AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 05, 2003
REGISTRATION NO.: XXXXXXX
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AUTO DATA NETWORK, INC.
(Name of small business issuer in its charter)
Delaware 7389 13-3944580
(State or jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
The Forsyth Centre, Century Place
Lamberts Road, Tunbridge Wells
Kent TN2 3EH United Kingdom
011 44 1892 511 566
(Address and telephone number of principal executive offices and principal
place of business)
Christopher Glover, Chief Executive Officer
The Forsyth Centre, Century Place
Lamberts Road, Tunbridge Wells
Kent TN2 3EH United Kingdom
011 44 1892 511 566
(Name, address, and telephone number of agent for service)
Copies of communications to:
L. STEPHEN ALBRIGHT, ESQ.
17337 Ventura Boulevard, Suite 208
Encino, California 91316
(818) 789-0779)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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- -------------------------------------------------------------------------------------------------------
Calculation of Registration Fee
- -------------------------------------------------------------------------------------------------------
Proposed Proposed
maximum maximum
Title of securities Amount offering price aggregate Amount of
to be registered to be registered per share (1) offering price registration fee
- --------------------------------------------------------------------------------------------------------
Preferred Stock 500,000 shares $2.50 $1,250,000 $125.00
underlying Series A-1
par value $0.0001
- --------------------------------------------------------------------------------------------------------
Preferred Stock 5,000,000 shares $2.50 $12,500,000 $1,250.00
underlying Series A-2
par value $0.001
- --------------------------------------------------------------------------------------------------------
Common Stock 1,331,000 shares $1.25 $1,663,750 $166.00
par value $0.01
- --------------------------------------------------------------------------------------------------------
(1) Estimated solely for purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average of the bid and ask prices
per share of our common stock, as reported on the OTC Bulletin Board, on
November 3, 2003. Total Filing Fee is $1,541.00.
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.
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PROSPECTUS
Dated: November 05, 2003 Subject to completion
12,331,000 SHARES OF COMMON STOCK
AUTO DATA NETWORKS, INC.
We have prepared this prospectus to allow certain of our current
stockholders to sell up to 12,331,000 shares of our common stock. We are not
selling any shares of common stock under this prospectus. The shares of common
stock that we are registering for resale include shares of common stock that may
be issued upon the conversion of Series A-1 Preferred Stock Convertible
Promissory Notes, conversion of Series A-2 Preferred Stock and the exercise of
warrants to purchase shares of common stock. Up to 11,000,000 shares of common
stock will be issued upon the exercise or conversion of the two series of
preferred stock and exercise of the warrants. The selling stockholders listed on
page 15 may sell these shares from time to time after this Registration
Statement is declared effective by the Securities & Exchange Commission.
The prices at which the selling stockholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds received by the selling
stockholders.
We may receive up to $1,663,750 in proceeds from the exercise of the
outstanding warrants. We will not receive any proceeds from the conversion of
Series A-1 or Series A-2 Preferred Stock to common stock held by the selling
stockholders. As of the date of this prospectus, none of the warrants have been
exercised.
Our common stock is quoted on the OTC Bulletin Board under the symbol
"ADNW.OB." On November 3, 2003, the last reported sales price of our common
stock as reported by the OTC Bulletin Board was $2.40 per share.
We urge you to read carefully the "Risk Factors" section beginning on page
4 where we describe specific risks associated with an investment in Auto Data
Network, Inc. and these securities before you make your investment decision.
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 THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is November 05, 2003.
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TABLE OF CONTENTS
PAGE
PART I
Prospectus Summary............................................................6
Risk Factors ................................................................11
Disclosure Regarding Forward Looking Statements .............................17
Use of Proceeds .............................................................17
Determination of Offering Price .............................................18
Dilution ....................................................................18
Selling Security Holders.....................................................18
Plan of Distribution ........................................................23
Legal Proceedings ...........................................................26
Directors, Executive Officers, Promoters and Control Persons.................26
Security Ownership of Certain Beneficial Owners & Management.................28
Description of Securities....................................................29
Interests of Named Experts and Counsel.......................................30
Disclosure of Commission Position
on Indemnification for Securities Act Liabilities............................30
Description of Business......................................................33
Managements Discussion and Analysis or Plan of Operation.....................47
Description of Property......................................................51
Certain Relationships and Related Transactions...............................51
Market for Common Equity and Related Stockholder Matters.....................52
Executive Compensation ......................................................54
Changes and Disagreements with Accountants on
Accounting and Financial Disclosures........................................ 55
Financial Information........................................................55
PART II
Indemnification of Directors and Officers....................................69
Recent Sales of Unregistered Securities .....................................70
Exhibits ....................................................................71
Undertakings ................................................................72
Signatures ..................................................................73
Back Cover of Prospectus (no page number)
4
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM THAT CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING
OFFERS TO BUY, SHARES OF THE COMPANY'S COMMON STOCK IN JURISDICTIONS WHERE
OFFERS AND SALES ARE PERMITTED. THE INFORMATION IN THIS PROSPECTUS MAY ONLY BE
ACCURATE AS OF THE DATE OF THIS PROSPECTUS REGARDLESS OF THE TIME OF DELIVERY OF
THIS PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding us and the securities being offered for sale by means of
this prospectus and our financial statements and notes to those statements
appearing elsewhere in this prospectus. The summary highlights information
contained elsewhere in this prospectus.
CORPORATE INFORMATION/BACKGROUND
Our principal executive offices are located at The Forsyth Centre, Century
Place Lamberts Road, Tunbridge Wells Kent, TN2 3EH United Kingdom and our phone
number, including country code is 011 44 1892 511 566.
Auto Data Network Inc ("the Company") was formed as a Delaware corporation
on November 6, 1996, under the name Medic Media Inc. On March 30, 1999, Medic
Media changed its name to AMAC Inc. and engaged in the development and
manufacture of amphibious vehicles, anticipated market demand did not
materialize and the company decided to change direction and pursue a different
strategy for returning value to shareholders. On October 2, 2001, the Company
acquired all of the outstanding shares of Europortal Inc T/A AutoData Group
("ADG") in exchange for the sale of 95% of the outstanding shares of the Company
to the former stockholders of ADG. The remaining 5% equity was retained by
original AMAC stockholders. The effect of this transaction was a change in
control of the Company, ceding corporate control to the former stockholders of
ADG. In acquiring ADG the Company became the owner of Automotive Data Network
Ltd., formerly All Group Holdings Ltd., a UK holding company. On October 4, 2001
the Company changed its name to Auto Data Network, Inc. The acquisition of
Eurportal Inc by AMAC Inc was considered to be a reverse merger because of the
respective sizes of the two entities and Europortal Inc became the accounting
acquirer.
THE COMPANY
Auto Data Network, Inc. (referred to as "us", "we" or "Company") is a group
of established companies which provide software products and services to the
automotive industry. Our main customers are auto dealership in a marketplace of
approximately 78,000 dealers in North America and 92,000 dealers in Europe. The
company estimates that this represents a $15 billion market for Software and
Services specifically for auto dealerships. The company supplies a suite of
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software solutions and services that enable dealerships to run their businesses
more efficiently and achieve considerable cost savings. The majority of the
company's current solutions are focused on serving the aftermarket and finance
areas of automobile dealerships. These areas are of particular importance since
we estimate that the aftermarket business is responsible for 48% of a
dealerships profits generated from 12% of their overall revenue. We estimate
that the second most profitable area is vehicle finance and insurance which
contributes 35% of profits from 2% of revenues.
Our open business automation and distribution channel eCommerce products
and services are designed for industry participants interested in relevant,
real-time data related to the purchase and sale of motor vehicles and automotive
parts and related services in specific markets Our operations are conducted
through our four subsidiaries and using our solutions, many companies now
generate new sales, operate more cost efficiently, accelerate inventory turns
and maintain stronger relationships with suppliers and customers. The Group
generates sales from its two divisions, aftermarket service products and
information services. These divisions supply real time and transactional
services to manufacturers, retailers and consumers producing industry-wide
revenue generation, communication and information collection.
On April 23, 2003 the company completed the acquisition of MAM Software
Limited. MAM Software is the leading European supplier of automotive aftermarket
of computer software and systems within the automotive aftermarket and marine
trade. It provides a complete range of products covering all aspects of sales,
stock and purchase control linked to a full range of accounting systems. These
systems apply to Motor Factors and Distributors, Parts Retailers and Garages.
MAM Software offers a service that covers installation of new computer systems
followed by comprehensive support and maintenance. Its range of software
products are known as "Auto Part", a complete system for wholesalers and
retailers, "Auto Work", a computer system for garages and workshops, "Autocat",
a stand alone electronic catalogue, and "Autonet" a service for establishing and
maintaining a presence on the world wide web. MAM Software currently maintains
four sites in the United Kingdom and Republic of Ireland. It is considered a
pre-eminent system supplier to the Automotive Parts Aftermarket.
On July 1, 2003 the company completed the acquisition of Avenida
Technologies Limited, a company based in Coventry, UK, which develops software
to address the most pressing challenges of the automotive industry - issues such
as the coordination of activities between manufacturers and dealers, information
exchange between suppliers and manufacturer, reducing costs to stay competitive
and increasing customer retention. Avenida software accelerates the flow of
information throughout an organization by removing the barriers between
applications, data stores and network platforms, so increasing its efficiency.
Furthermore, Avenida takes these benefits outside the enterprise by pushing its
technology boundaries to include selected trading partners and customers.
Avenida reduces data-management costs while ensuring data is accurate and
up-to-date, regardless of its location.
Avenida's software connects existing, legacy systems to those of
trading partners using the latest XML standards and 'rules based' processing.
Using Avenida, businesses benefit from the centralization and sharing of the
critical business services, processes, messages, and vocabularies that make up
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the transactions exchanged between trading partners. Avenida offers an
Internet-based solution to reflect the increasingly distributed nature of the
automotive industry. Streamlined business information is able to flow between
dealerships, manufacturers, aftermarket service providers and other distribution
'value chain' companies. Messaging to exchange customer records, orders,
shipment information and other business information, within automotive product
configuration and sales systems, is already in use with a number of clients
including Land Rover, MG Rover, Ford (NYSE: F), BMW (Frankfurt: BMWG.F), Rolls
Royce, Lloyds TSB (NYSE: LYG), and TNT.
On August 13, 2003 the company announced an agreeement with CarParts
Technologies, Inc. (CarParts) is a leading provider of software systems to the
automotive aftermarket supply chain. Over 3,000 customers, including leading
automotive aftermarket outlets, tier 1 manufacturers, program groups, warehouse
distributors, tire and service chains and independent installers across all 50
U.S. states and Canada, rely on CarParts software.
Under the terms of the agreement, Auto Data Network has provided a loan
of $2 million to fund the continued growth of the company. ADNW will also
acquire CarParts Technologies on a pre-determined formula at the end of 2005.
CarParts has developed the world's first application suite that puts
the Internet inside its VAST point-of-sale (POS) and back office (DirectStep)
automotive aftermarket systems. CarParts has created an industry-specific
private trading network, OpenWebs(TM) Intelligent Trading Network, with
in-built, secure trading and accounting functionality that lets members buy
from, and sell to, any other partner on the network - distributors,
manufacturers, even other dealers. Since everyone is connected under trading
rules, members can confirm sales to their own customers based on accurate
information and reduce their inventory. CarParts' OpenWebs(TM) Intelligent
Trading Network integrates with existing industry systems from a standard
Microsoft based platform resulting in lower customer installation costs and
minimal user training requirements.
Using OpenWebs(TM), CarParts has also deployed a leading tire-industry
ERP application, Tradera, with advanced tire functionality, tire adjustment
warranty tracking, volume bonus accruals and integration with retread software.
Computer-to-computer connectivity with leading tire manufacturers provides
accurate real-time product information to assist dealerships and repair centres
in managing and extending their relationship with customers
We market our products to vehicle and parts manufacturers, dealers,
consumers and related industry participants, including financial institutions,
insurance providers and fleet owners. Our core product offering revolves around
three functions: (1) our ability to link the often incompatible systems and data
structures of the various participants in the industry into one unified
information platform, (2) our ability to assemble and provide relevant,
actionable data in real-time to our subscribers, and (3) our breadth of services
and product offering designed to facilitate and increase efficiencies using the
data we provide to facilitate sales of new and used vehicles, parts and
accessories, and various services such as finance, insurance and vehicle
servicing.
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Our product suite includes applications we have developed internally and
applications developed by businesses through acquisition. The platform
propositions are integrated as a communications channel that allows all
automotive sector participants to transact within a single environment, in which
transactional data is added and modified on the network. This process creates a
unique source of "Intelligent Information(TM)" that can be accessed by
subscribing companies to analyze and react to changes in market conditions.
We believe that we have the opportunity to become a leading technology
company servicing the automotive industry in the next five years if we
successfully execute our balanced growth strategy. We anticipate that revenues
derived from our current software portfolio will permit us to further develop
new products in our development portfolio. We intend to commence marketing our
software offering in a combined package, and to continue developing our existing
platform technologies with a primary business focus on automotive dealerships. A
key element of our business strategy is to continue to acquire, obtain licenses
for, and develop new technologies and products that we believe offer unique
market opportunities and/or complement our existing product lines.
In addition, between June 1, 2003, and October 15, 2003, we sold an
aggregate total of 5,328,000 shares of preferred stock, 500,000 were Series A-1
Convertible Promissory Note Preferred Stock and 4,828,000 were Series A-2
Preferred Stock. All of these sales were made in reliance upon exemptions from
registration under the Securities Act of 1933, as amended (the "Act"). We sold
all of these preferred shares for $2.50 per share. Each of these preferred
shares is currently convertible into two (2) shares of our common stock. The
shares of common stock underlying these preferred shares are being registered
pursuant to this registration statement. In addition to selling those shares, we
issued warrants to purchase up to 1,331,000 shares of our common stock to
various investment advisors and consultants. These warrants are exercisable at
the price of $1.25 per share. We are also registering 1,331,000 shares of our
common stock which underlie these warrants. These transactions are listed in the
Selling Shareholders portion of this registration statement.
THE OFFERING
Shares offered by the
selling stockholders ......................................................up to 11,987,000 shares of common stock.
Shares outstanding prior to
offering ...............................................................................................14,389,850
Shares to be outstanding
following offering .............................................................................. up to 26,376,850
Use of proceeds ................................................We will not receive any proceeds from the sale and
and issuance of common stock following the
conversion of Series A-1 and Series A-2
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Preferred Stock. However, if the selling
shareholders who own warrants exercise them,
we would receive up to $1,663,750.00. We
cannot know how many warrants the selling
shareholders will exercise or sell. Depending
upon the amount of proceeds generated by this
offering, we plan to use most of the proceeds
for general working capital to pay
administrative and general expenses. We
estimate the expenses of this offering, such
as printing, legal, and accounting will be
approximately $225,000.
Risk Factors........................................................An investment in our common stock is subject to
significant risks. You should carefully
consider the information set forth in the
"Risk Factors" section of this prospectus as
well as other information set forth in this
prospectus, including our financial
statements and related notes.
Dividend policy ................................................. We intend to retain any earnings to finance the
finance the development and growth of our
business. Accordingly, we do not anticipate
that we will declare any cash dividends on
our common stock for the foreseeable future.
See "Market For Common Equity and Dividend
Policy" on page 49.
Plan of Distribution ......................................................................The
shares of common stock offered for resale may
be sold by the selling stockholders pursuant
to this prospectus in the manner described
under "Plan of Distribution" on page 20.
OTC Bulletin Board symbol .................................................................................ADNW.OB
SUMMARY FINANCIAL DATA
The following summary financial information is taken from our financial
statements included elsewhere in this prospectus and should be read along with
the financial statements and the related notes.
INCOME STATEMENT DATA
Three months Ended February 28 Six months Ended August 31
2003 2002 2003 2002
---- ---- ----- ----
Total revenue $1,772,996 $40,412 $9,006,104 $551,385
Operating expenses 313,528 68,053 4,527,459 380,994
Net profit / loss 514,648 (725,002) 1,099,885 2,703
Net profit/(loss) per share $0.045 $(0.065) $0.076 $0.0002
Average number of shares 11,552,289 11,462,078 14,389,850 11,552,289
BALANCE DATA SHEET
Years Ended
February 28, 2003 May 31, 2003
(unaudited) (unaudited)
----------------- ------------
Total assets $9,143,601 $25,750,871
Cash & cash equivalents 722,961 2,990,399
Total liabilities 2,531,376 7,930,307
Working capital (deficiency) (452,115) 4,926,348
Stockholders' equity (deficit) 7,214,749 17,483,881
RISK FACTORS
You should carefully consider the following risks before you decide to buy
our common stock. Our business, financial condition or operating results may
suffer if any of the events described in the following risk factors actually
occur. There may be additional risks that we are not currently able to identify.
