ArchiveXpress presents Archium An Intuitive Visual Document Management Program Private Placement Memorandum
ArchiveXpress 3252 Rice Street St Paul, MN 55126 (651)294-2421 (Office) (651)494-0143 (Fax) http://archivexpress.org
Private Placement Memorandum for Archive Software Development LLC. Unauthorized duplication is prohibited without explicit permission. This information is proprietary and confidential to Archive Software Development, LLC. This is not a publicly released document. $275,000 project development $50,000 minimum investment
Archive Software Development, LLC. presents:
A new program to manage your business files just like you were touching paper with your hands
ARCHIVE SOFTWARE DEVELOPMENT, LLC.
A Minnesota Company $275,000.00 Application Development Archive Software Development, LLC (the “Company”) was organized under the laws of the State of Minnesota on November 14, 2006. The company is offering membership investment of $275,000.00. ARCHIVE SOFTWARE DEVELOPMENT, LLC. THE INVESTMENT DESCRIBED HEREIN IS SPECULATIVE AND INVOLVES CERTAIN RISKS AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN ASSUME SUCH RISKS. (SEE “RISK FACTORS”)
THE INVESTMENT DESCRIBED HEREIN IS SPECULATIVE AND INVOLVES CERTAIN RISKS AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN ASSUME SUCH RISKS. (SEE “RISK FACTORS”) THIS INVESTMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSOIN OR ANY STATE SECURITITES COMMISSION. ACCORDINGLY, NEITHER THE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PRIVATE PLACEENT MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ACCEPTANCE OF THE TERMS OF THIS AGREEMENT: ______________________________________________________ (SIGNATURE AND PRINT NAME) THE DATE OF THIS PRIVATE PLACEMENT MEMORANDUM IS ____________, ___________, 20__. THE INVESTMENT OFFERED HEREIN HAS NOT BEEN REGISGTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS OR REVIEWED BY ANY FEDERAL OR STATE AGENCY. THE INVESTMENT IS OFFERED PURSUANT TO THE EXEMPTIVE PROVISIONS OF REGULATION D AS PROMULGATED UNDER THE SECURITIES ACT OF 1933 AND THE SECURITIES LAWS OF THE STATE OF EACH OFFEREE. THE INVESTMENT OFFERED HEREBY SHOULD BE PURCHASED ONLY FOR LONG-TERM INVESTMENT. THE INVESTMENT IS BEING OFFERED PRIVATELY, AND IS NOT FREELY TRANSFERABLE AND MAY NOT BE ASSIGNED EXCEPT IN LIMITED CIRCUMSTANCES, WITHOUT THE CONSENT OF THE COMPANY. THE INVESTMENT IS OFFERED SUBJECT TO THE ABSOLUTE RIGHT OF THE COMPANY TO REJECT SUBSCRIPTIONS IN WHOLE OR IN PART. THE COMPANY WILL, TO THE EXTENT NECESSARY, REJECT SUBSCRIPTIONS TO MAKE CERTAIN THAT THE NUMBER OF “PERSONS” (AS THAT TERM IS DEFINED UNDER FEDERAL AND STATE SECURITIES NOT EXCEED THE MAXIMUM NUMBER ALLOWED BY FEDERAL LAWS) WHO ARE MEMBERS PURSUANT TO THIS OFFER DOES NOT EXCEED THE MAXIMUM NUMBER ALLOWED BY FEDERAL AND CERTAIN STATE SECURITIES LAWS. NO INVESTMENTS ARE FINAL UNTIL ACCEPTED BY THE COMPANY. PROSPECTIVE INVESTORS SHALL NOT CONSTRUE THE CONTENTS OF THIS PRIVATE PLACEMENT MEMORANDUM AS LEGAL, TAX OR ACCOUNTING ADVICE. RATHER PROSPECTIVE INVESTORS ARE ENCOURAGED TO CONSULT THEIR OWN LEGAL COUNSEL, ACCOUNTANTS AND BUSINESS ADVISORS AS TO ALL LEGAL, TAX ACCOUNTING AND OTHER FINANCIAL MATTERS CONCERNING THEIR INVESTMENT IN THESE SECURITIES. THE INFORMATION CONTAINED IN THIS PRIVATE PLACEMENT MEMORANDUM IS CONFIDENTIAL AND PROPRIETARY TO THE COMPANY AND IS BEING SUBMITTED TO:
PROSPECTIVE INVESTORS IN THE COMPANY SOLELY FOR SUCH INVESTORS’ CONFIDENTIAL USE WITH THE EXPRESS UNDERSTANDING THAT WITHOUT THE PRIOR EXPRESS PERMISSION OF THE COMPANY, SUCH PERSONS WILL NOT RELEASE THIS DOCUMENT OR DISCUSS THE INFORMATION HEREIN OR MAKE REPRODUCTIONS OR USE IT FOR ANY PURPOSE OTHER THAN EVALUATING A POTENTIAL INVESTMENT IN THE COMPANY. A PROSPECTIVE INVESTOR, BY ACCEPTING DELIVERY OF THIS PRIVATE PLACEMENT MEMORANDUM, AGREES PROMPTLY TO RETURN TO THE COMPANY THIS PRIVATE PLACEMENT MEMORANDUM AND ANY OTHER DOCUMENTS OR INFORMATION FURNISHED IF THE PROSPECTIVE INVESTOR ELECTS NOT TO INVEST IN THE COMPANY. NO OTHER LITERATURE IS BEING EMPLOYED IN THE OFFERING OF THIS INVESTMENT OTHER THAN THIS PRIVATE PLACEMENT MEMORANDUM AND THE MICROSOFT POWERPOINT PRESENTATIONS. ANY REPRODUCTION OR DISTRIBUTION OF THIS PRIVATE PLACEMENT MEMORANDUM, IN WHOLE OR IN PART OR DISCLOSURE OF ANY OF ITS CONTENTS, BY THE RECIPIENT’S HEREOF (EXCEPT TO THE RECIPIENTS’S ADVISORS) IS PROHIBITED. CERTAIN PROVISIONS OR AGREEMENTS, DOCUMENTS OR RECORDS MAY BE SUMMARIZED IN THIS PRIVATE PLACEMENT MEMORANDUM, WHICH SUMMARIES ARE NOT COMPLETE. COPIES OF, OR ACCESS TO SUCH AGREEMENTS, DOCUMENTS AND RECORDS WILL BE PROVIDED TO ANY OFFEREE, UPON REQUEST, TO THE EXTENT POSSIBLE. NO STATEMENTS OR ANY INFORMATION OTHER THAN THAT SET FORTH IN THIS