U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D. C., 20549
Form 10-SB/A
General Form for Registration of Securities of Small Business Issuers
(Under Section 12(b) or (g) of the Securities Exchange Act of 1934)
ANONYMOUS DATA CORPORATION
-----------------------------------------
(Exact name of registrant as specified in charter)
Nevada 86-0857752
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4340 South Valley View, Suite 210
Las Vegas, Nevada 89103
(Address of Principal Executive Office) (Zip Code)
(702) 221-0756
( Telephone Number)
Securities To Be Registered Under Section 12(b) of the Act:
Title of each Class Name of each Exchange on which
To Be Registered each Class is to be Registered
None None
Securities To Be Registered Under Section 12(g) of the Act:
Common Stock,
$0.001 Par Value
(Title of Class)
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TABLE OF CONTENTS
Item 1. Description of Business
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Description of Property
Item 4. Security Ownership of Certain Beneficial Owners and Management
Item 5. Directors, Executive Officers, Promoters and Control Persons
Item 6. Executive Compensation
Item 7. Certain Relationships and Related Transactions
Item 8. Legal Proceedings
Item 9. Market for Common Equity and Related Stockholder Matters
Item 10. Recent Sales of Unregistered Securities
Item 11. Description of Securities
Item 12. Indemnification of Directors and Officers
Item 13. Financial Statements
Item 14. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 15. Financial Statements and Exhibits
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INTRODUCTORY STATEMENT
Anonymous Data Corporation has prepared this Form 10SB on a voluntary
basis to make available reportable information about Anonymous Data
Corporation to existing shareholders and others interested in our
activities.
ITEM 1. DESCRIPTION OF BUSINESS
Overview
Anonymous Data Corporation, a Nevada corporation (the "Company" or
"ADC") formed in November 1996, is a development stage company engaged in
the business of data management using a biometric identification system.
The biometric identification system; (i) archives individual data, such as
medical educational information, for access by registered users through
rapid sorting using scanning of a portion of their anatomy as a
preliminary search method; and, (ii) permits a second method of
identification of individuals volunteering for payment as plasma donors.
Background
We have obtained rights to a method of linking files of archived data
to the anatomy of an individual. This method allows the search function
for records to be more rapid and accurate and re-checked according to the
name of the individual. We have spent $78,000 during 1997 and $189,000
during 1998 toward research and development toward the refinement of our
biometric individual data identification system.
The term BIOMETRIC derives from the words body (BIO) and measurement
(METRIC). The science of biometrics has in recent years developed the
technology to take a reading from a human (such as electronic scan of a
fingerprint, iris scan, facial recognition, palm print, voice sample,
etc). The electronic scan is then matched with to the same biometric
marker for purposes of recognition and verification of identity. The
United States Patent and Trademark Office has issued two U.S. patents to
Dr. James E. Beecham, Chairman of the Company. The Patents, Patent Numbers
U.S. 5,876,926 [PCT/U.S. 98/16435]) and U.S. 5,897,989 [PCT/U.S.
97/08015], pertain to a method, system and apparatus that permit an
individual to submit biologic test specimens for medical testing under
biometric identification. The system then allows for the subsequent
retrieval of test results from a computerized database utilizing the same
biometric personal identification. These Patents have been exclusively
licensed to us from Dr. Beecham. - See "Certain Transactions - License
Agreement."
The patented applications, in non-U.S. territories, will be utilized
for collecting medical specimens in containers labeled by "biometric
index". For example, a biometric index may be obtained from the scan of a
fingerprint and/or the scan of the iris of the eye of the specimen donor.
After testing in a certified laboratory, the test data is stored
electronically under linkage to that same personal biometric index. Access
to such "biometrically" stored information is controlled by the re-scan of
the specimen donor. Since viewing the data requires "unlocking" the
computer file by scanning the same fingerprint and/or eye as was used for
sending the specimen to the lab in the first place, our system provides
the secure protection of the donors sample and limits mistakes that are
sometimes made in the donation process.
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We have developed a plan and are in the process of developing a
method for providing services and products worldwide based on our
exclusive patent licenses. We plan to offer these products as turnkey
systems and also to offer services directly to subscribers domestically
and abroad.
Current Status of ADC's Products and Related Software
ADCNET, a comprehensive software and hardware system, was designed to
be generic to support all four of the current ADC product line. Namely, 1)
Court Mandated Data System, 2) Infectious Disease Education System, 3)
Plasma Industry System, and 4) Medical Records Privacy/Genetics Data
Security System.
Each of the four products named above requires a shared database in a
Local Area Network (LAN) or a Wide Area Network (WAN) environment.
Functionally, each of the systems has an "Enroll," "Recognize," "Print2D
bar code control label," and "Enter Results" options.
Two versions of ADCNET are planned: Version .5 and Version 1.0.
Version .5 is currently beta testing as a "Pilot Court Data System" for the
American Toxicology Institute, and Las Vegas Family Court. This Version is
a LAN between the Court and the Drug Testing Lab. Both sites are
anticipated to share a database located at the Court. Version 1.0 will
permit each location to continue processing in the event of a power
failure, until such time as the power is restored, at which time the
database is automatically updated. Version 1.0 is scheduled to be completed
in late September, 1999.
The Prototype ADCNET Version .5 is currently installed as a beta
testing system at the American Toxicology Institute and the Las Vegas
Family Court. This system is operational and is anticipated to be evaluated
by both Court and Lab personnel. Minor enhancements are being noted as the
system is commissioned and these enhancements will be implemented in
Version 1.0. prior to its implementation in September of 1999.
To become market ready, Version 1.0 will require customer
modifications specific to each customer. Modifications such as Title
Screen, Customer name, Customer Address, etc., will have to be programmed
for each Customer Installation.
The completion and operational status of the four systems as
described below, utilizing ADCNET, will be developed through manufacturing
contracts, corporate strategic partnerships and sublicense agreements with
U.S. and foreign governments, corporations and other organizations.
- Court Information System. Developed for the benefit of United
States judicial order compliance. The system pre-identifies an
individual whom the court orders to proceed to the laboratory for drug
testing. The laboratory, prior to the standard identification process
such as by drivers license verification, rechecks the identity by
biometric index. This double check is independent of all laboratory
procedures and does not interface or replace the methods and systems
within the laboratory.
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- Infectious Disease Educational System. Developed for individuals and
social organizations in the United States interested in communicable
disease prevention through voluntary testing and sharing of results
privately with selected persons among the public. A study published in 1998
in the Journal of the American Medical Association demonstrated the
important contribution of education and anonymity in the U.S. for HIV
testing. The study concluded that when people are aware of the disease and
not required to give their name but are offered anonymous HIV testing, they
voluntarily test more than 1 year earlier and enter medical care earlier.
Most U.S. states are now required to permit anonymous HIV testing.
In the foreign markets we plan to offer turnkey computerized systems
for nationwide medical testing and data management. One use would be by
foreign government officials to monitor child bearing age women and
their HIV test results. By re-scanning their biometric index when they
arrive at the maternity ward to deliver, HIV positive women can be given
AZT, which in 80% of cases protects their baby from HIV infection.
- Plasma Industry System. Developed for use in U.S. plasma centers to
prevent the paid donor from violating regulations that forbid donation more
frequently than 48 hours. By registering the biometric index of the donor
in one center and providing the data to other centers, a paid donor, even
giving a false name, can be prevented from creating the health risk of
donating plasma for money several times in one day at multiple centers in
one city.
- Medical Data Privacy/Genetics Data Security System. Developed for U.S.
health care organizations and individuals interested in verifying and
safeguarding their sensitive medical testing data such as genetic testing
results. In particular where such genetic studies identify predisposition
to disease or can predict future disease and thus if disclosed to
unauthorized parties affect insurability of the individual tested and their
family. Developed to allow those who wish to seek testing directly from a
laboratory to identify their specimens and test results while maintaining
privacy.
The primary product lines listed above each utilize a proprietary
apparatus as disclosed in the licensed patents to be used in archiving
medical information for educational purposes. Data retrieval via
computerized stored data or from a 2-D bar code encryption is linked to a
re-scanning of the donor for matching biometric identification.
The Company's technology may be utilized in the marketplace for
revenue generation in two areas:
(i) as a seller of hardware components and software for turn-key systems
for large clients and;
(ii) as a provider of services to subscribers directly in certain
localities.
The systems which ADC plans to offer for these 2 business models are:
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Court Data System
As a direct service provider, we are beta testing a prototype system
code named, "ADCNET," which utilizes biometric identification in the
Nevada court jurisdiction. ADCNET is designed to be utilized by the
judicial system to verify the identification of an individual ordered by
the judge to report to the laboratory for drug testing. The system matches
the identification of the individual biometricly by matching his/her
biometric identification with the biometric image of the individual who
has been ordered by the judge for testing. We are not involved in the
testing or laboratory work up itself, merely the means by which the test
results are confirmed as having come from the person identified. The
standard laboratory procedures are still followed independently of the
biometric system. The affiliated laboratories are fully inspected and in
compliance with all governmental regulation such as CLIA, OSHA, etc.
Infectious Disease Education System
We have designed a direct service data management system, that can
allow thoughtful persons seeking information and a way to address, for
themselves and their loved ones, personal issues regarding health
information. Understanding how the system works requires an understanding
of the value of information that can allow a person to assess the risk of
the spread of disease when engaged in a relationship. The basic question
is "How and when are these diseases usually transmitted?"
Sexually transmitted diseases are ordinarily transmitted from one
person to another, not from a single sexual contact, but rather only after
repeated contacts over weeks or even months. Thus, even after a
relationship starts, there is an opportunity to prevent the spread of
disease, if a person has the knowledge of the partners' recent testing
results. Our technology provides that information in a convenient and
private manner.
To use the system as a tested person, you (i) first subscribe
yourself as an individual, (ii) select from a menu of educational data
offered and then (iii) register as having read the data and understood the
process. For convenience, our system is planned to be utilized as a
college campus health service or private community health service located
in storefront type clinics in public places. Our system is planned to
allow a parent to subscribe for an adolescent child. Over the next months
or years, the parent will be able to monitor the compliance of the child
to our education program by going with the child to a computer monitor,
having the adolescent childs fingerprint scanned or iris scanned and
viewing the record of educational sessions with the adolescent child.