These may also adversely affect our business, financial condition or operating
results. I f any of the events we have identified or those that we cannot now
identify occurs, the trading price of our common stock could decline, and you
may lose all or part of the money you paid to buy our common stock.
We have a limited operating history, which makes it difficult to evaluate
our business and to predict our future operating results.
We were organized in November 1996. Since our inception, we have been
primarily engaged in organizational activities, including developing a strategic
operating plan, entering into various collaborative agreements for the
development of products and technologies, hiring personnel and developing and
testing our products.
With the exception of our most recently completed fiscal year we have
incurred net losses since commencing business. We may incur future losses. We
may never generate material revenues or achieve profitability and, if we do
achieve profitability, we may not be able to maintain profitability.
We may fail to address risks we face as a developing business which could
adversely affect the implementation of our business plan.
We are prone to all of the risks inherent to the establishment of any new
business venture. You should consider the likelihood of our future success to be
highly speculative in light of our limited operating history, as well as the
9
limited resources, problems, expenses, risks and complications frequently
encountered by similarly situated companies. To address these risks, we must,
among other things,
o maintain and increase our product portfolio;
o implement and successfully execute our business and marketing
strategy;
o continue to develop new products and upgrade our existing products;
o respond to industry and competitive developments; and
o attract, retain, and motivate qualified personnel.
We may not be successful in addressing these risks. If we are unable to do
so, our business prospects, financial condition and results of operations would
be materially adversely affected. We have limited experience in developing
products and may be unsuccessful in our efforts to develop products.
To achieve profitable operations, we, alone or with others, must
successfully develop, market and sell our products. The development of new
software products is highly uncertain and subject to a number of significant
risks. Most products resulting from our or our collaborative partners' product
development efforts are not expected to be available for sale for at least a
year. Potential products that appear to be promising at early stages of
development may not reach the market for a number of reasons.
To date, our resources have been substantially dedicated to the
acquisition, research and development of products and technologies. Most of the
existing and future products and technologies developed by us will require
extensive additional development. Our product development efforts may not be
successful.
An increase in competition from other software manufacturers could have a
material adverse effect on our ability to generate revenue and cash flow.
Because many of our competitors have substantially greater capabilities and
resources, they may be able to develop products before us or develop more
effective products or market them more effectively which would limit our ability
to generate revenue and cash flow.
Competition in our industry is intense. Potential competitors in the United
States and Europe are numerous most of which have substantially greater capital
resources, marketing experience, research and development staffs and facilities
than us. Competing technologies and products may be more effective than any of
those that are being or will be developed by us.
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If we fail to keep up with rapid technological change, our technologies and
products could become less competitive or obsolete.
The software industry is characterized by rapid and significant
technological change. We expect that automotive technology will continue to
develop rapidly, and our future success will depend on our ability to develop
and maintain a competitive position. Technological development by others may
result in products developed by us, branded or generic, becoming obsolete before
they are marketed or before we recover a significant portion of the development
and commercialization expenses incurred with respect to these products.
We have limited sales and marketing capability, and may not be successful
in selling or marketing our products.
We depend on patent and proprietary rights to develop and protect our
technologies and products, which rights may not offer us sufficient protection.
The software industry places considerable importance on obtaining patent
and trade secret protection for new technologies, products and processes. Our
success will depend on our ability to obtain and enforce protection for products
that we develop under United States and foreign patent laws and other
intellectual property laws, preserve the confidentiality of our trade secrets
and operate without infringing the proprietary rights of third parties.
We also rely upon trade secret protection for our confidential and
proprietary information. Others may independently develop substantially
equivalent proprietary information and techniques or gain access to our trade
secrets or disclose our technology. We may not be able to meaningfully protect
our trade secrets which could limit our ability to exclusively produce products.
We require our employees, consultants, members of the scientific advisory
board and parties to collaborative agreements to execute confidentiality
agreements upon the commencement of employment or consulting relationships or a
collaboration with us. These agreements may not provide meaningful protection of
our trade secrets or adequate remedies in the event of unauthorized use or
disclosure of confidential and proprietary information.
If we lose key management or other personnel our business will suffer.
We are highly dependent on the principal members of our management staff.
We also rely on consultants and advisors to assist us in formulating our
development strategy. Our success also depends upon retaining key management and
technical personnel, as well as our ability to continue to attract and retain
additional highly-qualified personnel. We face intense competition for personnel
from other companies, government entities and other organizations. We may not be
successful in retaining our current personnel. We may not be successful in
hiring or retaining qualified personnel in the future. If we lose the services
of any of our management staff or key technical personnel, or if we fail to
continue to attract qualified personnel, our ability to acquire, develop or sell
products would be adversely affected.
11
Our management and internal systems might be inadequate to handle our
potential growth.
Our success will depend in significant part on the expansion of our
operations and the effective management of growth. This growth will place a
significant strain on our management and information systems and resources and
operational and financial systems and resources. To manage future growth, our
management must continue to improve our operational and financial systems and
expand, train, retain and manage our employee base. Our management may not be
able to manage our growth effectively. If our systems, procedures, controls, and
resources are inadequate to support our operations, our expansion would be
halted and we could lose our opportunity to gain significant market share. Any
inability to manage growth effectively may harm our ability to institute our
business plan.
Because we intend to have international operations, we will be subject to
risks of conducting business in foreign countries.
If, as we anticipate, international operations will constitute a part of
our business, we will be subject to the risks of conducting business in foreign
countries, including:
o difficulty in establishing or managing distribution relationships;
o different standards for the development, use, packaging and marketing
of our products and technologies;
o our inability to locate qualified local employees, partners,
distributors and suppliers;
o the potential burden of complying with a variety of foreign laws,
trade standards and regulatory requirements; and
o general geopolitical risks, such as political and economic
instability, changes in diplomatic and trade relations, and foreign
currency risks.
We cannot predict our future capital needs and we may not be able to secure
additional financing which could affect our ability to operate as a going
concern. We have recently completed an offering through the sale of shares of
the Series A-1 and Series A-2 Preferred Stock. We received $13,320,750 from the
sale of those securities. We issued warrants to placement agents and other
consultants and advisors who have provided services to us. The warrants to
purchase common stock are generally exercisable within five years of the
issuance date. However, other terms, such as price, vary from warrant holder to
warrant holder. These variations reflect the differing circumstances, such as
then current needs, under which the warrants were issued. Nevertheless, we may
need additional financing to continue to fund the research and development of
our products and to generally expand and grow our business. To the extent that
we will be required to fund operating losses, our financial position would
deteriorate. There can be no assurance that we will be able to find significant
12
additional financing at all or on terms favorable to us. If equity securities
are issued in connection with a financing, dilution to our stockholders may
result, and if additional funds are raised through the incurrence of debt, we
may be subject to restrictions on our operations and finances. Furthermore, if
we do incur additional debt, we may be limiting our ability to repurchase
capital stock, engage in mergers, consolidations, acquisitions and asset sales,
or alter our lines of business or accounting methods, even though these actions
would otherwise benefit our business. As of August 31, 2003 we had stockholders'
equity of $17,483,881 and net working capital of $4,926,348.
If adequate financing is not available, we may be required to delay, scale
back or eliminate some of our research and development programs, to relinquish
rights to certain technologies or products, or to license third parties to
commercialize technologies or products that we would otherwise seek to develop.
Any inability to obtain additional financing, if required, would have a material
adverse effect on our ability to continue our operations and implement our
business plan.
The prices we charge for our products and the level of third-party
reimbursement may decrease and our revenues could decrease.
Our ability to commercialize products successfully depends in part on the
price we may be able to charge for our products.
We may encounter significant financial and operating risks if we grow our
business through acquisitions.
As part of our growth strategy, we may seek to acquire or invest in
complementary or competitive businesses, products or technologies. The process
of integrating acquired assets into our operations may result in unforeseen
operating difficulties and expenditures and may absorb significant management
attention that would otherwise be available for the ongoing development of our
business. We may allocate a significant portion of our available working capital
to finance all or a portion of the purchase price relating to possible
acquisitions although we have no immediate plans to do so. Any future
acquisition or investment opportunity may require us to obtain additional
financing to complete the transaction. The anticipated benefits of any
acquisitions may not be realized. In addition, future acquisitions by us could
result in potentially dilutive issuances of equity securities, the incurrence of
debt and contingent liabilities and amortization expenses related to goodwill
and other intangible assets, any of which could materially adversely affect our
operating results and financial position. Acquisitions also involve other risks,
including entering markets in which we have no or limited prior experience.
The price of our common stock is likely to be volatile and subject to wide
fluctuations.
The market price of the securities of software companies has been
especially volatile. Thus, the market price of our common stock is likely to be
subject to wide fluctuations. If our revenues do not grow or grow more slowly
than we anticipate, or, if operating or capital expenditures exceed our
expectations and cannot be adjusted accordingly, or if some other event
13
adversely affects us, the market price of our common stock could decline. In
addition, if the market for pharmaceutical and biotechnology stocks or the stock
market in general experiences a loss in investor confidence or otherwise fails,
the market price of our common stock could fall for reasons unrelated to our
business, results of operations and financial condition. The market price of our
stock also might decline in reaction to events that affect other companies in
our industry even if these events do not directly affect us. In the past,
companies that have experienced volatility in the market price of their stock
have been the subject of securities class action litigation. If we were to
become the subject of securities class action litigation, it could result in
substantial costs and a diversion of management's attention and resources.
The public trading market for our common stock is limited and may not be
developed or sustained which could limit the liquidity of an investment in our
common stock.
There is a limited trading market for the common stock. Since April 1999,
the common stock has been traded sporadically under the symbol "ADNW.OB" on the
OTC bulletin board, an inter-dealer automated quotation system for equity
securities. There can be no assurance that an active and liquid trading market
will develop or, if developed, that it will be sustained which could limit your
ability to sell our common stock at a desired price.
Certain events could result in a dilution of your ownership of our common
stock.
As of October 20, 2003, we had 14,389,850 shares of common stock
outstanding, 500,000 shares of Series A-1 Convertible Promissory Note, 4,828,300
shares of Series A-2 Preferred Stock outstanding (a total of 5,328,300 shares of
preferred stock) which are currently convertible into 10,656,000 shares of
common stock. We also have outstanding warrants which represent 1,331,000 common
stock equivalents. The exercise prices of the common stock warrants is $1.25 per
share. These securities also provide for anti-dilution protection upon the
occurrence of sales of our common stock below certain prices, stock splits,
redemptions, mergers and other similar transactions. If one or more of these
events occurs the number of shares of our common stock that may be acquired upon
conversion or exercise would increase. If converted or exercised, these
securities will result in a dilution to your percentage ownership of our common
stock.
The provisions of Delaware law may inhibit potential acquisition bids that
stockholders may believe are desirable, and the market price of our common stock
may be lower as a result.
We are subject to the anti-takeover provisions of Section 203 of the
Delaware corporate statute, which regulates corporate acquisitions. These
provisions could discourage potential acquisition proposals and could delay or
prevent a change in control transaction. They could also have the effect of
discouraging others from making tender offers for our common stock. As a result,
these provisions may prevent our stock price from increasing substantially in
response to actual or rumored takeover attempts. These provisions may also
prevent changes in our management.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
14
We have made statements under the captions "Risk Factors," "Business" and
in other sections of this prospectus that are forward-looking statements. In
some cases, you can identify these statements by forward-looking words such as
"may," "might," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue," the negative of these terms
and other comparable terminology. These forward-looking statements which are
subject to risks, uncertainties and assumptions about us, may include
projections of our future financial performance, or anticipated growth
strategies and anticipated trends in our business. These statements are only
predictions based on our current expectations and projections about future
events. There are important factors that could cause our actual results, level
of activity, performance or achievements to differ materially from the results,
level of activity, performance or achievements expressed or implied by the
forward-looking statements, including those factors discussed under the section
entitled "Risk Factors." You should specifically consider the numerous risks
outlined under "Risk Factors." Although we believe the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. Moreover, neither we
nor any other person assumes responsibility for the accuracy and completeness or
any of these forward-looking statements.
USE OF PROCEEDS
The following table describes how we plan to allocate the proceeds of
this offering, assuming the selling shareholders exercise half or all of the
1,331,000 shares of Common Stock offered:
Sale of Sale of
665,500 Shares 1,331,000 Shares
(50% of Offering) (100% of Offering)
Gross proceeds $831,875.00 $1,663,750.00
Estimated offering expenses (e.g.; printing and
mailing costs, legal and accounting fees,
SEC registration fee, and blue sky fees) $100,000.00 $ 100,000.00
Estimated net proceeds $781,875.00 $1,563,750.00
Estimated uses of proceeds
General and administrative
expenses and additional working capital $781,875.00 $1,563,750.00
------------------------------------
$781,875.00 $1,563,750.00
15
Regardless of the amount of proceeds we may receive from the exercise
of warrants, the funds will be used to cover general and administrative expenses
and as additional working capital. We are not relying on these proceeds to
finance the Company during the next twelve months. For an analysis of the use of
proceeds from our private placement of preferred stock, please see Item 25
below.
DETERMINATION OF OFFERING PRICE
The selling stock holders will, at their discretion, sell the stock at the
prevailing market price for our shares, provided that they have converted their
Series A-1 and Series A-2 Preferred Stock (note that there are no proceeds to
the Company upon the conversion of the preferred stock) the warrant holders will
pay us $1.25 per share upon the exercise of those warrants. The price for the
shares of stock offered by this Prospectus has not been and will not be
determined by us.
DILUTION
As of October 20, 2003, we had: (i) 14,389,850 shares of common stock
outstanding; (ii) 5,328,000 shares of Preferred Stock outstanding which are
currently convertible into 10,656,000 shares of common stock; and, (iii)
1,331,000 warrants exercisable into 1,331,000 shares of common stock. The
exercise and conversion prices of the warrants into common stock is $1.25 per
share. These securities also provide for anti-dilution protection upon the
occurrence of sales of our common stock below certain prices, stock splits,
redemptions, mergers and other similar transactions. If one or more of these
events occurs the number of shares of our common stock that may be acquired upon
conversion or exercise would increase. If converted or exercised, these
securities will result in a dilution to your percentage ownership of our common
stock.
SELLING STOCKHOLDERS
The following table details the name of each selling stockholder, the
number of shares owned by each selling stockholder and the number of shares that
may be offered for resale under this prospectus. To the extent permitted by law,
the selling stockholders who are not natural persons may distribute shares, from
time to time, to one or more of their respective affiliates, which may sell
shares pursuant to this prospectus. We have registered the shares to permit the
selling stockholders and their respective permitted transferees or other
successors in interest that receive their shares from the selling stockholders
after the date of this prospectus to resell the shares. Because each selling
stockholder may offer all, some or none of the shares it holds, and because
there are currently no agreements, arrangements, or understandings with respect
to the sale of any of the shares, no definitive estimate as to the number of
shares that will be held by each selling stockholder after the offering can be
provided. The selling stockholders may from time to time offer all or some of
the shares pursuant to this offering. Pursuant to Rule 416 under the securities
act, the registration statement of which this prospectus is a part also covers
any additional shares of our common stock which becomes issuable in connection
with such shares because of any stock dividend, stock split, recapitalization or
other similar transaction effected without the receipt of consideration which
16
results in an increase in the number of outstanding shares of our common stock.
The following table has been prepared on the assumption that all shares offered
under this prospectus will be sold to parties unaffiliated with the selling
stockholders. Except as indicated by footnote, none of the selling stockholders
has had a significant relationship with us within the past three years, other
than as a result of the ownership of our shares or other securities. Except as
indicated by footnote, the selling stockholders have sole voting and investment
power with their respective shares. Percentages in the table below are based on
14,389,850 shares of our common stock outstanding as of October 20, 2003.
