SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Amendment No. 45)
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ADENA, INC.
(FORMERLY KNOWN AS CROSS GENETICS TECHNOLOGIES, INC.)
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(Name of small business issuer in its charter)
Virginia 541511 54-203-0708
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(State of Incorporation) (Primary Standard Industrial (IRS Employer
Classification Number) I.D. Number)
11921 Freedom Drive, Suite 550, Reston, VA 20190 (703) 925-5912
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(Address and telephone number of principal executive offices)
11921 Freedom Drive, Suite 550, Reston, VA 20190
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(Address of principal place of business)
McSweeney & Crump, P.C., 11 South 12th Street, 5th Floor, Richmond, VA 23219,
(804) 783-6800
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(Name, address and telephone number of agent for service)
Approximate date of proposed commencement of sale to the public: From
time to time after the Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
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Title of each class of Amount of shares to Proposed maximum offer Proposed maximum Amount of
securities to be registered be registered price per unit aggregate offering price registration fee
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COMMON STOCK 11,008,000 $0.05 $550,400 $137.60
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ADENA, INC. (FORMERLY KNOWN AS CROSS GENETIC TECHNOLOGIES, INC.) a
Virginia Corporation
11,008,000 shares
common stock, no par value
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ADENA, INC., formerly known as Cross Genetic Technologies,
Inc.("Adena") is hereby registering the resale by shareholders of 11,008,000
shares of its common stock that have been issued and are outstanding to date.
The selling shareholders may sell the shares covered by this Prospectus
in ordinary brokerage transactions, in negotiated transactions or otherwise, at
prevailing market prices at the time of sale or at negotiated prices, and may
engage a broker or a dealer to sell the shares. This offering will close 90 days
after the registration statement is declared effective by the Securities and
Exchange Commission ("SEC"). Any or all of the selling shareholders may be
deemed to be underwriters within the meaning of the Securities Act in connection
with the sale of its shares. We will not receive any proceeds from the sale of
the shares, but will bear the costs relating to the registration of the shares.
There is no public market for our common stock and we can give no
assurance that a market will develop.
THIS PROSPECTUS IS DATED SEPTEMBER 27, 2001 AND
AMENDED JANUARY 13, 2003
Proceeds
Offering to
Price Cross Genetic
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Per Share $0.05 $0.00
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Total $550,400 $0.00
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THESE SECURITIES ARE SPECULATIVE AND INVESTING IN THESE SECURITIES COMMON STOCK
INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS
BEGINNING ON PAGE 2.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Prospectus Summary...........................................................................................1
Risk Factors.................................................................................................2
No operating history or experience......................................................................2
May not successfully compete............................................................................2
Have no technology......................................................................................3
No agreements with partners.............................................................................3
Limited financial resources.............................................................................3
No qualified employees..................................................................................3
"Penny stock" risk......................................................................................4
Determination of offering price..............................................................................4
Plan of Distribution.........................................................................................4
Legal Proceedings............................................................................................5
Directors, Officers, and Key Personnel of the Company........................................................5
Security Ownership of Certain Beneficial Owners..............................................................5
Security Ownership of Management.............................................................................6
Description of Securities....................................................................................6
Disclosure of Commission Position on Indemnification for Securities Act Liabilities..........................6
Description of Business......................................................................................7
Industry...............................................................................................7
Competition............................................................................................9
Current Status of the Company..........................................................................9
Plan of Operations..........................................................................................10
Description of Property.....................................................................................12
Certain Relations and Related Transactions..................................................................12
Market for Common Equity and Related Stockholder Matters....................................................12
Executive Compensation......................................................................................12
Financial Statements........................................................................................13
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.......................25
Dividend Policy.............................................................................................25
Legal Matters...............................................................................................25
Item 24 -- Indemnification of Directors and Officers........................................................25
Item 25 -- Other expenses of issuance and distribution......................................................26
Item 26 -- Recent sales of unregistered securities..........................................................26
Item 27 -- Exhibits.........................................................................................26
Item 28 -- Undertakings.....................................................................................26
Signatures..................................................................................................27
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PROSPECTUS SUMMARY
The following is summary financial information of Adena and summary
information for the proposed offering.
Adena Inc.
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As of December 31, 2001 balance sheet
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Assets $115,306
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Liabilities $ 21,298
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Total Stockholder's Equity $ 94,008
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The offering being registered by Adena consists of the resale of its
stock by its current shareholders. The shares of common stock are being offered
by Adena's parent company and fifty-seven individual or corporate shareholders.
We issued shares to the parent company in exchange for the payment of start-up
expenses. We issued the shares to the remaining corporate and individual
shareholders in an exempt private placement. Any proceeds from this offering
will go directly to the selling shareholders and Adena will not receive any
funds as a consequence of this offering.
Offering
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=================================================
Proceeds
Offering to
Price Adena
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Per Share $0.05 $0.00
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Total $550,400 $0.00
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Adena currently has $115,306 in funds that it raised from an offering
of its common stock in a private placement that commenced on February 26, 2001
and was fully subscribed on May 1, 2001. The expenses involved in the offering
and this registration are approximately $25,737.60, which have been paid by the
Company.
ADENA, INC.
(FORMERLY CROSS GENETIC TECHNOLOGIES, INC.)
Adena, Inc. ("Adena") is a developmental stage biotechnology
software company with its headquarters located in Reston, Virginia. Our
principal office is located at 11921 Freedom Drive, Suite 550, Reston, Virginia
20190 and its telephone number is (703) 925-5912. Adena raised $150,400 in an
exempt private placement offering, where it offered 3,008,000 shares at a price
of $0.05 per share. Fifty-seven investors purchased shares in the fully
subscribed offering. We intend to develop software and other computer products
incorporating recent genomic discoveries to assist medical researchers in
identifying gene targets for the development of novel therapeutic, vaccine and
diagnostic products. Adena intends to file for a listing on the OTC bulletin
board.
RISK FACTORS
1. BECAUSE ADENA HAS NO OPERATING HISTORY OR EXPERIENCE IN THE
BIOTECHNOLOGY SOFTWARE INDUSTRY, WE CANNOT ASSURE YOU THAT WE WILL BE
PROFITABLE.
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Adena has no operating history by which investors can evaluate its
business and prospects. We were incorporated in February 2001. We plan to
produce database software utilizing the raw data of the human genome. This
business model is new and unproven. Adena has no experience in this industry and
cannot assure investors that its business will be profitable.
2. BECAUSE WE ARE A SMALL DEVELOPMENT STAGE COMPANY, WE MAY NOT COMPETE
SUCCESSFULLY WITH LARGER PHARMACEUTICAL, BIOTECHNOLOGY, AND SOFTWARE
COMPANIES THAT MAY DEVELOP SIMILAR PRODUCTS. THESE POTENTIAL
COMPETITORS MAY RENDER OUR PRODUCTS OBSOLETE OR UNECONOMICAL, THEREBY
ADVERSELY IMPACTING THE COMPANY'S PROFITABILITY.
Although Adena is unaware of any software products in development
similar to Adena's, the company will face competition. This competition may come
from other bio-software firms, or from potential client firms due to in-house
software development. These potential competitors of Adena include
pharmaceutical and biotechnology companies both in the United States and abroad.
These competitors have more funding than us. Universities and other non-profit
research institutions and United States and foreign government-sponsored
entities are conducting significant research to identify and sequence genes. Any
of these organizations may realize the value of a bio-software product and opt
to develop it in-house instead of outsourcing. Adena expects competition may
increase in the foreseeable future, which may or may not impact the
profitability of the company. Competitors may be developing technologies or
products that may be similar or superior to ours. These competitors may have a
better ability to market their products. The products developed by others may
render the software products Adena develops obsolete or uneconomical or result
in products superior to ours. We cannot guarantee that our products will be
preferred to any existing or newly developed bio-software.