In the international market, in circumstances where a sex worker is
the subscribed person (through government mandate in certain
jurisdictions) the authorities can scan the iris of the sex worker's eye
and view that worker's data from the database, which database includes HIV
test results. Where the worker has not continued to be tested periodically
the authorities can arrest or detain the non-compliant worker. Similarly
in circumstances where the authorities provide the system for use of child-
bearing age women the system can be used to identify those pregnant woman
who are HIV positive. By providing AZT to an HIV positive woman during
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delivery, the newborn child can be protected from HIV 80% of the time. In
addition, for overseas markets, in compliance with the foreign government
regulations, it is important that the subscriber and the significant other
in a relationship understand our rules for data retention. Our data base
management techniques enhance the medical validity of data in the Golden
Rule database. Each subscriber, in order to maintain data in the active
Golden Rule database, may be required to present a specimen to be tested
at least every four months. If a recent specimen is not provided at one of
the participating, certified laboratories in our system, no older data is
accessible.
Internationally, this testing frequency is designed to be medically
appropriate because in most cases it takes six weeks to several months for
an immuno-competent, recently infected person to make enough antibody to
be detectable. (Some newer tests utilize antigen identification, not
antibody, i.e. a substance such as nucleic acid -DNA or RNA or cell wall
fragments from the organism itself, to detect infection sooner. These
viral bacterial antigen detection tests may be applied in the Golden Rule
system as appropriate). The person with whom the data is shared can have
confidence that the data is valid at least as of the most recent date
tested because they will know that the Golden Rule system imposes a
frequent testing discipline on the subscriber with medical officer review
and comment on test results.
In the international area, the seven diseases for which testing can
be ordered by a physician and data sharing are targeted by our Golden Rule
System are: Human Immunodeficiency Virus or HIV; Gonorrhea; Chlamydia;
Herpes type 2; hepatitis B and C; and Syphilis.
As of the date of this filing, we have received letters of interest
and invitations to demo the system from representatives of the Governments
of Honduras and the Dominican Republic. Similarly the national turn-key
system will be available at the option of the client government to locate,
in public places such as hotel lobbies and selected nightclubs, customers
of sex workers in order to verify the test results of the sex worker in
the field on a 24 hour per day access basis.
ADC plans to offer to the government of those countries identified as
having a major HIV/AIDS problem the ADCNET solution. The initial countries
to be approached are identified in the U.S. Census Bureau, Official
Statistics, 2/2/99 and the World Bank Study of Central America to include:
Honduras, Nicaragua, Panama, Costa Rica, El Salvador, Dominican Republic,
and other Caribbean countries. In the year 2,000 and beyond ADC plans to
expand its list of High-Risk countries for marketing.
Plasma Industry System
In the plasma industry paid donors often falsify their name and try
to donate at several centers in one day to gain multiple payments. Our
DataSecure system offers a means to improve the chances that the high risk
donors or donors attempting to circumvent the system by donating multiple
times prior to the wait period, are accurately linked to the plasma center
computer database and, optionally, remain confidential.
The DataSecure system for plasma centers permits biometric linkage to
be maintained from start to finish in a two-step process: a) through
biometric label of iris of the prospective donor, and b) in the network of
computers to other blood centers.
An alternative use of our turnkey system is for use in the plasma
industry to screen out donors who carry infections. The DataSecure system
for the plasma industry permits biometric linkage to be maintained for
paid donors to records of their previous donations and testing results.
When one donor tests positive for a condition disqualifying that donor
from donating plasma, the information is entered under the biometric of
that donor. When that donor next appears at any blood donation site in the
computer network, the re-scan of the biometric accesses the record and
enables the blood center personnel to disqualify that donor. This step
prevents unnecessary expense in re-testing and more importantly allows a
subscribing blood industry company to prevent inadvertently drawing the
<PAGE>
blood of that donor, who may attempt to falsify identity to gain payment
for tainted blood donation.
Medical Records Privacy/Genetics Data Security System.
Medical records privacy has become a prominent concern of U.S.
national leaders, as demonstrated by President Clinton in his January 1999
State of the Union address in which he promised action on this issue in
1999. Many sensitive medical data are at issue including testing data, in
particular the area of genetic testing. Scientists today are close to
completing the sequencing of all of the human DNA code through an effort
known as the Human Genome project. One early finding is rather surprising.
Each of us has little imperfections in our own DNA code. In fact, experts
say each of us has a minimum of 5 to 20 errors in our DNA sequence.
Some of these errors result in disease or, more precisely, an
increased risk of developing a certain disease. For example, there are
genes now known that predispose to breast cancer, colon cancer, diseases
of the nervous system and over 450 other different diseases. Tests for
many of these genes are either available now or soon to be available.
Unfortunately information of this type, if released to unauthorized
persons, may lead to discrimination. Some unscrupulous health insurers may
use genetic test information to deny insurance to those persons found to
be at risk for certain diseases. Although Congress and some medically
oriented government agencies are drafting legislation to outlaw such
discrimination, it is one form of discrimination that is difficult to
detect or prove.
Our data base of Private Medical test results and Genetic Testing
results is planned to be filed in a unique manner, by fingerprint codes or
iris codes: the fingerprint scan or iris scan of the person who is tested
for genetic markers (the ADC subscriber) and optionally a second
fingerprint code or iris code from the subscriber's doctor. This dual
biometric filing and retrieval method for genetic testing data offers a
subscriber confidence that sensitive test results such as genetic
predisposition to diseases such as breast cancer (BRCA-1 gene) or colon
cancer or diabetes are not accessible by unauthorized individuals or
organizations. Furthermore, the fingerprint scan or iris code module
having a clinic setting presents the appropriate opportunity for genetic
counseling and for education by the physician to the subscriber privately
of the meaning of the results. This allows plans to be made for medical
surveillance for the disease for which the patient has a genetic
predisposition.
Business Strategy
Our business strategy is to make proposals to interested governments,
large corporations and interest groups domestically and overseas. As
vendor of hardware and software turnkey systems for large clients, the
Company plans to approach those countries where the problems exist for
which the systems offer solutions. In order to provide services to
subscribers directly, the Company plans to research the medical and legal
aspects of its proposed services in each jurisdiction through appropriate
consultation with local officials.
We have received invitations to demonstrate the Infectious Disease
System from representatives of the Governments of Honduras and the
Dominican Republic.
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Domestically, we are beta testing the court data management system
via pilot programs with the American Toxicology Institute and the Las
Vegas Family Court. Our plans are to expand within the U.S. judicial
national market on a city by city basis, with presentations of our systems
at the Sixth National Court Technology Conference in Los Angeles in
September 1999.
Also, domestically, we plan to enter the Plasma industry through
attendance at the American Blood Resources Association conference in
Washington, D.C. in June 1999, where contacts are desired to establish a
pilot program with a large U.S. plasma industry company.
We hope to expand the system within the U.S. market and abroad
through contracts with medical service providers, insurance companies and
laboratories.
Product Testing
The testing phase for each of the two systems will occur with funding
of pilot projects.
FDA REGULATIONS SPECIFY THAT PRODUCTS AND SOFTWARE USED FOR
EDUCATIONAL PURPOSES ONLY ARE EXEMPT FROM FDA REGULATION. FURTHERMORE
PRODUCTS THAT DO NOT PROVIDE DIAGNOSIS OR TREATMENT ARE EXEMPT AND NOT
CONSIDERED A MEDICAL DEVICE. The initial four product lines qualify for
the exemptions stated above. Future development of U.S. market products in
line with the issued patents and related software programming domestically
will take note of FDA regulations in anticipation of submitting
applications for approval to the FDA as necessary. We have also engaged
the services of C. L. McIntosh and Associates, a prominent consulting firm
in the area of FDA regulatory matters, to assist us in any future FDA
related matters. Field-testing will occur in the venue best suited to each
system, whether in the U.S. or abroad.
Consultants Utilized by the Company
On June 10, 1997 the Company retained the consulting services of Jack
Morrow to assist it in medical laboratory business relations and business
strategy. Jack Morrow is paid at an hourly rate of $75 plus authorized
expenses. The initial term of this agreement was for 12 months and was
renewed for an additional 12 months on June 15, 1998. In addition, Jack
Morrow has been issued 10,000 shares of the Company's Common Stock.
On August 19, 1997 the Company retained the consulting services of
C.L. McIntosh & Associates, Inc. to assist it in a broad range of
consultation on the regulation of medical devices and to assist in all
matters concerning the Food and Drug Administration (FDA). C.L. McIntosh &
Associates, Inc. was paid $1,000 as an initial retainer and is paid at an
hourly rate of $175. The term of this agreement is for 12 months and
automatically renews for additional 12-month periods, with approval from
both the Company and Consultant.
On August 29, 1997 the Company retained the consulting services of
Sher-Janel T. Todd to assist it in focus group and market research. Sher-
Janel T. Todd was paid at an hourly rate of $50 plus authorized expenses.
The term of this agreement was for 12 months.
On September 2, 1997 the Company retained the consulting services of
Ilene Nikoley to assist it in focus group and market research. Ilene
Nikoley was paid at an hourly rate of $25 plus authorized expenses. The
term of this agreement was for 12 months.
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On May 1, 1998 the Company retained the consulting services of Michael
Moore to assist it in computer services to include hardware and software
recommendations and programs. Michael Moore is paid at an hourly rate of
$45 plus a $20 service charge and authorized expenses. The term of this
agreement was for 12 months.
On September 16, 1998 the Company retained the consulting services of
Dave Denney to assist it in computer services to include hardware and
Software recommendations and programs. Dave Denney was issued 10,000
shares of the Company's Common Stock, valued at $.10 per share, as
compensation plus he is also reimbursed for authorized expenses. The term
of this agreement is for 12 months.
On August 16, 1998 the Company retained the consulting services of
William Somers, to assist it in computer services to include hardware and
Software recommendations and programs. William Somers, was issued 10,000
shares of the Company's Common Stock, valued at $.10 per share, as
compensation plus he is also reimbursed for authorized expenses. The term
of this agreement is for 12 months.