PRIVATE PLACEMENT MEMORANDUM OR CONTAINED IN AGREEMENTS, DOCUMENTS AND RECORDS REQUIRED AND FURNISHED SHOULD BE RELIED UPON. INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM SOURCES DEEMED RELIABLE. NO REPRESENTATION OR WARRANTY IS MADE, HOWEVER, AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. THIS PRIVATE PLACEMENT MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PRIVATE PLACEMENT MEMORANDUM AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS TO ANY ITEM SUBSEQUENT TO ITS DATE. THIS PRIVATE PLACEMENT MEMORANDUM CONSTITUTES AN OFFER ONLY TO THE PERSON WHOSE NAME APPEARS ON THE COVER PAGE OF THIS MEMORANDUM. SUCH PERSON, BY ACCEPTING DELIVERY OF THIS PRIVATE PLACEMENT MEMORANDUM, AGREES TO RETURN THE SAME AND ALL ENCLOSED DOCUMENTS TO:
Paul V. Kieffer Gallagher Law Firm 3252 Rice Street Little Canada, MN 55126 (651) 222-4466 (Office) (651) 494-0143 (Facsimile)
A modern business cannot be effectively managed by relying on the old ways of doing business. We all know that. The trouble with existing document management programs is they make you change the way you do business
ArchiveXpress II速 is designed to be different ... its intuitive visual layout matches your present way of doing business ... except with better organization while maintaining ease of use.
We live in a visual society. ArchiveXpress IIÂŽ will have advanced visual features which are image and icon driven to expedite customer and document searching.
It will match a user’s current way of doing business
The desktops in many offices are extremely cluttered. The promises of document management software to actually reduce the volume of paper in offices have not been met. ArchiveXpress II速 is unique because it visually and operationally mimics the workflow and paper filing systems of your office. The program takes the paper handled each day by a modern business and transforms desktops and filing cabinets visually to your computer screen. Instead of modifying your business procedures to fit a computer program, ArchiveXpress II速 is designed to meet your current business procedures and make you more efficient.
ArchiveXpress II速 meets the needs of the legal, medical, other professions, non-profits, and expansive business usage.
As demonstrated in the illustration, a user of ArchiveXpress II® will literally transfer the file storage system presently used to each user’s computer screen. The only difference: the new digitial system will be more organized. ArchiveXpress II® can be tailored to visually meet each client’s present method of document storage. The images will include file cabinets, drawers, folders, subfolders, tabs and documents. A user will click on a file cabinet containing the sought after file, then will click on the folder to “pull it” out of the cabinet. The user can then access the file in the same manner as a paper file would be accessed, including having multiple sections one of larger folder open on the screen at the same time.
visual, intuitive & efficient
ArchiveXpress II® enables the files to be fully searchable. Therefore, if the user knows a letter was written to “Mr. Anderson”, ArchiveXpress II® enables the user to search directly for the letter. All information contained in the file cabinets will be fully searchable and organized in chronological fashion. This setup enables access to any data (subject to security restrictions) in the entire office file cabinet. A user will be able to “page” through the computer file in the same way as touching a paper file using state of the art “page turning” technology. Documents will be set up based on the user’s needs but in the end a medical chart will look like the ArchiveXpress II® computer medical file, the CPA’s file will match the ArchiveXpress II® CPA file, and so on. The program is designed so any prior paper use or visual appearance on a computer screen can easily be incorporated in to the ArchiveXpress II® program. Viewing documents will include page turning where a user can visibly watch the page turn and browse a computer file just like a paper file. An essential feature of the program is the ease in which the user can save documents, emails, photos, and spreadsheets to the client or other file in the system. Documents will be created in the programs presently used by a company and then uploaded to the web server in .TIFF, JPEG, PDF or native format by simply dragging the documents to the folder. As demonstrated in the illustration, the information in the paper file is simply placed into the appropriate folder in ArchiveXpress II®. For backup, the images and database will be written to optical media for off-site and internal use if the Internet connection is unavailable for an extended period of time.