3. WE CURRENTLY HAVE NO TECHNOLOGY AND MAY NOT DEVELOP EFFECTIVE AND
COMMERCIAL GENOMIC DATABASE TECHNOLOGY. FAILURE TO ADEQUATELY DEVELOP
THIS TECHNOLOGY MAY RESULT IN THE COMPANY'S INABILITY TO GENERATE
REVENUE.
Adena's strategy of developing software to manage gene-sequencing data
is unproven. Adena has not yet developed the software and may never develop
software that is effective and commercially viable. There can be no assurance
that our approach to data-basing genomic data will assist clients in identifying
specific genes that cause or predispose individuals to the diseases that are the
targets of its gene discovery programs. If we are unable to develop a viable
product, we may be unable to generate revenue or stay in business. Even if Adena
is successful in developing a working database model to help identify specific
human disease genes or sequencing the genomes of pathogens, there can be no
assurance that these gene discoveries will lead to the development of commercial
products.
4. WE HAVE NO AGREEMENTS WITH PARTNERS AND MAY NOT BE ABLE TO ENTER ANY
AGREEMENTS OR LICENSING ARRANGEMENTS. FAILURE TO ADEQUATELY ESTABLISH
NECESSARY AGREEMENTS MAY RESULT IN OUR INABILITY TO PROFITABLY DEVELOP
OUR SOFTWARE AND SUSTAIN OPERATIONS.
At the present time, Adena has no agreements with other companies or
organizations. Adena's strategy for development and commercialization of genome
data software depends on the formation of various strategic collaborations and
licensing arrangements with pharmaceutical and biotechnology development
partners. We may not be able to establish necessary strategic collaborations or
licensing arrangements, such arrangements or licenses may not be on terms
favorable to us, and future strategic collaborations or licensing arrangements
may not ultimately be successful. There can be no assurance that future
collaborators will not pursue alternative technologies, or develop alternative
products either on their own or in collaboration with others, including Adena's
competitors, as a means for developing similar software.
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5. LARGER DNA FRAGMENTS NECESSARY TO OPERATE OUR DATABASE MAY BE
PATENTED. FAILURE TO OBTAIN ADEQUATE LICENSING ARRANGEMENTS WITH THE
PATENT HOLDER(S) MAY RESULT IN OUR INABILITY TO DEVELOP OUR
BIOTECHNOLOGY SOFTWARE AND GENERATE REVENUE.
It has yet to be determined whether users of larger DNA fragments
containing patented material will require licenses for use. These issues impact
a relatively tiny fraction of genetic research and often apply to artificially
engineered bacteria genes, which do not occur in nature. If future development
of the genomic database were to require patented DNA data, we would be required
to obtain a licensing arrangement from the patent holder. There can be no
assurance that the patent holder will be willing to license the data to Adena,
or that any such arrangements or licenses will be on favorable terms.
6. BECAUSE WE HAVE LIMITED FINANCIAL RESOURCES, WE WILL LIKELY NEED
ADDITIONAL FINANCING WITHIN THE NEXT EIGHTEEN MONTHS. IF CAPITAL IS
UNAVAILABLE, ADENA WILL NOT BE ABLE TO SUSTAIN ITS OPERATIONS OR
PROVIDE ANY RETURN ON INVESTMENT.
If we are unable to raise sufficient capital, we will not be able to
sustain our operations. Other than the proceeds of our private placement
offering and possible future revenues from sale of Adena's software, we do not,
at this time and may not in the future, have any additional sources of funds
from which to pay the costs of our proposed operations. We do not expect any
revenue in the next year while we are developing our software products. Adena
expects capital and operating expenditures to increase over the next several
years as it increases its research and development activities. We will seek
additional funds through public or private equity or debt offerings or
additional strategic collaborations and licensing arrangements. We cannot assure
you that capital from private and public offerings will be available or, if
available, can be obtained on terms advantageous to Adena.
7. UNTIL WE HIRE AN EXPERIENCED MANAGEMENT TEAM, WE MAY BE UNABLE TO
SUSTAIN OUR BUSINESS OPERATIONS AND ESTABLISH A PROFITABLE COMPANY.
Adena has one officer, and he has no management experience in the
technology software industry. Until we locate, select and hire an experienced
management team, we will be unable to achieve our business goals. We need a
senior management team, no members of which are currently identified. Our
inability to successfully hire and retain an experienced management team could
prevent us from establishing a financially profitable company.
8. UNTIL WE HIRE QUALIFIED TECHNICAL PERSONNEL, WE WILL BE UNABLE TO
ADEQUATELY DEVELOP OUR BIOTECHNOLOGY SOFTWARE AND PRODUCT LINE, WHICH
WOULD RESULT IN OUR INABILITY TO GENERATE REVENUE.
Adena has one employee, and he has no experience in creating
biotechnology software. Until we locate, select and hire technical employees, we
will be unable to further develop our product line. We need key scientific and
technical personnel, none of whom are currently identified. Our inability to
successfully hire, train and retain technical personnel could prevent us from
developing our primary line of products and establishing a profitable company.
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9. BECAUSE ADENA'S STOCK IS A "PENNY STOCK," INVESTORS WILL BE EXPOSED
TO THE RISK OF ILLIQUIDITY, WHICH MAY RESULT IN AN INABILITY TO
ACTIVELY TRADE THE SHARES OR RECOVER THEIR INVESTMENT.
Adena's stock will fall under the definition of a "penny stock" and
thus trading the stock can be more difficult than trading other securities.
Investors may be unable to actively trade their shares of Adena or to recover
their investment in the company. A "penny stock" is any stock that trades at a
price below $5 that is not on a national exchange. Broker-dealers are required
to provide their customers with disclosure documents prior to allowing them to
participate in transactions involving "penny stocks." These disclosure
requirements are burdensome to broker-dealers and may discourage them from
allowing their customers to participate in transactions involving our common
stock.
10. THERE IS CURRENTLY NO PUBLIC TRADING MARKET FOR ADENA'S STOCK AND
WE CAN GIVE NO ASSURANCE THAT A MARKET WILL DEVELOP, WHICH MAY
RESULT IN AN INVESTOR'S INABILITY TO ACTIVELY TRADE THE SHARES OR
RECOVER THEIR INVESTMENT.
Adena does not currently have shares trading in the public market.
Adena intends to engage a market maker for the shares and file for a listing on
the OTC Bulletin Board. However, this is no guarantee the public trading market
will develop, which may result in the investor's inability to sell his
securities in the market in normal brokerage transactions.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no market for our securities.
Accordingly, the offering price for the shares has been determined solely by
Adena. The registrant has determined the offering price to be $.05 per share,
which is the price paid for the shares in the private placement. Among the
factors considered in pricing the offering were our current financial condition,
our future prospects, our management's background, and the general condition of
the equity securities market.
PLAN OF DISTRIBUTION
Adena intends to pay for the expenses involved in the offering and this
registration, which are approximately $25,737.60, and are set forth below in the
table:
Expenses of Offering
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Registration Fee $ 137.60
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Estimated Printing Expenses $ 600.00
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Estimated Legal Fees and Expenses $ 20,000.00
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Estimated Accounting Fees and Expenses $ 2,500.00
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Estimated Blue Sky Fees and Expenses $ 0.00
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Estimated Transfer Agent Fees and Expenses $ 1,500.00
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Estimated Misc $ 1,000.00
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Total $ 25,737.60
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The shares of common stock are being offered by the selling
shareholders, and we will not receive any proceeds from the offering. Adena
knows of no existing arrangements between the selling shareholders and any other
shareholders, broker, dealer, underwriter or agent relating to the sale or
distribution of the shares of common stock. Once the offering of the shares is
declared effective by the SEC, Adena intends to obtain a market maker for the
shares and file for a listing on the OTC Bulletin Board. The offering will close
90 days after the registration statement is declared effective by the Securities
and Exchange Commission ("SEC"). Once the stock is listed, the shareholders will
be able to resell their shares in the market in normal brokerage transactions.
Adena knows of no existing arrangements between the selling shareholders and any
other shareholders, broker, dealer, underwriter or agent relating to the sale or
distribution of the shares of common stock.