Suppliers
Our business strategy has been to combine proprietary technology and
products with "best of class" technology and products and design an
integrated, seamless product that takes advantage of the superior quality
of our components which are Y2K compliant.
Hardware Suppliers- Our products and services are not dependent on
any one supplier of hardware and will use any off-the-shelf IBM compatible
computer available on the market today, i.e.-Compaq, DELL, Gateway, etc.
We do not foresee the acquisition of such equipment as a problem and
supply should not affect our business in any way.
We use cameras designed by IriScan in the majority of our
applications, however, there are several other companies that make similar
cameras, such as OKI corporation of Japan. Fingerprint scanners produced
by UltraScan, Inc. are also under consideration.
Software Suppliers
We primarily use software based on Oracle database products designed
by Dimensia Inc. of Hawaii.
Sales and Marketing
Initially, the Company, through its officers, directors and key
consultants, plans to start pilot programs in strategic markets with
corporate partners such as Toyota Tsusho and Litton Data Systems and upon
the success of these programs, plans will be to set up Strategic Alliances
with these and other highly visible and well known vendors throughout the
world.
Strategic Alliances
Our success will be dependent in part upon a number of strategic
relationships that we intend to enter into. At present, we have not
established relationships with any particular entity, however, we are in
discussions with several large companies, both locally and internationally.
The amount and timing of resources which future strategic partners devote
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to assisting us will not be within our control. There can be no assurance
that strategic partners will perform their obligations as expected or that
any revenue will be derived from strategic arrangements. If any of our
strategic partners breaches or terminates an agreement with us or otherwise
fails to conduct its collaborative activities in a timely manner, the
development, commercialization or marketing of the product which is the
subject of the agreement may be delayed and we may be required to undertake
unforeseen additional responsibilities or to devote additional resources to
development, commercialization or marketing of our products.
The inability to enter into strategic relationships or the failure of
a strategic partner to perform its obligations could have a material
adverse effect on our business, financial condition and results of
operations. There can be no assurance that we will be able to negotiate
acceptable strategic agreements in the future, that the resulting
relationships will be successful or that we will continue to maintain or
develop strategic relationships or to replace strategic partners in the
event any such relationships are terminated. Our failure to maintain any
strategic relationship could materially and adversely affect our business,
financial condition and results of operations. We are currently in
negotiations with IriScan and UltraScan to determine the terms under which
we have access to their respective biometric technology.
Customer Support
In addition to ongoing client prospecting and product demonstrations
through direct sales, a satisfied customer is one of the most cost-
effective sales tools for our systems is a satisfied customer. Our
customers will generally require significant support and training with
respect to our products, particularly in the initial deployment and
implementation stage. We intend to provide support via telephone,
teleconference or on-site visits, and anticipate hiring additional staff
as our customer base grows. Next to product quality and ease of use, we
will always place customer satisfaction and technical support as its
highest marketing priorities. However, we have limited experience with
widespread deployment of products to a diverse customer base, and there
can be no assurance that we will have adequate personnel to provide the
levels of support that our customers may require during initial product
deployment or on an ongoing basis. An inability to provide sufficient
support to our customers could delay or prevent the successful deployment
of our products. Failure to provide adequate support could have an adverse
impact on our reputation and relationship with its customers, could
prevent us from gaining new customers and could have a material adverse
effect on our business, financial condition or results of operations.
Competition
We compete indirectly with certain companies which utilize biometrics
in related fields, such as Sony Corporation and Lockheed Martin
Corporation, which have biometric systems on the market that are in
current use. Other companies, such as NEC Technologies, have biometric
fingerprint identification systems on the market for physician
identification when accessing computerized patient information rather than
a specific patient file. IriScan Inc. may elect to retain the right to
offer IriScan recognition systems in the medical field either directly or
through vendors other than to us who then may compete with us.
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We are aware of medical data collection, storage and display systems
technology entitled' "Medical Image Filing Apparatus," and "Health
Examination Method and System Using Plural Self-Test Stations and a
Magnetic Card." These systems store medical data on magnetic media
contained on a card or film.
We are unaware of any company which utilizes our current patented
technology to biometricly link together an individual with that
individual's specimen, either anonymously or otherwise.
Because we are not a testing laboratory we do not compete with
laboratory companies.
Developing and Changing Market
The market for archiving of medical data management is continually
evolving and is highly dependent upon changes in the regulation arena.
Concern for privacy appears to be a favorable development for us. Changes
in technology and regulatory processes, however, may affect the demand our
products, which in turn may cause existing companies in other product
lines to shift their emphasis to products similar to our services and
products, thus increasing the competition.
Intellectual Property
Two U.S. patents are currently licensed exclusively to us (U.S.
5,876,926 [PCT/ US98/16435] and 5, 897, 989 [PCT/US97/08015]) from our
Chairman, James E. Beecham, MD. The Exclusive Licensee Territorial
Agreement is for the territory of the United States with provisions for
expansion of the licensed territory on a 1st right basis under terms and
conditions relating to payment of patent fees, use of the license and
payment of royalties. These U.S. licenses are exclusive and non-revocable
for the term until May 14, 2008 assuming compliance of the parties with
the terms. Pursuant to the License Agreement, a fee will be paid to Dr.
Beecham in the form of a royalty of three percent (3%) of the first $10
million gross revenues to us from the manufacture, use, sale or operation
of the Products and Services, two percent (2%) of gross revenues which
exceed $10 million but are less than $25 million and one percent (1%) of
gross revenues which exceed $25 million. Dr. Beecham has also agreed to
extend the patent licenses for us for these two U.S. patents for an
additional eight (8) years depending on performance. We consider these
licensed patents to be valuable and of substantial commercial benefit.
We also seek to protect our intellectual property rights by limiting
access to the distribution of our software, documentation and other
proprietary information. In addition, we enter into confidentiality
agreements with our employees and certain customers, vendors and strategic
partners. There can be no assurance that the steps taken by us in this
regard will be adequate to prevent misappropriation of our technology or
that our competitors will not independently develop technologies that are
substantially equivalent or superior to our technologies.
By virtue of his agreement with us, Dr. Beecham is under no
obligation to assign or license to us any additional patents he may
receive beyond the initial two U.S. patents already licensed by us. A
first rights of license provision for additional patents by Dr. Beecham in
the area of medical biometrics is in place in exchange for our promise to
provide funds to underwrite the costs of additional patent filings and
prosecution. There can be no assurance that any patents, federal
trademarks or services marks will be granted, additional patents will be
licensed or that the licensed patents, although issued by the Patent and
Trademark Office, can be defended or will permit substantial protection
for our services or products.
<PAGE>
U.S. Government Approvals
The United States Food and Drug Administration (the "FDA"), is the
most stringent regulatory agency for medical devices and claims and may
have jurisdiction over one or more of our services and products.
Exemptions exist for non-diagnostic and non-treatment data archiving
system. We expect that biometric-based information systems that provide
archival non-diagnostic, non-treatment data, will be exempt. However,
there can be no guarantee that the governmental regulations will not
change in the future. Governmental guidelines for universal and special
precautions for handling infectious disease material do not apply to us
since we are a medical education and data storage, retrieval and
dissemination service. Neither can there be a guarantee that our products
or services can successfully compete with those of other competitors, or
that the protection provided by the U.S. patents licensed by us will be
successful in preventing competitors from offering services or products
similar ours. We further believe that certain of our products and services
may not qualify for exemption without FDA pre-market approval. FDA
approval should be expedited by our plans to utilize consultants familiar
with FDA procedures. There can be no guarantee, however, that these
approvals will be received in an expeditious manner. The overseas markets
vary in regulatory oversight country by country.
Foreign Government Approvals
The Company and its products may be subject to foreign regulation
regarding export restrictions and controls on technology such as that
incorporated into the Company's products. Additional approvals from foreign
regulatory authorities may be required, and there can be no assurance that
the Company will be able to obtain foreign approvals on a timely basis or
at all, or that it will not be required to incur significant costs in
obtaining or maintaining its foreign regulatory approvals. In Europe, the
Company will be required to obtain certifications necessary to enable the
"CE" mark to be affixed to the Company's products in member countries of
the European Union. The CE mark is an international symbol of quality and
complies with applicable European medical device directives. The Company
has not yet obtained this CE certification. Failure to comply with foreign
regulatory requirements could have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, the increasing demand for biometric systems has exerted pressure
on regulatory bodies worldwide to adopt new standards for such products and
services, generally following extensive investigation of and deliberation
over competing technologies. The delays inherent in this governmental
approval process may cause the cancellation, postponement or rescheduling
of the installation of systems by the Company's customers, which in turn
may have a material adverse effect on the sale of products by the Company
to such customers.
Many countries in which the Company currently intends to operate
either do not currently regulate devices similar to the Company's or have
minimal registration requirements; however, these countries may develop
more extensive regulations in the future that could adversely affect the
Company's ability to market its products in such countries. In addition,
significant costs and requests by regulators for additional information may
be encountered by the Company in its efforts to obtain regulatory
approvals. Any of such events could substantially delay or preclude the
Company from marketing its products in the U.S. or internationally. Failure
to comply with applicable regulatory requirements can result in loss of
previously received approvals and other sanctions and could have a material
adverse effect on the Company's business, prospects, financial condition
and results of operations.
<PAGE>
Additionally, the Company and its agents will be subject to compliance
with the Foreign Corrupt Practices Act of 1977, as amended ("FCPA"), which
prohibits the promise or payments of any money, remuneration or other items
of value to foreign government officials, public office holder, political
parties and others with regard to the obtaining or preserving commercial
contracts or orders. The FCPA imposes on SEC reporting companies certain
accounting and internal control requirements, with which the Company
intends to comply, insofar as applicable to the Company. Violation of the
FCPA may result in corporate fines of up to $1,000,000 per offense and
fines and/or imprisonment for convicted corporate officers of up to $10,000
and five years imprisonment. Although the Company will make every effort to
comply with all such statutes and regulations, inadvertent non-compliance
could result in legal actions against the Company and consequent impairment
of its ability to conduct business and these restrictions may hamper the
Company in its marketing efforts abroad.