ArchiveXpress II速 will be developed into a Web based application and desktop version creating the most visually intuitive document management program on the market.
Competitors The market for software for document management includes “Cabinet NG Inc.”, “Spring CM”, “LexBe”, “Share Point”, and “DocuShare”. Pricing varies from a monthly ISP charge to a full blown per license arrangement. The marketplace has other competitors but all are based on a “folder” and “tree system” requiring a use to go back and forth between folders and not have access to documents in multiple folders at the same time. ArchiveXpress II® will be priced at the mid to low range versus competitors for web based applications and a mid-price point on the server based program. While price competitiveness is important, our goal is to distinguish the product through its visual
Affordability Document imaging (also called document archive and retrieval) has primarily been a large company application. Large companies deploy these systems at headquarters, permitting users to access the documents sent to the home office through the Internet. Small and medium size companies have not implemented document imaging due to large initial cost of the software, hardware and personnel. Smaller companies cannot afford the overhead of software applications, file and database servers, scanners or the expense of a production staff for maintaining the digital documents. Companies realize the need for a “Paperless Office�. ArchiveXpress IIŽ provides these companies an affordable application.
Summary of benefits The upgrade has and will be accomplished with the assistance of outside volunteer consultants in the medical and legal profession along with existing customers and new customers in potential markets (such as marketing and contractors)
Analysis of Present Operations Revenues of the ArchiveXpress II®, the current desktop version, have risen to $230,000. The principal customer is Rural Computer Consulting. ArchiveXpress II® is integrated with Rural Computer Consultings’s insurance management and propane distributorship software. Rural Computer Consulting funded one half of the development costs in exchange for the marketing rights to these markets. ArchiveXpress II® presently provides an affordable document imaging application for workstations and small local area networks. The application was developed in Visual Basic 6 utilizing Microsoft Access as the primary database. The user interface was a Windows Explorer style presentation, familiar to the Windows users. The interface implemented a familiar, easy to use, file cabinet, drawer, folder, subfolder structure, consistent throughout the ArchiveXpress family. The principle design feature was the ability to quickly search for folders (clients) using one of eleven search fields. Once the folder was located, a client view contained all the client’s documents, organized by document type. This feature enabled the program to be integrated with other applications such as Insurance and Propane Dealership management software. The integration provided automatic filing of documents printed through an image printer as .TIFF files. The Insurance and Propane Dealership software provided a separate file with the information for storing the image. The Insurance and Propane Dealership applications could view documents associated with a client displayed on their application by clicking an icon. The client view screen opens with the client’s images displayed. The client view closed (only the client requested could be viewed) after the user completed viewing the documents allowing the
integrated application to control security access. Writing to optical media for backup of the database and the images. ArchiveXpress II® commenced the process of upgrading ArchiveXpress II®. The upgrade moved the product to a client/server application and utilized current development technology; Visual Studio 2005, Microsoft .NET 2.0 framework and Microsoft SQL Server 2005 or SQL Express 2005. This version stores the images in CD-ROM size directories for easy backup on optical media. The upgrade is fully scalable to any size company. Additional features were added, such as annotations, stamps, notes on documents, and emailing or printing of selected pages. The application utilizes data grids in lieu of a tree view for selection of folders and documents. Additional security has been added for file cabinets, drawers (for example, drawers can be limited to managers and folders can be limited to a user, such as a salesman). With the exception of Rural Computer Consulting, ArchiveXpress II® is currently marketed by direct sales to end users. The sales plan is to find local companies willing to test the application and further refine the features of the product. To date, ArchiveXpress is installed in legal, financial advisor, accountant, title and mortgage companies and construction companies. Rural Computer Consulting located in Bird Island, Minnesota is a reseller for ArchiveXpress II® and has sold both versions of ArchiveXpress II® to small insurance companies and propane dealerships. RCC has an exclusive sales contract for these vertical markets.
