.
Development of Related Web Sites. We may design related Web sites such as a site
- ---------------------------------
containing tips on how to play certain casino games or a site providing
interesting gaming news. The company intends to design, develop, and promote a
sports information portal site which will feature up-to-date sports information
content including scores, statistics, casino and sports news headlines, and odds
on all of the world's major sporting events. This site will be linked to the
online sportsbook to generate traffic with the intention of enhancing revenues.
Banner advertisements would then be placed on all pages of each related Web site
to attract players to the our Internet gaming and sports wagering Web sites.
Distribution of a CD-ROM. We have, in conjunction with Starnet Systems, produced
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a CD-ROM on which the Company's casino games are contained. When an individual
obtains the CD-ROM, they are able to play all the Company's casino games without
the necessity of wagering real money. This promotional idea is intended to give
the Company the ability to distribute, to a large number and variety of
potential players, quality examples of the services and products offered at its
Web sites. Once a potential player plays the games offered for fun, we hope that
the potential player makes an application on the Company's Web sites and
eventually plays the same games for money. We intend to distribute such CD-ROM's
by direct mail-outs, insertions in magazines, distributions through Internet
Service Providers to their subscribers and distributions at tradeshows.
IV. INDUSTRY OVERVIEW
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A. Global Gaming Industry
----------------------
UNITED STATES OF AMERICA
In the U.S., Americans legally wager over $500 billion per year. This level of
legalized gambling is the result of rapid expansion in the industry over the
past decade. Since 1988, the number of states allowing casino gambling has
increased from two, Nevada and New Jersey, to 24, (including those with Native
American Casinos) with all but three states having some form of legalized
gambling. U.S. casino revenues were projected to be about $24 billion in 1998,
reflecting an expected 6% growth from 1997, lower than the double-digit
increases earlier in the decade. Gambling in the U.S. has many forms, including
casinos, horse and dog racing, government run lotteries, riverboat casinos and
Jai Alai, all of which are highly regulated. At the present time, there is no
existing regulation of Internet gambling in the U.S. In July 1998, the U.S.
Congress defeated a proposed bill (the "Kyl" bill) that would prohibit gambling
over the Internet, but exempted certain forms, such as horse and dog racing, and
lotteries. In May 1999, the Kyl bill was re-introduced, in a less stringent form
(See VII "Government Regulation").
Annual Report 2000 Page 6
NET-FORCE SYSTEMS, INC.
Geographic growth prospects have remained relatively flat over the past two
years. With more people employed and improved economic conditions in various
parts of the United States, states and localities have fewer incentives to
encourage gaming development as a prospective source of taxes, tourism and jobs.
Additionally, economic downturns in Asia, and to a lesser extent, South America,
have led to significant decreases in "high roller" traffic to North American
gaming locations, such as Las Vegas and Atlantic City. In response to the
downturn in travelers from this section of its revenue base, the traditional
gaming companies in Las Vegas have continued their rapid growth campaign to
transform the city from a gaming community into a world wide family resort
destination. In recent months Las Vegas in particular has made strides in trying
to upgrade the entertainment it offers. Major U.S. casino destinations are
competing more for resort and vacation population than the average gambling
client.
Pari-mutuel and Lottery Gaming
Pari-mutuel wagering is currently authorized in 43 states in the United States,
all provinces in Canada, and approximately 100 other countries around the world.
The 117 racetracks in 35 states in North America have revenues of $4 billion
dollars from their racing alone.
In its most recent report on the worldwide lottery industry, International
Gaming and Wagering Business reported that total global lottery sales were up
significantly (4.5%) in 1998, compared to 1997. For most lotteries, the increase
stemmed from a combination of increased sales and the rebounding of local
currencies versus the U.S. dollar. In general, most states' lotteries
experienced record setting years, in most cases erasing 1997's declines.
(International Gaming & Wagering Business, Vol. 20, Num. 5, May 1999). The only
region reporting continued declines from 1997 was Asia, which is attributable to
the continued weakness in Asian currencies. However, some smaller Asian markets,
such as China's Social Welfare Lottery saw sales virtually double, in most cases
due to the increase in instant ticket sales. Instant tickets and spiel games
(those which Net-Force intends to deliver to its players) once again experienced
an increase in market share. Lotto and spiel games exceeded 40% of all lottery
sales in 1998. International sales of state lotteries in jurisdictions such as
Liechtenstein and South Africa begin promotions revolving around the millennium.
While little focus has been made on the Internet market, the AILE/Intertoto
recently addressed the issue at a conference held in Washington, D.C. (See
www.aile.com). The conference members agreed that a wait and see strategy was
the best approach at the present time, with the AILE/Intertoto maintaining a
watchful eye to ensure that the Internet industry develop an international legal
framework that mirrors that of the current successful system of national laws.
INTERNATIONAL GAMING MARKETS
Gaming outside of the U.S. and Canada is a mixture of active markets, large and
small resort destinations, and strictly regulated, often state-run, operations.
Asia and South Africa provide the most dynamic markets and opportunities for
growth, with Latin America and the Caribbean also active in the gaming industry.
Western Europe consists mostly of mature, state-controlled markets. The
following is an overview of selected foreign markets:
EUROPE
There were a total of 531 European Casinos generating gross Revenues of
$5,336,971,600 US as of February 1999 (International Gaming and Wagering
Business, 1999 European Casino Report, February 1999).
The European Commission last reviewed the issue of gambling in 1991 and found no
need for EU-wide regulation. This position has remained in accordance with the
many of the EU's member states' positions that gaming, including Internet
gambling, should remain an issue for the sovereign state (Cabot, Anthony, THE
INTERNET GAMBLING REPORT III, "European Overview," by Steven Philippsohn, (Trace
Publications, Las Vegas), 1999, P.211-216). Among the member nations of the EU,
views on Internet gambling vary widely. Some states are slowly accepting the
idea of interactive gaming. For example, the Dutch government recently allowed
telephone betting, while certain European states, notably Finland and Sweden,
are allowing providers to offer Internet gambling, but only to their own
respective residents. Conversely, the German position on Internet gaming
reflects the view taken on traditional forms of gambling. That is, that games of
chance are morally corrupting and should only be allowed in connection with
charitable purposes.
Annual Report 2000 Page 7
NET-FORCE SYSTEMS, INC.
Countries such as France, Italy, Spain, England and Portugal are merely
monitoring Internet gambling development to see if it becomes a problem. This is
consistent with these nations' actions toward e-commerce in general, of which,
they have no immediate plans to introduce new legislation.
Prospects for growth in Europe are brightest in Scandinavia, Spain and Eastern
Europe. Sweden is setting up its regulatory system for its new casino market,
and state-sanctioned monopolies are being challenged in Norway and Finland in
the casino and machine markets. In Spain, a more relaxed regulatory climate is
emerging, and new casino operations are coming on line. Three Spanish firms
dominate this market: Cirsa/Unidesa, Recreativos Franco and Sega.
Eastern Europe continues to grow and refine is regulatory structures.
Uncertainty and prohibitions against foreign investment, however, hamper
participation by international operators. Casino Austria is a major player,
although its activity there is shrinking.
The path which European regulation of Internet gambling is taking is more akin
to that which the Australian states are taking. The cultural differences between
European countries, however, are more marked than between the Australian states.
The consequent diversity in attitudes to gambling may slow down the process
(Steven Philippsohn, Internet Gambling, European Overview," 1998, p.215).
ASIA
Large capital projects and debt levels in Australia left many casinos highly
exposed to the Asian economic crisis. Stung by a US$150 million drop in revenues
from international players, stock prices for Australia's leading casinos are now
a fraction of previous levels. The domestic market remains solid, however, and
long-term prospects are optimistic. The next year should bring the beginning of
a recovery and a more realistic assessment of the international market.
Despite the economic crisis, the casino industry in the Philippines is
experiencing the strongest expansion in the region, with three new operations
having opened in recent years and another scheduled to open in 1999. The Manila
market is being reorganized and partially privatized, providing the opportunity
for change and market growth. Three publicly traded companies are active in the
Philippines casino market: Starwood Hotels & Resorts, Malaysian-based Metroplex
and Manila-based Belle Bay Corporation. Taiwan offers the most interesting
potential for change. The government took another step toward legislation in
1998 by commissioning a report recommending a tightly regulated industry of
casinos in recreational areas. Foreign investment would be permitted up to 40%.
AFRICA AND THE MIDDLE EAST
The most significant activity is occurring at opposite ends of the region. South
Africa is progressing with the transformation of its casino industry and the
opening of a route market for gaming devices. The current estimated size of this
market is US$1.5 billion, with the majority of revenues coming from casino
gaming operations (US$935 million). The Middle East market is growing in
response to the closing of gaming operations in Turkey and limited choices in
Northern Europe. With gaming illegal in Israel, further growth in border areas
is expected. New operations are expected to grow quickly in Palestine-controlled
Jericho to support public demand. In Egypt, across the border from Eilat, major
project development is underway in the Taba Heights. Additional operations have
also opened recently in North Africa, with more than the planning stages.
LATIN AMERICA
Gaming in Latin America remains decentralized and difficult for operators.
However, for patient companies with deep pockets, the market potential in the
region is large, especially in countries such as Argentina and Peru. The level
of optimism has been raised in Brazil and Mexico for gaming legislation in the
near future. Legislation in Brazil, the most populous country in Latin America,
would affect regional markets that target Brazilian players, notable Argentina,
Uruguay and Paraguay.
Sodak Gaming, International Thunderbird, Starwood, Hilton Hotels (Conrad
International), IGT and also very active, especially Recreativos Franco,
Cirsa/Unidesa and Leisure & Gaming.
Annual Report 2000 Page 8
NET-FORCE SYSTEMS, INC.
CARIBBEAN
Although dominated by small hotel and resort-based casino operations, gaming in
the Caribbean is expanding into new areas, as well as growing in established
markets. The Bahamas offers the most substantial casinos in the region, followed
by Puerto Rico and Aruba. Casinos can also be found on other islands such as St.
Maarten, Curacao, and Antigua.
B. Internet Entertainment Industry
-------------------------------
Internet gambling offers people the opportunity to play virtual sports,
horseracing, slot machines and other casino games without the inconvenience of
leaving their home. While Internet gambling provides some amount of competition
for existing casinos, it is not a substantial threat to the traditional gaming
industry. The social aspect of gaming - the primary reason for the
transformation of the Las Vegas gaming market into a destination leisure market,
cannot be replicated in the artificial environment of the Internet. Most
visitors to casinos are motivated by the ambiance of the casinos, not just the
opportunity to gamble. Small markets, however, may incur negative impacts
associated with Internet gambling as these markets have been established
themselves as leisure destinations.
The popularity of gaming has transcended beyond the physical boundaries of the
casinos to the borderless and unregulated realm of the Internet. Gambling Web
sites, offering computer users the opportunity to wager on such games as bingo,
sports and horse wagering, poker and roulette, are beginning to thrive on the
Internet. To participate as one of these Web sites, the player needs only to set
up an account, typically supplying credit card information, wire transfers or
E-cash. With a click of the mouse, the player is now able to gamble. Losses are
typically deducted from the players' credit cards or established credit line,
and winnings, upon the request of the player, can be electronically transferred
or mailed to the person. Modern technology has eliminated the physical
requirement of visiting a casino or racetrack before engaging in such games as
slot machines, black jack, roulette and thoroughbred or harness racing. With
Internet gambling, patrons need not leave the comfort of their homes or offices.
ESTIMATED WORLD-WIDE INTERNET GAMBLING REVENUES ($ MILLIONS)
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
# of home users (in millions) 46 81 121 145 159
% users conducting online transactions 15% 18% 21% 24% 27%
Potential Internet Gamblers (in millions) 6.9 14.5 25.4 34.8 43
Per-capita expenditure $ 146 $ 154 $ 155 $ 160 $ 160
Potential Internet gambling market $1,009 $2,182 $3,933 $5,555 $7,080
Estimated actual Internet Gambling revenues $ 300 $ 651 $ 811 $1,520 $2,330
Penetration rate 30% 30% 21% 27% 33%
- -------------------------------------------------------------------------------------------------
Source: Christian/Cummings Associates, Inc.
The popularity of Internet gambling is increasing as illustrated by the growth
of gaming-related Web sites. Currently, more than 500 gambling websites are
offered on the Internet, which we estimate are owned by approximately 100
operators. With the current licensing of gambling Web sites by foreign
governments and increased usage of Internet services, this market will continue
to grow. It is estimated that almost 300 million people will use the Internet by
the year 2000. With casino gambling garnering public acceptance as a form of
entertainment and Internet usage increasing, every personal home computer now
has the capacity to become a "cybercasino" Current market size estimates for
Internet gambling are $650 million in 1999, growing to more than $10.0 billion
by 2002 according to Datamonitor.
Annual Report 2000 Page 9
NET-FORCE SYSTEMS, INC.
INTERNATIONAL OUTLOOK ON INTERNET GAMING
While the U.S. is debating whether to prohibit Internet gaming or create
legislation to severely regulate the industry, other countries are viewing it as
a revenue generator. Most Internet gambling Web sites are located in the
Caribbean and South America, along with other sites in Australia, South Africa,
the Netherlands and New Zealand. The Caribbean governments charge Internet
"casino" operators up to $100,000 annually for a license and require operators
to post bonds. In Antigua, the government requires the employment of local
residents and payment of education taxes. The governments of Liechtenstein and
Finland operate their national lottery via the Internet.
Australia and New Zealand have recently decided to legalize Internet gambling,
choosing to regulate and tax the activity as opposed to banning it. The State of
Queensland in Australia passed a law in March 1998, licensing cybercasinos and
sports betting operations. The other Australian states are expected to pass
similar laws. The states of Australia maintain pro-gambling environments -
Australians spend more than $40 billion a year gambling, or $2,000 per person
per year on average ("Aussies Love Their Gambling." LAS VEGAS REVIEW-JOURNAL,
Rohan Sullivan, March 9, 1998). Placing bets over the phone is legal in
Australia, making legalization of Internet gambling a less controversial issue.
To regulate the industry, the governments propose the establishment of gambling
service providers who will check the identity and address of the gambler.
Winnings will then be taxed accordingly, with the taxes forwarded at the
appropriate rate for the state in which the service provider is based.
On May 15, 1998, European gambling regulators from 18 European countries signed
a recommendation on good practices for Internet gambling services. In the
non-binding statement, the countries agreed that European countries should be
free to regulate Internet gambling services. In addition, the countries should
ensure that Internet gambling is not used for money laundering or under-aged
gambling.
V. COMPETITION
-----------
The online commerce market is new, rapidly evolving and intensely competitive,
and the Company expects that competition will further intensify in the future.
Barriers to entry are minimal, and current and new competitors can launch new
sites at a relatively low cost. In a search of the Internet by the Company,
there were over 300 online gaming sites as of January 1999. In addition, the
broader gaming industry is intensely competitive.
We intend to compete with a variety of companies, including (i) online vendors
of gaming and gaming related products, (ii) online service providers which offer
gaming products directly or cooperation with other retailers, (iii) traditional
providers of gaming products, including specialty gaming providers, and (iv)
other retailers that offer gaming products. Many of these traditional providers
also support dedicated Web sites, which may compete directly with us.
We believe that the principal competitive factors in its online market are brand
recognition, selection, variety of value-added services, ease of use, site
content, quality of service, technical expertise and product availability. Many
of our potential competitors have longer operating histories, larger customer
bases, greater brand recognition and significantly greater financial, marketing
and other resources than we do. We are aware that certain of its proposed
competitors have and may continue to adopt more aggressive pricing or marketing
policies and devote substantially more resources to Web site and systems
development than the Company. Increased competition may result in reduced
operating margins, loss of market share and a diminished brand franchise.
There can be no assurance that we will be able to compete successfully against
intended and future competitors. New technologies and the expansion of existing
technologies may increase the competitive pressures on our operations. There can
be no assurance of the economic success of any marketing effort by us since the
revenues derived from the Internet casino gaming and sports wagering Web sites
depend primarily upon the site's acceptance by the international public, which
cannot be predicted with certainty. To be ultimately successful, we will be
faced with the challenge of marketing its gaming Web sites to a variety of
foreign cultures. Our Web sites will compete for consumer acceptance with
similar Web sites hosted by other companies. As a result, the success of our
marketing efforts is dependent not only on the quality and acceptance of the our
virtual casino games and on-line sports wagering Web sites, but also on the
acceptance of other competing virtual casino games and Web sites offered in the
marketplace during the same time period.
Annual Report 2000 Page 10
NET-FORCE SYSTEMS, INC.
VI. RISKS
-----
A. RISKS RELATED TO THE BUSINESS
-----------------------------
Limited Operating History. The Company was recently formed and has limited
- --------------------------
operating history. Since incorporation, the Company has expended resources on
technology, license fees, Web site development, hiring of personnel and startup
costs. As a result, losses were incurred since incorporation and management
expects to experience operating losses and negative cash flow for the
foreseeable future. Management anticipates losses will continue to increase from
current levels because the Company expects to incur additional costs and
expenses related to: brand development, marketing and other promotional
activities; the addition of customer service personnel; the continued
development of the Web sites; the expansion of service offerings and Web site
content; and development of relationships with strategic business partners. The
recorded loss for the fiscal period-ended April 30, 2000 was $397,366.
Cumulative Losses from inception at March 1, 1999 to date at April 30, 2000 are
$403,859.
There can be no assurance at this time that we will operate profitably or that
we will have adequate working capital to meet our obligations as they become
due. We believe that our success will depend in large part on its ability to (i)
offer aesthetic, interesting and diverse casino-style games on its Web sites, as
well as sports wagering, (ii) attract players and provide them with outstanding
service, (iii) instill consumer confidence, and (iv) achieve name recognition.
Accordingly, we intend to invest in Web site development, technology and
operating infrastructure, as well as marketing and promotion. As a result, we
expect to incur operating losses in the initial stages of its business and for
the foreseeable future.
No Assurance of Profitability. Our business is speculative and dependent upon
- ------------------------------
the acceptance of our Web sites and the effectiveness of our marketing program.
Our only assets will be the offshore Internet gaming Web sites, our gaming
software license, some administrative office furniture and equipment and the
revenues derived from the Web sites. There can be no assurance that our Internet
gaming and sports wagering Web sites will be successful or result in revenue or
profit. There is no assurance that we will earn significant revenues or that
investors will not lose their entire investment.
Failure to Respond to Change. If we face material delays in introducing new
- -----------------------------
services, products and enhancements, customers may forego the use of the our
services and use those of competitors. To remain competitive, we must continue
to enhance and improve the functionality and features of the Web sites. The
Internet and the online commerce industry are rapidly changing. If competitors
introduce new products and services, or if new industry standards and practices
emerge, the existing Web sites, technology and systems may become obsolete. To
develop the Web sites and technology entails significant technical and business
risks. We may use new technologies ineffectively or may fail to adapt the
technology to meet customer requirements or emerging industry standards.
Intellectual Property Claims. Other parties may assert infringement or unfair
- -----------------------------
competition claims against us. We cannot predict whether they will do so, or
whether any future assertions or prosecutions will harm the business. If we are
forced to defend against any infringement claims, whether they are with or
without merit or are determined in our favor, then we may face costly
litigation, diversion of technical and management personnel, or product shipment
delays. Further, the outcome of a dispute may be that management would need to
develop non-infringing technology or enter into royalty or licensing agreements.
Royalty or licensing agreements, if required, may be unavailable on terms
acceptable to management, or at all.
Reliance on Trademarks and Copyrights. We intend to take steps to protect
- --------------------------------------
proprietary rights which steps may be inadequate. Management regards copyrights,
service marks, trademarks, trade secrets and similar intellectual property as
critical to its success. We intend to rely heavily on trademark and copyright
law, trade secret protection and confidentiality or license agreements with our
employees, customers, partners and others to protect proprietary rights.
Effective trademark, service mark, copyright and trade secret protection may not
be available in every country in which we intend to provide its services.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear. Therefore,
we may be unable to prevent third parties from acquiring domain names that are
similar to, infringe upon or otherwise decrease the value of intended trademarks
and other proprietary rights.
Annual Report 2000 Page 11
NET-FORCE SYSTEMS, INC.
Risks Inherent in a New Industry. Both the Internet and Internet-based casinos
- ---------------------------------
are relatively new industries. The market for Internet and Sports wagering has
only recently begun to develop, is rapidly evolving and is characterized by an
increasing number of market entrants. As is typical in the case of a new and
rapidly evolving industry, demand and market acceptance for recently introduced
services are subject to a high level of uncertainty. There can be no assurance
that gaming and wagering on the Internet will become widespread, or that our Web
sites will become widely used. If the market fails to develop, develops more
slowly than expected or becomes saturated with competitors or if our services do
not achieve market acceptance, our business, operating results, and the
financial condition will be materially adversely affected.
Online Commerce Risks - Reliance on Starnet Systems. Concerns over the security
- ----------------------------------------------------
of transactions conducted on the Internet and other on-line services as well as
user's desires for privacy may also inhibit the growth of gaming and wagering on
the Internet. The activities of the Company are expected to involve the storage
and transmission of proprietary information, such as credit card numbers and
other confidential information. Any such security breaches could damage the our
reputation and expose us to a risk of loss, litigation and possible liability.
There can be no assurance that our security measures will prevent security
breaches or that failure to prevent such security breaches will not have a
material adverse effect on our business, financial condition and results of
operations. We are dependent on Starnet Systems for our software and the hosting
of our casino Web sites. Businesses on the Internet are subject to the risk of
credit card fraud and other types of theft and fraud perpetrated by "hackers"
and on-line thieves. Credit card companies may hold merchants fully responsible
for any fraudulent purchases made when the signature cannot be verified.
Although credit card companies and others are in the process of developing
anti-theft and anti-fraud protections, and while we will continually monitor
this problem, at the present time the risk from such activities could have a
material adverse effect on our operations. A party who is able to circumvent our
security measures could misappropriate confidential information or cause
interruptions in our operations. We may be required to expend significant
capital and other resources to protect against such security breaches or to
alleviate problems caused by such breaches. If a compromise of the our security
were to occur, or if Starnet Systems's software or Web site hosting fails, there
could be a material adverse effect on our business, financial condition and the
results of operations.
Lack of Consumer Confidence. Concerns that a virtual casino's odds can be easily
- ----------------------------
and arbitrarily manipulated may deter customers from using our Web sites. There
can be no assurance that we will be able to instill customer confidence in and
alleviate negative perceptions about Internet gaming. If our efforts are
unsuccessful, it could have a material adverse effect on our business, financial
condition and the results of operations.
Competition. The market for our Internet gaming and sports wagering services is
- ------------
intensely competitive. Our principal competitors include other on-line Internet
casinos. These competitors have longer operating histories, greater name
recognition, larger installed customer bases, and substantially greater
financial, technical and marketing resources than we do. We believe that the
principal factors affecting competition in its proposed market include name
recognition, ability to develop aesthetic and diverse casino-style games,
customer confidence, ability to respond to changing customer needs, and ease of
use. Other than technical expertise and the limited time available to enter the
market, there are no significant proprietary or other barriers of entry that
could keep potential competitors from developing or acquiring similar tools and
providing competing services in the our proposed market. Our ability to compete
successfully in the on-line casino and sports wagering business will depend in
large part on its ability to attract new players and respond effectively to
continuing technological changes by developing more sophisticated on-line casino
games. There can be no assurance that we will be able to compete successfully in
the future, or that future competition will not have a material adverse effect
on our business, operating results and financial condition.