Risks Associated with International Sales
A number of risks are inherent in international operations and
transactions. International sales and operations may be limited or
disrupted by the imposition of government controls, export license
requirements, political instability, trade restrictions, changes in tariffs
and difficulties in staffing, coordinating and managing international
operations. Additionally, our business, financial condition and results of
operations may be adversely affected by fluctuations in international
currency exchange rates as well as constraints on our ability to maintain
or increase prices. The international nature of our business subjects us
and our representatives, agents and distributors to laws and regulations of
the foreign jurisdictions in which they operate or in which our products
are sold. The regulation of medical devices in a number of such
jurisdictions, particularly in the European Economic Area, continues to
develop and there can be no assurance that new laws or regulations, or new
interpretations of existing laws and regulations, will not have a material
adverse effect on our business, prospects, financial condition and results
of operations. In addition, the laws of certain foreign countries do not
protect our intellectual property rights to the same extent as do the laws
of the U.S. There can be no assurance that we will be able to successfully
further commercialize our current products or successfully commercialize
any future products in any international market.
Risks Associated with Acquisitions
The integration of any acquisitions will require special attention
from management, which may temporarily distract its attention from the day-
to-day business of the Company. Any acquisitions will also require
integration of the Company's product offerings and coordination of research
and development and sales and marketing activities. Furthermore, as a
result of acquisitions, the Company may enter markets in which it has no or
little direct prior experience. There can also be no assurance that the
Company will be able to retain key technical personnel of an acquired
company or recruit new management personnel for the acquired businesses, or
that the Company will, or may in the future, realize any benefits as a
result of such acquisitions. Acquisitions by the Company may result in
potentially dilutive issuances of equity securities, the incurrence of
debt, one-time acquisition charges and amortization expenses related to
goodwill and intangible assets, each of which could be significant and
could materially adversely affect the Company's financial condition and
results of operations. In addition, the Company believes that it may be
required to expand and enhance its financial and management controls,
<PAGE>
reporting systems and procedures as it integrates acquisitions. There can
be no assurance that the Company will be able to do so effectively, and
failure to do so when necessary would have a material adverse effect upon
the Company's business, financial condition and results of operations.
Employees
As of December 31, 1998, we had 4 full time employees and 10
consultants. All employees are located at our headquarters in Las Vegas.
None of our employees are subject to any collective bargaining agreement.
Our proposed personnel structure can be divided into three broad
categories: management and professional, administrative, and project
personnel. As in most small companies, the divisions between these three
categories are somewhat indistinct, as employees are engaged in various
functions as projects and work load demands.
We are dependent upon the services of James E. Beecham, MD, Chairman
of the Company, Thomas Yokoyama, President, Robert Nikoley, Chief
Financial Officer, and Karen Cavallaro, Vice President of Public
Relations. Our future success also depends on our ability to attract and
retain other qualified personnel, for which competition is intense. The
loss of Dr. Beecham, Mr. Yokoyama, Mr. Nikoley or Ms. Cavallaro, or our
inability to attract and retain other qualified employees, could have a
material adverse effect on us. See "Management".
Risks Associated with Year 2000 Problem
Background.
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result, date-
sensitive computer software may recognize a date using "00" as the year
1900 rather than the year 2000. This is generally referred to as the "Year
2000 issue," or "Y2K." If this situation occurs, the potential exists for
computer system failures or miscalculations by computer programs, which
could disrupt operations.
In less than one year, computer systems and/or software used by many
companies may need to be upgraded to accept four digit entries to
distinguish 21st century dates from 20th century dates. As is the case with
most other companies using computers in their operations, we recognize the
need to ensure that our operations will not be adversely impacted by
software and/or system failures related to such "Year 2000" noncompliance.
Within the past twelve months, we have been upgrading components of our own
internal computer and related information and operational systems and
continue to assess the need for further system redesign and believe we are
taking the appropriate steps to ensure Year 2000 compliance. Based on
information currently available, we believe that the costs associated with
Year 2000 compliance, and the consequences of incomplete or untimely
resolution of the Year 2000 problem, will not have a material adverse
effect on our business, financial condition and results of operations in
any given year.
Introduction (Phases)
In preparation for the change in the millennium, we have instituted a
seven-phase plan to address our Y2K readiness in the following areas:
internal IT systems, non-IT systems (including facilities, process control
and building control equipment, communications systems, laboratory and test
equipment, etc.), our products, and external business relationships. The
seven phases of the plan are: (1) perform inventory of all items
potentially subject to Y2K effect and prioritize on the basis of business
<PAGE>
criticality; (2) develop a plan for assessing Y2K compliance of all
inventoried items; (3) determine whether inventoried items are Y2K
compliant; (4) design a remediation strategy (e.g., remediate, replace,
retire, etc.) for non-compliant inventoried items and develop contingency
plans; (5) develop and test remediation solutions; (6) implement
remediation solutions; and (7) document verification of compliance of
remediated solutions.
Inventories of each area have been completed and determinations have
been made regarding Y2K impact. Inventoried items have been prioritized,
assessment plans have been completed and remediation solutions are being
developed. Field implementation of remediation solutions for critical Y2K
items is targeted for completion by the end of July 1999, with remediation
of least critical items targeted for completion by the end of October 1999.
Verification of compliance of remediated solutions is planned to occur
contemporaneously with the field installation of solutions. Contingency
plans are being developed to address potential Y2K related failures that
could affect critical Company operations.
IT System
A significant portion of our information technology "IT"
infrastructure has been completed with the remaining portion expected to be
completed by September 1999. We operate on recent versions of Y2K compliant
software, a significant factor in our Y2K compliance status. We believe
that the recent vintage of the system will significantly reduce the
likelihood of Y2K-related interruptions to normal operations. The Company
must, however, test all system software applications added to the new IT
system and custom code written for the ADCNET system. Although we do not
foresee a material adverse effect on our business, results of operations,
or financial position related to Y2K issues and the Company's IT system,
risk is not eliminated until the system is fully tested and all non-
compliant code is identified, corrected, and re-verified.
Non-IT Systems
We are also assessing our non-IT systems for issues of Y2K compliance.
This assessment includes reviewing not only the Company's internal computer
equipment, but also systems that control temperature, utility equipment,
telephone systems, and security systems. Laboratory and test equipment are
also being evaluated. While we do not believe that it is likely to
experience material adverse effects related to Y2K in the area of non-IT
systems, failure to identify all Y2K vulnerable controls or equipment, or
failure to remediate them in a timely way, could result in the inability of
a particular plant or facility to manufacture or test product or conduct
business in the ordinary course.
Products
The majority of our products do not have electronic date
functionality. Those products that do have electronic date functionality
have been assessed and remediation strategies have been developed to
address any issues of Y2K non-compliance. We believe we have sufficient
resources dedicated to product compliance activities and we do not foresee
any material adverse impact on the our business, results of operations, or
financial position due to Y2K product issues. However, there remains the
<PAGE>
possibility that we could fail to identify all susceptible products or be
unable to implement all field remediations for which it is responsible
prior to January 1, 2000.
Third Parties
Y2K preparedness of third parties with whom we do business could
impact our ability to deliver products and services in the new millennium.
This constitutes an area of potentially significant risk to our business,
results of operations, and financial position. Suppliers of critical raw
materials and providers of utility and communication services could
particularly impair the Company's ability to conduct business in the
ordinary course if those third parties fail to successfully assess and
remediate their own products and internal operations. While third party
risk related to the Y2K problem is difficult to quantify or control, we are
taking steps in an effort to try to minimize the potential adverse effect
of Y2K problems that could arise based on our external business
relationships.
Y2K surveys have been sent to the Company's suppliers asking them for
the Y2K compliance status of their products and internal operations. We are
re-contacting our most critical suppliers and conducting Y2K phone surveys
with them. At the present time, the feedback being received from the phone
surveys has been favorable.
We plan to develop third party contingency plans as we identify
critical partners evidencing inadequate Y2K preparations. Our contingency
plans may include plans to accumulate extra inventory and/or establish
alternative sources of supply and channels of distribution. However, even
with diligent planning, third party providers pose an uncertain risk, which
cannot be entirely eliminated.
Expenditures
Aside from expenditures made by us in implementing our corporate IT
system, we have not incurred any significant Y2K-related costs to date.
Based on current information and resources, we estimate that we could
potentially spend up to $5,000 on completing our Y2K program, excluding
costs already anticipated for completion of our IT system. This estimated
expenditure would most likely occur in the non-IT systems area. This
estimate is subject to change as we move through final phases of our Y2K
plan.
While the Company's management does not believe that our Y2K costs
will have a material adverse effect on our business, results of operations,
or financial position, Y2K costs could increase if currently unknown Y2K
deficiencies are discovered in our IT systems, non-IT systems, products, or
external business partners.
Summary
Due to the uncertain nature of the Y2K problem, the Company's
management cannot say with certainty whether Y2K issues will have a
material adverse effect on our business, results of operations, or
financial position. We believe we are taking reasonable steps to address
the Y2K problem, but the Y2K problem is very complex. If several of our
<PAGE>
external business partners should fail to implement successful Y2K
programs, or if we should fail to identify Y2K deficiencies in critical IT
and non-IT systems, or if our product remediations should fail to be
implemented in the field by January 1, 2000, Y2K problems could have a
material adverse effect on our business, results of operations, or
financial position.
The projected expenditures and dates contained in this discussion are
based on our best estimates and are derived from assumptions about future
events, including the availability of resources and other factors. We do
not guarantee that these estimates will be achieved and results may vary
due to uncertainties.
However, even if our internal systems are not materially affected by
the Year 2000 problem, our business, financial condition and results of
operations could be materially adversely affected through disruption in the
operation of the enterprises with which we interact. We have attempted to
generate a strategy toward Y2K compliance which combines our proprietary
technology and products with "best of class" technology which takes
advantage of the superior quality of components which are Y2K compliant. To
that end, we have obtained a letter from IriScan confirming that their
products are Y2K compliant. There can be no assurance that third party
computer products used by us are Year 2000 compliant. Further, even though
we believe that our current products are Year 2000 compliant, there can be
no assurance that under actual conditions such products will perform as
expected or that future products will be Year 2000 compliant.
Any failure of our products, to be Year 2000 compliant, could result
in the loss of or delay in market acceptance of our products and services,
increased service and warranty costs to us or payment of compensatory or
other damages, which could have a material adverse effect on our business,
financial condition, and results of operations.