Marketing ArchiveXpress II®’s marketing approach is to sell the Web based application through Internet Service Provider (“ISP”) to the ISP’s resellers. An ISP provides internet connection, desktop or server backup of data, email service and spam filtering. The services are sold through resellers. The resellers provide IT products and services to customers. Resellers include companies providing managed services, a monthly fee per computer and server, for maintaining the hardware and software provided by the reseller. Other resellers provide the support on an hourly basis. ArchiveXpress II® would setup application servers at the ISP, to be managed and maintained by the ISP. Doing so provides another product for the ISP to market through the resellers and provides additional revenue for maintaining the applications server. ArchiveXpress II® will be pursued through three to five ISP reseller partners for product definition and eventual beta testing. The ISP’s resellers will provide a number of small clients to test the new product and complete the functionality of the Web Application. The development of the Web Service will require 6 months for design, development specifications and programming. Testing will begin in approximately four months. In addition, the program will also be sold directly through authorized resellers for those companies seeking the desktop application for their business.
Market Assessment There are few, if any companies, marketing a Web based application for document archive and Most of the Web based services are for remote backup of all the computer data. Microsoft Share
Most of the Web based services are for remote backup of all the computer data. Microsoft Share Point Server (another enterprise application) provides remote access to document images; however, a Microsoft Server, Microsoft SQL server, Internet server and Microsoft Share Point server are required. Microsoft small business server contains these programs, but most small businesses do not have a server. ArchiveXpress II® will fill the gap between desktop storage of data files and physical file cabinets and desk drawers for paper and a Web hosted virtual filing system. ArchiveXpress II® realizes that it would incur significant costs in marketing the package to individual companies. Instead ArchiveXpress II® will market through internet service providers). ISP’s have resellers supporting their products such as PC backup, Spam filtering and Email hosting. ArchiveXpress II® will develop a relationship with the ISP’s and gain access to these resellers. We believe our software will benefit ISP’s in the following ways: • • • •
A sought after service that they can host Increased revenue by increase use of disk space. (Document images occupy significant disk space. ISP’s charge for disk usage, on a monthly basis.) Reoccurring monthly income for hosting ArchiveXpress II®’s software More motivated resellers from reoccurring monthly commissions
ArchiveXpress II® will benefit in the following ways:
• • • • •
ISP’s and their resellers have an established customer base. ISP’s and their resellers have an active sales staff, motivated by monthly commissions. The ISP will collect the charges monthly, and remit to us, our portion. The ISP will provide the SQL servers, and image storage. The ISP provides backup, security, and network administration.
An ISP we will use, as an example, is US Internet, a Minneapolis based ISP. US Internet provides internet access, website hosting, shared application hosting such as MS Exchange and more. They sell their services directly to clients and through a network of 100+ resellers. In 2007, they began offering a backup solution called ZStorage. It provides users with the ability to back up their PC or Server to a secure database located at US Internet. This service has proven to be very successful with more than 500 clients already signed up. We estimate that we will contract with 10% (50) of these remote backup clients immediately and then continue adding more users from their customer base. ArchiveXpress II® will select users from their customer database to participate in testing and feedback programs. We anticipate that 25-30 users will be selected to participate in this program. ArchiveXpress II® will select users from their customer database to participate in testing and feedback programs. We anticipate that 25-30 users will be selected to participate in this program. This service has proven to be very successful with more than 500 clients already signed up. We estimate that we will contract with 10% (50) of these remote backup clients immediately and then continue adding more users from their customer base. ArchiveXpress II® will select users from their customer database to participate in testing and feedback programs. We anticipate that 25-30 users will be selected to participate in this program. Retention of clients: Once a client has committed to using ArchiveXpress II®, and its documents are stored on the ISP’s server, we believe the customer would be unlikely to switch either the software or the ISP.
• • •
• • •
We will market to ISP’s and their resellers, not individual companies thereby eliminating the need for a large sales force. The ISP’s and their resellers already have call / support centers. They will provide the first line of support. Web based. No messy installs / updates. Only the data capture module will be By partnering with the ISP’s we make the best use of what already exists in the market place. This eliminates ArchiveXpress II® from having to hire a support staff for maintaining the hosting infrastructure. The ISP provides backup, security, and network administration. The ISP and their resellers has a support staff that will be the first line of support for our software
By partnering with the ISP’s we make the best use of what already exists in the market place. It’s a natural combination. • •
The ISP provides backup, security, and network administration. The ISP and their resellers has a support staff that will be the first line of support for our software
Sales Approach ArchiveXpress II® will sell the Web application utilizing the “Software as a Service” approach. ArchiveXpress II® will contact the ISP’s and present the Web application. The ISP will provide an introduction to its resellers. The resellers provide the sales force for contacting and contracting the Web application. ArchiveXpress II®’s revenue is received from the ISP or the reseller depending on the client contracting choice. The reseller will be responsible for installation, training and level 1 and 2 Technical Support. ArchiveXpress II® will support the reseller at level 3 Technical Support. This reduces the personnel requirements on ArchiveXpress II®. An ISP we will use, as an example, is US Internet, a Minneapolis based ISP. US Internet provides internet access, website hosting, shared application hosting such as MS Exchange and more. They sell their services directly to clients and through a network of 100+ resellers. In 2007, they began offering a backup solution called ZStorage. It provides users with the ability to back up their PC or Server to a secure database located at US Internet. This service has proven to be very successful with more than 500 clients already signed up. We estimate that we will contract with 10% (50) of these remote backup clients immediately and then continue adding more users from their customer base. ArchiveXpress II® will select users from their customer database to participate in testing and feedback programs. We anticipate that 25-30 users will be selected to participate in this
Monthly charges will be a base amount plus an additional fee for every ‘seat’. As the client companies grow, so does our revenue. This marketing approach will make ArchiveXpress II® a low overhead, high potential company.