OWNERSHIP OF COMMON STOCK PRIOR TO THE OFFERING
NAME OF SELLING
SHAREHOLDER
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
PREFERRED SHARES
- ----------------
Brand Equity Ventures L.L.P. ** 117,200.00 *
Investor Group L.P. ** 9,120.00 *
Investor Growth Capital Limited ** 21,280.00 *
Rho Management Trust I ** 280,000.00 3.89% (1)
St. Paul Venture Capital VI, LLC ** 72,400.00 *
Alta Partners Discount Convertible Arbitrage Holdings Ltd 400,000.00 5.56%(2)
Amy S. Bertsch 4,000.00 *
Andrew Maltin 10,000.00 *
Anne M. Esker 40,000.00 *
Anthony G. Williams 20,000.00 *
Arrowhead Capital Management, LLC 40,000.00 *
Arthur Steinberg 4,000.00 *
Ashish Kumar 10,000.00 *
Barron Ventures 920,000.00 12.79%(3)
Bellefonte Capital VF I, LLP 20,000.00 *
Benjamin Burick Smith 20,000.00 *
Bernard N. Holst Jr. 4,000.00 *
Brendan McNamee 20,000.00 *
Brian Walsh 14,000.00 *
Bruce Lee McKee 20,000.00 *
C.R. Querbes 15,000.00 *
Caydal, LLC 40,000.00 *
Caydal, LLC 20,000.00 *
Central Point Partners 40,000.00 *
Crestview Capital Fund II 190,000.00 2.64% (4)
17
Crestview Capital Offshore Fund Inc 10,000.00 *
Dale Burns 15,000.00 *
Daniel Williams 3,000.00 *
Darren Taube 10,000.00 *
David Dobell 10,000.00 *
Dennis W. Slavik 20,000.00 *
Donsky Holdings LTD. 10,000.00 *
Echo Trust 20,000.00 *
Edward Hamilton 20,000.00 *
Elaine Roberts Investment Trust 10,000.00 *
Ellis International Ltd. Corp. 20,000.00 *
Eric Lichtenstein 10,000.00 *
First Mirage, Inc. 80,000.00 *
Florence Mittleman 10,000.00 *
Fred G. Ledlow 10,000.00 *
Gary Evan Lipski 5,000.00 *
Generation Capital Associates 40,000.00 *
George A. VonderLinden 20,000.00 *
Greg J. McCall 30,000.00 *
Greg Osborn 46,000.00 *
H. John Greeniaus 40,000.00 *
H. Ward Lay - his separate property 10,000.00 *
HK Partners 10,000.00 *
IndiGo Ventures, LLC 18,000.00 *
James B. Robinson 4,000.00 *
James E. Altman 10,000.00 *
James T. Pappas 20,000.00 *
Jess S. Morgan & Co. 460,000.00 6.40% (5)
John J. Gebhardt 33,000.00 *
John P. Smith 40,000.00 *
Jonathan Sack 20,000.00 *
Joshua Emanuel 20,000.00 *
Julian Cohen 30,000.00 *
Kenneth G. Futter 20,000.00 *
Kirk A. Scoggins 40,000.00 *
Larry D. Bouts 60,000.00 *
Leon Frenkel 40,000.00 *
Louis Marx, III 20,000.00 *
Lyn Gaylord 4,000.00 *
18
Lynch Childrens Trust FBO Ann Lynch 10,000.00 *
Lynch Childrens Trust FBO Elizabeth Lynch 10,000.00 *
Lynch Childrens Trust FBO Mary Lynch 10,000.00 *
Manu Gambhir 2,000.00 *
Marc. S. Blank 10,000.00 *
Mark Austin Smith 20,000.00 *
Marketwise Trading, Inc. 80,000.00 *
MHJ Holdings Co. 40,000.00 *
Michael J. Miller 5,000.00 *
Myron Neugeboren 15,600.00 *
Nathan Gantcher 20,000.00 *
Neeta Khubani 20,000.00 *
Neil V. Moody Rev. Trust Dated 2/9/95 10,000.00 *
Patrick J. McMahon 40,000.00 *
Patrick Lawler 5,000.00 *
Peter and Carolyn Lynch JT 90,000.00 *
Peter J. O'Gorman 30,000.00 *
Peter Rugg 20,000.00 *
Philip C. Mittleman 10,000.00 *
Pilot Ventures Trust 20,000.00 *
Platinum Partners Global Macro Fund LP 40,000.00 *
Platinum Partners Value Arbitrage Fund LP 110,000.00 *
Prestige CapitalLLC 20,000.00 *
Professional Traders Fund, LLC 80,000.00 *
Puglisi Capital Partners, L.P. 100,000.00 *
RCI II Ltd. 90,000.00 *
RCI2 (Segal) 40,000.00 *
Richard Dickey 10,000.00 *
Richard Molinsky 60,000.00 *
Robert DeLeonardis 10,000.00 *
Rodd Friedman 60,000.00 *
Rosen Capital Management Purchase Pension Plan 30,000.00 *
Shelly Singhal 8,000.00 *
Stephen J. Nicholas, MD 10,000.00 *
Thomas P. Kurz 6,400.00 *
Thomas Samph 10,000.00 *
Tom Pirelli 48,000.00 *
Triage Capital Management LP 60,000.00 *
Triage Offshore Fund, LTD 100,000.00 *
19
Valhalla Investment Partners LP 20,000.00 *
Vincent J. Lupinacci 15,000.00 *
Vito R. Capotorto 10,000.00 *
Voltron Ventures, L.P. 20,000.00 *
Wayne Saker 20,000.00 *
WEC Partners LLC 60,000.00 *
Will Garwood, Jr. 20,000.00 *
William C. Martin 20,000.00 *
William J. Ritger 102,000.00 *
William J. Truxal 20,000.00 *
Wry Ltd 14,000.00 *
Wry Ltd. 10,000.00 *
TOTAL NUMBER OF PREFERRED SHARES 5,328,000 74.05% (6)
Total number of shares of common stock to
be issued upon conversion of all preferred stock 10,656,000 74.05%
WARRANTS
First Securities USA. 150,000.00 1.04 (7)
Middlebury Capital, LLC 781,000.00 5.43% (8)
Seargeant Consulting 400,000.00 2.78% (9)
TOTAL 1,331,000 9.25% (10)
** These Selling Shareholders own Series A-1 Convertible Promissory Note
preferred stock which total 500,000 shares of preferred stock and are
convertible into 1,000,000 shares of common stock. The balance of the of Seller
Shareholders own Series A-1 Preferred Stock which represent 4,828,000 shares of
preferred stock and are convertible into 9,656,000 shares of common stock for a
total of 10,656,000 shares of common stock to be issued upon the conversion of
the preferred stock..
* Represents less than 1% of our outstanding shares of common stock before and
after offering.
(1) Represents 2.12% after offering, assuming all shares are converted and all
warrants are exercised.
(2) Represents 3.03% after offering, assuming all shares are converted and all
warrants are exercised.
(3) Represents 6.97% after offering, assuming all shares are converted and all
warrants are exercised.
(4) Represents 1.44% after offering, assuming all shares are converted and all
warrants are exercised.
(5) Represents 3.49% after offering, assuming all shares are converted and all
warrants are exercised.
(6) Represents 40.40% after offering, assuming all shares are converted and all
warrants are exercised.
(7) Represents less than 1% after offering, assuming all shares are converted
and all warrants are exercised
20
(8) Represents 2.96% after offering, assuming all shares are converted and all
warrants are exercised.
(9) Represents 1.52% after offering, assuming all shares are converted and all
warrants are exercised.
(10) Represents 5.05% after offering, assuming all shares are converted and all
warrants are exercised
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to
time by the selling stockholders. The term "selling stockholders" includes
pledgees, donees, transferees or other successors in interest selling shares
received after the date of this prospectus from the selling stockholders as a
pledge, gift, partnership distribution or other non-sale related transfer. The
number of shares beneficially owned by each selling stockholder will decrease as
and when it effects any such transfers. The plan of distribution for the selling
stockholders' shares sold hereunder will otherwise remain unchanged, except that
the transferees, pledgees, donees or other successors will be selling
stockholders hereunder. To the extent required, we may amend and/or supplement
this prospectus from time to time to describe a specific plan of distribution.
The selling stockholders will act independently of us in making decisions with
respect to the timing, manner and size of each sale. The selling stockholders
may offer their shares from time to time pursuant to one or more of the
following methods:
on the OTC Bulletin Board or on any other market on which our common stock may
from time to time be trading;
one or more block trades in which the broker or dealer so engaged will attempt
to sell the shares of common stock as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by the broker
or dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o in public or privately-negotiated transactions;
o through the writing of options on the shares;
o through underwriters, brokers or dealers (who may act as agents or
principals) or directly to one or more purchasers;
o an exchange distribution in accordance with the rules of an exchange;
o through agents;
21
o through market sales, both long or short, to the extent permitted
under the federal securities laws; or
o in any combination of these methods.
The sale price to the public may be:
o the market price prevailing at the time of sale;
o a price related to the prevailing market price;
o at negotiated prices; or
o any other prices as the selling stockholder may determine from time to
time.
o In connection with distributions of the shares or otherwise, the
selling stockholders may
o Enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the shares in
the course of hedging the positions they assume;
o sell the shares short and redeliver the shares to close out such short
positions;
o enter into option or other transactions with broker-dealers or other
financial institutions which require the delivery to them of shares
offered by this prospectus, which they may in turn resell; and
o pledge shares to a broker-dealer or other financial institution,
which, upon a default, they may in turn resell.
In addition to the foregoing methods, the selling stockholders may offer
their share from time to time in transactions involving principals or brokers
not otherwise contemplated above, in a combination of such methods as described
above or any other lawful methods.
Sales through brokers may be made by any method of trading authorized by
any stock exchange or market on which the shares may be listed or quoted,
including block trading in negotiated transactions. Without limiting the
foregoing, such brokers may act as dealers by purchasing any or all of the
shares covered by this prospectus, either as agents for others or as principals
for their own accounts, and reselling such shares pursuant to this prospectus. A
selling stockholder may effect such transactions directly, or indirectly through
underwriters, broker-dealers or agents acting on their behalf. In effecting
sales, brokers and dealers engaged by the selling stockholders may arrange for
other brokers or dealers to participate.
The shares may also be sold pursuant to Rule 144 under the securities act,
which permits limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
22
availability of certain current public information concerning the issuer, the
resale occurring following the required holding period under 144 and the number
of shares during any three-month period not exceeding certain limitations. The
selling stockholders have the sole and absolute discretion not to accept any
purchase offer or make any sale of their shares if they deem the purchase price
to be unsatisfactory at any particular time.
The selling stockholders or their respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. These broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom these broker-dealers may act as agents
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that the selling stockholders will attempt to
sell shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholders cannot assure that all or any of the shares offered by this
prospectus will be issued to, or sold by, the selling stockholders if they do
not exercise or convert the common stock equivalents that they own. The selling
stockholders and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered by this prospectus, may be deemed "underwriters" as that
term is defined under the securities act or the exchange act, or the rules and
regulations under those acts. In that event, any commissions received by the
broker-dealers or agents and any profit on the resale of the shares of common
stock purchased by them may be deemed to be underwriting commissions or
discounts under the securities act.
The selling stockholders, alternatively, may sell all or any part of the
shares offered by this prospectus through an underwriter. To our knowledge, none
of the selling stockholders have entered into any agreement with a prospective
underwriter and there can be no assurance that any such agreement will be
entered into. If the selling stockholders enter into such an agreement or
agreements, then we will set forth, in a post-effective amendment to this
prospectus, the following information:
the number of shares being offered;
the terms of the offering, including the name of any selling stockholder,
underwriter, broker, dealer or agent;
o the purchase price paid by any underwriter;
o any discount, commission and other underwriter compensation;
o any discount, commission or concession allowed or reallowed or paid to
any dealer;
23
o the proposed selling price to the public; and
o other facts material to the transaction.
We will also file such agreement or agreements. In addition, if we are
notified by the selling stockholders that a donee, pledgee, transferee or other
successor-in-interest intends to sell more than 500 shares, a supplement to this
prospectus will be filed.
The selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
exchange act and the rules and regulations under the exchange act, including,
without limitation, Regulation M. These provisions may restrict certain
activities of, and limit the timing of purchases and sales of any of the shares
by, the selling stockholders or any other such person. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to the same securities for a specified period of time prior to the
commencement of the distribution, subject to specified exceptions or exemptions.
All of these limitations may affect the marketability of the shares.
We have agreed to pay all costs and expenses incurred in connection with
the registration of the shares offered by this prospectus, except that the
selling stockholder will be responsible for all selling commissions, transfer
taxes and related charges in connection with the offer and sale of the shares
and the fees of the selling stockholder's counsel.
We have agreed with the selling stockholders to keep the registration
statement of which this prospectus forms a part continuously effective until the
earlier of the date that the shares covered by this prospectus may be sold
pursuant to Rule 144(k) of the securities act and the date that all of the
shares registered for sale under this prospectus have been sold.
We have agreed to indemnify the selling stockholders, or their respective
transferees or assignees, against certain liabilities, including liabilities
under the securities act, or to contribute to payments that the selling
stockholders or their respective pledgees, donees, transferees or other
successors in interest, may be required to make in respect of those liabilities.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
MANAGEMENT
Our executive officers, directors and other significant employees and their
ages and positions are as follows:
24
Name of Individual Age Position with Auto Data Network and Subsidiaries
- ------------------ --- ------------------------------------------------
Christopher R. Glover 58 Chairman and Chief Executive Officer
Lee J. Cole 42 Chief Financial Officer
Lt. General J. W. Morris (ret) 79 Director
Linden Boyne 60 Secretary
All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. There are no
agreements with respect to the election of directors or regarding their position
with the Company.
CHRISTOPHER R. GLOVER, the founder of the Company, has served as the
Company's Chief Executive Officer and as the Chairman of the Board of Directors
since 2001. Mr. Glover has also served as the Chief Executive Officer and
Chairman of the Board of Directors of ADN (UK) since 2001. Mr. Glover has 27
years experience in the automotive industry. Prior to joining the Company, Mr.
Glover served as the Managing Director of Coasis Promotions Ltd., a UK marketing
company, which he founded in 1995, the largest client of which was the Ford
Motor Company. Concurrently therewith he founded and was the Managing Director
for Redleaf Vehicle Leasing Ltd., a UK vehicle leasing company. From 1991 to
1995, he served as Sales Director for COS Ltd., a UK marketing and production
services company supplying mainly to publishing, training and motor industries.
From 1989 to 1991, Mr. Glover was the Managing Director and part owner for
County Contract Hire Ltd., a UK vehicle leasing company operating in Britain and
in France. From 1985 to 1989, Mr. Glover served as the Director and the General
Manager for Equity & General Finance (Rentals) Ltd., a UK company specializing
in truck and car rental and leasing ("EGF"). Prior to joining EGF, in 1985, he
served as the Finance and Leasing Manager for Hughes of Beaconsfield, a UK
Mercedes outlet company. From 1984 to 1985, Mr. Glover acted as the Deputy Chief
Executive of Sales and Marketing for Securiplan, a UK static guarding, mobile
control and courier service. From 1979 to 1984, Mr. Glover worked for Highway
Vehicle Leasing Ltd. in the UK, and from 1977 to 1979, he co-founded and was
responsible for all sales and marketing for The Car Leasing Company. Mr. Glover
has a B.Sc., with honours, in Sociology and Management Psychology from Warwick
University.
LEE COLE has been a director of the Company since 2001. Mr. Cole has been a
director of DBP Holdings Ltd. ("DBP"), our largest shareholder, since 1999. DBP
currently has investments in fourteen European software and related service
companies. From 1995 to 1999, Mr. Cole served as the Managing Director of TEC
Capital Group, a venture capital firm.
LT. GENERAL J. W. MORRIS (RET.), Chairman, retired from the military in
1980 after serving as Chief of the US Army Corp. of Engineers (USACE) for nearly
five years. He has had a long distinguished career in the US army which began
with his West Point academic career at the outset of World War II. He has also
worked directly with three US Presidents, Nixon, Ford and Carter. He is a Fellow
of the Society of Military Engineers, and a Governor of West Point Military
Academy. He is a director of numerous corporations, American and European. He
25
has excellent contacts in Washington, DC and throughout the United States from
his distinguished career in the Military and as a member of the National Academy
of Engineering. He also was chair at the University of Maryland graduate course
in Engineering Management.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of common stock, as of September 1, 2003 by (i) each person whom we
know to beneficially own 5% or more of the common stock, (ii) each of our
directors, (iii) each person listed on the Summary Compensation Table set forth
under "Executive Compensation" and (iv) all of our directors and executive
officers. The number of shares of common stock beneficially owned by each
stockholder is determined in accordance with the rules of the Commission and
does not necessarily indicate beneficial ownership for any other purpose. Under
these rules, beneficial ownership includes those shares of common stock over
which the stockholder exercises sole or shared voting or investment power. The
percentage ownership of the common stock, however, is based on the assumption,
expressly required by the rules of the Commission, that only the person or
entity whose ownership is being reported has converted or exercised common stock
equivalents into shares of common stock; that is, shares underlying common stock
equivalents are not included in calculations in the table below for any other
purpose, including for the purpose of calculating the number of shares
outstanding generally.
Percentage of Percentage of
Number of Class Owned Class Owned
Name Shares Owned Before Offering After Offering (1)
- ---- ------------ --------------- ------------------
Christopher Glover (2) 1,517,973 10.54% 5.6%
Lee Cole (3) Nil Nil Nil
Lt. Gen. J. W. Morris (4) 2,000 * *
Linden Boyne (5) Nil Nil Nil
All officers and directors
as a group (3 persons) 1,519,973 10.54% 5.6%
- ---------------
(1) Assumes that all 12,837,600 of the shares offered by the selling
stockholders are sold.