Additional Information
We intend to provide an annual report to stockholders, and to make
quarterly reports available for inspection by stockholders. The annual
report will include audited financial statements.
We are subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith,
will file reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected at public reference facilities of the Commission at Judiciary
Plaza, 450 Fifth Street N.W., Washington D.C. 20549; Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; 7
World Trade Center, New York, New York, 10048; and 5670 Wilshire Boulevard,
Los Angeles, California 90036. Copies of such material can be obtained from
the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street N.W., Washington, D.C. 20549 at prescribed rates. For further
information, the SEC maintains a website that contains reports, proxy and
information statements, and other information regarding reporting companies
at (http://www.sec.gov). We maintain a website at www.adcx.com.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Following discussion should be read in conjunction
with, and is qualified in its entirety by the Financial Statements section
included elsewhere herein.
With the exception of historical matters, the matters discussed herein
are forward-looking statements that involve risks and uncertainties.
Forward-looking statements include, but are not limited to, statements
concerning anticipated trends in revenues and net income, the date of
introduction or completion of the Company's products, projections
concerning operations and available cash flow. The Company's actual results
could differ materially from the results discussed in such forward-looking
statements. The following discussion of the Company's financial condition
and results of operations should be read in conjunction with the Company's
financial statements and the related notes thereto appearing elsewhere
herein.
Overview
The Company, which was organized in November 1996, is a Development
Stage Enterprise, engaged in the business of marketing services and
products related to the management of data based on biometric individual
identification. The Company has a limited operating history and has not
generated revenues from the sale of any products. The Company recently
installed its beta testing system at the American Toxicology Institute and
in the Las Vegas Family Courts. Until the installation of the system in
Las Vegas, the Company's activities have been limited to the development
of prototypes, licensing U.S. patents, evaluating biometric equipment and
analyzing the market conditions for the proprietary services and products.
Consequently, the Company has incurred the expenses of start-up and patent
licensing. Future operating results will depend on many factors, including
the ability of the Company to raise adequate working capital, demand for
the Company's services and products, the level of competition and the
Company's ability to satisfy governmental regulations and deliver company
services and products while maintaining quality and controlling costs. The
Company's financial statements have been prepared assuming the Company
will continue as a going concern.
Results of Operations
Period from November 15, 1996 (Inception) to December 31, 1998
The first years of existence for the Company achieved three main
goals; The formation of the Company's organization to pursue its business
strategy, development of a production model and achieving the public
company status to assist in funding the Company's objectives.
Revenues. The Company is a development stage enterprise as defined in
Statement of Financial Accounting Standards- No. 7, and has yet to generate
any revenues. The Company is devoting substantially all of its present
efforts to: (1) developing its medical data management products and
systems, (2) developing its market, and (3) obtaining sufficient capital to
commence full operations.
General and Administrative. General and administrative, legal and
consulting expenses for the period from November 15, 1996 to December 31,
1998 were $151,560.
Research and Development. Research and Development expenses were
$86,784 for the period from November 15, 1996 to December 31, 1998.
<PAGE>
Net losses for the Company were $158,227 for the year ended December
31, 1998 as compared to net losses of $84,032 for the year ended December
31, 1997, a 47% increase. This increase was the result of increasing
activity and related additional expenses incurred in research and
development and additional administrative expenses associated with being a
development stage enterprise.
Liquidity and Capital Resources
The receipt of funds from Private Placement Offerings and loans
obtained through private sources by the Company are anticipated to offset
the near term cash requirements of the Company. Since inception, the
Company has financed its cash flow requirements through debt financing,
issuance of common stock, and minimal cash balances. As the Company
expands its medical data management activities, it may continue to
experience net negative cash flows from operations, pending receipt of
sales revenues, and will be required to obtain additional financing to
fund operations through common stock offerings and bank borrowings, to the
extent available, or to obtain additional financing to the extent
necessary to augment its working capital.
Over the next twelve months, the Company intends to develop its
revenues by releasing its products under development to its target markets.
However, the Company will continue the research and development of its
products, increase the number of its employees, and expand its facilities
where necessary to meet product development and completion deadlines. The
Company believes, that existing capital and anticipated funds from
operations will not be sufficient to sustain operations and planned
expansion in the next twelve months. Consequently, the Company will seek
additional financing in order to pursue the Company's plan of operations.
It is unknown whether such additional funds will be available or that, if
available, such additional funds will be on terms acceptable to the
Company.
The Company will be required to seek additional capital in the future
to fund growth and expansion through additional equity or debt financing or
credit facilities. No assurance can be made that such financing would be
available, and if available it may take either the form of debt or equity.
In either case, the financing could have a negative impact on the financial
condition of the Company and its Shareholders.
The Company anticipates that it will incur operating losses in the
next twelve months. The Company's lack of operating history makes
predictions of future operating results difficult to ascertain. The
Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets
such as bio-medical. Such risks for the Company include, but are not
limited to, an evolving and unpredictable business model and the
management of growth. To address these risks, the Company must, among
other things, obtain a customer base, implement and successfully execute
its business and marketing strategy, continue to develop and upgrade its
technology and products, provide superior customer services and order
fulfillment, respond to competitive developments, and attract, retain and
motivate qualified personnel. There can be no assurance that the Company
will be successful in addressing such risks, and the failure to do so can
have a material adverse effect on the Company's business prospects,
financial condition and results of operations.
<PAGE>
Initial financing is only to provide funds to prove the business
concept, to finish the development of the software, and to install the
first prototype system. Additional funds will be necessary to take the
products to market. The Company hopes to enter into additional funding
arrangements through strategic partnerships, merger, equity offering or
debt offering. Nothing has been secured as of this time.
Costs Associated with Year 2000 Problem
The Company has incurred minimal expenses associated with the Year
2000 Problem. As a result the Company being a Development Stage
Enterprise, the Company's computer equipment is being purchased as Year
2000 compliant, where possible.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's main offices are located at 4340 So. Valley View, Las
Vegas, Nevada. The facility is a leased 2,300 square foot facility utilized
in the following manner: a) administrative offices, b) professional
offices, c) storage, and d) developmental laboratory. These headquarters
are adequate for marketing throughout the United States. The Company
anticipates it may require additional space in the future, but anticipates
no difficulty in obtaining such space in its immediate vicinity at
favorable rates. The Company pays rent at the rate of $2,680.29 per month.
The Company has other tangible property, including computer equipment,
proprietary software and biometric prototype.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners.
The following table sets forth certain information as of March 31,
1999 with respect to the beneficial ownership of common stock by (i) each
person who to the knowledge of the Company, beneficially owned or had the
right to acquire more than 5% of the Outstanding common stock, (ii) each
director of the Company and (iii) all executive offices and directors of
the Company as a group.
<TABLE>
Name of Beneficial Owner (1) Number Percent
of Shares Of Class (2)
<S> <C> <C>
James E. Beecham, MD 7,757,000 77%
Thomas Yokoyama 280,000 3%
Robert Nikoley 300,000 3%
Nikoley Family Ltd. Partnership (3) 10,000 0%
Karen Cavallaro 20,500 0%
William M. Somers, OD 19,000 0%
------------ -----------
All Directors & Officers as a Group 8,386,500 83%
------------ ------------
</TABLE>
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security, or the sole or
shared investment power with respect to a security (i.e., the power to
dispose of, or to direct the disposition of, a security). In addition, for
purposes of this table, a person is deemed, as of any date, to have
"beneficial ownership" of any security that such person has the right to
acquire within 60 days after such date.
(2) Figures are rounded to the nearest percentage. Less than 1% is
reflected as 0%.
(3) Robert Nikoley, Treasurer and Chief Financial Officer of the Company,
is a beneficial owner of this limited partnership.
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The following table sets forth the names, positions with the Company and
ages of the executive officers and directors of the Company. Directors will
be elected at the Company's annual meeting of shareholders and serve for
one year or until their successors are elected and qualify. Officers are
elected by the Board and their terms of office are, except to the extent
governed by employment contract, at the discretion of the Board.
<TABLE>
Name Age Title
<S> <C> <C>
James E. Beecham, MD 51 Chairman of the Board
Thomas M. Yokoyama 61 President, Director
Robert Nikoley 59 Treasurer, Chief Financial Officer
Karen Cavallaro 29 Secretary, Vice President of
Public Relations
William M. Somers, OD 53 Director
</TABLE>
Duties, Responsibilities and Experience
James E. Beecham, MD. Founded Anonymous Data Corporation and as served as
Chairman of the Board since inception in November of 1996. From 1990 to
present Dr. Beecham has been a Physician/Pathologist at Laboratory
Medicine Consultants Laboratories, Inc. Dr. Beecham served as Vice
President of Laboratory Medicine Consultants Laboratories, Inc., a full
service medical laboratory located in Las Vegas, Nevada from its inception
until it's sale in 1997. Dr. Beecham is a member of the Board of Directors
and full partner in Laboratory Medicine Consultants, Ltd., a medical
practice consisting of 12 pathologists located in Las Vegas, Nevada. Dr.
Beecham received his medical degree from the University of Florida School
of Medicine in 1973. He has been engaged in the full time practice of
medicine in the specialty of Pathology since his completion of a residency
at the University of North Carolina and University of Washington in 1978.
Dr. Beecham spends approximately 25% of his time on ADC related
activities.
Thomas M. Yokoyama has served as President and Director of Anonymous Data
Corporation since January, 1999, where Tom currently works full time. From
1993 until January, 1999 Mr. Yokoyama was president of Laser Barcode
Solutions, Inc. He received his undergraduate degree in Banking and
Finance from the University of Hawaii and his MBA from Pepperdine
University in Los Angeles. Mr. Yokoyama worked for IBM Corporation for
over 28 years, working as a Programmer, Marketing Manager, Senior
Instructor, and Senior Advisor in IBM World Trade Headquarters in Tokyo,
Japan. He subsequently joined Symbol Technologies in Tokyo as Senior
Executive Vice President of Olympus-Symbol, a joint venture between
Olympus Camera Company of Japan and Symbol Technologies, Inc. of the
United States.
Robert Nikoley, CPA has served as Treasurer since November, 1998 and Chief
Financial Officer since December 16, 1997 of Anonymous Data Corporation.