Potential for indebtedness. There is no assurance that we will not incur debt in
- ---------------------------
the future, that it will have sufficient funds to repay its indebtedness or that
we will not default on its debt, jeopardizing its business viability.
Furthermore, we may not be able to borrow or raise additional capital in the
future to meet our operational needs or to otherwise provide the capital
necessary to conduct its business. As of the period ended April 30, 2001, the
total outstanding long term indebtedness is $550,690. Total liabilities are
$589,871 comprised of $39,181 in current liabilities.
Annual Report 2000 Page 12
NET-FORCE SYSTEMS, INC.
No Assurance that Dividends Will be Paid. We do not currently anticipate
- -----------------------------------------
declaring and paying dividends to our shareholders in the near future. It is our
intention to apply net earnings, if any, in the foreseeable future to increasing
its capital base and marketing. Prospective investors seeking or needing
dividend income or liquidity should therefore not purchase the Shares. There can
be no assurance that we will ever have sufficient earnings to declare and pay
dividends to the holders of Net-Force Systems Inc. Common Stock, and in any
event, a decision to declare and pay dividends is at the sole discretion of the
Board of Directors.
Government Regulation. The wagering and casino industry is subject to extensive
- ----------------------
government regulation and licensing requirements in certain jurisdictions of the
world. Legal uncertainties may preclude us from offering our Internet gaming
services in certain jurisdictions. Some jurisdictions may impose restrictions,
licensing requirements or prohibitions on Internet wagering. At present, we do
not anticipate any such restrictions, prohibitions or licensing requirements in
its target markets but no assurance can be made that such restrictions,
prohibitions or licensing requirements will not arise which would materially
adversely effect our business, operating results, and financial condition.
Dependence on Key Personnel. Our success is substantially dependent on the
- ----------------------------
performance of its executive officers and key employees. Given our early stage
of development in the Internet gaming business, we are dependent on our ability
to retain and motivate high quality personnel. Although we believe we will be
able to attract, retain and motivate qualified personnel for such purposes, an
inability to do so could materially adversely affect our ability to market,
sell, and enhance its services. The loss of one or more of our employees or our
inability to hire and retain other qualified employees could have a material
adverse effect on our operations.
Uninsured Losses. There is no assurance that we will not incur uninsured
- -----------------
liabilities and losses as a result of the conduct of its proposed business. We
plan to maintain comprehensive liability and property insurance at customary
levels. We will also evaluate the availability and cost of business interruption
insurance. However, should uninsured losses occur, our shareholders could lose
their invested capital.
Liabilities. We may have liabilities to affiliated or unaffiliated lenders. As
- ------------
at April 30, 2000, total liabilities are $589,871. Current Liabilities are
$39,181. Liabilities to affiliated lenders consist of a shareholders loan
outstanding in the amount of $2,024. This shareholder loan was made from Geneva
Overseas Holdings Ltd., of which Terry G. Bowering, Chairman and Chief Executive
Officer of Net-Force Systems Inc., is beneficial owner. Current liabilities to
unaffiliated lenders (accounts payable) consist of accrued wages payable,
International telephone and Internet service payable to Cable and Wireless
Telecommunications Company, and fees payable to Pannell Kerr Forster for
accounting and auditing services. The aforementioned liabilities represent fixed
costs which would be required to be paid regardless of the level of our business
operations' profitability. There is no assurance that we will be able to pay all
of our liabilities. Furthermore, we are always subject to the risk of litigation
from players, employees, suppliers or others because of the nature of its
business. Litigation could cause us to incur substantial expenses and, if cases
are lost, judgments and awards could add to our cost of operations.
B. RISKS RELATED TO THE INDUSTRY
-----------------------------
Dependence on Increasing use of the Internet. Our future revenues substantially
- ---------------------------------------------
depend upon the increased acceptance and use of the Internet and other online
services as a medium of commerce. Rapid growth in the use of the Internet, the
Web and online services is a recent phenomenon. As a result, acceptance and use
may not continue to develop at historical rates and a sufficiently broad base of
customers may not adopt, and/or continue to use, the Internet and other online
services as a medium of commerce and entertainment. Demand and market acceptance
for recently introduced services and products over the Internet are subject to a
high level of uncertainty and there exist few proven services and products.
In addition, the Internet may not be accepted as a viable long-term commercial
marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and performance improvements. If the Internet continues to
experience significant expansion in the number of users, frequency of use or
bandwidth requirements, the infrastructure for the Internet may be unable to
support the demands placed upon it. In addition, the Internet could lose its
viability as a commercial medium due to delays in the development or adoption of
new standards and protocols required to handle increased levels of Internet
Annual Report 2000 Page 13
NET-FORCE SYSTEMS, INC.
activity, or due to increased governmental regulation. Changes in, or
insufficient availability of, telecommunications services to support the
Internet also could result in slower response times and adversely affect usage
of the Internet generally.
Our business, financial condition and results of operations would be seriously
harmed if use of the Internet, the Web and other online services does not
continue to increase or increases more slowly than expected; the infrastructure
for the Internet, the Web and other online services does not effectively support
expansion that may occur; the Internet, the Web and other online services do not
become a viable commercial marketplace; or traffic to the Web sites decreases or
fails to increase as expected or if management spends more than was expected to
attract visitors to the Web sites.
Inability to Acquire Domain Names. We may be unable to acquire or maintain Web
- ----------------------------------
domain names relating to the brand in the jurisdictions in which management may
conduct business. As a result, we may be unable to prevent third parties from
acquiring and using domain names relating to our brand, which could damage its
brand and reputation and take customers away from its Web sites. We currently
hold the domain names "www.AntiguaOnlineGaming.com",
"www.AntiguaOnlineCasino.com" and "www.AntiguaSportsbook.com" and may seek to
acquire additional domain names. Governmental agencies and their designees
generally regulate the acquisition and maintenance of domain names. The
regulation of domain names in the United States and in foreign countries is
subject to change in the near future. The changes in the United States are
expected to include a transition from the current system to a system that is
controlled by a non-profit corporation and the creation of additional top-level
domains. Governing bodies may establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names.
Requirements to Change Manner of Business. The adoption or modification of laws
- ------------------------------------------
or regulations relating to the Internet could adversely affect the manner in
which we propose to conduct our business. In addition, the growth and
development of the market for online gaming may lead to more stringent consumer
protection laws, both in the United States and abroad, that may impose
additional burdens on our operations. Laws and regulations directly applicable
to communications or commerce over the Internet are becoming more prevalent. The
United States Congress recently enacted Internet laws regarding children's
privacy, copyrights, taxation and the transmission of sexually explicit
material. The European Union recently enacted its own privacy regulations. Laws
regulating the Internet, however, remain largely unsettled, even in areas where
there has been some legislative action. It may take years to determine whether
and how existing laws such as those governing intellectual property, privacy,
libel, and taxation apply to the Internet.
In order to comply with new or existing laws regulating online commerce, we may
need to modify the manner in which it proposes to do business, which may result
in additional expenses. For instance, we may need to spend time and money
revising the process by which it intends to accept players' wagers to ensure
that each wager complies with applicable laws. We may need to hire additional
personnel to monitor compliance with applicable laws. We may also need to modify
its software to further protect players' personal information.
Liability for Content. As a publisher of online content, we face potential
- ----------------------
liability for defamation, negligence, copyright, patent or trademark
infringement, or other claims based on the nature and content of materials that
it publishes or distributes. If we face liability, then our reputation and our
business may suffer. In the past, plaintiffs have brought these types of claims
and sometimes successfully litigated them against online companies. In addition,
we could be exposed to liability with respect to the unauthorized duplication of
content or unauthorized use of other parties' proprietary technology. Although
we intend to carry general liability insurance, such insurance may not cover
claims of these types. We cannot be certain that we will be able to obtain
insurance to cover the claims on reasonable terms or that it will be adequate to
indemnify us for all liability that may be imposed. Any imposition of liability
that is not covered by our insurance or is in excess of insurance coverage could
harm our business.
The Imposition of Taxes. If one or more states or any foreign country
- ------------------------
successfully asserts that we should collect taxes on the winnings earned by
players, the financial position and results of operations could be harmed. If we
become obligated to collect taxes, it will need to update its system that
processes wagers and winnings to calculate the appropriate sales tax for each
player and to remit the collected sales to the appropriate authorities. These
upgrades will increase operating expenses. In addition, players may be
discouraged from utilizing our Web sites because they have to pay tax, causing
net sales to decrease. As a result, we may be adversely materially affected.
Annual Report 2000 Page 14
NET-FORCE SYSTEMS, INC.
C. RISKS RELATED TO SECURITIES MARKETS
-----------------------------------
Inability to meet Future Capital Requirements. We cannot be certain that
- ----------------------------------------------
additional financing will be available on favorable terms when required, or at
all. If we raise additional funds through the issuance of equity, equity-related
or debt securities, the securities may have rights, preferences or privileges
senior to those of the rights of the common stock and those stockholders may
experience additional dilution. We expect to require substantial working capital
to fund the business. Since inception, we have experienced negative cash flow
from operations and we expect to experience significant negative cash flow from
operations for the foreseeable future. We currently anticipate that the private
financing done to date, together with expected revenues, will be sufficient to
meet anticipated needs for working capital and capital expenditures through at
least the next 12 months. After that period, we may need to raise additional
funds.
Volatility of the Common Stock. The market price for our common stock is likely
- -------------------------------
to be highly volatile and subject to wide fluctuations in response to factors
including the following, some of which are beyond our control: actual or
anticipated variations in the quarterly operating results; announcements of
technological innovations or new services by the us or our competitors; changes
in financial estimates by securities analysts; conditions or trends in the
Internet and/or online commerce or gaming industries; changes in the economic
performance and/or market valuations of other Internet, online gaming companies;
announcements by management or competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments; additions or
departures of key personnel; release of lock-up or other transfer restrictions
on the outstanding shares of common stock or sales of additional shares of
common stock; and potential litigation. In addition, the stock market has from
time to time experienced extreme price and volume fluctuations. These broad
market fluctuations may adversely affect the market price of our common stock.
Securities Class Action Lawsuit. In the past, following periods of volatility in
- --------------------------------
the market price of their stock, many companies have been the subject of
securities class action litigation. If we are sued in a securities class action,
it could result in substantial costs and a diversion of management's attention
and resources and would cause the stock price to fall.
VII. REGULATORY BACKGROUND
---------------------
In July 1998, the U.S. Senate voted to largely prohibit gambling on the
Internet. Under the legislation, operators of illegal Internet gambling sites
could be sentenced to up to four years in jail and fined up to $20,000. Gamblers
who illegally bet via the Internet could receive a jail sentence of up to three
months and a fine of either $500 or three time the amount of the bet. Some
Internet-based "fantasy" or "rotisserie" sports league activities would be
exempt from the ban. However, in August 1998 the U.S. House of Representatives
overwhelmingly voted down the legislation. On March 23, 1999, Senator Kyl
(R-Arz.) submitted Bill S.692 to the Senate for consideration. If passed, this
Bill would also serve to effectively outlaw gambling on the Internet in the
United States. As of November 1, 1999 the Senate had not voted on this
legislation, in part because it is effectively the same legislation that was
voted down in 1998, and even if it should pass a Senate vote it is highly
questionable as to whether the House of Representatives would view it any
differently from the last Internet gaming bill.
The move on the part of the federal government to ban Internet gambling is a
departure from gambling policy. The federal government has typically left the
issue up to the authority of the state governments, resulting in a wide range of
attitudes towards gambling. Most states allow some type of gambling whether it
be full casinos, card rooms, pari-mutuel tracks or state-operated lotteries.
While passage of the act is possible, in one form or another, practical
enforcement of the law is a separate matter. The Internet is a global
information and communications medium operating without boundaries. Due to the
global nature of this medium, no regulatory agency has control over the content
of information accessible to users. The inability of governments to regulate
materials it deems offensive or illegal results in political and social
frustration. Measures to remove offensive materials, such as those classified as
Annual Report 2000 Page 15
NET-FORCE SYSTEMS, INC.
containing adult content, have been unsuccessful to date. The same enforcement
problems will be encountered with gambling sites. These are three avenues
through which law enforcement officials may attack the problem: the gaming Web
site, the ISP or the user. The enforcement of anti-Internet gambling laws
through each of the avenues presents interesting social and technological
problems.
CURRENT INTERNET GAMBLING ENFORCEMENT
Senator Jon Kyl released his proposed "Internet Gambling Prohibition Act" on
March 29, 1999. A similar Bill, also proposed by Senator Kyl failed to pass in
1998. The current proposed 28 page Bill attempts to ban most forms of gambling
on the Internet within U.S. borders. There is no prohibition on individuals
placing bets over the Internet, only "gambling businesses" within U.S.
jurisdictions, are proposed to be prohibited. The Bill also outlines several
exemptions, some of which are summarized as follows:
o The basic proposal states that it shall be unlawful for a person
engaged in a gambling business to use the Internet or any other
interactive computer service to place, receive, or otherwise make a
bet or wager. The significance of the language is that it does not
make the act of gambling on the Internet illegal. Only gambling
businesses based and operated within U.S. borders are affected.
o Penalties for violators include fines in the amount of total wagers
received, or $20,000, whichever is greater, and jail time of up to
four years. This is significant and, if approved, will limit new
participants.
o Several types of gambling are exempted. These include fantasy sports
leagues, state lotteries, and certain activities under the Interstate
Horseracing Act of 1978.
o The Bill provides that interactive computer service providers shall
have no liability for hosting illegal gambling businesses.
In its proposed format, compliance will be difficult to enforce. Therefore, it
seems the Bill will not pass in its current format. Some selected reasons are
summarized below as extracted from "Staking VALUE Early", The RESOURCE
INDICATOR, Vol. 3, No. 15:
o In testimony before the House Justice subcommittee on crime, Deputy
Assistant Attorney General Kevin V. DiGregory said the long reach of
the Internet into people's homes and across international borders
creates special obstacles for law enforcement. It simply will not be
enforceable.
o Prosecutors will not be able to indict operators of virtual casinos
who are based legally in other countries. The Deputy Assistant
Attorney General supported this claim by stating that a foreign
national who is operating a licensed Internet-based casino in his
country will not be violating his country's laws if he solicits or
accepts bets from United States citizens.
o It is nearly impossible to close off an entire category of content,
since presently, there is no mechanism to automatically identify and
screen out types of content from U.S. Internet consumers.
o In Australia, just seconds away in cyberspace, lawmakers are taking
the opposite road. Rather than attempting to ban Internet gaming,
Australian politicians are attempting to regulate online wagering by
developing a seal of approval that will draw players from unregulated
cybercasinos and bring new tax revenue to Australia.
o Other nations, including Sweden, Germany, South Africa, Costa Rica,
Antigua, the Marshall Islands, and Curaco have already begun licensing
and regulatory processes for online casino operators.
o Even if enacted, Michael Mount, deputy press secretary for Senator
Kyl, said the law will do little to stop an operator who is
headquartered abroad. "It will be hard to regulate it", he said of the
possibility that foreign sites might accept bets from inside of the
United States. "There is nothing the [law enforcement] can do if
everything is run over there, including the ISP." ("Senate effort to
outlaw Internet Gambling may prove futile," Knight-Riddler/Tribune
News: Wed, May 12, 1999).
Annual Report 2000 Page 16
NET-FORCE SYSTEMS, INC.
March 4, 1998 marked the first federal prosecution for gambling on the Internet
as 14 gambling site operators were charged with conspiring to illegally transmit
bets over the Internet and the telephone. ("14 Net gambling operators charged,"
Mike Brunker, MSNBC, March 5, 1998). The men were owners or managers of six
Caribbean and Central American-based companies that advertise sports books over
the Internet or in magazines circulated in the U.S. The charges were a violation
of the Wire Act, which prohibits gambling over telephone lines, as opposed to
the use of the Internet.
The only known federal case against an Internet gambling operator prior to this
most recent event involved the Interactive Gaming and Communications Corporation
in Pennsylvania. The company operated a virtual gambling operation in Grenada,
which reportedly handled over $58 million in wagers. In February 1997, FBI
agents seized company records and froze company assets. ("Can Lawmakers Control
Online Gambling?" New York Times, Peter Lewis, September 22, 1997). The company
is also involved in legal issues with the state Attorney General's Office. No
formal charges were filed by the Department of Justice, although the company
eventually sold its gambling assets to a Canadian-based company.
STATES' ROLES IN INTERNET GAMBLING
Residents in states prohibiting gambling may circumvent anti-gaming laws by
logging into the Internet. Several states have taken the initiative to curtail
Internet Gambling within its borders by taking legal action against the Web site
operators. In the following section, measures taken by state offices to
prosecute Internet and offshore gambling operations that have transacted
business within their state are summarized.
Nevada - In July 1997, Nevada became the first state to pass a law prohibiting,
and legalizing, Internet gambling. It is a misdemeanor to place a bet from
Nevada over the Internet, regardless of the location of the gambling site. In
addition, the law allows for the prosecution of those accepting bets from Nevada
residents. However, Senate Bill 318 is also the first statute to expressly
allow:"licensed" race and sports books, off-track betting operators and casinos
to accept wagers via the Internet (Rose, J. Nelson, Gambling and the Law,
"Nevada First State to Expressly Prohibit, and Legalize, Internet Gambling,"
(Whittier Law School, Los Angeles, CA), May 12, 1999).
Minnesota - The Minnesota Attorney General sued Wager Net Web, a Las Vegas-based
company that was preparing to offer sports betting over the Internet, for
consumer fraud when the company advertised that its service was legal. The
company intended the service to be set up and run by another company located
outside the U.S. Subsequently, the company filed an appeal with the state court
of appeals claiming that the state did not have jurisdiction over the company
since it was not based in Minnesota. In December 1997, a Minnesota state court
ruled that the Attorney General does indeed have jurisdiction to prosecute
Internet gambling companies. (The National Bet, U.S. News Online, Dan McGraw).
The state is seeking a court order to stop the advertising and civil penalties
of at least $25,000. The case reached the Minnesota State Supreme Court, where
on May 8, the same court upheld a lower court's ruling. The court, however, did
not address the issue of whether Internet gambling itself is illegal.
Wisconsin and Missouri - The Coeur d'Adlene Indian Tribe of Idaho, Unistar
Entertainment and Executone Information Systems are being sued by the attorneys
general of Wisconsin and Missouri over the operation of a national online
lottery. The tribe claims that it has the authorization to operate the lottery
under the Indian Gaming Regulatory Act of 1988 since the computer server
operating the games is located on the reservation. The states contend that the
gambler must be physically present on the reservation when gambling as opposed
to using the Internet. The lawsuit seeks injunctions to stop the operation of
the gambling sites in Wisconsin, in addition to fines and consumer restitution
("Wisconsin Sues Over Internet Gambling," The Associated Press, The New York
Times on the Web, September 16, 1997).
Missouri - In May 1998 a Missouri judge upheld a civil lawsuit against
Interactive Gaming and Communication Corporation (IGCC) by the state's attorney
general. IGCC was found to have violated state consumer protection law, fined
$66,000 and ordered to "reject and refuse" all applications by Missouri
residents. When the company accepted wagers by undercover agents in Missouri,
criminal charges were filed against the company's president. The case is still
pending.
Annual Report 2000 Page 17
NET-FORCE SYSTEMS, INC.
We are presently of the view that we are not prohibited from offering our
services and accepting wagers from residents of almost all jurisdictions in the
world. However, Internet gaming is a relatively new activity and some or all of
these jurisdictions may take action to more severely regulate or even prohibit
Internet gaming operations in their jurisdictions. The Company intends to adopt
a proactive policy of lobbying international jurisdictions, where appropriate,
for purposes of seeking approval of Internet gaming and the regulation of those
activities on a basis that is favorable to the Company.
In addition to the aforementioned regulations pertaining specifically to gaming,
we may become subject to any number of laws and regulations that may be adopted
with respect to the Internet in general as the Internet becomes widely used.
These laws may cover issues such as user privacy, freedom of expression,
pricing, content and quality of services, taxation, advertising, intellectual
property rights and information security. Furthermore, the growth of online
commerce may prompt calls for more stringent consumer protection laws. Several
states have proposed legislation to limit the uses of personal user information
gathered online or require online services to establish privacy policies. The
Federal Trade Commission has also initiated action against at least one online
service regarding the manner in which personal information is collected from
users and provided to third parties. We do not contemplate providing personal
information regarding the Company's customers to third parties. However, the
adoption of additional consumer protection laws could create uncertainty in Web
usage and reduce the demand for the Company's products and services.
We are not certain how our business may be affected by the application of
existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, taxation, libel, obscenity
and export or import matters. The vast majority of these laws were adopted prior
to the advent of the Internet. As a result, they do not contemplate or address
the unique issues of the Internet and related technologies. Changes in laws that
are intended to address these issues could create uncertainty in the Internet
market place. This uncertainty could reduce demand for the our services or our
cost of doing business may increase as a result of litigation costs or increased
service delivery costs.
In addition, because our services are intended to be made available over the
Internet in multiple foreign countries, other jurisdictions may claim that we
are required to qualify to do business in that foreign country. Our failure to
qualify in a jurisdiction where it is required to do so could subject it to
taxes and penalties. It could also hamper our ability to enforce contracts in
these jurisdictions. The application of laws or regulations from jurisdictions
whose laws do not currently apply to the business could have a material adverse
effect on our business operations and financial condition.
VIII. DISCLOSURE
----------
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and/or
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. In addition, the Company intends to be an electronic
filer and as such, all items filed by the Company are available through an
Internet site maintained by the SEC which contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC, which site is available at http://www.sec.gov. We
also maintain an Internet site which contains information about the Company.
This site can viewed on the World Wide Web at http://www.netforcesystems.com.
------------------------------
ITEM 2. DESCRIPTION OF PROPERTY
The Company occupies approximately 1,100 square feet of commercial office space
at Third Floor, Dollar Building, Nevis Street, St. John's, Antigua, West Indies.
This facility houses all of the Company's operations including production,
marketing, Web site development, financial transactions and administration. The
only operation not housed at this location is the computer server on which the
Company's online casino is hosted. The building in which the Company has leased
space is in the heart of St. John's and is home to several other Technology and
Internet based companies. This arrangement and proximity to other similar
Annual Report 2000 Page 18
NET-FORCE SYSTEMS, INC.
companies is expected to lend itself well to promoting the Company as being in
the right area and on the leading edge of technology. As well, the company
offices are in close proximity to banking services, the post office, money
transfer services, courier services, and other essential business service
providers and their offices.
The terms of the Nevis Street commercial lease are as follows: we currently
lease 1,100 square feet through to September 30, 2000 (12 months lease) at an
annual rent of $37,164 USD. The Company has a renewal option thereafter of up to
five years on terms to be negotiated at the time. It is the company's intention
to renew the lease at the end of the first year and exercise its option for a
further five-year term.