(2) Brooklands, St. Marks Road, Tunbridge Wells, Kent, TN2 5LU, UK
(3) 32 Haymarket, Piccadilly, London, SW1Y 4TP, UK
(4) Fairfax Drive, Suite Number 5, Arlington, Virginia, USA
(5) Aberfoyle, 33 Green Lane, Blackwater, Camberley, Surrey, UK
DESCRIPTION OF SECURITIES
DESCRIPTION OF COMMON STOCK
26
Number of Authorized and Outstanding Shares. Our Certificate of
Incorporation authorizes the issuance of 50,000,000 shares of common stock,
$.001 par value per share, of which 14,389,760 shares were outstanding on
October 30, 2003. All of the outstanding shares of common stock are fully paid
and non-assessable.
Voting Rights. Holders of shares of common stock are entitled to one vote
for each share on all matters to be voted on by the stockholders. Holders of
common stock have no cumulative voting rights. Accordingly, the holders of in
excess of 50% of the aggregate number of shares of common stock outstanding will
be able to elect all of our directors and to approve or disapprove any other
matter submitted to a vote of all stockholders.
Other. Holders of common stock have no preemptive rights to purchase our
common stock. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock.
Transfer Agent. Shares of common stock are registered at the transfer agent
and are transferable at such office by the registered holder (or duly authorized
attorney) upon surrender of the common stock certificate, properly endorsed. No
transfer shall be registered unless we are satisfied that such transfer will not
result in a violation of any applicable federal or state securities laws. The
transfer agent for our common stock is Liberty Transfer Company, 274B New York
Avenue, Huntington, New York 11743.
DESCRIPTION OF PREFERRED STOCK
Number of Authorized Shares. Our certificate of incorporation authorizes
the issuance of up to 25,000,000 shares of preferred stock, par value $.00l per
share, in one or more series with such limitations and restrictions as may be
determined in the sole discretion of our board of directors, with no further
authorization by stockholders required for the creation and issuance thereof.
Shares of preferred stock will be registered on our books. We currently
anticipate that the preferred stock will not be registered with the SEC pursuant
to the Exchange Act. No transfer shall be registered unless we are satisfied
that such transfer will not result in a violation of any applicable federal or
state securities laws.
We have designated 500,000 shares of our preferred stock as Series A-1
Convertible Promissory Note preferred stock ("Series A-1") , of which 500,000
shares were issued and outstanding as of October 30, 2003. We have designated
5,000,000 shares of our preferred stock as Series A-2 Preferred Stock ("Series
A-2") , of which 4,828,000 shares were issued and outstanding as of October 30,
2003. The holders of either the Series A-1 or Series A-2 shares vote as a single
class with the common stock, on an as-converted basis, on all matters on which
the holders of the common stock are entitled to vote. Each of the outstanding
shares of Series A-1 and Series A-2 preferred stock may currently be converted
into two (2) shares of common stock. The shares of Series A convertible
preferred stock shall be automatically convertible into shares of common stock
under certain circumstances and may be convertible into common stock at the our
option or the shareholder's option under other circumstances. Holders of Series
A-1 and Series A-1 preferred stock have a liquidation preference over holders of
27
common stock and may receive annual dividends which may be paid in cash or
additional shares of common stock in our sole discretion.
WARRANTS
As of October 30, 2003, there were outstanding warrants to purchase an
aggregate of 1,331,000 shares of our common stock, exercisable at $1.25 per
share.
STOCK OPTIONS
None.
TRANSFER AGENT
Our transfer agent is Liberty Transfer Company, Inc., 274B New York Avenue,
Huntington, New York 11743.
EXPERTS
Our auditors are F. E. Hanson, Ltd., certified public accountants. Our
consolidated financial statements as at and for the year ended February 28, 2003
have been included in this prospectus and in the registration statement in
reliance upon the report of F. E. Hanson Ltd., and upon the authority of F. E.
Hanson C.P.A, as experts in accounting and auditing. Our financial statements
for the half year period ended August 31, 2003 have also been included in this
prospectus and in the registration statement. These have been reviewed by our
auditors F. E. Hanson Ltd.
L. Stephen Albright, attorney at law, has passed upon the validity of the
securities being offered hereby.
Neither F.E. Hanson, Ltd. nor Mr. Albright were hired on a contingent
basis, nor will either receive a direct or indirect interest in the business of
issuer. Further, neither was or will be a promoter, underwriter, voting trustee,
director, officer, or employee of the issuer.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The indemnification of our officers and directors is governed by Section
145 of the General Corporation Law of the State of Delaware (the "DGCL") as well
as our Certificate of Incorporation, as amended, and By-Laws. Subsection (a) of
DGCL Section 145 empowers a corporation to 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 (other than an action by or in the right of the corporation) by
reason of the fact that the person 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,
28
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in the manner the person 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 the
person's conduct was unlawful.
Subsection (b) of DGCL Section 145 empowers a corporation to 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 the
person 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 attorneys' fees) actually and
reasonably incurred by the person in a connection with the defense or settlement
of such action or suit if the person acted in good faith and in the manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
DGCL Section 145 further provides that to the extent that to a present or
former director or officer is successful, on the merits or otherwise, in the
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of Section 145, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith. In all cases in
which indemnification is permitted under subsection (a) and (b) of Section 145
(unless ordered by a court), it shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because the applicable standard of conduct has been met by the
party to be indemnified. Such determination must be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are no parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the stockholders.
The statute authorizes the corporation to pay expenses incurred by an officer or
director in advance of the final disposition of a proceeding upon receipt of an
undertaking by or on behalf of the person to whom the advance will be made, to
repay the advances if it shall ultimately be determined that he was not entitled
to indemnification. DGCL Section 145 also provides that indemnification and
advancement of expenses permitted thereunder are not to be exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any By-law, agreement, vote of stockholders or
29
disinterested directors, or otherwise. DGCL Section 145 also authorizes the
corporation to purchase and maintain liability insurance on behalf of its
directors, officers, employees and agents regardless of whether the corporation
would have the statutory power to indemnify such persons against the liabilities
insures.
Article Seventh of our Certificate of Incorporation, as amended (the
"Certificate"), provides that none of our directors shall be personally liable
to the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL (involving certain unlawful
dividends or stock purchases or redemptions), or (iv) for any transaction from
which the director derived an improper personal benefit.
Pursuant to Section 145(g) of the DGCL, our By-Laws, as amended, authorize
the us to obtain insurance to protect officers and directors from certain
liabilities, including liabilities against which the Company cannot indemnify
its officers and directors.
In derivative actions, the Company may only protect its officers,
directors, employees and agents from liability against expenses actually and
reasonably incurred in connection with the defense or settlement of a suit, and
only if they acted in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of the Company. Indemnification is not
permitted in the event that the director, officer, employee or agent is actually
adjudged liable to the Company unless, and only to the extent that, the court in
which the action was brought so determines.
Our Certificate of Incorporation permits it to protect from liability its
directors except in the event of: (1) any breach of the director's duty of
loyalty to the Company or its stockholders; (2) any act or failure to act that
is not in good faith or involves intentional misconduct or a knowing violation
of the law; (3) liability arising under Section 174 of the Delaware General
Corporation Law, relating to unlawful stock purchases, redemptions, or payment
of dividends; or (4) any transaction in which the director received an improper
personal benefit.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of Wien
Group pursuant to the foregoing provisions, or otherwise, we have been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable.
DESCRIPTION OF BUSINESS
We are an emerging software company. Our primary business focus is the
acquisition, development and sale of software to the automotive industry. We
have a broad range of products and technologies under development.
30
PRODUCTS
We are a leading producer of integrated solutions that provide Information
Management Services and Software Solutions to the automotive sector helping to
grow business, manage change and improve profitability. We market a specialized
suite of feature-rich, proprietary software support solutions and information
services for the automotive industry.
Our solutions, products and services are designed for industry participants
interested in relevant, real-time data related to the purchase and sale of motor
vehicles and automotive parts and services in specific markets. We enable car
companies and automotive retailers to work together to build value for their
customers and create efficiencies in the supply chain. Our focus is clear, it is
to provide automobile companies and retailers with the software tools,
information and services they need to develop and improve their business.
We divide our products and services into two areas. The first is
aftermarket Support Software and the second is Information Management services.
All of our products and services revolve around three unique selling points.
These are:
1. Our ability to link the often incompatible systems and data structures
of the various participants in the industry into one unified information
platform;
2. Our ability to assemble and provide relevant, actionable data in
real-time to our subscribers, and;
3. Our breadth of services and product offering designed to facilitate and
increase efficiencies using the data we provide to facilitate sales of new and
used vehicles, parts and accessories, and essential services such as finance,
insurance and vehicle servicing.
Our corporate executive team with over 150 years of combined operating
experience, delivering on strategy and strong relationships with participants in
the automotive sector in the UK, Europe and North America.
Our strategy is designed to reinforce and increase our market share by
leveraging upon strong existing relationships in different automotive
distribution channels, a broad range of solutions, information and service
offerings and the use of our information exchange network as the most efficient
means of transacting with the maximum number of suppliers and customers. We earn
a substantial amount of our revenues from license fees and through service
support for our products and services paid by dealers, manufacturers and parts
suppliers, in addition we earn some fee income on a per-transaction usage basis.
This strategy is supported by the objectives of the management;
o To accomplish and capitalize on industry integration; and
31
o To deliver and expand our offering of information and solutions to our
subscribers.
We intend to also develop, and where appropriate acquire, communication and
information networks that connect and integrate the three primary sales
information channels in the automotive sectors, manufacturer, retailer and
customer forming one information network and one transaction engine upon which
the entire automotive sector can build an internal marketplace.
The key to the successful integration of various industry infrastructures
will be the creation and maintenance of an information architecture designed to
ensure that all data that we capture is evaluated, sorted and repackaged for
resale. Since inception the company has acquired four separate businesses in
these areas and developed two internally. As the network develops, we will be
increasing our charges, for the expanded service offering, including
subscription and transaction fees when supplying industry transaction data
collected by and distributed through our own communications hub. Additionally,
this repackaged information can be leveraged to sell additional incremental
products and services. The strategy to increase charges as the services and
depth of offering increases will continue to grow revenues and the penetration
of the system as we will have greater access to data that will benefit our
subscribers and users.
OFFERING
As a software and information services company, our integrated product,
service, training and technology solutions enable automotive retailers and other
companies in their supply chain to manage their businesses profitably and serve
their customers efficiently. Through our two divisions; Aftermarket Software and
Information Management Services our innovative solutions span the range from new
e-business, web solutions, turnkey systems and software, to, consulting,
learning and networking services.
AFTERMARKET SOFTWARE
Our Aftermarket Software Division develops and markets a range of
proprietary solutions for the parts and accessories segment of the automotive
industry. The applications link directly to the major manufacturers of parts and
accessories in the UK to monitor inventory levels. Our award winning
applications, which provide real-time data are licensed to both distributors and
dealers and facilitate the purchase of parts from the manufacturers. The
company's products are customized according to specialization for companies
engaged in parts supply, distribution, retailing, vehicle repair and servicing,
and engine and component reconditioning. We are actively developing our suite of
programs adding new age systems to extend our offering and expand market share.
INFORMATION MANAGEMENT SERVICES
The key driver for growth in this division is the Orbit database "Platform"
which we developed over the last three years and continues to expand and invest
in. The platform aggregates information gathered from the client data base
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refines it sells it to auto retailers and other customers on a subscription
basis. The Platform is designed to act as a powerful "translator," enabling the
different proprietary software and databases of automotive industry participants
to interact efficiently in real-time. Information is consolidated into a single,
seamless data interchange through which automotive industry-related businesses
can communicate. Data is provided to and collected from over 4,500 UK automotive
dealers, as well as manufacturers and financial institutions in the United
Kingdom ("UK").
STRATEGY
Our strategy is to be the market leader in providing systems and software
products and services, to act as the hub of a data information network for the
automotive sector. Our products address and capitalize on the automotive
industry's need for a common data information exchange network. Our products and
services are integrated and leveraged upon the information within our Network to
increase efficiencies for all Network participants. We plan to increase market
share and revenue opportunities by developing and maintaining our position as
the strategic hub of this information and services network. Initially, we are
focusing on the UK market, although we recognize, and will pursue, additional
opportunities in Europe and the U.S.
The following is a description of how we aim to achieve these objectives.
Our objective is to develop, and where appropriate acquire, the technology
to create a network that connects and integrates the three primary industry
channels -- manufacturer, retailer and customer - together, forming one data
network and one transaction engine upon which the entire automotive sector can
build an internal marketplace. The key to the successful integration of various
industry infrastructures will be the creation and maintenance of an information
flow designed to ensure that all data that we capture is evaluated, sorted and
repackaged for resale.
We have spent the last three years developing our Orbit database which is a
key driver for growth as it resells information gathered from the rest of the
group to auto retailers on a subscription basis. The Platform is designed to act
as a powerful "translator," enabling the different proprietary software and
databases of automotive industry participants to interact efficiently in
real-time through the use of a comprehensive XML and UNIX infrastructure. We
consolidate this information flow into a single, seamless data interchange
through which automotive industry-related businesses and consumers can
communicate. The platform currently provides and collects industry data from
over 4,500 UK automotive dealers, as well as manufacturers and financial
institutions in the United Kingdom ("UK"), including HSBC Holdings Ltd., GM
Interleasing UK, Ltd., a subsidiary of General Motors of America Corporation,
SAAB GB Ltd., Volkswagen Group UK Ltd., Honda UK Ltd., Nissan Motor (GB) Ltd.,
Ltd., Renault UK Ltd., and Lombard Auto Exchange. Additionally we have a
strategic relationship with Europe's largest Dealer Management System "DMS"
provider (who currently have over 15,000 systems installed)
As the Data Interchange grows, we will begin charging subscription and
transaction fees for supplying industry transaction data collected by and
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distributed through our own communications hub. Additionally, this repackaged
information can be leveraged to sell additional incremental products and
services. The anticipated impact of our integration of industry data on each of
the three network channels is set forth below.
Manufacturer Channel. Our Network will provide real-time, consolidated
information on trading, product demand and supply to and from manufacturers. It
will facilitate business-to-business acquisition and disposal of surplus
components and vehicle stock.
Retailer Channel. By creating a full-service communications gateway through the
Network, we will revolutionize existing dealer management systems. Dealers will
be able to access real-time records of vehicle and owner history, vehicle
reliability and running costs and competitor comparisons on price and
availability.
Consumer Channel. Access to our Network database will provide the consumer with
the opportunity to access the relevant vehicle's complete service and insurance
history, as well as allowing the consumer to verify used vehicle mileage.
Information on real-time regional market valuations and vehicle availability
will also be available to consumers either through dealerships, direct from
manufacturers, or via private sales or auctions.
MAXIMIZING TRANSACTION OPPORTUNITIES
By centralizing data and information in the Network, we will enable the
automotive industry to maximize transaction opportunities by streamlining the
processes for accessing and managing this data and information. We believe that
by centralizing and streamlining these processes we will be able to reduce the
costs of data management for both the Company and for our subscribers, and
thereby increase profitability. Additionally, with the increasing size of our
database we believe the opportunities for leveraging upon new products for
commercial advantage will grow exponentially.
GROWTH STRATEGY
Our plans for expansion include the continued development of a wide range
of profitable products and services for our existing clients and future clients
and the continued development of our database software technology. We intend to
leverage upon these developments. On the global level, we plan to capitalize on
our existing technology and products and services as well as our industry
relationships to expand overseas, first into Europe, and then into North
America. We believe the automotive industry in Europe is as fragmented as in the
UK, allowing us to employ our integration strategy to expand into Europe. Many
of our existing subscribers have European and overseas subsidiaries, giving us a
springboard into those markets. Additionally, we will utilize our management
team's industry-wide relationships with information providers to expand our
market.
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OUR OPERATING COMPANIES AND PRODUCTS
The following is a brief description of each of the separate business of
our current operating entities:
ORBIT DATA ("Orbit") Orbit has developed the Data Interchange that enables the
different proprietary software and databases of automotive industry participants
to interact efficiently in real-time through the use of a comprehensive XML
infrastructure. Orbit is a universal communications platform that gathers
industry data from a wide variety of sources, translates this information into a
common format and database, and makes it available to subscribers.
Orbit gathers industry data from businesses that use our software and Web
portals. It also has data mining agreements with other business management
software providers. We collect information from more than 4,500 dealers in the
U.K. and 3,000 in Europe, as well as major financial institutions and automobile
manufacturers. The Company has recently signed a five-year exclusive agreement
with Europe's largest provider of dealership management software, Kerridge
Technology Systems to mine data from more than 15,000 dealerships and service
providers.
The platform creates information services for participants at all points
along the supply chain. At the upstream end of the supply chain, manufacturers
can analyze demand trends and adjust supply and pricing accordingly. Downstream
operators can monitor inventory levels at the U.K.'s major parts manufacturers,
an arrangement that increases liquidity and sales. Retailers can keep track of
the competition, research used vehicle histories, and effectively expand their
inventory by using Orbit's dealer-to-dealer vehicle locator and wholesale
auction service to find and purchase requested models. These dealer services
create greater vehicle liquidity and higher profit margins. Service shops and
parts suppliers can access an exhaustive, up-to-date parts catalogue, as well as
vehicle service and repair histories. Consumers are provided with a suite of
research tools; they can browse vehicle availability and pricing, research book
values, and check service, mileage and insurance histories through a single
service. They can also research and apply for discounted financial products
provided through our partnerships with insurance and financing companies.