GENERAL BACKGROUND INFORMATION
History Since 1968 technology experts have talked about the “Paperless Office�. The personal computer revolution moved paper from hand written to digital. Advances in word processing, spreadsheets, calendars, and email have made the average worker more productive and efficient. Storage device technology has reduced the cost to where we can store gigabytes for a few dollars. We have become a mobile society, with personal digital assistants and laptop computers. So what’s the bad news? Along with the proliferation of the information has come chaos. Large companies have spent billions, trying to control and manage the available information. Volumes of paper have bogged down companies processes. Collecting and organizing paper costs are soaring. Very few small to medium sized companies utilize document imaging due to the large capital investment.
Accessing Documents and Customer Service Without central document management, companies are vulnerable to lost files, increased inefficiency and decreased customer satisfaction. In addition, filing, moving, sharing and storing (onsite or offsite) files is very costly. With ArchiveXpress, files are always available at the click of a button. If there is no central document management, problems arise. Searching for paper file folders is time consuming and customer service is significantly slowed by this inefficient process.
If another employee has the file or did not return it, the customer must be called back when the file is located. In addition, filing, moving, sharing and storing (on-site or off-site) is very costly. Searching for lost or misfiled or re-creating documents is an enormous waste of time.
Backup and Disaster Recovery Small companies do not, as a rule, backup computer or paper files. This is an enourmous liability. Companies that lose their computer or paper files do not remain in business. Even if the computer files are backed up, losing the paper files could cause the business to fail. ArchiveXpress offers a method to backup both the computer and paper files.
Government Regulations Companies must keep documents due to federal, state and local government laws, and in the case of litigation. Documents must also be referred to during audits or produced for inspection. If a document cannot be produced in a timely manner, a fine is incurred which are costs that could be avoided with ArchiveXpress. Conversely, documents should not be kept beyond the company retention date. Government regulations dictate the retention requirements for documents. Companies should have a retention policy for all documents controlled by government agencies. Most companies do not have a retention policy, or only have a general policy concerning the length of time to retain documents. Implementing a document imaging application provides a good opportunity to develop a document retention plan.
Many government agencies require document images to be stored on non-rewriteable media (microfiche or CD/DVD) so the documents cannot be modified. ArchiveXpress meets government regulations for storing documents on optical media, controls documents modifications, and provides security for access to databases, file cabinets, drawers and folders and documents. These documents must be immutable if required for audits or litigation.
Risk Factors Any investment offered hereby will involve a high degree of risk and may result in a loss of the entire amount invested. Prospective investors should carefully consider the risks of an investment in any speculative business and the risks and the speculative factors inherent in and affecting the Company’s business described below and throughout this Private Placement Memorandum.
1.
Risks Related to the Company
Our management team is highly experienced in all aspects of software development and technical areas required to complete the application development. ArchiveXpress IIÂŽ will team with outside contractors to provide some of the technical expertise to finish the program. Economic and political conditions could impact the projected sales. A slowdown in the economy affects all small business expenditures and would reduce how quickly the product is accepted. In addition, the slowdown could lengthen the sales cycle. Small businesses are the most likely to fail.
Slow economy could increase the likelihood of a small business failure. Introduction of new technology may adversely affect the development schedule and associated costs. Microsoft continues to release new development environments, operating systems and browsers. Other browsers such as Foxfire will also release new versions. Web standards are also changing and could affect the schedule and therefore the costs. Our intellectual property and proprietary rights will be adequately protected from unauthorized uses. We regard the software technology and processes we use to deliver our services as proprietary. We seek to protect our proprietary rights through a combination of confidentiality agreements and copyright, trademark, patent and trade secret laws. Third parties may copy aspects of our products or otherwise obtain and use our proprietary information without authorization or develop similar technology independently. In addition, existing copyright and trademark laws afford limited practical protection. Enforcement of breaches of intellectual property rights will be expensive for ArchiveXpress.
2.
Risks Related to the ISP Partnership
It is important that we have reputable partners. ArchiveXpress will set standards for participation in our SaaS (software as a service) program. The criteria will include: • • • • •
Dunn & Bradstreet / Bank credit check Length of time in business Number of commercial customers Quality of the facility, servers, emergency power, connection to the ‘backbone’ of the internet. History of outages
• • • •
Evaluation of firewall and network security Adequate support staff Service level agreement that will include provisions for terminating our partnership in the event of poor customer service, unresolved complaints, or hardware performance issues. Maintaining current updates to SQL server, and appropriate operating system updates.