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The selling shareholders and other persons participating in the sale or
distribution of the common stock will be subject to applicable provisions of the
Exchange Act and rules and regulations which may limit the timing of purchases
and sales of any of the common stock by the selling shareholders or any other
such persons. This may affect the marketability of the common stock. We will pay
substantially all expenses incidental to the registration, offering and sale of
the common stock to the public, other than any commissions or discounts of
underwriters, broker-dealers or agents.
Since Adena's stock will fall under the definition of a "penny stock,"
we have the obligation to disclose the following:
Brokers and dealers who effect transactions in Adena stock with or for
the account of a customer are obligated to first disclose to that
customer several items. They must disclose the inside bid quotation,
the inside offer quotation for the stock, the aggregate amount of any
compensation received by such broker or dealer in connection with the
transaction, the aggregate amount of cash compensation that any
associated person of the broker or dealer has received or will receive
from any source in connection with the transaction. Additionally,
brokers and dealers who effect a sale of a penny stock on the last
trading day of the month must give customers a written statement with
respect to each month in which the security is held for the customer's
account, within ten days following the end of the month. Because these
obligations are burdensome on brokers and dealers, many of them may be
reluctant to participate in transactions involving Adena stock.
LEGAL PROCEEDINGS
Adena is not a party to any legal proceedings. Adena is not aware of
any legal proceedings involving any director, director nominee, promoter or
control person including criminal convictions, pending criminal matters, pending
or concluded administrative or civil proceedings limiting one's participation in
the securities or banking industries, or findings of securities or commodities
law violations.
DIRECTORS, OFFICERS AND KEY PERSONNELOF THE COMPANY
Officers and Directors
----------------------
Adena's executive officers and directors are as follows:
Name Age Position Director Since
---- --- -------- --------------
Director, President and
Lino Novielli 37 Chief Executive Officer February 2001
Each director serves for a term of one year and is elected at the
annual meeting of shareholders. Adena's officers are appointed by the Board of
Directors and hold office at the discretion of the Board.
5
Lino Novielli. Mr. Novielli has been an investment consultant for over
12 years. He received a Bachelor of Science in economics from York University in
Toronto in 1987. From October 1993 through July 2000, Mr. Novielli was an
account executive at Gordon-Daly Grenadier Securities, a Toronto-based brokerage
firm. His duties involved counseling clients in their investments and
facilitating trades on their behalf. While at Gordon-Daly, Mr. Novielli was
involved in the investment process of financing set-up, corporate organization,
market research, corporate analysis, marketing, management, and sales
negotiations. From August 2000 to the present, Mr. Novielli has acted as founder
and CEO of Cross Genetic. This new venture is involved in the development and
marketing of computer software for the biotechnology industry. Mr. Novielli is a
member of The Canadian Securities Institute of Canada.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of January 9,
2003, regarding the ownership of common stock by each person known by Adena to
be the beneficial owner of more than five percent of Adena's outstanding common
stock.
Title of Class Name and Address of Amount and Percentage Percentage
Beneficial Owner Nature of of Class of Class
Beneficial (Pre- (Post-
Owner Offering) Offering)
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Voting UM Tean, Ltd. 8,000,000 73% 73%
Common Lino Novielli (Director, President and Chief
Executive Officer)
701 North Green Valley Parkway, Suite 200
Henderson, NV 89014
Fairmount Solutions, Inc.
Voting Paul Thomson (Control Person) 1,000,000 9% 9%
Common Bank of America Tower, Suite 1340
12 Harcourt Road
Central Hong Kong
Voting Westmount Technologies, Ltd. 1,000,000 9% 9%
Common Dan Peterson (Control Person)121A, Des Voues Road
Hong Kong
Voting Lynx Enterprises, Ltd. 1,000,000 9% 9%
Common Ken Roam (Control Person)
12 Harcourt Road, Suite 2403
Hong Kong
Adena is not aware of any relationship or affiliations between the
shareholders listed above. These shareholders own their shares through nominee
companies.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the ownership of common stock by Adena's
management:
Title of Class Name and Address of Amount and Percentage Percentage
Beneficial Owner Nature of of Class of Class
Beneficial (Pre- (Post-
Owner Offering) Offering)
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Voting Lino Novielli, President and Sole Director 8,000,000 73% 73%
Common 701 North Green Valley Parkway, Suite 200
Henderson, NV 89014
Voting
Common TOTAL OFFICERS AND DIRECTORS AS 8,000,000 73% 73%
A GROUP (Lino Novielli is the sole director
and officer)
DESCRIPTION OF SECURITIES
Adena is authorized to issue 50,000,000 shares of common stock with no
par value. The holders of common stock are entitled to one vote per share on all
matters to be voted on by the shareholders and to receive ratably dividends when
and as declared by the Board of Directors from funds legally available therefor.
The company anticipates that any earnings will be retained for use in its
business for the foreseeable future. In the event of a liquidation, dissolution
or winding up of the company, holders of common stock are entitled to share
ratably in all assets available for distribution to stockholders after payment
of all liabilities. There are no preemptive, subscription, redemption or
conversion rights relating to the common stock. All outstanding shares of common
stock are, and the shares sold by Adena in this offering will be, upon issuance
and payment therefor, fully paid and non-assessable. The holders of common stock
do not have cumulative voting rights, which means that the holders of more than
one half of the outstanding shares can elect all of the directors.
Adena is not currently required to deliver an annual report to security
holders because it is not a reporting company. Once the registration statement
is declared effective by the Securities and Exchange Commission ("SEC") and
becomes a reporting company, Adena will send an annual report including audited
financial statements to its shareholders. The SEC maintains an Internet site
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The public can access
that site at http://www.sec.gov, and review any documents that Adena does file
with the SEC.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
Adena may indemnify a person who is a party to an action, except an
action by or in the right of the company, by reason of the fact that he is or
was a director, officer, employee or agent of Adena, or was serving at our
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. Such indemnification
covers expenses, judgments, fines and settlement payments incurred by the
indemnified person in connection with the action if the person acted in good
faith and in a manner believed to be in the best interest of Adena and had no
reasonable cause to believe the conduct was unlawful. Adena may indemnify a
person who was a party to an action in the right of the company to procure a
judgment in its favor by reason of the fact that the person was a director,
officer, employee or agent of Adena, or was serving at our request as a
director, officer, employee or agent of another enterprise against the
aforementioned expenses and costs if the person acted in good faith and in a
manner the person reasonably believed to be in the best interests of Adena.
However, Adena cannot indemnify a person where the person has been adjudged by
an appropriate court to be liable to us unless the court determines that in view
of all the
7
circumstances, the person is fairly and reasonably entitled to
indemnity as the court deems proper. To the extent one of our directors,
officers, employees or agents is successful on the merits of any of the
aforementioned actions, we must indemnify them against expenses incurred in
connection with their defense.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") MAY BE PERMITTED TO DIRECTORS, OFFICERS AND CONTROLLING
PERSONS OF THE SMALL BUSINESS ISSUER PURSUANT TO THE FOREGOING PROVISIONS OR
OTHERWISE, THE SMALL BUSINESS ISSUER HAS BEEN ADVISED THAT IN THE OPINION OF THE
SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY
AS EXPRESSED IN THE ACT AND IS, THEREFORE, UNENFORCEABLE.
DESCRIPTION OF BUSINESS
Adena, Inc. changed its name from Cross Genetic Technologies on
September 25, 2002 which was originally incorporated on February 5, 2001, in the
Commonwealth of Virginia. Its objective is to be a leading developer of
bio-software utilizing genetic technology. Through future identification of and
collaboration with strategic partners, Adena intends to develop software and
other computer products incorporating recent genomic discoveries to aid in the
research and development of therapeutic products for the treatment of diseases
including cancer and cancer-related disorders. Our business will consist solely
of developing and marketing computer software. This software will aid our
clients in their research for new disease treatments.