From 1994 until present Mr. Nikoley has been owner/manager of Desert
Business Services, an accounting firm. Mr. Nikoley is a graduate of
<PAGE>
Mankato State University in Minnesota. Mr. Nikoley is a Certified Public
Accountant and previously was a partner with Deloitte, Haskins & Sells.
Karen Cavallaro has served as Vice President of Public Relations since
July 1, 1998 for Anonymous Data Corporation and corporate Secretary since
November, 1998. From 1997 through 1998 Ms. Cavallaro was a
transcriptionist at Laboratory Medicine Consultants. From 1995 through
1997 Ms. Cavallaro was the office manager for Parks, Ritzlin and Sohn,
Ltd., a medical practice. From 1994 through 1995 Ms. Cavallaro was a
customer service representative with Nevada Environmental Laboratories.
She received her undergraduate degree in Biology from the University of
Nevada, Reno in 1993.
William M. Somers, OD has served as Director of Anonymous Data Corporation
since November, 1998. From 1994 until present William Somers, a Doctor of
Optometry has maintained a full time optometry practice in Las Vegas,
Nevada. He has held numerous committee positions throughout his career
including the Medicare Carrier Advisory Committee, the Nevada chapter of
the American Optometric Association and advisory board committee member and
spokesman for Vistakon (Johnson & Johnson contact lenses). He received his
optometry degree from the Southern California College of Optometry.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation of the Company's
executive officers and directors during each of the fiscal years since
inception of the Company. The remuneration described in the table does not
include the cost to the Company of benefits furnished to the named
executive officers, including premiums for health insurance and other
benefits provided to such individual that are extended in connection with
the conduct of the Company's business. The value of such benefits cannot be
precisely determined, but the executive officers named below did not
receive other compensation in excess of the lesser of $50,000 or 10% of
such officer's cash compensation.
<TABLE>
Summary Compensation Table
Long Term
Annual Compensation Compensation
Name and Principal Other Restricted
Position Year Salary Bonus Annual Stock Options
Compen- (2)(3)
sation
<S> <C> <C> <C> <C> <C> <C>
James E. Beecham (1) 1996 -0- N/A N/A N/A N/A
James E. Beecham 1997 -0- N/A N/A N/A N/A
James E. Beecham 1998 -0- N/A N/A N/A N/A
Thomas Yokoyama 1998 -0- N/A N/A $20,000 N/A
Karen Cavallaro 1998 $12,320 N/A N/A $1,750 N/A
Robert Nikoley 1998 -0- N/A N/A N/A N/A
William M. Somers 1998 -0- N/A N/A $10,000 N/A
James E. Beecham 1st -0- N/A N/A $27,000 N/A
Qtr.
1999
Thomas Yokoyama 1st $16,242 N/A N/A $80,000 N/A
Qtr.
1999
Karen Cavallaro 1st $6,778 N/A N/A $3,000 N/A
Qtr.
1999
Robert Nikoley 1st $5,000 N/A N/A $10,000 N/A
Qtr.
1999
William M. Somers 1st -0- N/A N/A $9,000 N/A
Qtr.
1999
</TABLE>
<PAGE>
(1) Beecham also had the right to purchase 6,000,000 shares of restricted
stock in the Company at $.02 per share as the result of his Pre-
Incorporation Agreement with the Company.
(2) Restricted shares issued at a value of $.10 per share in 1998.
(3) Restricted shares issued at a value of $1.00 per share in the 1st
quarter of 1999.
Compensation of Directors
All directors will be reimbursed for expenses incurred in attending
Board or committee meetings.
Stock Option Plan and Non-Employee Directors' Plan
The following descriptions apply to stock option plans which the
Company has adopted; however, no options have been granted as of this date.
The Company reserved for issuance an aggregate of 1,500,000 shares of
common stock under a Stock Option Plan (the "Stock Option Plan") and Non-
Employee Directors' Plan described below (the "Directors' Plan") which has
been adopted by the Company. These plans are intended to encourage
directors, officers, employees and consultants of the Company to acquire
ownership of common stock. The opportunity so provided is intended to
foster in participants a strong incentive to put forth maximum effort for
the continued success and growth of the Company, to aid in retaining
individuals who put forth such efforts, and to assist in attracting the
best available individuals to the Company in the future.
Stock Option Plan
Officers (including officers who are members of the Board of
Directors), directors (other than members of the Stock Option Committee
(the "Committee") to be established to administer the Stock Option Plan and
the Directors' Plan) and other employees and consultants of the Company and
its subsidiaries (if established) will be eligible to receive options under
the planned Stock Option Plan. The Committee will administer the Stock
Option Plan and will determine those persons to whom options will be
granted, the number of options to be granted, the provisions applicable to
each grant and the time periods during which the options may be exercised.
No options may be granted more than ten years after the date of the
adoption of the Stock Option Plan.
Unless the Committee, in its discretion, determines otherwise, non-
qualified stock options will be granted with an option price equal to the
fair market value of the shares of common stock to which the non-qualified
stock option relates on the date of grant. In no event may the option
price with respect to an incentive stock option granted under the Stock
Option Plan be less than the fair market value of such common stock to
which the incentive stock option relates on the date the incentive stock
option is granted.
Each option granted under the Stock Option Plan will be exercisable
for a term of not more than ten years after the date of grant. Certain
other restrictions will apply in connection with this Plan as to when some
awards may be exercised. In the event of a change of control (as defined
in the Stock Option Plan), the date on which all options outstanding under
the Stock Option Plan may first be exercised will be accelerated.
Generally, all options terminate 90 days after a change of control.
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PreIncorporation Agreement. On the 1st of November, 1996, the Company
entered into an agreement with James Beecham, MD, wherein Beecham agreed
to provide exclusively to the Company an option to enter into a formal
License Agreement. The Pre-Incorporation Agreement provided that James
Beecham would receive 6,000,000 shares of common stock at a price to
Beecham of $0.02 per share to be paid over two years. The agreement
recited that the option was the only asset of the to be formed
corporation.
License Agreement. On May 14 1998, the Company entered into an "Exclusive
Licensee Territorial Agreement" for two U.S. patents relating to medical
biometrics with Dr. James Beecham, Chairman of the Company, in exchange
for future royalties in the amount of three percent (3%) of the first $10
million gross revenues to the Company from the manufacture, use, sale or
operation of the Products and Services, two percent (2%) of gross revenues
which exceed $10 million but are under $25 million and one percent (1%) of
gross revenues which exceed $25 million. A disinterested Company senior
management official approved the agreement which was then ratified by the
Board of Directors. The Company believes the agreement is commercially
reasonable and generally equivalent to what a third party would receive
with no affiliation.
Memorandum of Understanding. In November 1998, the Company signed a
Memorandum of Understanding with Laser Barcode Solutions, Inc. ("LBS"),
wherein LBS agreed to provide the Company with all pertinent contract
terms relating to bar code equipment of interest to the Company. In
addition, LBS will provide bids on bar code equipment to the Company, and
LBS will make available barcode equipment for the Company to purchase at a
price that equally divides the LBS Value Added Reseller discount between
LBS and the Company. This could result in a discount of up to 50%. Thomas
Yokayama, President of the Company, is a principal of Laser Barcode
Solutions, Inc.
Office Lease Agreement. In November 1998, the Company agreed to sublease
part of its Office Space to Laser Barcode Solutions, Inc. for $500 per
month. The term of the lease is for three (3) years.
ITEM 8. LEGAL PROCEEDINGS
The Company is not presently a party to any litigation, nor to the
knowledge of management is any litigation threatened against the Company,
which would materially affect the Company.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior to this filing there has not been a public market for the
Company's common stock, and there can be no assurance that a public market
for the common stock will develop or be sustained after this filing. The
future trading price of the Company's common stock could be subject to
wide fluctuations in response to quarterly variations in operating
results, announcement of technological innovations or new products by the
Company or its competitors, and other events or factors. In addition, in
recent years the stock market has experienced extreme price and volume
<PAGE>
fluctuations that have had a substantial effect on the market prices for
many emerging growth companies, which may be unrelated to the operating
performance of the specific companies.
The Company's shares of common stock are not registered with the U.S.
Securities and Exchange Commission under the Securities Act of 1933, as
amended (hereinafter referred to as the "Act"), and with the exception of
certain shares issued pursuant to Regulation D-504, are "restricted
securities." Rule 144 of the Act provides, in essence, that holders of
restricted securities for a period of one year (unless an affiliate of the
Company) may, every three months, sell to a market maker or in ordinary
brokerage transactions an amount equal to one percent of the Company's then
outstanding securities. Affiliates may be required to hold for two years.
Non-affiliates of the Company who hold restricted securities for a period
of two years may sell their securities without regard to volume limitations
or other restriction. A total of 842,450 shares were sold pursuant to Rule
504 and are unrestricted. 9,227,710 shares of the Company's common stock
fall under Rule 144. Sales of shares of common stock under Rule 144 may
have a depressive effect on the future market price of the Company's common
stock, should a public market develop for such stock. Such sales might
also impede future financing by the Company.
Since its inception in 1996, the Company has not paid cash dividends
on its common stock. It is the present policy of the Company not to pay
cash dividends and to retain any future earnings to support the Company's
growth. Any payments of cash dividends in the future will be dependent
upon, among other things, the amount of funds available therefor, the
Company's earnings, financial condition, capital requirements, and other
factors which the Board of Directors deems relevant.
As of March 4, 1999 there were approximately 132 common stock
Shareholders of record.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
In March of 1999, the Company completed and closed an exempt private
placement of securities of 842,450 shares of unrestricted common stock,
pursuant to Rule 504, at a price of $1.00 per share for a total of
$842,450. 610,950 shares were sold at a price of $1.00 per share in the
first quarter of 1999 and 231,500 shares were sold at a price of $1.00 per
share under the same offering in the third and fourth quarter of 1998.