ITEM 3. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
The Company is not aware of any material legal proceedings involving any
director, director nominee, promoter or control person including criminal
convictions, pending criminal matters, pending or concluded administrative or
civil proceedings limiting one's participation in the securities or banking
industries, or findings of securities or commodities law violations. However,
legal bankruptcy proceeding under Canadian law involving Terry Bowering in 1997,
concluded with Mr. Bowering receiving a judicial discharge.
LEGAL PROCEEDINGS
The issuer is not a party to any pending legal proceeding nor is its property
the subject of any pending legal proceeding.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no disagreements on accounting and financial disclosures fromthe
inception of the Company through to the date of this Annual return.
EXPERTS
The consolidated financial statements of Net-Force Systems Inc. as at April 30,
2000 and April 30, 1999, appearing in this Annual return have been audited by HJ
and Associates, LLC, of Salt lake City, Utah, USA, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 30, 2000 by (i) each person
who is known to the Company to own beneficially more than 5% of the Company's
outstanding Common Stock, (ii) each of the Company's directors, (iii) executive
officers and (iv) all current directors and executive officers as a group.
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Owner (1) of Class
- ---------------------------------------------------------------------------------------------------
*Douglas N. Bolen 500,000 5.9%
Suite 2103-1188 Quebec St. beneficial owner (2)
Vancouver, British Columbia
Canada, V6A 4B3
Secretary/Director
*Terry G. Bowering 4,400,000 51.8%
Marble Hill beneficial owner (3)
P.O. Box W-645
St. John's, Antigua, West Indies
Annual Report 2000 Page 19
NET-FORCE SYSTEMS, INC.
President/Chief Executive Officer
And Director
* Terry G. Bowering 500,000 5.9%
C/o High Street & Corn Alley beneficial owner (4)
P.O. Box 1679
St. John's, Antigua, West Indies
*Dwight Lewis 50,000 0.59%
Cassada Gardens
P.O. Box W - 386
St. Johns, Antigua, West Indies
Director
Hendrika Prins 500,000 5.9%
C/O Sagem - JC Roder beneficial owner (5)
35 Rue De Bains
Geneva, Switzerland 120
Alfred Peeper 500,000 5.9%
Hogeweg 76-1 2042 GJ Zandvoort beneficial owner (6)
The Netherlands
Beverly Hunt 500,000
C/O Sagem -JC Roder beneficial owner (7) 5.9%
35 Rue De Bains
Geneva, Switzerland 120
*All Directors & Executive Officers = 5,450,000 64%
Total outstanding shares = 8,500,000 100%
- ---------------------------------------------------------------------------------------------------
1. No member of Management has the right to acquire within sixty days through
options, warrants, rights, conversion, privilege or similar obligations any
security of the Company.
2. The BRF Family Trust, of which Douglas N. Bolen is a beneficiary enjoys
legal ownership of said securities.
3. Geneva Overseas Holdings Ltd., of which Terry G. Bowering is a beneficial
owner, enjoys legal ownership of said securities.
4. JPKT Metro Investment Corporation, of which Terry G. Bowering is a
beneficiary, enjoys legal ownership of said securities.
5. Orientstar Finance Limited, of which Hendrika Prins is a beneficial owner
enjoys legal ownership of said securities.
6. Eur-Am BV, of which Alfred Peeper is a beneficial owner enjoys legal
ownership of said securities.
7. Fonds Mondial D'Investissement, of which Beverly Hunt is a beneficial owner
enjoys legal ownership of said securities.
CHANGES IN CONTROL
Management is not aware of any arrangements which may result in a change of
control of the issuer.
ITEM 5. NATURE OF TRADING MARKET
Our common stock has never been quoted on any exchange or quotation service.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
(a) There are no governmental laws, decrees, or regulations in Antigua and
Barbuda under the "Act" that restrict the export or import of capital of the
registrant as an exempt corporation under the "Act". Section 280 of The
International Business Corporations Act, 1982, Antigua and Barbuda, states the
following with respect to exchange controls:
"280. The income, profits, gains and other revenues, and the funds and
securities of an exempt corporation that are generated, acquired or managed in
the course of the international trade or business of the exempt corporation are
Annual Report 2000 Page 20
NET-FORCE SYSTEMS, INC.
exempt from the Exchange Control Ordinance; and, unless the exempt corporation
is a resident, the income, profits, gains, and other revenues of the exempt
corporation are also exempt from that Act."
(b) There are no limitations on the right of nonresident or foreign owners to
hold or vote the securities to be registered in this filing by the registrant
company either under the "Act" or by charter or other constituent document of
the registrant.
ITEM 7. TAXATION
United States security holders of the registrant company are not subject to
taxes or withholding provisions. Sections 271- 274 of the International Business
Corporations Act, 1982, Antigua and Barbuda, Division G: Special Taxation
Provisions detail the relevant tax provisions under the Act.
Section 271, "Exempt corporations" states the following:
"For the purposes of this Division, an exempt corporation shall mean any
corporation formed or continued under this Act."
Section 272, "Exemption from tax" states the following:
(1) No income tax, capital gains tax, or other direct tax or impost may be
levied in Antigua and Barbuda upon the profits or gains of an exempt
corporation, in respect of the international trade and business it carries on
from within Antigua and Barbuda.
(2) No income tax, capital gains tax, or other direct tax or impost may be
levied in Antigua and Barbuda in respect of any securities or assets of an
exempt corporation that are beneficially owned by an exempt corporation or by a
person who is not a resident.
(3) No estate, inheritance, succession or similar tax or impost may be levied in
Antigua and Barbuda in respect of any securities or assets of an exempt
corporation that are beneficially owned by an exempt corporation or by a person
who is not a resident.
(4) No tax, duty or other impost may be levied upon the increment in value of
the property, or other assets in Antigua and Barbuda or elsewhere of an exempt
corporation other than upon such of them as are distributed to residents.
Section 273, "No assets transfer tax".
(1) No tax, duty or other impost may be levied upon an exempt corporation, its
security holders or transferees in respect of the transfer of all or any part of
it's securities or other assets to another exempt corporation or to a person who
is not a resident.
(2) When an exempt corporation or a person who is not a resident transfers
securities or assets of an exempt corporation that are held by that exempt
corporation, or person to another exempt corporation, or to another person who
is not a resident, the transfer is exempt from the payment of any tax, duty, or
other impost thereon.
(3) No income tax or capital gains tax, and no other direct tax or impost, may
be levied or collected in Antigua and Barbuda, in respect of any dividends
interests or other returns from any securities, deposits or borrowings of an
exempt corporations or any assets managed by the exempt corporation if the
dividends, interest or other returns are in respect of securities, deposits,
borrowings or assets beneficially owned by another exempt corporation, or a
person who is not a resident; but the onus of establishing ownership, lies upon
the exempt corporation holding or managing the deposits, borrowings or assets.
Annual Report 2000 Page 21
NET-FORCE SYSTEMS, INC.
Section 274, "Withholding tax and report"
(1) Notwithstanding, any provision of the Income Tax Ordinance, but subject to
subsection (2), no exempt corporation need withhold any portion of any dividend,
interest or other returns, payable of any person in respect of any borrowings of
the exempt corporation from that person or in respect of securities of the
exempt corporation held by that person.
(2) All dividends interest or other returns attributable to the securities of,
or the management of, assets by an exempt corporation that are payable to a
resident who is known to be a resident, by the exempt corporation or who, with
the exercise of reasonable care by the exempt corporation, could be known by him
to be a resident, must be reported to the Commissioner of Inland Revenue by the
exempt corporation
Section 276 of the Act, "Duration of tax exemption" states the following:
"Any tax exemption provided under this Act, shall continue in effect for a
period of fifty years from the date of incorporation of the exempt corporation."
There is no reciprocal tax treaty in existence between the United States and
Antigua and Barbuda regarding withholding taxes.
ITEM 8. SELECTED FINANCIAL DATA
Selected Financial Data
- -----------------------
Set forth below is certain selected consolidated financial data of the Company
for the April 30, 2000 and April 30, 1999 year-ends. The selected financial
information is derived from the Company's audited consolidated financial
statements for the period. The company's consolidated financial statements are
prepared in accordance with US GAAP. The information set forth below should be
read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations.
SUMMARY OF OPERATIONS (audited)
Stated in US Dollars 2000 1999
---- ----
Sales 1,399 -
Gross Profit (78) -
Loss from operations (355,681) (6,493)
Other Income and Expenses (41,685) -
Net Loss (397,366) (6,493)
Basic Loss Per Share (0.05) (0.00)
Weighted Average Number of Shares 8,500,000 5,899,999
Total Assets 221,512 33,507
Total Current Liabilities 39,181 4,500
Long Term Debt 550,690 -
Total Liabilities 589,871 4,500
Common Stock 8,500 8,500
Paid in Capital 27,000 27,000
Accumulated deficit (403,859) -
Total Stockholders Equity (368,359) 29,007
Total Liabilities and Shareholders Deficit 221,512 33,507
Eastern Caribbean and US Dollar Exchange Rates
- ----------------------------------------------
Annual Report 2000 Page 22
NET-FORCE SYSTEMS, INC.
On March 22, 2000, the company received the following clarification from the
Director of Banking & Monetary Operations, Eastern Caribbean Central Bank,
Basseterre, St. Kitts, West Indies:
"The Eastern Caribbean dollar is pegged to the United States Dollar rate of
2.70. This rate has remained unchanged for several years and therefore is the
average exchange rate for the Eastern Caribbean Dollar to the United States
Dollar for the past five years."
All revenues are received in US Dollars. In addition, all marketing and
advertising expenditures as well as equipment expenditures of a material nature,
are transacted in US Dollars. Ordinary monthly office overhead expenses that
include office rent, leasehold improvements, utilities, bandwidth charges, and
local salaries are conducted in the EC Dollar.
Dividends
- ---------
The company has not paid any cash dividends since its inception. The Company
does not intend to pay any cash dividends in the foreseeable future, but intends
to retain earnings, if any, for use in its business operations.
ITEM 9. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION
I. PLAN OF OPERATIONS
------------------
A. Revenues and Financing
----------------------
Operations to date have been predominantly limited to establishing the
infrastructure and other general and administrative expenditures and
organizational costs. The operations of the casino Web-site are our principal
source of revenue. Our primary online casino gaming site, www.aogaming.com was
----------------
officially launched on April 7, 2000 to accept real-money deposits and wagers.
The Internet casino Web site was initially launched in December of 1999 for
testing purposes. During the months of January to March of 2000, we experienced
operating and design difficulties with the casino website and gaming software
that prevented customers from depositing funds to play for real-money. As a
result, our marketing expenditures during the period of January to March of 2000
yielded no recorded revenues for the period. We re-configured the software and
re-designed the website for an official re-launch on April 7, 2000. The casino
web site functioned effectively from that date forward. As of the period ended,
April 30, 2000, revenues totaled $1,399.
Historical Expenditures. Total expenses for the period-ending April 30, 2000
- ------------------------
were $355,603. Monthly expenditures for office overhead including rent,
utilities, and salaries, commenced September of 1999. We recognize that many of
the initial expenditures incurred in this period such as organizational and
set-up costs, office leasehold improvements, and security deposits for rent,
utilities, and licenses, and certain legal and consulting fees will be
eliminated as operations move forward. The most significant expenses incurred
during the period include marketing and advertising, professional and consulting
fees, interest expense, and salaries and wages. Due to the anticipation of a
December 1999 launch date for the casino Web site, our marketing and advertising
costs for the period totaled $147,283. Professional and consulting fees totaled
$43,016. Interest expense on the note payable was $55,690. Salaries and wages
amounted to $93,616. We intend to analyze all of these expenses and believe that
there are opportunities for overhead and expense reductions going into the next
fiscal period.
Financing. We have been funded to date through debt financing from private arm's
- ----------
length lenders. We have secured approximately $495,000 US through debt financing
in the form of a note payable to Mountain High Management Inc. dated July 15,
1999 The loan is unsecured, bears interest at the rate of 15% per annum and is
due on July 15, 2001. We received the sum on or about July 13, 1999. We believe
that the $495,000 in debt financing plus ongoing revenues from wagers placed
will enable us to meet its financial obligations for the next 12 months. No
assurance can be given that revenues from gaming activities and/or proposed
secondary revenues will enable us to meet our financial obligations. As such, we
may solicit and arrange for additional debt financing from private arm's length
lenders in the event existing financing and revenues do not meet our financial
Annual Report 2000 Page 23
NET-FORCE SYSTEMS, INC.
obligations. In addition, we may consider raising additional equity financing
through the sale of common stock of the Company through private placements to
sophisticated investors. The combination of existing financing, expected
revenues from operations and additional debt and/or equity financing is intended
to provide us with sufficient operating capital for a period of approximately
two years.
Revenue Generation Process. Revenues for the Company are generated each time a
- ---------------------------
customer makes a wager on the website. Net monthly revenues are calculated as
the total dollar amount wagered by customers in the virtual casino and/or the
sportsbook wagering web-site less winnings by customers in the virtual casino
and/or sportsbook wagering web-site less transaction processing fees for a given
calendar month. Electronic Financial Services Caribbean Inc., the transaction
processing subsidiary of Starnet Systems, processes all deposits and credits on
behalf of the Company's gaming web-site. Daily online activity reports of all
financial transactions are produced by Electronic Financial Services Caribbean
Inc. These reports include an account summary and an exposure report. The
account summary details dollar amounts deposited and withdrawn for each
individual customer account for the date queried. The exposure report provides
an actual detailed breakdown of the total dollar amounts wagered (i.e., total
bets) and total winnings (i.e., payouts to winners of successful wagers) by each
specific casino game played and by each sports wagering type and event. The net
amount (i.e., wagers less payouts) is recognized as revenue. Electronic
Financial Services Caribbean Inc. produces a monthly summary report of total net
monthly revenue (i.e., total dollar amount wagered less winnings) less
transaction processing fees less calculated software licensing fees (i.e., a
percentage of net revenues calculated according to the terms of the Software
Licensing Agreement attached hereto as an Exhibit 6.1).
Ongoing royalty payments to Starnet Systems. These royalty payments are
- --------------------------------------------
calculated as a percentage of the net revenue generated on a monthly basis. As
detailed in the software agreement, these payments will begin upon commencement
of live operations of the gaming web-site. The schedule of royalty payments
payable to Starnet Systems as detailed in Schedule "A" of the software agreement
is as follows:
*Net Monthly Revenue (US$) Royalty Fee Payable
0 to < or = $500,000 25%
$500,000 to < = $1,000,000 20%
$1,000,000 to < = $5,000,000 15%
$5,000,000 < = $10,000,000 12.5%
$10,000,000 plus 10%
*Net Monthly Revenue is calculated as the total dollar amount wagered in the
virtual casino and/or the sportsbook wagering site LESS winnings in the virtual
casino and/or sportsbook wagering site LESS transaction processing fees, for a
given calendar month.
Payment Processing Agreement: Section 2.3.1 of the software agreement states:
"Softec shall provide a transaction processing system that will allow the
licensee's customers to deposit funds for use of the Games (the "Transaction
Processing System")." Deposits are made electronically by Visa or Mastercard
credit cards and by other methods such as bank wire transfer and bank draft.
This transaction processing system is provided by Electronic Financial Services
Caribbean Inc. , a wholly-owned subsidiary of Starnet Communications Internal
Inc. Electronic Financial Services Caribbean Inc. will also facilitate payouts
of winnings for the licensee by processing credits to credit cards and by bank
draft.
Actual costs for payment processing include transaction fees of 5.50% of the
gross transactions (`merchant discount rate') and a flat fee of US$1.60 per
transaction. As well, there is a monthly 5% rolling reserve held on deposits
which is rolled back to the licensee after 180 days. This reserve is required to
offset any credit card chargebacks that may occur. Finally, there is a US$5.00
charge for each bank draft that is processed for payouts of winnings.
The only significant trends in expenditures in this industry of note, relate to
marketing expenditures and its direct relationship with net revenues generated.
Marketing expenditures are a variable cost, so it is anticipated that as these
expenditures are increased and the marketing program is in full swing, revenues
will respond as a direct result, further enhancing the company's liquidity. It
is important to note that the revenues generated are entirely of a cash nature
with no customer account receivables generated of a material nature and
therefore no need to establish an allowance for doubtfull accounts. As was
stated in the previous paragraph, Electronic Financial Services Caribbean Inc.,
Annual Report 2000 Page 24
NET-FORCE SYSTEMS, INC.
the online credit card transaction processor, maintains a 5% rolling reserve
hold on credit card deposits on behalf of the company. The statements make no
reference to doubtful accounts and no provision is made by the company for the
same, primarily because web-site operations have only recently commenced on
April 7, 2000 and because all revenues are generated and realized on a cash
basis. No credit is extended to customers.
B. Operations for the Next Twelve Months
-------------------------------------
We anticipate that revenues from our casino Web site operations will not
initially meet expenses in the early stages of operations and as such, we plan
to finance operations through additional debt financing from arm's length
private lenders until such time as revenues from wagers meet or exceed expenses.
Once achieved, we intend to begin repaying the private arm's length lenders. In
addition, we may raise additional capital as is deemed necessary by management
through private placements of stock issued out of the treasury of the Company to
individuals or corporations who have expressed interest in obtaining stock in
Net-Force Systems Inc.
We intend to hire additional product, marketing, computer programming and
graphic design personnel over the next twelve months as is deemed necessary by
management. From player data obtained from the web sites during the first ten to
twelve months of operations, we plan to make adjustments to the operations as is
deemed necessary by management. We anticipate that the Internet will continue to
become more accessible and that the market opportunities for us will continue to
expand. This tremendous growth will also attract many potential new competitors.
In order to maintain revenue growth, we intend to expand the content and to
improve the services offered on our Internet Web sites, as well as researching
and developing other projects that may effectively utilize our existing
competencies and expertise.
C. Balance Sheet Data
------------------
At April 30, 2000 At April 30, 1999
----------------- -----------------
Total Assets 221,512 33,507
Shareholders' Equity (deficit) (368,359) 29,007
D. Liquidity and Capital Resources
-------------------------------
As at April 30, 2000, current assets total $168,560, of which $131,269 is cash.
The balance of current assets consists of prepaid expenses and security
deposits. Current liabilities total $39,181. On July 15, 1999, a promissory note
in the amount of $495,000 due on July 15, 2001 with an interest rate of 15%. It
is intended that the interest accruing on the promissory note will be paid upon
the maturity date of the note. Deferring payment of the interest until the
note's maturity date (July 15, 2001) will allow the company to channel cash flow
to marketing efforts designed to firmly establish the company's brand name at an
early stage in the company's life. Alternatively, prior to the note's maturity,
an agreement may be negotiated with the holder of the note whereby part or all
of the debt plus accrued interest may be swapped for equity.
Funding for the next year will be derived from current cash resources and
expected revenues from operations. In addition, if necessary, we will seek
further funding in the form of an additional promissory note with similar terms
of the existing note. We anticipate that with the marketing campaign employed to
launch the site, revenues from operations will add sufficient cash flow to
supplement existing current cash resources. This will allow the company to
adequately cover all overhead expenses and planned capital expenditure
commitments over the balance of the calendar year 2000. Because of the very
nature of the Internet, the company operates and delivers its service with
relatively low fixed overhead costs. The material variable cost factor is
marketing expenditures, which in turn drives revenues.
Annual Report 2000 Page 25
NET-FORCE SYSTEMS, INC.
E. Material Commitments for Capital Expenditures
---------------------------------------------
Material commitments for capital expenditures as of the end of the latest
interim period consisted of computer hardware and office furniture and equipment
(desks and chairs), and office leasehold improvements. The office and computer
hardware specifically included personal computers, printers, fax machines, and
backup power supply units.
The purpose of these capital expenditure commitments was to establish a
corporate and administrative office for the company. From this office, the
company conducts web-site design, marketing, customer service support services
for the company's web-sites. The company also manages corporate communications
and investor relations from this office. The company maintains access to the
internet which requires personal computers, communications hardware and
software, and backup power supply units. All of the above commitments were
settled in full payment from cash resources made available from the proceeds
from promissory note. The details of the note are provided in the financial
statements and in the body of the annual return.
Capital expenditures for software for the period-ended April 30, 2000 consisted
of an initial payment of US$10,000.00 which was paid upon execution of the
software agreement on July 31, 1999, leaving a balance of US$90,000.00 payable
to Starnet Systems Inc. (formerly Softec Systems) for the initial software
set-up and configuration. This one-time software fee includes all future
versions and upgrades of the software at no additional cost. Upon completion of
the configuration/design of the software and commencement of live operations,
the balance was to be payable based on a schedule of monthly payments detailed
in the software agreement. The schedule of payments was to commence 90 days from
the date of `live' operations consisting of US$10,000 per month for 9 months
until the entire amount of US$90,000.00 was paid. After the 90-day grace period
to establish operations, it is anticipated that these payments will be made from
cash flow generated from ongoing operations on a monthly basis. As stated, live
operations commenced on April 7, 2000 and none of these payments have been made
since that date. On September 6, 2000, the balance payable to Starnet Systems
Inc. was negotiated and adjusted to zero payable as a result of a compensation
agreement to cover early software configuration difficulties delaying the
planned launch date of the casino website in early 2000. See exhibit 6.1,
attached Amendment to Software License Agreement.
The useful life of the software for depreciation purposes was determined by
management to be ten years. New versions and upgrades of the software are
continually being developed so we, as a licensee of this software, will always
be utilizing an asset with an extended life. As per the software agreement with
Starnet Systems, (please see exhibit 6.1 for the entire software contract), the
term is as follows:
1.6.1 This Agreement shall commence and be deemed effective on the date
when fully executed (the "Effective Date"). This Agreement is in effect for a
period of one-year (the "Term") and shall be automatically renewed indefinitely
with additional one year terms unless the Licensee gives written notice of
termination of this Agreement at least 45 days prior to the end of any one year
period.
Softec will provide all upgrades of the Licensed Software that do not require
changes to the graphical interface, at no charge to the Licensee.
2.2.11 All upgrades are to be made available to the Licensee within 30
days of the completion of testing.
Given that all new software upgrades will be provided to the licensee on an
ongoing basis at no additional cost to the licensee under the agreement, the
company will essentially operate almost indefinitely without having to purchase
new software. Therefore, based on the above reasons, it was determined by
management to depreciate the software at least over a ten-year period.
Annual Report 2000 Page 26
NET-FORCE SYSTEMS, INC.
F. Material Commitments for Resources
----------------------------------
As already stated, the only material commitment of resources anticipated over
the next year will be marketing expenditures. Being a variable cost, marketing
and advertising expenses are controlled by management. There will be no
additional material capital expenditures necessary over the next year.
At the end of the current one year term of the office lease, we have an option
to extend the office lease for an additional term of five years. The lease
expires September 30, 2000. Given that the product delivery process utilizes the
Internet, overhead expenses are kept at a minimal level, as an increase in
customer base and revenues does not necessarily require a corresponding
incremental investment in personnel or equipment. The customer service function
and transaction processing system, as well as web hosting costs are absorbed by
Starnet Systems as outlined in the software agreement. After the one-time set-up
fee is accounted for, the cost of the software to the company on an ongoing
basis is a variable cost (percentage of monthly net revenues) in the form of a
royalty.