Orbit applications address market inefficiencies and facilitate
collaborative arrangements, because suppliers, dealers and workshops are
provided with a common medium through which to communicate and conduct business.
These services are available through Orbit at a small fraction of the price
of existing offerings. Our management anticipates using the Orbit platform for
the continued development of new sales applications, including collaborations
with providers of financing, insurance and warrantee plans, as well as auction
houses and roadside assistance companies.
The Orbit subscription service is installed at test locations in the U.K.,
and it is scheduled for commercial introduction later in 2003. The Company's
agreement with Kerridge will likely provide a ready market for the Orbit suite
of information and service offerings, and Kerridge is expected to help market
Orbit.
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Orbit Feature Existing Sources
----------------------------------------------------------------
Online classified listings Average dealer expenditure: $500/month
Online wholesale auctions Not available
Book values and service histories Blue Book/Glass's: $200/month
Mileage verifications $25/vehicle, average of 40/month: $1000
Accident histories $20/vehicle, average of 40/month: $800
Custom discount insurance and warrantees Not available
Real time industry statistics Not available
Total cost: $200/month Total cost: $2,500/month
COUNTY SERVICES AND PRODUCTS LTD. ("County") County has developed and markets
proprietary insurance products including warranties for the dealer network to
assist them in selling more services to their consumers and helping them achieve
a better return on their sales.
County has developed initially nine products both in warranty and insurance
based services which have enabled it to amass a large database containing car
buying trends and customer choices which have been built up over the last ten
years. It also has a very strong liaison with all the major insurance
underwriters assisting it to develop further products and being able to resell
the data to the underwriters.
The products that County offers allow dealers to maintain margin if not
increase and give them an advantage over their competition. By using County
software application a dealer can store and access information that will help
him to quickly calculate and recalculate deals by providing profit margin
calculations and real-time information, all of which allows the dealer greater
flexibility in negotiations. County have also developed a radio frequency
identification tab to be fitted to all vehicles, plus legal fees cover, a reward
for stolen vehicles and insurance against odometer tampering. The company has
developed bespoke software in Insurance, Warranty and Financial services
County software is charged at a monthly fee as well as taking a percentage
on all insurance and warranty sold at all the dealerships that the group is
linked, which is initially 4,500, including UK dealerships such as, Reg Vardy
plc, Dixon Motors plc, Perry Group plc, Mercedes-Benz Direct, Concept Automotive
Services Ltd., CD Bramall plc, Corby Motor Group Ltd., Bates Motor Group Ltd.
and the Robert Mowett Motor Group. County also supplies warranty packages to
other dealership groups within the UK. County has a unique warranty for MOT
tests in the UK upon 22,000 a carried out each month and they would expect to
maintain a 50% sales success into this market
ALLCARS RETAIL LIMITED and ALLCARS.com ("Allcars") This is a web hub for a
variety of retail services, including a used vehicle locator, price guide,
retail auction service, and access to discounted financing and insurance
products. The site also contains automotive news and information, a route
planner, a page to book mechanics' services, and free email reminders about
registration and insurance renewal dates. AllCars also hosts free Web sites for
dealerships and provides links to these, as well as those of manufacturers and
others. More than 2,000 U.K. dealerships list merchandise or services on the
36
site, and we have assurance from 4,000 more dealerships that they will join when
additional functionality is added. The Company receives 20% of all revenues that
AllCars's services generate for dealerships.
Our online used vehicle locating service is the core of AllCars. The
AllCars database is linked to dealerships' management software, and inventory is
automatically posted on the Web. Consumers can search for vehicles by a variety
of criteria including make, model, price and dealership.
AllCars also offers a portal to discounted financial services from two U.K.
auto financing and insurance firms. We collaborated with Redleaf Vehicle Leasing
to provide a guide to help consumers decide on appropriate vehicles and
financing plans; free estimates are generated and online loan applications can
be made. AllCars also provides information and free quotes from AXA Direct and
AXA Insurance, which market discounted insurance and warrantee plans.
Our plans to increase AllCars's revenues by collaborating with more
dealerships and adding to the site's general content and advertising base. We
have seeded search engines to increase site traffic, and is pursuing strategic
relationships with other providers of dealership management software. AllCars
also expects to be available soon on Europe Digital, an interactive television
service, and the Company may launch new sites called Allbikes, Allvans and
Allrentals
E-COM MULTI LTD. This is a dealer information service for the location of
vehicles that all subscribing dealers have for sale. The subscribing dealers
utilize this proprietary network to locate and purchase vehicles for the
consumer making the request in their dealership. The information services
dramatically increases the vehicles a dealer can offer at no cost and maximize
the sales opportunities for trade in vehicles at the best market prices through
the orbit platform connecting the dealership back end system to an online and
real time biding process. At any one time we expect to have 70,000 vehicles on
the database. The Company hosts wholesale automobile auctions for dealerships as
well as insurance companies seeking replacement vehicles for those written-off
in accidents. The service is not available to the public, but is only for
high-volume industry players for whom auctions are a regular and time-consuming
part of business. Orbit auctions are conducted through a dealer-to-dealer
intranet, and they operate continuously. There are no subscriptions or listing
fees, which encourages dealers to list more vehicles and browse freely. Listings
provide detailed descriptions, and the bidding process is simple. Invoices are
sent automatically at the end of each auction, and payment and shipping
solutions are arranged. The Orbit auction service allows dealers to offer a
great selection of used and new vehicles, and it significantly reduces the work
involved in an auction. It also boosts liquidity and turnover, which are
becoming increasingly important as heightened competition places added pressure
on margins in the auto retail business.
MAM Software LTD ("MAM") We recently acquired MAM Software, the U.K.'s largest
provider of software for the highly profitable automotive parts and accessories
industry. MAM's award winning software applications serve all sectors of the
parts supply chain, including manufacturers, distributors, retailers and service
facilities. The Company installs customized software solutions and associated
hardware, and offers consultation, training and technical support for its
37
customers. MAM is currently the leading supplier of software to U.K. body shops,
and it has been consistently named as the nation's "Best Aftermarket Software
Company" by the Institute of Transport Management. MAM markets four primary
software products for the auto parts industry, as described below.
AUTOPART is a fully customizable and scalable business management system
for the aftermarket auto parts industry. Autopart provides very detailed
applications for all major aspects of factory, distribution, and retail business
operations. Applications include inventory management, purchase and sales order
processing and accounting programs. The software is integrated with MAM's
Autocat database, which tracks 5 million auto parts in the U.K. Autopart is
fully e-business enabled with XML technology, and includes features such as
instant faxing of any screen, internal messaging, and the ability to conduct
transactions over the Internet. The system utilizes a flexible and secure
Windows environment and runs on Intel processors; it is compatible with a range
of memory, speed and hardware specifications.
AUTOWORK is MAM's comprehensive software package for workshops and repair
facilities. Like Autopart, it provides detailed management applications for
every major aspect of business operations. Features include the generation of
quotations and invoices with profit margins, the maintenance of service records
by vehicle and customer, detailed stock controls, customized report generation,
and a database of average retail prices and installation times. Another database
tracks employee work records; a supplier database records contact information
and connects to the parts database for ease of ordering; a separate tire
database details pricing and stock information. Autowork is also linked to
Autocat, and customers can elect access to other industry databases. In the
U.K., most repair facilities are located at dealerships, so Autowork includes a
cars sales module that allows clients to keep track of new or used vehicle
sales. Autowork comes with a powerful set of statistical and graphics tools to
help businesses analyze their operations and become more efficient. Customized
reports and color charts show such data as sales and profit margins for each
business segment, and the efficiency and productivity of individual mechanics.
AUTOCAT is MAM's comprehensive auto parts catalogue, which is updated and
distributed in CD-ROM format on a quarterly basis. The catalogue displays
millions of car and light commercial truck parts available from hundreds of
aftermarket suppliers of all sizes. Simple steps make it easy to locate parts,
and entries are accompanied by photographs or drawings and average street prices
and installation times. Autocat generates estimates and purchase orders that can
be printed or sent over the Internet.
AUTONET provides a full range of Internet services for the auto industry.
Customers can choose from simple web access and e-mail packages or full service
website creation and hosting. The most basic package is dial-up ISP, provided
through British Telephone's popular BTclick service. Customers are billed for
time spent online; there are no installation charges or commitments. This
package includes two email addresses and the ability to send and receive
purchase orders from MAM software applications. For larger businesses, Autonet
has a dedicated mail server that provides registered domain names and networked
email systems that employees can access from any location. Local mail servers
can also be installed.
38
MAM employs a Web design team that works with business owners to create
customized Web sites. The MAM team can handle all management and updating,
although instruction is provided for customers who want to manage their own
sites. All Web sites can be customized, but MAM also offers a suite of packaged
designs.
MAM recently announced the release of its next generation of software,
dubbed `Version 21.' The software uses new open standards, which are compatible
with a wider range of system platforms, such as the Microsoft .NET initiative.
Version 21 is compatible with more than 20 operating languages, allowing greater
accessibility and networking capability, such as cross-platform distributed
computing and the integration of mobile devices. Scale-up capabilities and speed
have also been increased, and the advance effectively widens the market for MAM
Software.
CARPARTS TECHNOLOGIES, INC. ("CarParts") CarParts is a is a leading provider of
software systems to the automotive aftermarket supply chain. Over 3,000
customers, including leading automotive aftermarket outlets, tier 1
manufacturers, program groups, warehouse distributors, tire and service chains
and independent installers across all 50 U.S. states and Canada, rely on
CarParts software.
Under the terms of an agreement completed August 13, 2003, we made a loan
of $2 million to fund the continued growth of the company. We will acquire
CarParts on a pre-determined formula at the end of 2005.
CarParts has developed the world's first application suite that puts the
Internet inside its VAST point-of-sale (POS) and back office (DirectStep)
automotive aftermarket systems. CarParts has created an industry-specific
private trading network, OpenWebs(TM) Intelligent Trading Network, with
in-built, secure trading and accounting functionality that lets members buy
from, and sell to, any other partner on the network - distributors,
manufacturers, even other dealers. Since everyone is connected under trading
rules, members can confirm sales to their own customers based on accurate
information and reduce their inventory. CarParts' OpenWebs(TM) Intelligent
Trading Network integrates with existing industry systems from a standard
Microsoft based platform resulting in lower customer installation costs and
minimal user training requirements.
Using OpenWebs(TM), CarParts has also deployed a leading tire-industry ERP
application, Tradera, with advanced tire functionality, tire adjustment warranty
tracking, volume bonus accruals and integration with retread software.
Computer-to-computer connectivity with leading tire manufacturers provides
accurate real-time product information to assist dealerships and repair centers
in managing and extending their relationship with customers.
Combined with the acquisition of MAM Software, we have created the footprint
from which we intend to expand our aftermarket offering in the US & Europe.
There is a complementary suite of products that both companies sell which means
that current product lines will not be replaced in their respective markets.
CarParts' software development has pursued a similar strategy to MAM Software
39
and the adherence to open standards, such as Microsoft's .NET (NASDAQ: MSFT),
will simplify the integration of our service offerings to the benefit of our
customers in our respective markets. Collaboration between both companies
development teams will lead to a complete and integrated suite of product
offerings to the automotive aftermarket.
Both CarParts and MAM Software bring highly experienced management teams
and a powerful, unduplicated roster of customers in their respective North
American and European markets. The combined product lines of the two companies
addresses market needs for new automotive aftermarket services that are expected
to be broadly adopted in coming years. We anticipate that the combined resources
and competencies achieved by the cooperation between MAM and CarParts will
enable us to capture larger market share, and better enable our target customers
to derive profits and growth from the $237 billion US aftermarket which serves
200m US car and Fleet owners.
AVENIDA LIMITED ("Avenida") Avenida, based in Coventry, UK, develops software to
address the most pressing challenges of the automotive industry, such as the
coordination of activities between manufacturers and dealers, information
exchange between suppliers and manufacturer, reducing costs to stay competitive
and increasing customer retention. Avenida software accelerates the flow of
information throughout an organization by removing the barriers between
applications, data stores and network platforms, so increasing its efficiency.
Furthermore, Avenida takes these benefits outside the enterprise by pushing its
technology boundaries to include selected trading partners and customers.
Avenida reduces data-management costs while ensuring data is accurate and
up-to-date, regardless of its location.
Avenida's software connects existing, legacy systems to those of trading
partners using the latest XML standards and `rules based' processing. Using
Avenida, businesses benefit from the centralization and sharing of the critical
business services, processes, messages, and vocabularies that make up the
transactions exchanged between trading partners. Avenida offers an
Internet-based solution to reflect the increasingly distributed nature of the
automotive industry. Streamlined business information is able to flow between
dealerships, manufacturers, aftermarket service providers and other distribution
'value chain' companies. Messaging to exchange customer records, orders,
shipment information and other business information, within automotive product
configuration and sales systems, is already in use with a number of clients
including Land Rover, MG Rover, Ford (NYSE: F), BMW (Frankfurt: BMWG.F), Rolls
Royce, Lloyds TSB (NYSE: LYG), and TNT.
Our recently announced release of `Version 21' software by its subsidiary,
MAM Software Inc., will benefit from the rules-based translation technology
developed by Avenida. The combination of these two technologies, which utilize
new open standards, such as Microsoft's .NET initiative and XML, will provide
integration services that universally connect automotive applications, data
stores and network platforms - even across technical and organizational
boundaries - and enable those resources to work together within one framework.
This provides a foundation from which automotive companies, and their trading
partners, are able to leverage existing information assets from a portfolio of
Internet-based applications.
40
PATENTS AND PROPRIETARY RIGHTS
Our success will depend, in part, upon our ability to obtain and enforce
protection for our products under United States and foreign patent laws and
other intellectual property laws, preserve the confidentiality of our trade
secrets and operate without infringing the proprietary rights of third parties.
Our policy is to file patent applications in the United States and/or foreign
jurisdictions to protect technology, inventions and improvements to our
inventions that are considered important to the development of our business. We
will also rely upon trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop a competitive position. We
evaluate the desirability of seeking patent or other forms of protection for our
products in foreign markets based on the expected costs and relative benefits of
attaining this protection. There can be no assurance that any patents will be
issued from any applications or that any issued patents will afford adequate
protection to us. Further, there can be no assurance that any issued patents
will not be challenged, invalidated, infringed or circumvented or that any
rights granted thereunder will provide competitive advantages to us. Parties not
affiliated with us have obtained or may obtain United States or foreign patents
or possess or may possess proprietary rights relating to our products. There can
be no assurance that patents now in existence or hereafter issued to others will
not adversely affect the development or commercialization of our products or
that our planned activities will not infringe patents owned by others.
We could incur substantial costs in defending ourselves in infringement
suits brought against us or any of our licensors or in asserting any
infringement claims that we may have against others. We could also incur
substantial costs in connection with any suits relating to matters for which we
have agreed to indemnify our licensors or distributors. An adverse outcome in
any litigation could have a material adverse effect on our business and
prospects. In addition, we could be required to obtain licenses under patents or
other proprietary rights of third parties. No assurance can be given that any of
these licenses would be made available on terms acceptable to us, or at all. If
we are required to, and do not obtain any required licenses, we could be
prevented from, or encounter delays in, developing, manufacturing or marketing
one or more of our products.
We also rely upon trade secret protection for our confidential and
proprietary information. There can be no assurance that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets or disclose this
technology or that we can meaningfully protect our trade secrets.
It is our policy to require our employees, consultants, members of the
Board and parties to collaborative agreements to execute confidentiality
agreements upon the commencement of employment or consulting relationships or a
collaboration with us. These agreements provide that all confidential
information developed or made known during the course of the relationship with
us is to be kept confidential and not disclosed to third parties except in
specific circumstances. In the case of employees, the agreements provide that
all inventions resulting from work performed for us, utilizing our property or
relating to our business and conceived or completed by the individual during
41
employment shall be our exclusive property to the extent permitted by applicable
law.
SALES AND MARKETING
The sales, distribution, servicing and after-market for motor vehicles is
huge-representing 1.7 trillion dollars of economic activity in North America
alone. A marketplace that is ready for change. Technologies such as the
Internet, broadband data transmission, wireless and handheld digital devices are
creating entirely new ways to share information and conduct business in the
automotive retailing marketplace. Consumers are armed with more information than
ever before. They clearly expect an improved experience at the point of sale,
whether they enter the physical bricks and mortar of an automotive retailer or
make their purchase through the click of a mouse.
Car companies need to lower the cost of distribution. They wish to create
build-to-order manufacturing strategies that quickly deliver the vehicles that
consumers require. They want to free up capital and inventory and improve
customer service.