In the first quarter of 1999, the Company issued 290,210 additional
restricted common shares for services at $290,210 or $1.00 per share. These
shares were issued to officers, directors and consultants of the Company in
lieu of cash payments. The shares were deemed exempt pursuant to Section
4(2) of the Act based upon the close relationship between the Company and
the recipient, and the recipients internal knowledge of the Company
operations. The recipients of these shares were as follows: Frank Meyers -
1,000, Thomas Yokoyama - 85,200, William Somers - 9,000, Burcor Venture
Capital - 50,000, Barrett & Associates - 50,000, Karen Cavallaro - 3,000,
Protocol Services - 50,000, Joyce Blackney - 10, James Beecham - 27,500,
Nikoley Family Ltd. Partnership - 10,000, Robert Kleinfelter - 1,000,
Anchor Gaming - 1,000, Bailey Properties - 1,000, Antonio Reveria - 1,000
and Sharon Wood - 500.
<PAGE>
In 1998 the Company issued 373,200 shares of common stock in exchange for
services. The shares were issued to consultants whom assisted the Company
in establishing its technology in addition to services rendered in
assisting the Company in its formation. 138,200 unrestricted shares were
issued pursuant to the exemption provided by Rule 504, and 235,000
restricted shares were issued pursuant to the exemption provided by Section
4(2) at $0.10 per share. The shares issued pursuant to 4(2) were issued to
consultants with a close working relationship with the Company who had
access to all the Company information on an internal basis.
ITEM 11. DESCRIPTION OF SECURITIES
Common Stock
The Company's Articles of Incorporation authorizes the issuance of
100,000,000 shares of common stock, $0.001 par value per share, of which
10,070,160 shares were outstanding as of the date of this filing. Holders
of shares of common stock are entitled to one vote for each share on all
matters to be voted on by the stockholders and have no cumulative voting
rights. Holders of shares of common stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time by the Board of
Directors in its discretion, from funds legally available therefor. In the
event of a liquidation, dissolution or winding up of the Company, the
holders of shares of common stock are entitled to share pro rata all
assets remaining after payment in full of all liabilities. Holders of
common stock have no preemptive rights to purchase the Company's common
stock. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock. All of the outstanding shares
of common stock are validly issued, fully paid and non-assessable.
Preferred Stock
The Company's Articles of Incorporation authorizes the issuance of
25,000,000 shares of preferred stock, $0.001 par value per share, of which
no shares were outstanding as of the date of this filing. The Preferred
Stock may be issued from time to time by the Board of Directors as shares
of one or more classes or series. Subject to the provisions of the
Company's Certificate of Incorporation and limitations imposed by law, the
Board of Directors is expressly authorized to adopt resolutions to issue
the shares, to fix the number of shares and to change the number of shares
constituting any series, and to provide for or change the voting powers,
designations, preferences and relative, participating, optional or other
special rights, qualifications, limitations or restrictions thereof,
including dividend rights (including whether dividends are cumulative),
dividend rates, terms of redemption (including sinking fund provisions),
redemption prices, conversion rights and liquidation preferences of the
shares constituting any class or series of the Preferred Stock, in each
case without any further action or vote by the stockholders.
One of the effects of undesignated Preferred Stock may be to enable
the Board of Directors to render more difficult or to discourage an attempt
to obtain control of the Company by means of a tender offer, proxy contest,
merger or otherwise, and thereby to protect the continuity of the Company's
management. The issuance of shares of Preferred Stock pursuant to the Board
of Director's authority described above may adversely affect the rights of
holders of common stock. For example, Preferred stock issued by the Company
may rank prior to the common Stock as to dividend rights, liquidation
preference or both, may have full or limited voting rights and may be
convertible into shares of common Stock. Accordingly, the issuance of
shares of preferred stock may discourage bids for the common Stock at a
premium or may otherwise adversely affect the market price of the common
stock.
<PAGE>
The Company has no plans to issue Preferred Stock.
Transfer Agent
The transfer agent for the common stock is Pacific Stock Transfer,
5844 South Pecos Road, Suite D, Las Vegas, Nevada 89120.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation for the Company do contain provisions for
indemnification of the officers and directors; in addition, Section 78.751
of the Nevada General Corporation Laws provides as follows:
78.751 Indemnification of officers, directors, employees and agents;
advance of expenses.
1. A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by
reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorney's fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit
or proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding,
he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement
of the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or
matter as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to
the corporation or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which the action or suit
was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person
is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections 1 and 2, or in
defense of any claim, issue or matter therein, he must be indemnified by
the corporation against expenses, including attorneys' fees, actually and
<PAGE>
reasonably incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by
a court or advanced pursuant to subsection 5, must be made by the
corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper
in the circumstances. The determination must be made:
(a) By the stockholders:
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot to obtained, by independent legal counsel in a
written opinion; or
5. The articles of incorporation, the bylaws or an agreement made by
the corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal, suit or proceeding must be paid
by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined by a court of competent jurisdiction that he
is not entitled to be indemnified by corporation. The provisions of this
subsection do not affect any rights to advancement of expenses to which
corporate personnel other than the directors or officers may be entitled
under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
articles of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his or her
official capacity or an action in another capacity while holding his or her
office, except that indemnification, unless ordered by a court pursuant to
subsection 2 or for the advancement of expenses made pursuant to subsection
5, may not be made to or on behalf of any director or officer if a final
adjudication establishes that his or her act or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was
material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
<PAGE>
ITEM 13. FINANCIAL STATEMENTS
The financial statements of the Company, audited by the Accounting Firm of
Piercy, Bowler, Taylor & Kern, required by Regulation S-X commence on page
1 hereof in response to this Part 13 of this Registration Statement on Form
10SB and are incorporated herein by this reference.
Audited Financial Statements of Anonymous Data Corporation
Independent Auditors' Report 1
Balance Sheet as of December 31, 1998 2
Statements of Operations from inception (November 15, 1996)
to December 31, 1998 3
Statements of Changes in Stockholders' Equity from inception
(November 15, 1996) to December 31, 1998 4
Statements of Cash Flows from inception (November 15, 1996)
to December 31, 1998 5
Notes to Financial Statements 6-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
In our opinion, the financial
Board of Directors statements referred to above
Anonymous Data Corporation present fairly, in all material
Las Vegas, Nevada respects, the financial position of
Anonymous Data Corporation as of
We have audited the balance sheet December 31, 1998, its results of
of Anonymous Data Corporation (a operations and its cash flows for
development stage enterprise) as of the period from inception (November
December 31, 1998, and the related 15, 1996) and for each of the two
statements of operations, years then ended, in conformity
stockholders equity and cash flows with generally accepted accounting
for the period from inception principles.
(November 15, 1996) to December 31,
1996 and for each of the two years The accompanying balance sheet has
then ended. These financial been prepared assuming that the
statements are the responsibility Company will continue as a going
of the Company's management. Our concern. As discussed in Notes 1
responsibility is to express an and 4, the Company's ability to
opinion on these financial commence operations and realize its
statements based on our audit. investments in intangible assets is
dependent upon the successful
We conducted our audit in completion of its equipment and
accordance with generally accepted software development and obtaining
auditing standards. Those standards additional sources of capital.
require that we plan and perform These conditions raise substantial
the audit to obtain reasonable doubt as to the Company's ability
assurance about whether the to continue as a going concern.
financial statements are free of Management's plans in regard to
material misstatement. An audit this matter are described in Notes
includes examining, on a test 1 and 4. The financial statements
basis, evidence supporting the do not include any adjustments that
amounts and disclosures in the might result from the outcome of
financial statements. An audit this uncertainty.
also includes assessing the
accounting principles used and
significant estimates made by
management, as well as evaluating /s/ PIERCY, BOWLER, TAYLOR & KERN
the overall financial statement
presentation. We believe that our January 26, 1999
audit provides a reasonable basis
for our opinion. March 4, 1999, as to Note 7
<PAGE>
<TABLE>
ANONYMOUS DATA CORPORATION
(A Development Stage Enterprise)
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
<S> <C>
Current assets:
Cash $ 13,793
Prepaid expense 1,000
---------
14,793
---------
Equipment, including equipment subject to lease purchase
obligation 22,741
Less accumulated depreciation (9,762)
---------
12,979
---------
Other assets:
Unamortized patent costs 60,638
Deferred offering costs 144,000
---------
204,638
---------
$ 232,410
=========
</TABLE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities:
Accounts payable and accrued expenses $ 7,319
Lease purchase obligation, all current 5,246
------------
12,565
------------
Stockholders' equity:
Common stock, $.001 par, 100,000,000 shares authorized,
9,169,000 issued and outstanding 9,169
Preferred stock, $.001 par, 25,000,000 shares authorized,
none issued and outstanding
Additional paid-in capital 463,135
------------
472,304
Deficit accumulated during development stage (252,459)
-----------
219,845
------------
$ 232,410
============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
ANONYMOUS DATA CORPORATION
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
From
inception
November Year ended December
15, 31,
to
December
31, 1997 1998
1996
<S> <C> <C> <C>
Expenses:
Research and development 200 33,166 53,418
Administrative 10,000 49,116 92,444
Depreciation 1,750 8,012
Interest 4,353
-------- -------- --------
Net loss (10,200) (84,032) (158,227)
======== ======== =========
Loss per share (.002) (.001) (.020)
======== ======== =========
Weighted average number of 6,006,444 7,591,250 7,940,990
shares outstanding ========= ========= =========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
ANONYMOUS DATA CORPORATION
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
accumulate
Additiona Stock d
Common stock l Subscript during
paid-in ion developmen Total
capital receivabl t
e Stage
Shares Par
value
<S> <C> <C> <C> <C> <C> <C>
Common
shares
issued in
1996 to:
Officer for 6,000,000 $6,000 $114,000 $120,000
expenses
Employee 10,000 10 190 200
for
services
Less
founding (105,700) (105,700)
shareholder
stock
Subscriptio
n
receivable
Net loss
for period
from
inception
to ($10,200) (10,200)
December
31, 1996 ----------- ------ -------- --------- --------- --------
Balances, 6,010,000 6,010 114,190 (105,700) (10,200) 4,300
December
31, 1996
Common
shares
issued in
1997 to:
Officer/dir 1,000,000 1,000 19,000 20,000
ector
Employees
for:
Services 225,000 225 4,275 4,500
Cash 175,000 175 3,325 3,500
Consultants 325,000 325 6,175 6,500
for
services
Proceeds
from
founding 68,864 68,864
shareholder
Stock
subscriptio
n
receivable
Net loss (84,032) (84,032)
for 1997 ----------- ------- -------- --------- --------- ---------
Balances, 7,735,000 7,735 146,965 (36,836) (94,232) 23,632
December
31, 1997
Common
shares
issued in
1998 to:
Officer/dir 730,000 730 73,924 74,654
ector for
expenses
Officers 210,000 210 4,790 5,000
and
directors
for
services
Employees 27,500 28 1,722 1,750
for
services
Consultants 373,200 373 142,527 142,900
for
services
Others for 93,300 93 93,207 93,300
cash
Proceeds
from
founding 36,936 36,836
shareholder
Stock
subscriptio
n
receivable
Net loss (158,227) (158,227)
for 1998 --------- ------- -------- --------- ---------- ---------
Balances, 9,169,000 $9,169 $463,135 $0 ($252,459) $219,845
December
31, 1998 ============ ====== ======== ========= ========= =========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
ANONYMOUS DATA CORPORATION
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
From
Inception
November
15, Year ended December
To 31,
December
31,
1996 1997 1998
<S> <C> <C> <C>
Cash Flows from operating activities:
Net loss ($10,200) ($84,032) ($158,227)
Depreciation 1,750 8,012
Expenses primarily by founding
shareholder 200 31,000 40,304
exchange for stock
Change in operating assets:
Increase in prepaid expenses (1,000)
Change in operating liabilities:
Increase in accounts payable and
accrued expenses 7,319
expenses ----------- --------- ----------
Net cash used in operating activities (10,000) (51,282) (103,592)
----------- --------- ----------
Cash flows used in investing activities:
Purchase of equipment (500) (8,249) (8,746)
Payment of patent cost (3,800) (4,748 (52,090)
Payment of deferred offering costs (10,000)
---------- --------- ---------
Net cash used in investing activities (4,300) (12,997) (70,836)
---------- --------- ---------
Cash flows from financing activities:
Proceeds from founding shareholder
stock subscription receivable 14,300 68,864 36,836
Sale of common stock 3,500 93,300
Advances from founding shareholder
Exchanged for stock 50,000
----------- --------- ---------
Net cash provided by financing 14,300 72,364 180,136
----------- --------- ---------
activities
Increase (decrease) in cash 8,085 5,708
Balance, beginning of period 8,085
---------- -------- ---------
Balance, end of period $ $8,085 $13,793
========== ======== =========
Non-cash financing and investing
activities
Exchange of stock for offering costs $134,000
=========
Equipment purchased through lease
purchase obligation $5,246
=========
</TABLE>
See notes to financial statements.