Any material commitments of resources and normal monthly operating expenses over
the next year will be funded from a combination of existing cash resources, cash
flow generated from operations anticipated to be in full swing by mid-calendar
year, and anticipated proceeds from an additional financing. This additional
financing, if necessary, will consist of issuing a promissory note to raise
funds based on similar terms of the initial note with interest payable at
maturity and with a possible convertible component.
G. Impact of Inflation
-------------------
The Company believes that inflation will not materially affect its business.
H. Year 2000 Risks and Compliance
------------------------------
Many existing computer programs use only two digits to identify a year. These
programs were designed and developed without addressing the impact of the
upcoming change in the century. If not addressed, potentially many computer
software applications could fail or create erroneous results by, at or beyond
the year 2000. The Company uses software, computer technology and other services
developed and provided by third party suppliers that could have potentially
failed due to the year 2000 phenomenon.
From January 1, 2000 to the period-ended April 30, 2000, we have not experienced
any problematic issues associated with the Year 2000 issue. We experienced no
negative affects in the three of the potential areas of its computer systems
that it identified as potential for risk; its internal systems, its third-party
providers of computer systems, and the general infrastructure of the Internet.
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
QUANTITATIVE INFORMATION ABOUT MARKET RISK
Not Applicable
QUALITATIVE INFORMATION ABOUT MARKET RISK
Not Applicable
Annual Report 2000 Page 27
NET-FORCE SYSTEMS, INC.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
I. DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
TERRY G. BOWERING, PRESIDENT, CHIEF EXECUTIVE OFFICER & CHAIRMAN OF THE BOARD
- -----------------
Marble Hill
P.O. Box W-645
St. John's, Antigua, West Indies
Telephone: (268) 481-1970
DOB: August 30, 1960 (Age 39) Regina, Saskatchewan, Canada
Terry G. Bowering, B.Admin, M.B.A., Director
Mr. Bowering brings over fifteen years of experience in business management. Mr.
Bowering has considerable experience in both large corporations and
entrepreneurial enterprises and is qualified in the areas of business
development, finance, information systems, marketing, and sales. From January
1998 until his resignation June 20, 1999, Mr. Bowering was Vice President,
Offshore Operations for Starnet Communications International Inc., a Delaware
corporation, which is a fully reporting issuer on the NASD OTC:BB. Described as
being the "Microsoft of Internet Gaming", Starnet is one of the world's leading
Internet Gaming Software providers. Mr. Bowering was instrumental in
establishing and developing offshore operations and foreign government relations
for Starnet in Antigua and for establishing worldwide offshore banking
relationships in concert with the corporate development of Starnet's
subsidiaries, Electronic Financial Services Caribbean Inc. (EFS) and the EFS
group of International companies. Mr. Bowering has been interviewed and quoted
in the International press including FOX TV, COMPUTER WORLD MAGAZINE, SHIFT
MAGAZINE, TIME MAGAZINE (Atlantic Edition), and ESPN, specifically on the
subject of offshore Internet Gaming. From 1996 to 1998, Mr. Bowering was an
Investment Advisor, Vancouver office, with Levesque Securities Inc., a major
Canadian brokerage firm. From May 1992 to June 1996, Mr. Bowering was a
financial analyst with the Asset Management Group Dept. of Crown Life Insurance
in Regina, Saskatchewan, Canada. Mr. Bowering holds a Bachelor of Administration
in Finance from the University of Regina, and a Master of Business
Administration with a concentration in Strategic Management from the University
of Saskatchewan.
Mr. Bowering was appointed to the above positions on March 1, 1999 to serve
until his successor has been elected and qualifies.
DOUGLAS N. BOLEN, CORPORATE COUNSEL, SECRETARY AND DIRECTOR
- ----------------
Suite 2103 - 1188 Quebec Street
Vancouver, British Columbia, Canada V6A 4B3
(604) 506-4243
DOB: August 25, 1965 (Age 34) Regina, Saskatchewan, Canada
Douglas N. Bolen, B.A., L.L.B. - Corporate Counsel, Secretary and Director.
Mr. Bolen brings over ten years experience in entrepreneurial enterprise. Mr.
Bolen received a Bachelor of Arts from the University of Regina, Saskatchewan
and his Bachelor of Laws from the University of Saskatchewan. Mr. Bolen is a
member in good standing of the Law Society of Saskatchewan, the Regina Bar
Association and the Canadian Bar Association. From 1992 to 1995, Mr. Bolen was
attending the College of Law at the University of Saskatchewan. Since February
1999, Mr. Bolen has held the positions of Corporate Counsel, Secretary and
Director of Denmans.com, Inc. a Colorado company, which is a retailer of jewelry
and related services via the Internet. Denmans.com, Inc. From 1995 to 1999, Mr.
Bolen articled and practiced law at Balfour Moss, Barristers and Solicitors, a
large Regina, Canada based law firm with a practice concentration in the area of
Corporate Commercial law.
Annual Report 2000 Page 28
NET-FORCE SYSTEMS, INC.
Mr. Bolen was appointed to the position of Director on March 1, 1999 to serve
until his successor has been elected and qualifies.
DWIGHT LEWIS, DIRECTOR
- ------------
Cassada Gardens
P.O. Box W-386
St. John's, Antigua, West Indies
(268)463-5103
DOB: May 24, 1961 (Age 38) St. Lucia, West Indies
Dwight Lewis, MA, BSc. - Director
Mr. Lewis is presently engaged as a Financial Consultant to Hanson International
Investment Services Ltd., an investment advisory organization. He also is
Managing Director of Mahaut Ltd., a corporation that provides offshore financial
services to its clients. Most recently Mr. Lewis was engaged as a Financial
Consultant and Interim Manager of RYO International Corporation and SAGA
Corporation, which were eventually merged to form International Data Processing.
This corporation owns and operates a number of Internet Casinos based and
licensed in Antigua. On behalf of the corporation's overseas principals, Mr.
Lewis was responsible for establishing these operations from conception to live
operation, having dealt with all aspects of the company's operations and
providing ongoing management and supervisory services.
From 1992 to 1997, Mr. Lewis was employed with the Bank of Antigua Ltd. as a
Senior Manager dealing with management of the investment portfolio and general
supervision of all bank operations. From 1988 to 1992, Mr. Lewis was employed
with the Eastern Caribbean Central Bank, located in St. Kitts, as a Senior Bank
Examiner. This entailed general supervision of commercial banking activities in
all member banks of the Eastern Caribbean Central Bank. From 1986 to 1988, Mr.
Lewis worked as a Budget Analyst with the Ministry of Finance, Government of St.
Lucia, and with Barclays Bank, St. Lucia, from 1980 to 1983.
Mr. Lewis graduated from the University of West Indies, Cave Hill Campus,
Barbados, with a Bachelor of Science Degree in Economics and Management. Mr.
Lewis also attended the University of Sheffield, Management School, England,
where he obtained an MA in Banking and International Finance. Mr. Lewis resides
in Antigua, West Indies.
Mr. Lewis was appointed to the position of Director on December 20, 1999 to
serve until his successor has been elected and qualifies.
II. FAMILY RELATIONSHIPS
--------------------
There are no family relationships among directors, executive officers or persons
nominated or chosen by the Company to become officers or executive officers.
III. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
Article VIII of the Company's Articles of Incorporation read as follows:
INDEMNIFICATION. The Corporation shall indemnify any and all of its Directors,
officers, employees or agents or former Directors, officers, employees or agents
or any person or persons who may have served at its request as a Director,
officer, employee or agent of another company, partnership, joint venture, trust
or other enterprise in which it owns shares of capital stock or of which it is a
creditor, to the full extent permitted by law. Said indemnification shall
include, but not be limited to, the expenses, including the cost of any
judgments, fines, settlements and counsel's fees, actually and necessarily paid
or incurred in connection with any action, suit or proceeding, whether civil,
Annual Report 2000 Page 29
NET-FORCE SYSTEMS, INC.
criminal, administrative or investigative, and any appeals thereof, to which any
such person or his legal representative may be made a party or may be threatened
to be made a party by reason of his being or having been a Director, officer,
employee or agent as herein provided unless such action, suit or proceeding is a
result of the Director, officer, employee or agent's own negligence or illegal
action. The foregoing right of indemnification shall not be exclusive of any
other rights to which any Directors, officer, employee or agent may be entitled
as a matter of law or which he may be lawfully granted.
In addition, Section 97 of The Antigua and Barbuda International Business
Corporations Act, 1982 indicates that the foregoing provisions shall not
eliminate or limit the liability of a director to the corporation or to its
shareholders for monetary damages for any breach of the director's duty of care
to the corporation or to its shareholders, acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, improper
corporate distributions, or any transaction from which the director directly or
indirectly derived an improper personal benefit.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
We did not pay any compensation to its chief executive officer, any other
executive officer nor to any senior employees during its first fiscal year-ended
April 30, 1999. For the fiscal period-ended April 30, 2000, the executive
officers who received salaries are Terry Bowering, President, Chairman of the
Board, Chief Operating Officer, who received $60,000. Douglas N. Bolen,
Corporate Counsel, Secretary/Treasurer, received $12,000 in salary for the
period.
The members of the Board of Directors are reimbursed for actual expenses
incurred in attending Board meetings. There are no other arrangements for
compensation to the Board of Directors' members. There are no written employment
contracts or agreements with any executive officers. Employee salaries are set
by the Members of the Board of Directors.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
The Company has authorized the issuance of 1,000,000 Employee Stock Options
pursuant to a Non-Qualified Stock Option Plan. To date, no such options have
been granted by the Stock Option Committee to Officers, Directors, Consultants,
or Employees.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is not aware of any transactions or proposed transactions in respect
of which the Company was or is to be a party, in which any director, executive
officer, nominee for election as a director, 5% security holder, member of the
immediate family of any of the previously named persons had a direct or indirect
interest in the transaction.
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
Not Applicable
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Annual Report 2000 Page 30
NET-FORCE SYSTEMS, INC.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES
Not applicable.
Annual Report 2000 Page 31
NET-FORCE SYSTEMS, INC.
PART III
ITEM 17. FINANCIAL STATEMENTS
i. NET-FORCE SYSTEMS INC. AUDITED FINANCIAL STATEMENTS, APRIL 30, 2000.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2000 and 1999
Annual Report 2000 Page 32
NET-FORCE SYSTEMS, INC.
C O N T E N T S
Independent Auditors' Report...............................................3
Consolidated Balance Sheets................................................4
Consolidated Statements of Operations......................................6
Consolidated Statements of Stockholders' Equity (Deficit)..................7
Consolidated Statements of Cash Flows......................................8
Notes to the Consolidated Financial Statements.............................9
Annual Report 2000 Page 33
NET-FORCE SYSTEMS, INC.
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors
Net-Force Systems Inc.
(A Development Stage Company)
Antigua, West Indies
We have audited the accompanying consolidated balance sheet of Net-Force Systems
Inc. (a development stage company) as of April 30, 2000 and 1999 and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the years ended April 30, 2000 and 1999 and from inception on March 1,
1999 through April 30, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Net-Force Systems Inc. (a development stage company) as of April 30, 2000 and
1999 and the consolidated results of their operations and their cash flows for
the years ended April 30, 2000 and 1999 and from inception on March 1, 1999
through April 30, 2000 in conformity with accounting principals generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
consolidated financial statements, the Company is a development stage company
with no significant operating results to date and a substantial accumulated
deficit, which together raises substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 5. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
HJ & Associates, LLC
Salt Lake City, Utah
October 24, 2000, except for note 8 which is dated January 2, 2002
3
Annual Report 2000 Page 34
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Consolidated Balance Sheets
April 30,
--------------------------------------
2000 1999
------------------ ------------------
CURRENT ASSETS
Cash $ 131,269 $ 33,507
Prepaid expenses 34,698 -
Other current assets 2,593 -
------------------ ------------------
Total Current Assets 168,560 33,507
------------------ ------------------
PROPERTY AND EQUIPMENT (Note 2) 40,891 -
------------------ ------------------
OTHER ASSETS
Deposits 12,061 -
------------------ ------------------
Total Other Assets 12,061 -
------------------ ------------------
TOTAL ASSETS $ 221,512 $ 33,507
================== ==================
The accompanying notes are an integral part of these
consolidated financial statements.
4
Annual Report 2000 Page 35
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
April 30,
--------------------------------------
2000 1999
------------------ ------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 37,157 $ 2,500
Related party payable (Note 3) 2,024 2,000
------------------ ------------------
Total Current Liabilities 39,181 4,500
------------------ ------------------
LONG-TERM DEBT
Note payable and accrued interest (Note 4) 550,690 -
------------------ ------------------
Total Long-Term Debt 550,690 -
------------------ ------------------
Total Liabilities 589,871 4,500
------------------ ------------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock: 50,000,000 shares authorized of $0.001
par value, zero issued and outstanding - -
Common stock: 100,000,000 shares authorized of $0.001
par value, 8,500,000 and 8,500,000 shares issued and
outstanding, respectively 8,500 8,500
Additional paid-in capital 27,000 27,000
Deficit accumulated during the development stage (403,859) (6,493)
------------------ ------------------
Total Stockholders' Equity (Deficit) (368,359) 29,007
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 221,512 $ 33,507
================== ==================
The accompanying notes are an integral part of these
consolidated financial statements.
5
Annual Report 2000 Page 36
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Consolidated Statements of Operations
From Inception on
For the March 1, 1999 Through
Year Ended April 30,
April 30, --------------------------------------
2000 1999 2000
------------------ ------------------ ------------------
REVENUE
Sales $ 1,399 $ - $ 1,399
Cost of sales 1,477 - 1,477
------------------ ------------------ ------------------
Gross Margin (Deficit) (78) - (78)
------------------ ------------------ ------------------
EXPENSES
General and administrative 349,175 6,493 355,668
Depreciation and amortization 6,428 - 6,428
------------------ ------------------ ------------------
Total Expenses 355,603 6,493 362,096
------------------ ------------------ ------------------
LOSS FROM OPERATIONS (355,681) (6,493) (362,174)
------------------ ------------------ ------------------
OTHER INCOME (EXPENSE)
Interest income 3,635 - 3,635
Other income 10,370 - 10,370
Interest expense (55,690) - (55,690)
------------------ ------------------ ------------------
Total Other Income (Expense) (41,685) - (41,685)
------------------ ------------------ ------------------
PROVISION FOR INCOME TAX - - -
------------------ ------------------ ------------------
NET LOSS $ (397,366) $ (6,493) $ (403,859)
================== ================== ==================
BASIC LOSS PER SHARE $ (0.05) $ (0.00)
================== ==================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,500,000 5,899,999
================== ==================
The accompanying notes are an integral part of these
consolidated financial statements.
6
Annual Report 2000 Page 37
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Consolidated Statements of Stockholders Equity (Deficit)
Deficit
Accumulated
Common Stock Additional During the
---------------------------------- Paid-in Development
Shares Amount Capital Stage
---------------- --------------- -------------- ------------------
Balance, March 1, 1999 - $ - $ - $ -
March 1, 1999, common stock
issued to founders for cash at
$0.001 per share 5,500,000 5,500 - -
April 22, 1999, common stock
issued for cash at $0.01 per
share 3,000,000 3,000 27,000 -
Net loss from inception on
March 1, 1999 through
April 30, 1999 - - - (6,493)
---------------- --------------- -------------- -----------------
Balance, April 30, 1999 8,500,000 8,500 27,000 (6,493)
Net loss for the year ended
April 30, 2000 - - - (397,366)
---------------- --------------- --------------- -----------------
Balance, April 30, 2000 8,500,000 $ 8,500 $ 27,000 $ (403,859)
================ =============== ============== =================
The accompanying notes are an integral part of these
consolidated financial statements.
7
Annual Report 2000 Page 38
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
From Inception on
For the March 1, 1999 Through
Year Ended April 30,
April 30, --------------------------------------
2000 1999 2000
------------------ ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (397,366) $ (6,493) $ (403,859)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 6,428 - 6,428
Changes in assets and liabilities:
(Increase) in accounts receivables and other
assets (49,352) - (49,352)
Increase in accounts payable and other
current liabilities 34,681 4,500 39,181
Increase in accrued interest 55,690 - 55,690
------------------ ------------------ ------------------
Net Cash Used by Operating Activities (349,919) (1,993) (351,912)
------------------ ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (47,319) - (47,319)
------------------ ------------------ ------------------
Net Cash Used by Investing Activities (47,319) - (47,319)
------------------ ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 495,000 - 495,000
Common stock issued for cash - 35,500 35,500
------------------ ------------------ ------------------
Net Cash Provided by financing Activities 495,000 35,500 530,500
------------------ ------------------ ------------------
NET INCREASE (DECREASE) IN CASH 97,762 33,507 131,269
CASH AT BEGINNING OF PERIOD 33,507 - -
------------------ ------------------ ------------------
CASH AT END OF PERIOD $ 131,269 $ 33,507 $ 131,269
================== ================== ==================
CASH PAID FOR:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
The accompanying notes are an integral part of these
consolidated financial statements.
8
Annual Report 2000 Page 39
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000 and 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The Company was incorporated on March 1, 1999 under the International
Business Corporations Act No. 28 of 1982 of the laws of Antigua and
Barbuda as Net-Force Systems Inc.
The Company will be engaged in all business activities permitted under
the International Business Corporations Act of 1982 except
International Banking, Trust and Insurance. It will generally carry on
the business of an investment and holding company.
On August 5, 1999, a wholly-owned subsidiary, Net Force Entertainment
Inc. (Entertainment) was incorporated under the International Business
Corporations Act of the laws of Antigua and Barbuda. This subsidiary
Company will be engaged in all aspect of International betting,
gaming, sports betting and bookmaking but with a major emphasis on
internet gaming.
Net-Force Entertainment Inc. has been granted a gaming license by the
Antigua and Barbuda Free Trade & Processing zone and has also entered
into a software gaming license with Softec Systems for the operation
of an internet casino. The Company commenced operations in April 2000.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected an April 30 year end.
b. Basic Loss Per Share
Basic loss per share has been calculated based on the weighted average
number of shares of common stock outstanding during the period.
From
Inception on
For the March 1,
Year Ended 1999 Through
April 30, April 30,
2000 1999
------------------ ------------------
Basic loss per share:
Numerator - net loss $ (397,366) $ (6,493)
Denominator - weighted average
number of shares outstanding 8,500,000 (5,899,999)
------------------ -----------------
Loss per share $ (0.05) $ (0.00)
================== =================
9
Annual Report 2000 Page 40
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000 and 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Provision for Taxes
The Company's operations are within the Jurisdiction of St. John's,
Antigua, where there is no corporate income tax.
d. Cash and Cash Equivalents
The Company considers all highly liquid investment with a maturity of
three months or less when purchased to be cash equivalent.
e. Principles of Consolidation
The April 30, 2000 financial statements are consolidated with the
Company and Entertainment. All significant intercompany accounts and
transaction have been eliminated.
f. Property and Equipment
Office equipment and leasehold improvements are recorded at cost.
Minor additions and renewals are expensed in the year incurred. Major
additions and renewals are capitalized and depreciated over their
estimated useful lives. Depreciation of office equipment and leasehold
improvements is computed using the straight-line method over the
estimated useful lives of the asset of 5 and 10 years, respectively.
Depreciation expense for continuing operations for the years ended
April 30, 2000 and 1999 was $6,428 and $-0-, respectively.
Property and equipment consists of the following:
April 30,
---------------------------------------
2000 1999
------------------ ------------------
Computer equipment $ 19,550 -
Computer software 10,000 -
Leasehold improvements 9,668 -
Office furniture and equipment 8,101 -
Accumulated depreciation (6,428) -
------------------ ------------------
Net Property and Equipment $ 40,891 $ -
================== ==================
g. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
10
Annual Report 2000 Page 41
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000 and 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. Change in Accounting Principle
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which requires companies to record
derivatives as assets or liabilities, measured at fair market value.
Gains or losses resulting form changes in the values of those
derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. The key
criterion for hedge accounting is that the hedging relationship must
be highly effective in achieving offsetting changes in fair value or
cash flows. SFAS No. 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. The adoption of this
statement had no material impact on the Company's financial
statements.
i. Revenue Recognition Policy
The Company recognizes as revenue the net winnings from gaming
activities, which is the difference between gaming winnings and
losses. The earnings process is complete upon receipt of the net
winnings, and no further obligations exist to the customer.
Cost of sales includes royalties, payable to Softec, incurred on
Casino activity and bank discount fees incurred by the Company for the
acceptance of credit cards.
The formula for net revenue sharing is as follows: (Casino gain (loss)
less adjustment for incentives less charge backs) times a royalty
factor to be paid to Softec. The royalty factor used depends on net
monthly revenue. The following table lists the schedule of royalty
payments:
Net Monthly RevenueRoyalty Fee Payable
--------------------------------------
0 to $500,000 25%
$500,001 to $1,000,000 20%
$1,000,001 to $5,000,000 15%
$5,000,001 to $10,000,000 12.5%
$10,000,001 plus 10%
j. Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred. Advertising expense for the years ended April 30,
2000 and 1999 was $99,283 and $-0-, respectively.
k. Long-Lived Assets
In accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
long-lived assets, including goodwill associated with other long-lived
assets, are evaluated for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
11
Annual Report 2000 Page 42
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000 and 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
l. Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are
translated into United States dollars at the period end exchange rate.
Non-monetary assets are translated at the historical exchange rate and
all income and expenses are translated at the exchange rates
prevailing during the period. Foreign exchange currency translation
adjustments are included in the stockholders' equity section as other
comprehensive income. The Company operates with East Caribbean Dollars
(EC). The exchange rate between the EC and the United States Dollar
(USD) is always constant at .37453. This constant exchange rate makes
it unnecessary to have a foreign exchange translation adjustment in
the stockholders equity section.
m. Concentrations of Risk - Foreign Operations
The Company operates in St. John's which has a developing economy.
Hyperinflation and rapid political and legal change, often accompanied
by military insurrection, have been common in this and certain other
emerging markets in which the Company may conduct operations. The
Company may be materially adversely affected by possible political or
economic instability in St John's. The risks include, but are not
limited to terrorism, military repression, expropriation, changing
fiscal regimes, high rates of inflation and the absence of industrial
and economic infrastructure. Changes in development or investment
policies or shifts in the prevailing political climate in St. John's
in which the Company operates could adversely affect the Company's
business. Operations may be affected in varying degrees by government
regulations with respect to development restrictions, price controls,
export controls, income and other taxes, expropriation of property,
maintenance of claims, environmental legislation, labor, welfare,
benefit policies, land use, land claims of local residents, water use
and mine safety. The effect of these factors cannot be accurately
predicted.
NOTE 3 - NOTE PAYABLE - RELATED PARTY
Geneva Overseas Holdings Ltd. (A Company April 30,
controlled by the president of the Company) ------------------------------
made advances to the Company totaling 2000 1999
$2,024. These advances have an interest -------------- --------------
rate of 8% annually. This note is unsecured. $ 2,024 $ 2,000
Less Current Portion 2,024 2,000
-------------- --------------
Total Long-Term Debt -Related Party $ - $ -
============== ==============
12
Annual Report 2000 Page 43
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000 and 1999
NOTE 3 - NOTE PAYABLE - RELATED PARTY (Continued)
The following is a summary of the future maturities of the long-term
debt-related party:
For the
Year Ended
April 30,
----------
2001 $ 2,024
2002 -
2003 -
2004 -
-------------
$ 2,024
=============
Interest expense for the years ending April 30, 2000 and 1999 was $-0-
and $-0-, respectively.