Additionally we will have a legal agreement and technical protection, that in the event the ISP quits business or fails to forward the monthly client payments, they will be obligated to transfer the clients’ documents and SQL databases to another ISP of our choice.
3.
Risks Related to the Collection of Revenue & Licensing
We will contract a net pricing structure with the ISP. The ISP marks up the net price to the list price they want to charge their customers. The ISP will be responsible for invoicing and collecting all revenue. This would be on a monthly basis. We will maintain a private database of all ISP’s, their clients, the number of seats for each client, and our computed monthly receivable, for each client. We will generate a monthly invoice (by client, for the net amount, via Excel spread sheet) for each ISP. An electronic invoice will make it very easy for the ISP to verify and remit our charges. There is always a risk in losing an ISP or the customer contracted by the ISP. ISP’s will be required to provide bond coverage to guarantee ArchiveXpress receives the revenue collected by the ISP.
4.
Risks Related to the Licensing & Control
A client is validated through ArchiveXpress at sign on. By doing so, we control access to our software and prevent an ISP from not reporting new clients, or unauthorized use. If a client fails to pay ISP, we can deny him access via the logon database.
Like other technology businesses, we are subject to litigation, including litigation related to our own or third party intellectual property, which could adversely affect our financial results. Although competition in this market is limited, every innovative solution can be quickly copied. The market share we have projected can be impacted by another competitor coming into the market before our market share goal is reached. The investment is an unsecured obligation of the Company. In the event of bankruptcy, liquidation or reorganization and in certain other events, the Company’s assets will be insufficient to pay the obligations. The Company anticipates, but can provide no assurance; the entire amount of the investment can be raised pursuant to this Offering. Accordingly, investors have no assurance that the Company will receive sufficient funds to apply to the uses set forth in the “Use of Proceeds.” The Company made forward-looking statements in this document that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the Company’s management and on information currently available to management. Forward-looking statements include the information concerning possible or assumed future results of the operation of the Company.
Investor Payback, Exit Strategy The projected return on the investment is repaymentover three years. After five years the investors will have received double the original investment. After five years, the company will either grow through acquisitions or the company will be sold or merged with another company.
Acquisitions The Company could expand into one or all of the following areas. 1.
Paper destruction – Paper destruction is a logical outgrowth of a paperless office. Users will have their paper destroyed through contracts with local vendors.
2.
Personal use for home users for storage of bill payment and other digital records.
3.
Other document imaging companies – The Company could acquire companies without web enabled applications in order to convert their clients to a web based document imaging application.
4.
Managed services – The Company could acquire local managed services companies to broaden the Companies offering.
Each of the acquisitions would provide a broader solution to the current and acquired company customer base.
Sell/Merge Company The Company could sell to or merge with other companies in the same or similar products. As the web application software as a service becomes more ingrained, it is logical to integrate with these applications. Merging with web applications for accounting, contact management and back office applications would provide a complete solution for management of small companies.
IPO In the event the company grows significantly more than the forecast, a possibility exists ArchiveXpress II速 would generate an IPO.
USE OF PROCEEDS Initial Investment ($ 55,000) The initial investor investment of $ 55,000 will be used to develop a detailed overview and specification for the new developments. The funds will be expended in the following manner:
ArchiveXpress II速 Corporation Funding for the partnership will be expended for legal review of the Member Control Agreement, By Laws and Buy Sell Agreement. The partnership will also establish the ground work for copy right and patents for the software application. The funding will develop the organizational and technical controls to manage the development of the applications. Legal Review
$ 12,500
Website Development Develop a new web site that provides a product demonstration. This will include complete graphics depicting the actual application and will compliment the Power Point presentations and Marketing Collateral to be created for Marketing and Sales purposes. Graphics Person Web Developer
$ 8,500 $ 8,500
Total
$17,000
Application Specification Wizard Specification Data Capture Specification Web Application Specification
$ 8,500 $ 8,500 $ 8,500
Total
$ 25,500
Total initial investment
$ 55,000
At the completion of the above a design review will be held with investors and developers. The review will include the application specification, develop cost estimates and sales forecast. The investors will be required to complete the Private Placement Memorandum forms to continue the project.