Automotive retailers want to know more about the consumer and to do a
better job of marketing. They want access to actionable data about their
customers to help them establish long-term relationships through sophisticated
CRM programs. They need to better integrate their physical and online retailing
strategies to create a strong brand. They want to improve the vehicle-shopping,
purchase and service experience while improving efficiency and profitability.
Allied products and services providers-like financial institutions,
insurance companies, collision repair facilities and departments of motor
vehicles-want to lower costs, streamline processes and provide more value for
the consumer by better sharing of data and integrating services.
The transformation of the automotive industry is underway. We intend to
capitalize on this transformation with our in depth industry expertise, an
intense focus on our customers, market-leading solutions and award-winning
software.
In the UK alone the automotive industry is a substantial revenue-generating
sector of the economy, with thousands of participating companies. More than 2.2
million new vehicles were registered in 2002 in the UK market, with a sales
value of over $75 billion, as reported by The Society of Motor Manufacturers and
Traders Ltd. ("SMMT"). In addition, there were approximately 6.7 million used
vehicle sales in 2000, worth over $65 billion annually, according to SMMT.
Additional incremental sales of insurance, spare parts and other auto related
products created a total UK market in excess of $160 billion in 2000, according
to SMMT. Of the new vehicle sales each year, SMMT estimates that over 50% are
sold to the fleet, leasing and rental markets. Over 30 different manufacturers
compete in this market, through approximately 7,500 franchised retailers (31,000
outlets in total).
42
The retail automotive industry as a whole, though a multi-billion dollar
industry, is characterized by disconnected, individual businesses, inhibiting
the collection and utilization of critical transaction-related information in
the industry. There has been significant consolidation among manufacturers, but
the dealer networks, that serve as the primary means for distribution of
products, tend to be entrepreneurial and highly fragmented.
The absence of efficient information exchange makes the industry unwieldy,
unresponsive to market changes and operationally inefficient. Many of the
business units can be compared to islands of information: disconnected from
their immediate partners, within what we view as the three primary industry
channels - manufacturers, retailers and consumers. Linkage between different
channels is limited due to antiquated systems with no common technology
platforms or information pathways. These barriers to information supply and
analysis increase inefficiencies throughout the industry. Without a system that
facilitates compatibility these inefficiencies will only be exacerbated as the
industry's reliance on technology grows.
We believe that the industry suffers from similar problems in Europe and in
the U.S. The impact of global competitive pressures are forcing the automotive
industry to reduce margins and look for areas where efficiencies can be improved
and new revenue streams located and utilized. A need exists to build a universal
network through which the automotive industry can communicate and conduct
business.
Our success will depend, in part, upon our ability to obtain and enforce
protection for our products under United States and foreign patent laws and
other intellectual property laws, preserve the confidentiality of our trade
secrets and operate without infringing the proprietary rights of third parties.
Our policy is to file patent applications in the United States and/or foreign
jurisdictions to protect technology, inventions and improvements to our
inventions that are considered important to the development of our business. We
will also rely upon trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop a competitive position.
We also rely upon trade secret protection for our confidential and
proprietary information. There can be no assurance that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets or disclose this
technology or that we can meaningfully protect our trade secrets.
It is our policy to require our employees, consultants, members of the
Scientific Advisory Board and parties to collaborative agreements to execute
confidentiality agreements upon the commencement of employment or consulting
relationships or a collaboration with us. These agreements provide that all
confidential information developed or made known during the course of the
relationship with us is to be kept confidential and not disclosed to third
parties except in specific circumstances. In the case of employees, the
agreements provide that all inventions resulting from work performed for us,
utilizing our property or relating to our business and conceived or completed by
the individual during employment shall be our exclusive property to the extent
permitted by applicable law.
43
INDUSTRY OVERVIEW
The software industry has significantly evolved since its commercial
inception in the 1970s and is currently approaching a period of sustained
growth. We believe that this growth, coupled with the maturing state of the
existing automotive software sector, will strengthen the large software
companies and result in the emergence of a new generation of software companies.
To be successful, this new breed of software company must have the ability to
harness rapidly advancing technology, provide solutions for previously unmet
needs, ensure faster development of new products and allow flexibility to
exploit changing market conditions. We seek to be at the forefront of this new
generation of companies.
COMPETITION
We have no direct competitors in the UK or in Europe who will be\offering
the same breadth of products, depth of data and services that we intend\to
offer. There are a number of our individual services and solutions that
have\specific competitors products in their respective businesses. However no
company\markets an equivalent data rich and flexible suite of integrated
services.
Orbit's direct competitors in the UK market are Cap Net, Glass's
Information Services Ltd., and Autologic Information International Inc. However,
it is possible that, in the future, we may face service or solutions competition
from other existing or potential competitors, such as The Reynolds and Reynolds
Company, currently operating only in North America.
We are confident that our ability to successfully integrate manufacturers,
retailers and customers in the industry, and provide a comprehensive information
service and software solution for the automotive industry through one unified
network will contribute to our continued success over any existing or future
competitors and ensure long term success. Additionally, we feel the depth of
industry knowledge and experience, the strong and credible reputation of our
management, as well as our proprietary technology and expertise will continue to
give our network and products a competitive edge in the market.
While the market for providing Internet products and services for the
automotive industry is relatively new, it is rapidly evolving, and it is likely
that the All Cars Web site will could face competition in the future. However we
believe that our established products and data will protect us from any
immediate threat and give us a competitive advantage from which to develop our
product and company strategy. However our existing and potential competitors may
develop offerings that are perceived as better than our services or otherwise
achieve greater market acceptance. Currently, AllCars consumer site competes
with Autobytel Inc. and Autotrade, both of which are Internet-based companies.
The value and unique position of our trade, consumer and data products create a
number of elements and markets for us and therefore provide numerous revenues
and markets to develop or focus on. This multi market strategy provide numerous
advantages to us.
44
EMPLOYEES
The Company and its subsidiaries have a total of 128 employees as at
February 28th 2003. We engage independent contractors for information technology
programming activities and software support and training. We consider our
relations with our employees to be good. We have never had a work stoppage, and
no employees are represented under collective bargaining agreements.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our results of
operations and financial condition. The discussion should be read together with
our audited financial statements and notes included elsewhere in this
prospectus.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Reporting Release No. 60, which was recently released by the SEC,
requires all companies to include a discussion of critical accounting policies
or methods used in the preparation of the consolidated financial statements. In
addition, Financial Reporting Release No. 61 was recently released by the SEC,
which requires all companies to include a discussion to address, among other
things, liquidity, off-balance sheet arrangements, contractual obligations and
commercial commitments. The following discussion is intended to supplement the
summary of significant accounting policies as described in Note 1 of the Notes
To Consolidated Financial Statements for the year ended February 28, 2003
included in our annual report on Form 10-K.
These policies were selected because they represent the more significant
accounting policies and methods that are broadly applied in the preparation of
the consolidated financial statements.
Revenue-recognition
Non-refundable up-front payments received in connection with software
licences and support services are deferred and recognized on a usage basis over
the relevant periods of the service agreement typically 3 or 5 years. All other
services supplied are invoiced in arrears and are immediately collectible.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles of the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates, and such differences may be material to the financial statements.
45
OVERVIEW
We are a group of established companies which provide software products and
services to the automotive industry. The company's main customers are auto
dealerships in a marketplace of approximately 78,000 dealers in North America
and 92,000 dealers in Europe. We supply a suite of software services and
solutions that enable the dealerships to run their businesses more efficiently
and achieve considerable cost savings. The majority of the company's current
solutions are focused on serving the aftermarket and finance areas of
dealerships.
COMPANY STATUS
We have made solid progress in developing our business over the past twelve
months. With the exception of our most recent fiscal year we have incurred
losses during our development stage. Our management believes that we have the
opportunity to become a leading automotive technology company, provided we
successfully bring our lead products to market. We intend to commence marketing
a combined suite of products. A key element of our business strategy is to
continue to acquire, obtain licenses for, and develop new technologies and
products that we believe offer unique market opportunities and/or complement our
existing product lines.
We are considered a development-stage company for accounting purposes
because we have not generated any material revenues to date. Accordingly, we
have no relevant operating history upon which an evaluation of our performance
and future prospects can be made. We are prone to all of the risks to the
establishment of any new business venture. You should consider the likelihood of
our future success to be highly speculative in light of our limited operating
history, as well as the limited resources, problems, expenses, risks and
complications frequently encountered by similarly situated companies. To address
these risks, we must, among other things:
o satisfy our future capital requirements for the implementation of our
business plan;
o commercialize our existing products;
o complete development of products presently in our pipeline and obtain
necessary regulatory approvals for use;
o implement and successfully execute our business and marketing strategy
to commercialize products;
o establish and maintain our client base;
o continue to develop new products and upgrade our existing products;
o respond to industry and competitive developments; and
46
o attract, retain, and motivate qualified personnel.
We may not be successful in addressing these risks. If we were unable to do
so, our business prospects, financial condition and results of operations would
be materially adversely affected. The likelihood of our success must be
considered in light of the development cycles of new pharmaceutical products and
technologies and the competitive and regulatory environment in which we operate.
RESULTS OF OPERATIONS
For the fiscal year end February 28, 2003
In the completed fiscal year we reported an increase in revenues to
$1,773,000, up from $40,412 in the previous year, reflecting the initial impact
of our acquisition program. Full contributions from these acquisitions and the
subsequent acquisition of MAM Software will produce a substantial increase in
revenue for the current year.
The Company made a net profit of $514,648 in the financial year which
reduced the net loss from operations, since the Company's inception, to
$675,941. The Company's performance in this year is reflective of its ongoing
expansion. It is anticipated that the Company will be able to meet its financial
obligations through internal net revenue in the foreseeable future.
The Company acquired Auto Data Group on October 2, 2001, and this has been
treated as a reverse takeover with Auto Data Group being regarded as the
acquirer in the financial statements. To complete the Company's change in
strategy to an automotive software and aftercare provider it was decided during
the fiscal year ending February 28, 2002, to sell its subsidiary, CMAC Limited,
and its assets. This was achieved for zero consideration and has been accounted
for as a write off of $774,402, which includes the disposal of a vehicle
prototype valued at $648,960.
Total assets have increased to $9,143,601 compared with $4,836,980 in the
previous year.
Liquidity and Capital Resources
The Company made post tax profit of $514,648 in the year ended February 28,
2003, and $354,404 in the first quarter this year and it is anticipated that the
Company will be able to meet its financial obligations through internal net
revenue in the foreseeable future. As a result, the Company has from time of
inception to August 31, 2003, a net profit from operations of $406,888.
Through October 30, 2003 we have sold an aggregate of 500,000 shares of
Series A-1 preferred stock in a series of private placements, 4,828,300 shares
of Series A-2 preferred stock and issued warrants to purchase an aggregate of
1,331,000 shares of common stock, resulting in aggregate gross proceeds of
approximately $14,983,750 once all warrants are exercised.
47
We intend to raise additional capital from public or private placements to
investors of our common stock and/or other series of preferred stock. However,
there can be no assurance that we will be able to obtain capital from a
placement of our common stock or whether the funds required by the Company will
enable us to further develop our operations. Additionally, there is no guarantee
that we will be able to raise capital on terms and conditions which are
acceptable to us. The inability to raise additional capital may forestall our
growth.
PLAN OF OPERATION
Our management does not believe that we need any of the net proceeds from
the exercise of the warrants and that without those proceeds, we will be able to
continue as currently planned operations for the next 12 months.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued Statement No. 142, Goodwill and Other
Intangible Assets, effective for fiscal years beginning after December 15, 2001.
Under the new rules, goodwill and intangible assets with indefinite lives will
no longer be amortized, but will be subject to annual impairment tests in
accordance with Statement 142. Other intangible assets will continue to be
amortized over their useful lives. The Company is still in the process of
evaluating the impact of adopting this pronouncement on its consolidated
financial statements, however, it does not believe that the adoption of this
pronouncement will have a material impact on the consolidated financial
statements.
In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement is effective for fiscal years
beginning after December 31, 2001. This supercedes SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
while retaining many of the requirements of such statement. We do not believe
that this statement will have a material effect on our financial statements.
In April 2002, the FASB, issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, 64, Amendment of FASB Statement No. 13, and Technical Corrections. In
addition to amending and rescinding other existing authoritative pronouncements
to make various technical corrections, clarify meanings, or describe their
applicability under changed conditions, SFAS No. 145 precludes companies from
recording gains and losses from the extinguishment of debt as an extraordinary
item. SFAS No. 145 is effective for our first quarter in the fiscal year ending
June 30, 2003. The Company does not expect the adoption of this pronouncement to
have a material impact on our consolidated results of operations or financial
position.
In June 2002, the FASB issued SFAS No. 146, :Accounting for Costs
Associated with Exit or Disposal Activities." The standard requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal
48
activity. SFAS No. 146 is to be applied prospectively to exit or disposal
activities initiated after December 31, 2002. The Company does not expect the
adoption of this pronouncement to have a material effect on the consolidated
results of operations or financial position.
DESCRIPTION OF PROPERTY
As of the date of this report we do not own any interest in real property.
Our corporate headquarters are located at The Forsyth Centre, Century Place, and
Lamberts Road, Tunbridge Wells, Kent TN2 3EH, United Kingdom. We also have
offices at 509 Madison Avenue New York NY 10023 and in London at 32 Haymarket,
London SW1Y 4TP. We occupy approximately 2,600 square feet on one floor at our
corporate headquarters, which is leased through The Forsyth Business Centre. We
occupy approximately 300 square feet on one floor at our New York office and
approximately 600 square feet on one floor at our London Office.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended February 28, 2003, there were no material
transactions or relationships between the Company and its management.
49
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
High Low
---- ---
Fiscal Year Ended February 29, 2004
First Quarter $2.45 $0.90
Second Quarter $2.50 $1.930
Fiscal Year Ended February 28, 2003
First Quarter $3.15 $0.80
Second Quarter $3.75 $2.30
Third Quarter $4.25 $3.50
Fourth Quarter $4.50 $4.00
Fiscal Year Ended February 28. 2002
First Quarter $4.50 $4.00
Second Quarter $4.10 $0.01
Third Quarter $65.625 $0.75
Fourth Quarter $65.625 $65.625
(X) On September 29, 2001 the Company effected a 25-for-1 reverse stock
split which reduced the number of shares of issued common stock to 534,871. On
October 16, 2001, the Company issued 9,500,000 shares in consideration for all
of the outstanding shares of Europortal Inc T/A AutoData Group ("ADG"). The
remaining 5% equity of the Company was retained by existing AMAC stockholders.
The effect of this transaction was a change of control of the Company, ceding
corporate control to the former stockholders of ADG. In acquiring ADG, the
Company became the owner of Automotive Data Network Ltd., formerly All Group
Holdings Ltd., a UK holding company.
COMMON STOCK
The Company's certificate of incorporation provides for the authorization
of 50,000,000 shares of Common Stock, par value $0.001 per share and 25,000,000
of preferred stock, par value $0.001 per share. As of August 26, 2003,
14,389,850 shares of Common Stock were issued and outstanding, all of which are
fully paid and non-assessable. As of August 26, 2003, there were 85 shareholders
of record of common stock.
Each share of our Common Stock is entitled to one vote. Our stockholders
have no pre-emptive rights.
50
PREFERRED STOCK
As stated above, our Articles of Incorporation authorize the issuance of
25,000,000 shares of preferred stock, par value $0.001 per share. As of October
30, 2003, 5,328,300 shares of preferred stock were issued and outstanding which
were held by 124 shareholders of record.
DIVIDENDS
We have never declared or paid cash dividends on our capital stock, and our
board of directors does not intend to declare or pay any dividends on the common
stock in the foreseeable future. Our earnings, if any, are expected to be
retained for use in expanding our business. The declaration and payment in the
future of any cash or stock dividends on the common stock will be at the
discretion of the board of directors and will depend upon a variety of factors,
including our ability to service our outstanding indebtedness and to pay our
dividend obligations on securities ranking senior to the common stock, our
future earnings, if any, capital requirements, financial condition and such
other factors as our board of directors may consider to be relevant from time to
time.
Owners of preferred shares have a certain rights and priorities to
dividends and liquidation proceeds.
The transfer agent for our Common Stock is Liberty Transfer Co. located at
274 New York Avenue, Suite B Huntington, New York 11743. Their telephone number
is 212 509-4000.