NOTE 4 - NOTE PAYABLE AND ACCRUED INTEREST
April 30,
------------------------------
Note payable to Mountain High Management Inc. 2000 1999
dated July 13, 1999, accruing interest at 15% -------------- --------------
annually, due on July 29, 2001. This note is
unsecured $ 495,000 $ -
Accrued Interest 55,690 -
-------------- --------------
Total Note Payable and accrued interest 550,690 -
Less Current Portion - -
-------------- --------------
Total Long-Term Debt $ 550,690 $ -
============== ==============
The following is a summary of the future maturities of the long-term
debt:
For the
Year Ended
April 30,
-----------
2001 $ -
2002 550,690
--------------------
$ 550,690
====================
13
Annual Report 2000 Page 44
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000 and 1999
NOTE 5 - GOING CONCERN
The Company's consolidated 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 incurred
losses from its inception through April 30, 2000. The Company does not
have an established source of revenues sufficient to cover its
operating costs and to allow it to continue as a going concern. It is
the intent of the Company to seek additional financing through private
placements of its common stock. This will be accomplished through the
use of equity issuances. Management believes the funds will more
likely than not be successfully raised, but there can be no assurance
of this. The Company expects that operations will increase in 2001,
and will start to provide cash flows from operations and expansion.
The Company expects that it will need $750,000 to $1,250,000
additional funds for operations and expansion in 2001.
NOTE 6 - STOCK TRANSACTIONS
On March 1, 1999, the Company issued 5,500,000 shares of common stock
to founders of the Company for $5,500 of cash. The shares were sold at
the par value of $0.001.
On April 22, 1999, the Company sold 3,000,000 shares of common stock
for cash at $0.01 per share to related investors.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Software Licensing Agreement
In the first quarter of 1999, the Company entered into a software
licensing agreement with Softec Systems Caribbean Inc. (Softec), to
provide online-gaming software and hardware services. The license
agreement calls for a commitment by the Company to spend a minimum of
10% of the previous months net revenue (based on a yearly average) for
ongoing promotion and marketing. The marketing obligation only applies
to the first 365 days of operation. The license agreement also calls
for sharing of net revenues based on a specific formula agreed to by
the Company and Softec. The license agreement may be terminated by the
Company at the end of any one-year term or by Softec at the end of any
one-year term subsequent to the first year of the agreement.
All of the Company's websites and advertising are directly linked to
Softec's software. Softec manages the software as well as the upkeep
and maintenance. The Company is highly dependent, therefore, on
Softec's ability to maintain the software and keep it running. In the
event that the software fails, the Company's business and operations
could be strongly affected.
14
Annual Report 2000 Page 45
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000 and 1999
NOTE 8 - SUBSEQUENT EVENTS
Stock Buy Back
--------------
On June 1, 2000, the Company repurchased 3,000,000 shares which had
been previously issued on April 22, 1999 for $30,000. These shares
were canceled.
Private Placement
-----------------
On June 1, 2000, the board of directors approved a Regulation S
Private Placement for 2,500,000 shares of common stock to be sold at
$0.10 per share. Each share sold has an attached warrant exercisable
at $2.00 per share which expires on December 31, 2002. The Company
received $250,000 and issued 2,500,000 shares pursuant to this Private
Placement.
506 Regulation D
----------------
On July 1, 2000, the board of directors approved a best efforts
private placement equity fundraising under Rule 506 of Regulation D
for up to 2,000,000 shares at $0.50 per share. Each share has an
attached warrant exercisable at $4.00 per share. The warrants expire
on December 31, 2002. The Company has raised $-0- as of the date of
the audit report.
Notes Payable - related party
-----------------------------
The Company borrowed an additional $206,096 on several promissory
notes from a related party. The notes bear an annual interest rate of
8% and are due two years from the note dates.
Notes Payable
-------------
On November 1, 2001, the Company borrowed an additional $50,000. The
note bears an annual interest rate of 8% and is due on November 1,
2004.
Stock Issuance
--------------
On September 15, 2001, the Company converted the note payable related
party of $208,121 and accrued interest of $6,362 into equity by
issuing 2,144,830 shares of common stock at $0.10 per share for a
total of $214,483.
On September 15, 2001, the Company converted a note payable of
$495,000 and accrued interest of $107,783 into equity by issuing
6,027,830 shares of common stock at $0.10 per share for a total of
$602,783.
On September 15, 2001, the Company converted a note payable of $50,000
and accrued interest of $3,333 into equity by issuing 533,333 shares
of common stock at $0.10 per share for a total of $53,333.
15
Annual Report 2000 Page 46
NET-FORCE SYSTEMS, INC.
NET-FORCE SYSTEMS INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000 and 1999
NOTE 8 - SUBSEQUENT EVENTS (Continued)
Stock Issuance (Continued)
--------------------------
On September 30, 2000, the Company issued 2,000,000 shares of common
stock valued at $0.10 per share for cash of $200,000.
On October 2, 2001, the Company issued 500,000 shares of common stock
for the subscription payable of $50,000 at $0.10 per share.
On August 15, 2001, the Company issued 200,000 shares of common stock
valued at $0.10 per share, to a director for services and consulting,
with 100,000 shares for services and 100,000 shares for consulting.
16
Annual Report 2000 Page 47
NET-FORCE SYSTEMS, INC.
ITEM 18. FINANCIAL STATEMENTS
Not Applicable
PART IV INDEX TO EXHIBITS
2.
2.1 Articles of Incorporation of Net-Force Systems Inc.
2.2 Bylaws of Net-Force Systems Inc.
2.3 Articles of Incorporation - Net-Force Entertainment Inc.
2.4 Bylaws of Net-Force Entertainment Inc.
6. Material Contracts
6.1 Starnet Systems Inc. (formerly Softec Systems Caribbean Inc), Amendment
To Software License Agreement
6.2 Government of Antigua and Barbuda Gaming License
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this annual return to be signed on its behalf by the
undersigned, thereunto duly authorized.
Net-Force Systems Inc. (Registrant)
Date: April 12, 2002
/s/ "Terry G. Bowering"
----------------------------------------------------
Terry G. Bowering, President, Chairman of the Board,
Chief Executive Officer and Director
Date: April 12, 2002
/s/ "Dwight Lewis
----------------------------------------------------
Director
Annual Report 2000 Page 48
NET-FORCE SYSTEMS, INC.
Exhibit 2.1 - ARTICLES OF INCORPORATION
ANTIGUA AND BARBUDA
The International Business Corporations Act, 1982
No. 28 of 1982 Cap. 222 Vol. 5 of the Revised Laws of Antigua 1992 Edition
A Company Limited by Shares
ARTICLES OF INCORPORATION
OF
NET-FORCE SYSTEMS INC.
ARTICLE 1
---------
NAME
----
The name of the Corporation is NET-FORCE SYSTEMS INC.
ARTICLE II
----------
REGISTERED OFFICE AND AGENT
---------------------------
The registered agent of the Corporation shall be Hill & Hill whose office
is situate at 36 Long Street, in the City of Saint John in Antigua and Barbuda,
which offices shall also be the registered office of the Corporation.
ARTICLE III
-----------
CAPITAL
-------
1. The Corporation is authorized to issue 100,000,000 bearer or
registered shares of US$0.001 each par value common stock which shall be
designated "Common Shares" and 50,000,000 Preferred Shares of US$0.001 each par
value which shall be designated "Preferred Shares".
2. No pre-emptive rights shall attach to the shares to be issued in
respect of any class.
3. Both classes of shares may be issued in series and the directors shall
have the authority to fix the number of shares in, or to determine the
designation of, and the rights, privileges, restrictions and conditions
attaching to the shares of each series.
4. The Corporation shall have the power to increase or reduce said
capital, and to issue any part of its capital, original or increased, with or
without any preference, priority, or special privilege, or subject to any
postponement of rights, or to any conditions or restrictions, and so that,
unless the conditions of issue shall otherwise expressly declare, every issue of
shares, whether declared to be preference or otherwise shall be subject to the
power herein contained.
Annual Report 2000 Page 49
NET-FORCE SYSTEMS, INC.
ARTICLE IV
----------
BOARD OF DIRECTORS
------------------
The objects for which the Corporation is established are:
a. To conduct any and all business activities permitted by the Laws of
Antigua/Barbuda as an International Business Corporation.
b. To carry on the business of an investment and holding company and for
that purpose to acquire and hold either in the name of the Corporation or in
that of any nominee, shares, stocks, debentures, debenture stock, script bonds,
notes, obligations, investments and securities and warrants or options in
respect of any shares, stocks, debentures, debenture stock, script bonds, notes,
obligations, investments or securities, of all kinds issued in any country in
any part of the world.
c. To acquire and deal with any property, real or personal, to erect
buildings, and generally to do all acts and things which, in the opinion of the
Corporation or the Directors, may be conveniently or profitably, or usefully,
acquired and dealt with, carried on, erected or done by the Corporation in
connection with said property.
d. The Corporation shall not engage in International Banking, Trust,
Insurance, Betting and Book making or any activity which requires a License
under the International Business Corporations Act.
e. To generally have and exercise all powers, rights and privileges
necessary and incident to carrying out properly the objects herein mentioned.
ARTICLE VI
----------
EXISTENCE
---------
The Corporation shall have perpetual existence unless sooner dissolved in
accordance with the Laws of Antigua and Barbuda. The date on which corporate
existence shall begin is the date on which these Articles of Incorporation are
filed with the Director of International Business Corporations of Antigua and
Barbuda.
ARTICLE VII
-----------
LIABILITY OF SHAREHOLDERS
-------------------------
The liability of a shareholder is limited to the amount, if any, unpaid on the
shares held or subscribed to by said shareholder.
ARTICLE VIII
------------
INDEMNIFICATIONS
----------------
The Corporation shall indemnify any and all of its Directors, officers,
employees or agents or former Directors, officers, employees or agents or any
person who may have served at its request as a Director, officer, employee or
agent of another company, partnership, joint venture, trust or other enterprise
in which it owns shares of capital stock or of which it is a creditor, to the
full extent permitted by law. Said indemnification shall include, but not be
limited to, the expenses, including the cost of any judgments, fines,
=settlements and counsel's fees, actually and necessarily paid or incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, and any appeals thereof, to which any such
person or his legal representative may be made a party or may be threatened to
be made a party by reason of his being or having been a Director, officer,
employee or agent as herein provided unless such action, suit or proceeding is a
Annual Report 2000 Page 50
NET-FORCE SYSTEMS, INC.
result of the Director, officer, employee or agent's own negligence or illegal
action. The foregoing right of indemnification shall not be exclusive of any
other rights to which and Directors, officers, employee or agent may be entitled
as a matter of law or which he may be lawfully granted.
ARTICLE IX
----------
CHARTER CONTINUATION
--------------------
The Corporation is authorized to transfer its charter to any jurisdiction which
permits continuation of a foreign corporation.
ARTICLE X
---------
SECURITIES
----------
No securities of the Corporation will be distributed to the public in Antigua
and Barbuda in contravention of Section 365 of the International Business
Corporations Act, 1982.
ARTICLE XI
----------
INCORPORATORS
-------------
The name and address of the Corporation's incorporators are:
Stacy Richards-Anjo Ethlyn Tonge
C/o Hill & Hill Chambers c/o Hill & Hill Chambers
Long Street, St. John's Long Street, St. John's
Antigua Antigua
"Stacy Richards-Anjo" "Ethlyn Tonge"
- -------------------------------- -------------------------
DATED this 24th day of February, 1999 at St. John's, Antigua.
- -------------------------------------------------------------
Annual Report 2000 Page 51
NET-FORCE SYSTEMS, INC.
Exhibit 2.2 - BY-LAWS
ANTIGUA AND BARBUDA
The International Business Corporations Act, 1982
No. 28 of 1982 Cap. 222 Vol. 5 of the Revised Laws of Antigua 1992 Edition
A Company Limited by Shares
BY-LAWS
OF
NET-FORCE SYSTEMS INC.
PRELIMINARY
-----------
In these By-Laws, if not inconsistent with the subject or context, the words
hereinafter stated shall bear the meanings opposite to them.
THE CORPORATION The above-named Corporation
THE ACT The International Business Corporations Act, 1982 No. 28 of
1982, and every other Act for the time being in force
concerning corporations and affecting the Corporation.
THESE PRESENTS These By-Laws as originally framed, or as from time to time
amended or altered by special resolution.
THE REGISTER The Register of shareholders to be kept as required by
Section 130 of the Act.
OFFICE The Registered Office for the time being of the Corporation.
THE BOARD The Board of Directors for the time being of the
Corporation.
ORDINARY A resolution passed by a majority of the shares entitled to
RESOLUTION vote.
1. Shares and Share Capital
------------------------
1.1 Issuance
--------
The issue or allotment of shares shall be under the control of the Board
which may issue the whole or any portion thereof with such referred, deferred,
special or limited rights as it may think fit.
1.2 Alteration of Capital
---------------------
The Corporation may from time to time by ordinary resolution increase the
share capital by such sum to be divided into shares of such amount as the
resolution shall prescribe. The Corporation may by ordinary resolution:
a. Consolidate and divide all or any portion of its share capital into
shares of larger amount than its existing shares;
b. Sub-divide its existing shares, or any of them, into shares of smaller
amount that is fixed by the Articles of Incorporation subject,
nevertheless, to the provisions of the Act;
c. Cancel any shares which, at the date of the passing of the resolution,
have not been taken up or agreed to be taken up by any person.
Annual Report 2000 Page 52
NET-FORCE SYSTEMS, INC.
Subject to the provisions of the Act, the Corporation may by special
resolution reduce its share capital, any capital redemption reserve fund or any
share premium account.
2. Share Certificates and Register
-------------------------------
2.1 Certificates
------------
Certificates representing shares of the Corporation shall be in such form
as shall be determined by the directors. Such certificates shall be signed by a
director. All certificates for shares shall be consecutively numbered or
otherwise identified. Certificates may be issued to bearer or in registered
form. Bearer certificates shall be marked as not transferable to residents of
Antigua and Barbuda.
2.2 Register
--------
The number of shares, the date of issue, the consideration paid, and the
serial number of each bearer or registered certificate shall be entered on the
Register of the Corporation. In the case of registered shares, the name and
address of the holder shall also be entered on said register.
2.3 Lost or Damaged Certificate
---------------------------
In the case of a lost, destroyed or mutilated certificate, a new one may be
issued therefore upon such terms and indemnity to the Corporation as the Board
may prescribe.
3. Transfer of Shares
------------------
3.1 Transfer
--------
Upon surrender to the Corporation or the transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, and
cancel the old certificate; every such transfer shall be entered on the Register
of the Corporation.
3.2 Record Owner
------------
The Corporation shall be entitled to treat the holder on record of any
registered share as the holder in fact thereof, and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share on
the part of any other person whether or not it shall have express or other
notice thereof, except as expressly provided by the Act.
4. Fiscal Year
-----------
The fiscal year of the Corporation shall begin on the 1st day of January
each year.
5. Dividends
---------
The Board may from time to time declare, and the Corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
Annual Report 2000 Page 53
NET-FORCE SYSTEMS, INC.
6. Seal
----
The Board may provide a corporate seal which shall be circular in form and
shall have inscribed thereon the name of the Corporation, the place of
incorporation and the year of incorporation.
7. Meetings
--------
7.1 Annual Directors' Meeting
-------------------------
The annual Directors' Meeting of the Corporation shall be held no more than
four (4) months from the date of registration of the Corporation at such place
within Antigua and Barbuda as the Board may determine.
7.2 Annual Shareholders' Meeting
----------------------------
An Annual Shareholders' Meeting of the Corporation shall be held every year
after the incorporation of the Corporation at such time and place within Antigua
and Barbuda as shall from time to time be prescribed by the Board.
7.3 Special Shareholders' Meeting
-----------------------------
The Board may, whenever it thinks fit, convene a Special Shareholders'
Meeting. The Board shall also on the requisition of the holders of not less than
one-twentieth (1/20) of the issued share capital of the Corporation proceed to
convene a special Shareholders' Meeting of the Corporation.
7.3 Proceedings
-----------
All business shall be deemed special that is transacted at a Special
Shareholders' Meeting, and also that is transacted at any Annual Shareholders'
Meeting, with the exception of the consideration of the accounts and auditor's
report, if any, the election of directors and the reappointment of any incumbent
auditor.
7.5 Quorum
------
No business shall be transacted at any shareholders' meeting unless a
quorum of shareholders is present at the time when the meeting proceeds to
business. Save as is herein otherwise provided, shareholders present in person
or by proxy representing a majority of the Corporation's shares shall constitute
a quorum.
7.6 Chairman
--------
All meetings shall be chaired by a Director appointed by the Board to act
as Chairman.
7.7 Minutes
-------
Minutes of the proceedings of every Annual Shareholders' Meeting shall be
kept, and shall be signed by the Chairman of the same meeting, or by the
Chairman of the next succeeding meeting, and the same, when so signed, shall be
conclusive evidence of all such proceedings and of the proper election of the
Chairman.
Annual Report 2000 Page 54
NET-FORCE SYSTEMS, INC.
7.8 Votes of Shareholders
---------------------
Subject to any rights or restrictions for the time being attached to any
class or classes of shares, every shareholder shall have one vote for each share
of which he is the holder. All elections for directors shall be decided by
majority vote; all other questions shall be decided by majority vote except as
otherwise required by the Act.
7.9 Informal Action by Shareholder
------------------------------
Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
7.10 Proxies
-------
Votes may be given either personally or by proxy. The instrument appointing
a proxy shall be in writing under the hand of the appointer or his attorney duly
authorized in writing, or if the appointer is a corporation, either under seal
or under the hand of an officer or attorney duly authorized. A proxy need not be
a shareholder of the attorney or other authority, if any, under which it is
signed or a certified copy of that power of attorney shall be deposited at the
office or at such other place within Antigua as is specified for that purpose in
the notice convening the meeting.
7.11 Notice of Meeting
-----------------
Written or printed notice stating the place, day and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less that Twenty-One (21) days before the date
of the meeting, either personally by mail or facsimile, to each shareholder on
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the mail, addressed to the shareholder at his
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid.
7.12 Waiver of Notice
----------------
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
8. Directors
---------
8.1 Number of Directors
-------------------
Unless and until the Corporation in a General or Special Shareholders'
Meeting shall otherwise determine, the number of Directors shall be five. Each
director shall hold office unless removed as provided in these presents, until
the next Annual Shareholders' Meeting and until his successor shall have been
elected.
8.2 Remuneration of Directors
-------------------------
Each of the Directors shall be paid out of the funds of the Corporation
such remuneration for his services as a director as the Corporation is an Annual
Shareholders' Meeting may from time to time determine. The directors may also be
paid all traveling, hotel and other expenses properly incurred by them in
attending and returning from meetings of the directors or any committee of the
directors or meetings of the Corporation or in connection with the business of
the Corporation.
Annual Report 2000 Page 55
NET-FORCE SYSTEMS, INC.
8.3 Directors with Other Offices and Interests
------------------------------------------
A director may hold any other office or place of profit under the
Corporation and he or any firm of which he is a member may act in a professional
capacity for the Corporation in conjunction with his office of director of the
Corporation for such period and in such terms as to remuneration and otherwise
as the Board may determine. No director or intending director shall be
disqualified by his office from contracting with the Corporation, either with
regard thereto, as a vendor, purchaser or otherwise, nor shall any such
contract, or any contract or arrangement entered into by or on behalf of the
Corporation in which any director so contracting or being so interested be
liable to account to the Corporation for any profit realized by any such
contract or arrangement by reason of such director holding such office, or of
the fiduciary relationship thereby established so long as the director notifies
the Corporation in accordance with the requirements of the Act. To the extent
permitted by the Act, any director may vote as a director or shareholder in
respect of any such contract or arrangement; provided that such director must
disclose his interest in the contract or arrangement, the contract or
arrangement must be entered into by the Corporation in an Annual or Special
Shareholders' Meeting, and before the contract or arrangement is so entered
into, the directors must disclose their interests to the meeting.
8.4 Proceedings of the Board
------------------------
The Board at the request of any Director may meet together for the dispatch
of business, adjourn and otherwise regulate their meetings as it thinks fit.
8.5 Executive Committee
-------------------
The Board at a duly constituted meeting may by a resolution appoint a
committee from among themselves to be known as an executive committee. This
committee may perform such acts in the name of the Board in the same fashion as
if the Board had acted. The limits of the executive committee's acts shall be
prescribed by resolution of the Board. The powers of this committee may be
changed from time to time by subsequent resolution of the Board.
8.6 Quorum
------
The quorum necessary for the transaction of the business of the Board may
be fixed by the Board, and unless so fixed shall be one-half (1/2) of the number
of persons then serving as directors. The quorum of any committee of the Board
shall be fixed by the meeting of the Board appointing such committee and, if not
so fixed, then such quorum shall be fixed by the members of such committee.
8.7 Voting
------
Every question at a meeting of the Board shall (except where otherwise
provided by the Board) shall be determined by a majority of the votes of the
Directors present, every director having one (1) vote.
8.8 Action without a Meeting
------------------------
A resolution may be adopted without any meeting of the Board or of a
committee if evidenced by writing under the hands of all the directors or of all
the members of such committee, and such writing shall be as valid and effectual
as a resolution duly passed at a meeting of the Board or such committee.
8.9 Powers of the Board
-------------------
The business of the Corporation shall be managed by the Board, who may
exercise all such powers of the Corporation as are not by the Act or by these
By-Laws required to be exercised by the Corporation in an Annual Shareholders'
Meeting, subject nevertheless to any regulation of these By-Laws, to the
provisions of the Act as may be prescribed by special resolution of the
Annual Report 2000 Page 56
NET-FORCE SYSTEMS, INC.
Corporation, but no regulation so made by the Corporation shall invalidate any
prior act of the Board which would have been valid if such regulation had not
been made. The general powers given by this by-law shall not be limited or
restricted by any special authority or power given to the Board by any other
By-Law.
8.10 Appointment of Attorney
-----------------------
The Board may from time to time and at any time, by powers of attorney,
appoint any corporation, firm or person to be the attorneys of the Corporation
for the purpose of executing deeds on behalf of the Corporation in or outside
Antigua and Barbuda and for such periods and subject to such conditions as they
may think fit, and any such power of attorney may contain such provisions for
the protection of persons dealing with any such attorney as the Board may think
fit, and may also authorize any such attorney to sub-delegate all or any of the
powers, authorities and discretion vested in him.
8.11 Removal of Director
-------------------
Any director may be removed by a majority vote of the shareholders.
8.12 Resignation of Director
-----------------------
A director may resign at any time by giving written notice to the Board.
Unless otherwise specified in the notice, the resignation shall take effect upon
receipt thereof by the Board and the acceptance of the resignation shall not be
necessary to make it effective.
8.13 Presumption of Assent
---------------------
A director of the Corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the Secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the Secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
9. Officers
--------
9.1 Number
------
The officers of the Corporation shall be a president, a vice-president, a
secretary and a treasurer, each of whom shall be elected by the directors. Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the Directors. Any two or more offices may be held by the same
person.