Adena intends to develop a computer program using existing databases to
create a comprehensive database for the human genome. This database program can
be created using modified versions of existing software language, so no new
versions will be required to run the program. Adena's product will differ,
however, from the average database application due to the complexity and sheer
volume of data managed within the comprehensive database. Our computer program
will allow users to effectively manage and search through enormous amounts of
data to provide a comprehensive analysis of the human genome.
At the onset, Adena plans to directly market its computer software and
promote it through trade shows, marketing events, and limited advertising in
trade journals and publications. Eventually we expect that our future licensees
and strategic partners will assist in our marketing efforts. We hope to develop
and maintain a large number of biotechnology companies and researchers as
customers. However, Adena may depend on a few major customers until our software
product is fully developed and sufficiently marketed. Adena is not aware of any
government approvals required for the development and/or marketing of its
software products. Nor are we aware of any governmental regulations, which would
affect our business.
INDUSTRY
--------
The gene research industry undertakes to map the genetic code of
humans in order to better understand and treat disease. The public sector
initiative began in 1990 as the Human Genome Project, funded by the federal
government and primarily utilized facilities of government and educational
institutions. The private sector, identifying the vast potential of gene
research in the development of new drugs, has also committed resources to this
research. Private companies race to discover potentially valuable proprietary
treatments before their competitors. Adena will market its software to these
companies, who will have a need for fast and efficient software to collect and
analyze the results of their research.
A working draft of the entire human genome sequence was announced in
June 2000, with analyses published in February 2001. Efforts are currently
underway to complete the finished, high-
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quality sequence with expected completion before the end of 2003. With the draft
data, researchers are already attempting to derive meaningful knowledge from the
DNA sequences to further understand human biology. Creating new drugs, therapies
and other treatments will define biological research through the coming decades.
As portions of the final sequences are made public, Adena will issue software
updates to ensure clients have the highest quality data available.
Data generated by the Human Genome Project has been deposited into
GenBank, a public database freely accessible by anyone with a connection to the
Internet. The human genome data are also available on numerous other websites
worldwide as well as in scientific periodicals. Human genetic codes are in the
public domain to promote research worldwide for the common good. Since 1980, the
United States has granted patents for fragments of DNA. It has yet to be
determined whether users of larger DNA fragments containing patented material
will require licenses for use. These issues impact a relatively tiny fraction of
genetic research and often apply to artificially engineered bacteria genes,
which do not occur in nature. Adena will conform to industry practices on the
use of genetic data, and will obtain legal advice on patenting and licensing
issues as the need arises. Clients who purchase software licenses from Adena
will be paying for the use of the proprietary database tool, not the underlying
data.
An unprecedented amount of data is being generated by genome sequencing
projects and other experimental efforts to determine the structure and function
of biological molecules. The demands and opportunities for interpreting these
data are growing exponentially as the fields of biotechnology, pharmacology and
medicine continue to expand and unveil new probablistic models of data based on
selective extraction of molecular biological information. This growth is
resulting in a separate industry known as bioinformatics. In essence,
bioinformatics is the development and application of computer methods for
analysis, interpretation, and prediction, as well as for the design of
experiments. The industry ties together the fields of biology and computer
science by using computer databases to organize and analyze biological data. We
intend to apply our bioinformatics capabilities, including the use of computers
and proprietary software, to process, store and analyze the DNA data generated
by our genetic search programs. These capabilities will permit research
institutes and other users to integrate and analyze comprehensive genetic
information that is obtained from public genomic databases. "Public Genomic
Databases" denotes the openly shared genetic information on the human genome
created by the Human Genome Initiative. The Human Genome Initiative is a
worldwide research effort to analyze the structure of human DNA and determine
the location and sequence of the estimated 100,000 human genets. Two prominent
sources of the Initiative's findings are the Genome Database at Johns Hopkins
University in Baltimore, Maryland established in 1990 and the Bioinformatics
Supercomputing Centre formed in the spring of 1999 at the Hospital for Sick
Children in Toronto, Canada. Both databases can be freely accessed, without
cost, via the Internet.
The human genome is made up of DNA, which has four different chemical
building blocks called nucleotides. These are called bases and are abbreviated
as A (adenine), G (guanine), C (cytosine), and T (thymine). In the human genome,
about 3 billion bases are arranged along the chromosomes in a particular order.
One million bases of the DNA sequence data is roughly equivalent to 1 megabyte
of computer data storage space. Since the human genome is 3 billion base pairs
long, 3 gigabytes of computer data storage space is needed to store the entire
genome. In addition to this nucleotide sequence data, storage is also required
for annotation by researchers. This presents a challenge to organize these large
volumes of information in an efficient and useable way. Adena's database will be
designed to maximize the speed and ease of searching, manipulating and
annotating genetic data for research purposes.
Adena's goal is for its software to assist researchers in deriving
useful medical discoveries from the identification and characterization of
genes. Adena's commercial gene software strategy
9
will apply technology and bioinformatics capabilities in two principal areas,
the discovery and characterization of (1) genes of infectious organisms
("pathogens") that are responsible for many serious diseases and (2) human
disease genes. Adena believes that genomic discoveries may lead to the
development of novel therapeutics, vaccines and diagnostic products by it and
its strategic partners.
COMPETITION
-----------
The biotechnology industry is subject to intense competition. Adena's
competitors in the United States and internationally are numerous and include
pharmaceutical and biotechnology companies, universities and other research
institutions, the United States-funded Human Genome Project and other
government-sponsored entities. Additionally, other companies, including large
biotechnology companies, have likely begun developing their own database
software in-house. Potential competitors may be able to develop technologies
that are as effective as, or more effective or easier to use than those Adena
will offer. Competitors' products could render our future products
noncompetitive or obsolete. Moreover, many of Adena's potential competitors have
substantially greater financial, marketing, sales, distribution and
technological resources than us. Such existing and potential competitors may
also enjoy substantial advantages in terms of research and development
expertise, manufacturing efficiency, name recognition, sales and marketing
expertise and distribution channels. We may be unable to compete successfully
against current or future competitors.
Adena believes that its ability to compete is dependent, in part, upon
its ability to create and maintain advanced technology, the speed with which it
can develop and update its software and its ability to attract and retain
qualified personnel. To effectively compete, Adena will also need to seek patent
protection for its software products and secure sufficient capital resources for
the expected twenty-four month time period between technological conception and
commercial sales of the software.
PLAN OF OPERATIONS
This prospectus contains forward-looking representations that involve
certain risks and uncertainties. Adena's actual results could differ materially
from the results discussed in the forward-looking representations.
Adena is a development stage company and will engage in the business of
developing and marketing computer software. The Company remains in the early
stages of collecting and entering genomic data that will be manipulated and
implemented in the final biotechnological software product. Adena has secured
office space in Fountain Square Center, 11921 Freedom Drive, suite 550, Reston,
Virginia, 20190. Itplans to obtain hardware, and hire software technicians to
begin researching and creating its software. The Company has incurred overhead
expenses since its inception, but still has Company After the registration
process, we will have $124,662.40 in funds remaining from the private placement
offering which management believes to be sufficient to finance the continued
development of its software, preliminary working capital, and other general
corporate purposes. Adena intends to maintain a conservative approach towards
spending in the early development stages of the company. During the first
eighteen months of operation, the company plans to seek a combination of equity
and debt financing and it will aggressively pursue any research grants and tax
incentives for which it may be eligible in order to further finance the final
development and production stages.
Adena has established its main office in Reston, Virginia and intends
to hire an office manager to handle administrative office matters. In its first
eighteen months of operations, we intend
10
to secure debt financing and submit applications for research grants from the
government. Additionally, during this time period, in order to maintain its
conservative spending approach, Adena intends to lease office furniture and
equipment and hire a head research and development employee. Adena will also
lease necessary computer equipment and software, engage a technical support
subcontractor, and begin to develop the early planning stages of its marketing
campaign by attending trade shows in order to meet potential clients and assess
our competition.