51
EXECUTIVE COMPENSATION
The following table sets forth information for each of the fiscal years
ended February 28, 2002 and April 30, 2001, 2000 and 1999 concerning the
compensation paid and awarded to all individuals serving as (a) our chief
executive officer, (b) each of our four other most highly compensated executive
officers (other than our chief executive officer) at the end of our fiscal year
ended April 30, 2001 whose total annual salary and bonus exceeded $100,000 for
these periods, and (c) up to two additional individuals, if any, for whom
disclosure would have been provided pursuant to (b) except that the
individual(s) were not serving as our executive officers at the end of our
fiscal year ended April 30, 2001:
SUMMARY COMPENSATION TABLE
Securities
Restricted Underlying
Name & Salary Bonus Other Annual Stock Options/SARs LTIP All Other
Principal ($) ($) Compensation Awards (#) Payouts Compensation
Position Year ($) ($) ($) ($)
- --------------- ---- -------- -------- ------------ ----------- ------------- -------- --------------
Christopher
R. Glover 1999 0 0 0 0 0 0 0
2000 0 0 0 0 0 0 0
2001 0 0 0 0 0 0 0
2002 0 0 0 39,000 0 0 0
shares
1999 0 0 0 0 0 0 0
Lee Cole 2000 0 0 0 0 0 0 0
2001 0 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
Lt. General 1999 0 0 0 0 0 0 0
J. W. Morris 2000 0 0 0 0 0 0 0
2001 0 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
1999 0 0 0 0 0 0 0
Linden Boyne 2000 0 0 0 0 0 0 0
2001 0 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DSICLOSURES
NONE
52
FINANCIAL STATEMENTS
--------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AUTO DATA NETWORK, INC. - as of August 31, 2003 and for the year ended February 28, 2003
- ----------------------------------------------------------------------------------------
Report of Independent Auditors ................................................................................... F-3
Consolidated Balance Sheet as of February 28, 2003 .................................................................F-4
Consolidated Statements of Operations for the years ended
February 28, 2003 and 2002 and the period from
August 16, 1996 (inception) to February 28, 2003 .................................................................. F-5
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
February 28, 2001, 2002 and 2003 and the period from
August 16, 1996 (inception) to February 28, 2003 .................................................................. F-6
Consolidated Statements of Cash Flows for the years ended
February 28, 2003 and 2002 ........................................................................................F-8
Notes to Consolidated Financial Statements for
the year ended February 28, 2003 ................................................................................. F-9
AUTO DATA NETWORK, INC. - as of August 31, 2003 and for the six months
ended August 31, 2003 and 2002 (Unaudited)
Consolidated Balance Sheet as of August 31, 2003 and 2002 ........................................................F-17
Consolidated Statements of Operations for the six months ended
August 31, 2003 and 2002 ........................................................................................ F-16
Consolidated Statements of Cash Flows for the six months
ended August 31, 2003 and 2002 ................................................................................. F-18
Notes to Consolidated Financial Statements
for the six months ended August 31, 2003 .........................................................................F-19
53
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors, Auto Data Network Inc.:
I have audited the accompanying balance sheet of Auto Data Network Inc., ("the
Company") as of February 28, 2003 and the related Income Statement and Cash Flow
for the period then ended. These financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on these
financial statements based on our audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides a reasonable basis for our opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Auto Data Network Inc., as of
February 28, 2003, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ F. E. Hanson, Ltd. Date June 16 2003
- --------------------------
F. E. Hanson Ltd.
Frank E, Hanson, C.P.A.
Arlington, VA.
54
AUTO DATA NETWORK, INC.
(A Development Stage company)
CONSOLIDATED BALANCE SHEET
February 28, 2003
ASSETS
Current assets:
Cash & cash equivalents 722,961
Deferred costs 1,194
Accounts receivable 867,106
--------------
Total current assets
$1,591,261
Property, plant and equipment, net 54,159
Other assets:
Intangible assets, net 7,498,181
--------------
$ 9,143,601
==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Bank overdraft $ 312,327
Accounts payable 1,807,616
Other accrued liabilities 279,683
Tax payable 488,000
--------------
Total current liabilities 2,887,626
Long term liabilities:
0
--------------
Total liabilities 2,887,626
Stockholders' deficit:
Common stock, $0.001 par value 11,552
Authorised: 50,000,000 shares
Issued and outstanding: 11,552,289
Additional paid in capital 6,858,537
Currency value changes 61,827
Deficit accumulated during development stage (675,941)
--------------
Total stockholders' deficit 6,255,975
--------------
$9,143,601
==============
The accompanying footnotes are an integral part of these financial statements.
AUTO DATA NETWORK, INC.
(A Development Stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
Year ended Year ended Period from
February 28, February 28, August 16,
2003 2002 1996
(inception)
through
February
28,2003
Revenue $ 1,772,996 $ 40,412 $ 5,135,697
------------ ------------ ------------
Cost of sales 590,193 40,760 2,288,113
Gross Profit/Loss 1,182,803 (348)
Total operating expenses 313,528 68,053 1,887,486
Disposal of Asset - 648,960 648,960
------------ ------------ ------------
Net Profit/loss pre Tax $ 101,186 $ (717,361) $ (248,333)
============ ============ ============
Basic and diluted net loss per share $0.045 ($0.065)
Weighted average shares used
in computing basic and diluted
basic and diluted net loss per share 11,552,289 11,462,078
The accompanying footnotes are an integral part of these financial statements.
AUTO DATA NETWORK, INC. (A Development Stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock Issued Total Acc. Shareholder's
Shares Par Value Paid Capital Deficit Equity
----------------------------------------------------------
Balance as of
April 30, 1998 10,000,000 $10,000 $9,000 $(31,450) $ (12,450)
Shares Canceled
March 31, 1999 (10,000,000) (10,000)
Shares Issued
6.5 to 1 Reverse
Split March 8, 1999 1,538,461 1,538
Net Loss for
Year Ended 1999 3,500,000 3,500 (133,004) (150,416)
------------------------------------------------------------
Balance
Apr. 30, 1999 5,038,461 $5,038 $9,000 $(164,454) $(150,416)
Net Loss for
Year Ended 2000 (126,846) (277,261)
------------------------------------------------------------
Balance
Apr. 30, 2000 5,038,461 $5,038 $9,000 $(291,300) $(277,261)
Net Loss for
Year Ended 2001 (143,450) (420,711)
------------------------------------------------------------
Balance
Apr. 30, 2001 5,038,461 $5,038 $9,000 $(434,750) $(420,711)
AMAC Inc
============================================================
Shares Issued
Sep 28, 2001 8,333,333 ($8,333)
Gala Loan Capitalised
25 for 1 Reverse
Split Sep 29, 2001 534,871 ($534)
Shares Issued
Oct 16, 2001 9,500,000 ($9,500)
Acquisition of Europortal Inc
Shares Issued
Oct 17, 2001 1,077,268 ($1,077)
Loans Capitalised
Shares issued
Feb 15, 2002 350,000 (3,500)
Consultants
Net loss for
Year Ended 2002 (725,002) 3,941,390
Balance
February 28, 2002 11,462,078 (11,462) $5,120,518 (725,002) 3,941,390
============================================================
Shares Issued
April 26, 2002 90,211 ($90.21) $383,307
Acquisition of E-com Multi Ltd
August 3, 2002 $1,274,700
Acquisition of Hilsten Resources Ltd
Loans Capitalised $44,167
Exchange differences $35,845 (12,371)
Net profit for
Year Ended 2003 514,648
Balance
February 28, 2003 11,552,289 ($11,552) $6,858,537 502,274 6,255,975
The accompanying footnotes are an integral part of these financial statements.
AUTO DATA NETWORK, INC.
(A Development Stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended For the Year Ended
February 28, 2003 February 28, 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit/(Loss) $ 514,648 $(725,002)
Depreciation and amortization 144,853 4,349
Write off of R&D Costs -0- 648,960
Net Change in Assets, Liabilities
& Accruals 178,941 723,998
Net Adjustments 323,794 1,377,307
Net Cash Used in Operating Activities 838,442 652,305
Cash Flows from Investing Activities (25,000) (714,917)
Cash Flows from Financing Activities
Exchange Rate Difference 61,827 (31,859)
Other Non-Cash Change (2,844,106) 4,221
New Shares Issue 90 6,424
Additional Paid in Capital 1,738,019 24,946
---------- ---------
(1,044,170) 3,732
Net Change in Cash (230,728) (58,880)
Cash Beginning Period (55,425) 3,455
---------- ---------
Cash at End of Period (286,153) (55,425)
Cash and Bank Balance 3,591 14
Bank Overdrafts (289,744) (55,439)
---------- ---------
$ (286,153) (155,425)
The accompanying footnotes are an integral part of these financial statements.
AUTO DATA NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ending February 28, 2003
NOTE 1. Nature of Business and Significant Accounting Policies:
Description of Company: Auto Data Network, Inc. a Delaware corporation is the
parent company arising from the merger between the Company and the following
entities: Europortal Inc., Automatrix Ltd., County Services and Products Ltd, E
Multi Ltd. its aim is to create a dedicated information network between the UK
automotive industry, its consumers and trading partners.
NOTE 2. Basis of Presentation:
Financial statements are prepared on an accrual basis of accounting where
revenue is recognized when earned and expenses when incurred.
NOTE 3. Accounts Payable:
As of the date of this report there are no judgments or pending litigation
outstanding. However management indicates that alternative funding will be
required to satisfy liabilities.
NOTE 4. Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles require management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly actual results
could differ from these estimates. Significant estimates in the financial
statements include the assumption that the company will continue as a going
concern.
NOTE 5. Contingent Liability:
A possible liability exists with Inland Revenue when and if the accrued payroll
of UK staff and Directors are converted to equity.
NOTE 6. Acquisitions:
During the fiscal year acquisition agreements have been reached with Hilsten
Resources, Ltd., Automatrix (UK) Ltd., and E-Com Multi (UK) Limited.
NOTE 7. Depreciation Policy:
The company depreciates all its fixed assets over their useful lives on the
following basis:
o Tangible assets at the rate of 25% per annum on the reducing balance
of the asset value.
o Intangible assets at the rate of 3% per annum commencing one year
after the asset was acquired.
NOTE 8. Revenue Recognition:
The company recognizes income when services are rendered and license fees are
normally agreed on an annual basis and invoiced monthly in arrears.
NOTE 9. Foreign Currency:
The company's foreign subsidiaries use the local currency as their functioning
currency. Accordingly assets and liabilities are translated into US dollars at
year end exchange rates, and revenues and expenses are translated at the average
prevailing during the accounting period.
NOTE 10. Subsequent Events:
On January 18, 2003, a Share Sale Agreement was executed relating to the
acquisition by Auto Data Network of the entire Share Capital of MAM Software
Limited, ("MAM"), a company registered in England and based in Sheffield, South
Yorkshire. Completion took place on April 23, 2003.
AUTO DATA NETWORK, INC.
CONSOLIDATED BALANCE SHEET
As Of As Of
August 31,2003 February 28,2003
(Unaudited) (Audited)
--------------- --------------
ASSETS
Current Assets
Cash and equivalents $2,990,399 $722,961
Accounts Receivable 5,543,536 867,106
Accounts Receivable - sundry 1,460,932 0
Prepaid expenses 8,817 1,194
Inventories 309,944 0
---------- ----------
Total Current Assets 10,313,628 $1,591,261
Accounts receivable due after
More than 1 year 2,002,889 0
Fixed Assets less accumulated
depreciation $ 425,803 $ 54,159
Intangibles 6,936,863 7,498,181
Goodwill 6,071,688 0
----------- ----------
TOTAL ASSETS $25,750,871 $9,143,601
LIABILITIES
Current Liabilities
Accounts Payable 4,312,385 $1,451,366
Accrued Expenses and sundry
accounts payable 550,046 279,683
Short-Term Loans 19,582 22,583
Short Bank Borrowing 505,267 289,744
----------- ----------
Total Current Liabilities $5,387,280 $2,043,376
Other Liabilities
Accrued Tax 1,014,105 488,000
Value added tax 434,993 0
Long Term Liabilities & Deferred
Income 1,093,929 0
----------- ----------
Total Liabilities $ 7,930,307 $2,531,376
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value,
Authorized 50,000.000 Shares;
Issued and Outstanding
14,389,850 Shares 14,390 11,590
Preferred Stock 2,030,300 $.001
Par value issued and outstanding 2030
Additional Paid in Capital 17,483,881 7,214,749
Accumulated Other Income (86,625) (30,838)
Accumulated Surplus/Deficit 406,888 (675,941)
----------- ----------
Total Stockholders' Equity $17,820,564 $6,612,225
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $25,750,871 $9,143,601
=========== ==========
The accompanying notes and accountant's report are an integral part of these
financial statements.
CONDENSED CONSOLIDATED INCOME STATEMENT
AUTO DATA NETWORK INC.
CONDENSED CONSOLIDATED INCOME STATEMENT
Three months Ending Six months Ending
August 31, August 31,
(Unaudited) (Unaudited)
2003 2002 2003 2002
------------------- ------------------------
Revenue $ 5,612,053 422,903 $ 9,006,104 551,385
Cost of Revenue 1,038,626 30,760 2,731,548 159,784
----------------------- ----------------------
Gross Margin 4,573,428 392,143 6,274,555 391,601
Operating Expenses
- ------------------
Personnel 1,344,724 0 1,826,869 0
Sales & Marketing 72,860 8,839 143,576 20,028
General & Administrative 1,798,348 144,176 2,336,289 351,259
Depreciation and Amortization 201,974 3,872 220,725 9,707
------------------------- -----------------------
Total Operating Expenses 3,417,906 156,887 4,527,459 380,994
Net Operating Profit/Loss 1,155,522 235,256 1,692,130 10,607
Interest Expense (40,762) (3,188) ( 54,967) (6,247)
------------------------- -----------------------
NET PROFIT/LOSS FROM
TRADING 1,114,760 232,068 1,637,163 4,359
Net Profit/Loss before tax 1,114,760 232,068 1,637,163 4,359
Provision for Taxation 386,336 104,577 592,246 1,656
------------------------- -----------------------
Net Profit after Tax 728,424 127,491 1,099,885 2,703
Net Profit Per Share 0.05 0.01104 0.076 0.0002
Weighted average
Number of Shares
Outstanding 14,389,850 11,552,289 14,389,850 11,552,289
The accompanying notes and accountant's report are an integral part of these
financial statements.
AUTO DATA NETWORK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS AUGUST 31, 2003
AUTO DATA NETWORK INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 3 mos For the 3 mos
Ended Ended
August 31, 2003 August 31, 2002
(Unaudited) (Unaudited)
------------------- -----------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income Profit $728,424 $(127,491)
Adjustments to Reconcile Net Loss
To Cash Used in Operating
Activities:
Depreciation and other non-cash
charges 201,974 3,928
Other Non cash changes
Changes in Assets, Liabilities
Accounts receivable (2,786,684) (543,236)
Other current assets 140,864 5,780
Tangible assets (6,519) 0
Accounts Payable (1,936,565) (284,978)
Accrued Expenses 611,830 95,117
Other Non current liabilities 73,942 115,552
Net Cash Provided/(Used in)
Operations (2,972,734) (480,402)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of subsidiaries 0 (170,741)
Investing Activities 0 0
Net cash used in investing
Activities 0 (170,741)
CASH FLOWS FROM FINANCING
ACTIVITIES:
New Share issue 2,868 0
Additional Paid-in Capital 6,294,819 0
Effect of Exchange rates on cash (45,093) 65,681
Other non cash changes 0 0
---------- ---------
6,252,594 65,681
Net Change in Cash and
Equivalents 3,279,860 (1,176)
Cash and Cash Equivalents at
Beginning of Period (289,461) 494
---------- ---------
Cash and Cash Equivalents at
The accompanying notes and accountants report are an integral part of these
financial statements
AUTO DATA NETWORK INC.
Notes to Financial Statements
August 31, 2003
NOTE 1. BASIS OF PRESENTATION
The financial statements are prepared on the accrual basis of accounting.
Accordingly, revenue is recognized when earned and expenses when incurred.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended August, 31, 2003 compared with the
same period in the previous year are not necessarily indicative of the results
that may be expected for the year ending February 28, 2004. These Condensed
Consolidated Financial Statements should be read in conjunction with the
Consolidated Financial Statements and notes thereto contained in the Company's
Form 10-KSB for the year ended February 28, 2003.
NOTE 2. LIQUIDITY
The Company made post tax profit of $514,648 in the year ended February 28, 2003
compared to $1,099,885in the six months to August 31,2003 and it is anticipated
that the Company will be able to meet its financial obligations through internal
net revenue in the foreseeable future
As a result, the Company has from time of inception to August 31, 2003 made a
net profit from operations of $406,888.
NOTE 3. STOCK TRANSACTIONS
On April 23, 2003 the company issued 2,000,000 (two million) shares of
restricted Common stock in part satisfaction of the purchase consideration of
MAM Software Limited. The balance of the consideration is by a deferred cash and
stock payment.