Financial Assumptions •
The project development and beta testing will require 6 months
•
The initial marketing plan is to work directly with US Internet and their 100+ resellers
•
We expect to sell 10% of each resellers clients within the first five months
•
We expect resellers to grow their customer list by 10% per quarter
•
Revenue Projections are based on the following
Forecast $54.00 3 $162.00
per user cost number of users per client revenue per client
ArchiveXpress II® Costs Recurring Overhead Monthly Annual $170 $2,040 170 $2,040
Applications Server SQL Server
400 150 1,000 208
4,800 1,800 12000 2,500
$2,098
$25,180
Bandwidth Rack Space Development Facility AtalaSoft License
Startup Costs Development system Quantity Per Unit Atalasoft SDK plus Gold Support 1 2,500 Atalasoft Server Licens 1 2,500 Development Server SQL 1 3,200 Web application/service server 1 3,200 Visual Studio 2008 1 3,500 Microsoft Studio or Adobe Creative Suite 1 1,500 Microsoft SilverLight or Adobe Flash 1 800 Internet connection (dedicated IP/DSL) 1 500
Extended $2,500 Development Package 2,500 Quad Core Server 3,200 3,200 3,500 1,500 800 500 $17,700
Labor Summary Hours 2009 Development GraphicsWeb Web Design Full Time AX II Support Full Time
Rate
Extended Monthly Source
Wizard
Total Development Hours (No Mktg) To be determined by provider contract $12,500 Initial investment
$150,000
2010 Product Maint. In-house 25% of Development
980 85
$83,300
revenue
Product Maint. Contract 2 Person 4 Mos
344 85
$29,240
revenue
Product Manager/Marketing
980 85
$83,300
revenue
Web site/Sales training/Marketing
980 85
83,300
revenue
$279,140
$23,262
2011-2013 Product Maintenance 20% of Development
784
85
$66,640
revenue
Product Manager/Marketing
980
85
$83,300
revenue
Web site/Sales training/Marketing
980
85
83,300
revenue
$233,240 $19,437 Marketing Materials and Advertising Costs
2009 2010 2011 2012 2013
Annual Monthly $20,000 2,000 50,000 50,000 50,000 50,000
4,167 4,167 4,167 4,167
First year marketing Advertise in reseller Media Advertise in reseller Media Advertise in reseller Media Advertise in reseller Media
initial investment revenue revenue revenue revenue
$220,000 Investor Booklet Instructions to Investors Persons or organizations wishing to invest in ArchiveXpress II速 are required to complete the forms in this document. Investment Agreement Please complete the Investment Agreement form and indicate the amount of investment. Complete the ownership title information in Paragraph 9 of the Investor Agreement. Complete the appropriate investor questionaire.
ArchiveXpress II® 12500 Marion Lane West # 4325 Minnetonka, Minnesota 55305 1. Investment - The undersigned hereby applies for membership in ArchiveXpress II® as offered in the Private Placement Memorandum in the following amount: Investment Amount $ ______________ 2. Acceptance of Investment – a. The undersigned understands and agrees the Company, in its sole discretion reserves the right to accept or reject this or any other Investment in whole or in part at anytime notwithstanding prior receipt by the undersigned of a notice of acceptance. b. In the event this Investment is rejected in whole or in part, in which event the investment will be considered rejected, this Investment Agreement shall thereafter have no force or effect to that extent. 3. Representations, Warranties and Covenants - It is hereby represented, warranted and covenanted as follows: a. The undersigned has received the Companies Private Placement Memorandum (the “Memorandum”), and has carefully reviewed this Investment Agreement and the Memorandum, and has relied on the information contained therein or information from books and records of the company. The undersigned understands all documents, records and books pertaining to this investment have been made available for inspection, by the undersigned’s attorney and/or accountant and/or the undersigned’s purchaser representative and the undersigned records of the Company will be available upon reasonable notice, for inspection by investors during reasonable business hours at its principal
place of business. The undersigned and/or the undersigned’s advisor(s) have had a reasonable opportunity to ask questions of the receive answers from the Company, or a person or persons acting on its behalf, concerning the offering of the investment, and all such questions have been answered to the full satisfaction of the undersigned. No oral representations have been made or oral information furnished to the undersigned or the undersigned’s advisor(s) in connection with the investment which was in any way inconsistent with the Memorandum. b. The undersigned is (i) an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the “Act”) _, and (ii) the undersigned alone or with the undersigned’s purchaser representative has such knowledge and experience in financial and business matters that the undersigned si capable of evaluating the merits and risks of the prospective investment and to make an informed investment decision with respect thereto. c. The undersigned has carefully reviewed and understands the risks of, and other considerations relating to, an investment set forth under the caption of Risk Factors in the Private Placement Memorandum. d. The undersigned understands the investment has not been filed with or reviewed by any government agencies because the representation made by the Company is of a private nature. e. The undersigned is investing solely for the undersigned’s own account and not for the account of any other person and not for distribution, assignment or resale to others, and no other person has a direct or indirect beneficial interest in such investment. f. The undersigned, if a corporation or other legal entity, is authorized and otherwise duly qualified to invest and such entity has its principal place of business as set forth on the signature page hereof and such entity has not been formed to for the specific purpose of this investment. g. All information which the undersigned has provided to the Company concerning financial position and knowledge of financial and business matters of the person making the investment decision on behalf of such entity, is correct and complete as of the date set forth at the end hereof, and if
Investor Questionnaire Attached to the Investor Application is an Investor Questionnaire designed to determine whether each investor in the Company is an accredited investor pursuant to the federal securities act. Please complete the Investor Questionnaire regardless of your status as an accredited investor. Payment Payment of the amount indicated in the Investment Agreement must accompany the Investment Application.