During the first eighteen months of operations, Adena intends to hire
up to two additional research and development employees (in addition to the head
research and development employee and the technical support subcontractor) if
necessary, and as the budget permits, in order to assist in the creation of our
database model and load raw genome data into the computer model. Adena intends
to refine the user interface for ease of use (i.e., providing online user
assistance via the F1 key on the user's computer key pad, creating an easy to
use pull down menu, providing easy ability to switch views of the detail and
summary data, and implement short cuts to reduce the number of key strokes, in
general) and test the software with sample data. We expect to launch our
marketing campaign and exhibit our products at trade shows and other venues.
Within twenty-four months after beginning operations, Adena will refine its
software based on numerous tests. We will perform prospective client trials and
refine our software based on these trials.
Our goal is to generate our first sales orders within twenty-four
months. The steps to developing Adena's software are as follows: Initially, we
will hire a head research and development employee, acquire computer equipment
and software, engage a technical support subcontractor, and design a software
development plan based on the needs of clients that will be efficient, quick and
easy to use. Adena will then hire additional research and development employees
as permitted by the budget, create its database model and load raw genome data
into the computer model. We will also refine the software user interface for
ease of use and test the software with sample data. In the final stages of the
twenty-four month developmental period, Adena will rigorously test and refine
its software and perform prospective client trials until its software is ready
for distribution.
Management expects that in order to successfully achieve the
development of its software after the first twelve months, Adena will require an
additional $200,000 to $400,000 in funding. The ability to secure financing in
the $200,000 range will be sufficient to fully develop and implement the
software, whereas the additional money would be used, as secured, to more
aggressively pursue our marketing campaign. Adena will seek to obtain these
funds from future offerings, loans from commercial banks, grants from government
agencies, or some combination of these sources. We would use these additional
funds for refinement of our software and increased marketing of our product.
The development of a successful software product is conditional upon
the continued free availability of raw genome data, computer software and
hardware that can handle the large data storage and processing capacities
required, adequate data security and backup to protect Adena from computer
piracy, and key programming personnel capable of developing new systems and
modifying existing systems effectively. Adena plans to continually refine its
software to keep pace with new technology and research methods. Once we have
clients, we will foster alliances with them and with other data suppliers for a
potential data licensing business. We intend to collaborate with other companies
and organizations that will use its software to assist their research. Such
research may lead to development of new stronger antibiotics which may treat
diseases for which existing therapies are deficient. In the past decade, a
growing number of infections have been caused by pathogens that are becoming
resistant to an increasing number of currently available antibiotics. Adena
believes that it will be able to create software that will streamline gene
research. With accelerating research, our clients will be more likely to develop
commercially viable drugs ahead of their competitors.
11
Adena's gene software development strategy will also involve the
identification and characterization of human genes that are responsible for many
serious diseases. The identification of specific human genes may provide
important insights into the cause of certain diseases and facilitate the
development of highly specific therapeutic and diagnostic products.
Our clients will use our software to organize and analyze gene research
data. The software will be able to manage and compare data produced in-house by
the client as well as data that is publicly available. Adena plans to
continually refine these bioinformatics systems, focusing on four areas:
upgrading and standardizing its bioinformatics hardware and software; developing
enhanced data management systems; expanding its software engineering
capabilities; and expanding its resources in computational molecular biology.
Adena expects that these enhancements may result in more effective data
management by providing for smooth integration of laboratory automation,
supporting more rapid analyses and comparison of genomic data and facilitating
the identification of gene targets for the development of therapeutic, vaccine
and diagnostic products. As part of its enhancement of its bioinformatics
capabilities, Adena will place a significant portion of financial and human
resources towards this activity.
After Adena brings its products to market, the Company will seek to
form strategic partnerships. We first need to develop a client base, from which
strategic partnerships can be cultivated. Then, established clients who possess
proprietary data or methodology will be approached to license these assets to
other research facilities through our software. Profits from the sale of these
licenses would be shared between Adena and the contributing client. Adena's
customer base will consist primarily of medical researchers at pharmaceutical
and biotechnology companies throughout the United States and abroad, who will
use the software to access a comprehensive genomic database for the purposes of
genetic research and discoveries.
As Adena develops functional software, there will be a potential for us
to enter into licensing agreements with companies that hold rights to specific
research data. Adena could offer this proprietary data to clients with the
software for an additional fee. Clients may find it more attractive to purchase
specific data rather than attempting to generate it in-house. We are seeking
collaborations with clinicians and academic researchers to obtain these rights,
and believe that access to these resources will bolster our human gene discovery
software programs and enable us to initiate additional software programs that
are directed at human genes associated with significant diseases.
Adena plans to seek strategic collaborations with pharmaceutical and
biotechnology companies for the development and commercialization of products
based on Adena's computer software development. The company generally expects to
license all rights to therapeutic products and vaccines developed based on the
particular genetic database licensed by Adena. In exchange, Adena expects to
receive a combination of up-front license fees, research funding, milestone
payments and royalty payments on product sales.
In addition to our strategy of forming collaborations with
pharmaceutical and biotechnology companies, we will actively seek to participate
in government sponsored genomics technology research programs. Obtaining these
grants and contracts from the United States government will add to Adena's
genomics technology and enable the company to increase the number and enhance
the expertise of its scientific personnel.
Adena's current business plan does not require additional offerings for
the company to remain viable. If Adena is unsuccessful in raising additional
funding, operations could be scaled back to a limited degree. Rent costs could
be reduced by having employees work from home during the development phase, and
all equipment will continue to be leased until cash flow allows for its
purchase. Although we believe the current funds are sufficient, it is possible
that Adena may be unable to continue operations and fully develop the proposed
biotechnological software product if we are unable to raise additional funding
to meet growing expenses.
12
LONG TERM GOALS OF THE COMPANY
Adena is currently in its development stage. The Company's long-term
goals include initiating an in-house research and development facility. We will
assemble a scientific staff with a variety of complementary skills in a broad
base of advanced research technologies, including oncology, immunology, cell
biology and protein and synthetic chemistry. Adena will also recruit a staff of
technical and professional employees to carry out the manufacturing of beta
trial software.
DESCRIPTION OF PROPERTY
Adena does not currently own any real property. We lease office space
located at 11921 Freedom Drive, Suite 550, Reston, Virginia 20190. The rental
agreement is by and between Cross Genetic Technologies, now being known as
Adena, Inc., and HQ Global Workplaces, Inc., a wholly unrelated third party. The
original rental agreement was signed on August 1, 2001 for a minimum of 6 months
at a fixed monthly fee of $1,189 with the rolling option to renew under the same
terms. The lease has been renewed. Adena continues to occupy the office space in
accordance with the original lease terms.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Family Relationships. There are no family relationships among
directors, executive officers or persons nominated or chosen by Adena to become
officers or executive officers.
Mr. Lino Novielli is the sole promoter. Through his nominee company, UM
Tean Ltd., a Nevada corporation, he provided the initial capitalization of
$20,000 to Adena in exchange for 8,000,000 shares at a price of $0.0025 per
share. UM Tean is the parent company of Adena and owns seventy three percent
(73%) of its common stock. Um Tean was formed on February 14, 2000 with the sole
purpose of investing in and developing new ventures and has never been engaged
in the development of biotechnology software. Mr. Novielli is the sole
shareholder of Um Tean.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is currently no public trading market for Adena's stock. There are
no outstanding options or warrants to purchase, or securities convertible into,
common equity of Adena. As of the date of this prospectus, there are fifty-eight
(58) holders of record of Adena's common stock. Adena has never paid dividends
on its common stock and plans to retain earnings for the foreseeable future to
fund its operations.
13
EXECUTIVE COMPENSATIONS
The chart below sets forth the compensation of the key executives.
Long Term Compensation
- ---------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------
Name Year Salary Bonus Other Annual Restricted Securities & LTIP All
and Principal Compensation Stocks Underlying Payouts Other
Position Awards Options/ Sars Compensation
(#)
Lino Novielli
President and
Chief Executive
Officer 2001 $0 $0 $0 $0 $0 $0 $0
2002 $0 $0 $0 $0 $0 $0 $0
- ---------------------------------------------------------------------------------------------------------------------
Retirement Plan
- ---------------
Adena does not have a retirement plan at present, but intends to
implement one once the company becomes profitable.