NOTE 4. ISSUED SHARE CAPITAL
Shares Value
Issued Common Stock, $0.001 par value, at fiscal year end February 28, 2003 11,589,850 11,590
Stock issued for acquisition of Automatrix 190,000 190
Stock issued for the acquisition of MAM Software Limited 2,000,000 $ 2,000
Stock issued to consultants August 11,2003 610,000 610
Total Issued common stock as of August 31, 2003 14,389,850 $ 14,389
Preferred stock issued as of August 31, 2003 2,030,300 2,030
Total Stock issued 16,420,150 $ 16,420
ADDITIONAL CONTRIBUTED CAPITAL
Additional contributed capital at fiscal year end February 28 2003 $ 7,214,749
Acquisition of MAM Software Limited 3,998,000
Acquisition of Automatrix Limited 341,810
Shares issued to consultants 855,602
Preferred stock issued 5,073,720
Total 17,483,881
The company lists its Common Stock on the OTC Bulletin Board market (OTCBB -
ADNW). Authorised Common stock is 50,000,000 at $0.001 par value and authorized
Preferred stock is 25,000,000 at $0.001 par value
NOTE 5. CONSOLIDATION
The company owns 100% of the equity of all its subsidiaries and the Financial
Statements incorporate consolidation of all companies in the group.
NOTE 6. DEPRECIATION POLICY AND ACCOUNTING FOR GOODWILL ADN INTANGIBLE ASSETS
The Company depreciates all its fixed assets over their useful lives on the
following basis :
Tangible Assets at the rate of 25% per annum on the reducing balance of the
asset value.
Intangible Assets at the rate of 3% per annum commencing one year after the
asset was acquired but subject to the provisions of SFAS 141
SFAS No. 142, "Goodwill and Other Intangible Assets," changes the current
accounting model that requires amortization of goodwill, supplemented by
impairment tests, to an accounting model that is based solely upon impairment
tests. SFAS No. 142 also provides guidance on accounting for identifiable
intangible assets that may or may not require amortization. The provisions of
SFAS No. 142 related to accounting for goodwill and intangible assets will be
generally effective for the Company at the beginning of 2002, except that
certain provisions related to goodwill and other intangible assets are effective
for business combinations completed after July 1, 2001. The Company does not
believe this statement has any impact to the Company as of December 31, 2002.
In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations." SFAS No.143 addresses financial accounting and reporting for
obligations associated with the retirement of intangible long-lived assets and
associated asset retirement costs. SFAS No. 143 requires that the fair value of
a liability for an asset retirement obligation be recognized in the period in
which it has occurred. The asset retirement obligations will be capitalized as a
part of the carrying amount of the long-lived asset. SFAS No. 143 applies to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and normal operation of
long- lived assets. SFAS No. 143 is effective for years beginning after June 15,
2002, with earlier adoption permitted. Currently, the Company does not believe
this statement has any impact on the Company.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 establishes a single accounting
model for long-lived assets to be disposed of by sale and the recognition of
impairment of long-lived assets to be held and used. SFAS No. 144 is effective
for fiscal years beginning after December 15, 2001, with an earlier adoption
encouraged. The Company is evaluating the impact of adopting SFAS No. 144 but
believes it will not have a material effect on the Company's results of
operations or financial position.
Long Lived Assets - The company has completed a number of business combinations
over the years. These business combinations result in the acquisition of
intangible assets and the recognition of goodwill on the company's consolidated
balance sheet. The company accounts for these assets under the provisions of
SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 requires that goodwill not be amortized, but
instead tested for impairment at least annually. The statement also requires
recognized intangible assets with finite useful lives to be amortized over their
useful lives. Long-lived assets, goodwill and intangible assets are reviewed for
impairment annually or whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable from future cash flows.
Future cash flows are forecasted based on management's estimates of future
events and could be materially different from actual cash flows. If the carrying
value of an asset is considered impaired, an impairment charge is recorded for
the amount by which the carrying value of the asset exceeds its fair value.
NOTE 7. REVENUE RECOGNITION
The company recognizes income when services are rendered and licence fees are
normally agreed on an annual basis and invoiced monthly in arrears. Invoices for
sales of goods such as computer hardware products are issued on dispatch and
revenue is recognized on invoice date.
NOTE 8. FOREIGN CURRENCY
The company's foreign subsidiaries use the local currency as their functioning
currency. Accordingly Assets and liabilities are translated into US dollars at
year end exchange rates, and revenues and expenses are translated at the average
prevailing during the accounting period.
NOTE 9 - NEW ACCOUNTING PRONOUNCEMENTS
In December 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 148, "Accounting for Stock-Based Compensation
- -Transition and Disclosure." The new statement, which becomes effective December
2002, requires all entities with stock-based employee compensation arrangements
to provide additional disclosures in their summary of significant accounting
policies note; permits entities changing to the fair value method of accounting
for employee stock compensation to choose from one of three transition methods;
and requires interim-period pro forma disclosures if stock-based compensation is
accounted for under the intrinsic value method in any period presented. The
Company is still assessing this new standard but does not believe that it will
have a material effect on its results of operations or financial condition upon
adoption.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are currently no pending legal proceedings against the company.
ITEM 2. CHANGES IN SECURITIES
The instruments defining the rights of the holders of any class of common stock
have been modified by the issue of 6% Convertible Preferred Stock - Series A-1
and A-2 which has a dividend and liquidation preference ahead of the holders of
Common Stock. See 8K exhibit filed August 21, 2003 which is hereby incorporated
by reference.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There has been no default in the payment of any principal, interest, sinking or
purchase fund installment.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the last
quarter.
ITEM 5. CONTROLS AND PROCEDURES
A review and evaluation was performed by the Company's management, including the
Company's Chief Executive Officer (the "CEO") and Chief Financial Officer (the
"CFO"), of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rule 13a-14 under the
Securities Exchange Act of 1934) as of a date within 90 days prior to the filing
of this quarterly report. Based on that review and evaluation, the CEO and CFO
have concluded that the Company's current disclosure controls and procedures, as
designed and implemented, were effective to ensure that information the Company
is required to disclose in this quarterly report is recorded, processed,
summarized and reported in the time period required by the rules of the
Securities and Exchange Commission. There have been no significant changes in
the Company's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation. There were no
significant material weaknesses identified in the course of such review and
evaluation and, therefore, no corrective measures were taken by the Company.
ITEM 6. OTHER INFORMATION
There is no other information to report, which is material to the company's
financial condition not previously reported
BACK COVER OF PROSPECTUS
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL NOVEMBER 05 2005, (TWO YEAR ANNIVERSARY OF EFFECTIVE DATE) ALL
DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Seventh of our Certificate of Incorporation states: "No
director shall be personally liable to the Corporation of its stockholders for
monetary damages for any breach of fiduciary duty by such director as a
di4rector. Notwithstanding the foregoing sentence, a director shall be liable to
the extent provided by applicable law, (i) for breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith of laws, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived a
personal benefit. No amendment to or repeal of this Article Seventh shall apply
to or have any effect on the liability or alleged liability of any director of
the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment."
Further, indemnification of officers and directors of the company is
provided for under the Article XI of the Company's by-laws which state that
"Each person who was or is made a party or is threatened to be made a party or
is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigation (hereinafter a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a director or officer, of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
paragraph (b) hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation.
The right to indemnification conferred shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its disposition: provided, however,
that, if the Delaware General Corporation Law requires, the payment of such
expenses incurred by a director or officer in his or her capacity as a director
or officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer), to repay all amounts so advanced if it
shall ultimately be determined that such director or officer is not entitled to
be indemnified under this Section or otherwise. The Corporation may, by action
of its Board of Directors, provide indemnification to employees and agents of
the Corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
55
Section 145 of the Delaware General Corporation Law authorizes us to
indemnify any director or officer under prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceedings, whether civil, criminal, administrative or investigative, to which
such person is a party by reason of being one of our directors or officers if it
is determined that the person acted in accordance with the applicable standard
of conduct set forth in such statutory provisions.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Advanced Media pursuant to the foregoing provisions, or otherwise, we have been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
We estimate the following expenses in connection with this registration.
SEC registration fee $ 1,515
Printing costs 5,500
Blue sky fees 25,000
Accounting fees and expenses 75,000
Legal fees and expenses 75,000
Miscellaneous 42,985
-------
Total $225,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
From June 1, 2003 through October 15, 2003, we sold an aggregate total
of 5,328,000 shares of preferred stock, 500,000 were Series A-1 Convertible
Promissory Note Preferred Stock and 4,828,000 were Series A-2 Preferred Stock.
All of these sales were made in reliance upon exemptions from registration under
the Securities Act of 1933, as amended (the "Act"). These transactions are
listed under the Preferred Stock table in the Selling Shareholders portion of
this registration statement. All shares were sold at the price of $2.50 per
share. Each of these preferred shares is currently convertible into two (2)
shares of our common stock. The shares of common stock underlying these
preferred shares are being registered pursuant to this registration statement.
In addition to selling those shares, we issued warrants to purchase 1,331,000
shares of our common stock to various investment advisors and consultants. These
warrants are exercisable at the price of $1.25 per share. We are also
registering 1,331,000 shares of common stock which underlie these warrants.
These transactions are listed in the Selling Shareholders portion of this
registration statement
As a result of our sale of 5,500,000 shares of Preferred Stock in a
private placement, we received $13,750,000 in proceeds. The following is an
analysis of our use of those proceeds.
Gross proceeds $13,750,000.00
Offering expenses (e.g.; printing and
mailing costs, legal and accounting fees,
SEC registration fee, and blue sky fees) $ 225,000.00
56
Net proceeds $13,525,000.00
Anticipated uses of proceeds
Loan to Carparts $ 2,000,000
Completion of MAM Software acquisition $ 750,000
Cost of fund raising $ 1,787,500
Other planned acquisitions and working capital $ 8,987,500
----------------
$13,525,000
Regardless of whether or not we receive any proceeds from the selling
shareholders' exercise of warrants and purchase of common stock, we believe that
the proceeds generated from the sale of the preferred shares are sufficient to
provide us with the working capital necessary to cover our planned needs for at
least the next twelve months.
Unless otherwise stated, each of the persons who received these
unregistered securities had knowledge and experience in financial and business
matters which allowed them to evaluate the merits and risk of the receipt of
these securities, and that hey were knowledgeable about our operations and
financial condition; (ii) no underwriter participated in, nor did we pay any
commission or fees to any underwrite in connection with the transactions; (iii)
the transactions did not involve a public offering; and, (iv) each certificate
issued for these unregistered securities contained a legend stating that the
securities have not been registered under the Act and setting forth the
restrictions on the transferability and the sale of the securities.
In addition, between June 1, 2003 and October 15, 2003, we issued
warrants to purchase shares of common stock in the Company. These were issued as
consideration for assistance in placing the preferred stock, the sale of which
is described above, and to other consultants and advisors. The warrants were
issued as follows:
1. Warrants to purchase up to 150,000 shares of common stock at an exercise
price of $1.25 per share were granted to First Securities, Inc. These were
granted as compensation for placement agents for the preferred stock. These are
exercisable through October 31, 2008
2. Warrants to purchase up to 781,000 shares of common stock at an exercise
price of $1.25 per share were granted to Middlebury Capital, LLC. These were
granted as compensation for placement agents for the preferred stock. These are
exercisable through October 31, 2008
3. Warrants to purchase up to 400,000 shares of common stock at an exercise
price of $1.25 per share were granted to Seargant Consulting. These were granted
as compensation for consulting services. These may be exercised through October
31, 2008.
ITEM 27. EXHIBITS.
The following exhibits are filed or incorporated by reference as part
of this Registration Statement.
(3) Articles of Incorporation and Bylaws
57
3.1 Certificate of Incorporation of the registrant (then named Medic Media,
Inc.) dated November 6, 1996, and filed with the State of Delaware, Secretary of
State, Division of Corporations on November 6, 1996;
3.2 Certificate of Renewal and Revival of Charter of the registrant (then named
Medic Media, Inc.) dated July 27, 1998, and filed with the State of Delaware,
Secretary of State, Division of Corporations on July 29, 2003;
3.3 Certificate of Amendment of Certificate of Incorporation of the registrant
(then named Medic Media, Inc.) dated March 10, 1999 and filed with the State of
Delaware, Secretary of State, Division of Corporations on March 30, 1999
(changing name to AMAC, Inc.);
3.4 Certificate of Resignation of Registered Agent of AMAC Inc., dated August
17, 2001, and filed with the State of Delaware, Secretary of State, Division of
Corporations on August 17, 2001;
3.5 Certificate of Renewal and Revival of Charter of the registrant (then named
AMAC, Inc.) dated October 3, 2001, and filed with the State of Delaware,
Secretary of State, Division of Corporations on October 4, 2001;
3.6 Certificate of Amendment of Certificate of Incorporation of the registrant
(then named AMAC, Inc.) dated October 2nd, 2001 and filed with the State of
Delaware, Secretary of State, Division of Corporations on October 4,
2001(changing name to Auto Data Network, Inc.);
3.7 Certificate of Amendment of Certificate of Incorporation of the registrant,
dated July 18, 2001 and filed with the State of Delaware, Secretary of State,
Division of Corporations on July 27, 2001(changing authorized stock);
3.8 Certificate of Renewal and Revival of Charter of the registrant dated June
9, 2003, and filed with the State of Delaware, Secretary of State, Division of
Corporations on June 10, 2003;
3.9 Certificate of Designations, Preferences and Rights of Series A-1
Convertible Preferred Stock and Series A-2 Convertible Preferred Stock of Auto
Data Network, Inc. of the registrant dated July 15, 2003, and filed with the
State of Delaware, Secretary of State, Division of Corporations on July 15,
2003;
3.10 Bylaws of the registrant dated July 15, 2003, and filed with the State of
Delaware, Secretary of State, Division of Corporations on July 15, 2003;
(4) Instruments Defining the Rights of Security Holders, Including Indentures
4.1 Form of Certificate of Common Stock
(5) Opinion on Legality
5.1 Opinion of L. Stephen Albright regarding the legality of the securities
being registered
(10) Material Contracts
(21) Subsidiaries of the Registrant
58
21.1 Subsidiaries of the Registrant - NONE
(23) Consents of Experts and Counsel
23.1 Consent of accountants
23.2 Consent of L. Stephen Albright
ITEM 28. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any additional or changed material information
on the plan of distribution;
(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; and
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(e) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense
of any action, suit, or proceeding) is asserted by such director, officer,
or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
59
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
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, as amended, and authorized this
registration statement to be signed on its behalf by the undersigned, in the New
York City, State of New York, on November 05, 2003.
AUTO DATA NETWORK, INC.,
A Delaware corporation, Registrant
By: /s/ Christopher R. Glover
-------------------------------------
Christopher R. Glover,
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
/s/ Christopher R. Glover Chairman, Chief Executive November 05, 2003
- --------------------------- Officer, and Director (Principal
Christopher R. Glover Executive Officer)
/s/ Lee J. Cole Chief Financial Officer (Principal November 05, 2003
- ------------------------------------ Financial Officer) and Director
Lee J. Cole
60
EXHIBITS INDEX
EXHIBIT NO AND TITLE OF DOCUMENT
- --------------------------------
3.1 Certificate of Incorporation of the registrant (then named Medic Media,
Inc.) dated November 6, 1996, and filed with the State of Delaware, Secretary of
State, Division of Corporations on November 6, 1996;
3.2 Certificate of Renewal and Revival of Charter of the registrant (then named
Medic Media, Inc.) dated July 27, 1998, and filed with the State of Delaware,
Secretary of State, Division of Corporations on July 29, 2003;
3.3 Certificate of Amendment of Certificate of Incorporation of the registrant
(then named Medic Media, Inc.) dated March 10, 1999 and filed with the State of
Delaware, Secretary of State, Division of Corporations on March 30, 1999
(changing name to AMAC, Inc.);
3.4 Certificate of Resignation of Registered Agent of AMAC Inc., dated August
17, 2001, and filed with the State of Delaware, Secretary of State, Division of
Corporations on August 17, 2001;
3.5 Certificate of Renewal and Revival of Charter of the registrant (then named
AMAC, Inc.) dated October 3, 2001, and filed with the State of Delaware,
Secretary of State, Division of Corporations on October 4, 2001;
3.6 Certificate of Amendment of Certificate of Incorporation of the registrant
(then named AMAC, Inc.) dated October 2nd, 2001 and filed with the State of
Delaware, Secretary of State, Division of Corporations on October 4,
2001(changing name to Auto Data Network, Inc.);
3.7 Certificate of Amendment of Certificate of Incorporation of the registrant,
dated July 18, 2001 and filed with the State of Delaware, Secretary of State,
Division of Corporations on July 27, 2001(changing authorized stock);
3.8 Certificate of Renewal and Revival of Charter of the registrant dated June
9, 2003, and filed with the State of Delaware, Secretary of State, Division of
Corporations on June 10, 2003;
3.9 Certificate of Designations, Preferences and Rights of Series A-1
Convertible Preferred Stock and Series A-2 Convertible Preferred Stock of Auto
Data Network, Inc. of the registrant dated July 15, 2003, and filed with the
State of Delaware, Secretary of State, Division of Corporations on July 15,
2003;
3.10 Bylaws of the registrant dated July 15, 2003, and filed with the State of
Delaware, Secretary of State, Division of Corporations on July 15, 2003;