Delivery Instructions Please send the Investment Agreement, Investment Questionnaire and the Payment to: Gallagher Law Firm 3252 Rice Street St. Paul, Minnesota 55126 Attention: Paul V. Kieffer Investment Agreement
there should be any adverse change in such information prior to the undersigned’s investment being accepted, the undersigned will immediately provide the Company with such information. h. The undersigned has adequate net worth and adequate means to provide for the undersigned’s current needs and possible contingencies and has not need for liquidity in this investment, and is able to bear the economic risk of this investment, and has sufficient net worth to sustain a loss of the undersigned’s investment in the Company without economic hardship if such loss should occur. 4. Indemnification – The undersigned agrees to indemnify and hold harmless the Company and its affiliates from and against all damages, losses, costs, and expenses (including reasonable attorneys’ fees) which it may incur by reason of the failure of the undersigned to fulfill any of the terms or conditions of his investment, or by reason of any breach of the representations and warranties made by the undersigned herein, or in any document provided by the undersigned to the Company. 5. Correct Information – Any information which the undersigned has heretofore furnished to the Company with respect to the undersigned’s accredited investor status, financial position and business experience is correct and complete as of the date of this investment application and if there should be any material change in such information, the undersigned will immediately furnish such revised or corrected information to the Company. 6. Limited Transferability – The undersigned hereby agrees not to pledge, hypothecate, sell, assign, or otherwise transfer the investment hereunder unless the undersigned obtains an opinion of counsel acceptable to the Company that the proposed transfer will not violate the Act. 7. Miscellaneous – a. The undersigned agrees that the undersigned may not cancel, terminate, or revoke this investment or any agreement of the undersigned made hereunder and that this investment shall survive the death of disability of the undersigned and shall be binding upon the undersigned’s heirs, executors, administrators, successors and assigns. b. This investment constitutes the entire agreement among the parties hereto, with respect to the subject matter hereof and may be amended only by a writing executed by all parties.
c. This investment shall be enforced, governed and construed in all respects in accordance with the laws of the State of Minnesota without regard to its conflict of law principals. d. Within ten days after receipt of a written request from the Company, the undersigned agrees to provide such information and to execute and deliver such documents as reasonably may be necessary to comply with any and all laws and ordinances to which the Company is subject. e. The Company reserves the right to revoke and rescind this Investment Agreement if required by the appropriate regulatory authorities. 8. Type of Ownership – The investment is for a membership in ArchiveXpress II® and should be registered in the Company’s documentation as: Individual Investor _______________________________________ Other Organization _______________________________________
Signature Page Investor (Individual Investor) _____________________________ Signature _____________________________
Social Security Number ____________________________ Address: __________________________________ __________________________________ __________________________________ Executed at: __________________________________ City __________________________________ State/County This _________ day of ____________, 2009
Signature Page Investor (Organizational Investor) _____________________________ Business Name/State of Organization _____________________________ By Signature/Name/Title ____________________________ Organization Identity (Federal ID) Business Address: __________________________________ __________________________________
__________________________________ Executed at: __________________________________ City __________________________________ State/County This _________ day of ____________, 2009
Investment Accepted Archive Software Development, LLC.
Date: ________________________
By: _____________________________
Name: __________________________ Title: ___________________________
Investor Questionnaire You must complete this Investor Questionnaire (the “Questionnaire”) in order to subscribe to invest in ArchiveXpress II®. Your answers will at all times be kept strictly confidential. However, by signing this Questionnaire, you agree the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish the availability under the Act. If the answer to any question is “None” or “Not Applicable”, please so state. Attach additional sheets of paper if necessary to complete any answer. Please print or type your answers. Please complete, sign, date, and return to ArchiveXpress II®. 1. Personal Data Name: ______________________________________________ Home Address: _______________________________________ ____________________________________________ ____________________________________________ Occupation: _________________________________________ Business Address: _____________________________________ _____________________________________________
_____________________________________________ Telephone Business: ____________________________________ Telephone Home: ______________________________________ Telephone Mobile: _____________________________________ State of Principal Residence: _____________________________ States with which resident state income tax returns have been filed for the past two years. ____________________________________________________ 2.
Accredited Investor Status
If any of the following categories is applicable to you, such that you would be an accredited investor within the meaning of the federal securities laws, please initial the space opposite the applicable category and then go directly to the signature page of the Questionnaire. ___ A natural person whose individual net worth or joint net worth with such person’s spouse exceeds $ 1,000,000: or ___ A natural person whose individual income in each of the two most recent years was in excess of $ 200,000, or whose joint income with that person’s spouse was in excess of $ 300,000 in each of those years, and who reasonably expects an income reaching the same level in the current year; or You agree to provide the Company upon its request with written evidence of qualification under any category initialed above. Dated: ________________ 2009
______________________________ Signature of Investor _______________________________ Printed name of Investor