Employment Contracts, Termination of Employment, and Change in Control
- ----------------------------------------------------------------------
Agreements
- ----------
At present, Adena has no employment contract with any of its employees.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
Adena has no compensation committee; rather, Adena's Board of
Directors performs the functions that would otherwise be performed by a
compensation committee.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Except for historical information, the information in this prospectus
contains forward-looking statements about our expected future business and
performance. These forward-looking statements are not historical facts but
rather are based on current expectations, estimates and projections about our
industry, our beliefs, and our assumptions. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seek," and "estimates," and
variations of these words and similar expressions are intended to identify
forward-looking statements. These statements are not guarantees of future
performance and are subject to risks, uncertainties and other factors, some of
which are beyond our control, are difficult to predict and could cause actual
results to differ materially from those express, implied or forecasted in the
forward-looking statements. In addition, the forward-looking events discussed in
this prospectus might not occur. These risks and uncertainties include, among
others, those described in "Risk Factors" and elsewhere in this prospectus.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
prospectus.
The securities offered hereby are speculative in nature and involve a
high degree of risk. You should not purchase these shares if you cannot afford
the loss of your entire investment. In addition to the other information
contained in this prospectus, prospective investors should consider carefully
the following risk factors in evaluating Adena, our business prospects and an
investment in our shares of common stock.
14
FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANTS. The financial statements of Adena, Inc., formerly known
as Cross Genetic Technologies, Inc., as of December 31, 2001, have been audited
by Stokes & Company, independent accountants, as set forth in their report,
dated December 31, 2001. Stokes & Company is located at 1275 K Street, N.W.,
Suite 1201, Washington, D.C. 20005, (202) 289-4700. The principal independent
accountant has not resigned (or declined to stand for reelection) or been
dismissed since the Company's date of inception.
The following financial statements for Adena, Inc., formerly known as Cross
Genetic Technologies, Inc., are below as follows:
i. Cross Genetic Technologies, Inc. Audited Financial Statements, February 6,
2001
ii. Cross Genetic Technologies, Inc. Compiled Financial Statements, May 31,
2001
iii. Cross Genetic Technologies, Inc. Audited Financial Statements,
December 31, 2001
15
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Cross Genetic Technologies, Inc.
We have audited the accompanying balance sheet of Cross Genetic Technologies,
Inc. (a development stage enterprise) as of February 6, 2001 and the related
statements of operations and retained deficit and cash flows for the period from
inception (February 5, 2001) to February 6, 2001. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cross Genetic Technologies,
Inc. as of February 6, 2001, and the results of its operations and cash flows
for the initial period then ended, in conformity with generally accepted
accounting principles.
STOKES & COMPANY, P.C.
February 6, 2001
16
CROSS GENETIC TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Balance Sheet
February 6, 2001
ASSETS $ --
==========
LIABILITIES --
----------
STOCKHOLDER'S EQUITY
Common stock, no par value; 50,000,000 shares authorized;
8,000,000 shares issued and outstanding (note C) $ 20,000
Deficit accumulated during development stage (note B) (20,000)
----------
Total stockholder's equity --
----------
Total liabilities and stockholder's equity $ --
==========
17
CROSS GENETIC TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statement of Operations and Retained Deficit
From Inception (February 5, 2001) to February 6, 2001
REVENUE $ --
Organization and start-up costs (note B) 20,000
--------
NET LOSS (20,000)
RETAINED EARNINGS at beginning of period --
--------
Deficit accumulated during development stage (note B) $(20,000)
========
18
CROSS GENETIC TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statement of Cash Flows
From Inception (February 5, 2001) to February 6, 2001
CASH FLOWS FROM OPERATING ACTIVITIES (note C) $ --
--------
CASH FLOWS FROM INVESTING ACTIVITIES --
CASH FLOWS FROM FINANCING ACTIVITIES (note C) --
--------
NET INCREASE (DECREASE) IN CASH --
CASH at beginning of period --
--------
CASH at end of period $ --
========
RECONCILIATION OF NET LOSS
TO NET CASH USED BY OPERATING ACTIVITIES
Net loss $(20,000)
Issuance of Common Stock in lieu of cash (note C) 20,000
--------
NET CASH USED BY OPERATING ACTIVITIES $ --
========
19
Cross Genetic Technologies, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
From Inception (February 5, 2001) to February 6, 2001
NOTE A - NATURE OF ORGANIZATION
Cross Genetic Technologies, Inc., "the Company," is a wholly owned subsidiary of
UM Tean, Ltd., and is organized and incorporated under the laws of the State of
Virginia. The Company is a development stage, biotechnology software enterprise
headquartered in Reston, Virginia. The Company intends to develop software and
other computer products incorporating recent genomic discoveries to assist
medical researchers in identifying gene targets for the development of novel
therapeutic, vaccine, and diagnostic products. Um Tean, Ltd. is a Nevada
corporation that was incorporated in 2000 solely as a holding company for future
biotechnology software ventures and has had no other activities or operations to
date.
NOTE B - ACCOUNTING METHOD FOR START-UP ACTIVITIES
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 (Reporting on the Costs of Start-up Activities),
which requires that such costs, as broadly defined in SOP 98-5, be expensed as
incurred. The Statement is effective for years beginning after December 15,
1998. The Company has adopted SOP 98-5. At February 6, 2001, the Company had
$20,000 of organization and start-up costs which, accordingly, it has expensed.
The Company's fiscal year ends December 31, 2001.
NOTE C - ISSUANCE OF COMMON STOCK AS PAYMENT FOR COSTS OF FORMATION
On February 6, 2001, the Company issued 8,000,000 shares of Common Stock, valued
at $20,000, to its parent corporation as payment for its organization and
start-up costs.
20
Cross Genetic Technologies, Inc.
(A Development Stage Enterprise)
Financial Statements
From February 5, 2001 (Inception) to
May 31, 2001
21
CROSS GENETIC TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Balance Sheet
May 31, 2001
ASSETS
Cash $ 421
Stock sale receivable (note D) 150,400
---------
Total assets $ 150,821
=========
LIABILITIES
Officer's loan $ 500
---------
STOCKHOLDERS' EQUITY
Common stock, no par value; 50,000,000 shares authorized;
11,008,000 shares issued and outstanding (notes C & D) 170,400
Deficit accumulated during development stage (note B) (20,079)
---------
Total stockholders' equity 150,321
---------
Total liabilities and stockholders' equity $ 150,821
=========
See accompanying notes to financial statements
22
CROSS GENETIC TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statement of Operations and Retained Deficit
From February 5, 2001 (Inception) to May 31, 2001
REVENUE $ --
--------
EXPENSES
Organization and start-up costs (note B) 20,000
Check fees and bank service charges 79
--------
20,079
--------
NET LOSS (20,079)
RETAINED EARNINGS at beginning of period --
--------
Deficit accumulated during development stage (note B) $(20,079)
========
See accompanying notes to financial statements
23
CROSS GENETIC TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statement of Cash Flows
From February 5, 2001 (Inception) to May 31, 2001
CASH FLOWS FROM OPERATING ACTIVITIES $ (79)
--------
CASH FLOWS FROM INVESTING ACTIVITIES --
--------
CASH FLOWS FROM FINANCING ACTIVITIES 500
--------
NET INCREASE (DECREASE) IN CASH --
CASH at beginning of period --
--------
CASH at end of period $ 421
========
RECONCILIATION OF NET LOSS
TO NET CASH USED BY OPERATING ACTIVITIES
Net loss $(20,079)
Issuance of Common Stock in lieu of cash (note C) 20,000
--------
NET CASH USED BY OPERATING ACTIVITIES $ (79)
========
See accompanying notes to financial statements
24
Cross Genetic Technologies, Inc.