9.2 Election and Term of Office
---------------------------
The officers of the Corporation to be elected by the Board shall be elected
annually at the first meeting of the Board after each Annual Meeting of the
shareholders. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided.
9.3 Removal
-------
Any officer or agent elected or appointed by the Board may be removed by
the Board whenever in their judgment the best interests of the Corporation would
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
Annual Report 2000 Page 57
NET-FORCE SYSTEMS, INC.
9.4 Vacancies
---------
A vacancy in any office because of death, resignation, removal or
disqualification, may be filled by the Board for the unexpired portion of the
term.
9.5 President
---------
The President shall be the principal executive officer of the Corporation
and, subject to the control of the directors, shall in general supervise and
control all of the business affairs of the Corporation. He may sign, with the
secretary or any other proper officer of the Corporation thereunto authorized by
the directors, any deeds, mortgages, bonds, contracts, or other instruments
which the directors have authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the directors or
by these By-Laws to some other officer or agent of the Corporation, or shall be
required by law to be otherwise signed or executed; and in general shall perform
all duties incident to the office of president and such other duties as may be
prescribed by the directors from time to time.
9.6 Secretary
---------
The secretary shall keep the minutes of the shareholders' and of the
directors' meeting in one or more books provided for that purpose, see that all
notices are duly given in accordance with the provisions of these By-Laws or as
required, and be custodian of the Corporate records.
9.7 Treasurer
---------
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the Corporation; receive and give
receipts for moneys due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these By-Laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the Board.
9.8 Salaries
--------
The salaries of the officers shall be fixed from time to time by the Board
and no officer shall be prevented from receiving such salary by reason of the
fact that he is also a director of the Corporation.
10. Accounts
--------
The Board shall cause to be kept such books of account as are necessary to
comply with the provisions of the Act. The books of account shall be kept at the
office or at such other place as the Board thinks fit, and shall always be open
to the inspection of the Board. Any director or shareholder shall have the right
to inspect any account or book or document of the Corporation. The Board shall
from time to time in accordance with the provisions of the Act cause to be
prepared and to be laid before an Annual Shareholders' Meeting such profit and
loss accounts, balance sheets and reports as may be necessary.
11. Auditors
--------
Auditors may be appointed and their duties regulated in accordance with the
provisions of the Act. Subject to the provisions of the Act, all acts done by
any person acting as an auditor shall, as regards all persons dealing in good
faith with the Corporation, be valid, notwithstanding that there was some defect
in his appointment or that he was at the time of his appointment not qualified
for appointment.
Annual Report 2000 Page 58
NET-FORCE SYSTEMS, INC.
12. Liquidation
-----------
If the Corporation shall be wound up (whether the liquidation be voluntary,
under the supervision of or by the Court) the Liquidator may, with the required
authority, divide among the shareholders in specie or kind the whole or any part
of the assets of the Corporation, and whether or not the assets shall consist of
property of one kind or properties of different kinds, and may for such purpose
set such value as he deems fair upon one or more or classes of property, and may
determine how such different classes of shareholders. The Liquidator may, with
the like authority, vest any part of the assets in trustees upon such trusts for
the benefit of shareholders as the Liquidator with the like authority shall
think fit, and the liquidation of the Corporation may be closed and the
Corporation dissolved.
13. Amendments
----------
These By-Laws may be altered, amended or repealed and new By-Laws may be
adopted by a vote of the shareholders representing a majority of all the shares
issued and outstanding, at any Annual Shareholders' Meeting or at any Special
Shareholders' Meeting when the proposed amendment has been set out in the notice
of such meeting.
14. Initial Directors
-----------------
The initial Board of Directors shall be composed of:
Terry G. Bowering
Douglas N. Bolen
Annual Report 2000 Page 59
NET-FORCE SYSTEMS, INC.
Exhibit 2.3 - ARTICLES OF INCORPORATION
ORGANISATIONAL MEETING OF NET FORCE ENTERTAINMENT INC. HELD AT THE REGISTERED
OFFICE ON THE 13TH DAY OF AUGUST 1999 AT 11:30 A.M
- --------------------------------------------------
Present: Asdak Inc by its Director Alice Roberts; Clovis Grant as Secretary
Alice Roberts called the meeting to order. Alice Roberts acted as Chairman of
the meeting and Clovis Grant acted as Secretary thereof. The persons present
declared their waiver of notice of the time and place of the meeting. The
Chairman stated that a quorum was reached since the sole initial director was
represented.
By-Laws
- -------
The Secretary presented to the meeting the Certificate of Incorporation and Good
Standing and a print of the Articles of Incorporation and By-laws of the Company
as registered with the Executive Director, International Financial Sector
Authority on the 5th August 1999. By motion duly made, seconded and carried it
was resolved that the By-Laws be approved and adopted in the form presented.
Officers
- --------
By motion duly made, seconded and carried it was resolved that the following
persons be appointed officers of the company -
Terry Bowering - President
Douglas Bolen - Secretary
Shares
- ------
By motion duly made, seconded and carried it was resolved that the Board of
Directors be authorized to issue the following shares in the company in the
format attached:
Net Force Systems Inc, St John's, Antigua 100 shares
Banking Arrangements
- --------------------
By motion duly made, seconded and carried it was resolved that
(1) the Company be authorized to open an account or accounts with Swiss
American Bank Ltd, St. John's, Antigua.
(2) the usual banking resolutions required by the Company's bankers for the
operation of accounts by the Company be deemed resolutions duly passed by this
resolution.
(3) all cheques, bills of exchange and other negotiable instruments shall be
signed on behalf of the Company by either Terry Bowering or Douglas Bolen.
There being no further business the meeting ended at 11:45 a.m.
/s/ "Alice Roberts" /s/ "Clovis Grant"
....................... ..........................
Alice Roberts Clovis Grant
Chairman of Meeting Secretary of Meeting
Annual Report 2000 Page 60
NET-FORCE SYSTEMS, INC.
ANTIGUA AND BARBUDA
The International Business Corporations Act, Cap 222
A Company Limited By Shares
ARTICLES OF INCORPORATION
OF
NET FORCE ENTERTAINMENT INC.
----------------------------
ARTICLE I
NAME
----
The name of the Company is NET FORCE ENTERTAINMENT INC.
ARTICLE II
REGISTERED OFFICE AND AGENT
---------------------------
The registered agent of the Company shall be Caribbean Management & Trust
Company Limited situate at 60 Nevis Street in the city of Saint John, Antigua,
which office shall also Be the registered office of the Company.
ARTICLE III
CAPITAL
-------
The authorized capital of the Company is US$ 100,000.00 divided into 100,000,000
common Shares of US$0.01 each. The Company shall have the power to increase or
reduce said Capital, and to issue any part of it's capital, original on
increased, with or without any Preference, priority, or special privilege, or
subject to any postponement of rights, or to any Conditions or restrictions; and
so that, unless the conditions of issue shall otherwise Expressly declare, every
issue of shares, whether declared to be preference or otherwise, Shall be
subject to the power herein contained.
ARTICLE IV
BOARD OF DIRECTORS
------------------
The Powers of the Company shall be exercised by the Board of Directors of the
Company. The company shall have a minimum of one and a maximum of four
directors.
ARTICLE V
CORPORATE PURPOSE
-----------------
The object for which the Company is established are:-
Annual Report 2000 Page 61
NET-FORCE SYSTEMS, INC.
(a) To engage only in any International betting, gaming, sportsbetting and
bookmaking Permitted by the laws of Antigua and Barbuda and to accept wagers on
sporting Events taking place in the Caricom region from residents of countries
outside the Caricom region.
(b) To acquire and with any property, real or personal, to erect any buildings,
and do All acts and things, which in the opinion of the Company or the
directors, may be Conveniently or profitably, or usefully, acquired and dealt
with, carried on, erected Or done by the Company in connection with the
property.
(c) To generally have and exercise all powers, rights and privileges necessary
and incident to carry out properly the objects herein mentioned.
(d) With the exception of betting, gaming, sportsbetting, and bookmaking, the
company Shall not engage in International Banking, Trust, or Insurance or any
activity Which requires a Licence under the International Business Corporations
Act
ARTICLE VI
EXISTENCE
---------
The Company shall have perpetual existence unless sooner dissolved in
accordance with the Laws of Antigua and Barbuda. The date on which corporate
existence shall begin in the date On which these Articles of Incorporation are
filed with the Director of International Business Corporations of Antigua and
Barbuda.
ARTICLE VII
LIBIALITY OF SHAREHOLDERS
-------------------------
The liability of a shareholder is limited to the amount, if any unpaid on
the shares held or subscribed to by such shareholder.
ARTICLE VIII
INDEMNITIES
-----------
The Company shall indemnify any and all of its Directors, Officers,
employees or agents or Former Directors, officers, employees or agents or any
person or persons who may have Served at its request as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise in which it owns capital stock or of which it is a creditor, to
the full extent permitted by law; and such indemnity shall include, but not be
limited to, the expense, including the cost of any judgements, fines,
settlements and counsel's fees, actually and necessarily paid or incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, and any appeals thereof, to which any such
person or his legal representative may be made a party or may be threatened to
be made a party by reason of his being or having been a Director, officer,
employee or agent as herein provided. The foregoing right of indemnity shall not
be exclusive of any other rights to which any Directors, officer, employee or
agent may be entitled as a matter of law or which may be lawfully granted.
ARTICLE IX
CHARTER CONTINUATION
--------------------
The Company is authorized to transfer its charter to any jurisdiction which
permits Continuation of a foreign corporation.
ARTICLE X
SECURITIES
----------
No securities of the Company will be distributed to the public in Antigua
and Barbuda.
Annual Report 2000 Page 62
NET-FORCE SYSTEMS, INC.
ARTICLE XI
INCORPORATORS
-------------
The name and address of the Company's incorporators are;-
CLARE K. ROBERTS, Attorney-at-law, 60 Nevis Street, St.John's, Anitgua
CLOVIS GRANT, Attorney's Clerk, 60 Nevis Street, St. John's Antigua.
Dated this "5th" day of "August", 1999 at St. John's Antigua.
/s/ "Clare K. Roberts" /s/ "Clovis Grant"
............................. .............................
Clare K. Roberts Clovis Grant
Attorney-at-Law Attorney's Clerk
Annual Report 2000 Page 63
NET-FORCE SYSTEMS, INC.
Exhibit 2.4 - BY-LAWS
ANTIGUA AND BARBUDA
The International Business Corporation Act, Cap 222
A Company Limited By Shares
BY-LAWS
OF
NET FORCE ENTERTAINMENT INC.
----------------------------
PRELIMINARY
-----------
In these and other by-laws of the Company, unless the context otherwise
requires-
"Act" means the International Business corporation Act, Cap 222, as from
time to time amended any other enactment for the time being in force
substituted therefore;
"Board" means the board of directors for the time being of the Company;
"Company" means the above-named Company;
"ordinary resolution" means a resolution passed by a majority of the shares
entitled to vote;
"office" means the registered office for the time being of the Company; and
"Register" means the register of shareholders to be kept as required by
section 130 of the Act.
Unless the context otherwise requires, words and expressions defined in the Act
have the same meanings when used in these By- Laws in particular,
(a) words importing the singular number include the plural and vice-versa;
(b) words importing gender include the masculine, feminine and neuter
genders; and
(c) words importing a person include an individual, partnership,
association and body corporate and a trustee, executor, administrator
and other personal representative of any person.
SHARES AND SHARE CAPITAL
1.1 ISSUANCE. The issue or allotment of shares shall be under the control of
the Board which may issue the whole or any portion thereof with such preferred,
deferred, special or limited rights as it may think fit.
1.2 PREEMPTIVE RIGHTS. All new issue of unissued shares of whatever kind shall
be offered To the shareholders in proportion to the normal value of existing
shares held by them, And such offer shall be made by notice specifying the
number of shares to which the shareholder is entitled and limiting a time within
which the offer, if not accepted, will be deemed to be declined; and after the
expiration of such time or on the receipt of an indication from the shareholders
to whom such notice is given that declines to accept the shares so offered, the
Board may dispose of the same in such manner as it deems most beneficial to the
Company.
1.3 ALTERATION OF CAPITAL. The Company may from time to time by ordinary
resolution Increase the share capital by such sum to be divided into shares of
such amount as the Resolution shall prescribe. The Company may by ordinary
resolution:
Annual Report 2000 Page 64
NET-FORCE SYSTEMS, INC.
(a) Consolidate and divide all or any portion of its share capital into
shares of Larger amount than it's existing shares;
(b) Sub-divide it's existing shares, or any of them, into shares of
smaller amount Than is fixed by the Articles of Incorporation subject,
nevertheless, to the Provisions of the Act;
(c) Cancel any shares which at the date of the passing of the resolution,
have not Been taken up or agreed to, be taken up by any person.
Subject to the provisions of the Act, the Company may by special resolution
reduce Its share capital, any capital redemption reserve fund or any premium
account.
II
SHARE CERTIFICATES AND REGISTER
-------------------------------
2.1 CERTIFICATES. Certificates representing shares of the Company shall be in
such form as Shall be determined by the directors. Such certificates shall be
signed by a director. All Certificates for shares shall be consecutively
numbered or otherwise identified. Certificates May be issued to bearer or in
registered form. Bearer certificates shall be marked as not Transferable to
residents of Antigua and Barbuda.
2.2 REGISTER. The number of shares, the date of issue, the consideration paid,
and the Serial number of each bearer or registered share certificates shall be
entered on the Register Of the Company. In the case of registered shares, the
name and address of the holder shall Also be entered on said Register.
2.3 LOST OR DAMAGED CERTIFICATE. In the case of a lost, destroyed or mutilated
certificate, a New one may be issued therefore upon such terms and indemnity to
the Company as the Board may prescribe.
III
TRANSFER OF SHARES
------------------
3.1 TRANSFER. Upon surrender to the Company or the transfer agent of the
Company of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Company to issue a new certificate to the person entitled thereto,
and cancel the old certificate; every such transfer shall be entered on the
Register of the Company. 3.2 Record Owner. The Company shall be entitled to
treat the holder of record of any registered share as the holder in fact
thereof, and accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person whether or
not it shall have express or other notice threof, except as expressly provided
by the Act.
IV
FINANCIAL YEAR
--------------
4.1 The financial year of the company shall begin on the 1st day of January
each year.
V
DIVIDENDS
---------
5.1 The Board may from time to time declare, and the Company may pay, dividends
on its outstanding shares in the manner and upon the terms and conditions
provided by law.
Annual Report 2000 Page 65
NET-FORCE SYSTEMS, INC.
VI
SEAL
----
6.1 The board may provide a corporate seal which shall have inscribed thereon
the name of the Company, the place of incorporation and year of incorporation.
VII
MEETINGS
--------
7.1 ANNUAL DIRECTORS' MEETING. The Annual Director's Meeting of the Company
shall be held no more than four months from the date of registration of the
Company and at such place within Antigua And Barbuda as the Board may determine.
7.2 ANNUAL SHAREHOLDERS' MEETING. An annual Shareholders' Meeting of the
Company shall be held every year after the incorporation of the Company at such
time and place within Antigua and Barbuda as shall from time to time be
prescribed by the Board.
7.3 SPECIAL SHAREHOLDERS' MEETING. The Board may, whenever it thinks fit,
convene a Special Shareholders' Meeting. The Board shall also on the requisition
of the holders of not Less than one-twentieth of the issued share capital of the
Company proceed to convene a Special Shareholders' Meeting of the Company.
7.4 PROCEEDINGS. All business shall be deemed special that is transacted at a
Special Shareholders' Meeting, and also that is transacted at any Annual
Shareholders' Meeting, with the exception of the consideration of the accounts
and auditor's report, if any, the election of directors and the re- appointment
of any incumbent auditor.
7.5 QUORUM. No business shall be transacted at any shareholders' meeting unless
a quorum of shareholders is present at the time when the meeting proceeds to
business. Save as is herein otherwise provided, shareholders present in person
or by proxy representing a majority of the Company's shares shall constitute a
quorum.
7.6 CHAIRMAN. All meetings shall be chaired by a Director appointed by the
Board to act as Chairman.
7.7 MINUTES. Minutes of the proceedings of every Annual Shareholders' meeting
shall be kept and shall be signed by the Chairman of the same meeting, or by the
Chairman of the next succeeding meeting, and the same, when so signed, shall be
conclusive evidence of all such proceeding and of the proper election of the
chairman.
7.8 VOTES OF SHAREHOLDERS. Subject to any rights or restrictions for the time
being attached to any class or classes of shares, every shareholder shall have
one vote for each share of which he is the holder. All elections for directors
shall be divided by majority vote; all other question shall be decided by
majority vote except as otherwise required by the Act.
7.9 INFORMAL ACTION BY SHAREHOLDER. Unless otherwise provided by law, any
action required to be taken at a meeting of the shareholders, or any other
action which may be taken at a meeting of the shareholders, may be taken without
a meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
7.10 PROXIES. Votes may be given either personally or by proxy. The instrument
appointing a proxy shall be in writing under the hand of the appointee or his
attorney duly authorized in writing, or if the appointee is a corporation either
under seal or under the hand of an officer or attorney duly authorized. A proxy
need not be a shareholder of the Company. The instrument appointing a proxy and
the power of attorney or other authority, if any, under which it is signed or a
certified copy of that power or authority shall be deposited at the office or at
such other place within Antigua and Barbuda as is specified for that purpose in
the notice convening the meeting.
7.10 NOTICE OF MEETING. Written or printed notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than twenty-one
Annual Report 2000 Page 66
NET-FORCE SYSTEMS, INC.
days before the date of the meeting, either personally or by mail, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
company, with postage thereon prepaid.
7.11 WAIVER OF NOTICE. Unless otherwise provided by law, whenever any notice is
required to be given to any shareholder, a waiver thereof in writing, signed by
the person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
VIII
DIRECTORS
---------
8.1 NUMBER OF DIRECTORS. Unless and until the Company in a General or Special
Shareholders' Meeting shall otherwise determine, the number of directors shall
be two. Each director shall hold office unless removed as provided in these
presents, until the next Annual Shareholders' Meeting and until his successor
shall have been elected.
8.2 REMUNERATION OF DIRECTORS. Each of the directors shall be paid out of the
funds of the Company such remuneration for his services as a director as the
Company in an Annual Shareholders' Meeting may from time to time determine. The
directors may also be paid travelling, hotel and other expenses properly
incurred by them in attending and returning from meetings of the directors or
any committee of the directors or meetings of the Company in connection with the
business of the Company.
8.3 DIRECTORS WITH OTHER OFFICES AND INTERESTS. A director may hold any other
office or place of profit tinder the Company and he or any firm of which he is a
member may act in a professional capacity for the Company in conjunction with
his office of director of the Company for such period and on such terms as to
remuneration and otherwise as the Board may determine. No director or intending
director shall be disqualified by his office from contracting with the Company,
either with regard thereto, or as vendor, purchaser or otherwise, nor shall any
such contract, or any contract or arrangement entered into by or on behalf of
the Company in which any director is in any way interested, be liable to be
avoided, nor shall any director so contracting or being so interested be liable
to account to the Company for any profit realized by way of such contract or
arrangement by reason of such director holding such office, or of the fiduciary
relationship thereby established so long as the director notifies the Company in
accordance with the requirements of the Act. To the extent permitted by the Act,
any director may vote as director or shareholder in respect of any such contract
or arrangement; provided that such director must disclose his interest to his
co-directors, and if all the directors be interested in the contract or
arrangement, the contract or arrangement must be entered into by the Company in
an Annual or Special Shareholders' Meeting, and before the contract or
arrangement is so entered into, the directors must disclose their interests to
the meeting.
8.4 PROCEEDINGS OF THE BOARD. The Board at the request of any director may meet
together for the dispatch of business, adjourn and otherwise regulate their
meetings as it thinks fit.
8.5 EXECUTIVE COMMITTEE. The Board at a duly constituted meeting may by a
resolution appoint a committee from among themselves to be known as an executive
committee. This committee may perform such acts in the name of the Board in the
same fashion as if the Board had acted. The limits of the executive committee's
acts shall be prescribed by resolution of the Board. The powers of this
committee may be changed from time to time by subsequent resolution of the
Board.
8.6 QUORUM. The quorum necessary for the transaction of the business of the
Board may be fixed by the Board, and unless so fixed shall be one-half of the
number of persons then serving as directors. The quorum of any committee of the
Board shall be fixed by the meeting of the Board appointing such committee and,
if not so fixed, then such quorum shall be fixed by the members of such
committee.
8.7 VOTING. Every question at a meeting of the Board shall (except where
otherwise provided by the Board) be determined by a majority of the votes of the
directors present, every director having one vote.
8.8 ACTION WITHOUT A MEETING. A resolution may be adopted without any meeting
of the Board or of a committee if evidenced by writing tinder the hands of all
the directors or of all the members of such committee, and such writing shall be
as valid and effectual as a resolution duly passed at a meeting of the Board or
such committee.
Annual Report 2000 Page 67
NET-FORCE SYSTEMS, INC.
8.9 POWERS OF THE BOARD. The business of the Company shall be managed by, the
Board, who may exercise all such powers of the Company as are not by the Act or
these By-Laws required to be exercised by the Company in an Annual Shareholders'
Meeting, subject nevertheless to any regulations of these By-Laws, to the
provisions of the Act and to such regulations being not inconsistent with the
provisions of the Act as may be prescribed by special resolution of the Company,
but no regulation so made by the Company shall invalidate any prior act of the
Board which would have been valid if such regulation had not been made. The
general powers given by this By-Law shall not be limited or restricted by any
special authority or power given to the Board by any other By-Law.
8.10 APPOINTMENT OF ATTORNEY. The Board may from time to time and at any time,
by power of attorney, appoint any company, firm or person to be the attorney or
attorneys of the Company for the purpose of executing deeds on behalf of the
Company in or outside Antigua and Barbuda and for such periods and subject to
such conditions as they may think fit, and any such power of attorney may
contain such provisions for the protection of persons dealing with any such
attorney as the Board may think fit, and may also authorize any such attorney to
sub-delegate all or any of the powers, authorities and discretions vested in
him.
8.11 REMOVAL OF DIRECTOR. Any director may be removed by a majority vote of the
shareholders.
8.12 RESIGNATION OF DIRECTOR. A director may resign at any time by giving
written notice to the Board. Unless otherwise specified in the notice, the
resignation shall take effect upon receipt thereof by the Board and the
acceptance of the resignation shall not be necessary to make it effective.
8.13 PRESUMPTION OF ASSENT. A director of the Company who is present at a
meeting of the directors at which action on any company matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall rile his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the secretary of the Company immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favour
of such action.
IX
OFFICERS
--------
9.1 NUMBER. The officers of the Company shall be president, a secretary and a
treasurer, each of whom shall be elected by the directors. Such other officers
and assistant officers as may be deemed necessary may be elected or appointed by
the directors. Any two or more offices may be held by the same person.
9.2 ELECTION AND TERM OF OFFICE. The officers of the Company to be elected by
the Board shall be elected annually at the first meeting of the Board held after
each Annual Meeting of the shareholders. Each officer shall hold office until
his successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided.