<PAGE>
ANONYMOUS DATA CORPORATION
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
1.Summary of significant accounting policies:
Nature of business. The Company was incorporated, November 15, 1996, in
the State of Nevada for the purpose of developing equipment and related
software to store and retrieve data of medical laboratory testing. As of
December 31, 1998, the Company remains a development stage enterprise in
the phase of testing its technical equipment and software. Its emphasis is
in the area of research and development funded by proceeds from the sale of
common stock and, therefore, it has not commenced business operations.
The Company's ability to complete certain research projects is dependent
upon obtaining additional equity or debt financing. This condition could
prevent the Company from commencing business operations. The Company's
future operations also could be affected by adverse changes in local and
national economic conditions. (See Note 4.)
The Company plans to raise capital by offering its common stock for sale to
investors through private placement or through registration with the United
States Securities and Exchange Commission under the Securities Act of 1933.
At the present time, the Company has not engaged an underwriter or
identified any specific sources of capital.
Use of estimates. Timely preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts and disclosures,
some of which may require revision in future periods.
Equipment, depreciation and amortization. Equipment is stated at cost.
Depreciation and amortization is provided by an accelerated method over the
estimated useful live of the assets of 5 years.
Stock compensation awards. The Company has adopted Financial Accounting
Standard Board Statement No. 123, Accounting for Stock-Based Compensation,
for valuing compensatory stock and option awards.
Patent costs. Cost associated with patents pending are deferred for future
amortization based on the lives of patents to be granted. In the event
patent applications are denied or abandoned, such costs will be written
off.
Loss per share. Loss per share is computed based on the weighted average
number of shares outstanding for the periods presented.
<PAGE>
2.Related party transactions:
In May 1998, Dr. James E. Beecham (Chairman of the Board of Directors and
majority shareholder and former president of the Company) licensed to the
Company the rights associated with two U.S. Patents pending. The licenses
are irrevocable until May 14, 2008. Dr. Beecham has also agreed to extend
the licenses for an additional eight years depending upon performance. In
consideration for the assignment of rights, Dr. Beecham will receive a
royalty of 3% of the first $10 million, 2% of $10 to $25 million, and 1% in
excess of $25 million in gross revenues to the Company from the
manufacture, use, sale or operation of the products and services.
In November 1998, the Company signed a Memorandum of Understanding with
Laser Barcode Solutions, Inc. (LBS), wherein LBS agreed to provide the
Company with all pertinent contract terms relating to bar code equipment of
interest to the Company. In addition, LBS will provide bids on bar code
equipment to the Company, and LBS will make available equipment for the
Company to purchase at a price that equally divides the LBS value added
reseller discount between LBS and the Company. The President of the
Company, is a principal of Laser Barcode Solutions, Inc.
3.Long-term debt:
Lease purchase obligation, for computer equipment, payable monthly at $500,
including interest at 9.7%, through
November 1999 $5,246
Less current portion 5,246
$ 0
<PAGE>
4.Going concern contingency:
The Company's ability to complete its equipment and software development is
dependent, among other things such as those discussed in Note 1, upon
obtaining additional equity or debt financing. This condition could prevent
the Company from commencing business operations and continuing as a going
concern. The balance sheet, however, has been prepared assuming the
Company will continue as a going concern, and it reflects no adjustments
that might result from the outcome of this uncertainty. However, because
of this uncertainty, no effect has been given in the balance sheet to any
future income tax benefit of the loss recorded to date.
Management plans to raise additional equity capital or obtain debt
financing to complete the equipment and obtain the related patents.
Management also expects that the Company's medical data management
equipment, when completed, will have a wide range of applications in
medical testing programs.
5. Lease commitment:
The Company subleases office space under a term expiring December 31, 2000,
with an option to renew for an additional three years. Future annual
minimum lease payments are $32,150.
6.Stock option plan:
The Company adopted a stock option plan which reserves for issuance an
aggregate of 1,500,000 shares of common stock. No options have been
granted to date.
7.Subsequent event:
Subsequent to December 31, 1998, the Company issued 2,902,100 additional
common shares for services valued at $290,210 or $.10 per share and sold
610,950 shares for $610,950 or $1.00 per share.
8.Event subsequent to audit report
In June 1999, the transaction involving stock for services described in Note 7
was rescinded and instead, 290,210 shares valued at $1.00 per share were
substituted.
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit Description
Number
(3)(i)* Articles of Incorporation
(a) Articles of Incorporation of Anonymous Data Corporation
(a)(1)Articles of Incorporation, as amended for Anonymous Data
Corporation, a Nevada corporation
(a)(2)Articles of Incorporation, as amended for Anonymous Data
Corporation, a Nevada corporation
(3)(ii)* Bylaws
(a) Bylaws of Anonymous Data Corporation
(a)(1)Bylaws, as amended for Anonymous Data Corporation, a
Nevada corporation
(4)* Instruments defining the rights of security holders:
(4)(i)* (a) Articles of Incorporation for Anonymous Data Corporation,
a Nevada Corporation
(b) Bylaws of Anonymous Data Corporation, a Nevada Corporation
(c) Stock Certificate Specimen
(10)(i)* Material Contracts
(a) Pre Incorporation Agreement with James Beecham
(b) 1998 Stock Option Plan
(c) Consulting Agreement with C.L. McIntosh &
Associates
(d) Consulting Agreement with Sher-Janel T. Todd
(e) Consulting Agreement with Ilene Nikoley
(f) Consulting Agreement with Michael Moore
(g) Consulting Agreement with Dave Denney
(h) Consulting Agreement with William Somers
(i) Consulting Agreement with Jack Morrow 1997
(j) Consulting Agreement with Jack Morrow 1998
(k) Software Development & Technical Services
Agreement
(l) Exclusive Licensee Territorial Agreement with James E.
Beecham
(m) Amendment to Licensee Territorial Agreement with James E.
Beecham
(n) Non-Disclosure and Non-Circumvent Agreement with Toyota
Tsusho America, Inc
(o) Non-Disclosure and Non-Circumvent Agreement with IriScan,
Inc
(p) Non-Disclosure and Non-Circumvent Agreement with Batelle
Memorial Institute.
(q) Non-Disclosure and Non-Circumvent Agreement with Laser
Barcode Solutions
(r) Non-Disclosure and Non-Circumvent Agreement with Polaroid
Corporation
(s) Non-Disclosure and Non-Circumvent Agreement with Litton
Data Systems
(t) Memorandum of Understanding between Laser Bar
Code and Anonymous Data
(u) Amendment to the Memorandum of Understanding between Laser
Bar Code and Anonymous Data
(v) Office Sublease Agreement
(w) Amendment to the Office Sublease Agreement
(27)* Financial Data Schedule
*Filed herewith.
The documents required to be filed as Exhibit Number 2 in Part III of
Form 1-A filed as part of this Registration Statement on Form 10SB are
listed in Item 1 of this III above. No documents are required to be filed
as Exhibit Numbers 3, 5, 6, or 7 in Part III of Form 1-A, and the reference
to such Exhibit Numbers is therefore omitted. No additional exhibits are
filed hereto.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
June 30, 1999 ANONYMOUS DATA CORPORATION
(Registrant)
By:/s/ Thomas Yokoyama
Thomas M. Yokoyama
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ James Beecham Chairman June 30, 1999
James E. Beecham
/s/ thomas Yokoyama President, Director June 30, 1999
Thomas M. Yokoyama
/s/ Robert Nikoley Treasurer, CFO June 30, 1999
Robert Nikoley
/s/ Karen Cavallaro Secretary,
Karen Cavallaro VP of Public Relations June 30, 1999
/s/ William Somers Director June 30, 1999
William Somers