(A Development Stage Enterprise)
Notes to Compiled Financial Statements
From February 5, 2001 (Inception) to May 31, 2001
NOTE A - NATURE OF ORGANIZATION
Cross Genetic Technologies, Inc., "the Company," is a wholly owned subsidiary of
UM Tean, Ltd., and is organized and incorporated under the laws of the State of
Virginia. The Company is a development stage, biotechnology software enterprise
headquartered in Reston, Virginia. The Company intends to develop software and
other computer products incorporating recent genomic discoveries to assist
medical researchers in identifying gene targets for the development of novel
therapeutic, vaccine, and diagnostic products. Um Tean, Ltd. is a Nevada
corporation that was incorporated in 2000 solely as a holding company for future
biotechnology software ventures and has had no other activities or operations to
date.
NOTE B - ACCOUNTING METHOD FOR START-UP ACTIVITIES
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 (Reporting on the Costs of Start-up Activities),
which requires that such costs, as broadly defined in SOP 98-5, be expensed as
incurred. The Statement is effective for years beginning after December 15,
1998. The Company has adopted SOP 98-5. At May 31, 2001, the Company had $20,000
of organization and start-up costs which, accordingly, it has expensed. The
Company's fiscal year ends December 31, 2001.
NOTE C - ISSUANCE OF COMMON STOCK AS PAYMENT FOR COSTS OF FORMATION
On February 6, 2001, the Company issued 8,000,000 shares of Common Stock, valued
at $20,000, to its parent corporation as payment for its organization and
start-up costs.
NOTE D - ISSUANCE OF COMMON STOCK IN PRIVATE PLACEMENT OFFERING
On February 26, 2001, the Company tendered a private placement offering of
3,008,000 shares of its common stock at $.05 per share. All subscribed funds
were held in escrow pending the close of the offer. The offer was fully
subscribed by the end of May 2001 and shares of stock were transferred to the
subscribers during May 2001. The escrowed funds were released to the company on
June 1 and June 4, 2001. Accordingly, the Company has recorded a receivable of
$150,400 pending the release of the escrowed funds.
25
Cross Genetic Technologies, Inc.
(A Development Stage Enterprise)
Financial Statements
and
Independent Auditor's Report
From Inception (February 5, 2001) to
December 31, 2001
26
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Cross Genetic Technologies, Inc.
We have audited the accompanying balance sheet of Cross Genetic Technologies,
Inc. (a development stage enterprise) as of December 31, 2001 and the related
statements of operations and retained deficit and cash flows for the period from
inception (February 5, 2001) to December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cross Genetic Technologies,
Inc. as of December 31, 2001, and the results of its operations and cash flows
for the period from inception (February 5, 2001) to December 31, 2001, in
conformity with U.S. generally accepted accounting principles.
STOKES & COMPANY, P.C.
Washington, D.C.
September 18, 2002
27
CROSS GENETIC TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Balance Sheet
December 31, 2001
ASSETS
CURRENT ASSETS
Cash (notes A and B) $ 102,018
Deposit 1,908
Deferred tax assets (note D) 1,260
---------
Total current assets 105,186
OTHER ASSETS
Deferred tax assets (note D ) 10,120
---------
$ 115,306
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued liabilities $ 2,337
Loan payable - related party (note F) 18,961
---------
Total current liabilities 21,298
---------
STOCKHOLDERS' EQUITY
Common stock, no par value; 50,000,000 shares authorized;
11,008,000 shares issued and outstanding (note E) $ 170,400
Deficit accumulated during development stage (76,392) 94,008
--------- ---------
$ 115,306
=========
The accompanying notes are an integral part of this financial statement.
28
CROSS GENETIC TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statement of Operations and Retained Deficit
From Inception (February 5, 2001) to December 31, 2001
REVENUE $ --
--------
EXPENSES
Organization and start-up costs (note A) 42,015
Advertising and promotion 380
Check fees and bank service charges 307
Consulting 6,700
Office expense 650
Professional fees 27,704
Rent 6,671
Telephone and fax 923
Travel and automobile expense 2,422
--------
Total expenses 87,772
--------
Loss before income taxes (87,772)
Income tax benefits (notes A and D) 11,380
--------
NET LOSS (76,392)
RETAINED EARNINGS at beginning of period --
--------
DEFICIT ACCUMULATED during development stage $(76,392)
========
Loss per common share (note A )
from deficit accumulated during development stage $ (0.009)
========
The accompanying notes are an integral part of this financial statement.
29
CROSS GENETIC TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statement of Cash Flows
From Inception (February 5, 2001) to December 31, 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Cash paid for expenses $ (67,343)
---------
NET CASH USED BY OPERATING ACTIVITIES (67,343)
---------
CASH FLOWS FROM INVESTING ACTIVITIES --
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term loan from related party 59,410
Repayments on short-term loan from related party (40,449)
Issuance of Common Stock 150,400
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 169,361
---------
NET INCREASE IN CASH 102,018
CASH at beginning of period --
---------
CASH at end of period $ 102,018
=========
RECONCILIATION OF NET LOSS TO NET CASH
USED BY OPERATING ACTIVITIES
Net Loss $ (76,392)
---------
Adjustments to reconcile net loss to net cash used by operating activities:
Issuance of Common Stock for services paid (note E) 20,000
(Increase) decrease in assets
Deposit (1,908)
Deferred tax assets (11,380)
Increase (decrease) in liabilities
Accrued liabilities 2,337
---------
Total adjustments 9,049
---------
NET CASH USED BY OPERATING ACTIVITIES $ (67,343)
The accompanying notes are an integral part of this financial statement.
30
Cross Genetic Technologies, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
From Inception (February 5, 2001) to December 31, 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF ORGANIZATION
Cross Genetic Technologies, Inc., "the Company," is organized and incorporated
under the laws of the State of Virginia. The Company is a development stage,
biotechnology software enterprise headquartered in Reston, Virginia. The Company
intends to develop software and other computer products incorporating recent
genomic discoveries to assist medical researchers in identifying gene targets
for the development of novel therapeutic, vaccine, and diagnostic products.
The Company's success will depend, in part, on its ability to develop
biotechnology software and its ability to obtain product license rights,
maintain trade secrets and operate without infringing on the proprietary rights
of others. The Company intends to develop biotechnology software through
collaboration with strategic partners. There can be no assurance that the
Company will obtain agreements with strategic partners, develop software and
obtain proprietary protection for the software.
The accompanying financial statements for the period ended December 31, 2001
have been prepared assuming the Company will continue as a going concern. During
the year 2002, management intends to raise additional debt and/or equity
financing to fund future operations and to provide additional working capital.
However, there is no assurance that such financing will be consummated or
obtained in sufficient amounts necessary to meet the Company's needs.
The accompanying financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classifications of liabilities that may result from the
possible inability of the Company to continue as a going concern.
ACCOUNTING METHOD FOR START-UP ACTIVITIES
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 (Reporting on the Costs of Start-up Activities),
which requires that such costs, as broadly defined in SOP 98-5, be expensed as
incurred. The Statement is effective for years beginning after December 15,
1998. The Company has adopted SOP 98-5. At December 31, 2001, the Company had
$42,015 of organization start-up costs which, accordingly, it expensed.
CASH AND CASH EQUIVALENTS
The Company considers deposits that can be redeemed on demand and investments
that have original maturities of less than three months, when purchased, to be
cash equivalents. As of December 31, 2001, the Company had no cash equivalents.
31
Cross Genetic Technologies, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
From Inception (February 5, 2001) to December 31, 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets, including tax loss and credit carry forwards, and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Deferred income tax expense represents the change during the
period in the deferred tax assets and deferred tax liabilities. The components
of the deferred tax assets and liabilities are individually classified as
current and non-current based on their characteristics. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.