9.3 REMOVAL. Any officer or agent elected or appointed by the Board may be
removed by the Board whenever in their judgement the best interests of the
Company would be served thereby, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed.
9.4 VACANCIES. A vacancy in any office because of death, resignation, removal
or disqualification, may be filled by the Board for the unexpired portion of the
term.
9.5 PRESIDENT. The president shall be the principal executive officer of the
Company and, subject to the control of the directors, shall in general supervise
and control all of the business and affairs of the Company. He may sign, with
the secretary or any other proper officer of the Company thereunto authorized by
the directors, any deeds, mortgages, bonds, contracts, or other instruments
which the directors have authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the directors or
by these by-laws to some other officer or agent of the Company, or shall be
required by law to be otherwise signed or executed; and in general shall perform
all duties incident to the office of president and such other duties as may be
prescribed by the directors from time to time.
9.6 SECRETARY. The secretary shall keep the minutes of the shareholders' and of
the directors' meetings in one or more books provided for that purpose, see that
all notices are duly given in accordance with the provisions of these BY-Laws or
as required, and be custodian of the Company records.
Annual Report 2000 Page 68
NET-FORCE SYSTEMS, INC.
9.7 TREASURER. If required by the directors, the treasurer shall give a bond
for the faithful discharge of his duties in such sum and with such surety or
sureties as the directors shall determine. He shall have charge and custody of
and be responsible for all funds and securities of the Company; receive and give
receipts for moneys due and payable to the Company from any source whatsoever,
and deposit all such moneys in the name of the Company in such banks, trust
companies or other depositories as shall be selected in accordance with these
By-Laws and in general perform all of the duties as from time to time may be
assigned to him by the President or by the Board.
9.8 SALARIES. The salaries of the officers shall be fixed from time to time by
the Board and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the Company.
X
ACCOUNTS
--------
10.1 The Board shall cause to be kept such books of account as are necessary to
comply with the provisions of the Act. The books of account shall be kept at the
office or at such other place as the Board thinks fit, and shall always be open
to the inspection of the Board. Any director or shareholder shall have the right
to inspect any account or book or document of the Company. The Board shall from
time to time in accordance with the provisions of the Act cause to be prepared
and to be laid before an Annual Shareholders' Meeting such profit and loss
accounts, balance sheets and reports as may be necessary.
XI
AUDITORS
--------
11.1 Auditors may be appointed and their duties regulated in accordance with the
provisions of the Act. Subject to the provisions of the Act, all acts done by
any person acting as an auditor shall, as regards all persons dealing in good
faith with the Company, be valid, notwithstanding that there was some defect in
his appointment or that he was at the time of his appointment not qualified for
appointment.
XII
LIOUIDATION
-----------
12.1 If the Company shall be wound up (whether the liquidation be voluntary,
under the supervision of or by the Court) the liquidator may, with the required
authority, divide among the shareholders in specie or kind the whole or any part
of the assets of the Company, and whether or not the assets shall consist of
property of one kind or properties of different kinds, and may for such purpose
set such value as he deems fair upon one or more or classes of property, and may
determine how such division shall be carried out as between shareholders or
different classes of shareholders. The Liquidator may, with the like authority,
vest any part of the assets in trustees upon such trusts for the benefit of
shareholders as the Liquidator with the like authority shall think fit, and the
liquidation of the Company may be closed and the Company dissolved.
XIII
AMENDMENTS
----------
13.1 These By- Laws may be altered, amended or replaced and new By-Laws may be
Adopted by a vote of the shareholders representing a majority of all the shares
issued and Outstanding, at any, Annual Shareholders' Meeting or at any Special
Shareholders' Meeting When the proposed amendment has been set out in the notice
of such meeting.
Annual Report 2000 Page 69
NET-FORCE SYSTEMS, INC.
XIV
INITIAL DIRECTORS
-----------------
14.1 The initial Board of Directors shall be composed of the following members;-
ASDAK INC.
NET FORCE ENTERTAINMENT INC
Nevis Street, St.John's, Antigua
RESOLUTION OF SOLE SHAREHOLDER
IT IS RESOLVED THAT
(1) Asdak Inc be removed as a director of the company with immediate effect.
(2) the following persons be appointed as directors of the company with
immediate effect:
Terry G. Bowering
Douglas N. Bolen
Dated the "17th" day of August 1999
NET FORCE SYSTEMS INC
"Terry G. Bowering"
By...........................
Annual Report 2000 Page 70
NET-FORCE SYSTEMS, INC.
Exhibit 6.1 - SOFTWARE LICENSE AGREEMENT
SOFTWARE LICENSE AGREEMENT
THIS AGREEMENT is entered into this 31st day of July, 1999,
BETWEEN:
NET-FORCE ENTERTAINMENT INC., with registered offices in St. John's
Antigua, West Indies;
(hereinafter referred to as the "Licensee")
AND
SOFTEC SYSTEMS CARIBBEAN INC. with offices at 1589 Newgate Street, St.
John's Antigua, West Indies;
(hereinafter referred to as "Softec")
WHEREAS,
A. Softec owns rights to Internet casino software (the "Software");
B. Softec wishes to license the Software to other companies;
C. Softec wishes to provide a complete computer hardware and software package
that the Licensee may use to operate an Internet gaming site; and,
D. The Licensee wishes to license the Software and make use of Softec's
computer hardware in order to operate an Internet gaming site.
NOW THEREFORE, in consideration of the premises and mutual covenants herein set
forth, the parties agree as follows:
1. GENERAL PROVISIONS
- -- ------------------
1.1 DEFINITIONS
1.1.1 "Licensed Software" shall mean a licensed data processing program or
micro program consisting of a series or sequence of signals, or
instructions, statements, or fonts stored on any media in machine
readable form, and any related licensed materials such as, but not
limited to, graphics, flow charts, logic diagrams, manuals, and
listing made generally available by Softec for use in connection with
the licensed programs.
The Licensed Software shall consist of not more than 2 casinos, one
with an adult theme (where a license is available), and one with a
non-adult theme (collectively, the "Casino"). The Casino shall have
various games of chance which includes, but are not limited to,
blackjack, roulette, pai gow poker, video poker and slot machine and
other games as added from time to time, based on a theme chosen by the
Licensee, a sportsbook web site within the gaming site, an HTML
version of the sportsbook, and a lottery ticket distribution web site.
1.1.2 "Net Monthly Revenue" shall mean, for any given calendar month, the
total amount wagered in the casino, horse track and the sportsbook,
less winnings in the Casino, horse track and the sportsbook, PLUS,
total sales of lottery tickets, less the invoiced cost for purchasing
lottery tickets for the lottery ticket sales, PLUS, any membership
fees or additional fees that may be charged by the Licensee that are
not related to currency conversion or transaction processing.
1.1.3 "Hardware" shall mean all the necessary computers, routers, cabling,
monitors, hard drives, back-up systems, and other equipment, as
determined by Softec in its absolute discretion, located at its
Annual Report 2000 Page 71
NET-FORCE SYSTEMS, INC.
offices in St. John's Antigua, Vancouver, Canada, or other locations
designated by Softec as may be required in order to properly store,
distribute and run the Licensed Software.
1.1.4 "Games" shall mean the casino style games, sportsbook, lottery, and
pari-mutuel games that are played using the Licensed Software and are
available from time to time.
1.1.5 "Downloadable Software" shall mean the portion of the Licensed
Software that must be resident on a customer's computer in order for
the customer to access and play the Games.
1.1.6 "Master CD" shall mean the compact disc containing the Downloadable
Software that may be used to mass-produce compact discs for delivery
to the Licensee's customers.
1.1.7 "Customer Information" shall mean all data collected and stored on
customers including, without limiting the generality of the foregoing,
name, address, phone and fax number, e-mail address, credit card
numbers and expiration dates or information on other types of
payments, amounts wagered and frequency of wagering.
1.1.8 "Confidential Information" shall mean material in the possession of
Softec which is not generally available to or used by others or the
utility or value of which is not generally known or recognized as
standard practice, including, without limitation, all financial
business and personal data relating to Softec's clients, any
non-public information about affiliates, subsidiaries, consultants and
employees of Softec or its affiliates, business and marketing plans,
strategies and methods, studies, charts, plans, tables and
compilations of business industrial information, computer software and
computer technology whether patentable, copyrightable or not, which is
acquired or developed by or on behalf of Softec or its affiliates from
time to time.
1.2 RIGHT TO AUDIT
1.2.1 The Licensee shall, within reason, have the right, without prior
notice to Softec to inspect and audit all Softec's business,
accounting and supporting records that are necessary for purposes of
determining Softec's compliance with the terms of this Agreement.
Softec shall fully co-operate with any independent chartered
accountants or certified public accountants hired by the Licensee to
conduct any such inspection or audit. If any such inspection or audit
discloses an under statement of less than 3% for any period, Softec
shall pay, within ten days after receipt of the inspection or audit
report, the sums due on account of such understatement with interest
calculated at U.S. prime plus one percent. Further, if such inspection
or audit is made necessary by failure of Softec to furnish invoice
reports or any other documentation as herein required, or if an
understatement for any period is determined by such inspection or
audit to be 3% or greater, Softec shall, on demand and in any event
within the said ten days, in addition to paying the sums due on
account of such understatement, also reimburse for the cost of such
inspection or audit, including without limitation, the charges of any
independent chartered accountants or certified public accountants
retained by the Licensee in connection with such audit or inspection
and the reasonable travel expenses, room, board and compensation of
employees of the Licensee.
1.2.2 The Licensee's right to audit records shall only extend to records
that date back no more than two of Softec's fiscal years prior to the
date Softec receives notice of an impending audit.
1.3 INDEMNIFICATION
1.3.1 The Licensee acknowledges and agrees that neither Softec nor any of
its members, shareholders, directors, officers, employees or
representatives will be liable to the Licensee or any of the
Licensee's customers for any special, indirect, consequential,
punitive or exemplary damages, or damages for loss of profits or
savings, in connection with this Agreement, the services or the
Hardware or any other information, material or services provided by
Softec to the Licensee under this Agreement. If, despite the foregoing
limitations, Softec or any of its shareholders, directors, officers,
employees or rpresentatives should become liable to the Licensee or
any other person (a "Claimant") in connection with this Agreement, ten
the maximum aggregate liability of Softec, its members, shareholders,
directors, officers, employees and representatives for all such things
and to all such parties will be limited to the lesser of the actual
amount of loss or damage suffered by the Claimant or the amount of the
Licensee's fees payable by the Licensee to Softec for the six months
prior to the loss.
Annual Report 2000 Page 72
NET-FORCE SYSTEMS, INC.
1.3.2 The Licensee shall indemnify and save harmless Softec and its
members, shareholders, directors, officers, employees, agents,
contractors, representatives, parent company, or subsidiaries
(together, the "Indemnified Parties") from and against all damages,
losses, costs and expenses (including actual legal fees and costs),
fines and liabilities incurred by or awarded asserted or claimed
against any of the Indemnified Parties by any licensing or government
agency who licenses, regulates, or otherwise governs the licensing or
use of Internet gambling in connection with the Licensee's activities
under this Agreement, including claims brought by a person using or
relying upon any advice given or publication produced and distributed
by the Licensee.
1.3.3 Notwithstanding anything in this Section 1.3, if Softec is found
guilty of fraud in executing its' obligations under this Agreement,
the Licensee shall not be responsible for any indemnification of the
Indemnified Parties to the extent that the fraud has caused there to
be damages.
1.4 DISRUPTIONS
1.4.1 The Licensee acknowledges that from time to time, as a result of
Hardware failure, supplier failures, or acts of God, the services
provided under this Agreement by Softec can be temporarily disrupted.
The Licensee acknowledges and agrees that neither Softec nor any of
its members, shareholders, directors, officers, employees or
representatives will be liable to the Licensee or any of the
Licensee's customers for any special, indirect, consequential,
punitive or exemplary damages, or damages for loss of profits or
savings, in connection with these temporary disruptions. For the
purpose of this section, if the services provided under this Agreement
by Softec are temporarily disrupted for seven days within any
one-month period, the minimum monthly fees as calculated in section
1.7.3 shall be reduced on a pro rata basis.
1.4.2 The Licensee acknowledges that Softec's ability to perform its
obligations under this Agreement are subject to government licensing
in whatever jurisdiction Softec may choose to operate. Softec shall
not be held liable for any damages of any kind whatsoever that may
result from changes in government legislation or policy.
1.5 CONDITIONS OF LICENSE
This license is granted under the following conditions:
1.5.1 The Licensee acknowledges that its rights in and to the Licensed
Software may not be assigned, licensed or otherwise transferred by
operation of law without the prior written consent of Softec.
Violation of this section is grounds for immediate termination of this
Agreement.
1.5.2 Copyright and other proprietary rights of Softec protect the Licensed
Software. The Licensee may be held directly responsible for acts
relating to the Licensed Software which are not authorized by this
Agreement.
1.5.3 All right, title and interest in and to the Licensed Software, and
any copies thereof, and all documentation, code and logic, which
describes and/or comprises the Licensed Software remains the sole
property of Softec.
1.5.4 Softec shall not be responsible for failure of performance of this
Agreement due to causes beyond its control, including, but not limited
to, work stoppages, fires, civil disobedience, riots, rebellions, acts
of God, and similar occurrences.
1.5.5 The sportsbook "format" shall remain standard, and will not be
materially altered from Softec's standard sportsbook facilities.
Format shall refer to the tabular presentation of the sports
information making up the sportsbook look and feel and shall not
include the graphics that may be added in order to personalize it.
1.5.6 The Licensee acknowledges that this is a non-exclusive agreement and
that Softec will license the Licensed Software to as many other
parties as are willing to enter into a licensing agreement with
Softec.
1.5.7 The Licensee shall supply to Softec an irrevocable letter of credit
in the amount of $100,000 U.S. An appropriate amount of these funds
shall be released to Softec in the event the Licensee should become
unable or unwilling to pay for any legitimately invoiced amounts. This
security shall only be used to remedy non-payment of legitimate
Annual Report 2000 Page 73
NET-FORCE SYSTEMS, INC.
invoices, and cannot be applied by Softec to any other alleged
breaches of this Agreement. This section shall only become effective
upon the Licensee achieving in any one month Net Monthly Revenue of
$1,000,000 or greater.
1.5.8 The Licensee shall be responsible for ensuring that they are
operating the Licensed Software in compliance with any and all
applicable state, provincial, national, and international laws.
1.5.9 The Licensee shall provide Softec with all documentation necessary to
show that the Licensee has obtained any and all necessary licenses in
order to operate an Internet casino and/or Sportsbook in the
jurisdiction in which the Licensee chooses to operate.
1.5.10 It is the policy of Softec to prevent the use of the Licensed
Software for use as a "money laundering" vehicle. The Licensee
warrants that they will undertake all reasonable efforts to prevent
persons from using the Licensed Software for use as a money-laundering
vehicle. If it is revealed that the Licensee is purposely allowing or
is willfully blind to money laundering, Softec may terminate this
agreement without notice.
1.5.11 The Licensee shall not accept wagers from persons residing in Canada
and shall implement all measures stipulated by Softec to ensure that
persons residing in Canada are not able to wager utilizing the
Licensed Software.
1.6 TERM AND TERMINATION
1.6.1 This Agreement shall commence and be deemed effective on the date
when fully executed (the "Effective Date"). This Agreement is in
effect for a period of one-year (the "Term") and shall be
automatically renewed indefinitely with additional one year terms
unless the Licensee gives written notice of termination of this
Agreement at least 45 days prior to the end of any one year period.
1.6.2 Softec may terminate this Agreement by giving written notice to the
Licensee at least six months prior to the end of any one year term
provided, however, Softec shall not give notice of termination in the
first year of this Agreement.
1.6.3 Softec may terminate this Agreement at any time upon five days notice
if the Licensee is more than 30 days in arrears in paying any material
monthly fees due and owing to Softec. The Licensee shall be allowed to
cure the breach during the notice period, thus pre-empting Softec's
ability to terminate this Agreement in accordance with this section.
The arrears contemplated in this section must be of a material amount
for this section to be used by Softec. For the purposes of this
section, material shall mean anything greater than 5% of the previous
month's fees.
1.6.4 Softec may terminate this Agreement at any time upon five days notice
if the Licensee becomes bankrupt or insolvent or ceases carrying on
business for any reason.
1.6.5 The Licensee may terminate this Agreement at any time upon five days
notice if Softec becomes bankrupt or insolvent or ceases carrying on
business for any reason.
1.6.6 The Licensee may, inter alia, terminate this Agreement at any time
upon five days notice if Softec is materially in breach of this
Agreement for more than 30 days. Softec shall be allowed to cure the
breach during the notice period, thus pre-empting the Licensee's
ability to terminate this Agreement i accordance with this section.
1.6.7 Softec may terminate this Agreement at any time upon five days notice
if Softec, or any of its principals, officers or Directors becomes the
subject of third party civil or criminal litigation as a result of the
Licensee's operations under this Areement. The litigation contemplated
herein must be material, and found to be of a serious nature by
independent legal counsel.
1.6.8 Upon termination of this Agreement, the Licensee shall immediately
return to Softec any and all of Softec's materials which Softec has a
proprietary right in that are in the Licensee's possession and/or in
the possession of the Licensee's agents, servants and employees.
1.6.9 Upon termination of this Agreement, all Customer Information shall be
given to the Licensee and Softec shall not make use of or disclose any
Customer Information to any third party.
Annual Report 2000 Page 74
NET-FORCE SYSTEMS, INC.
1.6.10 Upon termination of this Agreement for any reason, any security
given by the Licensee shall be returned to the Licensee within thirty
days of termination, provided however that if there are any
outstanding invoiced amounts (as per section 1.5.7) against the
Licensee, sufficient security shall be retained in order to pay for
those claims.
1.7 REMUNERATION
1.7.1 The Licensee shall pay to Softec a non-refundable one-time fee f
$100,000 U.S. for the development of the graphical front end of the
gaming site and all set-up costs. This payment shall be paid in
accordance with the following schedule:
o $ 10,000 per month for ten months with the first payment being
made three months from the date of the 3 acceptance of the first wager using the
Licensed Software.
1.7.2 The Licensee shall pay to Softec a monthly fee based on a percentage
of the Net Monthly Revenue. The fee shall be paid in accordance with
Schedule A of this Agreement. The fees shall commence when the
Licensee accepts a wager utilizing the Licensed Software.
1.7.3 Notwithstanding any amount due and owing in accordance with Schedule
A of this Agreement, the Licensee shall pay to Softec a minimum of
$25,000 per month. This section shall come into effect 120 days from
the acceptance of the first wager utilizing the Licensed Software.
1.7.4 All monthly payments shall be delivered to Softec by the 15th of each
month in payment for the previous month's activity.
1.8 CONFIDENTIALITY
1.8.1 The Licensee shall not disclose, publish, or disseminate Confidential
Information to anyone other than those of its employees or others with
a need to know, and the Licensee agrees to take reasonable precautions
to prevent any unauthorized use, disclosure, publication, or
dissemination of Confidential Information. The Licensee agrees not to
use Confidential Information otherwise for its own or any third
party's benefit without the prior written approval of an authorized
representative of Softec in each instance.
1.8.2 Softec shall not disclose, publish, or disseminate Customer
Information to anyone other than those of its employees with a need to
know, and Softec agrees to take reasonable precautions to prevent any
unauthorized use, disclosure, publication, or dissemination of
Customer Information. Softec agrees not to use Customer Information
otherwise for its own or any third party's benefit without the prior
written approval of an authorized representative of the Licensee in
each instance.
1.8.3 All Confidential Information, and any Derivatives thereof whether
created by Softec or the Licensee, remains the property of Softec and
no license or other rights to Confidential information is granted or
implied hereby. For purposes of this Agreement, "Derivatives" shall
mean: (a) for copyrightable or copyrighted material, any translation,
abridgement, revision or other form in which an existing work may be
recast, transformed or adapted; (b) for patentable or patented
material, any improvement thereon; and (c) for material which is
protected by trade secret, any new material derived from such existing
trade secret material, including new material which may be protected
by copyright, patent and/or trade secret.
1.8.4 Notwithstanding anything in this Section 1.8, Softec shall be allowed
to use Customer Information for the purpose of fulfilling its
reporting obligations as a public company. Softec shall also be
allowed to use Customer Information in a statistical form so long as
it does not identify individuals or specific companies.
1.8.5 The Licensee shall not disclose the contents of this Agreement to any
third party who is not bound to maintain confidentiality between the
parties. The Licensee acknowledges that disclosure of the terms of
this Agreement to third parties would cause considerable damage to
Softec and its parent company, Starnet Communications International
Inc.
Annual Report 2000 Page 75
NET-FORCE SYSTEMS, INC.
2. OBLIGATIONS OF THE LICENSOR
- -- ---------------------------
2.1 HARDWARE
2.1.1 Softec shall supply the Hardware as defined in this Agreement.
2.1.2 Softec shall maintain the Hardware and pay all costs for maintaining
and/or upgrading the Hardware.
2.1.3 Softec shall supply the office space required to house the Hardware.
2.1.4 The Hardware shall, at all times, remain the property of Softec.
2.1.5 Softec shall supply an appropriate connection to the Internet with
sufficient bandwidth to properly operate the Licensed Software. The
Licensee shall pay for all bandwidth associated only with those
customers that are not playing the Games using real money and for the
downloading of the Licensed Software via the Internet, and for any
related marketing via the Internet. Bandwidth shall be charged to the
Licensee at market rates.
2.1.6 Softec shall not be required to maintain a redundant site.
2.1.7 Softec shall make all reasonable efforts to repair and correct any
problems arising under Softec's areas of responsibility that may arise
from time to time which would cause it to be unable to perform its'
obligations under this Agreement (see section 1.5.4).
2.1.8 Softec shall notify the Licensee of any problems that may arise from
time to time and shall keep the Licensee apprised of any efforts
undertaken to rectify the problem.
2.1.9 The Hardware shall be located only in places where Internet gambling
may be operated legally and where the Licensee has obtained all
necessary licenses to conduct online gaming.
2.2 THE LICENSED SOFTWARE
2.2.1 Softec shall install the Licensed Software on the Hardware.
2.2.2 Softec shall allow all of the Licensee's customers and all persons
who seek to be licensee's customers Internet access to the Licensed
Software.
2.2.3 Softec shall allow the Licensee's customers to download directly from
the server the Downloadable Software necessary for the Licensee's
customer to play the Games.
2.2.4 Softec shall supply to the Licensee a single Master CD containing the
Downloadable Software.
2.2.5 Softec may from time to time, at its discretion, create additional
games, which can be added to the Licensed Software. If additional
games become available, the Licensee may request to have the
additional games added to the Licensed Software at no additional
licensing cost to the Licensee.
2.2.6 Softec may from time to time, at its discretion, translate part or
all of the Games into other languages, which can be added to the
Licensed Software. If additional languages become available, the
Licensee may request to have the additional languages added to the
Licensed Software at no cost to the Licensee.
2.2.7 Notwithstanding anything stated in this section 2.2, any changes
requested by the Licensee to be made to the graphics portion of the
Licensed Software, shall be charged to the Licensee at market rates.
2.2.8 Notwithstanding anything stated in this section 2.2, any changes made
to the Master CD at the Licensee's request will be billed to the
Licensee at market rates, plus a $100.00 U.S. administration fee.
Softec retains the right to refuse to make the requested changes.
Annual Report 2000 Page 76
NET-FORCE SYSTEMS, INC.
2.2.9 Softec shall only be required to provide the Licensed Software in the
English language only.
2.2.10 Softec will provide all upgrades of the Licensed Software that do
not require changes to the graphical interface, at no charge to the
Licensee.
2.2.11 All upgrades are to be made available to the Licensee within 30 days
of the completion of testing.
2.2.12 The Licensee may operate the Casino on as many separate URL's as the
Licensee wants, with no additional licensing fee to be paid.
2.2.13 Softec warrants that the Licensed Software correctly implements
algorithms, which are in accordance with the rules and payouts, which
may be displayed on the screen at any time by the player.
Pseudo-random numbers used by the software for the purposes of
choosing game outcomes and shuffling cards are generated in an
unbiased manner.
2.2.14 Notwithstanding anything in this Agreement, the Licensee shall not
operate more than two casinos with different names and/or different
graphics.
2.3 FINANCIAL TRANSACTIONS
2.3.1 Softec shall provide a transaction processing system that will allow
the Licensee's customers to deposit funds for use of the Games (the
"Transaction Processing System"). The Licensee's customers will be
able to deposit funds via the Internet through the use of Visa, Master
Card, or American Express credit cards. Other methods of payment may
be made available from time to time at Softec's discretion, at a cost
to the Licensee to be agreed upon at the time.
2.3.2 Softec shall only be responsible for processing credit card debits
and credits for which the Licensee holds the appropriate merchant
number accounts.
2.3.3 The Licensee shall be responsible for all aspects of collecting and
paying funds, in accordance with this Agreement.
2.3.4 The Licensee shall have no rights whatsoever in the Transaction
Processing System.
2.4 TECHNICAL SUPPORT
2.4.1 Softec shall supply 24-hour technical support for the Licensee's
customers and for the Licensee.
2.4.2 Softec shall make the Technical support available via the Internet
and via toll free telephone lines.
2.4.3 Softec shall determine the number of people acting as technical
support and the number of incoming telephone lines for technical
support in its absolute discretion.
2.4.4 Technical support offered via the telephone shall be in English
language only.
2.5 ACCOUNTING
2.5.1 Softec shall maintain records of all transactions and wagers placed
utilizing the Licensed Software.
2.5.2 The Licensee shall pay a flat fee of $100.00 US plus all reasonable
hourly administration fees and disbursements, including printing,
photocopying and shipping costs, each time accounting information is
requested. Administration fees shall be paid at market prices. No fees
are payable for regular accounting information provided to the
Licensee for the purpose of calculating Net Revenue.
Annual Report 2000 Page 77
NET-FORCE SYSTEMS, INC.
2.5.3 Softec shall supply a complete accounting record, as defined by
Softec from time to time, of the previous month's activity relating to
the Licensed Software within ten working days of the end of each
month. The accounting records shall be delivered either by facsimile
or by e-mail.
2.5.4 Softec shall provide daily interim accounting reports, as defined by
Softec from time to time. The daily interim accounting records shall
be delivered either by facsimile or by e-mail.
2.5.5 Softec shall have the right to utilize the accounting information for
statistical and reporting purposes provided specific information about
the Licensee is not disclosed.
2.5.6 Softec shall archive and maintain the accounting information for a
period of 2 fiscal years.
2.5.7 Softec, at its discretion, may destroy any portion of the accounting
information that Softec deems to be no longer relevant.
2.5.8 The Licensee shall be given thirty days written notice prior to the
destruction of any accounting information. The Licensee may choose to
archive information about to be destroyed, at its own facilities.
2.6 CUSTOMER DATA
2.6.1 Softec shall maintain a database containing the Customer Information.
2.6.2 The Customer Information shall remain the property of the Licensee.
2.6.3 Softec shall provide daily interim Customer Information reports, as
defined by Softec from time to time.
2.6.4 The Licensee shall pay a fee of $100.00 US plus all reasonable hourly
administration fees and disbursements, including printing,
photocopying and shipping costs, each time additional Customer
Information is requested. Administration fees shall be paid out at
market prices.
2.6.5 Softec shall have the right to utilize the Customer Information for
any purpose that does not conflict with the Licensee's marketing of
the Licensed Software. Under no circumstances shall Softec utilize the
Customer Information in the marketing of any gaming site being
operated by a subsidiary of Starnet Communications International Inc.,
Softec's parent company.
2.6.6 Softec shall archive and maintain the Customer Information for a
period of two years.
2.6.7 Softec, in its discretion, may destroy any portion of the Customer
Information that Softec deems to be no longer relevant.
2.6.8 The Licensee shall be given thirty days written notice prior to the
destruction of any Customer Information. The Licensee may choose to
archive information about to be destroyed, at its own facilities.
2.7 THE GAMES
2.7.1 The lottery tickets and play options available in the lottery web
site shall be determined from time to time by Softec in its sole
discretion.
2.7.2 Softec shall determine the odds for the casino from time to time. The
Licensee shall be responsible for setting the odds for the sportsbook
and the HTML sportsbook, from time to time, in its sole discretion.
2.7.3 The Licensee shall determine the betting limits for both the casino
sportsbook and the HTML sportsbook, from time to time, in its sole
discretion. The Licensee may choose zero as a betting limit.
2.7.4 The Licensee, in its sole discretion, shall determine the betting
limits for the Games. The Licensee may choose zero as a betting limit.
Annual Report 2000 Page 78
NET-FORCE SYSTEMS, INC.
2.7.5 Softec shall determine the games available in the casino and both
versions of the sportsbook, from time to time, in its sole discretion.
2.7.6 Softec shall determine the lottery tickets available in the casino as
well as the forms of play, from time to time, in its sole discretion.
2.7.7 Softec shall only supply the Games that the Licensee has appropriate
licenses to operate.
3. OBLIGATIONS OF THE LICENSEE
- -- ---------------------------
3.1 LICENSES
3.1.1 The Licensee shall be responsible for obtaining and maintaining all
necessary licenses for the operation of an Internet Casino and an
Internet Sportsbook operation, or whichever the Licensee intends to
operate, in a location where Softec maintains Hardware.
3.1.2 Softec shall recommend a lawyer in Antigua that can assist the
Licensee in obtaining, an Internet casino license as required by the
Antigua Free Trade Zone.
3.2 MERCHANT NUMBERS
3.2.1 The Licensee shall be responsible for obtaining and maintaining
appropriate merchant numbers for the processing of Visa, Master Card
American Express credit cards and any other credit card the Licensee
may obtain merchant numbers for (the "Merchant Numbers").
3.2.2 Notwithstanding that from time to time, Softec may make merchant
numbers available to the Licensee through another subsidiary of
Starnet Communications International Inc. ("SCII"), neither Softec nor
SCII, nor any other subsidiary of SCII shall be responsible for
maintaining or continuing to provide merchant numbers.
3.3 MARKETING
3.3.1 The Licensee shall be responsible for all marketing of the services
offered through the Licensed Software.
3.3.2 The Licensee shall spend on a monthly basis, a minimum of 15% of the
previous month's Net Revenue on marketing and promoting the Licensee's
gaming site.
3.3.3 Softec is not responsible for tracking or maintaining any records or
data with respect to marketing. The Licensee shall be allowed access
to the Hardware for the purpose of tracking and maintaining marketing
data.
3.3.4 The Licensee shall be responsible for all aspects of customer
service, including, but not limited to dealing with customer
complaints and paying out winnings, provided that the Licensee has and
is using its own credit card merchant accounts.
3.4 DISTRIBUTION OF SOFTWARE
3.4.1 The Licensee shall be responsible for the production and distribution
of compact discs containing the Downloadable Software.
3.4.2 The Licensee shall not alter the Licensed Software as supplied on the
Master CD in any way.
Annual Report 2000 Page 79
NET-FORCE SYSTEMS, INC.
3.4.3 The Licensee shall ensure that the packaging for the Licensed
Software, as well as any logo imprinted on the compact disk, shall
display all proprietary rights symbols such as Copyright and
Trademark, as supplied by Softec (the "Symbols"). The Symbols shall be
of the exact same size and font as supplied by Softec.
3.5 REGULATORY ISSUES
3.5.1 The Licensee shall be solely responsible for determining which
jurisdictions they choose to market to and receive wagers from.
3.5.2 The Licensee shall be responsible for determining the legality of
accepting wagers in whichever jurisdictions they choose to market to
and receive wagers from.
3.5.3 The Licensee shall indemnify Softec for any reasonable legal costs,
and fines that arise as a result of the Licensee choosing to accept
wagers from any jurisdiction that determines or has determined that
Internet wagering is illegal.
3.6 THE WEB SITE
3.6.1 The Licensee shall construct and maintain the entire website(s) where
the Downloadable Software is to be made available to the Licensee's
customers (the "Web Sites").
3.6.2 The Licensee shall pay for any and all Uniform Resource Locators
("URL's") that the Licensee deems necessary to properly market the
Licensed Software.
3.6.3 The Licensee shall ensure that the Web Sites shall display a
statement that the software is licensed, as well as all proprietary
rights symbols such as Copyright and Trademark, as supplied by Softec
(the "Symbols"). The Symbols shall be of the exact same size and font
as supplied by Softec.
3.6.4 The Licensee shall have the right to add as many URL's that are
dedicated solely to the promotion of the Licensee's gaming site as the
Licensee deems necessary.
3.6.5 The Licensee shall have the right to make any changes to the Web
Sites the Licensee feels appropriate. All changes that are effected by
Softec will be charged to the Licensee at market rates.
3.6.6 If requested, Softec shall construct and maintain any and all
additional web sites the Licensee deems necessary for the marketing of
the Licensed Software. All work done to build additional web sites
shall be charged to the Licensee at market rates.
3.6.7 Softec shall not in any way be responsible for the design of the Web
Sites utilized by the Licensee.
3.6.8 The Licensee shall include in their Terms and Conditions of Play for
the Licensed Software the Terms and Conditions that are recommended by
Softec. The Licensee may embellish or add to these Terms and
Conditions. If the Licensee does not implement the minimum required
Terms and Conditions, in so far as the Terms and Conditions would have
protected the Licensee, Softec shall not be responsible to the
Licensee, notwithstanding anything in this Agreement.
4. STANDARD CLAUSES
- -- ----------------
4.1 NOTICES
Unless otherwise provided in this Agreement, any notice provided for under
this Agreement shall be in writing and shall be sufficiently given if
delivered personally, or if transmitted by facsimile with an original
signed copy delivered personally within twenty-four hours thereafter, or
mailed by prepaid registered post addressed to Softec at their respective
addresses set forth below or at such other than current address as is
specified by notice.
Annual Report 2000 Page 80
NET-FORCE SYSTEMS, INC.
To Softec: Newgate Street
P.O. Box 1589
St. John's, Antigua , West Indies
Attention: General Counsel
Fax: (268) 480-1656
To the Licensee: Hill & Hill legal offices in St. John's, Antigua
4.2 ENTIRE AGREEMENT and SCHEDULES
The parties agree that this Agreement and its Schedule, if any, constitute
the complete and exclusive statement of the terms and conditions between
the Licensee and Softec covering the performance hereof and cannot be
altered, amended or modified except in writing executed by an authorized
representative of each party. The Licensee further agrees that any terms
and conditions of any purchaser order or other instrument issued by the
Licensee in connection with this Agreement which are in addition or
inconsistent with the terms and conditions of this Agreement shall not be
binding on Softec and shall not apply to this Agreement.
4.3 GOVERNING LAW and ARBITRATION
Any dispute in connection with this Agreement shall be settled by
arbitration in accordance with any Arbitration Act agreed upon between the
parties; provided, however, should any dispute arise under this Agreement,
the parties shall endeavor to settle such dispute amicably between
themselves. In the event that the parties fail to agree upon an amicable
solution, such dispute shall be finally determined by arbitration as
aforesaid.
4.4 GOOD FAITH
The parties acknowledge to one another that each respectively intends to
perform its obligations as specified in this Agreement in good faith.
4.5 PARTIES TO ACT REASONABLY
The parties agree to act reasonably in exercising any discretion, judgment,
approval or extension of time that may be required to effect the purpose
and intent of this Agreement. Whenever the approval or consent of a party
is required under this Agreement, such consent shall not be unreasonably
withheld or delayed.
4.6 GOVERNING LAW
This agreement and all Schedules shall be governed by and construed in
accordance with the laws of the Country of Antigua, and the Licensee hereby
attorns to the jurisdiction of the courts of Antigua notwithstanding any
other provision expressed or implied in either this agreement or the
Schedules.
4.7 TIME TO BE OF THE ESSENCE
Time is of the essence.
4.8 NUMBER AND GENDER
In this Agreement the use of the singular number includes the plural and
vice versa the use of any gender includes all genders, and the word
"person" includes an individual, a trust, a partnership, a body corporate
and politic, an association and any other incorporated or unincorporated
organization or entity.
4.9 CAPTIONS
Captions or descriptive words at the commencement of the various sections
are inserted only for convenience and are in no way to be construed as a
part of this Agreement or as a limitation upon the scope of the particular
section to which they refer.
Annual Report 2000 Page 81
NET-FORCE SYSTEMS, INC.
4.10 NON-ASSIGNABILITY
This Agreement is personal to the Licensee, except as provided in S. 4.11,
and the Licensee may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent or
Softec.
4.11 BENEFIT
This Agreement shall ensure to the benefit of and be binding upon the
Licensee, its successors and assigns. The Licensee may delegate the
performance of any of its obligations hereunder to any corporation which
controls, is controlled by or is under common control with the Licensee.
4.12 WAIVER
No condoning, excusing or waiver by any party hereto of any default, breach
of non-observance by any other party hereto, at any time or times with
respect to any covenants or conditions herein contained, shall operate as a
waiver of that party's rights hereunder with respect to any continuing or
subsequent default, breach or nonobservance, and no waiver shall be
inferred from or implied by any failure to exercise any rights by the party
having those rights.
4.13 FURTHER ASSURANCE
Each of the parties hereto hereby covenants and agrees to execute such
further and other documents and instruments and to do such further and
other things as may be necessary to implement and carry out the intent of
this Agreement.
4.14 CUMULATIVE RIGHTS
All rights and remedies of Softec are cumulative and are in addition to and
shall not be deemed to exclude any other rights or remedies allowed by law
except as specifically limited hereby. All rights and remedies may be
exercised concurrently.
4.15 PRIOR AGREEMENTS
Except as specifically provided for herein, this Agreement, including its
Schedules, contains all of the terms agreed upon by the parties with
respect to the subject matter herein and supersedes all prior agreements,
arrangements and understandings with respect thereto, whether oral or
written.
4.16 SEVERABILITY
If any part of this Agreement is unenforceable because of any rule of law
or public policy, such unenforceable provision shall be severed from this
Agreement, and this severance shall not affect the remainder of this
Agreement.
4.17 NO PARTNERSHIP
Notwithstanding anything in this Agreement, no part of this Agreement, nor
the Agreement as a whole shall be construed as creating a partnership or
agency relationship between the parties. If any part of this Agreement
should become construed as forming a partnership or agency relationship,
that part shall be amended such that no partnership or agency relationship
is created, but that part achieves what it was originally intended to
achieve.
4.18 DOLLAR AMOUNTS
All references to money or specific dollar amounts in this Agreement are in
United States Dollars.
4.19 INTERPRETATION
In the interpretation of this Agreement or any provision hereof, no
inference shall be drawn in favor of or against any party by virtue of the
fact that one party or its agents may have drafted this Agreement or such
provision.
Annual Report 2000 Page 82
NET-FORCE SYSTEMS, INC.
IN WITNESS WHEREOF the parties have executed this Agreement on the date first
written.
SOFTEC SYSTEMS CARIBBEAN INC.
Per: /s/ "Christopher Zacharias" Per: /s/ "Mark Dohlen"
Name: Christopher H. Zacharias Name: Mark N. Dohlen
Title: In House Counsel Title: CEO
THE LICENSEE: NET-FORCE ENTERTAINMENT INC.
Per: /s/ "Terry Bowering"
Name: Terry G. Bowering
Title: President, Director
Annual Report 2000 Page 83
NET-FORCE SYSTEMS, INC.
SCHEDULE A
- ----------
The Licensee agrees to pay Softec monthly fees according to the following:
THE LICENSEE'S NET MONTHLY FEE PAYABLE
REVENUE (U.S. DOLLARS)
> $0.00 but < or = to $500,000 25%
> $500,000 but < or = to $1,000,000 20%
> $1,000,000 but < or = to $5,000,000 15%
> $5,000,000 to $10,000,000 12.5%
> $10,000,000 plus 10%
The above table should be read with the following understanding: If the licensee
has a Net Monthly Revenue of $550,000, the fee payable is calculated as follows:
25% on the first $500,000 = $125,000
20% on the next $50,000 = $ 10,000
--------
For a total fee payable = $135,000
Annual Report 2000 Page 84
NET-FORCE SYSTEMS, INC.
SCHEDULE OF MARKET RATES
------------------------
The Market rates as set out in this schedule and referred to in this
Agreement are subject to change without notice to the Licensee.
3D graphics:-----------------------------------------$150.00 per hour
Video editing:---------------------------------------$100.00 per hour
Graphic design:--------------------------------------$75.00 per hour
Programming:-----------------------------------------$150.00 per hour
Quality Assurance and testing:-----------------------$40.00 per hour
SCHEDULE OF MERCHANT NUMBER TERMS
---------------------------------
o Monthly processing limit: $100,000
o Merchant discount: 5.50%
o Rolling reserve: 5% for 180 days if chargeback are less than 5%
o 25% if chargebacks exceed 5% - but will be subject to review
o Transaction fee: $1.60 per transaction applied to both debit and credit
transactions
o Fraud Screen fee: $0.60 per transaction applied to all sales transaction
regardless of the response, (accept or reject). This system is essential to
keep the chargeback ratio down.
o Settlement: 30 days following the month end (e.g. All September
transactions will be settled by October 30th 1998)
o Chargeback: $25 per chargeback transaction
o Payout processing fee is $5.00 per bank draft.
Softec makes no guarantee as to the availability of the merchant numbers
contemplated in this Schedule. Please refer to section 3.2.2 of this Agreement
for clarification.
Annual Report 2000 Page 85
NET-FORCE SYSTEMS, INC.
AMMENDMENT TO SOFTWARE LICENSE AGREEMENT
Between Softec Systems Caribbean inc. (now Starnet Systems International
Inc., "Starnet") and Net Force entertainment Inc. ("Net Force")
dated July 31, 1999
WHEREAS Net Force entered into a software license agreement with Starnet dated
July 31, 1999 (the "Software License Agreement");
AND WHEREAS Starnet's Licensed software erroneously prevented Net Force from
accepting certain wagers;
AND WHEREAS Starnet now wishes to compensate Net Force for any inconvenience and
costs caused by Starnet;
AND WHEREAS Net Force wishes to provide Starnet with a release for the purposes
of making a full and final compromise and settlement of all claims against
Starnet;
NOW THEREFORE, in consideration of the mutual covenants set out herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Starnet and Net Force agree as follows;
1. Capitalized terms used in this Amendment that are defined in the
Software License Agreement shall have meaning as ascribed thereto in
the Software License Agreement.
2. Starnet hereby waives any further amounts payable by Net Force under
section 1.7.1 of the Software License Agreement.
3. For a period of twelve months, commencing September 1, 2000, Starnet
will reduce the monthly fee payable by Net Force under section 1.7.2
of the Software License Agreement so that the maximum monthly fee for
Net Monthly Revenues below $1,000,000 will be fifteen (15%).
4. Starnet hereby waives the provisions of section 1.7.3 of the Software
License Agreement.
5. Starnet hereby waives any further fees payable to Starnet by Net Force
for its initial Virtual Casino License, issued by the Antiguan Free
Trade Zone, which expires on April 6, 2001.
6. All other provisions, of the Software License Agreement shall remain
in full force and effect.
7. Net Force, its officers, directors, employees, agents, successors,
predecessors, affiliates and assigns, (herein collectively referred to
as the ("Net Force Group") hereby release Starnet and its officers,
directors, employees, agents, successors, predecessors, affiliates and
assigns, (herein collectively referred to as the ("Starnet Group") of
and from any and all actions causes of action, demands and damages
relating to the Licensed Software, howsoever arising, which the Net
Force Group presently has or at any time can, shall or may have
against the Starnet Group.
8. Starnet and Net Force will hold the terms of this Amendment and of the
release contained herein strictly confidential and will not disclose
the same to any person or entity whatsoever, except to its legal or
financial advisors or as required by law.
AGREED TO THIS 6TH DAY OF SEPTEMEBER 2000
/s/ Meldon Ellis
- --------------------------------------
Meldon Ellis
Starnet Systems International Inc.
/s/ Terry Bowering
- ---------------------------------------
Terry Bowering
Net Force Entertainment Inc.
Annual Report 2000 Page 86
NET-FORCE SYSTEMS, INC.
Exhibit 6.2 - LICENSE
[GOVERNMENT LOGO HERE]
GOVERNMENT OF ANTIGUA AND BARBUDA
Director of Offshore Gaming
Expediter of International Investment
Office of the Prime Minister
Queen Elizabeth Highway,
ST. JOHN'S, ANTIGUA, W.I.
Tel: (268)-462-0773/462-4956
E-mail: mcallisterg@candw.ag
August 5, 1999
Mr. Terence Bowering
President, Manager Director
Net Force Entertainment Inc.
P.O. Box W-645,
St, John's. Antigua
Dear Mr. Bowering,
This letter serves as notification of the approval of the application for
Virtual Casino/Sports Wagering License for Net Force Entertainment Inc., a
company duly incorporated under the laws of Antigua and Barbuda. Your office
will be notified when the License Certificate is available.
I remain,
/s/ "Gyneth A. McAllister"
---------------------
Mrs. Gyneth A. McAllister
Annual Report 2000 Page 87
NET-FORCE SYSTEMS, INC.
License #0138A
[FREE TRADE & PROCESSING ZONE LOGO HERE]
ANTIGUA AND BARBUDA
FREE TRADE & PROCESSING ZONE
CERTIFICATE AUTHORIZING THE ESTABLISHMENT
AND OPERATION OF BUSINESS IN THE
FREE TRADE & PROCESSING ZONE
Pursuant to Section 11 of the Free Trade & Processing Zone Act No. 12 of 1994,
the Commission certifies that:
NET FORCE ENTERTAINMENT INC.
----------------------------
(Name of Business)
which was incorporated under the laws of Antigua & Barbuda on the 5th day of
August 1999, is licensed and authorized to establish and operate
An Offshore Virtual Casino Wagering and Sportsbook Wagering business
--------------------------------------------------------------------
(Type of Business)
for the period August 5, 1999 to August 4, 2000, within the Free Trade &
Processing Zone in Antigua.
/s/ "Vere Murphy"
-------------------------
Commissioner
/s/ "Charles Fernandez"
-------------------------
Chairman
Dated this 1st day of September 1999
In Antigua and Barbuda, the License fee remains the same for a period of five
(5) years.
Annual Report 2000 Page 88