Use of estimates
- ----------------
Preparing the Company's financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
EARNINGS (LOSS) PER SHARE
BASICNET EARNINGS (LOSS) PER COMMON SHARE (EPS) IS COMPUTED BY DIVIDING NET
EARNINGS (LOSS) APPLICABLE TO COMMON SHAREHOLDERS BY THE WEIGHTED-AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING DURING THE PERIOD. DILUTED NET
EARNINGS (LOSS) PER COMMON SHARE IS DETERMINED USING THE WEIGHTED-AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING DURING THE PERIOD, ADJUSTED FOR THE
DILUTIVE EFFECT OF COMMON STOCK EQUIVALENTS, CONSISTING OF SHARES THAT MIGHT
BE ISSUED UPON THE CONVERSION OF WARRANTS, OPTIONS, OR DEBT. IN PERIODS
WHERE LOSSES ARE REPORTED, THE WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING EXCLUDES COMMON STOCK EQUIVALENTS, BECAUSE THEIR INCLUSION
WOULD BE ANTI-DILUTIVE.
The weighted average shares outstanding for basic EPS for the period ended
December 31, 2001 was 8,837,333.
NOTE B - CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. Accounts are guaranteed by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000. At December 31, 2001, the Company
had approximately $2,100 in excess of FDIC insured limits. The Company has not
experienced any losses in such accounts.
32
Cross Genetic Technologies, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
From Inception (February 5, 2001) to December 31, 2001
NOTE C - LEASES
The Company leases a corporate office under a short-term, cancelable operating
lease agreement. The lease expires in six-month intervals and renews
automatically for the same term unless cancelled. In the normal course of
business, it is expected that this lease will be renewed or replaced by leases
on other properties. The lease provides for a minimum fixed fee plus a variable
component for office services. Lease expense totaled $6,671 for the period ended
December 31, 2001.
At December 31, 2001, the Company was obligated for two months under the
six-month lease agreement. The minimum lease payment, under this obligation for
2002 is $2,378.
NOTE D - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets are as follows:
Deferred income tax assets:
Start-up costs $ 6,302
Net operating loss 5,078
-------
$11,380
=======
At December 31, 2001, the Company had net operating loss carry forwards and
temporary differences in start-up costs, which are available to offset future
taxable income. The current portion of the deferred tax assets of $1,260 is
attributable to start up-costs, which will be reversed for tax purposes in the
subsequent year. The long-term portion of the deferred tax assets consists of
start-up costs and a net operating loss carry forward of $5,042 and $5,078,
respectively, which are available to offset future taxable income of the
Company. The loss carry forwards begin to expire in 2021 and the tax effect of
those carry forwards is included in other deferred tax assets.
NOTE E - STOCKHOLDERS' EQUITY
On February 6, 2001, the Company issued 8,000,000 shares of Common Stock, valued
at $20,000, to its majority shareholder as payment for its organization and
start-up costs. On February 26, 2001, the Company tendered a private placement
offering of 3,008,000 shares of its Common Stock at $.05 per share. The offer
was fully subscribed by the end of May 2001 and shares of stock were transferred
to the subscribers during May 2001. Accordingly, the Company has recorded the
$150,400 in its Common Stock account.
33
Cross Genetic Technologies, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
From Inception (February 5, 2001) to December 31, 2001
NOTE F - RELATED PARTY TRANSACTIONS
At December 31, 2001, the Company has a payable of $18,961 due to its majority
shareholder, "UM Tean", that is due upon demand. This note is unsecured and is
non-interest bearing. Estimated interest on this payable is not considered
significant to the financial statements. The payable has been classified as
current in the accompanying Balance Sheet because repayment is possible during
the next year.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
There have been no disagreements on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
DIVIDEND POLICY
Adena has not paid any dividends on its common stock, and it is not anticipated
that any dividends will be paid in the foreseeable future. The Board of
Directors intends to follow a policy of retaining earnings, if any, to finance
the growth of the company. The declaration and payment of dividends in the
future will be determined by the Board of Directors in light of conditions then
existing, including the company's earnings, financial condition, capital
requirements and other factors.
LEGAL MATTERS
The validity of the common stock being registered hereby will be passed upon for
Adena by the Law Firm of Larson-Jackson, P.C. 1020 16th Street, N.W., 3rd Floor,
Washington, D.C. 20036, Tel. (202) 408-8180.
- --------------------------------------------------------------------------------
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Virginia's corporate statute, Va. Code ss.13.1-601 (2001), contains
provisions regarding indemnification of officers, directors, employees, and
agents. Some of these provisions are discretionary and some are mandatory. Where
the person is acting within the scope of employment, the permissive provisions
allow the small business issuer to indemnify a person in an action or proceeding
except an action by right of the small business issuer. The indemnification may
cover reasonable expenses incurred in connection with the proceeding if the
person acted in good faith. Where the action is by right of the small business
issuer, the company may indemnify a person who acts in good faith and within the
scope of their employment as long as the person has not been adjudged liable to
the small business issuer unless the court or similar body determines such
indemnification is fair. The statute mandates indemnification of a director,
officer, employee or agent of the small business issuer who has succeeded on the
merits or otherwise in defense of a proceeding in connection with a matter that
falls within the indemnification provisions. In its charter provisions, and
bylaws, Cross Genetic has not specifically provided for indemnification of its
officers, directors, employees or agents, nor has Cross Genetic entered into
contracts or other arrangements that insure or indemnify its controlling
persons, directors or officers.
34
Item 25. Other expenses of issuance and distribution
The following table sets forth the expenses in connection with the
issuance and distribution of the securities offered hereby:
--------------------------------------------------------------------
Registration Fee $ 137.60
--------------------------------------------------------------------
Estimated Printing Expenses $ 600.00
--------------------------------------------------------------------
Estimated Legal Fees and Expenses $ 20,000.00
--------------------------------------------------------------------
Estimated Accounting Fees and Expenses $ 2,500.00
--------------------------------------------------------------------
Estimated Blue Sky Fees and Expenses $ 0.00
--------------------------------------------------------------------
Estimated Transfer Agent Fees and Expenses $ 1,500.00
--------------------------------------------------------------------
Estimated Misc. $ 1,000.00
--------------------------------------------------------------------
Total $ 25,737.60
--------------------------------------------------------------------
Item 26. Recent sales of unregistered securities.
The following provides information of all sales of outstanding stock
which were not registered under the Securities Act of 1933 during the last three
years.
On February 6, 2001, Adena issued 8,000,000 shares of common stock to
its parent company, Um Tean, in exchange for startup costs totaling
approximately $20,000. This transaction was exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"), which
exempts transactions not involving a public offering. This was a private sale
that involved direct contact between the issuer and the offeree. There was no
general solicitation or advertising of the offering. Lino Novielli, our
president and a director is the beneficial owner of the shares.
Adena sold 3,008,000 shares of its common stock in a private placement
offering dated February 26, 2001 for a total of $150,400. The offering was
exempt under Category 3 of Regulation S, which allows a company to offer and
sell its shares outside the United States without registering the transaction.
All fifty-eight purchasers in the offering live outside the United States. Adena
provided each investor with a prospectus. The shares were issued with a
limitation on resale stating that the shares could not be sold until a
registration statement had been filed and declared effective by the SEC. The
offering began on February 26, 2001 and was fully subscribed on May 1, 2001.
Item 27. Exhibits.
3.1 Articles of Incorporation
3.2 Bylaws
5 Opinion re: Legality
24.1 Consent of Independent Certified Public Accountants
24.2 Consent of Counsel
Item 28. Undertakings
The Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to: (i) Include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) Reflect in
the prospectus any facts or events which, individually or together represent a
fundamental change in the information in the registration statement; (iii)
Include any additional or changed material information on the plan of
distribution.
35
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Washington, District of Columbia on January 13, 2003.
CROSS GENETIC TECHNOLOGIES, INC.
By /s/ Lino Novielli
- --------------------------------------------------------------------------------
President/ Chief Executive Officer/Chief Financial Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
- --------------------------------------------------------------------------------
Signature Title Date
- --------------------------------------------------------------------------------
By /s/ Lino Novielli President and Director, Chief January 13, 2003
Lino Novielli Executive Officer, Chief Financial
Lino Novielli Officer
- --------------------------------------------------------------------------------
36